Q2 2025 Lincoln National Corp Earnings Call

Operator: Good morning and thank you for joining Lincoln Financial's 2025 second quarter earnings call. At this time, all lines are in a listen-only mode. Later, we will open the call for questions, and instructions will be given at that time. If you need assistance at any time during the call, please press the star key followed by the zero, and someone will assist you. Now, I would like to turn the call over to the Senior Vice President, Head of Investor Relations, Tina Madon. Please go ahead.

Good morning, and thank you for joining Lincoln financials 2025. Second quarter earnings call at this time, all lines are in a listen-only mode. Later, we will open the call for questions and instructions will be given at that time.

If you need assistance at any time during the call, please press the star key followed by zero.

And someone will assist you. Now I would like to turn the call over to the senior vice president head of investor relations Tina Madden. Please. Go ahead.

Tina Madon: Thank you. Good morning, everyone, and welcome to our second quarter earnings call. We appreciate your interest in Lincoln. Our quarterly press release, earnings supplement, and statistical supplement can all be found on the Investor Relations page of our website, www.lincolnfinancial.com. These documents include reconciliations of the non-GAAP measures used in today's call, including adjusted income from operations or adjusted operating income, and adjusted income from operations available to common stockholders to their most comparable GAAP measures. Before we begin, I want to remind you that any statements made during today's call regarding expectations, future actions, trends in our businesses, prospective services or products, future performance or financial results, including those relating to deposits, expenses, income from operations, free cash flow or free cash flow conversion ratios, share repurchases, liquidity, and capital resources are forward-looking statements under the Private Securities Litigation Reform Act of 1995.

Thank you. Good morning everyone and Welcome to our second quarter earnings call. We appreciate your interest in Lincoln.

Our quarterly press release earnings supplement and statistical supplement can all be found on the investor relations page of our website.

Www.lincolnfinancial.com.

These documents include reconciliations of the non-gaap measures used in today's call, including adjusted income from operations or adjusted operating income and adjusted income from operations available to Common stockholders to their most comparable gaap measures.

Before we begin, I want to remind you that any statements made during today's call regarding expectations future actions Trends in our businesses prospective services or products.

Future performance or financial results, including those relating to deposits, expenses, income from operations, free cash flow, or free cash flow conversion, ratios, share repurchases, liquidity, and capital resources.

Tina Madon: These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from our current expectations. These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued earlier this morning, as well as those detailed in our 2024 annual report on Form 10-K, most recent quarterly reports on Form 10-Q, and from time to time in our other filings with the SEC. These forward-looking statements are made only as of today, and we undertake no obligation to update or revise any of them to reflect events or circumstances that occur after today. Presenting this morning are Ellen Cooper, Chairman, President and CEO, and Christopher Neczypor, Chief Financial Officer. After their prepared remarks, we will address your questions. Let me now turn the call over to Ellen. Ellen?

Or forward-looking statements under the private Securities. Litigation Reform, Act of 1995.

The forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from our current expectations.

These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued earlier this morning as well as those details in our 2024, annual report on form. 10K. Most recent quarterly reports on form 10 q and from time to time in our other filings with the SEC.

These forward-looking statements are made only as of today, and we undertake no obligation to update or revise any of them to reflect events or circumstances that occur after today.

Presenting this morning are Ellen Cooper, chairman president, and CEO, and Chris, and as a poor Chief Financial Officer.

Ellen Cooper: Thank you, Tina, and good morning, everyone. We appreciate you joining our call today. Our second quarter performance was strong, with adjusted operating income increasing 32% year over year, underscoring the progress we have made as we advance our growth strategy with discipline and focus across Lincoln National Corporation. Before I walk through the quarter's highlights, I wanted to step back and reflect on what we have accomplished since we began this journey at the beginning of 2023. The fundamental principles of foundational capital, an optimized operating model, and a strategy for profitable growth are coming through in our results, with clear evidence of building momentum balanced against a strategic awareness of where more work needs to be done.

After they are prepared remarks, we'll address your questions. Let me now turn the call over to Ellen Ellen.

Thank you, Tina and good morning, everyone. We appreciate you joining our call today. Our second quarter performance was strong with adjusted operating income, increasing, 32% year-over-year. Underscoring the progress we have made as we advance our growth strategy with discipline and focus across Lincoln

Before I walked through the quarters highlights, I wanted to step back and reflect on what we have accomplished. Since we began this journey at the beginning of 2023.

Ellen Cooper: We have evolved the direction of the company with a focus on increasing our risk-adjusted return on capital, reducing the volatility of our results, and growing our franchise, and we are starting to see the benefit of those actions. A few highlights worth noting: this marks the fourth consecutive quarter of year-over-year adjusted operating income growth. It is the seventh consecutive quarter with an estimated RBC ratio in excess of our target of 400%, and the fifth quarter in a row with an estimated RBC ratio exceeding our 20 percentage point buffer. Over the past several years, we have also made significant progress in optimizing our operating model, creating a more efficient and scalable organization. We have reduced expenses, streamlined processes, and enhanced our digital capabilities while strategically investing in talent and infrastructure in each of our businesses.

The fundamental principles of foundational capital and an optimized operating model, along with a strategy for profitable growth, are coming through in our results, with clear evidence of building momentum balanced against a strategic awareness of where more work needs to be done.

We have evolved the direction of the company with the focus on increasing our risk, adjusted return on Capital, reducing the volatility of our results and growing our franchise. And we're starting to see the benefit of those actions.

A few highlights worth noting.

In excess of our target of 400% and the fifth quarter in a row with an estimated RBC ratio exceeding our 20 percentage point buffer.

Over the past several years, we have also made significant progress in optimizing. Our operating model creating a more efficient, and scalable organization.

Ellen Cooper: We have also advanced our investment strategy and launched our Bermuda-based reinsurance subsidiary. Becoming a leaner, more efficient organization strengthens our ability to deploy capital more effectively, elevate the customer experience, and respond to market opportunities with greater agility. At the same time, each of our businesses has made progress on strategies to shift to products and segments with higher margins, more stable cash flow profiles, and greater capital efficiency. The first half of this year saw all four businesses deliver double-digit sales growth, a portion of which came from products that have historically not been key drivers for Lincoln National Corporation. Underneath the surface, we continue to increase the core capital generation of the company, investing that capital in areas that are expected to sharpen our competitive advantages, broaden our strategic moat, and drive growth in our free cash flow over the longer term. Results will not be linear.

We have reduced expenses, streamline processes and enhanced our digital capabilities while strategically investing in talent and infrastructure in each of our businesses.

We have also advanced our investment strategy and launched our Bermuda-based reinsurance subsidiary.

Becoming a leaner, more efficient organization strengthens our ability to deploy capital more effectively, elevate the customer experience, and respond to market opportunities with greater agility.

At the same time, each of our businesses has made progress on strategies to shift to products and segments with higher margins, more stable cash flow profiles and greater Capital efficiency.

The first half of this year saw all four businesses deliver double-digit sales growth, a portion of which came from products that have historically not been key drivers for Lincoln.

Underneath the surface. We continue to increase the core Capital generation of the company investing that capital in areas that are expected to sharpen our competitive advantages. Broaden our strategic mode and drive growth in our free cash flow over the longer term.

Ellen Cooper: Markets can be volatile, and the economic backdrop could change. But we remain steadfast in our commitment to deliver results that drive long-term value. Our momentum is building, our track record is increasingly evident, and we are excited about the path forward. Now turning to the highlights for the quarter. Our results this quarter demonstrate that the strategic repositioning of each of our businesses is beginning to translate into improved fundamentals supported by a more diverse and profitable business mix. Key highlights at the segment level included our Group Protection business, which delivered a record quarter for earnings and its highest ever margin. Annuities generated its third highest sales quarter, supported by a more diverse and balanced product mix. Retirement Plan Services saw a year-over-year increase in total deposits, resulting from strong first-year sales growth. Life Insurance achieved positive earnings driven by favorable mortality and improved expenses.

Results will not be linear. Markets can be volatile, and the economic backdrop could change, but we remain steadfast in our commitment to deliver results that drive long-term value.

Our momentum is building, our track record is increasingly evident, and we're excited about the path forward.

Now, turning to the highlights for the quarter.

Our results. This quarter demonstrate that this strategic repositioning of each of our businesses is beginning to translate into improved, fundamentals supported by a more diverse and profitable business. Mix.

Key highlights at the segment level included, our group protection business, which delivered a record quarter for earnings, and its highest ever margin.

Annuities generated its third, highest sales quarter supported by a more diverse and balanced product mix.

Retirement plan Services. Saw a year-over-year increase in total deposits. Resulting from strong first year sales growth.

Ellen Cooper: Now turning to our business results, starting with retail solutions, which includes Annuities and Life Insurance. Annuities produced robust sales of $4 billion, a 6% sequential increase supported by our ongoing focus on building and sustaining a diversified product mix. Spread-based products comprised two-thirds of the overall mix, with Fixed Annuity sequential growth of 41% and RILA sequential growth of 12%. Each of our three major product categories exceeded $1 billion in sales, and additionally, all sales in the quarter supported our strategic and financial goals with strong profitability and capital efficiency. We continue to lean into our distribution leadership, where we have the reach and scale to leverage our longstanding relationships, offer a compelling value proposition, and broaden our addressable markets, enabling us to reach more customers seeking to retire with confidence and financial security.

Life insurance achieved positive earnings driven by favorable mortality and improved expenses.

Now, turning to our business results, starting with Retail Solutions, which includes annuities and life insurance.

Annuities produced robust sales of $4 billion, a 6% sequential increase supported by our ongoing focus on building and sustaining a diversified product mix.

Spread-based products comprised 2/3 of the overall mix with fixed. Annuity sequential growth of 41% and Riya sequential growth of 12%.

Each of our 3, major product categories, exceeded 1 billion in sales and additionally. All sales in the quarter, supported our strategic and financial goals with strong profitability and capital efficiency.

We continue to lean into our distribution leadership where we have the reach and scale to leverage our long-standing relationships.

Ellen Cooper: Our distribution partners deeply appreciate our customer-centric approach, which is designed to equip producers with the insights, tools, and capabilities to enhance productivity and ease of doing business. Our scalable support model helps partners grow their businesses through marketing and training assistance, a smooth and automated sales process, and ongoing high-quality customer service. The breadth of products we offer in Fixed Annuities, RILA, and Variable Annuities is also a key competitive strength, reinforcing Lincoln as a holistic solutions provider that can adapt to customer preferences in various market environments. As I previously mentioned, our Fixed Annuities sales increased by 41% sequentially as we continue to leverage the foundational capabilities we built to sustain a consistent and growing presence in the fixed marketplace, including investment strategy enhancements, distribution expansion, and capital-efficient reinsurance.

Offer a compelling value proposition and broaden, our addressable markets enabling us to reach more customers seeking to retire with confidence and Financial Security.

Our distribution Partners deeply, appreciate our customer centered approach which is designed to equip producers, with the insights tools and capabilities to enhance productivity and ease of doing business.

Our scalable support model helps partners grow their businesses through marketing and training assistance, a smooth and automated sales process, and ongoing high-quality customer service.

The breadth of products we offer in fixed Riya and variable. Annuities is also a key competitive strength, reinforcing Lincoln as a Holistic Solutions, provider that can adapt to customer preferences in various Market environments.

As I previously mentioned, our fixed annuity sales increased by 41% sequentially as we continue to leverage the foundational capabilities we built to sustain a consistent and growing presence in the fixed marketplace.

Ellen Cooper: Optimizing our mix of internal and external reinsurance and retaining a greater portion of our spread-based earnings will further accelerate the profitability and risk-adjusted returns of our overall Annuities business. RILA generated a fifth consecutive quarter of sales in excess of $1 billion and the fifth consecutive quarter of sequential growth as we maintained momentum with a strong competitive position in this market. The continued growth in sales was driven by our ability to differentiate through unique features and crediting rate strategies as our second-generation RILA product continues to resonate with customers. We also benefited from further leveraging our distribution leadership to expand in targeted channels to drive additional market penetration and growth. Finally, traditional Variable Annuities remain integral to the diversification of our product suite, producing strong free cash flows and risk-adjusted returns while delivering a compelling customer value proposition.

Including investment strategy, enhancements distribution expansion and capital efficient reinsurance.

Optimizing our mix of internal and external reinsurance and retaining a greater portion of our spread-based earnings will further accelerate the profitability and risk adjusted returns of our overall, annuities business.

Quarter of sales in excess of 1 billion and the fifth consecutive quarter of sequential growth as we maintained momentum with a strong competitive position in this market. The continued growth in sales was driven by our ability to differentiate through unique features and crediting rate strategies as our second generation. Riya product continues to resonate with customers.

We also benefited from further leveraging our distribution leadership to expand targeted channels to drive additional market penetration and growth.

Ellen Cooper: In summary, these results reflect the success we are achieving in delivering a diversified product mix that meets customers where they are across different life stages, risk tolerances, and economic environments. This strategy to diversify our mix to more spread-based earnings translates into more predictable and resilient cash flows over time while meeting our risk-adjusted return targets and balancing the financial contribution across products. We remain confident in our strategic trajectory and our ability to leverage our competitive strengths to achieve our profitability and return objectives. Now turning to Life Insurance. In our retail life business, we have taken decisive steps to reposition the franchise for long-term value creation. We have intentionally been pivoting towards accumulation and protection products with more risk sharing and have been building out product features to expand our solution set, positioning us for future growth. A key part of this transformation is our distribution evolution.

Finally, traditional variable, annuities remain integral to the diversification of our product Suite, producing strong free cash, flows and risk adjusted returns, while delivering a compelling. Customer value proposition.

In summary, these results, reflect the success. We are teething in delivering a diversified product. Mix that meets customers where they are across different life, stages, risk tolerances, and economic environments.

This strategy to diversify our mix to more spread-based earnings translates into more predictable and resilient cash flows over time. While meeting our risk-adjusted return targets and balancing the financial contribution across products

We remain confident in our strategic trajectory and our ability to leverage our competitive strengths to achieve our profitability and return objectives.

Now, turning to Life Insurance.

In our retail life business. We've taken decisive steps to reposition the franchise for long-term value creation. We have intentionally been pivoting towards accumulation and protection products with more risk sharing and have been building out product features to expand our solution set. Positioning us for future growth,

Ellen Cooper: We focused on building a distribution footprint that sits closer to the financial professional. This proximity better positions us to provide support to our customers by giving us sharper insights, more streamlined connectivity, and enhanced efficiency in reaching our target segments, which is expected to support durable growth. Sales increased 15% year over year and 25% sequentially, with broad-based momentum across our products as our actions over the last several years begin to take hold. On a year-over-year basis, we saw executive benefits, which can vary from period to period, continue to gain traction, with sales in this segment tripling.

A key part of this transformation is our distribution evolution.

We focused on building a distribution footprint that sits closer to the financial professional.

This proximity better positions us to provide support to our customers by giving us sharper insights more streamlined connectivity and enhanced efficiency in reaching our Target segments, which is expected to support, durable growth.

Sales increased 15% year-over-year, and 25% sequentially with broad-based momentum across our products as our actions, over the last several years. Begin to take hold

Ellen Cooper: We value this business as a product category where we have strong competitive positioning and one that also generates more predictable cash flows. We are also seeing continued momentum in IUL, where we are growing our addressable market through enhanced products, expanded distribution access, and new digital tools to enhance the client experience. It is another area where we are leaning in to capture future growth while staying disciplined on achieving risk-adjusted returns. Overall, our retail life strategy is grounded in a clear focus: shift our mix towards products and channels that support our long-term enterprise objectives, including compelling value propositions for our customers, efficient capital deployment, and focused future growth. As I have previously highlighted, the repositioning of our life business will continue to take time.

On a year-over-year basis. We saw executive benefits which can vary from period to period, continued to gain traction with sales. In this segment tripling, we value this business as a product category, where we have strong competitive, positioning, and 1 that also generates more predictable, cash flows.

We're also seeing continued momentum in IUL, where we're growing. Our addressable market is enhanced by products, expanded distribution, access, and new digital tools to enhance the client experience.

It's another area where we're leaning in to capture future growth while staying disciplined on achieving risk-adjusted returns.

Ellen Cooper: However, we are confident that leveraging our strengths in product, distribution, and underwriting to support our customers will increase our competitive differentiation and drive higher earnings growth. Next, turning to workplace solutions, which includes our Group Protection and Retirement Plan Services businesses. As I mentioned earlier, Group delivered another record quarter, and we are very pleased with the strategic momentum of this business. Earnings grew by 33% year over year, and the margin increased by 250 basis points to 12.5%. These results highlight our disciplined execution in diversifying this business through targeted segment and product strategies while prioritizing profitable growth as we position Group Protection to become a sustained larger portion of Lincoln's overall earnings mix. Premiums grew 7% year over year, supported by robust sales and continued strong persistency.

Life business will continue to take time. However, we are confident that leveraging our strengths in product distribution and underwriting to support our customers will increase our competitive differentiation and drive higher earnings growth.

Next turning to workplace Solutions which includes our group protection and retirement plan Services businesses.

As I mentioned earlier, group delivered, another record quarter, and we are very pleased with the Strategic momentum of this business.

Earnings grew by 33% year-over-year, and the margin increased by 250 basis points to 12.5%.

These results highlight our disciplined execution in diversifying this business through targeted segments and product strategies while prioritizing profitable growth, as we position group to become a sustained, larger portion of Lincoln's, overall earnings mix.

Ellen Cooper: These outcomes reflect our disciplined approach to pricing, which is a cornerstone of our strategy for growth in competitive markets, both for new business and renewals. They also reflect the benefits of the investments we have made in our operating service and claims models, as well as the execution of our segment-level strategy, which has resulted in an expanded market presence. Sales increased by 16% year over year. At a segment level, local markets drove most of this growth as our momentum in this space continues to accelerate. Building a consistent presence in this market represents a significant growth opportunity while supporting our profitability objectives. Central to the success we are achieving are the targeted investments we have made over the last two years to grow this segment and deepen our ability to deliver on what customers consider most important: integrated solutions that emphasize ease, access, and efficiency.

Premiums grew 7%, year-over-year supported by robust sales and continued strong persistency.

these outcomes reflect our disciplined approach to pricing, which is a Cornerstone of our strategy for growth and competitive markets, both for new business and renewals

They also reflect the benefits of the Investments. We have made in our operating service and claims models as well as the execution of our segment level strategy which has resulted in an expanded Market presence.

Sales increased by 16% year-over-year at a segment level. Local markets drove most of this growth as our momentum in the space. Continues to accelerate.

Building a consistent presence in this market, represents a significant growth opportunity while supporting our profitability objectives.

Ellen Cooper: We have also invested in a broader, more comprehensive product suite that deepens our value proposition to local market employers. Additionally, we continue to make consistent progress in our other segments, growing and retaining our customers, which reinforces the durability of the strategy that we have been implementing over the last two years. In our regional segment, we are sustaining a strong position by deepening strategic broker partnerships to better support employers and their benefit decisions. We are making ongoing investments in an improved customer experience through expanded digital capabilities and a deeper product portfolio, with a focus on Supplemental Health and leave management. In our national segment, we are leveraging our expertise in combining product breadth, including Supplemental Health products, consultative guidance, and more digital engagement tools to provide high-quality customer service, strengthen our competitive differentiation, and drive sustained and profitable growth.

Central to the success. We are achieving are the targeted Investments. We have made over the last 2 years to grow the segment and deepen, our ability to deliver on what customers consider, most important Integrated Solutions, that emphasize ease access and efficiency.

We have also invested in a broader more comprehensive. Product Suite that deepens our value proposition to local market employers.

Additionally we continue to make consistent progress in our other segments growing and retaining our customers, which reinforces the durability of the strategy that we have been implementing over the last few years.

In our regional segment. We are sustaining a strong position by deepening. Strategic broker Partnerships to better support employers and their benefit decisions. We are making ongoing investments in an improved customer experience through expanding digital capabilities and a deeper product portfolio with the focus on supplemental health and leave management.

Ellen Cooper: On a product basis, sales of Supplemental Health products to both new and existing customers increased meaningfully this quarter, supported by the investments in our distribution and service models, as well as enhancements to our product features. Our suite of Supplemental Health products is a key focus given its strong customer value proposition, attractive margins, and significant growth potential compared to our traditional offerings. This quarter's results reinforce our confidence in the sustained growth and earnings potential of our Group business. With a strong foundation, disciplined execution, including pricing, and meaningful opportunities to further expand in its addressable markets, Group is positioned to continue to be an increasingly meaningful driver of our earnings and free cash flow growth. Turning to Retirement Plan Services, or RPS. RPS's first-year sales increased by nearly 50% year over year, driven by stable value sales, and total deposits increased by 10%.

In our national segment, we are leveraging our expertise in combining product breadth, including supplemental health products, consultative guidance, and more digital engagement tools to provide high-quality customer service. This strengthens our competitive differentiation and drives sustained and profitable growth.

On a product basis, sales of supplemental health, products to both new and existing customers increased meaningfully this quarter supported by the investments in our distribution and service models, as well as enhancements to our product features. Our suite of supplemental health products is a key Focus given its strong customer value proposition attractive, margins and significant growth potential, compared to our traditional offerings.

This quarter's results, reinforce our confidence in the sustained growth and earnings potential of our group business.

With a strong Foundation disciplined execution, including pricing and meaningful opportunities to further. Expand in its addressable markets group is positioned to continue to be an increasingly meaningful driver of our earnings and free cash flow growth. Now, turning to retirement plan, services or RPS,

Ellen Cooper: As we look ahead, we have a strong pipeline of known wins, which we anticipate will materialize in the second half of this year. This sales momentum demonstrates that the offerings in our core record-keeping and institutional market segments are resonating with customers. We remain focused on initiatives to strengthen our operational and service capabilities in RPS as we advance our objective to build sustainable and profitable growth in this business over the long term. In closing, we remain steadfast in our commitment to deliver sustainable long-term value for our shareholders. The progress we've made is not only reflected in our financial performance but also in the strategic clarity with which we are executing, the strength of our operating model, and the resilience of our capital position.

RPS is first year sales increased by nearly 50% year-over-year, driven by stable, value sales and total deposits increased by 10%.

As we look ahead, we have a strong pipeline of known wins, which we anticipate will materialize in the second half of this year.

This sales momentum demonstrates that the offerings in our core recordkeeping and institutional market segments are resonating with customers.

We remain focused on initiatives to strengthen our operational and service capabilities in RPS as we advance our objective to build sustainable and profitable growth in this business over the long term.

In closing.

Ellen Cooper: We are deepening our strategic moat, shifting to higher margin, capital-efficient growth, investing in areas that sharpen our competitive edge, and evolving into a more agile, scalable organization. We are building a stronger Lincoln, grounded in a more resilient foundation and positioned to realize greater potential, a market-leading franchise shaped by disciplined transformation. We are better positioned to operate in a dynamic environment, align capital deployment with strategic priorities, and unlock value where we've built momentum and scale. We are energized by our strong trajectory and confident in our path forward. With that, I will turn the call over to Chris.

Capital position, we are deepening our strategic mode, shifting to higher margin, Capital, efficient growth investing in areas. That sharpen our Competitive Edge and evolving into a more agile. Scalable organization.

Christopher Neczypor: Thank you, Ellen, and good morning, everyone. Our second quarter results reflect another period of strong performance, marking our fourth consecutive quarter of year-over-year adjusted operating income growth. This consistent progress demonstrates the effectiveness of our strategy, the disciplined execution across our businesses, and the sustained momentum we are generating throughout the enterprise. Collectively, our businesses made meaningful advancements on their strategic initiatives, further strengthening Lincoln's foundation to deliver increasingly stable cash flows and attractive risk-adjusted returns. We remain confident and encouraged by our trajectory as we continue positioning Lincoln for durable long-term success. This morning, I will focus on three areas. First, I will walk through our consolidated results for the second quarter. Second, I will go through the details of our segment-level performance. Third, I will provide a brief update on our capital position and investment portfolio. Let us begin with a recap of the quarter.

We are building a stronger, Lincoln grounded in a more resilient foundation and positioned to realize greater potential, a market-leading franchise shaped by discipline transformation. We are better positioned to operate in a dynamic environment aligned, Capital deployment with strategic, priorities, and unlock value, where we've built momentum and scale. We are energized by our strong trajectory and confident in our path forward. And with that, I will turn the call over to Chris.

Thank you, Ellen, and good morning, everyone.

Our second quarter results, reflect another period of strong performance marking our fourth, consecutive quarter of year-over-year, adjusted operating income growth.

This consistent progress demonstrates the effectiveness of our strategy, the disciplined execution, across our businesses and the sustained momentum. We're generating throughout the Enterprise

Collectively, our businesses made meaningful advancements on their strategic initiatives, further strengthening Lincoln's foundation to deliver increasingly stable cash flows and attractive risk-adjusted returns.

We remain confident and encouraged by our trajectory as we continue positioning Lincoln for durable, long-term success.

This morning, I'll focus on three areas. First, I'll walk through our consolidated results for the second quarter.

Second, I'll go through the details of our segment, level performance and third, I'll provide a brief update on our Capital position and Investment Portfolio.

Christopher Neczypor: This morning, we reported second-quarter adjusted operating income available to common stockholders of $427 million, or $2.36 per diluted share. There were no significant items in the quarter. Additionally, our alternative investment returns were in line with expectations, delivering a 10% annualized return, or $101 million. Turning to net income, we reported net income available to common stockholders of $688 million, or $3.80 per diluted share. The difference between GAAP net income and adjusted operating income was driven primarily by the positive movement in market risk benefits amid a stable interest rate environment and higher equity markets, partially offset by a decline in the value of our related hedge instruments. Importantly, our hedge program explicitly targets capital. Although the heightened equity market volatility in the early part of the quarter contributed to some variability in hedge outcomes, performance was within the range of expectations given that level of volatility.

Let's begin with a recap of the quarter.

This morning, we reported second quarter results. Adjusted operating income available to common stockholders was $427 million, or $2.36 per diluted share. There were no significant items in the quarter.

Additionally, our alternative investment returns were in line with the expectations, delivering a 10% annualized, return or 101 million.

Turning to net income, we reported net income available to common stockholders of $688 million, or $3.80 per diluted share.

The difference between gaap net income and adjusted operating income was driven primarily by the positive movement in Market, risk benefits amid a stable interest rate environment and higher Equity markets. Partially offset by a decline in the value of our related hedge instruments.

Importantly, our hedge program explicitly targets Capital, although the heightened Equity Market volatility in the early part of the quarter, contributed to some variability in hedge outcomes, performance was within the range of expectations given that level of volatility.

Christopher Neczypor: Now turning to our segment results. Let us start with Group Protection, which delivered a record quarter with operating earnings of $173 million, up 33% from $130 million in the prior year's second quarter. The margin was 12.5%, up 250 basis points for the same period. This record performance was driven by three primary factors. First, Life Insurance results improved meaningfully year over year, driven by lower incidents and improved severity. While mortality outcomes can exhibit quarter-to-quarter volatility, we continue to see broad-based improvement consistent with our expectations. Second, disability results remained favorable, supported by an ongoing tight labor market, a still supportive interest rate environment, and incidence levels that remain near historic lows. At the start of this year, we indicated that if LTD incidence rates were voted towards our longer-term expectations, it would represent roughly a 100 basis point margin headwind in 2025.

Now, turning to our segment results.

Let's start with Group, which delivered a record quarter with operating, earnings of 173 million up 33% from 130 million in the prior year, second quarter. And the margin was 12.5% of 250 basis points for the same period.

This Record performance was driven by 3 primary factors.

First life results, improved meaningfully year-over-year driven by lower incidents and improved severity.

While mortality outcomes can exhibit quarter to quarter volatility, we continue to see broad-based Improvement consistent with our expectations.

Second this ability results remain favorable supported by an ongoing tight. Labor market is still supportive interest rate environment and incident levels that remain near historic lows.

Christopher Neczypor: However, based on what we are currently observing, incidence rates continue to track favorably compared to quarterly expectations, and we anticipate maintaining a level of favorability in the third quarter. Should incidence rates revert toward historical levels, the anticipated margin headwind would remain. But as of now, these positive trends are persisting. Third, our strategic shift toward higher margin business is driving sustained margin expansion. By broadening our customer base, diversifying our product portfolio, and maintaining disciplined pricing, we continue to realize the anticipated benefits of these strategic actions. As we noted coming into the year, we anticipated this strategy alone would drive roughly 100 basis points of year-over-year margin improvement, and our results have been exceeding this expectation. Now turning to Group product line results for the quarter.

At the start of this year, we indicated that if LTD incidence rates reverted toward our longer-term expectations, it would represent roughly a 100 basis point margin headwind in 2025.

However, based on what we are currently seeing, instance rates continue to track favorably compared to quarterly expectations, and we anticipate maintaining a level of favorability in the third quarter.

Should incident rates revert toward historical levels, the anticipated margin headwind would remain. But as of now, these positive trends are persisting.

And third, our strategic shift toward higher-margin business is driving sustained margin expansion by broadening our customer base, diversifying our product portfolio, and maintaining disciplined pricing. We continue to realize the anticipated benefits of these strategic actions.

As we noted coming into the year, we anticipated this strategy alone which Drive roughly 100 basis points of year-over-year margin improvements and our results have been exceeding. This expectation.

now, turning to group product line, results for the quarter,

Christopher Neczypor: Our life loss ratio improved considerably, with the loss ratio declining to 67.2% compared to 75.6% in the second quarter of 2024, reflecting favorable incidents and favorable volatility with life severity. As we look ahead to the second half of the year, it's worth noting that our strong performance in the comparable period last year benefited from particularly favorable life experience and could result in a higher life loss ratio year over year, assuming a more normal mortality backdrop. The disability loss ratio also improved year over year, coming in at 64.2% compared with 65.9% in the prior year quarter. This was driven by lower than anticipated incidence rates and strong claims management outcomes. Taking a step back and looking at the overall group business, we expect our margin for the second half of 2025 to be broadly in line with the margin achieved during the second half of 2024.

Reflecting favorable incidents and favorable volatility with life severity.

As we look ahead to the second half of the year, it's worth noting that our strong performance in the comparable period last year benefited from particularly favorable life experience and could result in a higher life loss ratio year-over-year. Assuming a more normal mortality backdrop.

The disability loss ratio also improved year-over-year coming in at 64.2% compared with 65.9% in the prior year quarter. This was driven by lower than anticipated, incidence rates in strong claims management outcomes.

Christopher Neczypor: Lastly, I'd like to briefly address the annual experience refund associated with one state's paid family leave program. In the past, this refund was recognized in the quarter it was received. For example, this quarter we recorded a refund of $15 million compared to $23 million in the prior year period. Prior to these two years, recognition often occurred in the third quarter. To better align recognition of this annual refund with the full-year operations to which it relates and consistent with practices observed in the industry, we will accrue the refund on a quarterly basis going forward. This approach provides improved matching between the refund and our underlying business activity during the year. The quarterly accrual amounts will represent our best estimates and remain subject to annual adjustments.

Taking a step back and looking at the overall Group business, we expect our margin for the second half of 2025 to be broadly in line with the margin achieved during the second half of 2024.

Lastly, I'd like to briefly address the annual experience refund associated with the 1 State Paid Family Leave program.

in the past, this refund was recognized in the quarter, it was received

For example, this quarter, we recorded a refund of $15 million compared to $23 million in the prior year period.

Prior to these 2 years recognition, often occurred in the third quarter.

To better align recognition of this annual refund, with a full year operations to which it relates and consistent with practices observed in the industry. We will ACR the refund on a quarterly basis going forward.

This approach provides improved matching between the refund and our underlying business activity during the year.

Christopher Neczypor: Overall, our focus, disciplined execution, and ongoing efforts to grow Group Protection into a larger and increasingly profitable segment within Lincoln's overall earnings mix remains a top priority. This quarter's record results further reinforce our conviction in the long-term growth potential, sustainability, and strategic importance of the group business as we look ahead. Now turning to Annuities. Annuities generated second-quarter operating income of $287 million compared to operating income of $297 million in the prior year quarter. The decline was primarily driven by traditional Variable Annuity outflows, partially offset by ongoing growth in our spread income, which enhances our long-term earnings stability. Sequentially, earnings declined modestly from $290 million in the first quarter, reflecting lower average account balances.

The quarterly approval amounts will represent our best estimates and remain subject to annual adjustments.

Overall our Focus disciplined execution and ongoing efforts to grow group protection into a larger and increasingly profitable segments within Lincoln's. Overall earnings. Mix remains a top priority, this quarter's record results. Further, reinforce our conviction in the long-term growth potential sustainability, and strategic importance of the group business, as we look ahead,

Now, turning to annuities.

Annuities generated second quarter operating income of $287 million, compared to operating income of $297 million in the prior year quarter.

The decline was primarily driven by traditional variable annuity outflows, partially offset by ongoing growth in our spread income.

Which enhances our long-term earning stability.

Christopher Neczypor: In the second quarter, average account balances, net of reinsurance, were roughly flat compared to the prior year quarter, as strength in RILA, where balances grew 13%, was offset by traditional Variable Annuity net outflows. Turning to spreads, spread income continues to grow, with spread-based products representing 28% of total Annuity account balances net of reinsurance, a two percentage point increase from a year ago. RILA account balances increased 15% over the prior year quarter and now represent 22% of total balances, also net of reinsurance. Net flows for spread-based products remained strong in the quarter, nearing $1 billion, underscoring steady progress in our strategic diversification. Lastly, ending account balances, net of reinsurance, increased sequentially across all product lines and finished the quarter approximately 5% higher than the average balances during the period. This positions us favorably and provides a tailwind as we look toward the third quarter.

Sequentially, earnings declined modestly from $290 million in the first quarter, reflecting lower average account balances.

In the second quarter average account, balances net of reinsurance where roughly flat compared to the prior year quarter as strength and Riya were balances grew. 13% was offset by traditional variable annuity net outflows

Turning to spreads spread income continues to grow with spread-based products, representing 28% of total annuity account. Balances, net of reinsurance, a 2 percentage Point increase from a year ago.

Riya account, balances increased 15% over the prior year quarter and now represent 22% of total balances. Also, net of reinsurance.

Net flows for spread-based products remain strong in the quarter, nearing $1 billion, underscoring steady progress in our strategic diversification.

Christopher Neczypor: Overall, we remain confident in the strategic trajectory of our Annuities business, supported by our strong capital position and our ability to drive sustainable, quality earnings over the long term. Retirement Plan Services reported second-quarter operating earnings of $37 million compared to $40 million in the prior year quarter, but sequentially up from $34 million in the first quarter. Year-over-year results remained pressured from stable value outflows experienced over the past 12 months, partially offset by equity market favorability. Our base spread was 99 basis points in the quarter, down four basis points sequentially and year over year, in part due to a one-time administrative adjustment impacting interest credited. As we look ahead to the second half of the year, we expect spreads to move back toward first-quarter levels.

Lastly, ending account balances that have reinsurance increased sequentially across all product lines and finished the quarter approximately 5% higher than the average balances during the period. This positions us favorably and provides a tailwind as we look toward the third quarter.

Overall, we remain confident in the strategic trajectory of our annuities business, supported by our strong capital position and our ability to drive sustainable quality earnings over the long term.

Retirement plan Services. Reported second quarter operating earnings of 37 million compared to forty million dollars in the prior year quarter, but sequentially up from 34 million in the first quarter.

Year-over-year results remain pressured from stable value outflows experienced over the past 12 months, partially offset by equity market favorability.

Our base spread was 99 basis points in the quarter, down 4 basis points sequentially and year-over-year, in part due to a one-time administrative adjustment impacting interest credited. As we look ahead to the second half of the year, we expect spreads to move back toward first-quarter levels.

Christopher Neczypor: Net outflows totaled $585 million for the quarter, showing sequential improvement from $2.2 billion in outflows in the first quarter, but remaining elevated year over year. With ongoing strength in sales momentum and pipeline activity, we anticipate overall net flows will turn positive in the third quarter. Account balances benefited from equity market performance, with average account balances increasing 5% year over year. End-of-period balances reached $116 billion, up 7% sequentially, and were 4% above the quarter's average account balance, providing a tailwind for earnings as we enter the third quarter. While the recent headwinds to stable value flows have more than offset the positive impact of equity market-driven growth and expense discipline, we remain confident in the underlying growth of Retirement Plan Services over the long term. Lastly, turning to Life Insurance.

Net outflows totaled $585 million for the quarter, showing sequential improvement from $2.2 billion in outflows in the first quarter but remaining elevated year-over-year.

With ongoing strength in sales, momentum, and pipeline activity, we anticipate overall net flows will turn positive in the third quarter.

Account balances benefited from equity market performance, with average account balances increasing 5% year-over-year.

Providing a tailwind for earnings as we enter the third quarter.

While the recent headwinds to stable value flows have more than offset the positive impacts of equity market-driven growth and expense discipline, we remain confident in the underlying growth of retirement plan services over the long term.

Christopher Neczypor: Life reported operating earnings of $32 million for the second quarter, reflecting substantial improvement compared to an operating loss of $35 million in the prior year quarter and sequential improvement from the operating loss of $16 million reported last quarter. The year-over-year and sequential improvements were broad-based, driven by higher alternative investment returns, improved mortality, and expense discipline. Mortality results for the quarter improved modestly, driven by lower claim incidents, while severity remained broadly in line with expectations. As previously noted, mortality can fluctuate quarter to quarter. Turning to expenses, we continue to see year-over-year improvement driven by disciplined expense management. Net GNA expenses declined 2% compared to the prior year quarter, reflecting sustained underlying efficiency. Maintaining expense discipline remains critical to supporting earnings improvement and profitable growth in Life Insurance. Annualized alternative investment returns for the quarter were 10%.

Lastly, turning to Life Insurance.

Life reported operating earnings of $32 million for the second quarter, reflecting substantial improvement compared to an operating loss of $35 million in the prior quarter and sequential improvement from the operating loss of $16 million reported last quarter.

Improved modestly, driven by lower claim incidents, while severity remained broadly in line with expectations.

As previously noted, mortality can fluctuate quarter to quarter.

Turning to expenses, we continue to see year-over-year Improvement driven by disciplined expense management. Net CNA expenses declined 2% compared to the prior year quarter reflecting sustained underlying efficiency.

Maintaining expense, discipline remains critical to supporting earnings Improvement and profitable growth in life.

Christopher Neczypor: As a reminder, alternative assets are a good fit for our Life Insurance liabilities, and these assets provide important earnings support for the business. Overall, our second quarter performance was aligned with our expectation and reflects ongoing progress across key areas of the Life Insurance business, improving mortality trends, higher alternative investment returns, and effective expense management. While quarterly variability can occur, we remain confident in the underlying trajectory of our Life Insurance business as we look towards the next few years. Now for a brief update on capital. We again ended the quarter with an estimated RBC ratio well above 420%, consistent with our strategy of maintaining a capital buffer above our 400% target. With our transaction with Bain Capital now closed, we have further strengthened our deployable excess capital position, enhancing our flexibility to strategically execute and invest across several priority areas.

Annualized, alternative investment returns for the quarter were 10%. As a reminder, alternative assets are a good fit for our life liabilities, and these assets provide important earning support for the business.

Overall our second quarter performance was aligned with our expectation and reflects ongoing progress across key areas of the life business improving mortality Trends, higher alternative investment returns and effective expense management.

While quarterly variability can occur. We remain confident in the underlying trajectory of our life business as we look towards the next few years.

Now, for a brief update on Capitol,

We again ended the quarter with an estimated RBC ratio, well above 420%. Consistent with our strategy of maintaining a capital buffer above our 400% Target.

Christopher Neczypor: As always, our disciplined approach will guide our deployment decisions. Given our strengthened position, I wanted to provide clarity on how to think about the deployment of this excess capital. If you think about some of the larger strategic objectives in transforming Lincoln National Corporation, big picture, they can be categorized as: one, growing Group Protection benefits to become a much larger piece of the overall Lincoln National Corporation model. We've been deploying excess capital into this business over the past two years to invest in our capabilities and profitably grow, and that trajectory will continue, but largely self-funded from the capital being generated from that business today. The second priority we've discussed is diversifying our Annuities mix to be less dependent on Variable Annuities and equity market risks and more leveraged to growth and spread-based products.

With our transaction with Bain Capital now closed. We have further strengthened our Deployable excess Capital position, enhancing our flexibility to strategically execute and invest across several priority areas.

As always, our disciplined approach will guide our deployment decisions.

Given our strengthened position. I wanted to provide Clarity on how to think about the deployment of this excess capital.

If you think about some of the larger strategic objectives and transforming Lincoln, big picture, they can be categorized as one growing group. Benefits to become a much larger piece of the overall Lincoln model. We've been deploying excess capital into this business over the past two years to invest in our capabilities and profitably grow. And that trajectory will continue, but largely self-funded from the capital being generated from that business today.

Christopher Neczypor: Here, as we've mentioned, deploying excess capital can accelerate our goals, and it will come in two forms. The first is retaining more of the Fixed Annuities business we sell today, and you'll start to see that in the fourth quarter. Reducing our reliance on flow reinsurance requires capital, and a portion of the deployable excess capital we have today will be set aside to support this initiative. At the same time, growing the top line in RILA and Fixed Annuities in a capital-efficient manner by leveraging Alpine and with an increased competitive advantage as we onboard the Bain asset sourcing will also require capital, and we have planned for that over the next few years. The third priority we have talked about is continuing to optimize our legacy life portfolio.

The second priority we've discussed is diversifying our annuity, mix to be less dependent on variable and Equity Market risks and more leverage to growth and spread based products.

And a portion of the Deployable excess Capital. We have today will be set aside to support this initiative.

At the same time, growing the Top Line in raila and fixed in a capital efficient manner, by leveraging Alpine, and with an increased competitive advantages, as we onboard, the Bane asset sourcing, we'll also require capital and we've planned for that over the next few years.

Christopher Neczypor: This block remains the biggest drag on our overall free cash flow, though it has improved considerably over the past two years post the reinsurance deal and expense actions taken. Deploying excess capital toward this objective can take a number of different forms: rotating the asset mix, restructuring existing captives and lowering run-rate operating costs, or exploring external reinsurance solutions. The team is actively working across all these fronts to assess the best return on capital. From a timing perspective, some of this excess capital will be deployed in Q3 and Q4, while some may take through the end of next year. We are excited about the opportunity ahead of us and the ability to grow our free cash flow and deliver a more diversified, higher risk-adjusted return set of earnings as a result. Now turning to our investment performance.

The third priority we've talked about is continuing to optimize our Legacy life portfolio.

This block Remains the biggest drag on our overall. Free cash flow though has improved considerably over the past 2 years host. The reinsurance deal and expense actions taken.

Deploying excess Capital toward this, objective can take a number of different forms. Rotating the asset mix restructuring, existing captives and lowering run rate operating costs or exploring, external reinsurance Solutions, and the team is actively working across. All these fronts to assess the best return on Capital.

From a timing perspective. Some of this excess Capital will be deployed in third quarter and fourth quarter while some may take through the end of next year.

We're excited about the opportunity ahead of us in the ability to grow our free cash flow and deliver a more Diversified higher risk. Adjusted return set of earnings as a result.

Christopher Neczypor: Overall, we delivered solid performance again in Q2, reflecting the ongoing high quality and diversification of our portfolio. Our results underscore our continued strategic emphasis on investment optimization. We remain focused on executing strategic actions aligned with our enterprise priorities, particularly the growth of spread-based earnings. The onboarding of Bain Capital will enable us over time to deploy additional capital into structured and private strategies. These efforts complement broader initiatives to further optimize our investment portfolio while supporting objectives around sales growth, earnings potential, and capital generation, including initiatives designed to enhance overall capital efficiency. Lastly, our alternative investment portfolio achieved a 2.5% return this quarter, meeting our targeted level, driven by strong performance across all underlying strategies. In closing, our strong second quarter results reinforce Lincoln's accelerating momentum, highlighting continued earning strength, disciplined capital management, and focused execution on our strategic objectives.

Now, turning to our investment performance.

Overall we delivered solid performance again in the second quarter reflecting the ongoing high quality and diversification of our portfolio.

Our results underscore our continued, strategic emphasis on investment optimization.

We remain focused on executing strategic actions aligned with our Enterprise priorities. Particularly the growth of spread-based earnings

The onboarding of Bain Capital will enable us over time to deploy additional Capital into structured and private strategies.

These efforts complement broader initiatives. To further optimize our Investment Portfolio while supporting objectives around sales growth earnings potential and capital generation including initiatives designed to enhance overall Capital efficiency.

Lastly, our alternative Investment Portfolio. Achieved a 2.5% return. This quarter meeting our targeted level driven by strong performance across all underlying strategies.

Christopher Neczypor: We've advanced our operating model to emphasize higher margin, capital-efficient growth, enabling sustainable free cash flow generation and attractive risk-adjusted returns. Our strong capital position provides flexibility to strategically allocate resources not only to areas of established scale and profitability but also to emerging opportunities that offer compelling prospects for profitable growth. We remain confident in our trajectory and our ability to deliver enduring shareholder value. With that, let me turn the call back over to Tina.

In closing, our strong second quarter results, reinforced Lincoln's, accelerating momentum, highlighting continued, earning strength, disciplined Capital Management and focused execution on our strategic objectives. We've Advanced our operating model to emphasize higher margin Capital, efficient growth enabling sustainable, free cash, flow generation and attractive risk adjusted returns.

our strong Capital position, provides flexibility, to strategically allocate resources, not only to areas of established scale and profitability, but also to emerging opportunities that offer compelling prospects for profitable growth,

we remain confident in our trajectory and our ability to deliver enduring shareholder value.

Tina Madon: Thank you, Chris. Let me turn the call over to the operator to begin Q&A. Operator?

With that, let me turn the call back over to Tina.

Thank you Chris. Let me turn the call over to the operator to begin Q&A operator.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, again press star one. For optimal sound quality, please do not use the speakerphone. Please speak directly into your receiver or use a wired headset with a microphone. As a reminder, please limit yourself to one question and one follow-up. Your first question comes from Ryan Krueger with KBW. Please go ahead.

Thank you. We will now begin the question in answer session. If you would like to ask a question, please press star 1 on your telephone keypad, to raise your hand and join the queue. And if you would like to enjoy your question. Again, press star 1 for optimal sound quality, please do not use the speakerphone.

Please speak directly into your receiver or use a wired headset with a microphone.

And as a reminder, please limit yourself to 1 question in 1, follow up.

Your first question comes from Ryan Krueger with KBW, please go ahead.

Analyst: Hi, thanks. Good morning. My first question was on Group and thinking more about the shift into smaller local markets and Supplemental Health products. I know you had cited 100 basis points of margin expansion from that this year, and I think you said you are running ahead of that. Is that something that you expect to continue to cause margin expansion beyond this year? Can you maybe help think about where the margin in the group business may ultimately get to over time from these changes?

Hi. Thanks. Good morning. My first question was on group and thinking more about the the shift into um into smaller local markets, and supplemental health products.

Tina Madon: Ryan, I am going to start, and good morning, with just an overall around the group business, then I will hand it over to Chris to specifically address the margins. First of all, as you heard from our remarks, we are extremely pleased with the execution across our group business. As you know, and exactly as you asked, we have a targeted segment strategy. From a segment perspective, the place that we have been the most focused in terms of growing has been in the local market. The local market, first of all, we have been building out all the capabilities there that are required from an overall digital and technological perspective. We have also been expanding our products because in the local market, the expectation is that you will have a bundled set of overall products.

I know you would you would say that 100 basis points of margin expansion from that this year and I think you said you're running ahead of that. Is that something that you expect to continue to cause margin expansion Beyond this year? Um, and can you, you know, maybe help think about where the margin in the group is this may may ultimately get to over time from from these changes.

Tina Madon: It happens to be the highest margin and fastest growing part of Group as well. In addition to that, we also have been diversifying our products. A place where we have been doing that is in Supplemental Health. Supplemental Health is also a higher margin product. We have been seeing really nice growth in both of those areas. We saw that come through again this quarter. We saw that if you look at our overall sales, you will see that the sales increase of 16% year over year is fully, for the most part, attributed to growth in local markets. That growth is also attributed to Supplemental Health. I think the other thing that is worth pointing out is that about two-thirds of the sales that came through in this particular quarter were employee paid, so voluntary benefits, and also from existing customers where we are growing lines of coverage.

Ation is that you will have bundled set of overall products, um, and it happens to be the highest margin and fastest growing part of a group as well.

In addition to that, we also have been diversifying our products and a place where we have been doing. That is in supplemental health. Supplemental, health is also higher margin product, and we've been seeing, um, really nice growth in both of those areas. And so we saw that come through again. This quarter, we saw it. If you look at our overall sales, you'll see that the sales increase of 16% year-over-year is fully. Uh, for the most part attributed to growth in local markets. And that growth is also attributed to supplemental health. And I think the other thing that's worth pointing out is that about 2/3 of the sales that came through? In this particular quarter were, um, employee paid. So, voluntary benefits and also from existing customers where we are growing um lines of coverage

Christopher Neczypor: Ryan, let us just talk about the margin for a second. You are right. We said that we expected 100 basis points of margin improvement in 2025 from our strategic efforts. I would say, though, that that was a broader comment than just growing Supplemental Health and local markets. I think those are two big examples, but the other is repricing the business. Specifically to your question, we are probably further along in repricing the business relative to some of the other strategic initiatives. But we see a lot of runway in growing the Supplemental Health product portfolio and the local market from a segment perspective. I think if you step back, though, to your general question, as Ellen Cooper said, it was a great quarter for Group Protection.

And Ryan, let's just talk about the margin for a second. The

you're right. We said that we expected a 100 basis points of margin Improvement in 2025 from our strategic efforts. I would say though that that was a broader comment than just growing sub health and local markets. I think those are 2 big examples but the other is repricing the business. So specifically to your question, you know, we're we're probably further along in repricing, the business, um, relative to some of the other strategic initiatives, but we see a lot of

Runway, uh, in growing the supplemental health, um, product portfolio and the local market from a segment perspective.

I think if you if you step back though, to your, to your, you know, general question,

Christopher Neczypor: If you think about the drivers, disability, we continue to see loss ratio improvement there. That is really being driven by the incidence levels continuing to be favorable. Recoveries are relatively flattish from a metric perspective year over year. 2024 was exceptionally strong for us, as we had mentioned, due to a lot of the process and operational improvements that we have made. The dynamic that is occurring in the industry with lower incidence rates is certainly helping us as well. Frankly, at the moment, we do not see that reverting. It certainly could. We have talked about some of the drivers from a macro perspective, but the positive trend there continues. The second thing that really benefited the quarter was the life loss ratio, which can be volatile quarter to quarter. I think the improvement year over year was north of eight points.

As Alan said, it was a great quarter for group. Um if you think about the drivers uh you know, disability you know, continue to see loss ratio Improvement there. Um, that's really being driven by the incidence levels, continuing to be favorable. Uh, recoveries are are relatively flattish from a metric perspective. Year-over-year 2024 was exceptionally strong for us. As we had mentioned due to a lot of the process and operational improvements that we've made. So, you know, the the dynamic that you know, is in the industry with lower incidence rates um is certain helping us as well. And frankly at the moment we don't see that uh reverting it's certainly could we've talked about some of the drivers from a macro perspective but it's you know, the the positive trend there continues, the second thing uh that you know really benefited. The quarter was the life loss ratio.

Christopher Neczypor: We would not expect that necessarily to occur. We do not see anything that is problematic. But when you look at our quarterly results from a loss ratio perspective, specifically for Group Life, you can see that there is volatility. The third thing really for the quarter is just the fact, as we said, we continue to execute on the strategic initiatives, and that flows through in a lot of the different dimensions. If you step back and you think about the back half of the year, I would just point you to a few things. First, as I said, we do not really see any signs of deterioration in incidence rates. It could. But at the moment, we continue to see the trends there being positive. In life in particular, as a reminder, we had a very strong fourth quarter last year.

Which can be, you know, volatile quarter to quarter. I think the Improvement year-over-year was, you know, north of 8 points, we wouldn't expect that necessarily to occur. We don't see anything that is problematic, but when you look at our quarterly results from a loss ratio perspective, specifically for group life, you can see that there's volatility uh, and then the third thing really for the quarter it's just the fact is we said, you know we continue to execute on the Strategic initiatives um and that flows through and a lot of the different dimensions.

Christopher Neczypor: When you think about your margin, you put all that together for the back half of the year. I think, as I mentioned in the prepared remarks, we would expect a similar margin for the second half of 2025 to the second half of 2024. Then you put that together with the first half. The first half, we were around 10% plus the back half, somewhere around 8%. We would expect, just from the way that that math works, a 9% plus margin for the year, which is 100 basis points of improvement relative to last year. To the very beginning part of your question, the outlook that we had given at the beginning of the year, where we said we would expect margins to be flat year over year, given the fact that we had 100 basis points of macro tailwinds that we didn't know if it would persist.

So then if you step back and you think about the back half of the year, you know, I would just point you to a few things, you know, first as I said, we don't really see any signs of deterioration in incidents rates it could. Um, but at the moment we continue to see the trends, there being positive, and in life in particular, um, as a reminder, we had a very strong fourth quarter last year. So, you know, when you think about your margin, um, you put all that together for the back half of the year. You know, I think as I mentioned in the prepared remarks, uh, we would expect, you know, a similar margin for the second half of 25 to the second half of 24. So then you put that together with the first half. So the first half we were around 10%, um, plus uh, the back half somewhere around 8%, you know, we would expect, you know, just from the way that that math Works a 9% plus more than for the year, which is a 100 basis points of improvement, uh, relative to last year. So,

Christopher Neczypor: The reality is that things continue to be favorable from a macro perspective. But more important, the 100 basis points plus of Lincoln-specific, if you will, strategic execution on growing the margin remains. Long answer to your question, but I think it's important because at the end of the day, the macro could change, but the underlying momentum we have, we think will continue.

To the very beginning part of your question. The, the Outlook that we had given at the beginning of the year where we said we would expect margins to be flat year-over-year. Given the fact that we had a 100 basis points of macro Tailwinds that you know, we didn't know if it would um persist. Well the reality is is that you know, things continue to be favorable from a macro perspective but more important the 100 basis Points Plus of Lincoln specific, if you will uh, strategic execution on growing the margin remains so long answer to your question, but I think it's important because at the end of the day, the macro could change. But the underlying momentum we have we think will continue

Analyst: Thank you. No, that was really helpful. A follow-up was just on the restructuring of the life captives. Can you give any perspective on how meaningful that could be to earnings and free cash flow? Is that something that could be more of a second half of this year event or more likely in 2026?

Thank you know, that was really helpful and then follow-up was just on the um, the restructuring of the life captives.

Christopher Neczypor: I don't think we're going to get into the numbers right now, Ryan. We need to go through the work. It's something we've been working on for a while. It's an example of a number of the different ways that we've looked at optimizing the life portfolio. Once we have something more concrete, we'll give you some ways to think about the return on capital. As we talked about with the deployable excess capital, everything we're doing is geared towards maximizing the return we're going to get on that relative to the opportunities that we have in front of us. As it relates to timing, it's hard to say, but the actual execution of something like that is one dynamic. The impact on earnings and free cash flow, at a minimum, would be next year, not this year.

Can you give any perspective on how meaningful that could be to to earnings and free cash flow and is, is that something that could be more of a a second half of of this year event or more likely in 26?

To go through the work. It's something we've been working on for a while. It's an example of a number of the different ways that we've looked at optimizing the life portfolio. Once we have something more concrete, we'll we'll give you some ways to think about the return on Capital. But, you know, as we talked about with the with the Deployable excess Capital, everything we're doing is geared towards maximizing the, you know, return. We're going to get on that relative to the opportunity that we have in front of us as it relates to timing. You know. It it's hard to say. But you know the the actual execution of something like that uh, is 1 Dynamic. But then the the impact on earnings and free cash flow, you know, at a minimum would be next year, not this year.

Analyst: Got it. Thank you.

Alright, thank you.

Operator: Your next question comes from the line of Suneet Kamath with Jefferies. Please go ahead.

Analyst: Great, thanks. I wanted to start with the RILA product. It looked like your sales were quite strong, I think plus 32%. I think the industry was maybe plus 20%, so you are gaining share. There was another company that sort of talked about some increased competition in RILA. I just wanted to get a sense of what you are seeing in the market. Then relatedly, it looked like the flows may have been down a decent amount year over year. Can you just talk about that? Again, the flows I am specifically talking about is RILA. Thanks.

Your next question comes from the line of Senate. Kamath with Jeffrey's please go ahead.

Tina Madon: Great. So thanks and good morning, Suneet. Yes, we saw year over year, as it relates to RILA, we saw about a 32% increase in overall sales. Having said that, if you recall, we introduced our second-generation RILA product in the third quarter of last year. That was when we started to really see our sales accelerate. So you saw in the third quarter about $1.2 billion. Then relative sequentially, if you just look at where we were first quarter compared to where we are second quarter, we are up about 12% sequentially as the industry continues to grow. Importantly for us, and we have continued to highlight the fact that we are focused on profitable growth as opposed to top-line sales growth.

Uh, great thanks. I wanted to start with the the Rya product. It looked like your sales were quite strong. Uh I think plus 32% I think the industry was maybe plus 20. Uh so you're gaining share. There was another company that sort of talked about some increased competition in Riya. So I just wanted to get a sense of what you're seeing in the market and then relatedly, it looked like the flows may have been down a decent amount in year-over-year. So can you just talk about that? And again, the flow is on specifically talking about is is Rio. Thanks great. So so thanks and good morning sit. So um, yes, we saw year over year as it relates to Rio. We saw about a 32%, um, increase in overall sales. Having said that,

Tina Madon: So it is really critical to us that as we are thinking about overall product sales, that we are also thinking about capital efficiency. We are thinking about ensuring that we are maintaining our profitability targets, et cetera. The second-generation RILA product has some unique features associated with it, crediting rate strategies, indices, et cetera, that are extremely popular, and they are resonating. That is part of what is supporting us. Additionally, and I also mentioned this in remarks, we are expanding some of our distribution segments as well. So we are seeing some new segments that are also seeing the RILA product attractive. We are on those shelves, and we are seeing some success there. So more to come as we continue to grow out the RILA product.

If you recall, we introduced our second generation, Riya product in the third quarter of last year. And that was when we started started to really see our sales accelerate. So, so you saw in the third quarter, um, about 1.2 billion and then, you know, relative sequentially. If you just look at where we were first quarter, compared to where we are second quarter, we're up about 12% sequentially as, as the industry, um, continues to grow importantly for us. And we, we've continued to highlight the fact that we are focused on profitable growth as opposed to Topline sales growth. So it's really critical to us that as we're thinking about overall, um, product sales, that we are also thinking about Capital efficiency, we're thinking about ensuring that we are maintaining our profitability. Uh, seg targets, Etc. Um, the second generation, Rio product has some unique features. Um, so associated with it, crediting rate strategies. Um, indices

Tina Madon: As we mentioned, it is an important part of our overall spread-based business strategy, as is continuing to grow the overall fixed segment as well. I will hand it over to Chris for the second part of the question.

Etc, that are extremely popular and they are resonating. And that's part of what is supporting us and then additionally. And I also mentioned this in remarks, um, we're expanding some of our distribution segments, as well. So we're seeing some new segments that are also, um, seeing the Riya product attractive and we're on those those shelves and we're seeing some success there. So more to come, as we continue to grow out the Riya product. As we mentioned, it's an important part of our overall, um, spread-based business strategy as is.

Christopher Neczypor: Right. So, Suneet, I think the flows question is relatively straightforward. This is a block that is still relatively new. If you think about when we in the industry really started growing RILA, for us, it was probably about five or six years ago, maybe seven. But if you just think about the natural trajectory as those products come out of surrender period, you will see more outflows. The goal is to retain those policyholders into new RILA products. But at the end of the day, as that block ages, you would expect to see, and you are seeing it with some of our peers as well, the outflows increase. But the goal obviously is then to have sales increase more than that to continue to grow the block.

Continuing um to grow the overall fixed segment as well and I'll hand it over to Chris for the second part of the question.

Right? So I think the flows question is relatively straightforward. This is a block that is still relatively new, right? If you think about when we in the industry really started, uh, growing, uh Riya, you know, for us, it was probably about 5 or 6 years ago, maybe 7. But if you just think about the natural trajectory, as those products, come out of surrender, period. You know, you will see more outflows, you know, the goal is to retain those, um, uh, policy holders into new Rial products. But, you know, at the end of the day, as that as that block ages, you would expect to see and you're seeing it with some of our peers as well. Um, you know, the outflows, um, increase. But the goal obviously, is then to have sales increase more than that, um, to continue to grow the block.

Analyst: OK, that makes sense. I guess my second question, I guess for Christopher Neczypor, just wondering how you are feeling about that 45% to 60% free cash flow conversion guide that you gave us for 2026. I just want to understand, it seems to me that that guidance was given pre-Bain. If one of the objectives here of the Bain Capital is to improve risk-adjusted returns and free cash flow conversion, it would seem that with the Bain Capital, you should be perhaps above the target that you gave pre-Bain. I just wanted to make sure I am thinking about it right. Thanks.

Christopher Neczypor: We are feeling good about the outlooks that we provided, although obviously we give more of a concrete view at the end of the year, Suneet, as you know. The point on Bain is a nuanced one because, as we just talked about, we are going to deploy that capital over the next 18 months. We are not anchoring to a 2026 number as it relates to the returns that we will get on that capital. But I agree, longer term, if you think about both Lincoln as a product mix, the industry, the businesses that we are growing, and now the ability to deploy Bain into maximizing some of the areas that can be maximized, of course, the longer-term free cash flow conversion should be north of where it is. Even if you go back two years to the outlook that we gave, we talked about the 2026 guide.

Okay that that makes sense and then I guess my second question. Uh I guess for Chris um just wondering how you're feeling about that 45 to 60% free cash flow conversion guide that you gave us for 26 and I just want to understand like it it seems to me that that guidance was given pre-b and so if 1 of the objectives here of the Bain Capital is to improve risk, adjusted returns and free cash flow conversion. It would seem that with the Bain Capital. You should be perhaps above the targets that you gave pre-b, but I just wanted to make sure I'm thinking about it. Alright, thanks.

Christopher Neczypor: We also gave some thoughts on what the longer term would look like. At the end of the day, I would say because we are going to deploy the Bain capital over the next 18 months, I would not change your thinking as it relates to the trajectory that we are on relative to what we talked about before. But absolutely, longer term, as we grow Group, as we are more efficient with Bermuda, as we are more efficient from an operating model, all of those things, and frankly, dealing with the legacy life block, all of those things would suggest a higher free cash flow conversion rate, but over time.

Industry, the businesses that were growing and now the ability to deploy Bane into, you know, maximizing some of the areas that you know can be maximized, of course, the longer term, free cash flow conversion, should be North, where it is. And and even if you go back, 2 years to the Outlook that we gave, you know, we we talked about the um, 2026, uh guide. And then we also gave some thoughts on what the longer term would look like. So yeah, at the end of the day, I would say because we're going to deploy the main capital uh, Capital uh, over the next 18 months. You know. I wouldn't I wouldn't change your thinking as it relates to the trajectory that we're on relative to what we talked about before, but absolutely long longer term as we grow group, as we're more efficient with Bermuda as we're more efficient uh, from an operating model, all of those things and and frankly dealing with the the Legacy life block. All of those things would suggest a higher free cash flow conversion rate, but over time

Analyst: OK, thanks. That makes sense. Thanks.

Okay. Thanks, that makes sense. Thanks.

Operator: Your next question comes from the line of Alex Scott with Barclays. Please go ahead.

Your next question comes from the line of Alex Scott with Barkley's. Please go ahead.

Analyst: Hey, good morning. I wanted to see if you could give us a little more color on some of the things you are doing on distribution and Group in particular. It sounds like you are pretty optimistic on the growth profile of that business and just interested in what will be the drivers of that growth. Is it the capabilities in the platform? Is it the distribution and some of the things you are doing there? I just want to get a better feel for how you are going to grow.

Hey, good morning. Um, I wanted to see if you could...

Give us a little more color on some of the things you're doing on distribution and group in particular, I mean, it sounds like you're pretty optimistic on the growth profile of that business. And

Tina Madon: Absolutely. Good morning, Alex Scott. As it relates to Group and how we are thinking about distribution or really how we are thinking about competitive differentiation, it is all of the above. Starting with the fact that a targeted segment strategy enables our team to really be focused at the segment level, starting with distribution, where we have dedicated teams that are focused on the local, the regional, and the national market and really strengthening relationships from that level. We very much have been focused on what we think of as strategic broker relationships, which are really critical, and again, dedicating people at the different market segments to be able to build in and enhance those overall relationships. While we are doing that, we also very much have been investing in really building the capabilities, the digital capabilities, the technology capabilities.

You know, just interested in, you know what, what, what will be the drivers that that growth is it, you know, the capabilities and the platform is it the distribution and some of the things you're doing there. I just want to get a better feel for how you're going to grow.

Absolutely and good morning, Alex.

Tina Madon: I would say that they are really across a couple of different areas. First is, for example, thinking about InsureTech. Thinking about our ability to connect into the benefits administrative systems and to be able to provide more ease of use and more access. That is important across all segments. It is even more important in the local market, where they just tend to be smaller businesses. That is really critical. Having more digital tools. Those digital tools are there for the brokers, they are for the employers, and they are for the employees. We have done a lot there. We have invested quite a bit in leave management, and that has been an important part, particularly upmarket, of what differentiates us there as employers and employees are trying to navigate between paid family leave, short-term disability, long-term disability, Supplemental Health, how all of that integrates.

As it relates to group and how we're thinking about distribution or really, how we, how we're thinking about competitive differentiation, it's all of the above. So, starting with the fact that a targeted segment strategy, enables our team to really be focused at the segment level starting with distribution, um, where where we have dedicated teams that are focused on the local, the regional, and the National Market and really strengthening relationships. Um, at from, from that level, we, uh, we very much have been focused on what we think of as strategic, uh, broker relationships, which are really critical. And again, dedicating people at the different market segments to be able to build in and and enhance those overall relationships. But while we're doing that, we also very much have been investing in really building the capabilities, the digital capabilities, the technology capabilities, and I would say that

Tina Madon: That has been an important part of the overall capability as well. I am not sure if your question also extends over into our LFD, but let me just spend a minute on there. As you know, we are really known for our distribution leadership. It gives us the ability to lean in as we continue to build out our products and also our capabilities, both on the retail life side and also on the retail Annuity side. On the Annuity side, for example, where we are really leaning into having consistent presence, for example, in the Fixed Annuities markets, some of what we are doing there is really deepening our partnerships. We are working directly with some of our distribution partners to have unique features that are specifically for their shelves that also will support our capabilities going forward.

They're, they're really across a couple of different areas. Um, first is, for example, um, thinking about insurtech. And so thinking about our ability to connect into the benefits administrative systems and to be able to provide more ease of use and more access. Um, that's important, across all segments. Um, it's even more important in the local market where they just tend to be smaller businesses. And so, that's really critical having more digital tools. Those digital tools are they're for the Brokers, they're for the employers and they're for for the employees and we've done a lot there. Um, we've invested quite a bit in leave management and that's been an important part, particularly up Market of what differentiates us there, as as employers and employees, are trying to navigate between, um, Paid Family leaves, short-term disability long-term, disability, supplemental health, how all of that integrates? Um, and and so that's been an important part of the overall, um, capability as well. Um, I'm not sure

If your question, also extends over into our lfd, but let me just spend a minute on there. So as you know, we we are really known for our distribution leadership and so it gives us the ability to lean in as we continue to build out our products and and also our capabilities both on the retail life side and also on the retail annuity side. So on the annuity side, for example, where we're really leaning into having consistent presence for example, in the in the fixed,

Tina Madon: Same thing on the Life Insurance side, and I addressed that in our remarks as well, really working much more closely with the financial professional, providing them with digital tools, which has been critical, automated sales processes for new business, both on the Life Insurance and Annuity side. All of the ease of use of working with us and providing tools and support are supporting us to be able to continue to grow the business.

Uity markets. Um some of what we're we're doing there is really deepening our Partnerships. Um we we are working directly with some of our distribution Partners to have unique features that are specifically for their shelves that also will support our capabilities going forward. And same thing on, on the life side and I address that in in our remarks as well. Um, really working much more closely with the financial professional, providing them with digital tools, which has been critical, um, automated sales processes, um, for new business, both on the life and annuity side. So all of the ease of use of of working with us and providing tools and support, um, are supporting us to be able to continue to grow the business.

Analyst: is really helpful. Thank you. The second question I had is just on the external reinsurance solution potential. You mentioned that as one of the things you may use capital for. Could you just talk about the environment there and just appetite from the reinsurers and what you could potentially try to do? Are we talking more of a shedding risk type transaction or something that could actually provide you some kind of capital associated with blocks that do have significant value? How should we think about potential external?

I had is just on the external reinsurance solution potential and you know, you mentioned that as as, you know, 1 of the things you may use capital for. Could you just talk about the environment there and just appetite from the reinsurers? And you know what, you could potentially try to do? Like are we talking more of a

You know.

Shedding risk type transaction or, you know, something that could actually provide you.

You know, some kind of capital associated with blocks that that do have significant value, like, how should we think about potential external?

Christopher Neczypor: Yeah, Alex Scott, I guess I would say a couple of things. One, it is too early for us to really talk about anything we are focused on there with real detail. We are studying all of the possibilities. I think at the end of the day, though, we are focused as it relates to external reinsurance on the legacy life block. We obviously did a very large deal, very complicated deal two years ago. It has been a good deal for Lincoln if you think about the growth and improvement in some of the free cash flow and the de-risking that we were able to do there. I think as we have talked about the focus as it relates to the potential to do another reinsurance deal, we would really be focused on that. I think how we do it is something that we are looking at today.

Uh yeah Alex I guess I would say a couple things 1. It's too early for us to really talk about anything. We're focused on there with with real detail. You know, we're we're studying all of the uh possibilities I think at the end of the day, though, we're we're focused as it relates to external reinsurance on the Legacy life block.

Christopher Neczypor: Obviously, if you have deployable excess capital, it would lessen the need to include. You would not necessarily structure it the way that the previous deal for us was structured. You have a lot more options. At the end of the day, to your question about the environment, the environment is robust. It seems like every other week there is a new, large, complicated insurance transaction that is out there. We have done a lot of transactions over the past five years. We know all of the interested parties. To the degree that we decide there is something to do there, we will talk to you all about it. It is just one of the things that we are studying today.

And so, you know, we obviously did a very large deal, very complicated, deal 2 years ago, it's been um, you know, a good deal for for Lincoln. If you think about, you know, the growth and Improvement in some of the free cash flow and, you know, the de-risking that we were able to do there. So, you know, I think as we've, we've talked about the focus as it relates to, you know, the potential to do. Another reinsurance deal would really be focused on that I think, you know, I how we do, it is something that we're looking at today, um, but obviously, if you have Deployable excess Capital it would

Lessen, the need to uh, include a, you know, you wouldn't necessarily structure it. The way that, you know, the previous deal for us was structured, right? You have you have a lot more options. Uh, and then at the end of the day to your question about the environment, the environment is robust. Um, you know, it seems like every other week. There's a new large complicated Insurance transaction, that's out there. So, uh, we've done a lot of, um, transactions over the past 5 years, we know all of the, um, interested parties. Um, and you know, to the degree that we decide there is something to do there. We'll talk to you all about it. But it's, you know, it's just 1 of the things that we're studying today.

Analyst: Got it. Okay, thank you.

Got it. Okay, thank you.

Operator: Your next question comes from the line of Wes Carmichael with Autonomous Research. Please go ahead.

Your next question comes from the line of West Carmichael with autonomous research. Please go ahead.

Analyst: Hey, thank you. Good morning. I had a question, maybe a follow-up to Ryan's on Group. But in terms of GAAP profitability, I think remeasurement gains in the period were $104 million. I know you had a significant benefit last year. Is there any help on how to think about what produced that gain this quarter? As you are headed into the assumption review, if you think there is going to be any run-rate impact from potential unlocking?

Hey, thank you. Good morning. Um, I had a question, maybe a follow up to Ryan's on group, but in terms of uh, Gap profitability, I think we measurement gains in the period were 104 million. And I know you had a significant benefit last year, but is there any help on how to think about what produced that game this quarter and as you're headed into the Assumption review, um if if you think there's going to be any run rate impact from a, from a potential unlocking,

Christopher Neczypor: Wes, it is a good question. Let us just talk about what the line item is because I saw your note. I think it is very straightforward. If you think about the results that we are delivering and the favorability that is happening specifically in disability, you would expect that favorability to then flow through into that policyholder remeasurement line. Because ultimately what it is, is you set reserves at the beginning of the year. Included in those reserves, there is going to be the active claim or the claims which have been reported, and you have assumptions around that. There is also an assumption for claims that have been incurred but not reported yet.

So well, it's a, it's a, it's a good question. Let's just talk about what the line on line item is because I I saw your note I I think it's, it's very straightforward, right? If you think about the results that we are delivering and the favorability that's happening specifically in disability

Christopher Neczypor: When you have the reserve for that portion, you are making assumptions for how things are going to progress throughout the year, what the incidence rates will be, what the recovery rates will be, et cetera. If you think about the fact that what we have been saying is that our recent results are tracking better than what the long-term averages would look like, mechanically, you would expect to see this come through, assuming that the favorability continues. It is very much a byproduct of the way the reserves work. It is to be expected. In the second quarter, as we have talked about, big picture, we have favorable seasonality in disability. That is why you see both on the loss ratio and then as a result within the remeasurement line be a little bit bigger. You saw it last year as well.

You would expect that favorability to then flow through into that policy holder measurement line, right? Because ultimately what it is is you set Reserves at the beginning of the year, uh and included in those reserves that's going to be the active claim or the the claims, which, you know, have been reported and you have assumptions around that. And then there's also an assumption for claims that have been incurred, but not reported yet. And so when you have uh, the reserved for that, that portion you are making assumptions for how things are going to progress throughout the year. What the incidence rates will be what the recovery rates, will be Etc. And so, you know, if you think about the fact that what we've been saying is that our our recent results are tracking better than what you know the long term averages would look like, um mechanically you would expect to see this come through. Um, you know, and assuming that the the favorability continues. So it is very much, a byproduct of the way that reserves work, it's to be expected, you know, in second quarter as we've talked about, um, big picture

Christopher Neczypor: I would just think of it as the favorability and trends go relative to what we have talked about as the longer-term assumptions, you would expect to see that line item produce these types of results.

We have favorable seasonality in disability and so that's why you see you know, both on the loss ratio and then you know as a as a result within the remeasurement line, be a little bit bigger. You saw it last year as well. Um and so you know I wouldn't I would just think of it as as the favorability and trends go relative to what you know we've talked about as you know the longer term uh assumptions. You would expect to see that line item produce these types of results.

Analyst: That's helpful, Chris. Thank you. I guess just switching to Retirement Plan Services, you mentioned a strong pipeline in the second half of the year. Just a little bit more color there, if you could. I know there's a planned termination in the first quarter, but any help on how you're thinking about run-rate earnings out of that segment? Great, thank you.

Tina Madon: Sure. First of all, we messaged that our first-year sales, we saw some really healthy sales this particular quarter. They were up about 50% year over year. Importantly, because we have been talking to you about pressures around stable value outflows, a meaningful portion of those sales were in stable value. One of the drivers of that is a new product that we believe can support us as we continue to go forward. We often have a lot of insight into future pipeline as well. As we look at the go-forward sales that we expect in the back half of the year, we can see that they actually are quite healthy. We feel good about the momentum. We have seen some really nice first-year sales momentum and also recurring deposits as well. Total deposits have been healthy.

Not much help for Chris, thank you. Um, I guess just switching to RTS. You mentioned that a strong pipeline in second, half the year and just a little bit more color there if you could. And, um, I know there's a plan termination in the first quarter, but any help on how you're thinking about run rate or anything of that sort.

Great. Thank you, sure. So, uh, so first of all, we

That our first year sales, we saw some really healthy sales. This particular quarter, they were up about 50% year-over-year. Um and importantly because we've been talking to you about pressures around stable value, outflows a a meaningful portion of those sales where were in stable value and 1 of the drivers of that is is a new product that we believe.

Tina Madon: At the same time, we also acknowledged some pressure as it relates to earnings that has been mostly driven by stable value outflows. We have a number of actions in place to continue to improve that.

Christopher Neczypor: Yeah, I would just add, I think that's well said. At the end of the day, the dynamics that we've been experiencing in Retirement Plan Services have been good underlying growth, but offset by stable value outflows. We actually saw moderation there this quarter. To the degree that stable value moves around, that's going to have an outsized impact, just given the ROA on that business. Underneath the surface, we continue to grow the important parts of the business. We continue to have expense discipline. We do think that there's more we can do there. Sequentially, earnings were up for Retirement Plan Services, which I think is a good sign relative to the past couple of quarters. At the end of the day, this is still a business where we have to execute on our strategic priorities. It is still somewhat dependent on markets.

Can support us, um, as, as we continue to go forward. Um, as we, we, we often have a lot of insight into future pipeline as well. Um, and so, as we look at the go forward sales, that we expect in the back, in the back, half of the year, we can see that. Um, they actually are, are quite healthy. So, we feel good about the momentum, you've seen we've seen some really nice first year sales momentum, um and also recurring deposits as well. So total deposits have been healthy. Um and at the same time we also acknowledged some pressure as it relates to earnings that has been mostly driven by uh stable value outflows. And we have a number of actions in place to continue to improve that.

Yeah, and I would just add I think that's well said at the end of the day, the the Dynamics that we've been experiencing in RPS, um have been good underlying growth but offset by stable value outflows. Um, we actually saw moderation, there uh, this quarter. And so, you know, to the degree, that stable value moves around, that's going to have an outsized impact, just given the ROI on that business. But underneath the surface, we continue to grow

Christopher Neczypor: To the degree that stable value flows turn from negative to positive, that will provide a tailwind over time.

Um, you know, the important parts of of, of the business we continue to have expense discipline. We do think that there's more we can do there. Um, and you know, sequentially earnings were up, uh, for RPS, which I think is a, you know, a good, a good sign relative to the past couple of quarters. But at the end of the day, you know, this is still business where, you know, we have to execute on our strategic priorities. It is still somewhat dependent on markets uh and to the degree that stable value uh flows turned from um negative deposits that will provide a tip a Tailwind over time.

Analyst: Thank you very much.

Thank you very much.

Operator: That's all the time we had for questions today. If you did queue up to ask a question and your question hasn't been answered, Lincoln Financial will reach out after the conclusion of today's call. I would like to turn the call back over to Tina Madon for closing remarks.

That's all the time we had for questions today. If you did queue up to ask a question and your question hasn't been answered, Lincoln Financial will reach out.

After the conclusion of today's call and I would like to turn the call back over to Tina Madden for closing remarks.

Tina Madon: Thank you for joining us this morning. As the operator said, we are happy to address any follow-up questions you may have. Please email us at investorrelations@lfg.com.

So, thank you for joining us this morning. And, um, as the operator said, you know, we're happy to address any follow-up questions, you may have and, um, please email us at investor relations at lfg.com.

Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect