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Lincoln National posted its seventh straight quarter of year-over-year adjusted operating income growth, with Q1 adjusted operating income up 16% to $326 million. Management said the gains reflect continued progress from its multi-year restructuring and capital-strengthening efforts.
GAAP results were pressured by market volatility, as the company reported a net loss of $211 million due largely to negative movement in market risk benefits tied to lower equity markets. The company said its hedge program continued to perform as expected.
Core businesses showed mixed but improving trends: annuities continued shifting toward spread-based products, while Group Protection, Life Insurance, and Retirement Plan Services all posted stronger operating income. Lincoln also said its capital position remains above targets, with leverage now at its long-term goal.
Lincoln National (NYSE:LNC) reported a seventh consecutive quarter of year-over-year adjusted operating income growth, with management pointing to stronger underwriting results, spread income growth and continued capital generation as evidence that its multi-year restructuring strategy is gaining traction.
On the company’s first-quarter 2026 earnings call, Chairman, President and Chief Executive Officer Ellen Cooper said adjusted operating income increased 16% from the prior-year period. She attributed the performance to actions taken over several years to strengthen the balance sheet, improve operating efficiency and shift the business mix toward more durable sources of earnings.
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“Our first quarter results reflect continued execution,” Cooper said, adding that Lincoln remains focused on three strategic priorities: fortifying its capital foundation, optimizing its operating model and driving profitable growth across its businesses.
Chief Financial Officer Chris Neczypor said Lincoln reported adjusted operating income available to common stockholders of $326 million, or $1.66 per diluted share, for the quarter. The company reported a net loss available to common stockholders of $211 million, or $1.10 per diluted share.
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Neczypor said the difference between GAAP net income and adjusted operating income was driven primarily by negative movement in market risk benefits amid lower equity markets during the quarter. He said Lincoln’s hedge program, which is designed to target capital, “continued to perform in line with expectations.”
The quarter included two normalizing items, according to Neczypor. Alternative investments produced a 12.3% annualized return, contributing about $19 million after tax above the company’s 10% annualized target, or $0.10 per diluted share. Results also included a one-time $7 million unfavorable tax-related impact tied to a true-up of certain prior-year tax positions on variable annuity separate accounts.
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Cooper said Lincoln’s annuities business continued to move toward a more balanced and less market-sensitive mix. Total annuity sales were $3.9 billion, with spread-based products representing 64% of sales.
Registered index-linked annuity sales were higher than the prior year but lower sequentially, which Cooper said was consistent with Lincoln’s focus on profitability over volume. Fixed indexed annuity sales increased more than 90% year over year, supported by product features, crediting strategies, broader distribution and digital capabilities. Total fixed annuity sales were $716 million, down from the prior year because of lower sales of more price-sensitive multi-year guaranteed annuity products.
Variable annuity sales were $1.4 billion and declined year over year, especially in products with living benefits, in line with the company’s goal of reducing market sensitivity.
Neczypor said annuities operating income was $275 million, compared with $290 million a year earlier. He noted that results were affected by a reallocation of net interest income earned on collateral tied to index credit hedging strategies, the one-time tax item and two fewer fee days. Account balances, net of reinsurance, ended the quarter at $169 billion, up 7% from the prior-year period but down about 4% sequentially because of market declines and variable annuity outflows.
Group Protection operating income rose to $112 million from $101 million in the prior-year quarter, and the margin improved 60 basis points to 8%. Neczypor said the improvement was driven by Group Life results, partly offset by normalization in Disability.
The Group Life loss ratio was about 67%, improving more than 800 basis points from the first quarter of 2025. Neczypor said the results reflected favorable incidence and severity, as well as disciplined pricing actions.
The Disability loss ratio rose to 73.4% from 70.1% a year earlier. Neczypor cited elevated paid family leave incidence tied to two newly effective states and unfavorable long-term disability resolution severity. He said the company expects the paid family leave impact to moderate as the year progresses.
Cooper said Group Protection premiums increased 2% year over year, with local market premium rising more than 4%, its strongest year-over-year increase in nearly a decade. Supplemental health premium grew 28% year over year. Sales were roughly in line with the prior-year period, and 74% of sales came from existing customers.
Life Insurance operating earnings were $41 million, compared with an operating loss of $16 million in the prior-year quarter. Neczypor called it Lincoln’s strongest first-quarter result in five years, citing higher alternative investment returns and the benefit of captive consolidation. Mortality was favorable to expectations, driven primarily by term insurance.
Cooper said first-quarter life sales were $129 million, up more than 30% year over year. Core life and MoneyGuard sales were $96 million, up 20%, while executive benefits sales nearly doubled from the prior-year period.
Retirement Plan Services operating income rose 26% to $43 million from $34 million a year earlier. Neczypor said the improvement was driven by spread expansion and higher average account balances supported by equity market performance over the past 12 months.
Base spreads increased to 116 basis points from 103 basis points in the prior-year quarter. Average account balances rose about 10% to $125 billion. Net outflows were approximately $200 million, a meaningful improvement from the prior-year period.
However, Neczypor said second-quarter net outflows are expected to rise to a range of $2 billion to $2.5 billion because of a small number of known plan terminations, most of which did not meet Lincoln’s profitability targets. He said the company remains deliberate about the business it retains.
Neczypor said Lincoln’s estimated risk-based capital ratio remained above its 400% target and the 20-percentage-point buffer above that target for the eighth consecutive quarter. The leverage ratio improved to 25%, reaching the company’s long-term target.
Holding company liquidity ended the quarter at about $1.2 billion, including $400 million of prefunding for senior notes maturing in December. Excluding that prefunding, holding company liquidity was $805 million, above the company’s historical operating range.
During the question-and-answer session, analysts asked about free cash flow, alternative investment returns, disability trends and annuity competition. Neczypor said free cash flow conversion continues to look strong relative to guidance, while cautioning that quarterly results can vary because of taxes, expenses and the timing of dividends from subsidiaries. On alternative investments, he said it was too early to give a second-quarter view, but noted the portfolio is diversified and has been a strong contributor in recent years.
Cooper reiterated that Lincoln is focused on balancing growth with profitability and capital efficiency rather than pursuing top-line growth alone. “We remain confident in the actions we are taking,” she said, “which are building toward a higher quality earnings profile that creates sustainable long-term value for our shareholders.”
Lincoln National Corporation, doing business as Lincoln Financial Group, is a diversified financial services holding company focused on providing retirement, insurance, and wealth management solutions in the United States and select international markets. Headquartered in Radnor, Pennsylvania, the company operates through several business segments, including Retirement Plan Services, Life Insurance, and Group Protection. Its offerings are designed to help individuals, families, and institutions plan and prepare for their financial futures.
The Retirement Plan Services segment delivers recordkeeping, administrative services, and investment management for defined contribution and defined benefit plans.
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The article "Lincoln National Q1 Earnings Call Highlights" was originally published by MarketBeat.
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