Lincoln National (NYSE:LNC) executives said fourth-quarter 2025 results capped a year of sustained earnings improvement, driven by performance across multiple segments, ongoing expense discipline, and continued progress on the company’s strategic realignment.
On the company’s fourth-quarter earnings call, CEO Ellen Cooper said adjusted operating income increased 31% year over year, while full-year adjusted operating income rose to its highest level in four years. CFO Chris Neczypor added that the quarter marked Lincoln’s sixth consecutive quarter of year-over-year adjusted operating earnings growth, and that 2025 represented the third consecutive year of growth.
Quarterly and full-year results
For the full year, excluding the impacts of significant items in each year, Lincoln posted adjusted income from operations available to common shareholders of over $1.5 billion, a 23% improvement versus 2024. Neczypor attributed year-over-year earnings growth to favorable underwriting experience in Life and Group Protection, continued spread expansion, and the benefit of higher equity markets.
Business segment highlights
Group Protection delivered fourth-quarter operating income of $109 million versus $107 million a year earlier, with a margin of 7.9%. Neczypor said a lower disability loss ratio—73.6% versus 75%—was driven by favorable new claim severity, partly offset by lower recoveries and smaller average resolution amounts. Group life loss ratio rose to 67.9% from a record-low 64.7% last year, though management said results remained favorable compared to historical experience and reflected disciplined pricing. For the full year, excluding the annual assumption review, Group produced operating earnings of $493 million, up 16% from $426 million, with margin improving to 9% from 8.3%. Looking to 2026, management reiterated a goal of operating at an 8% margin or above, supported by pricing discipline and diversification into higher-margin segments and products.
Annuities reported quarterly operating income of $311 million, which management said normalized to approximately $303 million after about $8 million of favorable payout annuity mortality experience. Neczypor said earnings reflected higher spread income and higher average account balances, partially offset by traditional variable annuity outflows and higher expenses tied to retaining 100% of fixed annuity flows after the exit of an external flow reinsurance agreement in September. Ending annuity account balances, net of reinsurance, reached a record $175 billion, up 7% year over year. Spread-based products represented 30% of total annuity account balances (net of reinsurance), up from 27% a year ago; RILA balances increased 15% and represented 22% of balances, while fixed annuity balances increased 20% year over year. For the full year, annuities delivered operating earnings of approximately $1.2 billion, modestly higher than the prior year, primarily due to higher average account balances.
Cooper said total annuity sales volumes increased 25% in 2025, with about two-thirds coming from spread-based products. She said 2026 priorities emphasize balancing profitability, capital efficiency, and lower market sensitivity, including intentionally lower variable annuity volumes “more closely aligned with pre-2025 levels.” She also said Lincoln is now retaining 100% of fixed annuity sales after exiting the external treaty and expects fixed annuity account values to increase relative to 2025. On RILA, she cited expanding demand but increasingly competitive dynamics, with sales expected to remain broadly consistent with the past two to three years as the company maintains target return thresholds and focuses on profitable segments.
Retirement Plan Services posted fourth-quarter operating income of $46 million, up from $43 million, driven by favorable equity markets and spread expansion, offset by outflows over the past 12 months and higher expenses. Average balances increased nearly 9% year over year to $124 billion. Base spreads rose to 110 basis points from 101 basis points. Net outflows were approximately $1 billion in the quarter, primarily due to participant withdrawals and known plan terminations that management said largely did not meet profitability targets. Full-year operating earnings were $163 million, flat year over year. Management said net flows are expected to remain negative in 2026 as Lincoln prioritizes profitability over retaining business below return targets.
Life Insurance produced fourth-quarter operating earnings of $77 million, a marked improvement from an operating loss of $15 million a year earlier. Neczypor said results benefited from improved mortality, higher alternative investment returns, and the execution of a captive consolidation. He said mortality was in line with expectations, noting that the fourth quarter of 2024 had been pressured by elevated severity in the universal life block. For the full year, excluding the annual assumption review, Life delivered operating earnings of $146 million versus an operating loss of $71 million in the prior year, with the improvement driven by mortality, alternative investment returns, and expense discipline.
Expense discipline, investments, and capital actions
Neczypor said fourth-quarter G&A expenses increased sequentially and year over year, largely due to higher variable compensation tied to strong sales, as well as continued investments in annuities (following full retention of fixed annuity flows) and Group Protection technology modernization. He said the company continues to target efficiency through organizational simplification and technology-enabled productivity.
On investments, management said credit quality remained strong with 97% of investments rated investment grade and below-investment-grade exposure near historic lows. New money yields were 5.3% in the quarter, about 65 basis points above the portfolio yield; full-year new money yields averaged 5.7%, about 110 basis points above the portfolio yield. Alternative investments returned about 3% for the quarter (roughly 12% annualized), above a 10% target, and approximately 10% for the year, in line with the annual target.
The company also highlighted several fourth-quarter capital actions:
- Life captive consolidations, which management said simplify the legal entity structure and reduce reserve financing costs, supporting improved free cash flow within Life.
- A $75 million dividend from Alpine, Lincoln’s Bermuda-based affiliated reinsurance entity, which management said demonstrated strong capitalization and profitability.
- Holding company liquidity of approximately $1.1 billion, including $400 million of pre-funding for senior notes maturing in December 2026. Net of pre-funding, liquidity was about $655 million, above the historical $400 million to $500 million range.
Outlook, free cash flow, and capital return discussions
Executives emphasized progress since 2023 in strengthening capital, reducing volatility, and improving earnings mix. Neczypor said Group Protection represented about 25% of business unit earnings, up from 18% in 2023, while spread-based annuity balances (net of reinsurance) reached 30%, up from 25% in 2023. He also said leverage declined 500 basis points since the end of 2023 and returned to the long-term target.
Neczypor said adjusted operating income was $908 million in 2023 with a 35% free cash flow conversion ratio, compared with over $1.5 billion in 2025 and a 45% conversion ratio. In Q&A, he said Lincoln expects subsidiary remittances to the holding company to increase over the next two years as capital levels in operating entities remain above targets and more free cash flow is moved upstream. Management also discussed preparing for the preferred security becoming redeemable in 2027 and said additional capital return to shareholders would come after maintaining operating buffers and addressing the preferred.
Separately, management noted that beginning in 2026 it will reallocate net interest income earned on collateral posted for index credit hedging strategies from Annuities operating income to non-operating income. Neczypor said the change is an “allocation refinement” with no change to underlying economics or free cash flow, and that if applied in 2025 it would have shifted about $50 million annually from annuities operating income to non-operating income.
About Lincoln National (NYSE:LNC)
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.
