Lincoln Q3 Adjusted Operating Income Reaches $339 Million

Lincoln (LNC) reported third-quarter 2026 adjusted operating income available to common stockholders of $339 million, or $1.72 per diluted share, after a $95 million annual assumption review charge. Excluding that significant item, adjusted operating income was $434 million, or $2.20 per share, as stronger Life Insurance and Retirement Plan Services results helped offset weaker Group Protection earnings.

GAAP net income for the quarter ended September 30 was $1.40 billion. Net income available to common stockholders totaled $1.33 billion, or $6.77 per diluted share.

Lincoln also advanced its capital priorities during the quarter. The company resumed share repurchases, buying back $50 million of common stock, and retired $437 million of preferred stock through tender offers. Holding-company liquidity, net of prefunding, increased by about $350 million from year-end 2025 to approximately $1.0 billion, while the leverage ratio stood at its 25% long-term target.

Annuity sales shift toward spread-based products

Annuities operating income, excluding the assumption review, was $304 million, up 6% sequentially but down 4% from a year earlier. Growth in spread income and favorable equity markets was offset by a $12 million reallocation of net investment income to non-operating income and continued variable annuity outflows.

Annuity sales rose 21% from the second quarter to $4.3 billion, with fixed annuity sales more than doubling. Spread-based products represented 67% of quarterly sales, supporting Lincoln’s priority of diversifying the segment’s earnings mix. Ending account balances were $178 billion, up 3% year over year, and spread-based products accounted for 32% of balances, compared with 29% a year earlier. Return on average account balances improved for a second consecutive quarter to 67 basis points.

Life earnings rise as core sales grow

Life Insurance operating income, excluding the assumption review, increased to $130 million from $54 million a year earlier. Lincoln attributed the improvement to higher alternative investment income, better mortality experience and the impact of captive consolidation. Underlying earnings excluding alternative investment returns above or below the company’s long-term target increased 38%.

Total Life Insurance sales fell 64% to $106 million because the prior-year period included several large executive-benefits cases. Core sales, however, increased 3%, led by 36% growth in indexed universal life sales. The company said it remains focused on accumulation and risk-sharing products, capital-efficient new business and opportunities to improve free cash flow from legacy blocks.

Disability experience weighs on Group Protection

Group Protection operating income, excluding the assumption review, declined to $77 million from $110 million a year earlier. Favorable group life experience was more than offset by elevated disability severity and a moderation from previously favorable long-term disability incidence levels.

Premiums increased 3% to $1.39 billion, including 5% growth in local markets and 32% growth in supplemental health premiums. The disability loss ratio rose six percentage points year over year to 83%, reflecting the less favorable disability experience. Lincoln’s priorities for the business include expanding local-market and supplemental health products, improving capital efficiency and modernizing its claims platform.

Retirement Plan Services operating income rose 20% to $55 million, supported by spread expansion, favorable equity markets and a $3 million one-time item. Ending account balances increased 4% to $128 billion, while return on average account balances reached 17 basis points. The presentation indicated that lower mid-large market activity weighed on first-year sales.

Investment income and portfolio positioning

Lincoln’s $138 billion investment portfolio remained 97% investment grade and carried an average A- rating. The portfolio yield increased 20 basis points sequentially to 4.93%, supported by a 6.1% new-money yield.

Alternative investments generated $176 million of pre-tax income. The portfolio produced a 4.1% quarterly return, equivalent to 16.5% annualized, above Lincoln’s 10% long-term return target. Compared with that target, alternative investment income contributed a $55 million after-tax benefit to quarterly adjusted operating income.

Reinsurance-related reporting changes begin in the fourth quarter

Beginning in the fourth quarter of 2026, Lincoln plans to refine its definition of adjusted operating income by excluding amortization of deferred gains or losses on blocks exited through reinsurance. Together with the estimated effects of the Talcott reinsurance transaction, the company projects a fourth-quarter segment operating income impact of positive $12 million to $17 million for Life Insurance, negative $6 million to $1 million for Other Operations, and positive $1 million for Annuities.

For full-year 2027, Lincoln estimates the combined impact at positive $48 million to $58 million for Life Insurance, negative $25 million to $15 million for Other Operations, and positive $4 million for Annuities. These estimates are forward-looking and may differ from actual results.

Lincoln identified economic and capital-market conditions, interest-rate movements, equity-market volatility, policyholder behavior, mortality and morbidity experience, reinsurance collectability, regulatory changes and credit deterioration as key uncertainties. Other risks include cybersecurity and technology disruptions, competitive pressure, rating changes and the possibility that strategic initiatives or transactions do not deliver their anticipated benefits.