10-K: Lincoln National Reports 2025 Financials, Strategic Progress

Lincoln National Corporation reports a decrease in net income for 2025 to $1.177 billion, down from $3.275 billion in 2024, driven by capital market impacts on annuity features and reinsurance, despite operational improvements in Life Insurance and Group Protection.

Summary

• Net income decreased to $1.177 billion in 2025 from $3.275 billion in 2024.
• Income from operations increased to $1.628 billion in 2025 from $1.315 billion in 2024.
• The Annuities segment's income from operations increased to $1.198 billion in 2025 from $1.160 billion in 2024, driven by higher fee income and lower federal income tax expense.
• The Life Insurance segment's income from operations improved to $117 million in 2025 from a loss of $(63) million in 2024, due to higher net investment income and lower benefits.
• The Group Protection segment's income from operations increased to $532 million in 2025 from $425 million in 2024, due to higher insurance premiums and net investment income.
• The Retirement Plan Services segment's income from operations remained flat at $163 million in both 2025 and 2024.
• The Other Operations segment's loss from operations increased to $(382) million in 2025 from $(370) million in 2024.
• The company completed a stock sale to Bain Capital Prairie, LLC in Q2 2025, issuing 18.8 million shares for $825 million.
• Issued $500 million of fixed-rate senior notes in May 2025 and another $500 million in Q4 2025, with intentions to prefund 2026 debt repayment.
• Entered into affiliate reinsurance transactions with Lincoln Pinehurst Reinsurance Company (Bermuda) Limited (LPINE).
• Issued institutional funding agreements totaling $2.8 billion in 2025.
• Restructured certain captive reinsurance subsidiaries in Q4 2025 to reduce operating expenses and improve free cash flow within the Life Insurance segment.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed filing. While operational income showed improvement across key segments and strategic capital management actions were taken, the substantial decline in net income due to capital market impacts and ongoing regulatory and legal uncertainties temper the overall positive sentiment.

Positives

• Income from operations increased across Annuities, Life Insurance, and Group Protection segments in 2025.
• The Life Insurance segment returned to profitability with $117 million in income from operations in 2025, a significant improvement from a loss in 2024.
• The Group Protection segment demonstrated strong growth in insurance premiums and net investment income.
• Successfully raised $825 million in capital through a stock sale to Bain Capital Prairie, LLC.
• Proactive debt management included issuing $1.0 billion in senior notes in 2025, with $400 million intended to prefund 2026 debt repayment.
• Restructuring of captive reinsurance subsidiaries is expected to improve operational efficiency and free cash flow.
• Insurance subsidiaries maintain strong financial strength ratings (e.g., AM Best A, Fitch A+, Moody's A2, S&P A+ for LNL/LLANY) with a stable outlook.
• The consolidated RBC ratio for statutory insurance companies exceeded four times the company action level RBC as of December 31, 2025.
• Temporary NAIC guidance allowing admission of net negative IMR increased statutory capital and RBC ratio by approximately 10 percentage points as of December 31, 2025.

Negatives

• Net income decreased significantly to $1.177 billion in 2025 from $3.275 billion in 2024.
• Experienced a lower gain in net annuity product features due to the impact of capital markets.
• Unfavorable changes in the fair value of reinsurance-related embedded derivatives, trading securities, and certain mortgage loans contributed to the net income decline.
• A loss on other non-financial assets was recorded in 2025, contrasting with a gain in 2024 from the sale of the wealth management business.
• The annual assumption review in 2025 had an unfavorable impact on net income.
• The Annuities segment's outflow rate increased to 12% in 2025 (from 11% in 2024) due to the elevated interest rate environment and strong equity markets.
• The Retirement Plan Services segment's outflow rate increased to 17% in 2025 (from 14% in 2024) primarily due to a large plan termination.
• Ongoing legal proceedings, including class actions related to cost of insurance rates, involve a provisional settlement of $147.5 million pre-tax, which is currently under appeal.

Risks

• Weak conditions in global capital markets and the economy generally may materially adversely affect demand for products, account balances, investment results, and guaranteed benefit liabilities.
• Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting profitability and making it more challenging to meet certain statutory requirements.
• Increases in interest rates and sustained higher interest rates may negatively affect profitability, capital position, and the value of the investment portfolio, potentially leading to increased contract withdrawals and surrenders.
• Changes in equity markets, interest rates, and/or volatility affect the profitability of products with guaranteed benefits, potentially having a material adverse effect on business and profitability.
• Hedging strategies may not be fully effective to offset changes in the carrying value of guarantees on certain products, which could result in volatility in results of operations and financial condition.
• Businesses are heavily regulated, and changes in regulation and supervisory/enforcement policies may affect insurance subsidiary capital requirements, reduce profitability, or limit growth.
• Compliance with existing and emerging privacy laws and regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect confidential information could adversely affect reputation.
• Compliance with existing and emerging rules and regulations governing the use of AI could result in increased compliance costs and/or lead to changes in business practices and policies, and challenges with properly managing AI could result in reputational harm, competitive harm, and legal liability.
• Continued scrutiny and evolving expectations from investors, customers, regulators, and other stakeholders regarding ESG matters may adversely affect reputation or otherwise adversely impact business and results of operations.
• Federal or state regulatory actions could result in substantial fines, penalties, or prohibitions/restrictions on business activities that could materially adversely affect business, results of operations, and financial condition.
• Changes to laws or regulations could adversely affect the distribution model and sales of products, potentially resulting in additional disclosure and other requirements.
• Changes in tax law or the interpretation or application of existing tax laws could impact tax costs and the products sold.
• Legal and regulatory actions are inherent in businesses and could result in financial losses or harm businesses.
• Climate change and climate change regulation may adversely affect the investment portfolio and financial condition.
• Changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect financial statements.
• Anti-takeover provisions could delay, deter, or prevent a change in control of LNC, even if beneficial to shareholders.
• Adverse capital and credit market conditions may affect the ability to meet liquidity needs, access to capital, and cost of capital.
• The inability of subsidiaries to pay dividends to the holding company in sufficient amounts would harm the holding company's ability to meet its obligations.
• A decrease in the capital and surplus of insurance subsidiaries may result in a downgrade to credit and insurer financial strength ratings.
• An inability to access the credit facility or committed repurchase facilities could result in a reduction in liquidity, which in turn could lead to downgrades in credit and financial strength ratings.
• Changes in assumptions, estimates, and methods in calculating reserves may lead to inadequate reserves for future policy benefits and claims.
• May be required to recognize an impairment of goodwill or to establish a valuation allowance against deferred income tax assets.
• The determination of the amount of allowance for credit losses and impairments taken on investments is highly subjective and could materially impact results of operations and financial condition.
• May have difficulty selling certain holdings in the investment portfolio in a timely manner and realizing full value due to illiquidity.
• The amount and timing of income from certain investments can be uneven, and their valuations infrequent or volatile, which can impact recorded income or lead to lower-than-expected returns.
• Defaults and write-downs on mortgage loans may adversely affect profitability.
• Difficulties faced by other financial institutions could adversely affect the company due to credit risk exposure.
• Requirements to post collateral or make payments related to declines in market value of specified assets may adversely affect liquidity and expose to counterparty credit risk.
• Intense competition could negatively affect the ability to maintain or increase profitability.
• Sales representatives, being non-captive, may sell products of competitors if they are more attractive or offer higher compensation.
• Competition for employees is intense, and the company may not be able to attract and retain the highly skilled people needed to support the business.
• May not be able to protect intellectual property and may be subject to infringement claims.
• Information systems may experience interruptions, breaches in security, and/or a failure of disaster recovery systems that could result in loss or disclosure of confidential information, damage to reputation, and increased expenses.
• Subject to third-party information system and other operational risks due to reliance on third-party vendors and suppliers and outsourcing of certain business operations.
• Acquisitions and dispositions of businesses may not produce anticipated benefits and could result in operating difficulties, unforeseen liabilities, or asset impairments.
• Certain blocks of insurance business purchased from third-party insurers under indemnity reinsurance agreements may require assets in trust, letters of credit, or business return if financial strength ratings and/or capital ratios are not maintained at specified levels.

Future Outlook

The Federal Reserve's economic projections indicate a median expectation of one rate cut of 25 basis points in 2026, with continued monitoring of economic data for policy adjustments. The company plans to invest in businesses and product enhancements to grow revenues, drive margin, and reduce costs, leveraging its strategic partnership with Bain Capital for investment platform access and alternative asset expertise. It will also advance its Group Protection business, maintain industry-leading wholesale distribution, and explore reinsurance strategies for value maximization. The company is committed to capital-efficient growth and expense discipline. Regulatory initiatives from the NAIC, including long-term solutions for IMR, finalization of RBC calculation changes driven by the new GOES by the end of 2026, and mandatory compliance for VM-22 by January 1, 2029, are being monitored for potential impacts on product offerings and financial condition. The company expects to manage interest rate spread effects through portfolio management and crediting rate actions, assuming stable net flows, and anticipates maintaining its insurance subsidiaries' RBC ratios above the company action level. A decrease of $2 million in unrecognized tax benefits is expected by the end of 2026.

Management Comments

• "We continue to be proactive in our investment strategies, product designs, crediting rate strategies, expense management actions and overall asset-liability practices to mitigate the risk of unfavorable consequences due to the interest rate environment."
• "We believe that we will be able to maintain the RBC ratios of our insurance subsidiaries in excess of the company action level through prudent underwriting, claims handling, investing and capital management."
• "Management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums, fee income and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our impaired securities."
• "Management believes it is more likely than not that the deferred tax asset associated with the loss carryforwards will be realized."

Industry Context

StockSavvy.ai notes that the financial services industry, particularly insurance and retirement services, is navigating a complex environment characterized by fluctuating interest rates, evolving regulatory landscapes (e.g., NAIC initiatives on IMR, GCC, AG55, GOES, VM-22), and increasing scrutiny on data privacy, AI, and ESG matters. The company's proactive approach to investment strategies, product design, and risk management aligns with broader industry efforts to adapt to these challenges and maintain profitability and capital adequacy. The increased outflow rates in annuities and retirement plan services reflect a competitive market where customers seek higher returns in elevated interest rate environments, a trend observed across the sector.

Comparison to Industry Standards

• The company's financial strength ratings (e.g., AM Best A, Fitch A+, Moody's A2, S&P A+ for LNL/LLANY) are generally strong, indicating a solid position relative to industry benchmarks. For instance, an A+ from Fitch is the 5th highest of 19, and A2 from Moody's is the 6th highest of 21, suggesting above-average financial stability compared to many peers.
• The RBC ratio for LNC's statutory insurance companies exceeding four times the company action level RBC indicates a robust capital position, significantly above regulatory minimums and likely competitive within the life insurance sector.
• The increased outflow rates in Annuities (12% in 2025) and Retirement Plan Services (17% in 2025) due to elevated interest rates and strong equity markets suggest that the company, like many in the industry, faces challenges in retaining assets when alternative investment options become more attractive. This is a common industry dynamic, with competitors like Prudential Financial or MetLife also experiencing shifts in customer behavior in similar market conditions.
• The company's use of hedging strategies for variable annuity guarantees is a standard practice among large insurers to mitigate market risk, comparable to programs at companies like Jackson Financial or Equitable Holdings.

Management Changes

Corporate Governance

Legal Proceedings

• **Cost of Insurance Litigation (Glover, Iwanski, TVPX ARS INC., Vida)**: A provisional settlement of $147.5 million pre-tax for Glover class members (inclusive of all policyholders in Iwanski, TVPX ARS INC., and Vida) was granted final approval on June 16, 2025, and the case dismissed on June 18, 2025. This settlement is currently subject to appeal by plaintiffs in the Iwanski, TVPX ARS INC., and Vida cases to the U.S. Court of Appeals for the Second Circuit, filed on July 16, 2025.
• **Angus v. The Lincoln National Life Insurance Company**: An ongoing putative class action alleging breach of contract due to excessive non-guaranteed cost of insurance charges. The company is vigorously defending this matter.
• **EFG Bank AG, Cayman Branch, et al. v. The Lincoln National Life Insurance Company; Brighton Trustees, LLC, et al. v. The Lincoln National Life Insurance Company; Ryan K. Crayne, on behalf of and as trustee for Carlton Peak Trust v. The Lincoln National Life Insurance Company**: Consolidated civil actions alleging breach of contract due to increased non-guaranteed cost of insurance rates. The company is vigorously defending these matters.
• **Henry Morgan et al. v. Lincoln National Corporation d/b/a Lincoln Financial Group, et al**: A putative class action alleging misleading and deceptive insurance products (Lincoln OptiBlend), common-law fraud, negligent misrepresentation, and aiding and abetting fraud. Motions to dismiss are pending, and the company is vigorously defending.
• **Donald C. Meade v. Lincoln National Corporation, Ellen Cooper, Dennis Glass, and Randal Freitag**: A putative class action alleging materially false and/or misleading statements regarding Guaranteed Universal Life policies and lapse rates. The court granted defendants' motion to dismiss on July 24, 2025, and dismissed with prejudice on August 28, 2025. Plaintiff filed a Notice to Appeal to the U.S. Court of Appeals for the Third Circuit on September 25, 2025. The company is vigorously defending.
• **In Re Lincoln National Corporation Stockholder Derivative Litigation (Hollin, Wiersum)**: Consolidated civil actions alleging breaches of fiduciary duties and violations of federal securities laws. Proceedings are stayed pending resolution of motions to dismiss in the Meade matter. Individual defendants are vigorously defending.
• **In Re Lincoln National Corporation Shareholder Derivative Litigation (Morgan, Rosenthal)**: Consolidated civil actions alleging breaches of fiduciary duties and unjust enrichment. Proceedings are stayed pending resolution of motions to dismiss in the Meade matter. Individual defendants are vigorously defending.
• **Kelly Grink v. Virtua Health and Lincoln National Corporation et al.**: A putative class action alleging breach of fiduciary duty in defined contribution plans. Lincoln defendants were dismissed from the case without prejudice on December 3, 2025. Plaintiffs filed a second amended complaint on January 22, 2026, not including Lincoln entities, so this matter is no longer pending against Lincoln.
• **Maria Laurino and Ricardo Miller v. The Valley Hospital and Lincoln National Corporation and The Lincoln National Life Insurance Company, et. al.**: A putative class action alleging breach of fiduciary duty in a 401(k) plan. Plaintiffs filed an amended complaint on December 18, 2025, not including Lincoln entities, so this matter is no longer pending against Lincoln.
• **Lincoln National Life Insurance Company v. Township of Radnor**: A de novo appeal regarding a tax assessment. The trial court entered judgment in favor of LNL on July 16, 2025. The Township filed a notice of appeal on August 15, 2025.
• **PHL Variable Insurance Company Rehabilitation**: PHL Variable Insurance Company has been in a court-supervised rehabilitation proceeding since May 20, 2024. A liquidation order with a finding of insolvency is expected to trigger state guaranty association coverage. The company has not recorded a specific liability as of December 31, 2025, as the amount and timing of any assessments are not reasonably estimable.

Related Party Transactions

• Completed a stock purchase agreement with Bain Capital Prairie, LLC, a newly formed subsidiary of Bain Capital, for $825 million. The agreement grants Bain Capital the right to designate a Board observer and potentially a voting member.
• Engaged in affiliate reinsurance transactions with Lincoln Pinehurst Reinsurance Company (Bermuda) Limited (LPINE), a wholly owned subsidiary.
• Utilizes an inter-company cash management program between Lincoln National Corporation and its participating subsidiaries.
• Lincoln National Corporation made $967 million in capital contributions in cash to subsidiaries in 2025, including $800 million to The Lincoln National Life Insurance Company (LNL) using proceeds from the Bain Capital transaction.
• LNL made a $929 million extraordinary dividend in the form of investments to Lincoln National Corporation in 2024 for the initial capitalization of LPINE.
• Uses inter-company reinsurance agreements to manage statutory capital position and the hedge program for variable annuity guarantees.

Stakeholder Impact

• **Shareholders**: The significant decrease in net income is a negative impact, but strategic capital raising and debt management efforts aim to improve long-term shareholder value. The existing share repurchase authorization signals a commitment to returning capital. Ongoing litigation and regulatory risks could introduce volatility to the share price.
• **Employees**: The company offers a flexible hybrid work model, comprehensive total rewards, and well-being programs. Annual employee engagement surveys and talent development initiatives are in place. Updates to executive severance plans are noted.
• **Customers**: Products are designed for wealth accumulation, protection, and retirement. Guaranteed benefits on annuities and life insurance are key features. Cybersecurity and privacy regulations are in place to protect customer data. The cost of insurance litigation could impact policyholders.
• **Creditors**: Debt issuances and refinancing activities are ongoing. Credit ratings are crucial for the cost of capital and access to financing. Compliance with credit facility covenants is maintained.
• **Suppliers/Vendors**: The company's increasing reliance on third-party vendors and suppliers introduces operational and cybersecurity risks, which are managed through due diligence and contractual provisions.

Next Steps

• Monitor economic data and adjust monetary policy if risks emerge.
• Make investments in businesses and product enhancements to grow revenues, drive margin, and reduce costs.
• Leverage strategic partnership with Bain Capital for investment platform access and alternative asset expertise.
• Advance Group Protection business with a balanced approach to growth and profitability.
• Maintain industry-leading wholesale distribution through Lincoln Financial Distributors.
• Explore reinsurance and other strategies, including affiliate reinsurance with LPINE.
• Advance disciplined approach to capital-efficient growth.
• Focus on expense discipline to drive greater operational efficiency.
• NAIC to continue work towards a long-term solution for Interest Maintenance Reserve (IMR).
• Finalize RBC calculation changes driven by new GOES by the end of 2026.
• Mandatory compliance for VM-22 by January 1, 2029.
• Monitor potential changes from new GOES and VM-22 on product offerings, financial condition, and results of operations.
• Monitor efforts by the government to repeal or replace provisions of the Patient Protection and Affordable Care Act.
• Monitor and update underlying assumptions and financial models based upon new information for investment valuations.
• Continue to perform climate change scenario analyses.
• Monitor developments and evaluate the regulatory landscape regarding best interest or fiduciary standards.
• Continue to monitor and update aging schedules and nonaccrual status for residential mortgage loans monthly.
• Review each commercial mortgage loan individually annually to identify emerging risks.
• The Township of Radnor filed a notice of appeal in the Commonwealth Court of Pennsylvania regarding the tax assessment proceeding.
• Plaintiffs in Iwanski, TVPX ARS INC., and Vida cases appealed the Glover provisional settlement to the U.S. Court of Appeals for the Second Circuit.
• Plaintiff in Meade case filed a Notice to Appeal to the United States Court of Appeals for the Third Circuit.
• PHL Variable Insurance Company rehabilitation expected to require a liquidation order.

Key Dates

Recommendation

The filing presents a mixed financial picture with a substantial decline in net income for 2025, primarily driven by capital market impacts on annuity features and reinsurance. While operational income improved across key segments and the company undertook strategic capital management actions, including a significant capital raise from Bain Capital and proactive debt refinancing, the ongoing regulatory uncertainties, particularly regarding the DOL Fiduciary Rule and climate disclosures, coupled with a multitude of active legal proceedings, introduce considerable risk. The increased outflow rates in annuities and retirement services also signal competitive pressures. A seasoned investor would likely maintain a "hold" position, awaiting clearer resolution on the legal and regulatory fronts and sustained positive trends in net income, rather than just operational income, before considering a stronger position.

Keywords

Insurance, Annuities, Life Insurance, Group Protection, Retirement Plan Services, Financial Results, Capital Management, Risk Management, Corporate Governance, Investment Portfolio, Regulatory Compliance, Shareholder Value, Bain Capital, Debt Management, Cybersecurity, ESG, Litigation, Actuarial Assumptions, Financial Strength Ratings, RBC Ratio, Deferred Compensation, Executive Compensation