10-Q: Lincoln National Reports Q1 2025 Results; Announces Stock Purchase Agreement with Bain Capital

Lincoln National Corporation reports a net loss for Q1 2025, details a stock purchase agreement with Bain Capital, and provides updates on financial performance and legal proceedings.

Summary

• Lincoln National Corporation reported a net loss of $722 million for the three months ended March 31, 2025, compared to a net income of $1.222 billion for the same period in 2024.
• The company's Q1 results were impacted by net annuity product features, credit loss-related adjustments, investment losses, and changes in the fair value of reinsurance-related embedded derivatives.
• Operating revenues totaled $4.691 billion, while operating expenses reached $5.640 billion.
• The company entered into a stock purchase agreement with Bain Capital Prairie, LLC, to sell shares representing approximately 9.9% of its outstanding common stock for $825 million in cash.
• The company is involved in various legal proceedings, including cost of insurance litigation and other matters, with estimated possible losses up to $150 million after-tax.
• The company's board of directors authorized an increase in the securities repurchase authorization, bringing the total aggregate repurchase authorization to $1.5 billion, with $714 million remaining as of March 31, 2025.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company reports a net loss, it also announces a strategic investment from Bain Capital. The legal proceedings and market risks add a negative tone, but the company's efforts to manage capital and address challenges suggest a degree of resilience.

Positives

• The company entered into a stock purchase agreement with Bain Capital for $825 million, providing capital for strategic priorities.
• The company's board of directors authorized an increase in the securities repurchase authorization, bringing the total aggregate repurchase authorization to $1.5 billion.
• The company's Group Protection segment experienced growth in business in force and persistency, leading to higher insurance premiums.
• The company's Life Insurance segment experienced improved mortality due to lower claims incidence.

Negatives

• The company reported a net loss of $722 million for Q1 2025, a significant decrease compared to the $1.222 billion net income in Q1 2024.
• The company's Q1 results were impacted by net annuity product features, credit loss-related adjustments, investment losses, and changes in the fair value of reinsurance-related embedded derivatives.
• The company estimates the aggregate range of reasonably possible losses from legal proceedings to be up to approximately $150 million after-tax.
• The company's Life Insurance segment experienced lower net investment income, net of interest credited, driven by lower investment income on alternative investments.

Risks

• The company is involved in various legal proceedings, including cost of insurance litigation and other matters, with estimated possible losses up to $150 million after-tax.
• The company's financial results are subject to market risks, including interest rate risk, equity market risk, credit risk, and foreign currency exchange risk.
• The company's insurance subsidiaries must maintain certain regulatory capital levels, which are affected by statutory accounting rules and market conditions.
• The company's ability to generate and maintain sufficient liquidity depends on the profitability of its businesses, general economic conditions, and access to the capital markets.

Future Outlook

The company expects the transaction with Bain Capital to provide capital to deploy toward strategic priorities, including growing spread-based earnings, advancing portfolio management efforts and asset sourcing capabilities, and optimizing the legacy life portfolio.

Industry Context

The announcement reflects ongoing trends in the insurance industry, including the need to manage capital effectively, adapt to changing market conditions, and address regulatory and legal challenges.

Comparison to Industry Standards

• It is difficult to compare the results to industry standards without knowing the specific details of Lincoln National's business mix and risk profile.
• However, the company's focus on managing capital, hedging market risks, and addressing legal challenges is consistent with the priorities of other large insurance companies such as Prudential, MetLife, and Manulife.
• The stock purchase agreement with Bain Capital is similar to other strategic investments and partnerships seen in the industry, as companies seek to enhance their financial flexibility and growth prospects.

Legal Proceedings

• The company is involved in various pending or threatened legal or regulatory proceedings, including purported class actions, arising from the conduct of business both in the ordinary course and otherwise.
• As of March 31, 2025, the company estimates the aggregate range of reasonably possible losses, including amounts in excess of amounts accrued for these matters as of such date, to be up to approximately $150 million, after-tax.

Stakeholder Impact

• Shareholders will be impacted by the stock purchase agreement with Bain Capital and the company's efforts to manage capital and return value.
• Policyholders may be impacted by changes in product offerings and the company's ability to meet its obligations.
• Employees may be impacted by the company's strategic initiatives and efforts to realign the workforce.

Next Steps

• The company will work to close the stock purchase agreement with Bain Capital.
• The company will continue to manage its capital and liquidity.
• The company will continue to defend itself in ongoing legal proceedings.
• The company will continue to monitor and manage market risks.

Key Dates

Keywords

Lincoln National, financial results, stock purchase, Bain Capital, legal proceedings, insurance, annuities, investments, capital, liquidity