The paragraph introduces Lincoln Financial's Third Quarter 2024 Earnings Conference Call, noting that it is in a listen-only mode. It is hosted by Senior Vice President and Head of Investor Relations, Tina Madon, who thanks attendees for their interest and directs them to the company's website for earnings-related documents. The call will discuss non-GAAP measures, including adjusted operating income, with comparisons to GAAP measures. It also includes a disclaimer about forward-looking statements, highlighting that actual results may vary due to risks and uncertainties outlined in their earnings release and SEC filings.

The paragraph outlines a financial update by Ellen Cooper, highlighting a strong third-quarter adjusted operating income, marking the highest quarterly earnings in over two years due to robust performance across all business areas. Cooper discusses the company's strategic realignment aimed at sustained long-term value creation, which focuses on three main objectives: maintaining a strong capital foundation, optimizing the operating model for efficiency, and ensuring profitable business growth. The paragraph emphasizes the company's progress in building capital, improving expense efficiencies, optimizing investment strategies, and launching a Bermuda Reinsurance subsidiary to support these goals.

The paragraph outlines Lincoln's success in achieving profitable growth by transforming into a more stable and risk-adjusted organization. It highlights plans to continue growth in group and retirement businesses with targeted strategies, diversify the annuity business, and realign the life business. The company's competitive advantages include a strong franchise, distribution leadership, a broad product portfolio, and a trusted brand, which has recently undergone a refresh. The new logo and tagline, "Your Tomorrow, Our Priority," emphasize the firm's commitment to customer care. In the third quarter, group protection saw record results with earnings more than doubling, and annuities earnings increased by 15%, demonstrating substantial sales growth.

The paragraph highlights the company's strong performance in retirement plan services and life insurance, noting significant year-over-year growth in sales. The firm's annuity strategy is succeeding, with total annuity sales reaching $3.4 billion, a 25% increase from the previous year. This growth is attributed to a diversified earnings mix, expanded market, and enhanced capabilities. The company is prioritizing profitable growth with a focus on risk-adjusted returns and a comprehensive distribution network. The RILA product remains key, showing 13% annual and 10% sequential sales growth, while fixed annuity sales grew by 30% year-over-year, although they declined sequentially.

The company has developed capabilities for a growing presence in the fixed marketplace and plans to leverage a new Bermuda affiliate. Spread-based products made up two-thirds of sales for the quarter. Traditional variable annuity sales rose 31% year-over-year, contributing to product suite diversification and strong risk-adjusted returns. Looking ahead, while fourth-quarter sales may be lower than the record Q4 2023, overall annual sales growth is expected. The company is focused on competitively differentiating itself through its diverse product suite and strong distribution leadership. In its life business, the company achieved a second consecutive quarter of 16% sales growth, benefiting from distribution and product strategies. There is an emphasis on realigning the life product portfolio towards accumulation and protection products for more stable cash flows and better risk-adjusted returns, supported by an optimized life distribution team.

The paragraph discusses the company's strategy and progress in its life business and workplace solutions, including group protection and retirement plan services. It highlights that while realigning the life business may take time, leveraging product, distribution, and underwriting teams should lead to higher earnings growth. The company prioritizes margin expansion over top-line growth, resulting in significant improvements in group earnings and premium growth. Despite being a typically low sales volume quarter, group and supplemental health sales increased significantly. This success is attributed to targeted segment strategies focusing on tailored solutions, product enhancements, improved operating models, and a consultative approach, strengthening customer experience and strategic partnerships across local, regional, and national segments.

The company is focusing on enhancing customer experience by investing in talent, technology, and infrastructure, leading to growth through improved digital capabilities and product offerings. The company expects year-over-year sales growth in the fourth quarter, driven by strategic actions and favorable market conditions, while maintaining profitability. Specifically in Retirement Plan Services (RPS), the company achieved strong sequential earnings growth and record first-year sales, largely due to a successful strategy targeting core record-keeping and institutional markets. A robust sales pipeline resulted in $1.7 billion in sales and positive net flows, with notable performance in small and mid-large market segments due to its effective service model and strong distribution partnerships.

The paragraph discusses Lincoln's focus on innovation and growth in its retirement business, aiming to enhance products, customer experience, and operational efficiency. They report strong quarterly performance, reinforcing their strategic momentum for sustainable growth and value. Christopher Neczypor highlights the company's broad-based improvements and positive momentum across all businesses for the third quarter, noting adjusted operating income of $358 million or $2.06 per share, with a contribution from an assumption review. The alternative investment portfolio also provided an 11% annualized return, equating to $100 million.

The company reported a net loss of $562 million, or $3.29 per diluted share, for the quarter despite exceeding their after-tax return target by $7 million, or $0.04 per share. The loss was mainly due to a $446 million negative change in the fair value of a derivative related to the Fortitude Re reinsurance transaction, influenced by lower interest rates, and a $381 million unfavorable non-economic impact within non-operating income. Their hedge program performed as expected, enabling a $50 million distribution from LNBAR. The annual review of reserve assumptions resulted in a minimal $8 million benefit to adjusted operating income, mainly from the Life business, with no major changes in assumptions for policyholder behavior and mortality.

The paragraph discusses the strong performance of a group segment in the third quarter, highlighting a significant increase in operating income and margin compared to the previous year. This improvement is attributed to strategic diversification, disciplined pricing, and strong operational execution in the disability business, alongside improving mortality trends post-pandemic and favorable macroeconomic conditions. However, the text notes that as these macroeconomic benefits normalize, growth may moderate. Specifically, the disability loss ratio improved by approximately 5 percentage points year-over-year, excluding impacts from an annual assumption review.

The company reported favorable financial performance with a Group Life loss ratio of 72%, a 9-percentage point improvement from the previous year, due to low claim incidents and strong LTD recoveries. Despite expecting a sequential earnings decline due to seasonal trends, they anticipate over 200 basis points of margin expansion for 2023. Their long-term goal is to maintain a margin of at least 7%. In the Annuities segment, operating income rose to $300 million from $260 million, driven by higher account balances, increased spread income, and reduced expenses. Account balances increased by nearly 13% to $165 billion, with RILA account balances exceeding 20% for the first time.

The company is optimizing its investment strategy, leading to increased spread earnings as RILA and fixed products grow in their business mix. Annuity results are boosted by higher account balances and spread income, though fourth-quarter expenses and reinsurance costs may slightly offset these gains. In Retirement Plan Services, operating income saw a slight increase to $44 million, aided by higher equity markets but affected by stable value outflows due to high interest rates. The base spread for the quarter decreased by 5 basis points but is expected to stabilize. Net flows were $651 million, bolstered by strong sales and improved stable value activity. However, anticipated plan terminations in the fourth quarter may challenge the net flows. The company is also focusing on account balances.

In the quarter, average account balances rose by 15% year-over-year, reaching nearly $114 billion, a 21% increase from the previous year. Despite spreads posing slight challenges for the upcoming quarter, higher account balances, increased sales, and expense management are expected to support retirement earnings. In Life Insurance, operating income was $14 million, down from $23 million the previous year when excluding assumption review impacts and significant items. The Fortitude Re transaction's run rate impacts and elevated mortality, due to a few large claims in universal life products, were partially offset by above-target investment income and reduced expenses. General and administrative expenses decreased by $12 million from the prior year. The company anticipates ongoing expense reductions will enhance operating leverage in the Life business. Although elevated mortality from recent large claims may affect fourth-quarter results, this is within the company's long-term expectations. Company-wide expenses were also briefly mentioned.

The paragraph discusses the favorable trend in expenses compared to the previous year, primarily due to efforts to reduce organizational complexity. While seasonal expenses slightly increased from the previous quarter, further actions were taken to streamline expenses, specifically targeting areas misaligned with free cash flow. Although the effects of these actions will be seen in 2025, expenses will rise in the fourth quarter due to seasonal factors. The focus remains on efficient expense management aligned with earnings. Capital-wise, the RBC ratio improved to over 420%, aided by better-than-expected free cash flow and strategic moves like selling their wealth management business. The company also enhanced its leverage ratio through organic equity growth and is on track with the establishment of Alpine, an affiliate reinsurer in Bermuda, to increase reinsurance capacity by 2025. The paragraph concludes by shifting focus to investments.

The paragraph highlights the solid overall performance of a portfolio that is 97% investment grade, focusing on high-quality and diversified assets. By optimizing their general account and shifting towards investment-grade private assets and high-quality structured products, the organization achieved a 6.4% new money yield, outperforming comparably rated public bonds. Despite challenges in the office sector, their commercial mortgage loan portfolio remains stable, with office investments accounting for only 3% of total assets. Alternative investments yielded a 2.7% return, surpassing expectations. The company's strong quarterly results reflect ongoing strategic achievements and fundamental strengths.

The paragraph primarily discusses the company's positive progress in terms of free cash flow and their outlook on meeting future targets. Chris mentions that their capital position is strong, supported by better-than-expected free cash flow generation. They're on track to meet their 2026 targets, which include a goal for improving their free cash flow conversion ratio from 35% in 2023 to between 45% and 55% by 2026. Despite the year's positive cash flow performance and recent asset sales, he emphasizes that the improvement trajectory may not be linear. The paragraph ends with Tina and the operator transitioning to a Q&A session.

The paragraph discusses the company's efforts to maintain and grow its free cash flow. It highlights actions taken to manage expenses and build capital, such as expanding their RBC and creating a Bermuda subsidiary. The company has paid down debt and incurred costs related to severance and legal charges, while also planning a $300 million dividend. They express confidence in hitting 2026 targets but refrain from giving specific guidance for 2024 and 2025. Additionally, Suneet Kamath asks Ellen Cooper about the strong annuity sales despite lower rates, questioning if advisers accelerated sales due to expected future rate drops and inquiring about the source of growth, whether from new money or exchanges.

The paragraph discusses the positive outlook on annuity sales, emphasizing the company's strength in various product categories. Higher interest rates and the growing demographic of individuals nearing retirement are expected to sustain strong demand for annuities, positioning them as valuable for both accumulation and income solutions. Despite a temporary dip in rates, the company anticipates continued focus from advisers on annuities as a solution. The company aims to prioritize profitable growth and increased free cash flow over sheer volume in its annuity business.

In the paragraph, Elyse Greenspan from Wells Fargo asks about the assumption review for the life insurance business and the impact of an industry study update. Christopher Neczypor responds by noting there was a positive $8 million impact on operating income, mainly in the life segment. This is part of a comprehensive end-to-end process that involves analyzing over $100 billion in GAAP reserves, considering industry studies, and company experience. He emphasizes that their assumptions for policyholder behavior and mortality are now aligned with their expectations and past experiences. Although there will always be some variability in individual assumptions, the company feels confident in their current position.

In the article paragraph, Elyse Greenspan asks about the company's strategy regarding improved free cash flow conversion and its plan to pay down debt, referencing the recent LNBAR dividend. Christopher Neczypor responds by reiterating the company's previous outlook and emphasizes priorities such as repaying preferred securities, deleveraging, and investing in the business. He notes that the company's leverage ratio has decreased and $100 million of debt has been repaid this year. Their strategy includes leveraging the Bermuda subsidiary, Alpine, and focusing on cost management. Overall, the company feels confident about meeting its targets, but provides no new updates to its earlier guidance.

In the paragraph, Daniel Bergman inquires about the company's strategy for its remaining Universal Life with Secondary Guarantees (ULSG) exposure, in light of a competitor's recent reinsurance transaction. Christopher Neczypor responds, indicating that while there is interest from bidders in these liabilities, the company is focused on improving cash flow from existing blocks without relying on new deals. He mentions priorities such as establishing their Bermuda affiliate, driving profitable growth, and deleveraging. Neczypor also assures that they are always evaluating their options for what makes the most strategic sense. Bergman then briefly touches on strong annuity sales, particularly RILA sales following a product refresh.

The paragraph discusses the reception and sales performance of a second-generation RILA (Registered Index-Linked Annuity) product, highlighting a strong sales quarter of $1.2 billion, the best in nearly two years. Ellen G. Cooper, presumably from Lincoln, emphasizes their extensive experience in the RILA market since 2018 and strong distribution relationships. Despite increased competition with new entrants, the overall market is growing due to a strong customer value proposition. The introduction of Lincoln Level Advantage 2.0 with new features has allowed them to compete beyond just pricing, resulting in positive traction. They anticipate continued market growth, which, despite increased competition, offers more opportunities.

The paragraph concludes a conference call, with Tina Madon inviting participants to email any follow-up questions to their investor relations address. The operator then closes the call, allowing participants to disconnect.

This summary was generated with AI and may contain some inaccuracies.