Lincoln National Posts $339 Million Adjusted Income as Life Gains Offset Group Weakness

Lincoln National (NYSE:LNC) reported third-quarter 2026 adjusted operating income of $339 million, or $1.72 per diluted share, as stronger life insurance and retirement plan results offset weaker earnings in Group Protection. The figure included a $95 million after-tax charge from the insurer's annual assumption review. Excluding that impact, adjusted operating income rose 10% from a year earlier, supported in part by strong alternative investment returns, Chairman, President and CEO Ellen Cooper said.

Net income available to common stockholders was $1.3 billion, or $6.77 per diluted share. Interim Chief Financial Officer Adam Cohen said the gap versus adjusted operating income stemmed primarily from a favorable change in market risk benefits (guarantee-related liabilities that revalue as rates move) as interest rates rose, plus a change in the fair value of an embedded derivative tied to the Fortitude Re transaction.

Cooper said Lincoln had substantially achieved the financial targets in the three-year outlook it introduced in early 2024. The company will detail its next phase, including a 2027 outlook, on its fourth-quarter earnings call.

What changed on capital return?

Lincoln repurchased $50 million of common stock during the quarter after retiring $437 million, or more than 40%, of its outstanding preferred stock through tender offers. The company also finished building holding-company cash earmarked to redeem the remaining $563 million of preferred stock.

Cohen said the preferred-stock actions would cut financing costs and expand capacity to return capital. Based on expected subsidiary remittances and typical holding-company cash uses, fourth-quarter repurchases could run about double the third-quarter amount — a way, he said, to think about the run rate heading into 2027.

The estimated risk-based capital ratio (a regulatory measure of capital adequacy) stayed well above the 400% target plus a 20-point buffer, Cohen said, while leverage held at its long-term target of 25%. Subsidiary remittances totaled $990 million through nine months, tracking toward the high end of the $1.2 billion to $1.3 billion full-year outlook.

Cooper also confirmed the Talcott reinsurance transaction closed on Oct. 1. Together with Fortitude Re, it moved roughly 60% of Lincoln's guaranteed universal life reserves to reinsurance partners, she said.

How did the segments perform?

• Life insurance: operating income, excluding the assumption review, rose to $130 million from $54 million a year earlier. Cohen credited stronger alternative investment income, favorable mortality and captive consolidation benefits. Stripping out favorable mortality and above-target alternatives, underlying life earnings were approximately $60 million. He cautioned that Lincoln was not relying on continued favorable mortality.
• Alternatives: the portfolio returned an annualized 16.5% against a 10% target, worth $55 million in after-tax income above target.
• Group Protection: operating earnings fell to $77 million from $110 million, with margin down to 5.5% from 8.1%. The disability loss ratio rose 670 basis points to 83.4%. Cohen said roughly half the increase reflected higher severity, including elevated reserves on a small group of higher-salaried claims; severity moderated late in the quarter. Rising claim incidence, by contrast, looked more durable. Full-year margin is now seen at or modestly below the low end of the prior 8% to 9% range, though earnings should improve sequentially.

What did flows and sales show?

Total annuity sales rose 21% from the second quarter to $4.3 billion. Fixed annuity sales more than doubled sequentially to $1.4 billion; registered index-linked annuity sales were $1.5 billion and variable annuity sales $1.4 billion. Cooper expects fixed annuity momentum to continue into the fourth quarter.

Excluding the assumption review, annuities operating income was $304 million — up $17 million sequentially, down $14 million year over year, a decline Cohen attributed largely to a reclassification of certain investment income. The segment logged roughly $2.7 billion in net outflows, driven by traditional variable annuities, while fixed annuities drew about $725 million in net inflows.

Retirement Plan Services operating income increased to $55 million from $46 million on wider spreads and higher equity markets. The business recorded roughly $1.9 billion in net outflows and expects about $3 billion in fourth-quarter outflows, mostly from one large plan termination. Cooper said a strategic realignment of the retirement business is in its early stages, and sales and flows could remain uneven as Lincoln adjusts distribution, services and technology.

The verdict: a quarter carried by alternatives and mortality luck, with capital returns doing the talking. The durable questions — group margins and retirement outflows — wait for the January call.