Lincoln National (LNC 11.43%), a major provider of insurance, annuities, and retirement plan services, released its second quarter results on July 31, 2025. The standout headline was non-GAAP earnings per share of $2.36 in Q2 2025, exceeding analyst expectations by 25.5%. However, non-GAAP revenue was $4.308 billion, falling short of the $4.66 billion consensus estimate by 7.6%. The report showed clear improvement in operating margins and segment performance, especially in Group Protection, where operating margin reached 12.5% in Q2 2025. Net income and revenue, however, declined compared to the prior year, reflecting challenges in certain business lines and a changing product mix. Overall, the quarter highlighted increased profitability and execution on strategic initiatives.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $2.36 | $1.88 | $1.87 | 26.2 % |
| Revenue (GAAP) | $4.04 billion | $4.66 billion | $5.15 billion | (21.5 %) |
| Net Income per Diluted Share (GAAP) | $3.80 | $5.11 | (25.6 %) | |
| Adjusted Operating Income (Non-GAAP) | $427 million | $324 million | 31.8 % | |
| Book Value per Share, Excl. AOCI | $67.95 | $66.37 | 2.4 % |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Strategy
Lincoln National operates through four main business segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services. Annuities are long-term investment and income products. The Life Insurance segment provides various forms of life coverage, including term and universal life. Group Protection offers non-medical insurance for employer groups, such as disability and life insurance. Retirement Plan Services support employers and employees with defined contribution plan solutions.
Recently, Lincoln National has focused on diversifying its earnings sources, controlling expenses, and improving capital flexibility. Distribution efficiency, product innovation, and regulatory compliance are constant priorities. Strong risk management practices and a deliberate move towards less equity-sensitive products have helped reduce earnings volatility. Key factors for success include maintaining multiple revenue streams across business segments, managing investment performance, keeping a healthy risk-based capital ratio, and achieving strong distribution to both individuals and employer groups.
Quarter in Review: Segment Results and Key Developments
The period brought a significant earnings-per-share beat, driven by improved operating margins and expense discipline. Adjusted operating income available to common stockholders (non-GAAP) rose to $427 million, up 31.8% over the prior year, mainly due to outperformance in Group Protection and Life Insurance.
The Annuities segment, which sells a mix of variable and fixed-income retirement products, posted operating income of $287 million, a 3% decline year over year. Sales in this segment grew 5% to $4.0 billion, Spread-based products accounted for 66% of total sales. Spread-based products limit earnings volatility but typically yield lower returns on assets (ROA). Notably, annuity net outflows (more money withdrawn than invested) increased to $1.2 billion, pressuring future revenue, particularly as withdrawals rose in traditional variable annuities. Management noted that “you will see that ROA come down over time” as the product mix continues to shift.
Life Insurance reported operating income of $32 million, reversing a loss from the prior year. This turnaround was driven by improved mortality and higher alternative investment income. Sales in Life Insurance rose 15% to $121 million, with the increase attributed to continued momentum in risk-sharing products.
The Group Protection unit, which includes group life and group disability insurance for employers, delivered a record quarter. Operating income climbed 33% year over year to $173 million, and the segment’s operating margin jumped by 2.5 percentage points to reach 12.5%. Premiums rose to $1.4 billion, up 7%. and the segment’s loss ratio—a key metric measuring claims as a portion of premiums—fell by more than four points compared to the prior-year quarter, signaling improved profitability. Group Protection now represents more than 25% of Lincoln National’s overall operating earnings mix, helping reduce the company’s reliance on more volatile segments.
Retirement Plan Services, which provides 401(k) and pension solutions, saw operating income fall by 8% to $37 million. Deposits grew 9.5% to $3.6 billion compared to the prior-year quarter due to strong first-year sales. Net outflows were $0.6 billion, compared to $0.2 billion in the year-ago quarter. Outflows were driven by plan terminations. The impact of these withdrawals, if persistent, could weigh on future recurring fee income for this segment.
Distribution remains a strength, with Lincoln National leveraging its network of brokers and financial advisors to deliver product growth in Annuities and Group Protection. Recent initiatives include partnerships to boost sales and innovation, such as the new collaboration with Bain Capital, which is expected to expand investment capabilities and support product development, particularly in fixed income and alternative assets.
The company continued to emphasize regulatory compliance and prudent risk management. Hedging strategies remain in place to protect against swings in market value and to stabilize capital. Lincoln National maintained an estimated risk-based capital (RBC) ratio well above 420%, exceeding its 400% target as of Q2 2025, signaling sufficient financial cushion for unforeseen downturns.
On the financial strength front, holding company liquidity remained steady at $466 million as of Q2 2025. Net unrealized losses in available-for-sale securities (GAAP) narrowed by $1.4 billion year-over-year as of June 30, 2025, aided by lower Treasury rates. The Bain Capital deal closed in Q2 2025, giving Bain a 9.9% stake and launching a long-term partnership to manage at least $20 billion in assets over six years. The partnership is intended to scale private asset investments, support the growing share of spread-based annuity products, and enhance returns going forward.
No material changes were disclosed to the company’s financial strength ratings, and management reported stable outlooks from major rating agencies.
Looking Ahead
Management did not issue formal financial guidance for either the coming quarter or the remainder of fiscal 2025. No new details were provided on forward earnings per share or revenue targets. Instead, leadership reiterated its focus on maintaining a disciplined approach to capital, controlling outflows, and improving risk-adjusted returns, especially in its growing spread-based product areas.
Investors should watch future net flow metrics in Annuities and Retirement Plan Services, as sustained outflows could put pressure on recurring fee income and profitability. The ongoing partnership with Bain Capital, while promising for product development and investment returns, has yet to show results in operating numbers. With the business still in the midst of a shift toward lower-risk but lower-return products, further changes in business mix and core earnings should be monitored closely for their long-term impact on profitability and stability.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
