Lincoln National Corporation

Good morning and thank you for joining Lincoln Financial's third quarter 2024 earnings conference call. At this time, all lines are in listen-only mode. Later, we will announce the opportunity for questions and instructions will be given at that time. If you need assistance at any time during the call, please press the star key followed by the zero and someone will assist you. Now I would like to turn the conference over to the Senior Vice President of Investor Relations, Tina Madden. Please go ahead.

Thank you. Good morning, everyone, and welcome to our third quarter earnings call. We appreciate your interest in Lincoln. Our quarterly earnings press release, earnings supplement, and statistical supplement can all be found on the investor relations page of our website at www.linkingfinancial.com. These documents include reconciliations of the non-GAAP measures used on today's call, including adjusted income from operations or adjusted operating income, and adjusted income from operations available to common stockholders to their most comparable GAAP measures. Before we begin, I want to remind you that any statements made during today's call regarding expectations, future actions, trends in our businesses, prospective services or products, future performance or financial results, including those related to deposits, expenses, income from operations, share repurchases, liquidity and capital resources, are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that cause our actual results to differ materially from our current expectations. These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued earlier this morning, as well as those detailed in our 2023 annual report on Form 10-K, most recent quarterly reports on Form 10-Q, and from time to time in our other filings with the SEC. These forward-looking statements are made only as of today, and we undertake no obligation to update or revise any of them to reflect events or circumstances that occur after today. Presenting this morning are Ellen Cooper, Chairman, President, and CEO, and Chris Nezapor, Chief Financial Officer. After their prepared remarks, we'll address your questions. Let me now turn the call over to Ellen.

Thank you, Tina, and good morning, everyone. Thank you for joining our call today. We are pleased with our third quarter adjusted operating income, which was our highest quarterly earnings in over two years, reflecting continued progress in our strategic realignment. These results were driven by strong underlying performance in all four businesses as we continue to achieve consistent momentum advancing against the operating initiatives we outlined earlier this year. We are executing on tangible actions to deliver sustained long-term value creation and support our strategy built upon three objectives, a strong capital foundation to ensure enterprise stability across market cycles and support investment for future growth, an optimized operating model to advance a scalable framework to maximize our resources, and businesses and products that deliver profitable growth to improve free cash flow and grow the franchise. This is a multi-year journey, and as with any journey, a strong capital foundation lays the base for sustained long-term success. We continue to build capital with another sequential quarter of RBC in excess of our 420% buffer. We also continue to progress in optimizing our operating model with a focus on expense efficiencies, investment strategy optimization, and the launch of our Bermuda Reinsurance subsidiary last quarter to further strengthen our ability to deliver against our priorities. Lastly, we advanced against our objective of delivering profitable growth as we transform Lincoln into an organization characterized by businesses, market segments, and products with more stable cash flows and higher risk-adjusted returns. As we look ahead, we expect to continue to grow and diversify our group and retirement businesses with targeted segment strategies to serve the unique needs of our customers, evolve our annuity business with a diversified product mix that includes expansion of spread-based products, and realign our life business to emphasize more risk sharing within accumulation and protection products. Our progress to date has clearly been driven by broad-based execution and sets the stage for continued success as we leverage our competitive advantages, including our powerful franchise, distribution leadership, broad product portfolio, and trusted brand. On the topic of brand, I would be remiss if I did not spend a minute mentioning our recent brand refresh. Collectively, our four businesses deliver financial protection and security to more than 17 million customers today, customers who rely on us to support their financial futures. As we look forward, we seek to enable more people to confidently succeed their way. and we treat every customer's future with care. Our new logo is intended to drive brand recognition, and our new tagline, Your Tomorrow, Our Priority, embodies our focus on stewardship and our enduring commitment to being there for our customers today and tomorrow. Now turning to our third quarter performance, excluding the impact of our annual assumption review. Key highlights at the segment level included group protection delivering record third quarter results with earnings more than doubling year over year. Annuities earnings increased by 15% for the same period and delivered substantial sales growth. Retirement plan services sustained its momentum, producing another quarter of sequential earnings growth and first-year sales that more than tripled year over year. Life insurance generated sequential sales growth for a second quarter. We have made significant progress against our objectives, and our results have exceeded our expectations. Now shifting to our businesses and starting with retail solutions, which includes our annuities and life businesses. Our annuity strategy is taking hold as we execute on growing while diversifying our earnings mix to more spread-based products. We aim to achieve this with the continued expansion of our addressable market and increasing our competitiveness by enhancing our capabilities, including an optimized investment strategy, capital-efficient reinsurance solutions, and increased expense efficiencies. Total annuity sales for the quarter of 3.4 billion were up nearly 25% from the prior year quarter, with increases in all product categories and double-digit growth in spread-based products. We remain focused on delivering profitable growth over top line growth that meets our targeted risk adjusted returns in each product segment while leading with our distribution network to provide a broad holistic set of product solutions that address customer preferences in various market environments. Ryla continues to be a strategic focus and demonstrated another quarter of solid momentum with sales increasing year over year by 13% and 10% sequentially to the highest sales level in nearly two years. We successfully launched our second generation Ryla product last quarter and its refreshed features and unique crediting strategies are resonating in the market. While our fixed annuity sales increased by more than 30% year over year and were approximately $1 billion for the quarter, sales levels were down sequentially. As a reminder, we built the capabilities over the course of the last year to sustain a consistent and growing presence in the fixed marketplace and expect to leverage our new Bermuda affiliate for this product in the future. Spread-based products represented two-thirds of our total sales in the quarter as we continue to extend our reach to new segments. Finally, our traditional variable annuity sales increased 31% year-over-year as we experienced strong growth in variable products with and without guaranteed living benefits. Variable annuities further enhanced the diversification of our product suite while delivering strong risk-adjusted returns. As we look ahead to the fourth quarter, while we anticipate sales to be lower than the record 2023 fourth quarter, we expect sales growth for the full year. In summary, with the depth of our distribution leadership and the breadth and diversification of our product suite, we believe we are uniquely positioned to competitively differentiate. This is and will continue to be reflected in the results that drive the strength of our annuities business. Now turning to our life business. Life achieved sequential sales growth of 16% for a second consecutive quarter of double digit growth as our distribution and product actions gained further traction. We remain focused on realigning our life product portfolio to offer solutions that generate more stable cash flows and higher risk adjusted returns. Specifically, this means we are targeting growth in accumulation and protection products which have more risk sharing. As I mentioned last quarter, we are supporting this objective with our repositioned life distribution team to optimize our wholesaler footprint. This improves our customer reach and elevates our coverage to better enable and accelerate our product shift. While realigning our life business will continue to take time, and we expect that sales growth may not be linear, we are confident that leveraging our product distribution and underwriting teams will increase our competitive differentiation and drive higher earnings growth over time. Next, turning to workplace solutions, which includes our group protection and retirement plan services businesses. As I highlighted earlier, groups earnings more than doubled year over year as we continue to execute on our strategy to grow profitably by prioritizing margin expansion over top line growth. Year-over-year premium growth remained at 3% in the third quarter, reflecting our disciplined pricing approach to both new and renewal business, where we are achieving persistency in line with our expectations while undertaking a repricing effort, reinforcing the strength of our relationships and ability to deliver value to our customers. In what is typically our lowest sales volume quarter of this year, group sales increased 18% year over year and supplemental health sales doubled during the same period. These outcomes reflect the significant progress we have made in executing on our targeted segment strategies, which are key pillars of our margin expansion efforts as we build on the tailored solutions we offer with unique products and services within each segment. In our local market segment, we are expanding our growth through enhancements to our products and upgrading our operating model to improve access, ease, and affordability. In our regional segment, we are creating a unique value proposition focused on elevating the customer experience and further strengthening key strategic partnerships. As a market leader in our national segment, we are continuing to leverage our consultative approach and expanded product strategy to grow profitably. We are strategically investing in the capabilities to meet our customers where they want to be met, including talent, technology, and infrastructure to improve the customer experience by expanding our digital and self-serve capabilities, upgrading our underwriting technology, and re-engineering our client service model. These investments, along with our expanded product offerings, are driving our growth. As we look forward to the fourth quarter, which seasonally accounts for the majority of our full year sales, we anticipate year-over-year sales growth while maintaining our focus on profitability. In summary, Group's performance this year has exceeded our expectations, driven by our strategic actions, and supported by a favorable macro backdrop. Our focus remains on delivering a long-term sustainable margin, and we are confident we have the appropriate strategies to do so. Now turning to retirement plan services or RPS. RPS sustained its momentum, producing another quarter of sequential earnings growth and first year sales, which more than tripled over the prior year. Our strategy to continue growing in our core record keeping and institutional market segments through our differentiated service model and product innovation is resonating with the market. The robust pipeline we previously communicated materialized into strong sales in the quarter of $1.7 billion and drove positive net flows as our targeted segment strategy and increased engagement with our distribution partners continued to deliver results. Our small market sales reflected the strength of our LFD distribution franchise and ongoing product innovation. In the mid-large segment, we leveraged our service model, which drives high client satisfaction to attract new plan sponsors in markets where our value proposition is resonating. We continue to innovate and build capabilities in our retirement business, improving our products and services, enhancing our customer experience, and increasing operational efficiency as we further optimize our operating model to drive sales and earnings growth. In closing, our strong performance this quarter reinforces the momentum of our strategic execution as we continue to reposition Lincoln for sustainable growth and value. We are leveraging our competitive advantages to grow profitably, advance operational efficiency, and build the capital flexibility of our franchise. While our transformation is a multi-year journey, we are building a durable path to deliver lasting value for our shareholders, customers, partners, and employees. With that, let me turn the call over to Chris.