Lincoln National Corp "1Q26: Estimate updates and stock thoughts" (Neutral) Ward

Research evidence excerpt

Lincoln National Corp "1Q26: Estimate updates and stock thoughts" (Neutral) Ward

LNC has deliberately shifted its new business for Annuities (roughly 70% of

earnings) more towards spread-based products, by selling more RILA and fixed/

indexed, and by exiting its external flow reinsurance deal to retain more of the

economics.

Spread products were roughly two-thirds of 1Q26 sales, up from roughly 57%

in 1Q25.

We view this positively because spread annuities are valued at higher market

multiples than traditional variable annuities.

On the other hand, the nature of a seasoned annuity business mean that it takes

many years for new business to materially re-shape block composition.

69% of LNC's Annuities AUM is traditional variable annuities, with more than

half including guaranteed living benefits (the insurance riders that pose liability

tail risk and historically influence lower market multiples).

This 69% is reduced from 72% in 1Q25, an improvement of 3pts,

underscoring the amount of time organic mix shift can take.

LNC has also been increasingly investing in its Group Insurance business and

producing strong sales and margin growth. This has been one of the better stories

for the stock in our view, and has been impressive considering these lines are often

among the most competitive in the sector.

The earnings contribution from Group has more than doubled since 2018/19

to almost $500m.

LNC continues to explore options for optimizing its legacy life insurance block,

including potential risk transfer or internal repositioning.

Estimates and target

Reflecting post-2Q26 adjustments, updated equity markets and other model

refinements, our 2026/27E EPS increase from prior $7.53/$7.92 to new $7.73/$8.09.