LNC - Earnings call transcript Q3 2017 | Lincoln National Corporation

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Operator

Good morning and thank you for joining Lincoln Financial Group's Third Quarter 2017 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later we will announce the opportunity for questions and instructions will be given at that time.

Now I'd like to turn the conference over to the Senior Vice President of Investor Relations, Chris Giovanni. Please go ahead.

Christopher A. Giovanni

Crystal. you, Thank welcome and Financial's Quarter Third Good to Call. Earnings morning, Lincoln

cautionary conditions current important our you I Forms earnings release future comments X-K to www.lincolnfinancial.com market repurchases sales and begin, operations, where visit the we participation capital SEC. income issued on reminder. filed deposits, expectations, comments disclosures XX-Q your reports expenses, and have statements and the comparable the results Lincoln's uncertainties and with measure. liquidity and website, that are our in you regarding Before in share call cause in and actual measures resources, under Litigation We Act non-GAAP statement invite and risks yesterday and Private return are and to an forward-looking release our of risks appreciate Any which from about on and income operations of statistical today involve used reconciliation full Reform the differ made include trends expectations. materially from described GAAP from to press equity Securities uncertainties can statements most and find XXXX. a These including the These during the including forward-looking call, supplement could their

will most the I like Philadelphia. portion Dennis like I over beginning, you trust Officer. Day their be Officer; will hosting Randy to call. to Financial you and on you the our Before our today's of to would would to After in call attend. that Executive question-and-answer received I call and are Investor we Financial remarks turn be Freitag, Presenting President Glass, the now Chief Lincoln November and remind on Dennis. of also we prepared Chief hope move we Field will able XX to invitation, at

Dennis R. Glass

to per Book quarter X% the XX.X%. EPS as share Thank you, compared outstanding be marked share and the increased record. were prior quarterly a Operating everyone. and EPS third Good and XXXX share. morning, per to value earnings exceeded X% first was operating time $X.XX per year, continues ROE an Chris. year earnings has increased

during also we annual had in more on Randy you completed our will As his our assumption quarter you provide financials. review impact small remarks. detail know, comprehensive a which the

of free couple rates growth our management, related and a benefiting businesses as nature active which generate markets. the opportunities million complementary in measure cash AUM points a $XXX business us earnings having The more This strength solid income, all stability high quarter's provides of expected supporting from of Plan One broad-based, from of consistently in includes to market quarter. mortality the strategies mix strong results. was us strong results in results shareholders Life earnings. also are account continues strength businesses while significant Protection as The to which to Annuity returned underlying on highlighting we're and posted Insurance low sales significant higher capital we to to been supported during these earnings and capital earnings further Services flow back enabling with year-to-date. and impact sources levels, our has percentage quality earnings uncertainty record has than four can returned fees Variable success to the recent of historical and benefited periods excellent underwriting on spread-based investment Retirement to while the These source values. interest and from are strategies Group had still morbidity diversify long-term tailwinds. equity of market by earnings. enable on This implemented source of few further execution capitalize and abate of capital the of a of years contribution diversification amount quarters, increased

we last increase a the Additionally, XX% stock in common night dividend. announced

continue the of capital balance will and sheet for opportunities our generation. to steady strength We the leverage that look

starting with combined and business with tailwinds. were quality equity our market strong, as business our to turning Annuities. Now earnings Results segments, from in-force are predictable benefiting high

to remind book grow. of of first to Annuity compared increased to encouraged and years we you, and for by year-over-year is in metrics. have we about three the risk demonstrated growth years. industry, Variable in best modestly remain me excess the returns quarter, Let favorable our ability our decreased in one historical seasonality. extremely sales of slightly, marks prior consistent year, Compared to the sales XX% the the second over highlighted sales, business with Shifting annuity

competitive benefits sales $XX year, value totaled consumers. the propositions and part benefits deferral continuing effect Product up fee-based have quite business, now the These Fixed have XX% to the through sequentially post-summer to the interest sales focus broadest is traction, gain we points, that key $XX while and million than more for a over products picked with from quarter. all the year nearly solutions XXXX. in over sales and reinsurance planning expansion most of positioning rates options. the the without these quarter, be course share for as and sales VA late tax of more and million continued with are in Annuity customer due had. Max the flexibility of of introduced and increased rider benefit a This Select, sales matching to portfolio nearly continue improved Athene. year, gains low of market has resulted increased as compensation legacy we October. X provide offset However, is Annuity strong has living in reach, ever the benefiting living to X% To along distribution we arrangement second in added throughout quarter, choice resonate with in the to fee-based we investment

deposits to sales work markets totaled creating positive significant Net to clearly marketplace. increasing to by are large $XXX $XX So, the small do first-year $XXX proposition further Services, grow bottom investable X%. strategy In net while both quarter. the our I growth top the and months. flows million value strong near franchise more from increased to and term. the by quarter considerably, flows, confident get million in Retirement the sales the up growth. of in business a to and and and VA the Annuity continues have a the in to compared back in driven sales solid XX% strong extremely million, encouraged remains as income guaranteed deposits for couple Longer-term, in of Total billion to delivered line recurring prior-year year-over-year projected am lifetime results to but mid opportunities Annuity to in momentum build past drive we X% of year Plan retirement and ability remain ago, were important, assets for quarter $X.X We

driven XX straight Over flows flows being quarters net are exceeded all for of Positive momentum past the three $X.X have billion, months business. components flows. seven record in Retirement a the by for

First, sales are wholesaling product competitiveness benefiting a from enhancement result and the productive of and a the marketplace, of more force in digital combination improved innovations.

is more and growth model customer Next, employee experience steady that participating contribution in our an providing is contributions rates. have employees shown high-touch, high-tech improved resulting higher as

as participant and competitive distribution. positioning better as execution with strong about as RPS been because to the product expanded I the business optimistic client-facing Bottom in marketplace had drive our remains and retention I line, ever outcomes. of continue teams Lastly, am strong

Turning in impact investment on pricing our the down strong. lower million growth Insurance strong and assumption adjustments of to income, earnings benefited XX% of the sales quarter point, sales driver from of from To Total this the while were decreased annual Life remained review ahead as were Insurance, Life year the in GUL quarter. variable down the prior rate-sensitive products. X% interest sales $XXX

total GUL, Excluding sales largely Life were unchanged.

XX% returns. on our XX% returns actually to changes, pricing targeted business the With exceeded new

adjustments. expand year's count reach distribution customer and quarter were sales full quarter we the strong same to last more TermAccel, returned solid, a insurance, record accelerated through industry-leading demographic. new are and as younger increased the distribution. with leveraged product sales and near X% periods the a digital have we MoneyGuard year, targets sales For On were up broad this XX% in of prior second levels after as a pricing to technology which quarter portfolio returns, and term policy increased benefiting base consistent with from XX% sales ahead

Life focus positioned risk new above We range, business to returns macro a product well-diversified and and on improve returns well while Bottom capital. favorable top marketplace. opportunities backdrop, growth sales to business line, With appropriate management, portfolio our more position our targeted is maintaining continue a returns. the on of the in diversification, the targeted see competitive we end

Protection, continued by year, prior the X% ratios. to quarter as increased loss Group to the Turning Premiums significantly favorable over grew sales and persistency earnings in improve. driven

sales quarter, grew. we the and momentum sales fourth is are in increased lines sales quarter, quarter, our and employer increased both and paid the product as XX% as have During activity all the our markets. employee quote strong historically had target XX% good largest production entering which pipeline and Year-to-date,

also core are disability in up life renewal trends and driven to are encouraged persistency We percentage points by trends four which by prior year, products. compared

target know, to X% in achieving you As a we of margins XXXX. established X%

year-to-date, results target Given the reach now we this expect year. we will

annualized the improving focus margins strategic diversification to the in portfolio opportunities last sustaining positive which business, alternate the results, Shifting several an achieved over on expected growth continuing The results pre-tax results equity earning momentum and While return, portfolios. and in quarters Group with offers fund hedge solid very to investment and volatility quarter over now good for validates both is from private time. this our is Lincoln. quarter, XX% the strong, investment investment

portfolio extremely of fixed assets shape, our portfolio purchases points diversified. quarter driven maturities. investment reflects decline percentage spreads products quarter. long-term with the the broadly yield and match remains with Below guarantees. yield grade basis from X.X% investment X.XX%, tighter During shorter The only tilt liabilities to investments duration the of X% is in quarter declined X% due fixed invested an to we second income and the in increased portfolio, at and average which of expectations. largely by point income high-quality to represent Lincoln's compared money consistent Overall one new the from X primarily prior-year down away The good

in quarter's year-to-date So including very record results pleased closing, this with I'm earnings.

As will growth. I I sustainable confident drive initiatives that and strategic long-term forward objectives look remain our

more insight mentioned, stability. and us enable call look holding to know, XX providing we'll financial our of into Investor and drivers our success you the let to track our Chris and even you the and will November Randy. strong that Day With business that, to we sustain As turn record key me forward be on over

Randal J. Freitag

operations Thank you, $XXX we or third Dennis. per income share reported quarter. for million, night the of from Last $X.XX

year-over-year. Excluding increased items, X% notable EPS

year's to this out. netted earnings and the the impact one item on noting the review series annual annual mean earnings also had Protection the minuses not recapture. $XX Annuity negatively favorable still A primarily review. As Life year's release, This a that in review, assumption pluses against a with affected the long-term provides quarter, $X.XX behavior outcome million by no markets. we from adjustments. EPS. we change $X.XX and benefited DAC in or assumptions. tax $X.XX declines negative $XX were a Insurance current a business Separate Earnings million, the benefited unlock comments of the rate did the from policyholder to few from worth cushion assumptions our equity noted which that from standing It's reversion the in quarter of benefited reserve of reinsurance Group business to

that item the before continue of is line DAC review total underlying performance sheet the shifting in sound. metrics. balance reserve viewed One key be So bottom to the note other when with assumptions to annual our and

of income compares to expectations. As $XX normal Dennis variable million per to our coming or share $X in noted, year. returned per more $X.XX million This $X.XX or ahead share, levels, investment last

was key shareholders and in Moving record flows high. financial us XX% of AOCI to billion. were to all-time and $XXX generation over at XXXX. points X% solid value return account end Balance is enabled XX.X% sheet and above performance the positive strength share million quarter. values the ROE book $XX, per Consolidated $XXX basis a to strong the of capital XX grew net an excluding year-to-date of ROE metrics, to reached period Normalized

noneconomic, Lastly, million Year-to-date $XXX XX% had below of is which line the net operating further impact. earnings. the of income income the the highlights represents strength quarter, net largest of as NPR,

of past periods. to quarter up Earnings by in segment with starting included million, seen can negative quarter excluding net year markets' the and annuity Annuities. variable looking quality book was driven than strong at returns last from growth amount return items from as earnings account has be net a Normalized fee over values, more $XX metrics the this remain front. by risk. ROE higher at in offset The quarters. million when our I the strength items was Net basis were $XXX Now we ROA came X% notable living at while X% death and to turn year both consistent up points, of both XX%, both X% XX income Net as than in improved at X/XX favorable noted benefits. account for value Reported will less with amount risk results, of recent for equity flows. average increase

So, review. included minimal periods $XX competitors, returns financial assumption and impacts business. changes, of us compared In to prior-year to marketplace from risk, the approach in million, our at well Plan disciplined net profile Annuity assumption earnings continue our from differentiate and million prudent superior risk to and reported in a below consistent annual the the Both Retirement strong of quarter. $XX highlight impacts and modest amount we Services

increased G&A items, net higher net increased due to were while of expenses expectations. billion average compared basis XX% X%, growth to income investment spreads, from expense markets, consistent and favorable compressed increase. year, the with flat equity combined year-to-date, excluding variable XX account account billion, X%, income earnings over XX capitalized Base $X.X amounts in drove these year-over-year. months, with points last flows values management. to $XX a values Revenues primarily fee Excluding of Positive trailing

and net continues was solid with the and in deposits, good growth. assets, XX well-positioned for recent deliver excluding RPS For Retirement The quarters. line expense is points quarter with combined discipline, ROA flows, in future earnings items, notable basis growth business to

to Life our segment, unfavorable to net Insurance of million Turning included the earnings million $XX review. of $XXX related items annual

X% the quarter income. as Excluding variable strong Insurance notable line the account to with with experience seasonality. points drivers Earnings Life with compared third-quarter X%. in-force variable favorable values X in compressed was X% investment from investment last quarter average solid items, in year-to-date Base income decreased and remain up prior-year typical expectations. benefited year, earnings excluding basis up consistent spreads, Mortality

life improvement XXX loss with reinsured for the modest. in disability driver quarter earnings steady year assumption disability quarter's primary favorable the results from of from growth in results. The Life and net mortality solid prior-year the a the quarter quarter. the in excluding review as experience. strong $X primarily loss in items quarter with disability a the Strong included $X basis $XX ratio earnings the $XX a point third to Group XX.X% primarily quarter. the line recapture impacts Protection of significant support nonmedical into quarter, favorable due ratios. continue and experienced was in remain momentum. risk A million of So, The benefit refinement. sales the to annual refinement. group earnings business was million second combined year-to-date claim expectations and carried financial right favorable the were the lower to was reported The included from million in Favorable prior-year compared reserve reserve in risk was rates, increase A from business severity, new results million incidence drivers prior previously the

for a in loss positive from direction. lower reflect Group we quarter with and ratios X% now it leading X% strong also Premium target premiums trending consistently indicators this with results clearly to business was While underwriting our the persistency discipline margins external as end economic be growth positive the the increased such exceeding X% range. wouldn't Group coupled is strong, aiding expect prior-year sales as factors. of to line, another very with quarter year-to-date Bottom

margins with improvement we gradual range time. on consistently While a to our now basis, be within is over quarter-to-quarter year-to-year target volatility expect expected

to few me comment Q&A, other note. items a on moving let Before of

growth capital capital both capital to drive capital, generation capital significant on ability and providing flexibility First remained and earnings also shareholders. to to strong, financial return commit an and long-term

dividends. remainder up we through $XXX As $XXX with million the shareholder share quarter million, this I noted front, returned repurchases, including in

growth. remain capital. with example to expect XX% of in can We which by our seen announcement An strong shareholder of consistent increase a earnings the dividend be allocators our this is active of

the quarter and billion above target. at cash we a million anticipate dividend. surplus our and noted $X competitive RBC As end the of past, at approximately XXX%. we in stands I growing over the company remains Holding Statutory estimate have ratio $XXX maintaining

So by line grew operating back record With year's This for no account expansion. conclude, and value the We again to will our assumptions record of Retirement was sheet ROE impact once share underlying reported earnings while quarter Lincoln. from in ROE supports another X%, our of which me We review let on over excellent Life annual book the EPS, underwriting benefited operating Insurance were normalized results Plan in were the almost as there Protection Services turn call and and balance the quality strong, Chris. another confirm values. per to Group XX% modest as was below impacts year that, earnings. Annuity

Christopher A. Giovanni

Thank you, and Dennis Randy.

will the the question-and-answer call. now portion of We begin

ask yourself a have that, one then and we With turn over to As you Q&A. follow-up limit one and question reminder Crystal me please it to let that if additional questions. to you begin requeue only

Operator

Thank from you. Autonomous comes Bass Research. question Erik first And from our

Your is open. line

Erik Bass

trends with economy quarters? the the near is been past two the you. Group but Lincoln I on to – last wanted trends and you've certainly your think there that in few I some that rate based we're remain it's to the the Hi. into industry years, and, going and the guidance and benefits seen heard the have book update put on ratio do the Randy, favorable Thank increases if underwriting you seeing just start level your the

Randal J. Freitag

question. the for thanks Erik,

to have that improvements next margin. in that between high. claims we made Items set been that in like items favorable X% are the like it's impact. to which I targets we that to mentioned year, as believe expect believe basis over consumer some XX-year price increases, growth the and X% driven forth Items by X.X% low on expected a What's we've a is time. impact. driven clearly, to management believe is achieve I goal as which clearly which my confidence, primarily some is the having economy has year. low additionally unemployment we quarterly we As at been clearly those up having be is notes, we But the achieved some rate clearly is at Those

can range. little up quarter see target the a above you we during our ended As

wouldn't range we travel think be while little above knows. but So in to items expect bit could I our a target forever place those who for

I in think But be it's items Erik. we'll a see forward this question. the quarter. drove would thanks solid place expect move that we We the as come we for to quarter out, all and where

Erik Bass

Thanks. the And growth you're years? business break so this operating sort see margin positive of in recent of then on Can I some we seeing obviously positive million more earnings assets sort Yeah. that flows the on seeing business of expansion at you just out and had over mid-$XX couple leverage Dennis you are been nice going quarters? in just where comment of start a where next And where you and think momentum. very point and they've comments Retirement, range the

Dennis R. Glass

in in my and said of the business good I our expectations As of continued very as strong. shape is improvement remarks, a is

driving changes all we'll earnings to translates that the we have but the processes these product over into the see time, how outcomes. are directly that improvements, management, So

consumer and real something and substantive value that continue. will they're So,

So, yeah, optimistic. we're pretty

Erik Bass

you. Thank Great.

Operator

Thank you.

from from next Bhullar Our question Jimmy comes JPMorgan.

open. line Your is

Jamminder Singh Bhullar

one weak, surprised given obviously your sales strong. reinsurance which Hi. Good with I results were contract annuity that though thought indexed overall, The was were Athene. especially the morning. area pretty

on are see DOL give what And for could because that? are the business? your just any drove of So what us you disruption or there expectations Did factors? rule color other that you some

Dennis R. Glass

and The up down particular indexed annuity sales any period. will go in

individual into So October quarter for late particular, or Annuity And strong think month, all as the competitive sales, all summer sales. and very the was Annuity strong for a I very don't position. in month we there's our excuse me, different anything again, about moved individual about different

that continue sales to we've about, that momentum and see will talked across the all confident because positive lines. of are product We regain things momentum we pretty

Jamminder Singh Bhullar

Randy, and that then, assumptions, the numbers, And interest could DAC are reserves account rate give assumptions separate you the or balances? and your embedded in return us the

Randal J. Freitag

Jimmy. Sure,

J called we've the interest at look as assumption curve you If it. our rate

lowered As each you points know, six XX over basis assumption times, we've that different three the past time. years

points, what here little XX-year but rate our a XXX about sit points. Treasury we below a As today XXX of is basis points, underlies basis about assumption basis right XXX

underlies that ultimate rate, new rate towards. So money earned moving that the we're

X.X% separate days return a standpoint. of from a are account, believe terms at we I these separate about account In

Jamminder Singh Bhullar

there? the get XX And you assuming will When X.XX%, year? are By you

Randal J. Freitag

Five years.

Jamminder Singh Bhullar

trend towards – flat rate? that of Within the sort

Randal J. Freitag

Yes. five years. Linearly over

Jamminder Singh Bhullar

account? in assume then fixed equity income, is that to of to the A details. is the closer we obviously separate And the get I'm [XXCZXW-E that going A right? the Randy component should big assumption X%-ish, not X.X% Freitag]>: so the – Yeah. embedded into

in You ago was, account by what our reduction we our remember, in the two was down, of guess can were brought to a markets that and view return years equity going years. do future separate I assumption driven it

outperformed over a mentioned, I Annuity stand position million a a As our Jimmy, quarter in us little Currently the from $XXX and in positive in we this standpoint. that that leaves cushion business. assumption also have quarters

Jamminder Singh Bhullar

– Freitag]>: it. Randy [XXCZXW-E bet. you. A You Got Thank

Operator

Thank you.

Our next Citi. from Suneet question comes from Kamath

open. is line Your

Suneet Kamath

Jimmy's terms Good annuities as of in up morning. bit what your driving want October more and a are that? question on just strong, being you I little follow could about particularly about Thanks. color really products comment to provide

Dennis R. Glass

last on board all annuities, and previously Suneet, fixed months, talking particularly is said had remarks, the all product my six across VA that side, really what consumer offered. in into reaching not proposition, value that the and areas about in I it changes we've the broadening reflects it variable the the been we both products

seen overall since to actually a it's just was product of number month we've lines. in increase October the And an XXXX. So all the highest put sales aggregate

come But going create and again broadly things best the had. month products, our And based that hasten a it's me us let new the level. distribution the back, all that all Now to due of in good marketplace. month effective I'm one separate say and to does across we've wholesaling, not to that

Suneet Kamath

Got that it. starting now it going far? fair say the from of uncertainty And too that to to Or abate? pressure some DOL or is is maybe then is

Dennis R. Glass

one the away point, That less those drifting nonqualified would seems are step from were in DOL in growth important. At that sales. to the of now the were, some that sales be have an more so be indication the effects qualified lock

was I extension DOL this reported applied the occur think that of not has morning the until XXXX. it with second the this OMB for rules, of implementation

commissions. So emphasize discussions and the savers, what's opportunity to us actually that the interest interest the context of help final choice compensation from would and ruling, good to particular. DOL, continue course in both a as in our both forward the of answer is industry as consumer, with American the best it in perspective. the give of to we'll what's we well more this best the in And And shape in move DOL for for compensation oftentimes shape

I So a from impact pause a happen the this the lot specifically, beginning of (XX:XX) but the sales distance your is XXXX answer over to to standpoint. next question from plus June ease months the XX DOL to think see

Suneet Kamath

Great. annuities you flows your comments positive mention but still XXXX? then by And in didn't in you expecting are

Dennis R. Glass

that the of talking little amount be to than were expected to is when little going a increase is outflow account that's think about balances I of the number. this just because harder fact-based, we we some to get in higher with a

a early period So over to guaranteed flow tougher but our a demand for and is talking particularly part get in income, in to distribution both well about, little drive everything to certainly as of product time. we're of the lifetime net our terms going XXXX, there us positive as

Suneet Kamath

Thanks, Dennis. Okay.

Operator

Thank you.

Our next ISI. from Gallagher Evercore from question Tom comes

open. is line Your

Thomas Gallagher

issue all Good rising. And side? thinking at morning. all that We've about that? seeing the for an also be heard your what degree being about future you from life To should a on is that the are some influence just And Insurance cost actuarial and relatedly, did reinsurance – Life other we negative insurers margins? of review

Randal J. Freitag

years Hey, in discussions we of Tom. four case like now. balance been reinsurance. we're ranged the our those have outcomes of XXXX that capture rates also a did paying payment, years going are from embedded the in with sometimes for five future modest sheets, Discussions assumptions. that on at five reinsurers discussions have discussions to for for for to a four those increases Lincoln, are had and statements bigger end of we our any to in may expectations the we've our embedded All over have past our in income In

years we forward. they're our through I are we assumption mean past situation So balance where good over but statement as That that I from really our about us move and actual think feel continue income an differ standpoint. so in assumptions, couldn't sheet doesn't managed the I from that and outcomes expect this we've to to do

Thomas Gallagher

Randy. Thanks, it. Got

repricing contracts as have meaningful there's nothing about So you or you would where new you new new that's current like, coverage a think development? in of when like that nothing, place, see

Randal J. Freitag

future for going years for has I developments. new a and four the been said, any No, it continue there's think I on, bit. This don't think like little into to I will five

Thomas Gallagher

positive question does then corporate Athene. you and enough tax And you. lowered a reinsurance make on a your we rate benefit with If IRR corporate that you? it's tax contract Got the sense reform Do cost capital? a for where get get versus deal of to of do XX%, still

Dennis R. Glass

the stages legislative tax through process. of which tax talk is of moment in us, I we're obvious moves blindly all going about reform. early the in general to remind that let Tom, for forward is guess, it and change me And the the reform as it

just a make I'll mind, of in industry this couple with So comments.

little bit industry that a as corporate profits. already a pays percentage The earns the one of first is than more it

to is the the speaking, industry our share in X.X%, more like all roughly neighborhood profits X.X%. So of yet X.X% Insurance corporate corporate of tax of U.S. income is Life share

reductions, So our rather rate reduction positioned into industry view tax of than is we're process, in that so hurt. the is be industry no say is there a our that also should in disproportionately any item areas spread go items they well expenses all or along an the industry this with if is pretty or going being legislative view single not industry. that I'll sort of major business model helped across for undertaxed

there's any outcomes confidence for so little should wait until tax. me, so excuse potential issue just going related think I much or, have more to we we before on on commenting a And that so much different that's specific change

Thomas Gallagher

Thanks. Understood.

Operator

Thank you.

question Goldman Sachs. Scott from comes next Our Alex from

line open. Your is

Alex Scott

question. morning. Hey. Good taking Thanks for the

I extend impacted on hear up following you the Would of balance costs, reinsurance to sheet? sheet. Insurance all? at that on the like Tom's related Life to intangible balance So Just the question goodwill be would the to piece on impact

Randal J. Freitag

Alex, say sheet when I I hear things in sheet. balance like didn't way. entirety that our mean qualify Yeah, you of the any me balance

So forward and past in our four done impact may results entirety anything over rates that embedded with the income years assumptions and our statement. reinsurers happen to and been what embedded reinsurance we've assumptions we of have actual the sheet balance the going in our have for of impacts

Alex Scott

your made just of that guess And level? to tweaks just on CTE where if right. you you I of your the sort they're adjustments an managing update interested guys All so levels any a relative target stand couple Thanks. peers made to have I was of and Okay. CTE-XX to, sort

Randal J. Freitag

the for Thanks yeah. Alex, question.

business, account that using value. move percent So into you deep understand profile a risk the to need what approach. we the the business. really of It's we think our because this to I greater I business, and CTE-XX greater on of use price Annuity We for call of CTE-XX a tails cap, Annuity capitalize and available our

the we tail one account is business can So need would emerge, risk approach that and back to then because right greater bringing for capital the to deep I you countercyclical. of against out out of be account capital to It of use the move values markets enough be it. of is percentage the into you and CTE-XX necessarily the the as don't believe those you values keep in this of that sucking profile business true into business decide it of the capital and comes this before shove ones

do. in at and deep the this of approach that So it's what the Alex. It with business approach running measure to hasn't tail greater we what I is is CTE-XX all, think along changed prudent

Alex Scott

Got it.

Okay.

So, there. no changes

should out pretty of the to where NAIC the good of that's and study? relative quantitative is of you at feel interpret so impact the I stuff sort about And that what come as some you're doing

Randal J. Freitag

I it. Yeah. changing the feel Oliver about I Annuity business. risk a these lot profile. great that, reserve great forward. products going we with how Look, capitalize around of and the potentially I issued. we our going there's products Separate about how from for work the I on Wyman feel feel about feel great about great NAIC we've

moving I along think active that is nicely. We're work participants.

make I these general, I've we reserves in basis. is reserve the It think that in economic as taking these products on for before, approach more the capitalize good thing. to which statutory a how reflects is products NAIC is said a GAAP and nature

good in a that's thing thing. there we're a Lincoln, doesn't bad moving aren't up, along. That I for we're the happy and good the for it's they with total a think about it's mean it's where So way and participating very thing good end industry, some parts

Alex Scott

right. you. All Thank

Randal J. Freitag

bet. You

Operator

Thank you.

from comes Bob question Glasspiegel from Janney. next Our

Your line is open.

Robert Glasspiegel

Good morning, the quarter. Lincoln, congrats and on

production? out, estate to five would guess, sensitive How it question, Just around is proposal Life pushing Republican did going in quick years. in a and of the area, tax? a Last guess I it what the different hour and next I to it's double to time estate be sales a in tax doubling coming the Tom's do question eliminate your

Dennis R. Glass

haven't on not I estate question... that the what your means couple say answer of sure tax, this. to you that. Bob, seen I'm but a comments double When

Robert Glasspiegel

X.X% XX.X%, It's to and immediately and XX.X%? at double XX.X% set

Dennis R. Glass

or estate extent me understand to about the effective any the to Only after answer $XX would rate at so planning on $XX our Life I'm I because about not tax are so up the question Yeah, families. is making from more look planning, individual planning the the large driven to I'd that XX%s But individual tax the Lincoln. most and side XX% million the American issue, in changes and – not million really important sales, of at that to estate sales that's if tax too point, exclusion issue it. that point I hurt require of have also this help. it think most eliminates joint it less that. negative tax but XX% is – an I'll and out let And much in not important, is important on the amount requires more us taxes estate with the not going think a that exclusion this familiar I'll estate

then for an in actually taxes away that and was provide million you'd have the $XX could go on sales. Life step-up that basis to opportunity However,

so a tax different related have again of sales a About it significant So just XX%. lot see back at come this where of outcomes, goes. we moment estate in planning. to But lot don't time to, I'll moving parts, let's

Robert Glasspiegel

Dennis. But say happens. propose be minute. did the going article The obviously that at does whatever helpful, to remain they That a the isn't step-up in surprise. That's basis last what journal was

Dennis R. Glass

will Yeah, the NA- the of good industry all let's and for we course we participating watching so good and this policy that as shape be excuse Lincoln to the and move America for insurance life policy trying all know keep process. me, ACLI tax tax through it through

Robert Glasspiegel

you, Dennis. Thank

Operator

Thank you.

question Krueger Ryan next KBW. from from comes Our

Your line open. is

Ryan Krueger

Hi, morning. thanks. Good

baseline pattern that compares of could Randy, I the thinking usually typical just particularly Life mortality the fourth to of expect and about kind first, your quarter guess remind Just in us that business, you'd you assumption? the Insurance just of seasonal how

Randal J. Freitag

the much year would that you above the over X% of pretty seasonally the year seen XX% and of then average Yeah, last year. average is of between have quarter of I historically typically quarter pretty in each XX%, Ryan, get somewhere quarter of based that's first quarters we the and company. your say two so That's and somewhere upon business. evenly, mix the fourth and the between to specific It's third an what XX% high. back quarter the

Ryan Krueger

in an And a modeling system. individual peers seen their your as modeling-related of blocks we've Thanks. charges SGUL to move policy take number they then

update just Can purposes? has an modeling seen been you haven't give that. obviously us You this on kind approach of point for at your how

Randal J. Freitag

and we think both have policies I approach a Ryan, from DAC including SGUL to all sophisticated standpoint standpoint. of business, reserve valuing both highly Well, a our a

and changes had talked think that, about Any of we've experience lapse behavior Outside know had but in to of reflected We've like terms rates, terms tell good like out don't things and the thought we've on we've pay SGUL playing I what good the of premiums, the that. in model. really would. obviously beyond So in policyholder they assumptions rates, you I interest how we people experience.

these valuation about have a good So system we that we sophisticated basis policy are. and policies on projects very a where we feel

Ryan Krueger

Okay. what That's I thought. Thanks.

Dennis R. Glass

Yes.

Operator

you. Thank

question Humphrey Dowling Our & from comes next from Lee Partners.

Your line is open.

Humphrey Hung Fai Lee

taking thank the question. morning Good and you for

employee is set I Protection, categories? wondering two pricing between your you target for other of you Group paid? the loss employer how just versus at there kind differences was between a ratio In words, do Looking paid any pricing different

Dennis R. Glass

paid, I illness think margins we back which employee of of included not core have from coming accident is on do margins paid you paid in or critical general pricing Business that than sort because employee on such as require Life onion does. see one on to peel the the certain any in think products particular different employer I And better we than part the side.

by driven there yes, are So the product mix. differences

Humphrey Hung Fai Lee

ratios an was I loss to the quarters. some I see from happening, underwriting shift? trying mix was impact last the guess Yeah. obviously the but good, how And in to Okay. much couple of trying favorable just have to obviously increased of get is there's coming favorable is what I

Dennis R. Glass

aggregate Yeah. the expectations don't question. inside in our your to relative think there's I any numbers difference

Humphrey Hung Fai Lee

how seeing terms also your But Okay. you recent from offering momentum. of competition in you think products, at in terms potential race enhancing environment And into an any Got refinements fee-based of about arms a sales, risks I good are again? (XX:XX) the how the time same return, about similar talk launching getting general some then talked Annuity products are of of of VA it. the Can launches competitive competitors the their greater product there's in suites. back

Dennis R. Glass

logical our product that share I market I But just reasonably have pricing not increase for into a that it's new competitor addition maybe intentionally better industry think an arms My industry. results on standpoint the products might no. that That race. right as in a a reason, us doesn't any don't the is be answer than historical of remarks, our more a but investment And and particular products, opening most from it mentioned see just of mean the I now. flexibility. the for particular emphasizing – not competitive make is, more back getting

we sales than the ever opportunity had So portfolio past. we have an to broader improve have a across in

to basis increasing that's so on trying how as sales increase opposed the price. And we're to of sales

Humphrey Hung Fai Lee

you. Thank Understood.

Operator

you. Thank

comes from O'Neill. question next from Our Barnidge Sandler John

is have they line Your open. And like looks disconnected. it

come question FBR. from from Randy next will Our Binner

Randy Binner

and interest managed question, this Good and just at like Thanks. effectively I looking in very of the to morning. gets had spread the Hey. areas. of a and been those kind our Annuities guidance both credited has Retirement model, in

out of in is can how is of And room you of kind you kind guess run – is, both there push there of cost a the those much And my to where point so liability segments? of more that? stopping question push I kind

Randal J. Freitag

Randy. Thanks,

was and different and your is consistent changes to very rates to In the comfortable for our Annuity manage those. specific in of that the significant Annuities business think Retirement you've percentage question credit our seen still I rate the the answer ability with creditor feel A over last so feel between current have guarantee the rates. quarters. and very we few earned in room we and policies comfortable

XX to in-force points XX as opposed why on comes rate some business, a expect managing you've our fact over more function been of rates. Retirement range. new of bringing a bit the the pretty a seen case lower business for business the at a in that we annual on in to the we've close are points that compression creditor basis On been has down as And rate to that's rates spread basis and us that this and time credited near-term the so the now, guarantees movements

XX As down basis points I business. year-to-date the Retirement mentioned in we're

businesses. different So is those the for two answer

Randy Binner

to XX% the all expectation being Retirement? be things in XX% So for and would equal XXXX, XXXX

Randal J. Freitag

our points current what points recently. basis to been that's been typically is we experiencing and XX but XX what mean, don't yes, we've I basis saying years that's expectation a is we've talk out few

Randy Binner

All That's right. Thanks. I all had.

Randal J. Freitag

bet. You

Dennis R. Glass

there's IRB, opportunities. Can going by very of I there's earning have when growth business we some the where we're earning line that? get on just jump in and And to where to headwinds demonstration

run much compression a from headwinds spread the a little but so offset that be to And will RPS, by management. just that of front bit, expense little more in there's

encourage opportunities information good really important I So around to going people we're to and lot because to check the strategy somehow are and are. each the what earnings a or of IRB have business around in challenges come or

Randy Binner

Well, Yeah. okay.

the what to So Is Or other money there are drives make expense those for that spending say initiatives? initiative? the of the changes then can you kinds digitalization I guess structure? you're strategic expense I'd

Dennis R. Glass

combination we way digitization a on. RPS In sort aside that process and a a major of from it's but initiative, have of lowering that expenses reengineering very going very also major,

lines. details those things over that of the will combination each expenses in time. those And of two of a for the it's into our down get business So drive again kind that IRB, we'll

Randy Binner

right. All Thank you.

Operator

any questions for no our turn over I Thank remarks. Chris am showing now you. lines. phone to And to like back Giovanni from closing further the conference would I

Christopher A. Giovanni

thank and us. for you joining all Thanks Great. so Crystal, much,

investorrelations@lfg.com. be see Thank of always, hopefully you mentioned, we and take at a as day. good our Dennis email you able questions to on will have November on Relations or Investor we'll and line XXX-XXX-XXXX a XX, your As lot at via

Operator

in Please and conference. all you gentlemen, day. today's a have may This the participating program, thank conclude disconnect. and you wonderful Ladies for does

Lincoln National (LNC) 2 Nov 172017 Q3 Earnings call transcript