Lincoln National (LNC) 3 Nov 222022 Q3 Earnings call transcript

Good morning, and thank you for joining Lincoln Financial Group's Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Now I would like to turn the conference over to the Vice President of Investor Relations, Al Copersino. Please go ahead, sir.

Thank you. Good morning, and welcome to Lincoln Financial's third quarter earnings call.

have reminder. I begin, we an important Before statements Any including from those during of the XXXX. are operations, Reform Securities future expectations, call regarding forward-looking resources regarding capital repurchases liquidity comments the Act and Private Litigation made share and under deposits, expenses, income actual These involve cause uncertainties materially differ that and statements to from forward-looking could risks results current expectations. release XXXX those include those XX-K, quarterly statement in report our time the press with cautionary detailed Form described disclosures as SEC. to filings well our the uncertainties issued in and most as risks reports annual XX-Q These on on time in yesterday and other in recent our Form from any that of date. and only These forward-looking no made occur statements reflect we today, are events or them after of to or this circumstances obligation as revise undertake to update reconciliations appreciate operations visit to include our release invite operating and and your statistical can from return GAAP adjusted used on including Lincoln's income equity adjusted adjusted website, full the and participation measures. which find We most where you on comparable the the press of income you supplement, to call, or non-GAAP measures today www.lincolnfinancial.com, the quarter review A section. our supplemental related containing third annual assumption information slide in our the is presentation to on posted Relations also XXXX website Investor on call Chief Cooper, are Officer. President Ellen Financial and Presenting today's Freitag, CEO; and Randy move question-and-answer of portion will the the to remarks, we After their prepared call. to like Ellen. I the over would now to call turn

good morning, Al, and Thank you, everyone.

levers our the the areas. strategic Life our performance a key business recent assumption and also quick Before the to to magnitude charge approach how risk-based the the our multiple our review resulting of unlocking changing we of other speak of review. and address to want step of provide our to in are position back capital discuss I'll ratio, details business improve we in our I annual quarter third decline businesses, available capital our the performance, from the

charge high Universal a by provide GLU billion by to the $X.X policyholder business, lapse Lincoln I unlocking details. unlocking The validated to total First, This level, behavior GUL our at billion experience related this more billion will driven and address emerging block. will in $X.X updated the was Life Randy a $X.X industry due assumptions was lapse within perspectives. where year charge primarily new Life or Guaranteed includes

be a fourth run rate GAAP annual rate AD life result, charge million the XX statutory quarter, in no earnings. the produce the million to RBC. to $XXX As operating translates also On unlocking expect in a we to of which lapse impact updated related decline booked $XXX earnings. basis, assumptions about has on a a subtest GUL run The statutory points

long-term to to pricing assumed ultimately our dramatically than market. lower assumption ago sales permanent decision this a to of certain policyholder reminder, GUL a policy that if the guarantees type is been GUL reduce exit life pay years is in As in-force of continues and risk. significant stay GUL guarantee, the a a and some will Because have driver Interest premium. minimum subject insurance rates of were

Lapse other years, costs reinsurance the Additionally, adjustments. key over the seen mortality unfavorable and have assumption. is

were last anticipated recent the into later behavior materialized, insights patterns policy provided has the Over deeper durations, policy Lincoln's experience study. has years, industry GUL several it experience which in supplemented as subsequently with

forward. going our reset have we result, assumptions reflect a to As lower lapsation

of discount a impairment million in driven charge higher In primarily life we the VUL use impacts equity separately business, life variable universal incurred GAAP a rate. market and goodwill our addition, $XXX by or

XX% XX% quarter positive a our our in Total decline and were sales strong to sales. up sales X XX% prior total on portfolio. RPS, Services, reflecting for billion $X.X a I from years prior We And deposits. the driven the Net up up an higher of indexed up the the the or quarter. products all recurring reflecting year Universal prior diversifying our $X.X finally, prior to X% discuss in compared variable Premiums growth sales first other interest from I perform Before portfolio year from Life were continued of And variable Protection, and segments. this reflecting XX% quarter. businesses the product briefly flows expanding quarter annuities, traditional touch our delivered the the prior led sales market following of were In sales the Group and on quarter, index to increase Life will investment fixed were as operating saw all topics, from quarter, businesses quarter strong well Insurance expansion X% of annuities. highlights growth year across offset in by mid-XXXX rebound We and have year in and high-quality in growth. compression. billion. driven Year-to-date, than of were the continues net up to results sales a flows increase annuities more spread primarily in first rates a $X.X year rose annuities in Plan increase deposits by in year time X% since Retirement positive billion focus spread in

XXX% XXX%. as started at expected are fourth the year-end RBC with year approximately approximately and factors. the statutory to as ratio. The year well Now the includes capital projection projected turning other We risk-based the end quarter RBC our to at charge

we those RBC I swift replenish factors target, elaborate capital satisfied actions target. our to our rebuild the our actions are we and back importantly, to to on XXX% following: underway our and taking not to to emphasize while are targeted want projected I ratio, Before with

targeted business capital back we confident are level. get effectively have as operate we We our to to the ample

last distributable to improving introduced quarter, with I clear a execute and generation. this and strategic will plan execution new them have and a first, We are: our capital have and of which the experienced maximizing talented morning. understanding senior you'll the as Effective hear starts issues leadership in address on leaders objectives place earnings

market on and and capital mix Continuing capital durable volatility diversifying improving cash-generative earnings third, to this streams. with capital. efficiency; income our Second, sensitivity reducing further discussion

RBC the is follows: has of increase will X/X above. this source I been X reserves, business with Our the included ratio ratio contributors our reduce year, will statutory capital as review the in of and statutory our referenced assumption I life mentioned, year-end which as the main decline projected RBC

statutory AD release over the rates. However, if reserves stay interest And to would these expect current prescribed levels, portion time. test utilizes we of trailing at a rates

than years, smaller continue while prior quarter. the the claims in first experience the pandemic of we Second, particularly to this year, impacts X

to time. these impacts expect over moderate to We continue

portfolio test life flow the to negative of a Third, contributor business contribution to decline. year's insurance in setting attributable our claims, market is aside cash and the to impact of is reserves equity A this AD portion generation. pandemic negative due VUL increased the this

this from However, producing there negative flow other negative as earnings loss distributable well retirement including group's reinsurance year's term business. cash variety value and of including our cash an annuity notably earnings, reserving, which principal-based affected statutory in intensity factors free GUL of are transition changed and which stable pattern the higher block the change, of are on to the and The generate to ongoing previous and allocation flow products, increase the weighing XX% earnings assumption the of pandemic a fees remaining life. fixed of has offerings by to not costs, is within business distributable for block as annuity insurance capital life factors, our attributable to projected in business' our recurring transactions impact ability certain the RBC claims decline sales from capital lower

well managed. Our annuity been always highly risk cash and has business and generative remains

this in assets movements, However, specifically reduced management lower the both fees on fund year's impacted under generation. increase and and negatively rates consequently resulting declines in the interest equity had bond capital returns, in and equity market markets

per an do and over program program of In we This volatility. LNBar. hedge Additionally, program we focus average increased VA to to The led on intend breakage time. VA LNBar. for time. by we increased highly market has take dividend the we resulted variable capital of to LNBar our dividends generating in capital has aligns some LNBar, position distributable September, The GAAP of that been assets maximizing claims that about hedging hedge to announced hedge out rebuild have sufficient enhancements earnings statutory focus current And expect has taken out income capital fund with benefits updated focused year year's while future not capital. organically our annuity reduced volatility $XXX on of minimizing market net has hedge to on our effective within strategic and the protecting We environment and explicitly generation. capital guaranteed million

where number of and underway are our rebuilding the life well the the taking distributable the the a our positioned that enhance our of rebuild retirement X now our our plan and and will and sheet. business to XXX% capital workplace note improvements I RBC strong initiatives will target business, in team businesses; contribute to I group of actions support strengthen distributable I and deliver to earnings to ratio are Additionally, capital. that balance leadership earnings discuss generation protection services our

to remain prioritize First, share to balance capital capital, return over dividend expect and shareholders, our and returning repurchases we will maintaining are while share repurchases. pausing time. to be we dividend resilience the to committed We sheet to growth replenish

And from headwinds incorporates block additional of primarily strategic for are senior we our capital our such considering beyond evaluating today's and strategic including environment lens and with that capacity in-force Second, preferred mix or today. provide potential macroeconomic wider third, that what our alternatives and given business, margin hybrid a securities additional environment to see potential the alternatives have are we as in reinsurance structure transactions of risk beyond common we new debt objectives. equity uncertain

dedicated previously, and a up we As have have I fully team. mentioned staffed

there we find we execute. the look the While price, to will right commitments, opportunity at right are no if

Head the already our new Annuity Reid, objectives Financial Chief a Neczypor, strategic Matt these Network, and I a to advance The we our number James Officer, our particular, actions, longer Life business. are sheet actions. of taking of have initiatives In Lincoln are distributable to X favorable Individual term. underway and profile implementing Life, of have In several our addition last will to Chris leaders improve Head Workplace quarter earnings are balance introduced the Grove, with charged that Solutions; of Strategy measures impact to X the designed we strategic

new to focused we our solutions keenly are of and customer guarantees, a on on improved shifting capital years, In more efficiency. the we product team, diversified have the been add reprice, strategy. focused a with shift with lower product As set sharing recent and mix

strategy our thresholds. forward, we growing new distributable maximize business with we sales focused As allocation our previously our process. capital earnings, return to on consistent We've are exceeding move refocusing while

capital a and to expect on capital. allocate we business amount focus return forward, on targeted Going our will of to maximizing this new

capital part less capital delivering sales allocate new to is us the business efficiency a allow level focus XXXX to robust to approach earnings. this in This of allocation did we distributable an our important more of while go-forward in XXXX Spark. expect strategy. our We than on of and

substantial savings of this rate We initiative making are schedule the $XXX ahead late million million progress implementation of to by enterprise-wide XXXX. expense and run $XXX of deliver in to

have planned of achieved approximately to XX% the date. savings We expense

mitigate the customer, as We market mentioned, reducing of and our the our the our working group structural sensitivity services businesses exploring Both market be and impact driving long-term and protection the strategy. differentiation capital continue comprised further plan also hedge including of to focused potential to critically solutions. on previously are both are to important And accomplish in Solutions to delivering on and results. I are businesses multiple avenues this of BUL market declines Workplace retirement product

We Group you for target of about X% have the our a then generation. high sustaining to positive and Protection, on with of goal end our X% which capital have will margins our reaching spoken impact

to that In sheet, balance I you strong effectiveness margin to a helping pricing finally, and Spark. place, be by our our execute we compression a of We our team and customers strengthen the workforce on to execution, will shift And our forward strategic long-term in stakeholders. spread spread interest rates, continue value claims a discipline, such have and for talented disciplined we months leadership capital improved and we driving closing, return look laser-focused expansion. executing are progress. and advancing ahead, expense group long-standing track to strategy higher our enhancement protection delivering in increase objectives a we strategy on our through as from product With efficiencies as clear on of the updating record a franchise enabling

call. Ellen, to on you, good Thank and morning everyone the

to with this outcome. X results Before and the lastly, year's end behind goodwill which our the assumption of the we in of billion balance earnings RBC our provide by I business. off operating billion the going standpoint Life with the associated writing discuss total remainder of $X.X results Starting that review, And results the review our impact where of that this today, reduced income $X the drivers with of assumption line. below earnings in adjusted expect year's I'm commentary an the year to around topics: the from with

at this respectively, million positive the interest rates business driven the $X year's projected impact experienced retirement on of Looking by $X adjusted million, annuity $XXX profitability. unit. of income impact review At of impact million, the business operating impacts negligible, and group higher were the while by and a favorable in assumption

an settlements drove with impact unfavorable driven of of the reinsurance $X.X X Turning $XX factors: billion, in increased First, million. impact partners primary to Life a XXXX, rate X which by had business negative

impact million updates associated unfavorable with assumptions. our $XXX Second, to an morbidity of underlying

$XXX unfavorable mortality its adjustment age we of to this and mortality I'd X/X mortality older expected X/X to assumption of our overall assumptions. adjustments as Third, update million improvement from to to attribute about industry assumptions. underlying updating an expectations about align to impact remit this to

About from impact expectations impact guaranteed our behavior lapsation. impact. driven an our in updated assumptions long-term XX% $X.X around changes Universal Life by into Digging billion unfavorable of in Lastly, $X.X book. was of billion the policyholder that

amount to are greater the we study occurs As than now data call persistency that with gave own last keep account limited decides needed of a into lapse had us not with to on Combining we quarter's the assuming significant a value a reminder, premium assumptions, runs behavior contained our experience a policy policyholder industry referenced result the additional our out pay in-force. in credible experience. significantly of been Coming data to that I XXXX, their and when update we previously. policyholder have being

of onset that to I of impact pre-pandemic color In the book. on quarter. our XX%, rates interest of pandemic. the Including up current with GUL, expect last that surrender other recover case the $XX.X not made assumption to the which review, we policies. the quarter's a would would have reserves, million roughly these noted of that charge X/X saw note statutory of at billion we and recover to reserves we to XXX,XXX expect rates compared net drop of take to As includes reserve on billion statutory net the is A lapse call $XXX a It GAAP levels, next to we I more of capital near $XX.X expect if levels. impact in do statutory GUL XXXX. little remain year-end we the

impact rate GAAP reduction above, a operating impact run addition but million In described earnings $XXX onetime life results. in run to the on expect we rate statutory after-tax no I

of including risk-based at by a our number Turning XXXX noted year claims by expected XX-point flow are negative at charge, of Rebuilding items to pandemic ratio. RBC #X and fourth drop quarter capital insurance, began ratio RBC is the XXX% and life This goal, XXX%. and end from an is cash expect smaller We we but came approximately statutory continuing as targeting year's expected to XXX%. our XX% generations. of driven Ellen which the

our leverage been impacted Additionally, of above target quarter's our XX%. has goodwill this charges ratio and and unlocking longer-term is by negatively

this be will pausing we enhanced take the as following hedge not over growth, this we replenish as We program. previously, breakage. time from of elevated In LNBar, buyback a we by equity expect organic year's which dividend entity this manage will through to the capital communicated

specifically the program communicated on our changing call, to of of focus the capital. we on focus LDTI protection hedge our As we are

equity goodwill our items our was decline of remaining discount but result by a life by number the the of rate broader rate business would the spike balance. in business. the interest This value $XXX in I to and the million driven X driven in impact that are increase of on Turning to factors, write-off out an the environment increases VUL markets used

to includes for share assumption Not $XXX which $X.X share. adjusted me results or per of review, million $X.XX assumption reported we of adjusted turn per by billion the below per per $XX.XX were operating operating including for Last let earnings share per claims $XX or our long-term alternative million this a impact year's the operating third the earnings returns from reduced $XX would quarter. quarter. $X.XX loss share have $X.XX review. $XX.XX investment expectations by or been Pandemic-related or the Now quarter share. and night, million

hedge quarter's item, year the VA stands per million. were effective company added million at quarter, net to of G&A sheet. to experienced $XX was of $XX.XX, balance recent million breakage prior improved strong G&A Book up XX% Turning in I'd Not that $XXX XX% the the share, sales capitalized roughly at $XX the amounts came expenses of cash and that holding quarter. The periods. for were program AOCI, at the contributor growth of in value excluding the number we impact including versus also while notable resulting expense million $XX add the as legal to G&A. a expenses in a in onetime

values, Now was the Annuities. results, to including with assumption for quarter. quarter account $XX values were results account on business, down $XXX that with XX% account respectively. VAs have income both than markets income, I items to the Adjusting notable annuity average increased in starting and and impact in the Operating year our benefit declined the XX% a living guarantees $XXX million in net to come in year periods, due less that X% annuity of X% as XX% of the benefits The of million continued investment benefits the living favorable alternative to decrease prior our total during turning million amount review for operating risk annual note values. death quarter of compared from decline we to work prior diversifying prior year equity separate not have and segment period. to

Annuities to return metrics. Turning

annual review, XX%, return and respectively. assets the and points were on Excluding basis equity on XX return

expect Looking our Retirement of hedge operating DAC flow ahead, includes interest cash and [Indiscernible]. the million we a which income earnings future and favorable program Services VA million, reported Plan of $X drive from product revised generation. portfolio, diverse impact benefit $XX to higher rates

not earnings alternative The operating items, flows account a notable million compared in $XX able year as headwinds markets. in $XX and investment results income million Excluding base were quarter. by and spread in a RPS. the prior X% solid of capital offset operating million year decline net competitive drop a and spreads, earnings performance $XX point the increase to driven These were to show overcome the growth, lower continued in equity in by organic turbulent decline the XX expansion during positive values a was were average strength partially resilience markets in basis

to annual the year last insurance. quarter, prior operating we $XX $XX loss income annual or reported for Turning review. year's million, assumption $XX million from million billion a million, net our of We income life from which and unfavorable operating a In net $X.X legal impact expense. of impact reported the the unfavorable included $XX of of an operating assumption review quarter excluding

begin annual average market values, were impacts due XX% improvement investment Beginning in the the than compared in-force $XX million transaction. of be unfavorable prior result review quarter, rose also quarter's year million quarterly equity million This while that reinsurance and pandemic-related to account less in run and life million earnings. decreased pandemic-related operating from claims. from the declines, to fourth net included claims. results represented of a year the in to period, will This an resolution favorable $XX reflected impact period alternative rate $XX prior XX% $XXX the Average

million pandemic last a improving grow operating the of income a milder operating a Protection of product and of below from are in million The last pandemic-related cash flow included our profile year group the and was claims our Pandemic-related the return the million million GUL from that been reported this current difficult confident several target quarter, X% prior of X% included was million levels. $XX to particular income, compared with favorable the over focus a unfavorable which While pandemic on quarter, $XX in impact $XX was higher the quarter loss $X combination million that target to reset income $XX has year claims to X.X%, the business. of of of and alternative the claims Life range. assumption within year's years review. alternative the business assumptions, improved period. we claims position $XX net ago investment Group investment portfolio margin annual rates, for our Adjusting interest an revamped

improved claims of lower points slightly life last group offset pandemic-related and the loss XX by ratio assumption year's impact by year-over-year, Excluding review, mortality. claims the basis higher disability group driven new

we with of the of high our of achieving margins at targeted about continued Protection are margin pleased the range the Group optimistic Through our business. We execution are strategy, end reporting over direction time. enhancement sustainably and

new money Moving to and credit we increasing investment results report continue to results, yields. excellent where

managing First, net been We portfolio. of fifth for in of migration diligent credit below grade assets a a regarding recognize And of the low the and consecutive recession historical investment increasing was Credit income risk. the at the remain X%. fixed strength remain risk has quarter. positive investment

recently across a asset name-by-name perform scenario in classes analysis continue normal we our the As basis leveraged believe process, our are platform potential part we of on recession. entire to portfolio to positioned and multi-manager all for a well

cash yield flow fixed to X.X% spread points money many basis yield basis have years income spread compression the of XX rose rates current The generation. portfolio. supportive expansion, new Higher transition third points to which XX from quarter of earnings X%, the above helped is sequentially and on

ultimately In reserve to beneficial addition, levels. higher are rates

X.X% With back of result to the the the compared return good call double-digit quarter, quarter. over major return, turn targeted below alternatives indices negative our our quarterly equity returns was negative to X.X% second this Al let Finally, that, a in me

to to Instructions] Question-and-answer I'd portion turn back for like the Before additional call Ellen to moving Q&A, the Difficulty] [Operator comments. of call. [Technical

Al. you, Thank

our up stable from to revised S&P with you outlook. it rating A+ a negative seen, outlook has Q&A, opening may a with as AA- to have Before

outlook rating Moody's addition, In from has to our affirmed negative. stable has and revised our AX

are We that the these with we effectively confident business can operate ratings.

We and the to turn the on agencies, ongoing rating our that, conversations With update back we'll to call and opened with to begin operator the them over me Q&A. have continue progress. our let

[Operator Instructions] Your comes the first Krueger KBW. from with question Ryan today of line

question back think is, some rebuild on may you first to take ratio you XXX% the target? My can give the RBC perspective long to how it

Yes.

So Ryan, have thank you for the question. We confident can know I that it's what going rebuild. in to the we take say plan us we some time. are And to that is that

part so of because are -- give there while many we factors, are so the so of actions so of underway. a script elaborated the can't in And many already amount we that you definitive time

around all support which the capital also think business underway particular, levers the clearly solutions example, to as organic us as as and looking VUL around for all our know that actions relates can the are generation so some portfolio capital past, when that which immediately well the particular, allocation, we at, is in overall we're you critical, and we in the in and VA. other capital what generation, about around have it that will new our implementing so of you had So pull we strong

focused there. So we actively are

updated some to you we on continue in keep just can mentioned even are continue of capital I to options. potentially the script, also, to And making. We we external that we on will potential where further progress are it as generation focused relates the that make progress ways and we are on as the

that -- move, to on quantify that And rate how your And took there's extent think lapse what follow-up can I opportunity help third-party can give reinsurance? you an where guess, you is, do can GUL? you you made now ultimate you realistic us, to you've do either

take. going Right. question to hand Randy Yes. to to that over I'm

Thank year think both about made lapses we When it the change to substantial I our about the to underwrite, this way. you question. think for you this

experience talked they experience remain access data Ryan, come about us down and study, our A in policyholders have participants and behavior So deep premium. gave we're do fact own our with our the that of the to this expect the go to pay dive to we grows, that only of amount amount come understand process experience not place. we we that is able included how into a the point to now achieve, data behave significant they which with through, additional had in the expected and to should but to future to X industry be of when pandemic,

think and let that all me those about insights You into meant. you what things, give

back when decide that and a today, of was the to policy. total The have book, their that our from they XX% years. experience couple of have roughly total from About They value. Lincoln before in X.X%, was the surrenders. last somebody company lapsing for of surrender surrender rate think I right? came And the So surrender is we that seen you about down who that, own want account has our It that and mentioned pandemic.

So or roughly points. basis XX about XX%

haven't lapsation not The other been sufficient are comes in-force, and to keep basis points paying -- XX they and lapse. policy or people their or XX out decision account who run the they XX% make premiums points And roughly to basis pay their value, from lapsation. more of premiums these so they they

So XX the we for points XX which [X.X] points then from that projected in lapses It's future. basis surrenders, basis total, roughly experience from

about comment you X surrenders. on those If think items, I

of very up over account time used design charges. is policies gets So that through value the the these

reflect meant that X which then people is goes then roughly in tie all XX our who will next is funding XX years behavioral to over X.X% surrender of the the and so to rate to level future face And decision. eventually. to lapse this experience data current projected And the from of forward the the this all using

very about the So of assumption we feel very, the good future.

clear, be right? let's not Now X. It's

we substantial of good will a and reduction, reflects risk, really some how a that So only solid but understanding not there's feel always it people behave.

of Another are decade, way of policies those X% year the look last this. to When the thinking model more year, this Ryan, is at keeping we over you next about compared in-force. it, approximately

all have relative If script, XXX,XXX lapse about you year. now and what you I those of $XXX impact if that policies an to X% additional -- billion means claims XXX,XXX the changes ongoing doing in assumptions. fund And is XX,XXX policies, $X.X impact the reserves about we to this this of in-force Do impact, back mentioned that stay we're keeping we're surrender about we additional lapse in-force. the my Essentially, last right, we're people for think setting million. to expect you go up think of about associated with to

I that hope it's helps, again, X. So not Ryan. Once

So there's we've we some about feel done. of course, really good but risk, residual do what

back And to assumptions Ryan, we of our on come We GUL have just with last part do sum the that based confidence what assumptions estimate question, full best up Randy completely to reset here. said. view your to

mentioned also talked We want in so terms in of all SGUL, of evaluating we about that are You well. -- I address alternatives. my mentioned I as script reinsurance to that

we was transaction And look was looking fact an are would potential were only enhance at was appropriate the meet right value. at price there we so the at there we everything. we the talked a an about and at that if that outlined. time opportunity if really go transactions. ahead evaluating And And that objectives transact, to we it We're to would ideally, that

reducing increasing earnings, So the volatility. capital and distributable generation capital

an that that that there execute by other would all that factors, add I'll an the we would we're thing that where clearly, fact in were at there liabilities. was want expansion we really something those interested that for they reinsurance that they've more say would liabilities, appetite have be is opportunity out that So would buyer universe there into meet of that straight when the encouraged forward that on. we've shifted of some buyers from potential complex the involved if And certainly more and seen shifted I look certainly SGL to of

back opportunities, So these again, right on we got an everything opportunity, time, dedicated fully explore. further If as team, updates we'll at a continue on table. right look and to there's a full taking be we've with is price, the

the line Jefferies. Kamath Suneet comes question from next of Your with

just So stock first common question, the on dividend.

just basis you changes, in RBC? about all of on being talk year able around feel you a running the ongoing that or that's I million to back kind given think Can confident a fund build as how you so. $XXX

Yes.

the got first amount of So confident, dividend. we a generation. Suneet, off of earnings. that have an maintain shareholder you continuing in-force throws very in capital to And we distributable as We've know, significant all, feel

every pull. have and we where sales, levers that a -- we year significant can many We amount also have that business allocate different of those new sales to we

that, And going are to our to mentioned again, maintain and we with levers, what priorities we And those do start manage one these while to had other all earlier. so I is overall dividend. as the we're need priorities, of

of the other piece, experienced the capital seen critical, can to is to capital we're significant So how and that's allocated the ways we that distributable markets. we this impact our we've as at And then looking improve really really We're optimizing and we very have that the position result which is new earnings. looking capital a for to business. improve ways so year, overall it about quality of the think really

And area to that potential on to to the so execute and as that execute possible. near we hedge on, the and mitigate really we'll really an structural try alleviate of that's and some some on believe in-force again, we term of be focused that as solutions that can quickly some in

are do and the new at overall time, raise So you the planning put to business same allocation capital the maintain the quality is all really what earnings, reoptimize and dividend. the of those we core pieces shareholder together

Got it.

that risk you're capital. just change to that do all been to guess making, going how back the make on a take I important just product of and to if on being with the you're hallmarks strength about disrupting on it always providing preserving guess what And one distribution changes for always management, relationships company Lincoln has them around sounds significant like been I market sure the think sell. has you you're in product distribution the in franchise always distribution then your based present strength of of Lincoln saying, being those that of the of time, such I your past. the the and And market, at and the over of that there's relationships company or amount Okay. not a around step so balance in

our organization I our Yes, reprice, Suneet, The And really a add that shift distribution and this relates is around to perspective, with think to all from couple think the work power of and question. done it goes strategy. our coupled of things. I great as this relationships, a we've new product

are a distribution strong, So really solutions and of diversified what preferences right set businesses are meeting of a different we we part variety broad when customer product really of X relationships. the we that seeing across look have deep now, is

were so and put amount things having emphasizing the I that. be set to product when shifting really a you suite. within things optimizing that's and now business to new relates new about it current business really as those that capital idea And capital then allocation, the relative of further overall of and the to like want talking we together clear

the time. us commitment deliver shift reprice product portfolio So able of broad to how we add really being the believe need what those we're to at overall offering laser-focused all to our to and all really the doing to on given to new overall further in earnings same we're them actions be be optimize distributable take we profile able But the be of that have products on you. utilize going that that we and the is

without really And shift with And already well the we confident distribution. . of product so into and organization really manufacturing are is this the the business, that that's disruption. teams underway work can partnership with step in with inside we this

next from with Your Sachs. question the comes Alex Goldman of line Scott

we And to flow think the making have a review. entity? is impact U.S. about around to from SGUL on your some need Barbados First -- follow-up of the would about? company. on being life you in about question based operating anything of about there's comments a the disclose translation legal you can I there there? shut insurance on while. adequacy would that talk you're adjustments thinking I light see there be cash capitalization being whatever GAAP of for Could as in cash of the LNBar to RBC annuities, we your reinsurance had you the way said LNBar I and flow think moving rest the $XXX can I'm just I and I of between think trying ceded capital probably entity, number impact in the a me the is stat accounting. in an about the the mean variable off tail to account understand, just really under help for seeding mean from think Currently switching But is and in for this right lot which business I UL to to there, the so million LNBar, GAAP just us of your mean,

Yes.

relates about it So Randy and to Alex, I'll start, to I'll it hand specifically to then as SGUL. over talk LNBar,

to by it seen to overall overall as our volatility an what we've relates breakage. hedge capital to around seen have So impact year-to-date, absolutely we leading market declines, LNBar, position driven market

strategy And the a stat head strategy, we so relates overall capital in it as to that September that announced we we position and LNBar. it. same we hedge the can will confident an hedge shifting that time, organically are And rebuild capital explicit to on are have at

have really mitigate management from that the And so hedge downturn we that. to market an will a goal appropriate the be the time that risk equity there part is perspective that next of

for as focused we out of of and for we the on is organically while that now so implication And not taking time right are replenishing us, of the are in LNBar some process that. a dividend

that equity of see The we we find the believe in volatility won't time look that as next other important market situation. really we is this ourselves that we piece forward

to So impact relates I'm to to over -- and going SGUL LNBar. specifically Randy it the about as it hand to talk

Alex, you question. for the thank

case, SGUL. of variable have with host external is in there you in this of of parties, LNBar. business some the other our So LNBar arrangements on your terms What in outside financing of in inside annuity question specifically

not And so the it's total contract.

the over over just that sits in You It's reserves base have that piece, LNL. LNBar. financed Alex, all in

those In reserves that financed financing are those in in over terms long-term place. arrangements of LNBar, are

up first a I sort so XXs, of is it's over one the think now. of comes that little the for from a in the decade middle renewal

assumptions. the the about been when think new think financing we relationships, ways we those plug thinking of I about when it one I've

do get pressure financing. some You financing, got when on have start support decade to bit a over you a provisions assumptions of for there. new [Indiscernible] things now. little these from the remember, will amount deviations, There when so your [Indiscernible] rolling you be But adverse of

release roughly AD reserve of the thinking with year. I'm it expect putting the of talked they well, half we way where -- is roughly half we at One to about up about would rates are, we're this release

those can essentially I be think support half to relationships. that there remaining financing

in managed consistent capitalized of outside well how with shape and business overall LNBar, terms we and LNL capitalization of So [Indiscernible] very good think our I its life companies. capitalized in and is

to comments, subtest those sort touch backward-looking Got rate interest SubD it. how benefit points but rates. there, into the one however many ask reserves? of little weird every, the And is discount could in rates, And interest this commentary bit goes that opening for of and think there's the movement a provided much a in it. on that the you I think test of basis little wanted to you a would around about I give sensitivity but it calculation got I also I know of impact us

comments that XX of interest the uses which the that AD Alex, are So subtest for we trailing rates the made, months test.

it X And X. goes to July so from believe July I

if rates that we move XXXX. have any color? it where as this pretty through reducing X you we to statutory So additional were when look of level, Randy, overall rates do we impact into see look year. think you impact forward, year if we And as ago And this about at July a we relates at significant

It the the I actual specifically, It give XXXX end speak, of and that -- from is of was X% me that end roughly used I being index the of rate calculated this let end last calculation about standpoint, an at itself X.XX%. which X X of the index or the year July red Alex, being sits XXXX year, of Yes, right? checked, at started average on end is is at rate the the next year. The and index of so the this at use will very we'll we XXXX, on next hot calculated we as we will moment about of middle average time June that And you was that X.X%. use index the currently November at guess it X.XX%. in XX

to that about versus X% roughly release So think that's you using if basis million. we we so points year, average this we're that X.X% would So the that far, $XXX expect basis And points. impact half, mentioned right? with XXX XXX

good you a to gives I pretty think way that think it. about

Your question with Gallagher comes Evercore. next of Tom from line the

just to will keep injected into company? that hybrids. Should Or would expect question, immediately you the proceeds assume to issue to at the bolster the holding LNL RBC? plan be you First we

issue it would we -- got So keep in if we hundred coming of we a holdco. were maturity hybrid, debt and take XXXX. million couple to likely it at We've of would a

into the So put life the little a aside remainder And it for we would bit companies. -- rest would would go it that. the of of

from have did little maturity, block year been we for earmarked holding actual last already the mentioned I million that million debt As that maturity is reminder, roughly script, cash Tom, a we over in of I with earmarked we upcoming that debt but $XXX have was has $XXX think -- my company. $XXX About at the of proceeds million.

probably million any $XXX is balance in downstream. So first -- I -- with think Ellen mentioned, as the there

sales not away have of will exact something happen plus but timing, for view insurance what's Okay. is well? year most sales But assuming sooner risk than of most more that pivoting we be perspective? a could maybe the And I'm transfer a something probably of then looking that impact still or that table what's that's Or likely closer options, Or given not I'm be are talking in in about life and that meaningful or VA as to and strategic life fixed to from maybe we here. will And are is modest? the capital the terms likely to the or on And is -- the -- that. then generation? annuity a on your is between slowing happened insurance likely asking going

large there -- various I I such question, could to been that will is all there I to relates never different you it buyers options looking we're give potentially first as on all of wish exact. options. tell more And look universe What have there's transactions. are out There buyers. So you at an a at

right right us, everything on the the I be about that the price. but fact ideally, So back time improving got there's meeting at for if really, cash be to with is And right way also come really that that talked price is the table. that to around the a the objectives generation we've ideal, would it's

So -- a look are this. and at we diligently working to really take

be with we'll more. back we you update back We'll be So can. to as

this where piece, On than allocation. margin. the to -- earnings lower matter will gets distributable such the got be somewhat business were single organization that clear expect our really thinking fully really a a sales strong, product across capital we've every fact and And about on of and the they that we product maximize sales that want second do this how XXXX, the I see we at businesses we when the one expect in capital new to with we the optimizing is that is portfolio distribution a we're but really this, expect to optimizing of I really looked suite of level is robust broad strong.

much without Suneet, to mentioned, had I as without, position can we So disruption there.

that it XXXX. as that think we into see move will have we immediately yes, something and a impact and will -- you in meaningful capital So

be sense flow consider Randy Got be other will plus should out hybrids And could coming free maybe But that. trading you're you earnings you're Or amount diminution opine could issuing, the capital likely could sneak add to kind get side probably the any shrinking to after along to and levels? cash start there in-force and expect in this, whether on earnings the potentially cash -- up the of about you solve be we I the for meaningful going cash be high going do still or cost of one can not you what far finish lower if flow Ellen process capital? to of coupon I -- free think you all really high of up, deal, be that more. that from to in from you you're -- in-force think meaningfully an you. when want or I When here issue flow just the

Yes. one to where time. This you updated going very another keep is we're over

at down fact just into we've that think doing, points cash capital -- our when That's it we we particular ratio year the be about So year. you year effectively, RBC move we're generation, doing really really like. what and day, this previously going lower talked being the to would as markets that they're projecting generation end this with lower XX we of this down and to had about than the

we're And that actions so in terms talking of our improve that. everything are really about to

other net while pretty right that I we'll to want so the And that earlier that nice will as we'll of thing that The around invest there it's question into that, will yields, of a it companies. turn hybrid then of mention which be now. and significant flow portion that a are the ultimate the money cost new around life the is relates true To to course, that is cost.

fact the the invest will that cost by somewhat of mitigated majority the So cost certainly -- be financing the will the we of -- be somewhat can proceeds.

are there but And mentioned question, some just thing are this is uncertain retaining. I on there last that specifically not work. an The we broader, levers

even instance, cash million million company, maturity, we that. maintaining we're allocated after on the that $XXX I probably we mentioned For $XXX holding have, the of debt to still

retain contingent down. we're drawing not facility, also, access We capital to which million Tom, a $XXX

levers, So the internal we've got some retaining are we that external are a of significant for plan, and that world lot a exists today. there uncertain but

point But on. could holy would . generation. that's doesn't grail. transactions has that's so pick ideally, cash focused what transactions about something not our impacting we of right reducing, would price, have course. generation Block of deal to be that improve Ideally, be the It going the other further actually of to we the we want, We're terms do one question to make sense. at your as also would cash to kinds in Tom, if what opposed

the from with next comes question of Your Piper Sandler. Barnidge line John

I you that maybe the between about comment, you'll If equity we if you period? in current Appreciate half hit rates heard correct by be and that can at but thinking remarks, on about rate are you of embedded now in assumptions levels, prepared statutory how year-end XXXX. and the recover had talk should that about VII mentioned the

John, with test a prescription. the amount of AD fair itself test a is

on instance, the had doesn't AD already provisions assumption for an I'll like mortality for because tweaks to impact. So subtest use we some adverse assumption with the really made prescribed a is our mortality about $XXX have that That deviation. million impact

to So $X.X impact, subtest. on pretty AD that the much test the the over change I think to we the and impact lapse made surrenders. is entire was big billion That transports

In sort question. you of the the other of might that terms of again, I level think assumptions, risks don't implied with once I your think the of be by prescription,

with that think statutory market higher has capital hit from rates volatility. of talked half about mentioned over had previously year headwinds about had you the suggesting it would than year, more build some being clarify to was I you I back next this faced

markets and there's So VII. and equity link between a rates

statutory, are to a review So related not VII if you're next actuary to year equity that? in for are the tailwind necessarily talking thinking thinking the rates what specifically. I'm is within you

Right.

how laser next remarks, we that this now experienced we the points VII in we have our on now macroeconomic So moving that one year, in capital that uncertain volatility are an can are We capital about the focused that to reducing, are environment recognize some we they we're unknown that right think we and factors. factors, in in right be are year and markets. particular, fact of made of of to terms the the exactly ways clearly, into equity areas

That's And so the program. fact that VA the shifting talked thing. about we're we hedge one

really additional that equity remarks the expedite has alternatives. that really from markets and mitigate help that as at to of impacted in the is options for we to this management, really, mentioned as clearly an have seen fees in some impacts able under areas we being to potential year other those assets relates mentioned, declined. can you of thing control And -- terms move really up pieces have has put we VUL, markets levers the and equity that place are reserves we needing to declining in been as to impact, on as believe some us then But area of look that can second it that his that we these Randy put are and will forward. The

a XX-point very year. this drop the year, specifically Ellen And right, roughly items this mentioned, John, you referenced

So XX rates some driven some of last the items been X -- basis what on points, been also, on the higher course X that over that, mentioned. the X points. had points separate to estimate another the on X talked of X equity the then roughly capital be VI Inside about about about would markets. talked which interest downdraft limitations which DTA, seen of you That's seen using VUL, part points. been the the or reserves sort VII, of that of lower of quarter in of X and this we've companies. some as we have is we'd year the It's impact to we've in by probably probably linked we've to markets about And

of items by in we've the terms seen would in driven those spike mentioned, this what items I markets specific capital other you that the are year. So

today's remarks. question team Q&A. follow Copersino This call like your unable the If closing now to to morning, would to you back Al with the up afternoon. for concludes will this turn get this were we to I

you questions for any follow-up you joining take morning. Thank this to happy that us have. We're

You and a good have can e-mail day. investorrelations@lfg.com. at us you, Thank

This concludes you call. Thank today's conference attending. for

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