Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you provide more color on the decision to raise the top end of the free cash flow outlook for 2026 and how to think about free cash flow in 2025? A: Christopher Neczypor, CFO, explained that the increase in the free cash flow outlook is due to strategic priorities such as building a strong capital foundation and optimizing the operating model. In 2024, Lincoln National made significant progress, including margin expansion and expense management. For 2025, they expect continued investment and momentum, with initiatives like the FABN program and Bermuda reinsurance. By 2026, they anticipate further improvements in free cash flow conversion due to a mix shift towards higher free cash flow segments, capital efficiency in new sales, and actions on legacy blocks.
Q: Regarding the leverage ratio being lower, is this due to higher equity growth or reducing the dollar amount of leverage? How are you thinking about capital use above RBC targets? A: Christopher Neczypor, CFO, noted that the leverage ratio improvement is due to confidence in continued equity growth and potential deleveraging options. While opportunistic repurchasing is less attractive now, they are considering ways to manage leverage thoughtfully. Returning to share repurchases is important, contingent on sustainable free cash flow and leverage targets. They aim to reach a 25% leverage level by 2026.
Q: Should Alpine be seen as primarily helping with new sales strain, or are there opportunities to internally reinsure some of the enforced business to Alpine? A: Christopher Neczypor, CFO, stated that Alpine is focused on maximizing capital efficiency for new business. While they may consider enforced deals, the primary goal is to enhance competitiveness in key markets. They see opportunities in fixed annuities and retail life, with Bermuda being a key input for growing spread-based earnings and capital efficiency.
Q: The expense ratio seems flat for most of 2024. Do you have a target for where it should be over the next year? A: Christopher Neczypor, CFO, mentioned that expense reduction actions taken in 2024 will flow through more in 2025. While net G&A expenses will decrease, they may reinvest savings into growth opportunities, particularly in segments like group protection, to improve margins and invest in business growth.
Q: Group protection had strong results, but premium growth was subdued at 2%. What are your thoughts on competitive pricing and top-line growth expectations? A: Ellen Cooper, CEO, emphasized that Lincoln prioritizes profitable growth over top-line growth. The 3% annual premium growth reflects new business priced at appropriate margins and renewal pricing with higher margins. They focus on ensuring business sustainability and meeting customer needs with targeted investments in technology and capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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