Lincoln Financial Group (LNC)

Insurance and retirement company Lincoln National (NYSE:LNC) fell short of the market’s revenue expectations in Q3 CY2025, with sales falling 3% year on year to $4.47 billion. Its non-GAAP profit of $2.04 per share was 9.3% above analysts’ consensus estimates.

Company Overview

Founded in 1905 by a group of Fort Wayne, Indiana businessmen who named the company after Abraham Lincoln, Lincoln National Corporation (NYSE:LNC) provides insurance, retirement plans, and wealth management products through its subsidiaries, operating under four main segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services.

Life insurance companies collect premiums from policyholders in exchange for providing a future death benefit or retirement income stream. Interest rates matter for the sector (and make it cyclical), with higher rates allowing insurers to reinvest their fixed-income portfolios at more attractive yields and vice versa. Additionally, favorable demographic shifts, such as an aging population, are driving strong demand for retirement products while AI and data analytics offer significant opportunities to improve underwriting accuracy and operational efficiency. Conversely, the industry faces headwinds from persistent competition from agile insurtechs that threaten traditional distribution models.

Lincoln National's competitors include major insurance and financial services companies such as Prudential Financial (NYSE:PRU), MetLife (NYSE:MET), Principal Financial Group (NASDAQ:PFG), and Equitable Holdings (NYSE:EQH). In the retirement plan services space, it also competes with Vanguard, Fidelity, and TIAA.

Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services. Unfortunately, Lincoln Financial Group struggled to consistently increase demand as its $18.51 billion of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Just like its five-year trend, Lincoln Financial Group’s revenue over the last two years was flat, suggesting it is in a slump. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Lincoln Financial Group missed Wall Street’s estimates and reported a rather uninspiring 3% year-on-year revenue decline, generating $4.47 billion of revenue.

Net premiums earned made up 61.3% of the company’s total revenue during the last five years, meaning insurance operations are Lincoln Financial Group’s largest source of revenue.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Lincoln Financial Group’s net premiums earned has declined by 3.4% annually over the last five years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.

When analyzing Lincoln Financial Group’s net premiums earned over the last two years, we can see its woes have continued as income dropped by 6.1% annually. Since two-year net premiums earned underperformed total revenue over this period, it’s implied that insurance policies were a detractor of consolidated growth.

Lincoln Financial Group produced $1.35 billion of net premiums earned in Q3, down 54.4% year on year and short of Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

The economics of insurers are driven by their balance sheets, where assets (investing the float + premiums receivable) and liabilities (claims to pay) define the fundamentals. Interest income and expense should therefore be factored into the definition of profit but taxes - which are largely out of a company’s control - should not.

Over the last four years, Lincoln Financial Group’s pre-tax profit margin has fallen by 5.2 percentage points, going from 7.6% to 12.8%. It has also expanded by 5 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

In Q3, Lincoln Financial Group’s pre-tax profit margin was 8.2%. This result was 23.5 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Lincoln Financial Group’s EPS grew at a decent 10.1% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Lincoln Financial Group, its two-year annual EPS growth of 29.2% was higher than its five-year trend. This acceleration made it one of the faster-growing insurance companies in recent history.

In Q3, Lincoln Financial Group reported adjusted EPS of $2.04, down from $2.06 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 9.3%. Over the next 12 months, Wall Street expects Lincoln Financial Group’s full-year EPS of $7.91 to shrink by 1.1%.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float–premiums collected but not yet paid out–are invested, creating an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

Lincoln Financial Group’s BVPS declined at a 9% annual clip over the last five years. However, BVPS growth has accelerated recently, growing by 131% annually over the last two years from $13.04 to $69.66 per share.

Over the next 12 months, Consensus estimates call for Lincoln Financial Group’s BVPS to grow by 8.4% to $69.42, mediocre growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Lincoln Financial Group has no debt, so leverage is not an issue here.

Return on Equity, or ROE, ties everything together and is a vital metric. It tells us how much profit the insurer generates for each dollar of shareholder equity entrusted to management. Over a long period, insurers with higher ROEs tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Lincoln Financial Group has averaged an ROE of 9.4%, uninspiring for a company operating in a sector where the average shakes out around 12.5%.

It was good to see Lincoln Financial Group beat analysts’ EPS expectations this quarter. On the other hand, its revenue missed and its net premiums earned fell short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock traded up 1.1% to $40.50 immediately after reporting.

Updated: December 4, 2025 at 11:17 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We see the value of companies helping consumers, but in the case of Lincoln Financial Group, we’re out. To begin with, its revenue growth was weak over the last five years. And while its estimated BVPS growth for the next 12 months is great, the downside is its BVPS has declined over the last five years. On top of that, its projected EPS for the next year is lacking.

Lincoln Financial Group’s P/B ratio based on the next 12 months is 0.9x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $44 on the company (compared to the current share price of $42.18).