Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page
Forward-Looking Statements – Cautionary Language
Introduction
Executive Summary
Summary of C ritical Accounting Estimates
Results of Consolidated Operations
Results of Annuities
Results of Life Insurance
Results of Group Protection
Results of Retirement Plan Services
Results of Other Operations
Consolidated Investments
Reinsurance
Liquidity and Capital Resources
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The following Management’s Discussion and Analysis of Financial Condition and Results of Operations(“MD&A”) is intended to help the reader understand the financial condition as of December 31, 2025, compared with December 31, 2024, and the results of operations in 2025 compared to 2024 of Lincoln National Corporation and its consolidated subsidiaries. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024. Unless otherwise stated or the context otherwise requires, “LNC,” “Company,” “we,” “our” or “us” refers to Lincoln National Corporation and its consolidated subsidiaries.
The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and the accompanying notes to the consolidated financial statements (“Notes”) presented in “ Item 8. Financial Statements and Supplementary Data ,” as well as “ Part I – Item 1A. Risk Factors ” above.
FORWARD-LOOKING STATEMENTS – CAUTIONARY LANGUAGE
Certain statements made in this report and in other written or oral statements made by us or on our behalf are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements may contain words like: “anticipate,” “believe,” “estimate,” “expect,” “project,” “shall,” “will” and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective services or products, future performance or financial results and the outcome of contingencies, such as legal proceedings. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.
Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including:
• Weak general economic and business conditions that may affect demand for our products, account balances, investment results, guaranteed benefit liabilities, premium levels and claims experience;
• Adverse global capital and credit market conditions that may affect our ability to raise capital, if necessary, and may cause us to realize impairments on investments and certain intangible assets, including goodwill and the valuation allowance against deferred tax assets, which may reduce future earnings and/or affect our financial condition and ability to raise additional capital or refinance existing debt as it matures;
• The inability of our subsidiaries to pay dividends to the holding company in sufficient amounts, which could harm the holding company’s ability to meet its obligations;
• Legislative, regulatory or tax changes, both domestic and foreign, that affect: the cost of, or demand for, our subsidiaries’ products; the required amount of reserves and/or surplus; our ability to conduct business; and our affiliate reinsurance arrangements;
• Changes in tax law or the interpretation of or application of existing tax laws that could impact our tax costs and the products that we sell;
• The impact of regulations adopted by the Securities and Exchange Commission (“SEC”), the Department of Labor or other federal or state regulators or self-regulatory organizations that could adversely affect our distribution model and sales of our products and result in additional disclosure and other requirements related to the sale and delivery of our products;
• The impact of existing and emerging rules and regulations relating to privacy, cybersecurity and artificial intelligence (“AI”) that may lead to increased compliance costs, reputation risk and/or changes in business practices, and challenges with properly managing the use of AI that could result in reputational harm, competitive harm and legal liability;
• Continued scrutiny and evolving expectations and regulations regarding environmental, social and governance matters that may adversely affect our reputation and our investment portfolio;
• Actions taken by reinsurers to raise rates on in-force business;
• Declines in or sustained low interest rates causing a reduction in investment income, the interest margins of our businesses and demand for our products;
• Increasing or sustained higher interest rates that may negatively affect our profitability, value of our investment portfolio and capital position and may cause policyholders to surrender annuity and life insurance policies, thereby causing realized investment losses;
• The initiation of legal or regulatory proceedings against us, and the outcome of any legal or regulatory proceedings, such as: adverse actions related to present or past business practices common in businesses in which we compete; adverse decisions in significant actions including, but not limited to, actions brought by federal and state authorities and class action cases; new decisions that result in changes in law; and unexpected trial court rulings;
• A decline or continued volatility in the equity markets causing a reduction in the sales of our subsidiaries’ products; a reduction of asset-based fees that our subsidiaries charge on various investment and insurance products; and an increase in liabilities related to guaranteed benefits, including riders on certain of our annuity products and secondary guarantees on certain variable universal life insurance products;
• Ineffectiveness of our risk management policies and procedures, including our various hedging strategies;
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• A deviation in actual experience regarding future policyholder behavior, mortality, morbidity, interest rates or equity market returns from the assumptions used in pricing our subsidiaries’ products and in establishing related insurance reserves, which may reduce future earnings;
• Changes in accounting principles that may affect our consolidated financial statements;
• Lowering of one or more of our debt ratings issued by nationally recognized statistical rating organizations and the adverse effect such action may have on our ability to raise capital and on our liquidity and financial condition;
• Lowering of one or more of the insurer financial strength ratings of our insurance subsidiaries and the adverse effect such action may have on the premium writings, policy retention and profitability of our insurance subsidiaries and liquidity;
• Significant credit, accounting, fraud, corporate governance or other issues that may adversely affect the value of certain financial assets, as well as counterparties to which we are exposed to credit risk, requiring that we realize losses on financial assets;
• Interruption in or failure of the telecommunication, information technology or other operational systems of the Company or the third parties on whom we rely or failure to safeguard the confidentiality or privacy of sensitive data on such systems, including from cyberattacks or other breaches in security of such systems;
• The effect of acquisitions and divestitures, including the inability to realize the anticipated benefits of acquisitions and dispositions of businesses and potential operating difficulties and unforeseen liabilities relating thereto, as well as the effect of restructurings, product withdrawals and other unusual items;
• The inability to realize or sustain the benefits we expect from, greater than expected investments in, and the potential impact of efforts related to, our strategic initiatives;
• The adequacy and collectability of reinsurance that we have obtained;
• Pandemics, acts of terrorism, war or other man-made and natural catastrophes that may adversely impact liabilities for policyholder claims and adversely affect our businesses and the cost and availability of reinsurance;
• Competitive conditions, including pricing pressures, new product offerings and the emergence of new competitors, that may affect the level of premiums and fees that our subsidiaries can charge for their products;
• The unknown effect on our subsidiaries’ businesses resulting from evolving market preferences and the changing demographics of our client base; and
• The unanticipated loss of key management or wholesalers.
The risks and uncertainties included here are not exhaustive. Other sections of this report and other reports that we file with the SEC include additional factors that could affect our businesses and financial performance, including “ Part I – Item 1A. Risk Factors ” and “ Item 7A. Quantitative and Qualitative Disclosures About Market Risk ,” which are incorporated herein by reference. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.
Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligation to correct or update any forward-looking statements to reflect events or circumstances that occur after the date of this report.
INTRODUCTION
Executive Summary
We are a holding company that operates multiple insurance and retirement businesses through subsidiary companies. We sell a wide range of wealth accumulation, wealth protection, group protection and retirement products and solutions through our four business segments:
• Annuities
• Life Insurance
• Group Protection
• Retirement Plan Services
We also have Other Operations, which includes the financial results for operations that are not directly related to the business segments. See “ Part I – Item 1. Business ” above for a discussion of our business segments and products.
In this report, in addition to providing consolidated net income (loss), we also provide income (loss) from operations because we believe it is a meaningful measure of the profitability of our business segments and Other Operations. Income (loss) from operations is the financial performance measure we use to evaluate and assess the results of our segments and Other Operations. Accordingly, we define and report income (loss) from operations by segment in Note 19. Our management believes that income (loss) from operations explains the results of our ongoing businesses in a manner that allows for a better understanding of the underlying trends in and performance of our current businesses. Certain items are excluded from income (loss) from operations because they are not necessarily indicative of
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current operating fundamentals or future performance of the business segments, and, in most instances, decisions regarding these items do not necessarily relate to the operations of the individual segments.
We provide information about our business segments’ and Other Operations’ operating revenue and expense line items, key drivers of changes and historical details underlying the line items below. For factors that could cause actual results to differ materially from those set forth, see “ Part I – Item 1A. Risk Factors ” and “ Forward-Looking Statements – Cautionary Language ” above.
Industry Trends
Below is a discussion of certain trends impacting our business and industry:
Interest Rate Environment
During 2025, the Federal Reserve lowered the federal funds rate target range by 75 basis points to a range of 3.50% to 3.75%, stating that the labor market showed signs of softening while acknowledging inflation and economic outlook uncertainty remain somewhat elevated. In addition, effective December 1, 2025, the Federal Reserve ended its balance sheet reduction program, thereby adding liquidity into the financial system. The Federal Reserve also released economic projections that reflect a median expectation of one rate cut of 25 basis points in 2026. The Federal Reserve noted that it will continue to monitor economic data and adjust its stance on monetary policy if risks emerge that could negatively impact the attainment of its goal of maximum employment and inflation at 2% over the long term. At the January 2026 meeting, the Federal Reserve decided to maintain the current federal funds target range. We continue to be proactive in our investment strategies, product designs, crediting rate strategies, expense management actions and overall asset-liability practices to mitigate the risk of unfavorable consequences due to the interest rate environment.
We have provided disclosures around risks related to changes in interest rates in “ Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain statutory requirements,” “ Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates and sustained higher interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals and surrenders” and “ Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk .”
Regulatory Environment
U.S.-domiciled insurance entities are regulated at the state level, while certain products and services are also subject to federal regulation. Our Bermuda-based reinsurance subsidiary is licensed in Bermuda and is subject to regulations established by the Bermuda Monetary Authority (the “BMA”). In addition, our Barbados-based reinsurance subsidiary is regulated by the Barbados Financial Services Commission (“FSC”). Regulators may refine capital requirements and introduce new reserving standards for the insurance industry. Regulations recently adopted or currently under review can potentially affect the capital requirements and profitability of the industry and result in increased regulation and oversight for the industry. See “Part I – Item 1. Business – Regulatory” and “Part I – Item 1A. Risk Factors – Legislative, Regulatory and Tax” for a discussion of regulatory developments that may impact the Company and the associated risks.
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Significant Operational Matters
Throughout 2025, we executed against our strategic priorities of strengthening and maintaining our balance sheet, improving our operational efficiency, increasing free cash flow and focusing on profitable growth. Notable actions in 2025 include the following:
• During the second quarter of 2025, we closed our stock purchase agreement (the “Purchase Agreement”) with Bain Capital Prairie, LLC (the “Buyer”), a newly formed subsidiary of Bain Capital, under which we agreed to sell shares representing 9.9% of our outstanding common stock on a post-issuance basis to the Buyer. Under the final terms, Lincoln sold approximately 18.8 million shares of its common stock for aggregate consideration of $825 million. The transaction provided us with capital that we are deploying and expect to continue to deploy toward our strategic priorities, including growing spread-based earnings, advancing our portfolio management efforts and asset sourcing capabilities and optimizing our legacy life portfolio. For additional information on the Bain Capital transaction, see Note 18 .
• In the second quarter of 2025, we exercised in full our issuance right under the 10-year facility agreement dated as of August 18, 2020, and issued $500 million of fixed-rate senior notes and used the net proceeds to early extinguish long-term debt pursuant to a tender offer. Additionally in the second quarter of 2025, we entered into a $1.0 billion 30-year facility agreement that increased our access to liquidity by $500 million. In the fourth quarter of 2025, we completed the issuance of $500 million of fixed-rate senior notes and intend to use $400 million of the net proceeds to prefund the repayment of our senior notes due in 2026. For additional information, see “Liquidity and Capital Resources – Holding Company Sources and Uses of Liquidity and Capital – Debt” below and Note 13 .
• During 2025, LNL entered into affiliate reinsurance transactions with Lincoln Pinehurst Reinsurance Company (Bermuda) Limited (“LPINE”), a wholly owned subsidiary of LNC that operates as a Bermuda-based life and annuity reinsurance company. For additional information, see “Liquidity and Capital Resources – Holding Company Sources and Uses of Liquidity and Capital – Subsidiaries’ Capital” below.
• Throughout 2025, LNL issued institutional funding agreements totaling $2.8 billion to support growth in our spread-based earnings. For additional information, see Note 11 .
• In the fourth quarter of 2025, we restructured certain captive reinsurance subsidiaries to reduce operating expenses and improve free cash flow within our Life Insurance segment.
We continue to focus on the following actions in 2026:
• Making investments in our businesses and product enhancements to grow revenues, drive margin and reduce costs;
• Leveraging our strategic partnership with Bain Capital to access its investment platform and alternative asset expertise to drive differentiated asset sourcing and accelerate growth across our annuity and life insurance businesses.
• Advancing our Group Protection business with a balanced approach to growth and profitability through executing on our segment and product strategies;
• Maintaining our industry-leading wholesale distribution through Lincoln Financial Distributors, which distributes our annuities and life insurance products as well as our retirement plan products and services through financial institutions and other financial intermediaries;
• Exploring reinsurance and other strategies, including affiliate reinsurance transactions with LPINE, to maximize the value of our businesses;
• Advancing our disciplined approach to capital-efficient growth by prioritizing products with strong risk-adjusted returns; and
• Focusing on expense discipline to drive greater operational efficiency and enhance the operating leverage within our business.
Summary of Critical Accounting Estimates
We have identified the accounting estimates below as critical to the understanding of our results of operations and our financial condition. In applying these critical accounting estimates in preparing our financial statements, management must use critical assumptions, estimates and judgments concerning future results or other developments, including the likelihood, timing or amount of one or more future events. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our assumptions, estimates and judgments based upon historical experience and various other information that we believe to be reasonable under the circumstances. For a detailed discussion of significant accounting policies, see Note 1 .
Investments
Investment Valuation
Our measurement of fair value is based on assumptions used by market participants in pricing the asset or liability, which may include inherent risk, restrictions on the sale or use of an asset or non-performance risk, which would include our own credit risk. Our estimate of an exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability (“exit price”) in the principal market, or the most advantageous market in the absence of a principal market, for that asset or liability, as opposed to the price that would be paid to acquire the asset or receive a liability (“entry price”). We categorize our financial instruments carried at fair
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value into a three-level fair value hierarchy, based on the priority of inputs to the respective valuation technique. The three-level hierarchy for fair value measurement is defined in Note 1.
The following summarizes investments on the Consolidated Balance Sheets carried at fair value by pricing source and fair value hierarchy level (in millions) as of December 31, 2025:
Quoted
Prices
in Active
Markets for
Significant
Significant
Identical
Observable
Unobservable
Assets
Inputs
Inputs
Total
(Level 1)
(Level 2)
(Level 3)
Fair Value
Priced by third-party pricing services
Priced by independent broker quotations
Priced by matrices
Priced by other methods (1)
Total
Percent of total
(1) Represents primarily securities for which pricing models were used to compute fair value.
For the categories and associated fair value of our fixed maturity available-for-sale (“AFS”) securities classified within Level 3 of the fair value hierarchy as of December 31, 2025 and 2024, see Notes 1 and 1 4 .
Our investments are valued using the appropriate market inputs based on the investment type, and include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. In addition, market indicators and industry and economic events are monitored, and further market data is acquired if certain triggers are met. We incorporate the issuer’s credit rating and a risk premium, if warranted, given the issuer’s industry and the security’s time to maturity. We use an internationally recognized pricing service as our primary pricing source, and we do not adjust prices received from third parties or obtain multiple prices when measuring the fair value of our investments. We generally use prices from the pricing service rather than broker quotes because we have documentation from the pricing service on the observable market inputs they use, as compared to the limited information on the pricing inputs from broker quotes. For private placement securities, we use pricing matrices that utilize observable pricing inputs of similar public securities and Treasury yields as inputs to the fair value measurement. It is possible that different valuation techniques and models, other than those described above, could produce materially different estimates of fair value.
When the volume and level of activity for an asset or liability has significantly decreased in relation to normal market activity for the asset or liability, we believe that the market is not active. Activities that may indicate a market is not active include fewer recent transactions in the market, price quotations that lack current information and/or vary substantially over time or among market makers, limited public information, uncorrelated indexes with recent fair values of assets and abnormally wide bid-ask spread. As of December 31, 2025, we evaluated the markets that our securities trade in and concluded that none were inactive. We will continue to re-evaluate this conclusion, as needed, based on market conditions.
We use unobservable inputs to measure the fair value of securities trading in less liquid or illiquid markets with limited or no pricing information. We obtain broker quotes for securities such as synthetic convertibles, index-linked certificates of deposit and collateralized debt obligations when sufficient security structure or other market information is not available to produce an evaluation. For broker-quoted only securities, non-binding quotes from market makers or broker-dealers are obtained from sources recognized as market participants. Broker-quoted securities are based solely on receipt of updated quotes from a single market maker or a broker-dealer recognized as a market participant. Our broker-quoted only securities are generally classified as Level 3 of the fair value hierarchy. As of December 31, 2025, we used broker quotes for 19 securities as our final price source, representing less than 1% of total securities owned.
In order to validate the pricing information and broker quotes, we employ, where possible, procedures that include comparisons with similar observable positions, comparisons with subsequent sales and observations of general market movements for those security classes. Our primary third-party pricing service has policies and processes to ensure that it is using objectively verifiable observable market data. The pricing service regularly reviews the evaluation inputs for securities covered, including broker quotes, executed trades and credit information, as applicable. If the pricing service determines it does not have sufficient objectively verifiable information about a security’s valuation, it discontinues providing a valuation for the security. The pricing service regularly publishes and updates a summary of inputs
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used in its valuations by major security type. In addition, we have policies and procedures in place to review the process that is utilized by the third-party pricing service and the output that is provided to us by the pricing service. On a periodic basis, we test the pricing for a sample of securities to evaluate the inputs and assumptions used by the pricing service, and we perform a comparison of the pricing service output to an alternative pricing source. In addition, we check prices provided by our primary pricing service to ensure that they are not stale or unreasonable by reviewing the prices for unusual changes from period to period based on certain parameters or for lack of change from one period to the next. If such anomalies in the pricing are observed, we may use pricing information from another pricing source.
Valuation of Alternative Investments
Recognition of investment income on alternative investments is delayed due to the availability of the related financial statements, which are generally obtained from the partnerships’ general partners, as our venture capital, real estate and oil and gas portfolios are generally reported to us on a three-month delay, and our hedge funds are reported to us on a one-month delay. In addition, the effect of annual audit adjustments related to completion of calendar-year financial statement audits of the investees are typically received during the first or second quarter of each calendar year. Accordingly, our investment income from alternative investments for any calendar year period may not include the complete effect of the change in the underlying net assets for the partnership for that calendar year period. Recorded audit adjustments affect our investment income on alternative investments in the period that the adjustments are recorded.
Measurement of Allowances for Credit Losses and Recognition of Impairments
We regularly review our fixed maturity AFS securities for declines in fair value that we determine to be impairment-related. Realized gains and losses generally originate from asset sales to reposition the portfolio or to respond to product experience. In the process of evaluating whether a security with an unrealized loss reflects declines that are related to credit losses, we consider our ability and intent to sell the security prior to a recovery of value. However, subsequent decisions on securities sales are made within the context of overall risk monitoring, assessing value relative to other comparable securities and overall portfolio maintenance. Although our portfolio managers may, at a given point in time, believe that the preferred course of action is to hold securities with unrealized losses attributable to factors other than credit loss until such losses are recovered, the dynamic nature of portfolio management may result in a subsequent decision to sell. These subsequent decisions are consistent with the classification of our investment portfolio as AFS. We expect to continue to manage all non-trading investments within our portfolios in a manner that is consistent with the AFS classification.
We consider economic factors and circumstances within industries and countries where recent impairments have occurred in our assessment of the position of securities we own of similarly situated issuers. While it is possible for realized or unrealized losses on a particular investment to affect other investments, our risk management strategy has been designed to identify correlation risks and other risks inherent in managing an investment portfolio. Once identified, strategies and procedures are developed to effectively monitor and manage these risks. The areas of risk correlation that we pay particular attention to are risks that may be correlated within specific financial and business markets, risks within specific industries and risks associated with related parties. When the detailed analysis by our external asset managers and investment portfolio managers leads us to the conclusion that a security’s decline in fair value is due to credit loss, a credit loss allowance is recorded. In instances where declines are related to factors other than credit loss, the security will continue to be carefully monitored.
There are risks and uncertainties associated with determining whether an investment shows indications of impairment. These include subsequent significant changes in general overall economic conditions, as well as specific business conditions affecting particular issuers, future financial market effects such as interest rate spreads, stability of foreign governments and economies, future rating agency actions and significant accounting, fraud or corporate governance issues that may adversely affect certain investments. In addition, there are often significant estimates and assumptions that we use to estimate the fair values of securities as described in “Investment Valuation” above. We continually monitor developments and update underlying assumptions and financial models based upon new information.
For certain securitized fixed maturity AFS securities with contractual cash flows, including asset-backed securities (“ABS”), we use our best estimate of cash flows for the life of the security to determine whether it is credit impaired. In addition, we review for other indicators of impairment as required by the Investments – Debt and Equity Securities Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification TM (“ASC”).
Write-downs on real estate and other investments are experienced when the estimated value of the asset is deemed to be less than the carrying value. Write-downs and allowance for credit losses for commercial mortgage loans are established when the estimated value of the asset is deemed to be less than the carrying value. All commercial mortgage loans that are impaired are individually reviewed to determine an appropriate credit loss allowance. Changing economic conditions affect our valuation of commercial mortgage loans. Increasing vacancies, declining rents and the like are incorporated into the allowance for credit losses analysis that we perform for monitored loans and may contribute to an increase in the allowance for credit losses. In addition, we continue to monitor the entire commercial mortgage loan portfolio to identify both current and projected future risk based on reasonable and supportable forecasts. Areas of emphasis include properties that have deteriorating credits or have experienced debt-service coverage and/or loan-to-value (“LTV”) reduction. Where warranted, we have established or increased our allowance for credit losses based upon this analysis.
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We have also established an allowance for credit losses on our residential mortgage loan portfolio that includes a specific credit loss allowance for loans that are deemed to be impaired as well as an allowance for credit losses for pools of loans with similar risk characteristics. The allowance for credit losses for the performing population of loans is based on historical performance for similar loans, as well as projected future losses based on modeling, which includes reasonable and supportable forecasts. The historical data utilized in the allowance for credit losses calculation process is adjusted for current economic conditions.
Our additional liabilities for other insurance benefits reflect an assumption for an expected level of credit-related investment losses. When actual credit-related investment losses are realized, we recognize a true-up to our additional liabilities reserve. These actual to expected adjustments would be reported in benefits on the Consolidated Statements of Comprehensive Income (Loss).
Derivatives
Derivatives are primarily used for hedging purposes. We hedge certain portions of our exposure to interest rate risk, foreign currency exchange risk, equity market risk, basis risk, commodity risk and credit risk by entering into derivative transactions. We also purchase and issue financial instruments that contain embedded derivative instruments. See “Policyholder Account Balances” below for information on embedded derivatives. Assessing the effectiveness of hedging and evaluating the carrying values of the related derivatives often involve a variety of assumptions and estimates.
We carry our derivative instruments at fair value, which we determine through valuation techniques or models that use market data inputs or independent broker quotations. The fair values fluctuate from period to period due to the volatility of the valuation inputs, including but not limited to swap interest rates, interest and equity volatility and equity index levels, foreign currency forward and spot rates, credit spreads and correlations, some of which are significantly affected by economic conditions. The effect to revenue is reported in realized gain (loss) and such amount along with the associated federal income taxes is excluded from income (loss) from operations of our segments.
For more information on derivatives, see Notes 1 and 5 . For more information on market exposures associated with our derivatives, including sensitivities, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk .”
Future Contract Benefits
Future contract benefits represent liability reserves that we have established and carry based on estimates of how much we will need to pay for future benefits and claims.
Liability for Future Policy Benefits
Liability for future policy benefits (“LFPB”) represents the reserve amounts associated with non-participating traditional life insurance contracts and limited payment life-contingent annuity contracts that are calculated to meet the various policy and contract obligations as they mature. Establishing adequate reserves for our obligations to policyholders requires assumptions to be made that are intended to represent an estimation of experience for the period that policy benefits are payable. If actual experience is better than or equal to the assumptions, then reserves should be adequate to provide for future benefits and expenses. If experience is worse than the assumptions, additional reserves may be required. Significant assumptions include mortality rates, morbidity and policyholder behavior (e.g., persistency) and withdrawals. During the third quarter of each year, we conduct our comprehensive review of the actuarial assumptions to best estimate future premium and benefit cash flows (“cash flow assumptions”) and projection models used in estimating these liabilities and update these assumptions as needed (excluding the claims settlement expense assumption that is locked-in at inception) in the calculation of the net premium ratio. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. See “Annual Assumption Review” below for more information. In measuring our LFPB, we establish cohorts, which are groupings of long-duration contracts. On a quarterly basis, we retrospectively update the net premium ratio at the cohort level for actual experience. For all contract cohorts issued after January 1, 2021, interest is accrued on LFPB at the single-A interest rate on the contract cohort inception date. For contract cohorts issued prior to January 1, 2021, interest remains accruing at the original discount rate in effect on the contract cohort inception date due to the modified retrospective transition method. We also remeasure the LFPB using the single-A interest rate as of the end of each reporting period.
Liability for Future Claims
Future contract benefits include reserves for long-term disability and life waiver claims associated with our Group Protection segment. These reserves use actuarial assumptions primarily based on claim termination rates, mortality rates, offsets for other insurance including social security, morbidity, incidence and severity assumptions. Such cash flow assumptions are subject to the comprehensive review process discussed above. We remeasure the liability for future claims using a single-A interest rate as of the end of each reporting period. See “Annual Assumption Review” below for more information.
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Additional Liabilities for Other Insurance Benefits
We previously issued UL-type contracts where we provided a secondary guarantee to the policyholder. The policy can remain in force, even if the base policy account balance is zero, as long as contractual secondary guarantee requirements have been met. These guaranteed benefits require an additional liability that is calculated based on the application of a benefit ratio (calculated as the present value of total expected benefit payments over the life of the contract from inception divided by the present value of total expected assessments over the life of the contract). These secondary guarantees are reported within future contract benefits on the Consolidated Balance Sheets. The level and direction of the change in reserves will vary over time based on the emergence of the benefit ratio and the level of assessments associated with the contracts. Cash flow assumptions incorporated in a benefit ratio in measuring these additional liabilities for other insurance benefits include mortality rates, morbidity, policyholder behavior (e.g., persistency) and withdrawals based principally on generally accepted actuarial methods and assumptions. During the third quarter of each year, we conduct our comprehensive review of the cash flow assumptions and projection models used in estimating these liabilities and update these assumptions in the calculation of the ratio. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. See “Annual Assumption Review” below for more information.
For additional information on future contract benefits, see Note 1 2 .
Market Risk Benefits
Market risk benefits (“MRBs”) are contracts or contract features that provide protection to the policyholder from other-than-nominal capital market risk and expose us to other-than-nominal capital market risk upon the occurrence of a specific event or circumstance, such as death, annuitization or periodic withdrawal. An MRB can be in either an asset or a liability position. Our MRB assets and MRB liabilities are reported at fair value separately on the Consolidated Balance Sheets.
We issue variable and fixed annuity contracts that may include various types of guaranteed living benefit (“GLB”) and guaranteed death benefit (“GDB”) riders that we have accounted for as MRBs. For contracts that contain multiple riders that qualify as MRBs, the MRBs are valued on a combined basis using an integrated model. We have entered into reinsurance agreements to cede certain GLB and GDB riders where the reinsurance agreements themselves are accounted for as MRBs or contain MRBs. We therefore record ceded MRB assets and ceded MRB liabilities associated with these reinsurance agreements. We report ceded MRBs associated with these reinsurance agreements in other assets or other liabilities on the Consolidated Balance Sheets.
Net amount at risk (“NAR”) represents the amount of GLB or GDB in excess of a policyholder’s account balance at the balance sheet date. Underperforming markets increase our exposure to potential benefits with the GLB and GDB riders. A contract with a GDB rider is “in the money” if the policyholder’s account balance falls below the GDB. As of December 31, 2025 and 2024, 4% and 8% , respectively, of all in-force contracts with a GDB rider were “in the money.” A contract with a GLB rider is “in the money” if the policyholder’s account balance falls below the present value of GLB payments, assuming no full surrenders. As of December 31, 2025 and 2024 , 14% and 17% , respectively, of all in-force contracts with a GLB rider were “in the money.” However, the only way the policyholder can realize the excess of the present value of benefits over the account balance of the contract is through a series of withdrawals or income payments that do not exceed a maximum amount. If, after the series of withdrawals or income payments, the account balance is exhausted, the policyholder will continue to receive a series of annuity payments. The account balance can also fluctuate with market returns on a daily basis resulting in increases or decreases in the excess of the present value of benefits over account balance.
Many policyholders have both a GLB and GDB present on the same policy. The total NAR represents the greater of GLB NAR and GDB NAR for each policy as only one benefit can be exercised in practice. Details underlying the NAR, net of reinsurance, primarily related to our Annuities segment, (in millions) were as follows:
As of December 31,
GLB NAR
GDB NAR
Total NAR
The change in the fair value of MRB assets and liabilities is reported in market risk benefit gain (loss) on the Consolidated Statements of Comprehensive Income (Loss), except for the portion attributable to the change in non-performance risk, which is recognized in other comprehensive income (loss) (“OCI”). The change in the fair value of ceded MRB assets and liabilities, including the changes in our counterparties’ non-performance risks, is reported in market risk benefit gain (loss) on the Consolidated Statements of Comprehensive Income (Loss).
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MRBs are valued based on a stochastic projection of risk-neutral scenarios that incorporate a spread reflecting our non-performance risk. Ceded MRBs are valued based on a stochastic projection of risk-neutral scenarios that incorporate a spread reflecting our counterparties’ non-performance risk. The scenario assumptions, at each valuation date, are those we view to be appropriate for a hypothetical market participant and include assumptions for capital markets, lapse, benefit utilization, mortality, risk margin and administrative expenses. These assumptions are based on a combination of historical data and actuarial judgments. The assumption for our own non-performance risk and our counterparties’ non-performance risk for MRBs and ceded MRBs, respectively, are determined at each valuation date and reflect our risk and our counterparties’ risks of not fulfilling the obligations of the underlying liability. The spread for the non-performance risk is added to the discount rates used in determining the fair value from the net cash flows. We believe these assumptions are consistent with those that would be used by a market participant; however, as the related markets develop, we will continue to reassess our assumptions. During the third quarter of each year, we conduct our comprehensive review of the assumptions used in calculating the fair value of these MRBs and update these assumptions on a prospective basis as needed. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. For information on fair value inputs, see Note 1 4 . See “Annual Assumption Review” below for more information.
For illustrative purposes, the following presents hypothetical effects to MRBs attributable to changes to key assumptions / inputs, assuming all other factors remain constant:
Hypothetical
Hypothetical
Effect
Effect
Assumption / Input
Actual Experience
to MRB Liability
to Net Income
Description of Assumption / Input
Equity market return
Increase / (Decrease)
(Decrease) / Increase
Increase / (Decrease)
Equity market return input represents impact based on movements in equity markets.
Interest rate
Higher /
Lower
(Decrease) / Increase
Increase / (Decrease)
Interest rate input represents impact based on movements in interest rates and impact to fixed-income assets.
Volatility
Increase / (Decrease)
Increase / (Decrease)
(Decrease) / Increase
Volatility assumption represents overall volatilities assumed for the underlying variable annuity funds, which include a mixture of equity and fixed-income assets. Volatility assumptions vary by fund due to the benchmarking of difference indices.
Mortality
Increase / (Decrease)
(Decrease) / Increase
Increase / (Decrease)
Mortality represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die.
Mortality contracts with only GDB rider
Increase / (Decrease)
Increase / (Decrease)
(Decrease) / Increase
Mortality represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die.
Lapse
Higher /
Lower
(Decrease) / Increase
Increase / (Decrease)
Lapse assumption represents the estimated probability of a contract surrendering during a year, thereby forgoing any future benefits.
Benefit utilization
Higher /
Lower
Increase / (Decrease)
(Decrease) / Increase
Benefit utilization assumption of guaranteed withdrawals represents the estimated percentage of policyholders that utilize the guaranteed withdrawal feature.
We use derivative instruments to hedge our exposure to selected risk caused by changes in equity markets and interest rates associated with GLB and GDB riders that are available in our variable annuity products and accounted for as MRBs. Our hedge program focuses on generating sufficient income to fund future claims with a goal of maximizing distributable earnings and explicitly protecting capital. We utilize options and total return swaps on U.S.-based equity indices, and futures on U.S.-based and international equity indices, as well as interest rate futures, interest rate swaps and currency futures. For additional information on our derivatives, see Note 5 .
As part of our hedge program, equity market and interest rate conditions are monitored on a daily basis. We rebalance our hedge positions based upon changes in these factors as needed. While we actively manage our hedge positions, these positions may not
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completely offset changes in the fair value of our GLB and GDB riders caused by movements in these factors due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets, interest rates and market-implied volatilities, realized market volatility, policyholder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments or our ability to purchase hedging instruments at prices consistent with our desired risk and return trade-off.
The following table presents our after-tax estimates of the potential instantaneous effect to net income (loss) that could result from sudden changes that may occur in equity markets and interest rates (in millions) and excludes the net cost of operating the hedge program. The amounts represent the difference between the change in GLB and GDB riders and the change in the fair value of the underlying hedge instruments. These estimates are based upon the balance as of December 31, 2025, net of reinsurance, and the related hedge instruments in place as of that date. The effects presented in the table below are not representative of the aggregate impacts that could result if a combination of such changes to equity market returns and interest rates occurred.
In-Force Sensitivities
Equity Market Return
Hypothetical effect to net income
Interest Rates
-25 bps
+25 bps
Hypothetical effect to net income
The actual effects of the results illustrated in the table above could vary significantly depending on a variety of factors, many of which are out of our control, and consideration should be given to the following:
• The analysis is only valid as of December 31, 2025, due to changing market conditions, policyholder activity, hedge positions and other factors;
• The analysis assumes instantaneous shifts in the capital market factors and no ability to rebalance hedge positions prior to the market changes;
• The analysis assumes constant exchange rates and implied dividend yields;
• Assumptions regarding shifts in the market factors, such as assuming parallel shifts in interest rates, may be overly simplistic and not indicative of actual market behavior in stress scenarios;
• It is very unlikely that one capital market sector (e.g., equity markets) will sustain such a large instantaneous movement without affecting other capital market sectors; and
• The analysis assumes that there is no tracking or basis risk between the funds and/or indices affecting the GLB and GDB riders and the instruments utilized to hedge these exposures.
For additional information on MRBs, see Note 9 .
Policyholder Account Balances
Policyholder account balances include the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability includes universal life insurance (“UL”), MoneyGua rd ® , variable universal life insurance (“VUL”), indexed universal life insurance (“IUL”), and investment-type annuity products (including registered index-linked annuities (“RILA”)), individual and group fixed and fixed portion of variable annuities, fixed indexed deferred annuities and non-life contingent payout fixed annuities) where account balances are equal to deposits plus interest credited less withdrawals, surrender charges, asset-based fees and policyholder administration charges (collectively known as “policyholder assessments”), as well as amounts representing the fair value of embedded derivative instruments associated with our fixed indexed annuity and IUL products. During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models underlying our reserves and embedded derivatives and update assumptions as needed. We may also update these assumptions in other quarters as we become aware of information that is indicative of the need for such an update. See “Annual Assumption Review” below for more information.
Our indexed annuity and IUL contracts permit the holder to elect a fixed interest rate return or a return where interest credited to the contracts is linked to the performance of the S&P 500 ® Index or other indices. The value of the variable portion of the policyholder’s account balance varies with the performance of the underlying variable funds chosen by the policyholder. Policyholders may elect to rebalance among the various accounts within the product at renewal dates. At the end of each indexed term, which can be up to six years, we have the opportunity to re-price the indexed component by establishing different participation rates, caps, spreads or specified rates, subject to contractual guarantees. We purchase and sell index options that are highly correlated to the portfolio allocation decisions of our policyholders, such that we are economically hedged with respect to equity returns for the current reset period. The mark-to-market of the options held generally offsets the change in value of the embedded derivative within the contract, both of which are recorded as a component of realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss). The Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the FASB ASC require that we calculate fair values of index options we may
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purchase or sell in the future to hedge policyholder index allocations in future reset periods. These fair values represent an estimate of the cost of the options we will purchase or sell in the future, discounted back to the date of the balance sheet, using current market indicators of volatility and interest rates. Changes in the fair values of these liabilities are included as a component of realized gain (loss) on the Consolidated Statements of Comprehensive Income (Loss). For more information on indexed product derivative results, see Note 2 0 .
For additional information on the liability for policyholder account balances, see Note 1 1 .
Reinsurance Recoverables
Reinsurance recoverables are generally measured and recognized consistent with the assumptions and methodologies used to project the future performance of the underlying direct business as discussed in the “Future Contract Benefits” and “Policyholder Account Balances” sections above. During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models and update assumptions as needed. See “Annual Assumption Review” below for more information. In addition, we consider the potential impact of counterparty credit risks related to the reinsurance recoverable by estimating an allowance for credit losses using a probability of loss model approach to estimate expected credit losses for reinsurance recoverables. For additional information on our allowance for credit losses on reinsurance-related assets, see Note 7 .
Annual Assumption Review
During the third quarter of each year, we conduct our comprehensive review of the assumptions and projection models used in estimating MRBs, our reserves and embedded derivatives. For more information on our comprehensive review, see Note 1 . Details underlying the impact to net income (loss) from our annual assumption review (in millions) were as follows:
For the Years Ended December 31,
Income (loss) from operations:
Annuities
Life Insurance
Group Protection
Retirement Plan Services
Excluded from income (loss) from operations
Net income (loss)
The impacts of our annual assumption review were driven primarily by the following:
• For Annuities, the unfavorable impact was driven by model enhancements and updates to policyholder behavior assumptions.
• For Life Insurance, the unfavorable impact was driven by updates to mortality assumptions for our UL products with secondary guarantees and policyholder behavior assumptions, partially offset by updates to mortality assumptions for our traditional life insurance business and morbidity assumptions.
• For Group Protection, the favorable impact was driven by updates to the claim termination rate assumption, partially offset by updates to social security and incurred assumptions and other items.
• For excluded from income (loss) from operations, the unfavorable impact, related to net annuity product features, was driven by updates to policyholder behavior assumptions, model enhancements and other items, partially offset by updates to separate account fee assumptions.
• For Life Insurance, the favorable impact was driven by updates to capital market assumptions on reinsured blocks of MoneyGuard ® business and other items, partially offset by unfavorable updates to policyholder behavior assumptions on reinsured blocks of MoneyGuard business.
• For Group Protection, the unfavorable impact was driven by updates to disability claim termination rate assumptions, partially offset by favorable updates to life waiver incurred assumptions.
• For excluded from income (loss) from operations, the favorable impact, related to net annuity product features, was driven by model enhancements.
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Income Taxes
Management uses certain assumptions and estimates in determining the income taxes payable or refundable for the current year, the deferred income tax assets and liabilities for items recognized differently in its financial statements from amounts shown on its income tax returns and the federal income tax expense. Determining these amounts requires analysis and interpretation of current tax laws and regulations. Management exercises judgment in evaluating the amount and timing of recognition of the resulting income tax assets and liabilities. These judgments and estimates are re-evaluated on a continual basis as regulatory and business factors change. Legislative changes to the Internal Revenue Code of 1986, as amended, modifications or new regulations, administrative rulings, or court decisions could increase or decrease our effective tax rate.
The application of GAAP requires us to evaluate the recoverability of our deferred tax assets and establish a valuation allowance, if necessary, to reduce our deferred tax asset to an amount that is more likely than not to be realizable. Judgment and the use of estimates are required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, we consider many factors, including: the nature and character of the deferred tax assets and liabilities; taxable income in prior carryback years; future reversals of existing temporary differences; the length of time carryovers can be utilized; and any future prudent and feasible tax planning strategies.
As of December 31, 2025, we had an approximate $1.7 billion deferred tax asset related to net unrealized losses on fixed maturity AFS securities. In the assessment of the future realizability of this deferred tax asset, management concluded that its tax planning strategies, including holding these securities to recovery, were prudent and feasible as these unrealized losses were caused by factors other than credit loss, and we have the intent and ability to hold these securities to recovery and collect all of the contractual cash flows.
We may experience an increased likelihood of recording a valuation allowance in the future based on the following factors:
• Adverse global capital and credit market conditions that may impact the value of appreciated securities and the sale of certain corporate assets; and
• Legislative, regulatory or tax changes that may impact the sale of certain corporate assets.
Additionally, as of December 31, 2025, we had a $505 million deferred tax asset related to net operating losses, a $234 million deferred tax asset related to federal income tax credits and a $86 million deferred tax asset related to capital losses generated from the Fortitude Reinsurance Company Ltd. (“Fortitude Re”) reinsurance transaction. These deferred tax assets can be used to offset taxable income in future periods and reduce our income taxes payable in those future periods. The net operating losses do not expire and can be carried forward indefinitely. The federal income tax credits expire in 10 years. The capital losses can be carried back three years and carried forward five years.
Although realization is not assured, management believes it is more likely than not that the deferred tax assets, will be realized.
For risks related to establishing a valuation allowance against our deferred tax assets, see “Part I – Item 1A. Risk Factors – Assumptions and Estimates – We may be required to recognize an impairment of our goodwill or to establish a valuation allowance against our deferred tax assets.”
For additional information on income taxes, see Note 2 2 .
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RESULTS OF CONSOLIDATED OPERATIONS
Details underlying the consolidated results (in millions) were as follows:
For the Years Ended December 31,
Net Income (Loss)
Income (loss) from operations:
Annuities
Life Insurance
Group Protection
Retirement Plan Services
Other Operations
Net annuity product features, pre-tax (1)
Net life insurance product features, pre-tax
Credit loss-related adjustments, pre-tax
Investment gains (losses), pre-tax
Changes in the fair value of reinsurance-related
embedded derivatives, trading securities and
certain mortgage loans, pre-tax (2)
Gains (losses) on other non-financial assets, pre-tax (3)
Other items, pre-tax (4)(5)(6)(7)(8)
Income tax benefit (expense) related to the
above pre-tax items
Net income (loss)
(1) For the years ended December 31, 2025, 2024 and 2023, includes changes in MRBs of $341 million, $2,637 million and $2,197 million, respectively; changes in the fair value of the related hedge instruments inclusive of income allocated to support the cost of hedging or future benefits of $(263) million, $(561) million and $(1,894) million, respectively; and changes in the fair value of the embedded derivative liabilities and the associated index options for our indexed annuity products of $160 million, $432 million and $(235) million, respectively.
(2) Includes primarily changes in the fair value of the embedded derivative related to the fourth quarter 2023 reinsurance transaction. The coinsurance with funds withheld investment portfolio includes fixed maturity securities classified as AFS with changes in fair value recorded in OCI. Since the corresponding and offsetting changes in fair value of the embedded derivative related to the coinsurance with funds withheld investment portfolio are recorded in realized gain (loss), volatility can occur within net income (loss). See Note 7 for more information.
(3) For the year ended December 31, 2025, represents impairment of long-lived assets. For the year ended December 31, 2024, relates to the sale of our wealth management business (see Note 1 for additional information).
(4) For the year ended December 31, 2025, includes certain legal accruals of $(9) million and regulatory accruals of $2 million; for the year ended December 31, 2024, includes certain legal accruals of $(129) million, primarily attributable to a first quarter 2024 accrual related to the settlement of cost of insurance litigation, and regulatory accruals of $(12) million related to estimated state guaranty fund assessments net of estimated state premium tax recoveries associated with the Bankers Life Insurance Company and Colorado Bankers Life Insurance Company insolvencies (see “State Guaranty Fund Assessments” in Note 17 for more information); and for the year ended December 31, 2023, includes certain legal accruals of $(12) million.
(5) Includes severance expense related to initiatives to realign the workforce of $(24) million, $(74) million and $(7) million for the years ended December 31, 2025, 2024 and 2023, respectively.
(6) Includes transaction, integration and other costs related to mergers, acquisitions, divestitures and certain other corporate initiatives consisting of $(55) million of transaction costs related to restructuring certain captive reinsurance subsidiaries, $(25) million related to the sale of our wealth management business, $(22) million related to Life Insurance segment persistency optimization and $(21) million primarily related to the Bain Capital transaction for the year ended December 31, 2025; $(40) million primarily related to the sale of our wealth management business for the year ended December 31, 2024; and $(30) million related to the fourth quarter 2023 reinsurance transaction and $(4) million related to the sale of our wealth management business for the year ended December 31, 2023.
(7) Includes deferred compensation mark-to-market adjustment of $(32) million, $(15) million and $(2) million for the years ended December 31, 2025, 2024 and 2023, respectively.
(8) For the year ended December 31, 2025, includes gains on early extinguishment of debt of $94 million.
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Comparison of 2025 to 2024
Net income decreased due primarily to the following:
• Lower gain in net annuity product features driven by the impact of capital markets.
• Unfavorable changes in the fair value of reinsurance-related embedded derivatives, trading securities and certain mortgage loans in 2025 compared to favorable changes in 2024 driven by the fair value of the embedded derivative related to the fourth quarter 2023 reinsurance transaction.
• Gain on other non-financial assets in 2024 due to the sale of our wealth management business.
• Unfavorable impact from our annual assumption review in 2025 compared to favorable impact in 2024.
The decrease in net income was partially offset by the following:
• Improvement in income from operations in our Life Insurance segment, favorability in our total loss ratio in our Group Protection segment and growth in average account balances.
• Lower net unfavorable other items driven by settlement of cost of insurance litigation in 2024 and gain on extinguishment of debt in 2025.
• Lower loss in net life insurance product features driven by the change in the fair value of hedges associated with VUL products attributable to the impact of capital markets.
• Lower investment losses driven by favorable changes in the fair value of certain derivatives and lower realized losses on certain investments.
• Higher investment income on alternative investments.
Additional Information
For information on the fourth quarter 2023 reinsurance transaction, see Note 7.
For information on the sale of our wealth management business in 2024, see Note 1.
For information on the impacts from our annual assumption review, see “Introduction – Summary of Critical Accounting Estimates – Annual Assumption Review” above.
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RESULTS OF ANNUITIES
Income (Loss) from Operations
Details underlying the results for Annuities (in millions) were as follows:
For the Years Ended December 31,
Operating Revenues
Insurance premiums (1)
Fee income
Net investment income
Other revenues (2)
Total operating revenues
Operating Expenses
Benefits and policyholder liability remeasurement (1)
Interest credited
Commissions and other expenses
Total operating expenses
Income (loss) from operations before taxes
Federal income tax expense (benefit)
Income (loss) from operations
(1) Insurance premiums include primarily our income annuities that have a corresponding offset in benefits and policyholder liability remeasurement. Benefits and policyholder liability remeasurement include primarily changes in income annuity reserves driven by insurance premiums.
(2) Consists primarily of revenues attributable to interest income on deposit reinsurance assets and the net settlement related to certain reinsurance transactions, which has a corresponding offset in net investment income and interest credited, and broker-dealer services, which are subject to market volatility and have a comparable offset in commissions and other expenses. During the second quarter of 2024, we closed the sale of our wealth management business. See Note 1 for more information.
Comparison of 2025 to 2024
Income from operations for this segment increased due primarily to:
• Higher fee income driven by higher average daily separate account balances.
• Lower federal income tax expense due to unfavorable separate account dividends-received deduction true-ups in 2024.
The increase in income from operations was partially offset by the following:
• Higher commissions and other expenses, net of broker-dealer expenses, driven by higher deferred acquisition costs (“DAC”) amortization and the impact from our annual assumption review.
• Lower net investment income, net of interest credited, in certain reinsured portfolios and lower investment income within our surplus portfolio, which more than offset impacts from higher average general account balances and improving portfolio yields from the current interest rate environment. The lower net investment income, net of interest credited, in certain reinsured portfolios had a corresponding increase in other revenues.
The increase in income from operations was also due to higher commissions and other expenses in the first quarter of 2024 related to a balance sheet true-up in preparation for the close of the sale of the wealth management business.
See “Summary of Critical Accounting Estimates – Annual Assumption Review” above for information on the impacts from our annual assumption review.
Additional Information
Effective October 1, 2023, we entered into a reinsurance agreement with Fortitude Re to reinsure liabilities under certain blocks of in-force fixed annuities. Insurance premiums and benefits and policyholder liability remeasurement within the table above in 2023 reflect the
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ceding of in-force life-contingent payout fixed annuities that had no income (loss) from operations impact. See Note 7 for more information on the transaction.
New deposits are an important component of net flows and key to our efforts to grow our business. Although deposits do not significantly affect current period income from operations, they can significantly impact future income from operations.
The other component of net flows relates to the retention of new business and account balances. An important measure of retention is the reduction in account balances caused by full surrenders, deaths and other contract benefits. These outflows as a percentage of average gross account balances were 12%, 11% and 9% in 2025, 2024 and 2023, respectively . Our outflow rate in 2025 and 2024 reflects an increase in full surrenders as a result of the elevated interest rate environment and strong equity markets.
Our fixed annuities and RILA have discretionary fixed and indexed crediting rates that reset on an annual or periodic basis and may be subject to surrender charges. Our ability to retain these annuities will be subject to current competitive conditions at the time crediting rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “ Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain statutory requirements,” “ Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates and sustained higher interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals and surrenders” and “ Part I I – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk .” For information on the interest rate environment, see “Introduction – Executive Summary – Industry Trends – Interest Rate Environment” above.
Fee Income
Details underlying fee income (in millions) were as follows:
For the Years Ended December 31,
Fee Income
Mortality, expense and other assessments (1)
Surrender charges
DFEL:
Deferrals
Amortization
Total fee income
(1) Presented net of GLB and GDB hedge allowance.
We charge policyholders mortality and expense assessments on variable annuity accounts to cover insurance and administrative expenses. These assessments are a function of the rates priced into the product and the average daily separate account balances. Average daily separate account balances are driven by net flows and variable fund returns. Charges on GLB riders are assessed based on a contractual rate that is applied either to the account balance or the guaranteed amount. We allocate a portion of these fees to support the cost of hedging GLB and GDB riders. For more information, see Note 19 . We may collect surrender charges when our fixed and variable annuity policyholders surrender their contracts during the surrender charge period to protect us from premature withdrawals.
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Net Investment Income and Interest Credited
Details underlying net investment income and interest credited (in millions) were as follows:
For the Years Ended December 31,
Net Investment Income
Fixed maturity AFS securities, mortgage loans on real
estate and other, net of investment expenses
Commercial mortgage loan prepayment and bond
make-whole premiums (1)
Surplus investments (2)
Net investment income pertaining to broker-dealer services
Total net investment income
Interest Credited
Amount provided to policyholders
DSI deferrals
Interest credited before DSI amortization
DSI amortization
Total interest credited
(1) See “Consolidated Investments – Commercial Mortgage Loan Prepayment and Bond Make-Whole Premiums” below for additional information.
(2) Represents net investment income on the required statutory surplus for this segment and includes the effect of investment income on alternative investments for such assets that are held in the portfolios supporting statutory surplus versus the portfolios supporting product liabilities. See “Consolidated Investments – Alternative Investments” below for more information on alternative investments.
A portion of our investment income earned is credited to the policyholders of our deferred fixed annuities, the fixed portion of our variable annuities and our RILA contracts. We expect to earn a spread between what we earn on the underlying general account investments supporting the fixed annuities, fixed portion of the variable annuities and RILA contracts and what we credit to our policyholders’ accounts. Changes in commercial mortgage loan prepayments and bond make-whole premiums, investment income on alternative investments and surplus investment income can vary significantly from period to period due to a number of factors and, therefore, may contribute to investment income results that are not indicative of the underlying trends.
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Account Balances
Details underlying account balances (dollars in millions) were as follows:
As of or For the Years Ended
December 31,
Separate Account Balance Information (1)
Separate account deposits
Separate account net flows
Separate account balances
Average daily separate account balances
Average daily S&P 500 ® Index (2)
General Account Balance Information
General account deposits
General account net flows
General account balances (3)
Average general account balances (3)
(1) Excludes the fixed portion of variable annuities and RILA indexed account balances.
(2) We generally use the S&P 500 Index as a benchmark for the performance of our separate account balances. The account balances of our variable annuity contracts are invested by our policyholders in a variety of investment options including, but not limited to, domestic and international equity securities and fixed income, which do not necessarily align with S&P 500 Index performance.
(3) Net of reinsurance.
For more information on account balances, see Notes 1 0 and 11 .
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Commissions and Other Expenses
Details underlying commissions and other expenses (in millions) were as follows:
For the Years Ended December 31,
Commissions and Other Expenses
Commissions:
Deferrable
Non-deferrable
General and administrative expenses
Expenses associated with reserve financing
and LOC expenses
Taxes, licenses and fees
Total expenses incurred, excluding broker-dealer
DAC deferrals
Total pre-broker-dealer expenses incurred,
excluding amortization
DAC, VOBA and other amortization:
Amortization
Impact from annual assumption review
Broker-dealer expenses incurred (1)
Total commissions and other expenses
DAC Deferrals
As a percentage of sales/deposits
(1) During the second quarter of 2024, we closed the sale of our wealth management business. See Note 1 for more information.
Commissions and other expenses that result directly from and are essential to the successful acquisition of new or renewal business are deferred to the extent recoverable and are amortized on a constant level basis over the expected term of the related contracts using the groupings and actuarial assumptions consistent with those used for calculating the related policyholder liability balances. Certain types of commissions, such as trail commissions that are based on account balances, are expensed as incurred rather than deferred and amortized.
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RESULTS OF LIFE INSURANCE
Income (Loss) from Operations
Details underlying the results for Life Insurance (in millions) were as follows:
For the Years Ended December 31,
Operating Revenues
Insurance premiums (1)
Fee income
Net investment income
Operating realized gain (loss)
Other revenues (2)
Total operating revenues
Operating Expenses
Benefits and policyholder liability remeasurement
Interest credited
Commissions and other expenses (2)
Total operating expenses
Income (loss) from operations before taxes
Federal income tax expense (benefit)
Income (loss) from operations
(1) Includes term insurance premiums, which have a corresponding partial offset in benefits and policyholder liability remeasurement for changes in reserves. The decrease in insurance premiums in 2025 was driven by the expiration of a 10-year assumed reinsurance treaty in the first quarter of 2025, which has a corresponding offset in benefits and policyholder liability remeasurement.
(2) For information on amortization of deferred gain (loss) on business sold through reinsurance, see Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2024.
Comparison of 2025 to 2024
Income from operations for this segment increased due primarily to the following:
• Higher net investment income, net of interest credited, driven by higher investment income on alternative investments, growth in investments and moderate spread expansion.
• Higher fee income driven by higher deferred front-end loads (“DFEL”) amortization.
• Lower benefits and policyholder liability remeasurement driven by improved mortality due to lower claims incidence, partially offset by the impact from our annual assumption review and aging of the block.
• Lower commissions and other expenses, net of amortization of deferred loss on business sold through reinsurance, driven by expense management and a reduction in expenses associated with reserve financing due to restructuring certain captive reinsurance subsidiaries in the fourth quarter of 2025.
See “Summary of Critical Accounting Estimates – Annual Assumption Review” above for information on the impacts from our annual assumption review.
Additional Information
Effective October 1, 2023, we entered into reinsurance agreements with Fortitude Re to reinsure liabilities under certain blocks of in-force UL with secondary guarantees and MoneyGuard ® . See Note 7 for more information on the transaction.
For information on interest rate spreads and interest rate risk, see “ Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain statutory requirements,” “ Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates and sustained higher interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals and surrenders” and “Part II – Item 7A. Quantitative and Qualitative Disclosures About
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Market Risk – Interest Rate Risk .” For information on the interest rate environment, see “Introduction – Executive Summary – Industry Trends – Interest Rate Environment” above.
Insurance Premiums
Insurance premiums relate to traditional products and are a function of the rates priced into the product and insurance in force. Insurance in force, in turn, is driven by sales, persistency and mortality claims.
Fee Income
Details underlying fee income, sales, net flows, account balances and in-force face amount (in millions) were as follows:
For the Years Ended December 31,
Fee Income
Cost of insurance assessments
Expense assessments
Surrender charges
DFEL:
Deferrals
Amortization
Impact from annual assumption review
Total fee income
For the Years Ended December 31,
Sales by Product
IUL/UL
MoneyGuard ®
VUL
Term
Executive Benefits
Total sales
Net Flows
Deposits
Withdrawals and deaths
Net flows
Policyholder Assessments
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As of December 31,
Account Balances (1)
General account
Separate account
Total account balances
In-Force Face Amount
UL and other
Term insurance
Total in-force face amount
For the Years Ended December 31,
Average General Account Balances (1)
(1) Net of reinsurance ceded.
Fee income relates only to interest-sensitive products and includes cost of insurance assessments, expense assessments and surrender charges. Both cost of insurance and expense assessments can have deferrals and amortization related to DFEL. Cost of insurance and expense assessments are deducted from our policyholders’ account balances. These amounts are a function of the rates priced into the product and premiums received, face amount in force and account balances.
Sales are not recorded as a component of revenues (other than for traditional products) and do not have a significant effect on current quarter income from operations but are indicators of future profitability. Sales volumes can fluctuate given large case sizes within Executive Benefits.
Sales in the table above and as discussed above were reported as follows:
• UL, IUL and VUL – first-year commissionable premiums plus 5% of excess premiums received;
• MoneyGuard ® linked-benefit products – MoneyGuard (UL) and MoneyGuard Market Advantage SM (VUL), 150% of commissionable premiums;
• Executive Benefits – insurance and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess premium received, and single premium bank-owned UL and VUL, 15% of single premium deposits; and
• Term – 100% of annualized first-year premiums.
We monitor the business environment, including but not limited to the regulatory and interest rate environments, and make changes to our product offerings and in-force products as needed, and as permitted under the terms of the policies, to sustain the future profitability of our segment.
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Net Investment Income and Interest Credited
Details underlying net investment income and interest credited (in millions) were as follows:
For the Years Ended December 31,
Net Investment Income
Fixed maturity AFS securities, mortgage loans on real
estate and other, net of investment expenses
Commercial mortgage loan prepayment and bond
make-whole premiums (1)
Surplus investments (2)
Other investments (3)
Total net investment income
Interest Credited
(1) See “Consolidated Investments – Commercial Mortgage Loan Prepayment and Bond Make-Whole Premiums” below for additional information.
(2) Represents net investment income on the required statutory surplus for this segment and includes the effect of investment income on alternative investments for such assets that are held in the portfolios supporting statutory surplus versus the portfolios supporting product liabilities.
(3) Includes primarily net investment income earned on our alternative investments portfolio. See “Consolidated Investments – Alternative Investments” below for more information on alternative investments.
A portion of the investment income earned for this segment is credited to policyholder accounts. Statutory reserves will typically grow at a faster rate than account balances because of reserve requirements. Investments allocated to this segment are based upon the statutory reserve liabilities and are affected by various reserve adjustments, including financing transactions providing relief from reserve requirements. These financing transactions lead to a transfer of investments from this segment to Other Operations. We expect to earn a spread between what we earn on the underlying general account investments and what we credit to our policyholders’ accounts. Investment income partially offsets the earnings effect of the associated growth of our policy reserves. Commercial mortgage loan prepayments and bond make-whole premiums and investment income on alternative investments can vary significantly from period to period due to a number of factors, and, therefore, may contribute to investment income results that are not indicative of the underlying trends.
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Benefits and Policyholder Liability Remeasurement
Details underlying benefits and policyholder liability remeasurement (dollars in millions) were as follows:
For the Years Ended December 31,
Benefits and Policyholder Liability Remeasurement
Death claims direct and assumed
Death claims ceded
Reserves released on death
Net death benefits
Change in secondary guarantee life insurance product
reserves:
Change in reserves
Impact from annual assumption review
Change in MoneyGuard ® reserves:
Change in reserves
Impact from annual assumption review
Change in traditional product reserves:
Change in reserves
Impact from annual assumption review
Other benefits (1)
Total benefits and policyholder liability remeasurement
Death claims per $1,000 of in-force
(1) Includes primarily long-term care claims and life surrender benefits.
Benefits for this segment include claims incurred during the period in excess of the associated reserves for its interest-sensitive and traditional products. In addition, benefits include the change in secondary guarantee, linked-benefit and term life insurance product reserves. These reserves are affected by changes in expected future trends of assessments and benefits causing remeasurements. Generally, we experience higher mortality in the first quarter of the year due to the seasonality of claims.
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Commissions and Other Expenses
Details underlying commissions and other expenses (in millions) were as follows:
For the Years Ended December 31,
Commissions and Other Expenses
Commissions
General and administrative expenses
Expenses associated with reserve financing
Taxes, licenses and fees
Total expenses incurred
DAC and VOBA deferrals
Total expenses recognized before amortization
DAC and VOBA amortization:
Amortization
Impact from annual assumption review
Amortization of deferred loss on business sold
through reinsurance (1)
Other intangible amortization
Total commissions and other expenses
DAC and VOBA Deferrals
As a percentage of sales
(1) The amortization of deferred loss on business sold through reinsurance pertains to the fourth quarter 2023 reinsurance transaction. See Note 7 for additional information.
Commissions and other expenses that result directly from and are essential to the successful acquisition of new or renewal business are deferred to the extent recoverable. For our interest-sensitive and traditional products, DAC and value of business acquired (“VOBA”) are amortized on a constant level basis over the expected term of the related contracts using the groupings and actuarial assumptions consistent with those used for calculating the related policyholder liability balances.
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RESULTS OF GROUP PROTECTION
Income (Loss) from Operations
Details underlying the results for Group Protection (in millions) were as follows:
For the Years Ended December 31,
Operating Revenues
Insurance premiums
Net investment income
Other revenues (1)
Total operating revenues
Operating Expenses
Benefits and policyholder liability remeasurement
Interest credited
Commissions and other expenses
Total operating expenses
Income (loss) from operations before taxes
Federal income tax expense (benefit)
Income (loss) from operations
(1) Consists of revenue from third parties for administrative services performed, which has a corresponding partial offset in commissions and other expenses.
For the Years Ended December 31,
Income (Loss) from Operations by Product Line
Life
Disability
Dental
Income (loss) from operations
Comparison of 2025 to 2024
Income from operations for this segment increased due primarily to the following:
• Higher insurance premiums due to growth in business in force and persistency.
• Higher net investment income, net of interest credited, driven by growth in business in force.
The increase in income from operations was partially offset by the following:
• Higher commissions and other expenses due to incentive compensation as a result of production performance and higher other costs pertaining to business operations.
• Higher benefits and policyholder liability remeasurement driven by less favorable claims experience than expected in our disability business and growth in business in force, partially offset by the impact of our annual assumption review and lower incidence in our life business.
See “Summary of Critical Accounting Estimates – Annual Assumption Review” for information on the impacts from our annual assumption review.
Additional Information
Management compares trends in actual loss ratios to pricing expectations as group-underwriting risks change over time. We expect normal fluctuations in our total loss ratio, as claims experience is inherently volatile. For every one percent increase in the total loss ratio,
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we would expect an estimated annual decrease to income from operations of $41 million to $46 million. The effects are symmetrical for a comparable decrease in the loss ratio and, therefore, move in an equal and opposite direction.
For information on the effects of current interest rates on our long-term disability claim reserves, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk – Effect of Interest Rate Sensitivity .” For information on the interest rate environment, see “Introduction – Executive Summary – Industry Trends – Interest Rate Environment” above.
Insurance Premiums
Details underlying insurance premiums (in millions) were as follows:
For the Years Ended December 31,
Insurance Premiums by Product Line
Life
Disability
Dental
Total insurance premiums
Sales by Product Line
Life
Disability
Dental
Total sales
Premiums are a function of the rates priced into the product and our business in force. Business in force, in turn, is driven by sales and persistency experience.
Sales relate to new policyholders and new coverages sold to existing policyholders. We believe that the trend in sales is an important indicator of development of business in force over time. Sales in the table above are the combined annualized premiums for our products. Generally, we have higher sales during the fourth quarter of the year.
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Net Investment Income
We use our investment income to offset the earnings effect of the associated build of our reserves, which are a function of our insurance premiums and the yields on our investments. Details underlying net investment income (in millions) were as follows:
For the Years Ended December 31,
Net Investment Income
Fixed maturity AFS securities, mortgage loans on real
estate and other, net of investment expenses
Commercial mortgage loan prepayment and bond
make-whole premiums (1)
Surplus investments (2)
Total net investment income
(1) See “Consolidated Investments – Commercial Mortgage Loan Prepayment and Bond Make-Whole Premiums” below for additional information.
(2) Represents net investment income on the required statutory surplus for this segment and includes the effect of investment income on alternative investments for such assets that are held in the portfolios supporting statutory surplus versus the portfolios supporting product liabilities. See “Consolidated Investments – Alternative Investments” below for more information on alternative investments.
Benefits and Policyholder Liability Remeasurement
Details underlying benefits and policyholder liability remeasurement (in millions) and loss ratios by product line were as follows:
For the Years Ended December 31,
Benefits and Policyholder Liability
Remeasurement by Product Line
Life
Disability
Dental
Total benefits and policyholder liability
remeasurement by product line
Loss Ratios by Product Line
Life
Disability
Dental
Total
Generally, we experience higher mortality in the first quarter of the year and higher disability claims in the fourth quarter of the year due to the seasonality of claims. For additional information on our loss ratios, see “Additional Information” above.
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Commissions and Other Expenses
Details underlying commissions and other expenses (in millions) were as follows:
For the Years Ended December 31,
Commissions and Other Expenses
Commissions
General and administrative expenses
Taxes, licenses and fees
Other
Total expenses incurred
DAC deferrals
Total expenses recognized before amortization
DAC and other intangible amortization
Total commissions and other expenses
DAC Deferrals
As a percentage of insurance premiums
Commissions and other expenses that result directly from and are essential to the successful acquisition of new or renewal business are deferred to the extent recoverable and are amortized on a constant level basis over the expected term of the related contracts using the groupings and actuarial assumptions consistent with those used for calculating the related policyholder liability balances. Certain broker commissions that vary with and are related to paid premiums are expensed as incurred rather than deferred and amortized.
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RESULTS OF RETIREMENT PLAN SERVICES
Income (Loss) from Operations
Details underlying the results for Retirement Plan Services (in millions) were as follows:
For the Years Ended December 31,
Operating Revenues
Fee income
Net investment income
Other revenues (1)
Total operating revenues
Operating Expenses
Interest credited
Commissions and other expenses
Total operating expenses
Income (loss) from operations before taxes
Federal income tax expense (benefit)
Income (loss) from operations
(1) Consists primarily of mutual fund account program revenues from mid to large employers.
Comparison of 2025 to 2024
Income from operations for this segment remained flat due primarily to the following:
• Higher fee income driven by higher average daily separate account balances.
• Higher net investment income, net of interest credited, driven by higher average general account balances, impacts to portfolio yields from the current interest rate environment and higher investment income on prepayment and bond make-whole premiums, partially offset by an increase in crediting rates.
• Higher commissions and other expenses driven by higher trail commissions resulting from higher average daily separate account balances.
• Lower other revenues in 2025 due to a plan termination during the fourth quarter of 2024.
Additional Information
Net flows in this business fluctuate based on the timing of larger plans being implemented and terminating over the course of the year. New deposits are an important component of net flows and key to our efforts to grow our business. Although deposits do not significantly affect current period income from operations, they can significantly impact future income from operations. The other component of net flows relates to the retention of the business. An important measure of retention is the reduction in account balances caused by plan sponsor terminations and participant withdrawals. These outflows as a percentage of average account balances were 17%, 14% and 12% for 2025, 2024 and 2023, respectively. The increase in the outflow rate for the year ended December 31, 2025, was attributable primarily to a large plan termination during the first quarter of 2025.
Our net flows are negatively affected by the continued net outflows from our oldest blocks of annuities business (as presented on our Net Flows By Market table below as “ Multi-Fund ® and other”), which are among our higher margin product lines in this segment, due to the fact that they are mature blocks with low distribution and servicing costs. The proportion of these products to our total account balances was 11%, 13% and 15% for 2025, 2024 and 2023, respectively. Due to this overall shift in business mix toward products with lower returns, new deposit production continues to be necessary to maintain earnings at current levels.
Our fixed annuity business includes products with discretionary and index-based crediting rates that are reset on either a quarterly or semi-annual basis. Our ability to retain quarterly or semi-annual reset annuities will be subject to current competitive conditions at the time crediting rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows into or out of our fixed accounts or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease, impacting our profitability, and make it more challenging to meet certain
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statutory requirements” and “ Part I – Item 1A. Risk Factors – Market Conditions – Increases in interest rates and sustained higher interest rates may negatively affect our profitability, capital position and the value of our investment portfolio and may also result in increased contract withdrawals and surrenders” and “ Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk .” For information on the interest rate environment, see “Introduction – Executive Summary – Industry Trends – Interest Rate Environment” above.
Fee Income
Details underlying fee income (in millions) were as follows:
For the Years Ended December 31,
Fee Income
Annuity expense assessments
Mutual fund fees
Total expense assessments
Surrender charges
Total fee income
Our fee income is primarily composed of expense assessments that we charge to cover insurance, administrative, recordkeeping and other services and mutual fund fees earned for services we provide to our mutual fund programs. Fee income is primarily based on average account balances, both general and separate, which are driven by net flows and the equity markets. Fee income is also driven by non-account balance-related items such as participant counts. We may collect surrender charges when our policyholders surrender their contracts during the surrender charge period to protect us from premature withdrawals.
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Net Investment Income and Interest Credited
Details underlying net investment income and interest credited (in millions) were as follows:
For the Years Ended December 31,
Net Investment Income
Fixed maturity AFS securities, mortgage loans on real estate
and other, net of investment expenses
Commercial mortgage loan prepayment and
bond make-whole premiums (1)
Surplus investments (2)
Total net investment income
Interest Credited
(1) See “Consolidated Investments – Commercial Mortgage Loan Prepayment and Bond Make-Whole Premiums” below for additional information.
(2) Represents net investment income on the required statutory surplus for this segment and includes the effect of investment income on alternative investments for such assets that are held in the portfolios supporting statutory surplus versus the portfolios supporting product liabilities. See “Consolidated Investments – Alternative Investments” below for more information on alternative investments.
A portion of our investment income earned is credited to the policyholders of our fixed annuity products, including the fixed portion of variable annuity contracts. We expect to earn a spread between what we earn on the underlying general account investments supporting the fixed annuity product line, including the fixed portion of variable annuity contracts, and what we credit to our policyholders’ accounts. Commercial mortgage loan prepayments and bond make-whole premiums, investment income on alternative investments and surplus investment income can vary significantly from period to period due to a number of factors and, therefore, may contribute to investment income results that are not indicative of the underlying trends.
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Account Balances
Details underlying account balances (dollars in millions) were as follows:
As of or For the Years Ended
December 31,
Separate Account Balance Information (1)
Separate account deposits
Separate account net flows
Separate account balances
Average daily separate account balances
Average daily S&P 500 ® Index (2)
General Account Balance Information
General account deposits
General account net flows
General account balances
Average general account balances
Mutual Fund Account Balance Information
Mutual fund deposits
Mutual fund net flows
Mutual fund account balances (3)
(1) Excludes the fixed portion of variable annuities.
(2) We generally use the S&P 500 Index as a benchmark for the performance of our separate account balances. The account balances of our variable annuity contracts are invested by our policyholders in a variety of investment options including, but not limited to, domestic and international equity securities and fixed income, which do not necessarily align with S&P 500 Index performance.
(3) Mutual funds are not included in the separate accounts reported on the Consolidated Balance Sheets as we do not have any ownership interest in them.
For the Years Ended December 31,
Net Flows By Market
Small market
Mid – large market
Multi-Fund ® and other
Total net flows
For more information on account balances, see Notes 1 0 and 11 .
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Commissions and Other Expenses
Details underlying commissions and other expenses (in millions) were as follows:
For the Years Ended December 31,
Commissions and Other Expenses
Commissions:
Deferrable
Non-deferrable
General and administrative expenses
Taxes, licenses and fees
Total expenses incurred
DAC deferrals
Total expenses recognized before amortization
DAC amortization
Total commissions and other expenses
DAC Deferrals
As a percentage of annuity sales/deposits
Commissions and other expenses that result directly from and are essential to the successful acquisition of new or renewal business are deferred to the extent recoverable and are amortized on a constant level basis over the expected term of the related contracts using the groupings and actuarial assumptions consistent with those used for calculating the related policyholder liability balances. Certain types of commissions, such as trail commissions that are based on account balances, are expensed as incurred rather than deferred and amortized. Distribution expenses associated with the sale of mutual fund products are expensed as incurred.
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RESULTS OF OTHER OPERATIONS
Income (Loss) from Operations
Details underlying the results for Other Operations (in millions) were as follows:
For the Years Ended December 31,
Operating Revenues
Insurance premiums (1)
Net investment income (2)
Other revenues (3)
Total operating revenues
Operating Expenses
Benefits and policyholder liability remeasurement
Interest credited
Other expenses
Interest and debt expense
Total operating expenses
Income (loss) from operations before taxes
Federal income tax expense (benefit)
Income (loss) from operations
(1) Includes our disability income business, which has a corresponding offset in benefits and policyholder liability remeasurement for changes in reserves.
(2) Includes our institutional pension business, which has a corresponding offset in insurance premiums and benefits and policyholder liability remeasurement for changes in reserves, and funding agreement activity beginning in 2025, which has a partial offset in interest credited. For information on funding agreements, see Note 11 .
(3) Includes certain third-party advisory fees, which has a partial offset in other expenses.
Comparison of 2025 to 2024
Loss from operations for Other Operations increased due primarily to the following:
• Lower net investment income, net of interest credited, related to lower portfolio yields.
• Higher other expenses associated with costs pertaining to business operations.
The increase in loss from operations was partially offset by the following:
• Higher other revenues due to the effect of market fluctuations on assets held as part of certain compensation plans.
• Lower interest and debt expense driven by a decline in average outstanding debt and interest rates.
Additional Information
Effective October 1, 2023, we entered into a reinsurance agreement with Fortitude Re to reinsure liabilities under certain blocks of in-force institutional pension business. Insurance premiums and benefits and policyholder liability remeasurement within the table above in 2023 reflect the ceding of in-force institutional pension business that had no income (loss) from operations impact. See Note 7 for more information on the transaction.
Net Investment Income and Interest Credited
We utilize an internal formula to determine the amount of capital that is allocated to our business segments. Investment income on capital in excess of the calculated amounts is reported in Other Operations. If our business segments require increases in statutory reserves, surplus or investments, the amount of excess capital that is retained by Other Operations would decrease and net investment income would be negatively affected.
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Write-downs for impairments decrease the recorded value of investments owned by the business segments. These write-downs are not included in the income from operations of our business segments. When impairment occurs, assets are transferred to the business segments’ portfolios and will reduce the future net investment income for Other Operations. Statutory reserve adjustments for our business segments can also cause allocations of investments between the business segments and Other Operations.
The majority of our interest credited relates to our reinsurance operations sold to Swiss Re Life & Health America, Inc. (“Swiss Re”) in 2001. A substantial amount of the business was sold through indemnity reinsurance transactions, which is still recorded in the consolidated financial statements. The interest credited corresponds to investment income earnings on the assets we continue to hold for this business. There is no effect to income or loss in Other Operations or on a consolidated basis for these amounts because interest earned on the blocks that continue to be reinsured is passed through to Swiss Re in the form of interest credited.
Benefits and Policyholder Liability Remeasurement
Benefits are recognized when incurred for institutional pension products and disability income business. Policyholder liability remeasurement gains (losses) result from updates in cash flow assumptions and actual variance from expected experience used in the net
premium ratio or benefit ratio calculation for future policy benefits associated with institutional pension products.
Other Expenses
Details underlying other expenses (in millions) were as follows:
For the Years Ended December 31,
General and administrative expenses:
Legal
Branding
Other (1)
Total general and administrative expenses
DAC deferrals
Other (2)
Total other expenses
(1) Includes expenses that are corporate in nature and not allocated to our business segments.
(2) Consists primarily of reimbursements to Other Operations from the Life Insurance segment for the use of proceeds from certain issuances of senior notes that were used as long-term structured solutions, net of expenses incurred by Other Operations for its access to a financing facility and issuance of letters of credit (“LOCs”) and taxes, licenses and fees.
Interest and Debt Expense
Our current level of interest expense may not be indicative of the future due to, among other things, the timing of the use of cash and the future cost of capital. For additional information on our financing activities, see “Liquidity and Capital Resources – Holding Company Sources and Uses of Liquidity and Capital – Debt” below.
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CONSOLIDATED INVESTMENTS
Details underlying consolidated investment balances (in millions) were as follows:
Percentage of
Total Investments
December 31,
December 31,
December 31,
December 31,
Investments
Fixed maturity AFS securities
Trading securities
Equity securities
Mortgage loans on real estate
Policy loans
Derivative investments
Other investments:
Alternative investments
Alternative investments – reinsurance-related (1)
Company-owned life insurance
Other
Total investments
(1) Represents alternative investments that support reinsurance funds withheld and modified coinsurance agreements where the investment results are passed directly to the reinsure rs. For more information, see Note 7.
Investment Objective
Investments are an integral part of our operations. We follow a balanced approach to investing for both current income and prudent risk management, with an emphasis on generating sufficient current income, net of income tax, to meet our obligations to customers, as well as other general liabilities. This balanced approach requires the evaluation of expected return and risk of each asset class utilized, while still meeting our income objectives. This approach is important to our asset-liability management because decisions can be made based upon both the economic and current investment income considerations affecting assets and liabilities. For a discussion of our risk management process, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk .”
Investment Portfolio Composition and Diversification
Fundamental to our investment policy is diversification across asset classes. Our investment portfolio, excluding cash and invested cash, is composed of fixed maturity securities, mortgage loans on real estate, real estate (either wholly owned or in joint ventures) and other long-term investments. We purchase investments for our segmented portfolios that have yield, duration and other characteristics that take into account the liabilities of the products being supported.
We have the ability to maintain our investment holdings throughout credit cycles because of our capital position, the long-term nature of our liabilities and the matching of our portfolios of investment assets with the liabilities of our various products.
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Fixed Maturity and Equity Securities Portfolios
Fixed maturity securities consist of portfolios classified as AFS and trading. Details underlying our fixed maturity AFS securities by industry classification (in millions) are presented in the tables below. These tables agree in total with the presentation of fixed maturity AFS securities in Note 3 ; however, the categories below represent a more detailed breakout of the fixed maturity AFS portfolio. Therefore, the investment classifications listed below do not agree to the investment categories provided in Note 3 .
As of December 31, 2025
Net
Amortized
Gross Unrealized
Fair
Fair
Cost (1)
Gains
Losses
Value
Value
Fixed Maturity AFS Securities
Industry corporate bonds:
Financial services
Basic industry
Capital goods
Communications
Consumer cyclical
Consumer non-cyclical
Energy
Technology
Transportation
Industrial other
Utilities
Government-related entities
Collateralized mortgage and other obligations (“CMOs”):
Agency backed
Non-agency backed
Mortgage pass through securities (“MPTS”):
Agency backed
Commercial mortgage-backed securities (“CMBS”):
Non-agency backed
Asset-backed securities (“ABS”):
Collateralized loan obligations (“CLOs”)
Other (2)
Municipals:
Taxable
Tax-exempt
Government:
United States
Foreign
Hybrid and redeemable preferred securities
Total fixed maturity AFS securities
Trading Securities (3)
Equity Securities
Total fixed maturity AFS, trading and equity securities
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As of December 31, 2024
Net
Amortized
Gross Unrealized
Fair
Fair
Cost (1)
Gains
Losses
Value
Value
Fixed Maturity AFS Securities
Industry corporate bonds:
Financial services
Basic industry
Capital goods
Communications
Consumer cyclical
Consumer non-cyclical
Energy
Technology
Transportation
Industrial other
Utilities
Government-related entities
CMOs:
Agency backed
Non-agency backed
MPTS:
Agency backed
CMBS:
Non-agency backed
ABS:
CLOs
Other (2)
Municipals:
Taxable
Tax-exempt
Government:
United States
Foreign
Hybrid and redeemable preferred securities
Total fixed maturity AFS securities
Trading Securities (3)
Equity Securities
Total fixed maturity AFS, trading and equity securities
(1) Represents amortized cost, net of the allowance for credit losses.
(2) Includes securities collateralized by consumer loans, equipment loans and other asset types.
(3) Certain of our trading securities support our reinsurance funds withheld and modified coinsurance agreements and the investment results are passed directly to the reinsurers. See “Trading Securities” below for more information.
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Fixed Maturity AFS Securities
In accordance with the fixed maturity AFS accounting guidance, we reflect stockholders’ equity as if unrealized gains and losses were actually recognized and consider all related accounting adjustments that would occur upon such a hypothetical recognition of unrealized gains and losses. Such related balance sheet effects include adjustments to future contract benefits, policyholder account balances and deferred income taxes. Adjustments to each of these balances are charged or credited to accumulated other comprehensive income (loss) (“AOCI”). For instance, deferred income tax balances are adjusted because unrealized gains or losses do not affect actual taxes currently paid.
The quality of our fixed maturity AFS securities portfolio, as measured at estimated fair value and by the percentage of fixed maturity AFS securities invested in various ratings categories, relative to the entire fixed maturity AFS security portfolio (in millions) was as follows:
As of December 31, 2025
As of December 31, 2024
Rating Agency
Net
Net
NAIC
Equivalent
Amortized
Fair
Amortized
Fair
Designation (1)
Designation (1)
Cost
Value
Total
Cost
Value
Total
Investment Grade Securities
AAA / AA / A
BBB
Total investment grade securities
Below Investment Grade Securities
CCC and lower
In or near default
Total below investment grade securities
Total fixed maturity AFS securities
Total securities below investment grade
as a percentage of total fixed maturity
AFS securities
(1) Based upon the rating designations determined and provided by the National Association of Insurance Commissioners (the “NAIC”) or the major credit rating agencies (Fitch Ratings (“Fitch”), Moody’s Investors Service (“Moody’s”) and S&P Global Ratings (“S&P”)). For securities where the ratings assigned by the major credit rating agencies are not equivalent, the second lowest rating assigned is used. For those securities where ratings by the major credit rating agencies are not available, which does not represent a significant amount of our total fixed maturity AFS securities, we base the ratings disclosed upon internal ratings. The average credit quality of our total fixed maturity AFS securities portfolio w as A- as of December 31, 2025.
Comparisons between the NAIC designations and rating agency designations are published by the NAIC. The NAIC assigns securities quality designations and uniform valuations, which are used by insurers when preparing their annual statements. The NAIC designations are similar to the rating agency designations of the Nationally Recognized Statistical Rating Organizations for marketable bonds. NAIC designations 1 and 2 include bonds generally considered investment grade (rated Baa3 or higher by Moody’s, or rated BBB- or higher by S&P and Fitch) by such ratings organizations. However, securities designated NAIC 1 and 2 could be deemed below investment grade by the rating agencies as a result of the current risk-based capital (“RBC”) rules for residential mortgage-backed securities (“RMBS”) and CMBS for statutory reporting. NAIC designations 3 through 6 include bonds generally considered below investment grade (rated Ba1 or lower by Moody’s, or rated BB+ or lower by S&P and Fitch).
As of December 31, 2025 and 2024, 97% of the total fixed maturity AFS securities in an unrealized loss position were investment grade. See Note 3 for maturity date information for our fixed maturity investment portfolio. O ur gross unrealized losses recognized in OCI on fixed maturity AFS securities as of December 31, 2025, decreased by $2.0 billion sin ce December 31, 2024. For the year ended December 31, 2025, we recogniz ed $278 million of gross losses on fixed maturity AFS securities, which were primarily related to portfolio rebalancing and sales that support our reinsurance funds withheld agreements where the investment results are passed directly to the reinsurers. For the year ended December 31, 2024, we recognized $257 million of gross losses on fixed maturity AFS securities, which were primarily
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related to portfolio rebalancing and sales that support our reinsurance funds withheld agreements where the investment results are passed directly to the reinsurers.
We regularly review our fixed maturity AFS securities for declines in fair value that we determine to be impairment-related, including those attributable to credit risk factors that may require a credit allowance. We do not believe the unrealized loss position as of December 31, 2025, required an impairment recognized in earnings as: (i) we did not intend to sell these fixed maturity AFS securities; (ii) it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis; and (iii) the difference in the fair value compared to the amortized cost was due to factors other than credit loss. This conclusion is consistent with our asset-liability management process. Management considered the following as part of the evaluation:
• The current economic environment and market conditions;
• Our business strategy and current business plans;
• The nature and type of security, including expected maturities and exposure to general credit, liquidity, market and interest rate risk;
• Our analysis of data from financial models and other internal and industry sources to evaluate the current effectiveness of our hedging and overall risk management strategies;
• The current and expected timing of contractual maturities of our assets and liabilities, expectations of prepayments on investments and expectations for surrenders and withdrawals of annuity contracts and life insurance policies;
• The capital risk limits approved by management; and
• Our current financial condition and liquidity demands.
We recognized $(89) million and $(42) million of credit loss benefit (expense) on our fixed maturity AFS securities for the years ended December 31, 2025 and 2024, respectively. In order to determine the amount of credit loss, we calculated the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover. To determine the recoverability, we considered the facts and circumstances surrounding the underlying issuer including, but not limited to, the following:
• Historical and implied volatility of the security;
• The extent to which the fair value has been less than amortized cost;
• Adverse conditions specifically related to the security or to specific conditions in an industry or geographic area;
• Failure, if any, of the issuer of the security to make scheduled payments; and
• Recoveries or additional declines in fair value subsequent to the balance sheet date.
For information on credit loss impairment on fixed maturity AFS securities, see Notes 1 , 3 and 2 0 .
As reported on the Consolidated Balan ce Sheets, we had $148.4 billion of investments and cash and invested cash, which exceeded the liabilities for our future obligations under insurance policies and contracts, net of amounts recoverable from reinsurers and amounts on deposit with reinsurers, which totaled $120.6 billion as of December 31, 2025. If it were necessary to liquidate fixed maturity AFS securities prior to maturity or call to meet cash flow needs, we would first look to those fixed maturity AFS securities that are in an unrealized gain position, which had a fair value of $33.8 billion as of December 31, 2025, rather than selling fixed maturity AFS securities in an unrealized loss position. The amount of cash that we have on hand at any point in time takes into account our liquidity needs in the future, other sources of cash, such as the maturities of investm ents, interest and dividends we earn on our investments and the ongoing cash flows from new and existing business. For additional information, see “Fixed Maturity AFS Securities – Evaluation for Recovery of Amortized Cost” in Note 1 and “ Liquidity and Capital Resources ” below.
As of December 31, 2025 and 2024, the estimated fair value for all private placement secu rities was $23.2 billion a nd $20.9 billion, respectively, represen ting 17% and 16% of total investments, respectively.
Trading Securities
Trading securities, which in certain cases support reinsurance funds withheld and our modified coinsurance agreements, are carried at fair value and changes in fair value are recorded in net income (loss) as they occur. Investment results for these certain portfolios, including gains and losses from sales, are passed directly to the reinsurers through the contractual terms of the reinsurance arrangements. Offsetting these amounts in certain cases are corresponding changes in fair value of the embedded derivative liability associated with the underlying reinsurance arrangement. See Notes 1 and 7 for more information regarding modified coinsurance.
Mortgage-Backed Securities (Included in Fixed Maturity AFS and Trading Securities)
Our fixed maturity securities include mortgage-backed securities (“MBS”). These securities are subject to risks associated with variable prepayments. This may result in differences between the actual cash flow and maturity of these securities than that expected at the time of purchase. Securities that have an amortized cost greater than par and are backed by mortgages that prepay faster than expected will incur a reduction in yield or a loss. Those securities with an amortized cost lower than par that prepay faster than expected will generate an increase in yield or a gain. In addition, we may incur reinvestment risks if market yields are lower than the book yields earned on the
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securities. Prepayments occurring slower than expected have the opposite effect. The degree to which a security is susceptible to either gains or losses is influenced by: the difference between its amortized cost and par; the relative sensitivity of the underlying mortgages backing the assets to prepayment in a changing interest rate environment; and the repayment priority of the securities in the overall securitization structure.
We limit the extent of our risk on MBS by prudently limiting exposure to the asset class, by generally avoiding the purchase of securities with a cost that significantly exceeds par, by purchasing securities with improving collateral performance, and by primarily investing in securities that are current pay and senior priority in their trust structure. A significant amount of assets in our MBS portfolio are either guaranteed by U.S. government-sponsored enterprises, supported in the securitization structure by junior securities or purchased at discounted prices significantly lower than their expected recovery value, enabling the assets to achieve high investment grade status.
Our exposure to subprime mortgage lending is limited to investments in banks and other financial institutions that may be affected by subprime lending and direct investments in ABS and RMBS. Mortgage-related ABS are backed by home equity loans and RMBS are backed by residential mortgages. These securities are backed by loans that are characterized by borrowers of differing levels of creditworthiness: prime; Alt-A; and subprime. Prime lending is the origination of residential mortgage loans to customers with excellent credit profiles. Alt-A lending is the origination of residential mortgage loans to customers who have prime credit profiles but lack documentation to substantiate income. Subprime lending is the origination of loans to customers with weak or impaired credit profiles.
Delinquency and loss rates on residential mortgages and home equity loans have been showing positive trends, and, as long as the unemployment rate remains stable to improving, we expect these trends to continue. We continue to expect to receive payments in accordance with contractual terms for a significant amount of our securities, largely due to the seniority of the claims on the collateral of the securities that we own. The tranches of the securities will experience losses according to their seniority level with the least senior (or most junior), typically the unrated residual tranche, taking the first loss. As of December 31, 2025 and 2024, our ABS home equity and RMBS had a market value of $2.4 billion and $2.1 billion, respectively, and a net unrealized gain (loss) of $(80) million and $(178) million, respectively.
The market value of fixed maturity AFS and trading securities backed by subprime loans was $170 million and represented less than 1% of our total investment portfolio as of December 31, 2025. Fixed maturity AFS securities represented $168 million, or 99%, and trading securities represented $2 million, or 1%, of the subprime exposure as of December 31, 2025. The table below summarizes our investments in fixed maturity AFS securities backed by pools of residential mortgages (in millions) as of December 31, 2025:
Agency
Non-Agency
Total
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Type
RMBS
ABS home equity
Total by type (1)(2)
NAIC Designation
Total by NAIC designation (1)(2)(3)
Total fixed maturity AFS securities backed by pools of
residential mortgages as a percentage of total fixed maturity AFS securities
Total non-agency backed as a percentage of total fixed maturity AFS securities
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(1) Does not include the amortized cost of trading se curities totaling $68 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $68 million in trading securities consisted of $30 million agency and $38 million non-agency.
(2) Does not include the fair value of trading securities totaling $62 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $62 million in trading securities consisted of $29 million agency and $33 million non-agency.
(3) Based upon the rating designations determined and provided by the NAIC.
The market value of fixed maturity AFS and trading se curities backed by subprime loans was $179 million and represented less than 1% of our total investment portfolio as of December 31, 2024. Fixed maturity AFS securities represented $172 million, or 96%, and trading securities represented $7 million, or 4%, of the subprime exposure as of December 31, 2024. The table below summarizes our investments in fixed maturity AFS securities backed by pools of residential mortgages (in millions) as of December 31, 2024:
Agency
Non-Agency
Total
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Type
RMBS
ABS home equity
Total by type (1)(2)
NAIC Designation
Total by NAIC designation (1)(2)(3)
Total fixed maturity AFS securities backed by pools of
residential mortgages as a percentage of total fixed maturity AFS securities
Total non-agency backed as a percentage of total fixed maturity AFS securities
(1) Does not include the amortize d cost of trading securities totaling $64 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $64 million in trading securities consisted of $15 million agency and $49 million non-agency.
(2) Does not include the fair value of trading securities totaling $54 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $54 million in trading securities consisted of $14 million agency and $40 million non-agency.
(3) Based upon the rating designations determined and provided by the NAIC.
None of these investments as of December 31, 2025, and December 31, 2024, included any direct investments in subprime lenders or mortgages. We are not aware of material exposure to subprime loans in our alternative investment portfolio.
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The following summarizes our investments in fixed maturity AFS securities backed by pools of commercial mortgages (in millions) as of December 31, 2025:
Multiple Property
Single Property
Total
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Type
CMBS (1)(2)
NAIC Designation
Total by NAIC designation (1)(2)(3)
Total fixed maturity AFS securities backed by pools of
commercial mortgages as a percentage of total fixed maturity AFS securities
(1) Does not include the amortized cost of trading securities totaling $113 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $113 million in trading securities consisted of $64 million of multiple property CMBS and $49 million of single property CMBS.
(2) Does not include the fair value of trading securities totaling $100 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $100 million in trading securities consisted of $58 million of mu ltiple property CMBS and $42 million of sin gle property CMBS.
(3) Based upon the rating designations determined and provided by the NAIC.
The following summarizes our investments in fixed maturity AFS securities backed by pools of commercial mortgages (in millions) as of December 31, 2024:
Multiple Property
Single Property
Total
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Type
CMBS (1)(2)
NAIC Designation
Total by NAIC designation (1)(2)(3)
Total fixed maturity AFS securities backed by pools of
commercial mortgages as a percentage of total fixed maturity AFS securities
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(1) Does not include the amortized cost of trading securities totaling $126 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $126 million in trading securities consisted of $77 million of multiple property CMBS and $49 million of single property CMBS.
(2) Does not include the fair value of trading securities totaling $109 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $109 million in trading securities consisted of $68 million of multiple property CMBS and $41 million of single property CMBS.
(3) Based upon the rating designations determined and provided by the NAIC.
The following summarizes our investments in ABS within fixed maturity AFS securities (in millions) as of December 31, 2025:
CLOs
Other
Total
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Type
ABS (1)(2)
NAIC Designation
Total by NAIC designation (1)(2)(3)
(1) Doe s not include the amortized cost of trading securities totaling $274 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $274 million in trading securities consisted of $138 million of CLOs and $136 million of Other ABS.
(2) Does not include the fair value of trading securities totaling $271 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $271 million in trading securities consisted of $137 million of CLOs and $134 million of Ot her ABS.
(3) Based upon the rating designations determined and provided by the NAIC.
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The following summarizes our investments in ABS within fixed maturity AFS securities (in millions) as of December 31, 2024:
CLOs
Other
Total
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Net Amortized Cost
Fair Value
Type
ABS (1)(2)
NAIC Designation
Total by NAIC designation (1)(2)(3)
(1) Does not include the amortized cost of trading securities totaling $378 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $378 million in trading securities consisted of $240 million of CLOs and $138 million of Other ABS.
(2) Does not include the fair value of trading securities totaling $369 million that primarily support our reinsurance funds withheld and modified coinsurance agreements because investment results for these agreements are passed directly to the reinsurers. The $369 million in trading securities consisted of $240 million of CLOs and $129 million of Other ABS.
(3) Based upon the rating designations determined and provided by the NAIC.
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Composition by Industry Categories of our Unrealized Losses on Fixed Maturity AFS Securities
When considering unrealized gain and loss information, it is important to recognize that the information relates to the position of securities at a particular point in time and may not be indicative of the position of our investment portfolios subsequent to the balance sheet date. Further, because the timing of the recognition of realized investment gains and losses through the selection of which securities are sold is largely at management’s discretion, it is important to consider the information provided below within the context of the overall unrealized gain or loss position of our investment portfolios. These are important considerations that should be included in any evaluation of the potential effect of securities in an unrealized loss position on our future earnings. The composition by industry categories of all fixed maturity AFS securities in an unrealized loss position (in millions) as of December 31, 2025, was as follows:
Net Amortized Cost
Net Amortized Cost
Gross Unrealized Losses
Gross Unrealized Losses
Fair Value
Fair Value
Healthcare
Electric
Technology
Food and beverage
Industrial – other
Local authorities
Pharmaceuticals
Diversified manufacturing
Banking
Natural gas
Retail
ABS
Chemicals
Property and casualty
Brokerage asset management
Life insurance
Transportation services
Aerospace and defense
Utility – other
Government-sponsored
Railroads
Wirelines
Midstream
Consumer products
Wireless
Integrated
Non-agency CMBS
Industries with unrealized losses
less than $100 million
Total by industry
Total by industry as a percentage of
total fixed maturity AFS securities
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The composition by industry categories of all fixed maturity AFS securities in an unrealized loss position (in millions) as of December 31, 2024, was as follows:
Net Amortized Cost
Net Amortized Cost
Gross Unrealized Losses
Gross Unrealized Losses
Fair Value
Fair Value
Healthcare
Electric
Technology
Food and beverage
Industrial – other
Local authorities
Banking
ABS
Pharmaceuticals
Diversified manufacturing
Natural gas
Retail
Chemicals
Brokerage asset management
Property and casualty
Transportation services
Life insurance
Aerospace and defense
Utility – other
Consumer products
Midstream
Non-agency CMBS
Wirelines
Railroads
Government-sponsored
Integrated
Automotive
Wireless
Industries with unrealized losses
less than $100 million
Total by industry
Total by industry as a percentage of
total fixed maturity AFS securities
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Mortgage Loans on Real Estate
The following tables summarize key information on mortgage loans on real estate (in millions):
As of December 31, 2025
Commercial
Residential
Total
Credit Quality Indicator
Current
Delinquent (1)
Foreclosure
Total mortgage loans on real estate before allowance
Allowance for credit losses
Total mortgage loans on real estate
As of December 31, 2024
Commercial
Residential
Total
Credit Quality Indicator
Current
Delinquent (1)
Foreclosure
Total mortgage loans on real estate before allowance
Allowance for credit losses
Total mortgage loans on real estate
(1) Includes certain mortgage loans on real estate that support our modified coinsurance agreements, where the investment results are passed directly to the reinsurers. As of December 31, 2025, and December 31, 2024, the fair value of such commercial mortgage loans on real estate that were in delinquent status was $20 million and $21 million, respectively .
As of December 31, 2025, there were specifically identified impaired commercial and residential mortgage loans with an aggregate carrying value of $67 million and $85 million, respec tively, or less than 1% of total mortgage loans on real estate. As of December 31, 2024, there were specifically identified impaired commercial and residential mortgage loans with an aggregate carrying value of $36 million and $58 million, respectively, or less than 1% of total mortgage loans on real estate.
The total outstanding principal and interest on commerci al mortgage loans on real estate that were two or more payments delinquent, excluding foreclosures, as of December 31, 2025 and 2024, was $40 million and $34 million, respectively, or less than 1% of total mortgage loans on real estate. The total outstanding principal and interest on residential mortgage loans on real estate that were three or more payments delinquent, excluding foreclosures, as of December 31, 2025 and 2024, was $58 million and $32 million, r espectively, or less than 1% of total mortgage loans on real estate.
See Note 1 for more information regarding our accounting policy relating to the impairment of mortgage loans on real estate.
The carrying value of mortgage loans on real estate by business segment and Other Operations (in millions) was as follows:
As of December 31, 2025
As of December 31, 2024
Segment
Annuities
Life Insurance
Group Protection
Retirement Plan Services
Other Operations
Total mortgage loans on real estate
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The composition of commercial mortgage loans (in millions) by property type, geographic region and state is shown below:
As of December 31, 2025
As of December 31, 2025
Carrying Value
Carrying Value
Property Type
State
Apartment
Industrial
Office building
Retail
Other commercial
Mixed use
Hotel/motel
Total
Geographic Region
Pacific
South Atlantic
Middle Atlantic
West South Central
Mountain
East North Central
East South Central
West North Central
New England
All other states
Total
Total
The composition of commercial mortgage loans (in millions) by property type, geographic region and state is shown below as of December 31, 2024:
Carrying Value
Carrying Value
Property Type
State
Apartment
Industrial
Office building
Retail
Other commercial
Mixed use
Hotel/motel
Total
Geographic Region
Pacific
South Atlantic
Middle Atlantic
West South Central
Mountain
East North Central
East South Central
West North Central
New England
All other states
Total
Total
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The following table shows the principal amount (in millions) of our commercial and residential mortgage loans by year in which the principal is contractually obligated to be repaid:
As of December 31, 2025
Commercial
Residential
Total
Principal Repayment Year
2031 and thereafter
Total
See Note 3 for information regarding our LTV and debt-service coverage ratios and our allowance for credit losses.
Alternative Investments
Investment income (loss) on alternative investments by business segment and Other Operations (in millions) was as follows:
For the Years Ended December 31,
Annuities
Life Insurance
Group Protection
Retirement Plan Services
Other Operations
Total (1)
(1) Includes net investment income on the alternative investments supporting the required statutory surplus of our insurance businesses, not including alternative investments that support reinsurance funds withheld and modified coinsurance agreements where the investment results are passed directly to the reinsurers.
As of December 31, 2025 and 2024, alternative investments included investments i n 384 and 371 different partnerships, respectively, and the portfolio represented approximately 3% of total investments. These amounts do not include alternative investments that support funds withheld and modified coinsurance reinsurance agreements where the investment results are passed directly to the reinsurers. The partnerships do not represent off-balance sheet financing and generally involve several third-party partners. Some of our partnerships contain capital calls, which require us to contribute capital upon notification by the general partner. These capital calls are contemplated during the initial investment decision and are planned for well in advance of the call date. The capital calls are not material in size and are no t material to our liquidity. Alternative investments are accounted for using the equity method of accounting and are included in other investments on the Consolidated Balance Sheets.
Non-Income Producing Investments
As of December 31, 2025 and 2024, the carrying amount of fixed maturity securities, mortgage loans on real estate and real estate that were non-income producing was $74 million and $14 million, respectively.
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Net Investment Income
Details underlying net investment income (in millions) and our investment yield were as follows:
For the Years Ended December 31,
Net Investment Income
Fixed maturity AFS securities
Trading securities
Equity securities
Mortgage loans on real estate
Policy loans
Cash and invested cash
Commercial mortgage loan prepayment
and bond make-whole premiums (1)
Other investments (2)
Investment income
Investment expense
Net investment income
(1) See “Commercial Mortgage Loan Prepayment and Bond Make-Whole Premiums” below for additional information.
(2) Includes primarily investment income on alternative investments. See “Alternative Investments” above for additional information.
For the Years Ended December 31,
Interest Rate Yield
Fixed maturity AFS securities, mortgage loans on
real estate and other, net of investment expenses
Commercial mortgage loan prepayment and
bond make-whole premiums
Other investments
Net investment income yield on invested assets
We earn investment income on our general account investments supporting our liabilities associated with investment-type annuities (including RILA, individual and group fixed and fixed portion of variable annuities, fixed indexed deferred annuities and non-life contingent payout fixed annuities), UL, MoneyGuard (R) , VUL, IUL and funding agreement products. The profitability of our products is affected by our ability to achieve target spreads, or margins, between the interest income earned on the general account assets and the interest credited to the policyholder account balance. The net investment income and the interest rate yield tables above each include commercial mortgage loan prepayments and bond make-whole premiums, alternative investments and contingent interest and standby real estate equity commitments. These items can vary significantly from period to period due to a number of factors and, therefore, can provide results that are not indicative of the underlying trends.
Commercial Mortgage Loan Prepayment and Bond Make-Whole Premiums
Prepayment and make-whole premiums are collected when borrowers elect to call or prepay their debt prior to the stated maturity. A prepayment or make-whole premium allows investors to attain the same yield as if the borrower made all scheduled interest payments until maturity. These premiums are designed to make investors indifferent to prepayment.
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REINSURANCE
Our insurance companies cede insurance to other companies. The portion of our life insurance risks exceeding each of our insurance companies’ retention limit is reinsured with other insurers. We seek annuity and life reinsurance coverage to limit our exposure to mortality losses and/or to enhance our capital and risk management. We acquire other reinsurance as applicable with retentions and limits that management believes are appropriate for the circumstances. For more information about the impacts of reinsurance on our consolidated financial statements, see Notes 1 and 7. Our insurance companies remain liable if their reinsurers are unable to meet contractual obligations under applicable reinsurance agreements. We utilize inter-company reinsurance agreements to manage our statutory capital position as well as our hedge program for variable annuity guarantees. With regard to risk retention from a consolidated basis, these inter-company agreements do not have an effect on the consolidated financial statements.
We focus on obtaining reinsurance from a diverse group of reinsurers. We have established standards and criteria for our use and selection of reinsurers. In order for a new reinsurer to participate in our current program, we generally require the reinsurer to have an AM Best rating of A or greater or an S&P rating of AA- or better and a specified RBC percentage (or similar capital ratio measure). If the reinsurer does not have these ratings, we may require them to post collateral as described below; however, we may waive the collateral requirements based on the facts and circumstances. In addition, we may require collateral from a reinsurer to mitigate credit/collectability risk. Typically, in such cases, the reinsurer must either maintain minimum specified ratings and RBC ratios or establish the specified quality and quantity of collateral. Similarly, we have also required collateral in connection with books of business sold pursuant to indemnity reinsurance agreements.
Reinsurers, including affiliated reinsurers, that are not licensed, accredited or authorized in the state of domicile of the reinsured (“ceding company”), i.e., unauthorized reinsurers, are required to post statutorily prescribed forms of collateral for the ceding company to receive reinsurance credit. The three primary forms of collateral are: (i) qualifying assets held in a reserve credit trust; (ii) irrevocable, unconditional, evergreen LOCs issued by a qualified U.S. financial institution; and (iii) assets held by the ceding company in a segregated funds withheld account. Collateral must be maintained in accordance with the rules of the ceding company’s state of domicile and must be readily accessible by the ceding company to cover claims under the reinsurance agreement. Accordingly, our insurance subsidiaries require unauthorized reinsurers to post acceptable forms of collateral to support their reinsurance obligations to us.
As a result of our modified coinsurance and coinsurance with funds withheld agreements, we reported deposit assets, net of allowances for credit losses of $33.7 billion on the Consolidated Balance Sheets as of December 31, 2025. For additional information, see Note 7 .
Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers. As of December 31, 2025, 84%, or $23.5 billion, of our total reinsurance recoverable was secured by collateral for our benefit. Of this amount, $22.0 billion was held by reinsurers in reserve credit trusts (such reserve credit trusts are held by non-affiliated reinsurers; therefore, they are not reflected on the Consolidated Balance Sheets), $1.4 billion was held in our funds withheld portfolios and $142 million was secured by LOCs for which we are the beneficiary, an off-balance sheet arrangement. We reported funds withheld reinsurance liabilities of $17.9 billion on the Consolidated Balance Sheets as of December 31, 2025.
We regularly evaluate the financial condition of our reinsurers and monitor concentration risk with our largest reinsurers. We monitor all of our existing reinsurers’ financial strength ratings on a monthly basis. We also monitor our reinsurers’ financial health, trends and commitment to the reinsurance business, statutory surplus, RBC levels, statutory earnings and fluctuations, current claims payment aging and our reinsurers’ own reinsurers. In addition, we present at least annually information regarding our reinsurance exposures to the Finance Committee of our Board of Directors. For more discussion of our counterparty risk with our reinsurers, see “Part I – Item 1A. Risk Factors – Operational Matters – We face risks of non-collectability of reinsurance and increased reinsurance rates, which could materially affect our results of operations.”
Under certain indemnity reinsurance agreements, two of our insurance subsidiaries, LNL and Lincoln Life & Annuity Company of New York (“LLANY”), provide 100% indemnity reinsurance for the business assumed; however, the third-party insurer, or the “cedent,” remains primarily liable on the underlying insurance business. These indemnity reinsurance arrangements require that our subsidiary, as the reinsurer, maintain certain insurer financial strength ratings and capital ratios. If these ratings or capital ratios are not maintained, depending upon the reinsurance agreement, the cedent may recapture the business, or require us to place assets in trust or provide LOCs at least equal to the relevant statutory reserves. Under the LNL reinsurance arrangement, we held approximately $2.4 billion of statutory reserves as of December 31, 2025. LNL must maintain an AM Best financial strength rating of at least B++, an S&P financial strength rating of at least BBB- and a Moody’s financial strength rating of at least Baa3. This arrangement may require LNL to place assets in trust equal to the relevant statutory reserves. Under LLANY’s largest indemnity reinsurance arrangement, we held $848 million of statutory reserves as of December 31, 2025. LLANY must maintain an AM Best financial strength rating of at least B+, an S&P financial rating of at least BB+ and a Moody’s financial rating of at least Ba1, as well as maintain an RBC ratio of at least 160% or an S&P capital adequacy ratio of 100%, or the cedent may recapture the business. Under two other LLANY arrangements, by which we established $530 million of statutory reserves as of December 31, 2025, LLANY must maintain an AM financial rating of at least B++, an S&P financial rating of at least BBB- and a Moody’s financial rating of at least Baa3. One of these arrangements also requires LLANY to maintain an RBC ratio of at least 185% or an S&P capital adequacy ratio of 115%. Each of these
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arrangements may require LLANY to place assets in trust equal to the relevant statutory reserves. See “ Item 1. Business – Financial Strength Ratings ” for a description of our financial strength ratings.
For more information about reinsurance, see Notes 7 and 1 7 and “Liquidity and Capital Resources – Holding Company Sources and Uses of Liquidity and Capital – Subsidiaries’ Capital” below.
For factors that could cause actual results to differ materially from those set forth in this section, see “ Part I – Item 1A. Risk Factors ” and “Forward-Looking Statements – Cautionary Language” above.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Liquidity
Liquidity refers to our ability to generate adequate amounts of cash from our normal operations to meet cash requirements with a prudent margin of safety. Our ability to generate and maintain sufficient liquidity depends on the profitability of our businesses, general economic conditions and access to the capital markets and other sources of liquidity and capital as described below.
When considering our liquidity, it is important to distinguish between the needs of our insurance subsidiaries and the needs of the holding company, LNC. As a holding company with no operations of its own, LNC is largely dependent upon the dividend capacity of its insurance and other subsidiaries as well as their ability to advance or repay funds to it through inter-company borrowing arrangements, which may be affected by factors influencing the subsidiaries’ capital position, as discussed further below. Based on the sources of liquidity available to us as discussed below, we currently expect to be able to meet the holding company’s ongoing cash needs.
Capital
Capital refers to our long-term financial resources to support the operations of our businesses, to fund long-term growth strategies and to support our operations during adverse conditions. Our ability to generate and maintain sufficient capital depends on the profitability of our businesses, general economic conditions and access to the capital markets and other sources of liquidity and capital as described below.
Disruptions, uncertainty or volatility in the capital and credit markets may materially affect our business operations and results of operations and may adversely affect our subsidiaries’ capital position, which may cause them to retain more capital. This in turn may pressure our subsidiaries’ ability to pay dividends to LNC, which may lead us to take steps to preserve or raise additional capital. We believe we have appropriate capital to operate our business in accordance with our strategy. For more information, see “Subsidiaries’ Capital” below.
For factors that could cause actual results to differ materially from those set forth in this section and that could affect our expectations for liquidity and capital, see “Part I – Item 1A. Risk Factors” and “Forward-Looking Statements – Cautionary Language” above.
Consolidated Sources and Uses of Liquidity and Capital
Our primary sources of liquidity and capital are insurance premiums and fees, investment income, maturities and sales of investments, issuance of debt or other types of securities and policyholder deposits. We also have access to alternative sources of liquidity as discussed below. Our primary uses are to pay obligations under insurance policies and contracts, to fund commissions and other general operating expenses, to purchase investments, to fund policy surrenders and withdrawals, to pay dividends to our common and preferred stockholders, to repurchase our common stock and to repay debt. Our operating activities provided (used) cash of $(167) million, $(2.0) billion and $(2.1) billion in 2025, 2024 and 2023, respectively. Cash flows from operating activities will fluctuate based on the timing of insurance premiums received and benefit payments to policyholders, as well as other business activities including cash payments on certain derivatives used to hedge exposure to product-related risks.
Holding Company Sources and Uses of Liquidity and Capital
The primary sources of liquidity and capital at the holding company level are dividends, return of capital and interest payments from subsidiaries, augmented by holding company short-term investments, bank lines of credit and the ongoing availability of long-term public financing under an effective shelf registration statement, which allows us to issue, in unlimited amounts, securities, including debt securities, preferred stock, common stock, warrants, stock purchase contracts, stock purchase units and depository shares. These sources support the general corporate needs of the holding company, including its common and preferred stock dividends, common stock repurchases, interest and debt service, funding of callable securities, acquisitions and investment in core businesses.
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Details underlying the primary sources of the holding company’s liquidity (in millions) were as follows:
For the Years Ended December 31,
Cash Dividends and Return of Capital from Subsidiaries
LNL
First Penn-Pacific Life Insurance Company
Lincoln Investment Management Company
Lincoln National Reinsurance Company (Barbados) Limited
Lincoln Pinehurst Reinsurance Company (Bermuda) Limited
Total cash dividends and return of capital from subsidiaries
Interest from Subsidiaries
Interest on inter-company notes
The table above focuses on significant and recurring cash flow items and excludes the effects of certain financing activities, including the periodic issuance and retirement of debt, issuance of preferred stock or common stock, cash flows related to our inter-company cash management program and certain investing activities, including capital contributions to subsidiaries. These activities are discussed below. Taxes have been eliminated from the analysis due to a tax sharing agreement among our primary subsidiaries resulting in a modest effect on net cash flows at the holding company. Also excluded from this analysis is the modest amount of investment income on short-term investments of the holding company and employee stock exercise activity related to our stock-based incentive compensation plans. See “Part IV – Item 15(a)(2) Financial Statement Schedules – Schedule II – Condensed Financial Information of Registrant” for the holding company cash flow statement.
During 2024, LNL made a $929 million extraordinary dividend in the form of investments to LNC for the purpose of the initial capitalization of LPINE. See “Subsidiaries’ Capital” below for more information about LPINE.
Restrictions on Subsidiaries’ Dividends
Our insurance subsidiaries are subject to certain insurance department regulatory restrictions as to the transfer of funds and payment of dividends to the holding company. Under Indiana laws and regulations, our Indiana insurance subsidiaries, including our primary insurance subsidiary, LNL, may pay dividends to LNC without prior approval of the Indiana Insurance Commissioner (the “Commissioner”) only from unassigned surplus or must receive prior approval of the Commissioner to pay a dividend if such dividend, along with all other dividends paid within the preceding 12 consecutive months, would exceed the statutory limitation. The current statutory limitation is the greater of 10% of the insurer’s contract holders’ surplus, as shown on its last annual statement on file with the Commissioner or the insurer’s statutory net gain from operations for the previous 12 months, but in no event to exceed statutory unassigned surplus. Indiana law gives the Commissioner broad discretion to disapprove requests for dividends in excess of these limits. LNL’s subsidiary LLANY, a New York-domiciled insurance company, is bound by similar restrictions under New York law, with the applicable statutory limitation on dividends equal to the lesser of 10% of surplus to contract holders as of the end of the immediately preceding calendar year or net from operations for the immediately preceding calendar year, not including realized capital . Indiana law also provides that following the payment of any dividend, the insurer’s contract holders’ surplus must be reasonable in relation to its outstanding liabilities and adequate for its financial needs, and permits the Commissioner to bring an action to rescind a dividend that these standards. In the event the Commissioner determines that the contract holders’ surplus of one subsidiary is , the Commissioner could use his or her broad discretionary authority to seek to require us to apply payments received from another subsidiary for the of that insurance subsidiary.
Our Bermuda-based reinsurance subsidiary, LPINE, and our Barbados-based reinsurance subsidiary, Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”), are regulated by the BMA and the Barbados FSC, respectively. Similar to our domestic insurance subsidiaries, our reinsurance subsidiaries in Barbados and Bermuda are subject to regulatory restrictions as to the transfer of funds and payment of dividends imposed by the jurisdictions in which they are domiciled. These requirements may include satisfying certain earnings, reserve or solvency thresholds in order to pay a dividend or obtaining regulatory approval for payment of any dividend in excess of such thresholds.
We expect our direct domestic insurance subsidiaries could pay dividends to LNC of approximately $805 million in 2026 without prior approval from the respective state commissioners. The amount of surplus that our insurance subsidiaries could pay as dividends is constrained by the amount of surplus we hold to maintain our ratings, to provide an additional layer of margin for risk protection and for future investment in our businesses. See “ Part I – Item 1A. Risk Factors – Liquidity and Capital Position – A decrease in the capital and surplus of our insurance subsidiaries may result in a downgrade to our credit and insurer financial strength ratings.”
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We maintain an investment portfolio of various holdings, types and maturities. These investments are subject to general credit, liquidity, market and interest rate risks. An extended disruption in the credit and capital markets could adversely affect LNC and its subsidiaries’ ability to access sources of liquidity, and there can be no assurance that additional financing will be available to us on favorable terms, or at all, in the current market environment. In addition, further impairment could reduce our statutory surplus, leading to lower RBC ratios and potentially reducing future dividend capacity from our insurance subsidiaries. See “ Part I – Item 1A. Risk Factors – Liquidity and Capital Position – Adverse capital and credit market conditions may affect our ability to meet liquidity needs, access to capital and cost of capital.”
Subsidiaries’ Capital
Our insurance subsidiaries must maintain certain regulatory capital levels. We utilize the RBC ratio as a primary measure of the capital adequacy of our insurance subsidiaries. The RBC ratio is an important factor in the determination of the credit and financial strength ratings of LNC and its subsidiaries, as a reduction in our insurance subsidiaries’ surplus will affect their RBC ratios and dividend-paying capacity. For additional information on RBC ratios, see “ Part I – Item 1. Business – Regulatory – Insurance Regulation – Risk-Based Capital .”
Our insurance subsidiaries’ regulatory capital levels are affected by statutory accounting rules, which are subject to change by each applicable insurance regulator. For instance, our term products and UL products containing secondary guarantees subject to the NAIC RBC framework require reserves calculated pursuant to the Valuation of Life Insurance Policies Model Regulation (“XXX”) and Actuarial Guideline XXXVIII (“AG38”), respectively. Our insurance subsidiaries employ strategies to reduce the strain caused by XXX and AG38 by reinsuring the business to reinsurance captives or reinsurance subsidiaries. Our captive reinsurance and reinsurance subsidiaries provide a mechanism for financing a portion of the excess reserve amounts in a more efficient manner and free up capital the insurance subsidiaries can use for any number of purposes, including paying dividends to the holding company. We use long-dated LOCs, debt financing, excess of loss structures with third-party reinsurers, as well as other financing strategies to finance certain reserves. Included in the LOCs issued as of December 31, 2025, was $5 million of long-dated LOCs issued to support inter-company reinsurance agreements for term products and UL products containing secondary guarantees. For information on the LOCs, see Note 1 3 . Our captive reinsurance and reinsurance subsidiaries have also issued long-term notes of $3.2 billion to finance a portion of the excess reserves associated with our term and UL products with secondary guarantees as of December 31, 2025; of this amount, $2.6 billion involve exposure to variable interest entities. For information on these long-term notes issued by our captive reinsurance and reinsurance subsidiaries, see Note 4 . We have also used the proceeds from senior note issuances of $875 million to execute long-term structured solutions primarily supporting reinsurance of UL products containing secondary guarantees. LOCs and related capital market solutions lower the capital effect of term products and UL products containing secondary guarantees.
Statutory reserves for variable annuity guaranteed benefit riders and guaranteed benefits on VUL policies, as well as certain components of the NAIC RBC calculation that are impacted by such guaranteed benefits, are sensitive to changes in the equity markets and interest rates, and such statutory reserves and our RBC levels are also affected by the level of account balances relative to the level of any guarantees, product design and reinsurance arrangements. As a result, the relationship between reserve changes and equity market performance is non-linear during any given reporting period. Our insurance subsidiaries cede a portion of the variable annuity guaranteed benefit riders to LNBAR through a modified coinsurance agreement. Our variable annuity hedge program mitigates the risk to LNBAR from guaranteed benefit riders and continues to focus on generating sufficient income to fund future claims with a goal of maximizing distributable earnings and explicitly protecting capital. LNL also uses a partial hedge and a third-party reinsurance agreement to mitigate potential capital volatility from guaranteed benefits on VUL policies. Market conditions greatly influence the ultimate capital required due to its effect on the valuation of reserves and supporting derivatives.
Changes in equity markets may also affect the capital position of our insurance subsidiaries. We may decide to reallocate available capital among our insurance subsidiaries, as well as our captive reinsurance or reinsurance subsidiaries, which would result in different RBC ratios for our insurance subsidiaries. In addition, changes in the equity markets can affect the value of our variable annuity and VUL separate accounts. When the market value of our separate account assets increases, the statutory surplus within our insurance subsidiaries also increases, all else equal. Contrarily, when the market value of our separate account assets decreases, the statutory surplus within our insurance subsidiaries also decreases, all else equal, which will affect RBC ratios, and in the case of our separate account assets becoming less than the related product liabilities, we must allocate additional capital to fund the difference.
LNC made $967 million in capital contributions in cash to subsidiaries in 2025, including $800 million to LNL in the second quarter of 2025 using proceeds from the Bain Capital transaction. For more information on the Bain Capital transaction, see “Issuance of Common Stock” below and Note 18 .
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During 2024, LNC contributed $929 million of investments and $22 million in cash to LPINE, a wholly owned subsidiary of LNC and a licensed Bermuda-based life and annuity reinsurance company, in support of an inter-company reinsurance agreement with LNL. LNC made $5 million and $7 million in capital contributions in cash to other subsidiaries in 2024 and 2023, respectively.
On May 6, 2024, we closed the sale of all of the ownership interests in the subsidiaries of the Company that comprised the Company’s wealth management business operated through LFN to Osaic Holdings, Inc., a Delaware corporation. We received $723 million in cash that was primarily used to increase LNL’s RBC ratio. We also used a portion of the proceeds to reduce our leverage ratio. For more information on the sale of our wealth management business, see Note 1 .
Debt
Although our subsidiaries currently generate adequate cash flow to meet the needs of our normal operations, periodically LNC may issue debt to maintain ratings and increase liquidity, as well as to fund internal growth, acquisitions and the retirement of its debt.
Details underlying our debt activities (in millions) for the year ended December 31, 2025, were as follows:
Beginning Balance
Issuances
Maturities, Repayments and Refinancing
Change in Fair Value Hedges
Other Changes (1)
Ending Balance
Short-Term Debt
Current maturities of long-term debt (2)
Long-Term Debt
Senior notes (3)
Term loans
Subordinated notes (4)
Capital securities (5)
Total long-term debt
(1) Includes the non-cash reclassification of long-term debt to current maturities of long-term debt, premium (discount) associated with debt issuances, accretion (amortization) of discounts and premiums, amortization of debt issuance costs and amortization of adjustments from discontinued hedges, as applicable.
(2) We repaid our 3.35% Senior Notes that matured on March 9, 2025. As of December 31, 2025, consisted of $400 million principal amount of our 3.625% Senior Notes due December 12, 2026.
(3) In May 2025, we repurchased $34 million of our 3.05% Senior Notes due 2030, $129 million of our 4.35% Senior Notes due 2048 and $136 million of our 4.375% Senior Notes due 2050.
(4) In May 2025, we repurchased $97 million of our Subordinated Notes due 2066 and $97 million of our Subordinated Notes due 2067.
(5) In May 2025, we repurchased $21 million of our Capital Securities due 2066 and $5 million of our Capital Securities due 2067.
On November 10, 2025, we completed the issuance and sale of $500 million aggregate principal amount of our 5.350% Senior Notes due 2035. We intend to use the net proceeds from the offering to fund the repayment of the Company’s 3.625% Senior Notes due 2026, of which $400 million aggregate principal amount was outstanding as of December 31, 2025, on or prior to their maturity. We intend to use the remainder of the net proceeds from this offering for general corporate purposes, which may include the repayment of other debt on or prior to its maturity. On May 15, 2025, we issued $500 million aggregate principal amount of our 2.330% Senior Notes due 2030. See “Alternative Sources of Liquidity – Facility Agreements for Senior Notes Issuances” below for more information.
LNC made interest payments to service debt to third parties of $309 million, $308 million and $311 million for the years ended December 31, 2025, 2024 and 2023, respectively.
For additional information about our short-term and long-term debt and our credit facility, see Note 1 3 .
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Preferred Stock
Details underlying preferred stock dividends paid (in millions) were as follows:
For the Years Ended December 31,
Series C preferred stock dividends
Series D preferred stock dividends
Total preferred stock dividends
For additional information on preferred stock, see Note 18 .
Issuance of Common Stock
On June 5, 2025, we closed our stock sale transaction pursuant to the Purchase Agreement with Bain Capital Prairie, LLC, a newly formed subsidiary of Bain Capital, under which we agreed to sell shares representing 9.9% of our outstanding common stock on a post-issuance basis to the Buyer. Under the final terms, Lincoln sold approximately 18.8 million shares of its common stock for aggregate consideration of $825 million. The transaction provided us with capital that we are deploying and expect to continue to deploy toward our strategic priorities, including growing spread-based earnings, advancing our portfolio management efforts and asset sourcing capabilities and optimizing our legacy life portfolio. For additional information on the Bain Capital transaction, see Note 18 .
Return of Capital to Common Stockholders
One of our primary goals is to provide a return to our common stockholders through share price accretion, dividends and stock repurchases. In determining dividends, the Board of Directors takes into consideration items such as current and expected earnings, capital needs, rating agency considerations and requirements for financial flexibility. The amount and timing of share repurchases depends on key capital ratios, rating agency expectations, the generation of dividends from our subsidiaries and an evaluation of the costs and benefits associated with alternative uses of capital. For additional information regarding share repurchases, see “ Part II – Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – (c) Issuer Purchases of Equity Securities .”
Details underlying return of capital to common stockholders (in millions) were as follows:
For the Years Ended December 31,
Dividends to common stockholders
Repurchase of common stock
Total cash returned to common stockholders
Alternative Sources of Liquidity
Inter-Company Cash Management Program
To meet short-term liquidity needs that arise in the ordinary course of business, we utilize an inter-company cash management program between LNC and participating subsidiaries whereby participating subsidiaries can borrow cash from or lend cash to LNC. Loans under the inter-company cash management program are permitted under applicable insurance laws subject to certain restrictions. For our Indiana-domiciled insurance subsidiary, the borrowing and lending limit is currently 3% of the insurance company’s admitted assets as of its most recent year end. For our New York-domiciled insurance subsidiary, it may borrow from LNC less than 2% of its admitted assets as of its most recent year end but may not lend any amounts to LNC. As of December 31, 2025, LNC had $157 million of outstanding borrowings from the cash management program related primarily to liquidity management and had no outstanding lending into the cash management program. Holding company borrowing activity is reported in loans from and accrued interest due to subsidiaries on the holding company’s balance sheet. Holding company lending activity is reported in loans to and accrued interest due from subsidiaries on the holding company’s balance sheet. See “Part IV – Item 15(a)(2) Financial Statement Schedules – Schedule II – Condensed Financial Information of Registrant” for the holding company balance sheet.
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Facility Agreements for Senior Notes Issuance
On May 13, 2025, LNC exercised in full its issuance right under the 10-year facility agreement, dated as of August 18, 2020 (the “Trust I Facility Agreement”) with Belrose Funding Trust, a Delaware statutory trust (“Trust I”) and on May 15, 2025, LNC issued $500 million aggregate principal amount of its 2.330% Senior Notes due 2030 (the “2.330% Senior Notes”) to Trust I in exchange for the principal and interest strips of U.S. Treasury securities held by Trust I (the “Trust I Eligible Assets”), which had a fair value of $418 million when the 2.330% Senior Notes were issued. The net proceeds from the issuance of the 2.330% Senior Notes and subsequent sale of the Trust I Eligible Assets were subsequently used to early extinguish long-term debt during the second quarter of 2025 pursuant to a tender offer. For more information on the early extinguishment of debt, see “Debt” above and Note 13 .
On May 20, 2025, LNC entered into a 30-year facility agreement (the “Trust II Facility Agreement”) with Belrose Funding Trust II, a Delaware statutory trust (“Trust II”), in connection with Trust II’s sale of $1.0 billion of its Pre-Capitalized Trust Securities Redeemable May 15, 2055 (the “2055 P-Caps”) in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended. Trust II invested the proceeds from the sale of the 2055 P-Caps in a portfolio of principal and interest strips of U.S. Treasury securities (the “Trust II Eligible Assets”). The Trust II Facility Agreement provides LNC the right to issue to Trust II, and to require Trust II to purchase from LNC, on one or more occasions, up to an aggregate principal amount outstanding at any one time of $1.0 billion of LNC’s 6.792% Senior Notes due 2055 (the “6.792% senior notes”) in exchange for a corresponding amount of the Trust II Eligible Assets. LNC may direct Trust II to grant all or a portion of the issuance right to one or more assignees (who are LNC’s consolidated subsidiaries or persons to whom LNC or any such consolidated subsidiary has an obligation or liability) (each, an “Issuance Right Assignee”) who may cause a corresponding portion of the 6.792% senior notes to be issued to Trust II and receive the corresponding Trust II Eligible Assets that would otherwise have been delivered to LNC pursuant to the exercise of the issuance right. The 6.792% senior notes will not be issued unless and until the issuance right is exercised. In return, LNC pays Trust II a semi-annual facility fee at a rate of 1.888% per year (applied to the unexercised portion of the issuance right) and reimburses Trust II for its expenses.
For additional information on the facility agreements for senior notes issuances, see Note 13 .
Federal Home Loan Bank
Our primary insurance subsidiary, LNL, is a member of the Federal Home Loan Bank (“FHLB”) of Indianapolis (“FHLBI”). Membership allows LNL access to the FHLBI’s financial services, including the ability to obtain loans as an alternative source of liquidity, and to issue funding agreements, both of which are collateralized by qualifying mortgage-related assets, agency securities or U.S. Treasury securities. Borrowings under this facility are subject to the FHLBI’s discretion and require the availability of qualifying assets at LNL. As of December 31, 2025, LNL had a Board-approved maximum borrowing capacity of $7.0 billion under the FHLBI facility with outstanding funding agreements of $1.5 billion. Liquidity borrowings are reported within payables for collateral on investments and funding agreements are reported within policyholder account balances on the Consolidated Balance Sheets. LLANY is a member of the Federal Home Loan Bank of New York (“FHLBNY”) with a Board-approved maximum borrowing capacity of $750 million. Borrowings under this facility are subject to the FHLBNY’s discretion and require the availability of qualifying assets at LLANY. As of December 31, 2025, LLANY had no outstanding borrowings under this facility. For additional information on borrowings under this facility, see “Payables for Collateral on Investments” in Note 3 . For additional information on funding agreements issued to FHLBI, see Note 11 .
Repurchase Agreements and Securities Lending Programs
Our insurance and reinsurance subsidiaries had access to $2.6 billion through committed repurchase agreements, of which none was utilized as of December 31, 2025. Our insurance subsidiaries, by virtue of their general account fixed-income investment holdings, can also access liquidity through securities lending programs and uncommitted repurchase agreements. As of December 31, 2025, our insurance subsidiaries had securities pledged under securities lending agreements with a carrying value of $145 million, and none pledged under uncommitted repurchase agreements. For additional information, see “Payables for Collateral on Investments” in Note 3 .
Collateral on Derivative Contracts
Our cash flows associated with collateral received from counterparties (when we are in a net collateral payable position) and posted with counterparties (when we are in a net collateral receivable position) change as the market value of the underlying derivative contract changes. The net collateral position depends on changes in interest rates and equity markets related to the amount of the exposures hedged. As of December 31, 2025, we were in a net collateral payable position of $7.8 billion. In the event of adverse changes in fair value of our derivative instruments, we may need to return, post or pledge collateral to counterparties. If we do not have sufficient high quality securities or cash to provide as collateral to counterparties, we have alternative sources of liquidity. In addition to the liquidity from repurchase agreements and FHLB facilities discussed above, we also have a five-year revolving credit facility discussed in Note 1 3 . For additional information, see “Credit Risk” in Note 5 .
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Material Cash Outflows
Details underlying our estimated material cash outflows as of December 31, 2025, were as follows:
Less Than
1 Year
1 - 3 Years
3 - 5 Years
More Than
5 Years
Total
Policyholder account balances, future contract benefits
and MRBs (1)
Funding agreements (2)
Short-term and long-term debt (3)
Investment commitments (4)
Certain financing arrangements (5)
Retirement and other plans (6)
Total
(1) Estimates are based on financial projections over 40 years, not discounted for the time value of money and gross of any reinsurance recoverable. New business issued or acquired, business ceded or sold, changes to or variances from actuarial assumptions and economic conditions will cause these amounts to change over time, possibly materially. See Note 1 for details of what these liabilities include and represent.
(2) See Note 11 for additional information.
(3) Represents principal amounts of debt only. See Note 1 3 for additional information.
(4) See Note 3 for additional information.
(5) Represents certain financing arrangements that did not meet the requirements to be classified as a sale-leaseback arrangement. See Note 1 7 for additional information.
(6) Includes anticipated funding for benefit payments for our retirement and postretirement plans through 2035 and known payments under deferred compensation arrangements. In addition to these benefit payments, we periodically fund the employees’ defined benefit plans. See Note 1 5 for additional information.
Ratings
Financial Strength Ratings
See “ Part I – Item 1. Business – Financial Strength Ratings ” for information on our financial strength ratings.
Credit Ratings
Our indicative credit ratings published by the primary rating agencies are set forth below. Securities are rated at the time of issuance so actual ratings may differ from the indicative ratings. There may be other rating agencies that also provide credit ratings, which we do not disclose in our reports. Each rating should be evaluated independently of any other rating. Our credit ratings assigned by AM Best, Fitch, Moody’s and S&P are on outlook stable.
As of February 12, 2026, our indicative long-term credit ratings as published by the principal rating agencies that rate our long-term credit are indicated in the following table.
AM Best
Fitch
Moody's
“aaa to c”
“AAA to D”
“Aaa to C”
“AAA to D”
bbb+
BBB+
Baa2
BBB+
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As of February 12, 2026, our indicative short-term credit ratings as published by the principal rating agencies that rate our short-term credit are indicated in the following table.
AM Best
Fitch
Moody's
“AMB-1+ to AMB-4”
AMB-2
All of our credit ratings are subject to revision or withdrawal at any time by the rating agencies, and therefore, no assurance can be given that we can maintain these ratings. A downgrade of our credit ratings could affect our ability to raise additional debt with terms and conditions similar to our current debt, and accordingly, likely increase our cost of capital. In addition, a downgrade of these ratings could make it more difficult to raise capital to refinance any maturing debt obligations, to support business growth at our insurance subsidiaries and to maintain or improve the current financial strength ratings of our insurance subsidiaries described in “ Part I – Item 1. Business – Financial Strength Ratings .”
If our current financial strength ratings or credit ratings were downgraded in the future, terms in our derivative agreements and/or certain repurchase agreements may be triggered, which could negatively affect overall liquidity. For the majority of our derivative counterparties, there is a termination event if the long-term credit ratings of LNC drop below BBB-/Baa3 (S&P/Moody’s) or if the financial strength ratings of LNL drop below BBB-/Baa3 (S&P/Moody’s). For certain repurchase agreements, there is a termination event if the long-term credit ratings of LNC drop below BBB-/Baa3 (S&P/Moody’s) or if the financial strength ratings of LNL drop below BBB+/Baa1 (S&P/Moody’s). In addition, contractual selling agreements with intermediaries could be negatively affected, which could have an adverse effect on overall sales of annuities, life insurance and investment products. See “ Part I – Item 1A. Risk Factors – Ratings – A downgrade in our financial strength or credit ratings could limit our ability to market products, increase the number or value of policies being surrendered and/or our relationships with creditors” for more information.
