Good morning and thank you for joining Lincoln Financial Group’s First Quarter 2022 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, we will provide the opportunity for questions and instructions will be given at that time. Now, I would like to turn the conference over to the Vice President of Investor Relations, Al Copersino. Please go ahead, sir.

Thank you. Good morning and welcome to Lincoln Financial’s first quarter earnings call. Before we begin, I have an important reminder. Any comments made during the call regarding future expectations, deposits, expenses, income from operations, share repurchases, and liquidity and capital resources are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued yesterday, as well as those detailed in our 2020 Annual Report on Form 10-K, most recent Quarterly Reports on Form 10-Q, and from time to time in our other filings with the SEC. These forward-looking statements are made only as of today, and we undertake no obligation to update or revise any of them to reflect events or circumstances that occur after this date. We appreciate your participation today and invite you to visit Lincoln’s website, www.lincolnfinancial.com, where you can find our press release and statistical supplement, which include full reconciliations of the non-GAAP measures used on this call, including adjusted return on equity and adjusted income from operations or adjusted operating income to the most comparable GAAP measures. Presenting on today’s call are Dennis Glass, President and Chief Executive Officer; Ellen Cooper, CEO-elect; and Randy Freitag, Chief Financial Officer and Head of Individual Life. After their prepared comments, we will move to the question-and-answer portion of the call. I would now like to turn the call over to Dennis.

Thank you, Al. Good morning, everyone. This quarter's earnings conference call is a special one as we approach our CEO transition later this month. The transition is going very well, and I am incredibly confident that Lincoln under Ellen's leadership will continue to build on our strong foundation. This is an exciting time for Lincoln. We are pleased with our start to 2022 and optimistic as ever about what lies ahead. Most importantly, we have a highly talented team of more than 11,000 employees who have risen to meet every challenge that has come their way during the pandemic and before, as I have seen them do every day of my 15-year tenure as CEO. My Lincoln colleagues have shown an inspiring and unwavering commitment to our customers, partners, and communities. And to them, I say thank you for all you do. I will now turn the call over to Ellen.

Thank you, Dennis, and good morning, everyone. I am excited about and confident in Lincoln's continued success as I step into the CEO role effective later this month. Dennis has been a valued mentor and colleague for many years, and I look forward to working with him as he transitions into the role of Chairman of the Board. I have met many of the investors and analysts joining today's call and look forward to having more opportunities to discuss Lincoln with all of you. Although the U.S. continued to experience headwinds related to the pandemic, Lincoln had a solid start to 2022. We are pleased with our underlying results and optimistic about the outlook for our business. Our current strategy has proven to be robust, and we have an excellent track record of executing against it, as demonstrated in part by having compounded underlying EPS at 11% over the past decade. As we have said, we expect over the next few years to grow underlying EPS at or above the high end of our 8% to 10% target range. I will now touch on some of the initiatives that are positioning us to meet this objective. First, we continue to generate organic growth at strong new business returns meaningfully above target across our businesses, driven by our broad product portfolio and our industry-leading distribution franchise. Top-line growth is enhanced by our reprice, shift, and add new product strategy, which is enabling us to meet evolving consumer needs. We have been able to drive a shift towards products with additional risk sharing between Lincoln and customers that appeal to broader demographics and expand shelf space. We introduced 13 new products in 2021 and continue to innovate. Second, company-wide margin improvement efforts are primarily centered around our Spark Initiative, which we expect to generate $260 million to $300 million in run rate savings by the end of 2024. Investments we are making in our business through Spark will enable us to operate more efficiently and effectively, and improve the customer and employee experience, including the way we work here at Lincoln. Additionally, we are focused on improving the group protection underlying margin through continued pricing actions, improved claims effectiveness, and Spark expense savings. And last, we continue to focus on effective capital allocation, including returning capital to shareholders and maintaining a strong balance sheet. Recently, we announced that we are bringing our individual life and annuities businesses together under a senior leader who will join Lincoln in July and report to me. Product manufacturing has long been a key driver of the success of these businesses, and we see this continuing as we also place continued emphasis on in-force management. Bringing the life and annuities businesses together creates more opportunity to leverage our capabilities, share best practices, and enable greater innovation. This new leader will also oversee Lincoln Financial Network, or LFN, which represents more than 11,000 advisors and our growing wealth management platform. Turning now to the business segments, starting with annuities. Our products are generating strong returns as we continue to sell on our terms across a broadly diversified product segment with disciplined pricing and risk management built directly into the product design. Critical to our success in meeting the needs of our customers is offering a broad product portfolio through our industry-leading distribution force. We continue to enhance our product offerings, including the launch of multiple new investment options and features that differentiate our products and expand consumer choice. Sales of $2.7 billion were down 4% versus the prior year period due to a decline in indexed variable annuities. However, IVA sales were up sequentially for the second consecutive quarter as we regained sales momentum through our product innovation and an improved competitive pricing environment. In fixed indexed annuities, sales were up again significantly. Our differentiated investment options and higher rates have restored momentum to the FIA product line. The breadth of our annuity portfolio is enabling our strategic sales shift, and variable annuities with guaranteed living benefits remain under 30% of total annuity sales for the seventh consecutive quarter. Our ongoing sales shift also is further diversifying the total annuities in-force account value mix as variable annuities with guaranteed living benefits again represented less than half of total account value. At our current sales mix, this proportion will continue to decline. To be clear, we have been undertaking this mix shift for diversification purposes only as we believe in the value proposition of guaranteed living benefits for customers and are achieving a very attractive mid-20% ROE. We expect to see continued momentum as we look to further grow the Annuities business. Retirement Plan Services continues to have success and achieved record first-quarter net flows of $946 million. First-quarter total deposits of $3.4 billion were up 28%, including an 11% rise in recurring deposits and a 73% increase in first-year sales. This sales growth, combined with high customer retention led to the quarter's excellent outcome. The retirement business is benefiting from the strong labor market. US wage growth and increases in employee contribution rates were the main drivers of this quarter's recurring deposit growth. We also saw robust first-year sales growth across our broad product portfolio. Another external factor, the constructive legislative environment, is also creating longer-term growth opportunities for RPS around in-plan guarantees and pooled employer plan solutions as well as by creating greater incentives for employers to establish plans. Beyond these external tailwinds is the favorable competitive positioning of RPS, with its broad innovative product suite, enhanced digital capabilities, and the power of Lincoln's distribution franchise. The retirement business continues to produce strong returns and to drive positive net flows. Our Life Insurance business continues to demonstrate broad-based top-line momentum as sales of $155 million were up 36% over the prior year period with growth across all major product lines. Since undertaking our reprice, shift, and add new product strategy, we have returned to a more typical seasonal sales pattern and expect sales to ramp up through the end of the year. Our Life portfolio is achieving new business targeted returns, and we continue to attract new financial professionals, for instance, with our successful rollout last year of a first-of-its-kind variable hybrid life product, MoneyGuard Market Advantage. This ongoing product innovation is expanding our access to new customer segments while advancing our sales mix shift towards lower guarantee risk-sharing solutions, which represent over 70% of total life sales. We continue to expand upon and see strong adoption of our digital capabilities. For example, in underwriting, we are investing in automation and other technologies that drive internal efficiencies. We are also utilizing digital real-time medical information. This is helping improve the producer and consumer experience by decreasing the average issue time from five weeks to two with the capability to issue within the same day. Lastly, on Group Protection, our results continue to be impacted by the pandemic. However, we are beginning to see signs of improvement and are confident that underlying margins will build over time toward the upper end of our target 5% to 7% range. The strong demand for employee benefits helped drive sales of $105 million, up 42% compared to the prior year period. We generated growth across all case sizes, primarily driven by increased sales to existing clients as our corporate customers hire more employees, raise salaries, and expand benefits offerings to include new lines of coverage. Employee-paid sales represented 57% of the total this quarter. We expect the proportion of employee-paid sales to continue to rise over time on an annualized basis as we focus on growing in this market, including supplemental health. First-quarter premiums of nearly $1.2 billion rose 4% compared to the prior year period driven by new sales, improved persistency, rate increases, and employment growth. I'm pleased with this quarter's underlying results and confident our strategic actions will drive margin expansion over time to the top of our targeted range. Moving to investment results, credit quality remains excellent with 97% of our fixed income assets rated investment-grade or investment-grade equivalent. Portfolio performance remains strong as we experienced another quarter of negligible credit losses and positive net ratings migration. New money yields rose to 3.3% in the first quarter, a nearly 50 basis point sequential increase driven by higher rates. During the quarter, we invested 60% of new money in assets other than public corporate and expect to continue to invest at this level, adding high-quality assets with incremental yield. Finally, alternative investment performance was in line with our long-term expectations of 2.5% quarterly or 10% annualized return. In closing, Lincoln's underlying earnings power is intact. We expect to benefit from the recent significant decline in pandemic hospitalizations and deaths and the rise in interest rates. Looking across our businesses, we are progressing on several fronts. Sales momentum continues to build, driven by our broad and innovative product portfolio and distribution strength. The Spark initiative is on track and group protection margin expansion efforts take hold. We will continue to allocate capital towards its highest investments. In closing, we continue to execute on our near-term strategy with an eye toward long-term profitable growth. I will now turn the call over to Randy.

Thank you, Ellen. Last night, we reported first-quarter adjusted operating income of $294 million or $1.66 per share. The quarter's results included pandemic-related claims, which reduced earnings by $150 million or $0.85 per share and unusual items of $19 million or $0.11 per share, primarily related to a group protection customer being a backlog of prior year claims. As Ellen mentioned, alternative investment income was in line with long-term expectations. Net income for the first quarter totaled $104 million or $0.58 per share, with the difference between net income and adjusted operating income primarily resulting from a loss related to variable annuity net derivative results. The hedge program was 96% effective in what was a volatile quarter for the capital market. With the recent increase in rates this year, I thought I would update you on spread compression at Lincoln. Our current expectation is that spread compression will impact EPS growth in the near term by 0% to 1%, improved from the 2% to 3% range I communicated on last quarter's earnings call. Function on the performance of key financial metrics compared to the prior year, excluding excess alternative investment income in the prior year quarter and the impact of the third quarter 2021 block reinsurance transaction on a consolidated basis. Operating revenues were up 4%. Our expense ratio improved 20 basis points. Shares outstanding declined 10%, and book value per share, excluding AOCI, stands at $78.32, up 8% and an all-time high. Now turning to segment results, starting with Annuities. Operating income for the quarter was $302 million compared to $290 million in the prior year quarter. The increase was primarily due to higher account values driven by year-over-year growth in the equity markets and expense efficiency. Average account values of $164 billion increased 2% year-over-year. Of note, and as Ellen pointed out, variable annuities with guaranteed living benefits now represent less than 50% of our annuity account values. For variable annuities with guaranteed benefits, the net amount at risk is at 134 basis points for living benefits and 107 basis points for death benefits. We expect these percentages to remain at the very low end of peers, highlighting the lower risk nature of our in-force business. G&A expenses net of amounts capitalized declined 3% from the prior year quarter, leading to a 50 basis point improvement in the expense ratio. Return metrics remained solid with a return on assets of 74 basis points, up two basis points year-over-year and a return on equity of 23%. As a reminder, sequentially, there were two fewer fee days in the quarter to reduce earnings by roughly $8 million. Overall, a good result for the annuity business, highlighted by strong returns and effective expense discipline. Retirement Plan Services reported operating income of $55 million compared to $57 million in the prior year quarter, as strong net flows and a year-over-year increase in the equity markets were more than offset by less favorable variable investment income. Continued sales success has produced $1.1 billion in net flows over the trailing 12 months, contributing to a 7% increase in average account values to $96 billion. G&A expenses net of amounts capitalized were in line with the prior year quarter. Base spreads, excluding variable investment income, compressed to 6 basis points versus the prior year quarter, in line with our stated 5 to 10 basis point range as crediting rate actions take hold. Benefiting from the increase in rates, we expect spread compression in the retirement business going forward to be de minimis. This was another great quarter for the retirement business with strong net flows and expense management and an expectation, as we exit the quarter that spread compression has become a non-event for the business. Turning to Life Insurance, we reported operating income of $58 million compared to $107 million in the prior year quarter. The decline was due to less favorable alternative investment income, a more normal level of underlying mortality, and the impact of the resolution deal, which combined more than offset improved pandemic claims. This quarter's earnings were impacted by $69 million of pandemic-related mortality. Average account values, excluding the impact of last year's block reinsurance deals, rose 4%. G&A expenses net of amounts capitalized decreased 1% from the prior year quarter. Base spreads declined 12 basis points compared to the prior year quarter. We expect spread compression to return to our 5 to 10 basis point stated range. Outside of continued pandemic headwinds, Life results were solid with underlying mortality in line with our first-quarter expectations, good expense management, and growing sales. Group Protection reported a loss from operations of $41 million compared to a loss of $26 million in the prior year quarter. This quarter's loss is a significant improvement over a loss of $115 million in the fourth quarter as the impact of the pandemic began to ease, and we saw improvement in underlying disability results. As noted in my opening comments, this quarter's results were negatively impacted by $19 million of unusual items. The pandemic impacted our group life results by $53 million and our disability results by $18 million. Group protection pandemic claims relative to US COVID deaths improved significantly from recent quarters due to death transitioning back towards the nonworking edge population. Excluding pandemic claims and unusual items, the group margin was 5.1%, at the low end of our targeted range of 5% to 7%. On the life side, our underlying loss ratio of 72.9% improved 240 basis points year-over-year and 60 basis points sequentially, as results benefited from pricing actions and good underlying experience. Our underlying disability loss ratio of 80.4% improved 680 basis points sequentially, as the seasonally higher claims that we saw in the fourth quarter returned to more normal levels. Compared to the first quarter of 2021, our disability underlying loss ratio is up 290 basis points and remains elevated compared to long-term expectations, as both incidents and severity are above historic levels. I'd estimate that this hurts the group's first-quarter results by $10 million to $15 million. We believe our underlying disability results are indirectly influenced by the pandemic, as delayed treatments and lack of routine care during peak pandemic waves appears to be impacting the overall health of our claimants. Our claims management efforts are focused on helping our customers recover and get back to work as quickly as possible and should lead to improving underlying disability results over time. The expense ratio was 12.7%, up 20 basis points, primarily due to elevated staffing levels given the volume of pandemic-related claims. We remain confident that the combined impacts of repricing, improved claims management, and Spark expenses will move us to the top of our 5% to 7% target range. Turning to capital and capital management. We ended the quarter with $10.2 billion of statutory surplus and estimate our RBC ratio at approximately 415%, while cash at the holding company stands at $755 million. During the quarter, we paid off our $300 million 2022 debt maturity and issued $300 million of new debt as a partial pre-funding of our 2023 maturity. We executed a $400 million accelerated share repurchase program in the quarter, retiring over 3% of shares outstanding. As I mentioned, it was possible on last quarter's earnings conference call, with that level of repurchases, we chose not to pursue any open market buybacks, but we expect these to resume in the second quarter. In conclusion, while still affected by the financial impacts of the pandemic, our underlying results remain strong and leading indicators are positive, such as spread compression, which has been with us for many years, has come down dramatically. And as I noted earlier, now represents a very modest headwind to EPS growth of 0% to 1%. Our Group Protection margin enhancement efforts are gaining traction, with underlying results returning to the bottom of our targeted margin range. Investments that we are making in the Spark initiative will drive significant expense savings over the next three years. While the pandemic is still with us, the combined impact of vaccinations and natural immunity can continue to reduce the potential negative financial impact on Lincoln. And while investing significant capital at strong returns to support new business that will drive our earnings of tomorrow, we are continuing to return capital to shareholders through buybacks and dividends. With that, let me turn the call back over to Al.

Thank you, Dennis and Randy. We will now begin the question-and-answer portion of the call. As a reminder, we ask that you please limit yourself to one question and one follow-up, and then re-queue if you have additional questions. With that, let me turn the call over to the operator to begin Q&A.

Thank you. We'll take our first question from Nigel Dally with Morgan Stanley. Your line is open.

Great. Thanks. Good morning. I had a question on capital. While you completed the ASR, you didn't buy back stock above that, so I guess not overly surprising. But should we expect some sort of catch-up in buybacks in the second quarter to reflect regular buyback that you weren't able to complete this quarter? Any color there would be helpful. Thanks.

Thank you for your question, Nigel. Regarding buybacks in the second quarter, I would like to highlight our overall approach to ongoing share buyback programs. We typically adopt a balanced strategy, which we believe is more effective in addressing fluctuations in share price. Therefore, we plan to distribute our buybacks more evenly for the remainder of the year. It's also important to note the current uncertainties in the environment. With rising inflation and questions about economic performance, this might be a year to exercise caution. In terms of capital allocation, we have generated a significant amount of capital over the years. We primarily channel this capital into two areas. Historically, new business has accounted for 60% to 65% of our overall capital allocation. While we do adjust our investments based on opportunities—reducing them when necessary, as seen a couple of years ago—we tend to increase them when favorable opportunities arise. Ellen mentioned that every business is achieving returns that exceed their targets, making this a favorable time to pursue new business. As for returning capital to shareholders, we've made substantial efforts. In the past four quarters alone, we have returned $1.7 billion, which includes $1.4 billion in buybacks and $300 million in dividends. Looking back over the last decade, we've returned $10.3 billion to shareholders, with $7.9 billion coming from buybacks, representing a 46% reduction in our outstanding shares. We are committed to returning capital to shareholders and plan to resume buying stock in the second quarter, while also taking a more balanced and conservative approach for the remainder of the year.

Okay. That's helpful. Thanks, Randy. Follow-up is on group. If we back out COVID and other abnormal items, you hit the lower end of your 5% to 7% range, which I think is a bit stronger than if it's expected. Is that a reasonable base on which to build, or are there other factors that we should be considering if we look at the four prospects?

Yes, I think it is a very good spot to build from. And of course, there’s always volatility in these businesses but if you think what we've talked about, really, three big levers to growing group margins: pricing, and we did see nice price increases in our renewal program in the first quarter. So there's price increases, there's claims effectiveness, which we need to continue to work on. And then there's a Spark program, which is really just getting going from an investment standpoint, you really should start to see the benefits of. So yes, I think 5.1% is where you end up. I think it's a good place to start, and we're very confident, as both Ellen and I said, in moving towards the upper end of that range over time.

Next, we'll go to Tom Gallagher with Evercore. Your line is open.

Good morning. Randy, I want to follow up to clarify the timing of buybacks. Everything you mentioned makes sense regarding the current environment and your new business, which is likely to require more capital. Should we anticipate buybacks to fall below the typical $150 million per quarter in the upcoming quarters? Additionally, considering the capital freed up from the life reinsurance transaction, which included an additional $150 million in planned buybacks, should we assume those will not occur this year? Any insights you can provide on the timing of near-term buybacks would be appreciated. Thank you.

Let's start by revisiting the resolution deal. We raised approximately $1.150 billion in capital. At that time, we indicated that $900 million would be allocated to buybacks, with the remaining amount directed towards debt reduction. We have successfully completed the $900 million in buybacks. Historically, we've averaged around $150 million in quarterly buybacks, which we still consider a long-term expectation. It's worth noting that the $900 million in incremental buybacks we executed from the resolution deal corresponds to about 15 years' worth of distributable earnings we would have generated from that segment of the business. However, we did sacrifice about $75 million in distributable earnings in the short term. We anticipate our capital generation will increase over time. Nonetheless, typical growth from our expanding business might be affected this year due to downward trends in equity markets and other factors. Consequently, we expect capital generation to start slightly below the usual $150 million per quarter. As I mentioned earlier and you pointed out in your question, the capital opportunities in new business may also develop earlier, but these are difficult to forecast. For the first quarter and the remainder of the year, we anticipate about $100 million to $150 million in additional capital from new business compared to a typical year. This suggests that our expectations may settle around the $100 million per quarter range. Specifically, I would estimate it between $100 million to $150 million. If you had posed a similar question in the first quarter of last year, my response would have been comparable. We achieved $105 million in the first quarter last year and ultimately reached $600 million for the entire year, so the outcome will largely depend on how market conditions evolve as the year progresses.

Got it. That's really helpful. Thanks, Randy. And Ellen, my follow-up is for you, a little more strategic as you're taking over the new leadership role as CEO, any preliminary thoughts on strategic priorities where recognizing you've been there for a significant amount of time in a senior leadership role already. So you're part of what's happened. But is there anything at the edges maybe that you're looking to potentially change or pivot, whether that's capital efficiency, cash flow distribution? Anything you could share on preliminary thoughts would be helpful.

So Tom, thank you for the question. And exactly, you said it very well. So you know that I've been with Lincoln now for 10 years, and very much am part of really architecting the existing strategy. And everything that we have talked to you about, we are going to continue to execute on. So all things as it relates to our price shift and add new product strategy, and really focusing there on organic growth, you can see real evidence of that in this particular quarter that we are continuing to build momentum there. The second area is really around expense initiatives and all of the execution that we're doing and very much on track, as it relates to the overall Spark initiative. And we've also talked to you about the fact that, in addition to that being a cost-saving program, that it very much is focused on improving overall efficiency as it relates to our customers and how we face off with them. And also a real focus on the employee experience. So that's very important. And then the third area, which we've also touched on, is around restoring our group margin to the higher end. And there, as Randy just talked about, as we both highlighted in our script, we've got all of the pricing actions we're focused on there, of course, the expense efficiencies through Spark, and then the claims effectiveness. So all of that, we're going to continue to execute on. As we think about longer-term, and we have talked to all of you about the fact that as I'm stepping into the CEO role, we are also thinking about longer-term strategy and overall longer-term direction. And so, I'm way too early to communicate anything at this time, but what I will share with you is, one of the first things that we have done as part of the transition, is we've looked at our overall organizational structure and how that will align with us, thinking about executing on the near-term strategy, while we are also focused on building out what that longer-term strategy looks like. And so we've appointed a Chief Strategy Officer that is focused on that now 24/7 and really taking a look at that. And then also our focus on combining the individual life and annuity businesses together, along with LFN and bringing that together is also very much strategic as we think about that. And so if I just step back for a second on that, we very much – as we think about, for example, our product strategy and how we have focused on product manufacturing over the years, we're starting to see more opportunity for synergy and innovation across the two individual businesses. And so examples of that are products that have shifting investment engines, shifting value propositions, where both are thinking about risk-sharing as another example there. We see opportunity as it relates to the overall customer experience and operations. And then this other part that I highlighted, which is a continued emphasis as it relates to overall in-force management and some opportunity there. So more to come. Yes, we'll also take a look at capital management as part of everything that we're going to be doing longer-term, and as soon as we have something more definitive to be able to talk to you about, we'll, in fact, do that.

Okay. Thanks Ellen. Good luck.

Next we'll go to Ryan Krueger with KBW. Your line is open.

Hi, thanks. Good morning. I was hoping you could expand a little bit on the comments about this being a very favorable environment for new business. And just curious what you think are some of the key reasons, certainly, I mean, I guess, higher interest rates is probably one of them. But if you've seen any change in the competitive environment or other factors that's leading to this?

Sure. So Ryan, thank you for the question. So as it relates to a favorable environment, I think we see a couple of things there. The first is, clearly, from a capital markets perspective, we have higher rates. And in general, when we think about higher rates, and we have the 10-year now at 3%, this is an opportunity now to be able to invest new money higher, and that translates into offering customers higher value propositions. And so across the board, we think that that will benefit the overall industry, and it will benefit Lincoln as well. So that's one piece. The second thing that is very much important is that as we continue to manage through this pandemic, and we're now more than 24 months in, we're seeing that it has definitely increased awareness and, therefore, demand for financial protection and security. And so we're seeing real evidence of that, for example, in our Group Protection business, where we saw that sales were up pretty significantly year-over-year. The primary driver of that was inside of the existing clients and seeing increased demand there. The other thing that's happening from a macro environment is that we all know that we're seeing evidence of wage inflation, and we're seeing a direct relationship in terms of increased compensation that is leading to requests for example, on deposits in the retirement business. So across the board and also because there's such a significant focus right now on the overall employment environment and needing to attract talent, we're seeing expansion of benefits as well. And so that's another opportunity there. So I think across the board, there are a number of areas that are providing overall opportunity from a macro and external perspective. The other thing that I'll add is that we have done so much in terms of product innovation over the last couple of years that we are seeing that we have more and more attractive financial product. I mentioned in my script that we introduced 13 new products last year in 2021. And so we're seeing that the expansion of product is appealing to expand the demographics and very much so is part of why we also view that this is a favorable environment.

And then on group and the pricing actions you're taking. Can you give any more detail on how much rate you've been looking to get and if you've seen any impact on persistency?

So we have mentioned previously that we've seen year-over-year overall pricing increases in about the mid-single digits. And that really has been a combination of pricing as it relates to new business as well as overall persistency and then also organic growth. And Randy, I don't know if there's anything you want to add?

Yes, Ryan, I think you really see that in the results also. So just as a reminder, mid-single digits, about one-third of our book were prices. You do the math. The upside of that is you probably see about $10 million to $15 million of benefit in our financial statements. It's part of that margin improvement story, and I'd expect you'd see that over the next couple of years also.

Thank you. Next, we'll go to Alex Scott with Goldman Sachs. Your line is open.

Hi. First one I have is on annuities. The ROA this quarter came in a little bit lower than sort of the 75% to 80%. I think you guys have talked about over time and I was just interested in if the market decline probably plays some role in that. And just if you still have confidence even in a more volatile market, you can kind of get back up into that range and how interest rates affect that over time?

The ROA this quarter is actually up compared to the first quarter of last year, moving from 72 basis points last year to 74 basis points this year. There is some seasonality in the ROA, which reflects about $8 million when comparing the first quarter to the previous fourth quarter. This does have an impact, as lower market activity leads to reduced fee income, influencing the ROA. Whether we are in the high 70s or 80% range will depend on market stabilization and recovery. It's not just market volatility that affects ROE; sustained downturns lead to lower fee income, which impacts top line performance and results in a lower return on investment. However, over the long term, we believe that markets will stabilize and trend upwards, and we anticipate returning to the 75 to 80 basis point range in that scenario.

Thanks for that. And to the second question, just given rates are moving up and equities going down to sort of the macro inputs moving in different directions for annuities, I was interested if you could just provide an update on the LNBAR entity? How is the hedge program? And just any update on the hedge performance? And if you could provide an update on the capital position there and how that changed?

The capital position remains very robust. We received $85 million in dividends from LNBAR during the first quarter. Over the past five years, we’ve averaged around $125 million in annual dividends from LNBAR. Although we took $85 million in the first quarter, we experienced breakage during that time, following several quarters of strong performance. Last year, the total breakage for the year was approximately $120 million, which was elevated during the first quarter, primarily due to two factors. One-third of the excess breakage was related to fund basis movement during the quarter. Fund basis can fluctuate over time, ultimately balancing out to zero, but it did impact us this quarter. The remaining two-thirds of the breakage was largely due to market volatility experienced in the first quarter, with the hedge target moving about twice the average of last year. Such volatility results in increased trading and can cause additional breakage. Therefore, this quarter saw elevated breakage levels, but looking ahead over the next couple of years, this usually averages out with better quarters, returning us to our long-term expectations.

Next, we'll go to Suneet Kamath with Jefferies. Your line is open.

Thanks. Just wanted to start. I'm assuming this is Dennis's last call, so just wanted to wish him well as he transitions. My question was on indexed VA down, I think almost 30% year over year. I think in the script you'd mention some maybe product changes that you made. So I was just curious if you could talk about that, but also the competitive environment just given we've seen so many annuity players enter that particular product.

Thank you for your question, Suneet. Regarding indexed variable annuities, it’s an important discussion. While it’s true that IVA sales dropped by 30% year over year, it’s worth noting that in the first half of 2021, we experienced significant decreases in rates and market volatility. This situation led us to implement a substantial repricing to achieve our target returns. We took the lead in this action within the industry because we do not want to offer products that do not meet or exceed those returns. We anticipated that this adjustment would result in a decline in sales, which is exactly what occurred, with the third quarter representing the lowest point for our IVA sales. However, we began to see a sequential rebound afterward, with the fourth quarter showing improvement. The first quarter further reflected this positive trend as it was up from the previous quarter, with momentum building throughout those months—January was slightly lower, February increased, and March was even stronger. We feel optimistic about our position. In terms of competition, there are many new entrants in the space, and we are aware that more will join in 2022. We remain confident in our diverse product offerings and our ability to compete effectively. We have introduced a couple of new proprietary index options and unique product features, and combined with our strong distribution network, we believe we can maintain and grow our share of IVA sales. Well, first of all, thank you for that nice comment. I appreciate it very much. And I'd just like to thank everybody on the phone for their interest in Lincoln. I know over the last 15 years that I've been CEO and call out to yourself and the other sell-side analysts who do such good work for the industry and asking the right questions and doing the right work. We don't always agree with every opinion, but you guys all add valuable input and perspective on the industry. So thank you all for that. And then I'll turn it back to you, Suneet.

Yes, thanks for that Dennis. My second question was just on the VA flow reinsurance deal that you guys announced. I think that has an end date of June of this year. So just curious, one, how much of the $1.5 billion have you used? And then two what have you learned from that transaction and is there something that you think you could pursue kind of going forward in terms of incremental such structures? Thanks.

Yes, you are correct, Suneet. The VA Flow deal we undertook with Talcott is effective until the end of June. It is a flow deal that validates the pricing of our guarantees. Overall, it boosts our return on equity and supports our capital position because we are passing through a substantial portion of the guarantee. It has been successful, and we are nearing the capacity of this particular deal as we approach the end of the second quarter. Regarding our VA sales with guaranteed living benefits, we mentioned a 25% figure for the quarter. After accounting for the net pass-through from reinsurance, that figure adjusts to about 18%. We are assessing the possibility of extending the deal, as we typically do with all our partners. We will keep you updated, but it has worked out very well for both parties, and we appreciate our partnership with Talcott.

Got it. Thanks Ellen.

Thank you. For anyone who has not been able to participate in today's Q&A session, management will follow-up later this afternoon. I'll now turn the call back over to Al Copersino for any additional or closing remarks.

Thank you all for joining us this morning. As always, we are happy to take any follow-up questions that you have. You can e-mail us at [email protected]. Thank you all and have a great day.

This concludes today's conference. You may now disconnect.