We're going to get going. Really pleased to have Lincoln with us today, and representing Lincoln is Randy Freitag, CFO. Also, Al Copersino from Investor Relations. I'm just going to start with the topic everyone's been asking you about, I guess, we can get it over with at the beginning. Will the Vikings win the Super Bowl this year? That was my next. That's not the question. That was my next question. Okay. Let's start with universal life with secondary guarantees. I know you're not going to front-run the third quarter assumption review, as you like to say. Was hoping to at least get some perspectives on the assumption-setting process, how it works, and go from there. First off, it's nice to see 3D versions of you and everybody in the room. It's been a while. Yes. Did I coin that phrase, front-run the process? Maybe I should charge you a charge for using that phrase. I view it as coming from you, so you might owe me. Okay. You said it, I'll repeat it. I'm not going to front-run what is a pretty robust process at Lincoln. As you might imagine, there are literally scores of people involved in the process across our four businesses. At its core, it's people who live and breathe these things, the people who do our experience studies all year long, the people who participate in all the surveys we participate in, who really do all the work. Ultimately, they do their analysis, bring that work to their respective business unit CFOs, ultimately bring forth to our Chief Actuary and our Chief Risk Officer, who ultimately approve the new assumption sets for the year. In terms of what we look at, I don't think there's any surprise there. We're a big company with a lot of data. We look at trends in our own data. One of the things I mentioned on the call, for instance, last call was that in the life business with the pandemic, we did see persistency go up or surrender rates go down. While they've come back a little bit, they haven't come back all the way. We'll have to think about, is that a short-term trend? Is that a long-term trend? We'll blend in information we get from outside sources. We do participate in numerous studies over the course of the year. I referenced one specifically focused on Guaranteed Universal Life that provides some new information. We'll use that information. We'll blend that all together. Do we see the world changing in the future? Is there anything we need to think about in that regard? Ultimately, that's what creates what is our best estimate set of assumptions that we'll talk about on our third quarter call. Well, I guess one more on this, but slightly different angle to it. There are a lot of differences between GAAP and statutory reserves for ULSG, and I think that can get even further impacted by how reserve financing structures are utilized. Can you kind of discuss how these dynamics are for Lincoln's block? Because I think one of the concerns is if you do take a GAAP charge, how much of that would come through in stats? If you can give any perspectives on how the two differ for you. Well, obviously, I can't talk about the specifics of your question, but look, these are very different approaches to reserving for the same business. In the case of statutory, it is solvency-based, formulaic. In the case of GAAP, it is best estimate-based and model-based. You have very different standards. The upshot of that, given statutory solvency-based approach, is that statutory reserves are typically higher than GAAP reserves. Statutory is a formula-based approach, we should all be using the same formulas, so we should all be calculating the same statutory reserves. If we all had a policy issued on this day and this year, we should be all calculating the same level of reserve. There are some small examples, like New York has its own GUL reserving standard. We have some business in New York. It's called Reg 147. Everywhere else, it's called AG 38 or AXXX. Reg 147 is, once again, there's nothing that's uniform, but it's a little more conservative than the rest of the other 49 states. At a high level, those are the differences in the two standards. In the case of statutory, you also layer on an annual basis, cash flow testing of your entire book of business. In the case of GUL, there are a couple subtests, 8C and 8D, which you apply to subsets of your GUL book. The standards at their core, they're very different. Generally, statutory is going to give higher reserves than GAAP. Can you give any sense or I know, or at least directionally, just how strong your cash flow testing margins would have been in the GUL book when you did it last time? Yeah. If you go back, gosh, Al, seven, eight years, we used to talk about. Back then, we were at a very low rate environment. We would talk about if the 10-year Treasury went to 50 basis points and stayed there forever, we saw up to $600 million-$700 million of additional reserves that we would need to put up. Then we've talked about over the years, as the base reserves have built up, that that's went away. In fact, we've sort of come out of the negative situation, and we've built up some level of sufficiency inside of those two sub-tests. I feel good about the sufficiency, but obviously, whatever assumptions we do for our GAAP process will reflect in our statutory models. We don't have this set of assumptions over here and this set of assumptions over there. If we make changes, we reflect them across the company in all of the different areas where we need models, including the sub-tests for GUL. Yeah. Just to close up on this, so make sure we're all on the same page. If you start with positive cash flow testing margin, then you layer in new assumptions that has a negative impact, unless that cash flow testing margin went to zero or negative, you wouldn't actually have to make a change to statutory reserves. Is that correct? Yes. That is the math. You wouldn't have to put up a cash flow testing- Yeah reserve, which is ultimately something that is determined by our appointed actuary. All right. I will move on from this topic. Shift to capital. You've talked about managing the RBC ratio really in the context of stress scenarios. I was hoping you could talk about what your internal stress scenarios look like at Lincoln and what are typically the key drivers that cause stress. Let's start that question a little different way by remembering that Lincoln has been around in issuing business for 117 years. We've went through at least two pandemics. We've been through dozens of recessions. I think from my standpoint, I know in the recent stress cases we've been through, every time we've went through something, we've learned, and those learnings have made us a better company as we prepare for the next inevitable stress. I think a great example of that is the great financial crisis, where we made a number of changes coming out of that, including the most important one or most impactful one being how we manage cash at the holding company, where pre-great financial crisis, we had short-term leverage. Now we hold a substantial amount of cash. Just a single example of how we are continually evolving and hopefully getting better as a company. In terms of the stress tests themselves, stress tests are all about making sure that your balance sheet is in a position to not only withstand stress, but to meet any other goals you have as an organization. In our case, no different than I would imagine any company, we stress all the factors that we believe can impact capital, credit, equity markets, interest rates, et cetera. The list is very long. We run these models regularly to determine what the appropriate level of capital is to withstand stress, while at the same time meeting our overarching goals of not having to issue equity or having to cut our shareholder dividends. At a high level, that's how we think about why we do stress tests and what the hoped-for outcome of the stress test is. A little bit on capital itself. As I mentioned, we ended the second quarter at about 400% RBC. I remind people, hopefully, I think I reminded people on the call that there were some changes in C1 factors at the end of the year, which lowered that reported number by about 20 points. 400 this year is 420 last year. The other thing, sort of a philosophical thing at Lincoln, we don't talk about a single RBC target, because we believe that the right capital number, RBC number, is a number that changes over time. Sort of the bulk of the time, you're sort of at an average number, traveling between 380 and maybe a little above 400. Right after a stressful situation, you're probably 50 to 70 points below that. If you had exact foresight the day before you hit a stressful event, you'd be about 50 points above that. That's why we don't talk about a single number that never changes, because we fundamentally think that the appropriate amount of capital is something that changes over time. Is there, I assume equity markets and credit are the main stresses that you run? Credit has always been the item that drives the majority of stress. Equity is second. Interest rates historically don't provide a lot of stress. The biggest interest rate stress goes the other way. We run multiple stress scenarios, actually the stagflation scenario where interest rates jump up can cause a bit of disintermediation. Historically, the recession scenarios are more impactful for us, the credit and equity market, big drops. Got it. On the last quarter call, you had guided to $0-$100 million of share repurchase in the third quarter. Can you talk a little bit about what factors you're watching that may kind of determine where you'd fall within that range? I think the factors that go into how many buybacks you're going to do in any given period. By the way, I think I'd like to get back to the world where I'm not necessarily talking about what are we going to do in the next day or week or month or quarter, but more of an annual guide. I got into this with the pandemic. Look, I think there's capital level itself, as I mentioned. We're at 400, sort of 380 is the new 400, so there's capital levels. There's capital generation. I've talked about how capital generation is being impacted this year relative to previous years. There's the environment which you overlay around that, I talked about, I think on the first quarter call, that they're to us, it is a bit of an uncertain environment right now. You can turn on CNBC, and it's like this person says we're going into a severe recession, this person says we're going to have a soft landing, and everything's going to be sunshine and unicorns. To me that says it's very logical. There is a lot of uncertainty, and in a period of uncertainty, I think it makes sense to lean towards the conservative side rather than the aggressive side. Philosophically, capital levels themselves, capital generation, and what's going on in the environment. Got it. I know it's still early in the Spark Initiative, can you give a little bit of an update on how things are going, and maybe just remind everyone of the benefits you expect from it? The program's going great. We're actually over-performing a little bit, and we expect to deliver $260 million-$300 million of bottom-line benefits exiting 2024. 2022 was the peak year of investments. This year was expected to be modestly negative from a, if you look at the benefits minus the investments, which was expected to be modestly negative. I think we're over-performing that a little bit. You start to see the bottom-line benefits next year, and ultimately we'll get to that big run rate benefit. I think the other thing you get out of Spark, if we've done it right, is we should see improved agility and innovation. We should have modernized our technology platform, which I think will have big benefits. We should have improved our execution capabilities. Hopefully brought more modern practices to some of our operational areas, and I think that all will lead to a better customer and employee experience. Big bottom-line benefit, but I think there's a lot of other benefits across the organization. Shifting gears a little bit to variable annuities. Your hedging program has typically been more aligned with the current GAAP accounting, which of course is changing under LDTI. How are you thinking about, I guess, potential tweaks to the VA hedging program as a result of that? We have always run a very robust, economically focused hedge program that has had the added advantage, as you said, of being aligned with how we report from a GAAP standpoint. GAAP is changing, we'll have to definitely think about that. We have a call or webcast coming up in two weeks on the 21st, when we're going to talk about all aspects of LDTI. How does it impact our financial statements, our book value, how does it impact our earnings, and how does it impact how we manage the company, including with our hedge program. What's not going to change? While the target may change, what's not going to change is that this is going to remain an industry-leading program focused on delivering the assets required to fund the guarantees. We think that it is absolutely essential if you want to maintain what we have since the beginning of time, a high-quality annuity business. It's not cheap. It has historically cost us about $800 million a year to run the hedge program. We don't expect that to change. The reality of having an annuity business like we do, which from a characteristic standpoint is and has been high earnings, high return, high free cash flow generation. That is the annuity business. What makes that all work is running a hedge program, and as I said, it's not cheap to do it, but it's absolutely essential if you want to maintain the characteristics of this sort of business. On the second quarter call, you had talked about the long period of spread compression finally shifting to spread expansion. Actually interest rates becoming a tailwind. Can you talk about where you're seeing new money rates relative to your runoff yields at this point, just how much of a tailwind interest rates could be? I feel like singing hallelujah right now. Look, for as long as I can remember in our life and our retirement business, those two businesses have faced spread compression. That has been a substantial headwind for those two particular businesses and thus for the company in total as we seek to grow earnings. Inside of those businesses, as we talked about this on the second quarter call, in the retirement business, not only have we leveled out, but we expect that spreads will now expand looking forward in the life business where we use alternative investments. We've sort of leveled out. The upshot of that is that the spread compression, which depending on the area you look at more recently sort of been a 1%-2% headwind. In years prior to that, it was 3%-4%, maybe very early in that was in the 5% range. It is no more, right? That's a great thing. One of the things about interest rates or spread compression or spread expansion, it's different from equity markets. It doesn't appear in your financial statements immediately, but this is something that is going to compound into our financial statements over time. Over the next three to five years will be a tremendous benefit relative to what has been a tremendous headwind. Got it. The annuity ROA, it's typically been in kind of the 75 to 80 basis point range. It's dipped a bit below that in the first half of the year, presumably because of negative impacts from equity markets. This would probably slightly depend on equity markets. Where do you see that ROA headed over time? I'm going to come back to what I said about this business. We spend a lot of money to run a high-quality hedge program because that is what protects what this business is, high returns, high free cash flow. All that being said, it is essentially an asset management business, and when the equity markets go down 21%, you're going to see your earnings drop, you're going to see your ROAs drop. Where the ROA is in the future is somewhat dependent upon what the equity markets do. They've recovered a little bit here in the third quarter. Not the amount they've dropped for the year, but they've recovered a little bit, and that'll be helpful. Wherever it ends up, what's not going to change about this business is those characteristics that I've talked about. Got it. I guess in the life insurance business, you did about, call it $150 million of earnings in the second quarter, if you normalize for variable investment income and COVID. Do you think that's a decent run rate for the earnings power of that business at this point when you had some moving parts with the reinsurance transaction you had done before and? Yeah, look, I think in that $140 million-$150 million range is from a quarterly standpoint, is pretty reasonable for the life business. We did sell off what turns out to be about $40 million of earnings. On the other hand, we continue to issue profitable new business. I think those two sort of you can build back and hopefully replace those earnings we sold away over the next couple of years. I think in that $140 million-$150 million range is pretty reasonable. It's a lot of debate on this at the moment, how to think about mortality as we're hopefully emerging from the pandemic and some theories there should be a positive pull forward effect. Are there other negative things that may have developed during the pandemic as well that could be an offset? How are you thinking about this? The pandemic has been an issue for two businesses, the life business and the group business. In the case of the group business, I think the pandemic is rapidly receding as something we'll even talk about. There was really only one strain, I think it was Delta, that significantly impacted the working age population. You saw our group business get pretty significantly impacted in 2021 when that strain was rampant and in the first quarter of this year. It looks like more recent strains are back to older age people with comorbidities, just like any virus at the end of the day. I think the fact that in the group business, this virus seems to be moving away from the working age population, when we hit January 1st of next year, we'll have had two pricing cycles really to price in those expectations. I think it's rapidly becoming something we don't even talk about in the context of the group business. In the life business, the impacts have come down, and that's a good thing. I think in our most recent quarter, we were about $5.5 million per 10,000. We used to be more like eight, I mean, the sum total of the two businesses was only $39 million in the second quarter, which was down from $150 million in the first quarter. I think that means that once again, the pandemic will soon just become part of the background of the business as opposed to something that we spike out. I think that's something we'll think about in 2023. I assume you are in group benefits, but in individual life, have you changed pricing at all because of the pandemic? We haven't seen either in the rates that were charged by reinsurance companies or I mean, the area you would see it first one would presume would be in the term insurance market. Nor have we really seen any specific pricing in the term insurance market. I think that probably has to do with the fact that typically we're selling 10 to 20 year term as opposed to the group business where you're selling typically a three-year contract. Yeah, you haven't seen a pricing response on the individual side, a perceptible pricing response. Got it. In group benefits, your margin was close to your 7% target in the second quarter, which I think you had talked about building up to that 7%, maybe over a couple years. I guess, are you more optimistic about the timeframe of getting that 7% now or was it a bit too early to tell from one quarter's results? I think that one, we're very excited about the trajectory we're on. We're very excited that about a month ago We now have a new leader for our group business, Jimmy Reid, who joined us from Met. Spent some time with Jimmy. He's a great guy, and I think he's going to do a great job leading that very valuable business. When you think about our group business, admittedly, the second quarter is one of our seasonally stronger quarters, whereas the fourth quarter is typically one of our seasonally weaker quarters. Even with that, it was a good quarter. It was a strong quarter. We still have more work to do to get to what we aspire to be, which is consistently at the top end of that 5%-7% range. I think we have more pricing work to do. It is still a good market to price into in the group business. You're getting good price increases, January 1st will be the next big renewal point for us. We've got work to do in terms of how we execute in the claims area. A not insignificant chunk of the Spark Initiative is really focused on the group business. Our group business, which has been very focused on integration for the past three years, I think is behind where it needs to be, especially from a digital technology standpoint. I think there's a lot of benefits we can get there, though. The combination of those three items will bring benefits to the group business and ultimately, which is what will get us to consistently perform at the upper end of that range. look, I'm very excited to post $60 million of earnings as opposed to last year when we were posting negative earnings because of Delta. It's a good thing in a good direction. I think of Spark, I guess maybe as more of a cost savings program, to the extent you can upgrade digital capabilities in group, is that something that you think can also lead to better revenue growth if you have better enrollment technology and things like that? It could, I think that revenue opportunities that come out of programs like Spark are collateral and beneficial, they're not how you measure these things. Got it. I guess we talked some about the cost saves, you mentioned spread compression no longer occurring in retirement as well. I guess when you combined no longer having spread compression in retirement and the cost saves from the Spark Initiative, do you see a path towards the ROA and the retirement business expanding over the next few years? I'm tremendously proud of how our team has run our retirement business. We have an ROA in the 20-25 basis point range, which is very competitive with very large providers of retirement plans, Principal, Voya, et cetera. From the outside looking in, you would go, "Wow, you're smaller from an asset standpoint, Lincoln. How are you pulling that off?" Because we have, roughly speaking, $100 billion of assets versus some of the others that are multiples of that. We pull that off by really being good operators of this business. One, the retirement business leverages the heck out of LFD to get on platforms that on its own it wouldn't be able to get on. Because of LFD's unprecedented relationships with every single platform in America, we're able to get in places that our business wouldn't on its own. We get good returns because we are super focused on areas that value our business model, which you would describe as higher touch, a little higher cost, and that is healthcare, government, nonprofit, sort of the big three areas we focus on in the mid large segment. By doing that and by being super focused on expenses, which this business has done a tremendous job of bringing expenses down over the years, we have been able to maintain that 20-25 basis point ROA. I think that is a market competitive ROA. I don't think any of our peers are talking about that going up, I wouldn't expect that to suddenly go above that range. Got it. There are some outliers that earn almost impossible to understand ROAs, those must be very different businesses. Probably 403. I have no idea what they are, but they seem to be outliers. Can you discuss the sales environment across your businesses? You've been pretty optimistic about it being a good environment. Also what you're seeing for new business returns. New business returns across every one of our businesses are well above our targets. Our targets, they vary. They're different for each business, but at the lowest level, they're 12. Then they move up from there based upon the risk profile of any particular business. VA with living benefits, for instance, is going to be higher than term insurance, just to pick one example. It's a great time to be issuing new business in the context of the returns we're able to see. That is an attractive place to allocate capital right now. I think we're benefiting from higher interest rates. I'll use the life business as an example. A lot of our products were designed and priced in a much lower rate environment, and a lot of those higher rates drop straight through to expected returns in that particular business. We've been on this I don't know what it is, about a 3-year journey of really shifting the nature of the products we sell. Not only are the returns at or above our minimum thresholds, but the nature of what we're selling today is much more diversified than it has been historically. Use the annuity business as an example where, if you go back far enough, we were largely a one-product sort of company, right? VA with living benefits. Today, I think that product makes up 20% of our annuity sales, less than 50% of our in-force. It's much more diversified across the spectrum, and you see the same phenomena in the life business, where not only are we getting good returns, but we're shifting the risk profile. MoneyGuard is a great example, where we rolled out 100% new value prop, where we push risk out to the consumer, but we give them more upside potential. Very different from the old MoneyGuard model. Just a few examples. We're very happy and excited about the returns we're getting on new business. I'll pause and see if there's any questions in the audience. All right, I will continue. Did I go through your whole list over there? No, I got more. Okay. Thought I was going to get to finish early. Only a couple more. Ellen has discussed dedicating more resources to potential reinsurance transactions. I'm just hoping you could elaborate on that and what you're considering. We've always attempted and done reinsurance or block sales, right? Three, four years ago, we did an annuity deal. Last year we did a life deal. Very appropriately, what Ellen did was she created a new position under Chris Neczypor, who comes out of your guys' world. He was at Kingdon at one point, and Goldman. Under Chris, who's our Chief Strategy Officer, he has a team of people where every day they wake up with a singular focus on maximizing the value of our large, diverse in-force book of business. We will benefit from that over time. Like I said, while we've done things historically, we've never had a group who their only job was that. That is going to create, I think, more opportunities. I think the other thing you'll see change is the way we think about measuring what are the benefits of particular transactions. Historically, it's been very much an accretion dilution sort of focus. I think, consistent with what Ellen has talked about, you'll see us more focused, but we will elevate the importance of how any particular transaction may impact free cash flow. We're very well aware of how important in the eyes of investors free cash flow has become relative to a decade ago, it was all about what's your GAAP book value, what's your GAAP earnings, and what's your return on equity, and you could largely figure out how companies are valued. That's shifted over the years to more of this free cash flow focus and a free cash flow valuation model. I think elevating the lens of what could a particular transaction do from a cash generation standpoint. Are there elements of Lincoln that are detractors from free cash flow? Could we be more proactive in thinking about things we would do with those? I think not only having people living and breathing it every day, but also consistent with what Ellen has talked about, shifting sort of the lens we bring to assessing whether or not something makes sense are all things you'll see looking forward. That's on the in-force, I take it. I guess, or maybe it could include new business too. One of the other areas that Chris's team is very focused on is there are aspects of Lincoln which we just have not focused on before, but they have value, and what they need is a strategy to the extent they make sense. I think probably the best example is inside of LFM, where LFM, which is about 11,000 advisors, about 1,600 of those are registered reps. It just so happens that group generates about $30 billion of assets under management. We never talk about it. We've never focused on it. We've never had a specific strategy around growing that and reporting that. That's an example of something that Chris's group can work with the business on. Are there ways? Should we build a strategy around growing a business like that, which is very cash flow generative relative to its earning profile? Inside of Lincoln, we've never really focused on maximizing the value of LFD, right? It's been a wholesaler of Lincoln-based products. Are there things we could do there, once again, that have a profile that is very cash flow generative relative to any earnings potential? These are all, I think, really exciting opportunities, things we haven't just focused on as much in the past, and I think things you'll see an increased focus on looking forward. Are your distribution businesses, kind of the results of those just intertwined within each of the business that they distribute products for currently? LFD, 600 or so wholesalers, only wholesales Lincoln products. Yeah. LFD operates on an allowable base model. Inside of the pricing of the products they wholesale, there's an allowable, and they're charged with operating their business- Yeah Using that allowable. LFM, which is an independent broker-dealer, has two sides of it. It is an independent broker-dealer, but many of their advisors sell products in the same space that Lincoln does, so they happen to sell Lincoln products. You have a piece of LFM that is more like LFD. They're getting an allowable. Yep. You're basically charged with breaking even. You have a whole other side of LFM, which is this whole independent aspect of, they sell a lot of other companies' products. That's one thing we haven't done. I know some of our peers are more proprietary in how they operate their broker-dealer. Believe me, I go on trips with these folks and stuff. They're very independent-minded. They wholesale a lot of other companies' products. They have this $30 billion asset under management business. There are two halves to LFM that you should think about. Got it. Well, we are pretty much out of time, so I will wrap it up there. Thanks a lot, Randy and Lincoln. Appreciate your attendance. Thank you all for coming. I hope you learned a little bit more about Lincoln. I look forward to seeing you again in the future, hopefully in person. I'm tired of our two-dimensional Flat Stanley sort of world we were in. It's good to be back