LINCOLN NATIONAL CORPORATION (LNC): what the price assumes

In the published model solve dated 2026-Q2, anchored at $42.15, LINCOLN NATIONAL CORPORATION (LNC) is priced for 11.2% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/LNC

Headline

FieldValue
TickerLNC
CompanyLINCOLN NATIONAL CORPORATION
Current price$42.15/sh
CompositionAnnuities 26% / Life Insurance 34% / Group Protection 32% / Retirement Plan Services 7%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed11.2%
Return on equity now10.0%
ROE gap+1.2pp
Price-to-book0.79x

Solve inputs: computed at a 13.2% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~0.8pp.

Reconcile: at the x-ray's 9.3% required return this reads ~8.1%; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.31σ
cohort percentile (of 88 peers)8
sustained it ~10 years at this level72%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset0.40x3justifies
Earnings0.28x2justifies
Relative0.13x3justifies
Growth1.04x2expensive

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.9%); the inversion above states its own rate.

Per-Model Detail (n=10)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$118.690.36xyesTBVPS $47.42 × 2.50x (ROE (TTM) 16.9% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 0.79% allowance/loans → ×0.90, NPL 0.78% → ×0.99)
Relative ValuationRelative$77.420.54xyesP/E 8.47x (blended: static sector reference 11x + trailing (TTM) 5x), scenarios: 7.2x / 8.5x / 9.8x (bear / base = reference held flat / bull), EV/EBITDA 10x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$63.800.66xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$97.640.43xyesBV/sh $53.41, ROE (TTM) 16.9%, ke 9.3%
Two-Stage Excess ReturnAsset$130.310.32xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$29.641.42xyesRev $18.8B, growth -0% (input: historical growth; tapered), Terminal P/S: 0.4x / 0.4x / 0.5x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$319.900.13xyesEPS $9.14, growth 35% (input: historical EPS growth), PEG=0.13 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$104.800.40xyes√(22.5 × EPS $9.14 × BVPS $53.41) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$294.920.14xyesEPS $9.14 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative$342.750.12xyesEPS $9.14 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$98.810.43xyesEPS $9.14 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (dilution)2.7%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

The most surprising thing about Lincoln National is the gap between what it earns and what the market pays for those earnings. The company has recently generated a return on equity around 10%, and a healthy insurer earning that kind of return would normally trade at or above its book value. Lincoln trades at roughly 0.7 times book, which means the market is either disbelieving the earnings or demanding compensation for risk it sees in the balance sheet. The bull case is that the disbelief is overdone and the repair is real: the most recent quarter delivered adjusted EPS of $1.66, beating estimates and rising 3.7% year over year, on adjusted operating revenue up 3.9% to $4.9 billion. A company posting steady, growing core earnings while priced at a discount to book is the classic setup the value methods reward.

The repair is visible in the capital ratio, which is the metric that matters most for an insurer. Lincoln's estimated risk-based capital ratio rose above 420% and has now held above that buffer for eight consecutive quarters, with the leverage ratio improving to 25%, its long-term target. For a life insurer, the capital ratio is the foundation of everything: it determines how much risk the company can carry, how much it can return to shareholders, and how much cushion it has against market shocks. A ratio that has been rebuilt and sustained above target is the evidence that the post-charge crisis is behind the company, and it is exactly what a buyer at a discount to book needs to see.

The business mix is shifting toward the parts that consume less capital. Lincoln has emphasized capital efficiency and product-mix discipline, driving growth in fixed indexed annuity sales while managing down the riskier variable-annuity exposure, and the in-force book generates rising spread income as higher rates lift what the company earns on its investment portfolio relative to what it credits policyholders. Across the four segments, life insurance and group protection add diversification away from the market-sensitive annuity block. The bull case is simply that a recapitalized insurer earning a respectable return should not trade at two-thirds of its book value indefinitely.

Bear Case

The bear case is a cycle-and-sensitivity case, and it starts with why a stock this cheap is cheap. Lincoln trades below book because life-and-annuity insurers are leveraged bets on financial markets and interest rates, and the discount reflects real, structural exposure rather than mispricing. The company's earnings are most flattering when equity markets are favorable and rates are stable, exactly the recent environment, and a life insurer's reported results can swing violently when those conditions reverse. The 2022 reserve charge that triggered Lincoln's multi-year repair is the reminder: a single re-estimation of long-dated liabilities can wipe out years of earnings, and the long-tail nature of life and annuity contracts means the company is always carrying assumptions about mortality, policyholder behavior, and investment returns decades into the future that can prove wrong.

The annuity block is the specific pressure point. The 10-K describes the spread squeeze directly: when rates move, "the gap between our renewal crediting rates and competitors' new money rates may be wide enough to cause increased surrenders that could cause us to liquidate a portion of our portfolio," and if Lincoln raises crediting rates to retain policyholders, "our spreads will narrow". That is a textbook description of the trap a spread-based business faces: either lose the policyholders or lose the margin. The most recent quarter already showed the strain, with annuity operating income modestly below the prior year on larger variable-annuity outflows even as spread income rose. The book is running off in places faster than it is being replaced, and a shrinking in-force base is a shrinking earnings base.

The risk-based capital framework the bull cites as strength is also the bear's reminder of fragility. The 10-K's own capital model enumerates the exposures, asset default risk, the risk of "underestimating liabilities from business already written or inadequately pricing business to be written," and interest-rate risk, and a 420% capital ratio is a buffer precisely because those risks are large. A buffer is comforting until a tail event consumes it, and the discount to book is the market's price for that tail. The peak-earnings concern is real: the current return is being earned in a benign market with rising spreads, and a peak-cycle return capitalized at a discount can still fall if the cycle turns, because the return reverts faster than the multiple recovers. The bear does not need Lincoln to be insolvent, the capital position argues against that. It needs only the recent favorable conditions to normalize, which would pull the return down and validate, rather than refute, the discount.

Valuation

An insurer is worth the return it earns on its capital, so the right lens is price-to-book, and Lincoln trades at roughly 0.7 times book, a discount. At that price the market assumes Lincoln sustains a return on equity around 10.5%, close to what it has recently earned near 10%. The bet here is not growth; it is whether the company can hold a respectable return through the cycle, because a price below book is the market saying it doubts the durability of the return, not the level of it.

The method agreement points one way: every family supports the price, and none reads the stock as expensive. The insurance-and-bank fair-value method, built on tangible book of $46.15 a share times a multiple justified by Lincoln's return relative to its cost of equity, lands far above the price, near $115. The peer-multiple lens, anchored on a blended P/E near 8 times, lands well above the current price. The dividend-discount approach lands above it too. The pattern is a value-and-asset-supported name: the conservative methods that anchor on book value and demonstrated earnings all say the stock is cheap, which is the opposite of the growth-premium names where only the forward methods reach the price. The question the methods leave open is not whether Lincoln is statistically cheap, because it plainly is, but whether the discount is warranted by the risk in the long-dated liabilities, which the methods cannot fully see.

The cohort comparison frames the discount. The peer set spans life and property-casualty insurers, Brighthouse, Cincinnati Financial, Chubb, Markel, and RenaissanceRe, and Lincoln sits in the lower half of the group on price-to-book, alongside the other life insurer carrying market-sensitive annuity blocks. The companies trading at premiums to book in that group are the property-casualty underwriters with cleaner, shorter-tail liabilities; the life-and-annuity names trade at discounts for the long-tail risk Lincoln carries. The insurance solvency frame is capital adequacy, and here Lincoln's case is genuinely improving, with the risk-based capital ratio above its 420% buffer for eight quarters and leverage at its long-term target. The decisive point is the one the discount encodes: Lincoln is cheap on every static measure, and the entire investment question is whether the long-dated liability and market-sensitivity risk that the discount prices in is a permanent feature or a fear the rebuilt capital position can finally retire.

Catalysts

The Q1 2026 print supported the repair narrative on the core while showing the annuity strain. Adjusted EPS of $1.66 beat estimates and rose 3.7% year over year, with adjusted operating revenue up 3.9% to $4.9 billion, helped by higher net investment income, favorable equity markets, and lower expenses. The annuities segment produced $275 million of operating income, modestly below the prior year, as higher spread income was offset by larger variable-annuity outflows, while fixed indexed annuity sales grew on the company's capital-efficiency and product-mix push.

The capital trajectory is the catalyst that matters most for a recapitalizing insurer. Lincoln's estimated risk-based capital ratio rose above 420% and has now held above that buffer for eight consecutive quarters, with the leverage ratio improving to 25%, its long-term target. Continued capital strengthening is what would eventually let the company return more to shareholders and, over time, narrow the discount to book, so the quarterly RBC and leverage readings are the leading indicators of whether the repair converts into shareholder value.

The watch items are the insurance-cycle variables. Track annuity net flows, since the outflows that pressured the segment are the early sign of the surrender-versus-spread squeeze the company's own filings describe, and watch spread income as the rate environment evolves. Watch the alternative-investment returns, where management targets roughly 10% annualized and where a shortfall feeds directly into earnings, and watch for any further reserve re-estimation, the event that triggered the original repair and the one a long-tail insurer can never fully rule out. For a stock trading at a discount to book, the catalysts that would close the gap are continued capital build and stable flows; the catalysts that would justify the discount are a market reversal or a reserve surprise, and the next several prints will signal which way the cycle is leaning.

Peer Cohorts (Per Segment, With Filing Citations)

Annuities (reported)

Life Insurance (reported)

Group Protection (reported)

Retirement Plan Services (reported)

Other Operations (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 FY2026 earnings release · FY2024 10-K

View the full interactive LNC report on boothcheck