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Lincoln National (LNC) Incurs Loss in Q3, Beats on Revenues

Lincoln National Corporation LNC incurred third-quarter 2022 adjusted loss of $10.23 per share. The Zacks Consensus Estimate was of earnings of $1.93 per share. Earnings of $1.62 per share were reported in the prior-year quarter.

Adjusted operating revenues amounted to $4,630 million, which dropped 11% year over year. Yet, the top line beat the consensus mark by 5.9% and came above our estimate of $4,387.1 million.

The quarterly results suffered a blow due to escalating expenses related to benefits, lower returns from LNC’s alternative investment portfolio and feeble contributions from Retirement Plan Services and Life Insurance segments. Nevertheless, a decline in pandemic-related claims and robust sales across the Group Protection unit partly mitigated the downside.

Lincoln National Corporation Price, Consensus and EPS Surprise

Lincoln National Corporation Price, Consensus and EPS Surprise
Lincoln National Corporation Price, Consensus and EPS Surprise

Lincoln National Corporation price-consensus-eps-surprise-chart | Lincoln National Corporation Quote

Costs and Expenses

Lincoln National’s expenses of $7,935 million increased 62.8% year over year in the quarter under review, primarily due to higher costs related to benefits and the Spark program. Benefits account for 64.3% of the quarter’s total expenses.

Segmental Update

The Annuities segment’s operating income soared 33% year over year to $449 million in the third quarter on account of $217 million worth net favorable notable items linked with LNC’s annual review of deferred acquisition costs (DAC) and reserve assumptions. The figure outpaced the Zacks Consensus Estimate of $277 million. Operating revenues fell 6.6% year over year to $1,183 million but beat the consensus mark of $1,126 million and our estimate of $1,136.1 million. Total annuity deposits of $3,262 million grew 21% year over year.

Operating income in the Retirement Plan Services segment amounted to $52 million, which tumbled 13.3% year over year, mainly due to reduced returns from Lincoln National’s alternative investment portfolio and a fall in account values. The figure came higher than the consensus mark of $48.2 million. Operating revenues of $316 million decreased 3.7% year over year, higher than the consensus mark of $302 million and our estimate of $296 million. Total deposits improved 16.1% year over year to $2,799 million in the quarter under review, courtesy of a 33% and 9% rise in first-year sales and recurring deposits, respectively.

The Life Insurance segment recorded an operating loss of $2,160 million in the third quarter against the prior-year quarter’s operating income of $93 million. Lower returns from the insurer’s alternative investment portfolio were one of the factors hampering the performance of the segment. Operating revenues plunged 24.2% year over year to $1,762 million, outpacing the Zacks Consensus Estimate of $1,717 million and our estimate of $1,672.8 million.  Total Life Insurance sales of $171 million increased 3% year over year on the back of higher indexed universal life sales. Total deposits of $1,386 million rose 4.7% year over year.

The Group Protection segment reported an operating income of $37 million in the third quarter against the prior-year quarter’s loss of $32 million. This significant growth came from reduced pandemic-linked claims. Operating revenues of $1,333 million improved 7.2% year over year and came above the consensus mark of $1,289 million and our estimate of $1,245.3 million. Insurance premiums advanced 8.4% year over year to $1,200 million. Total sales in the segment soared 83% year over year to $88 million.

Financial Update (as of Sep 30, 2022)

Lincoln National exited the third quarter with cash and invested cash of $1,472 million, which declined 43.7% year over year. Total assets of $324.7 billion fell 13.9% year over year.

Long-term debt amounted to $5,959 million, which decreased 5.8% year over year. It had short-term debt of $500 million at the third-quarter end. As of Nov 2, 2022, its senior debt received ‘A-‘ and ‘BBB+’ ratings from Standard & Poor’s and Fitch, respectively.

Shareholders’ equity of $2,217 million plunged 89.5% year over year.

Book value per share, excluding accumulated other comprehensive income (AOCI), decreased 16.7% year over year to $64.09.

Adjusted operating return on equity excluding AOCI came in at a negative figure of 57% during the third quarter.

Capital Deployment Update

Lincoln National rewarded $127 million to its shareholders through share buybacks worth $50 million and common dividend payments worth $77 million.

Zacks Rank

LNC currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performances of Some Other Insurers

Of the insurance industry players that have reported third-quarter results so far, Voya Financial, Inc. VOYA, The Hartford Financial Services Group, Inc. HIG and Assurant, Inc. AIZ beat the respective Zacks Consensus Estimate for earnings.

Voya Financial reported third-quarter 2022 adjusted operating earnings of $2.30 per share, which surpassed the Zacks Consensus Estimate by 84%. The bottom line, however, decreased 10.5% year over year. Total revenues amounted to $1.3 billion, which decreased 33.4% year over year. VOYA's net investment income declined 22.4% year over year to $522 million.

Hartford Financial’s third-quarter 2022 adjusted operating earnings of $1.44 per share outpaced the Zacks Consensus Estimate by 11.6%. The bottom line climbed 14% year over year. Operating revenues of HIG amounted to $3,830 million, which rose 3.6% year over year in the quarter under review. The top line also beat the consensus mark by 1.8%. Total earned premiums improved 7.6% year over year to $4,910 million.

Assurant reported third-quarter 2022 net operating income of $1.01 per share, which beat the Zacks Consensus Estimate by 1%. The bottom line decreased 40.2% from the year-ago quarter’s level. Total revenues increased 1.9% year over year to $2.6 billion but missed the Zacks Consensus Estimate by 1.8%. AIZ’s net investment income was up 9.9% year over year to $83.5 million.


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