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Lincoln National (LNC) Q1 Earnings Beat on Group Protection Unit

Lincoln National Corporation LNC reported first-quarter 2023 adjusted earnings of $1.52 per share, which outpaced the Zacks Consensus Estimate by 2%. However, the bottom line slipped 1.9% year over year.

Adjusted operating revenues fell 1.3% year over year to $4,657 million. Yet, the top beat the consensus mark by a whisker.

The quarterly results benefited on the back of new business growth and the solid contribution from the Group Protection segment. However, the upside was partly offset by an elevated expense level resulting from the adoption of adverse Accounting Standards Update 2018-12 that gave rise to a new accounting for market risk benefits (“MRBs”).

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

Total expenses escalated 72.8% year over year to $4,984 million in the quarter under review due to the incidence of a significant MRB loss. Benefits account for 46% of the quarter’s overall costs.

Segmental Update

The Annuities segment recorded an operating income of $274 million, which decreased 14% year over year and came higher than the Zacks Consensus Estimate of $271 million. The metric suffered from reduced fee income resulting from unfavorable capital markets. Operating revenues of $1,141 million dipped 0.5% year over year and lagged the consensus mark of $1,175 million. Total annuity deposits advanced 17% year over year to $3,164 million in the quarter under review on the back of higher sales in fixed and indexed variable annuities.

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Operating income in the Retirement Plan Services segment came in at $43 million, which plunged 26% year over year due to a decline in prepayment income and an elevated expense level. The reported figure missed the Zacks Consensus Estimate of $52 million. Operating revenues of $328 million grew 3.1% year over year in the first quarter and outpaced the consensus mark of $323 million. Total deposits tumbled 11.8% year over year to $3,209 million.

The Life Insurance segment incurred an operating loss of $13 million in the quarter under review against the prior-year quarter’s operating income of $23 million. The decline was due to run-rate impact stemming from the third-quarter 2022 annual review of deferred acquisition costs (DAC) and reserve assumptions of Lincoln National coupled with reduced alternative investment income and prepayment income. Operating revenues of $1,757 million inched up 1.6% year over year and beat the Zacks Consensus Estimate of $1,721 million. Total Life Insurance sales dropped 16.1% year over year to $130 million due to a decline in Variable Universal Life, Executive Benefits and Term product sales. Total deposits of $1,320 million fell 2.3% year over year in the first quarter.

The Group Protection segment recorded an operating income of $71 million in the quarter under review against the prior-year quarter’s loss of $46 million. This significant improvement can be attributed to better disability underwriting results and declining COVID mortality claims. The reported figure outpaced the Zacks Consensus Estimate of $42.2 million.

Operating revenues increased 6.5% year over year to $1,388 million, higher than the Zacks Consensus Estimate of $1,358 million. Insurance premiums of $1,251 million rose 7% year over year. Sales amounted to $128 million in the segment, which climbed 22% year over year.

Other Operations incurred an operating loss of $87 million in the first quarter, wider than the prior quarter’s loss of $78 million.

Financial Update (as of Mar 31, 2023)

Lincoln National exited the first quarter with cash and invested cash of $3,766 million, which surged 92.1% year over year. Total assets of $343.1 billion slipped 7.3% year over year.

Long-term debt amounted to $5,974 million, which declined 8.9% year over year.  Short-term debt totaled $500 million at the first-quarter end. As of May 9, 2023, its senior debt received ‘BBB+’ ratings from Standard & Poor’s and Fitch.

Shareholders’ equity of $6,732 million plunged 52.8% year over year.

Book value per share, excluding accumulated other comprehensive income, came in at $56.04, which fell 11.9% year over year. Adjusted operating return on equity came in at 9.5%, which improved 110 basis points year over year.

Capital Deployment Update

Lincoln National returned $76 million in the form of common dividends to its shareholders in the first quarter.

Zacks Rank

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

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

Performance of Some Other Insurers

Of the other insurance industry players that have reported first-quarter 2023 results so far, the bottom-line results of Kinsale Capital Group, Inc. KNSL, Cincinnati Financial Corporation CINF and Aflac Incorporated AFL beat the respective Zacks Consensus Estimate.

Kinsale Capital delivered first-quarter 2023 net operating earnings of $2.44 per share, which outpaced the Zacks Consensus Estimate by 8.9% and our estimate of earnings of $2.20 per share. The bottom line improved 49.7% year over year. Total revenues amounted to $256.9 million, surpassing the Zacks Consensus Estimate by 3.2% and our estimate of $242.1 million. The metric rose 42.8% year over year in the quarter under review.

Net written premiums increased 38.1% year over year to $299 million in the quarter. The net investment income of KNSL increased 127.7% to $20.7 million. Underwriting income of $51.6 million improved 37.5% year over year, while the combined ratio improved 80 basis points to 78.2.

Cincinnati Financial reported first-quarter 2023 operating income of 89 cents per share, which beat the Zacks Consensus Estimate by 30.9% and our estimate of 61 cents per share. However, the bottom line decreased 43.7% year over year. Total operating revenues in the quarter under review were $2,135 million, which beat the Zacks Consensus Estimate by 5.4% and our estimate of $1,820.8 million. The top line improved 13.5% year over year.

Net written premiums of CINF climbed 6% year over year to $2,019 million. Investment income, net of expenses, increased 14% year over year to $210 million.  The combined ratio deteriorated 1080 basis points year over year to 100.7%.

Aflac reported first-quarter 2023 adjusted earnings per share of $1.55, which beat the Zacks Consensus Estimate by 12.3% and our estimate by 17.4%. The bottom line increased 7.6% year over year. AFL’s revenues dropped 7.2% year over year to $4,800 million in the quarter under review. The top line beat the consensus mark by 4.4% and our estimate by 6%.

Adjusted net investment income fell 3.9% year over year to $845 million. Adjusted revenues in the Aflac U.S. segment increased 1.3% year over year, while the same for the Aflac Japan unit decreased 15.8% year over year.

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Aflac Incorporated (AFL) : Free Stock Analysis Report

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Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

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