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Lincoln Financial Group Reports First Quarter 2021 ResultsLincoln Financial Group (NYSE: LNC) today reported net income for the first quarter of 2021 of $225 million, or $1.16 per diluted share available to common stockholders, compared to net income in the first quarter of 2020 of $52 million, or $0.15 per diluted share available to common stockholders. First quarter adjusted income from operations was $350 million, or $1.82 per diluted share available to common stockholders, compared to adjusted income from operations of $465 million, or $2.24 per diluted share available to common stockholders, in the first quarter of 2020. "First quarter results were strong as strategic actions taken to drive top and bottom line growth led to increased operating revenues and expense efficiency in all our businesses," said Dennis R. Glass, president and CEO of Lincoln Financial Group. "While reported results were again affected by the pandemic, mortality impacts should abate, capital markets have improved, sales pipelines are strong, and quarterly capital return to shareholders is being restored to pre-pandemic levels, all of which support continued momentum."
Operating Highlights - First Quarter 2021 vs. First Quarter 2020
There were no notable items within adjusted income from operations for the current quarter or the prior-year quarter. First Quarter 2021 - Segment Results Annuities Annuities reported income from operations of $290 million, up 11% over the prior-year quarter. The increase was driven by higher account values from strong equity market performance and favorable returns within the company's alternative investment portfolio, partially offset by a tax adjustment in the current quarter. Total annuity deposits of $2.8 billion were down 24% from the prior-year quarter. Total variable annuity sales were up 3% versus the prior-year quarter as strong growth in variable annuity sales without guaranteed living benefits more than offset declines in variable annuity sales with living benefits. Fixed annuity sales were $86 million, consistent with recent quarters, but down from $1.1 billion in the prior-year period due to product actions taken in response to lower interest rates. Net outflows were $776 million in the quarter. Average account values for the quarter of $160 billion were up 16% over the prior-year quarter. Retirement Plan Services Retirement Plan Services reported income from operations of $57 million, up 43% from the prior-year quarter with the increase primarily driven by higher account values from strong equity market performance, expense management and favorable returns within the company's alternative investment portfolio. Total deposits for the quarter of $2.6 billion were down 5% from the prior-year quarter as growth in recurring deposits was more than offset by a decline in first-year sales. Net flows totaled $347 million for the quarter. Average account values for the quarter of $90 billion were up 18% over the prior-year quarter. Life Insurance Life Insurance reported income from operations of $107 million compared to $171 million in the prior-year quarter as pandemic-related mortality was partially offset by favorable returns within the company's alternative investment portfolio and expense management. Total Life Insurance sales were $114 million compared to $169 million in the prior-year quarter, however sales were in line with the prior quarter. Average Life Insurance in-force of $901 billion grew 8% over the prior-year quarter, and average account values of $58 billion increased 10% over the same period. Group Protection Group Protection reported a loss from operations of $26 million in the quarter compared to income from operations of $40 million in the prior-year quarter. This change was driven by mortality and morbidity experience associated with the pandemic, which was partially offset by premium growth. The total loss ratio was 87% in the current quarter compared to 79% in the prior-year quarter, with the increase driven by the pandemic. Group Protection sales were $74 million in the quarter compared to $102 million in the prior-year quarter. Employee-paid sales represented 67% of total sales. Insurance premiums of $1.1 billion in the quarter were up 2% compared to the prior-year quarter. Other Operations Other Operations reported a loss from operations of $78 million versus a loss of $47 million in the prior-year quarter. In the current quarter there was $11 million of elevated deferred compensation expense related to the increase in the company's share price during the quarter. In the prior-year quarter deferred compensation expenses were $21 million below expectations related to the decrease in the company's share price during the quarter. Realized Gains and Losses / Impacts to Net Income Realized gains/losses and impacts to net income (after-tax) in the quarter were driven by:
Unrealized Gains and Losses The company reported a net unrealized gain of $11.4 billion, pre-tax, on its available-for-sale securities at March 31, 2021. This compares to a net unrealized gain of $6.4 billion, pre-tax, at March 31, 2020, with the year-over-year increase primarily driven by tighter credit spreads. Share Count The quarter's average diluted share count of 193.1 million was down 2% from the first quarter of 2020, the result of repurchasing 3.0 million shares of stock at a cost of $155 million since March 31, 2020. Book Value As of March 31, 2021, book value per share, including AOCI, increased 19% from the prior-year period to $102.50. Book value per share, excluding AOCI, increased 3% from the prior-year period to $72.36. The tables attached to this release define and reconcile the non-GAAP measures adjusted income from operations, adjusted operating ROE and BVPS, excluding AOCI, to net income, ROE and BVPS, including AOCI, calculated in accordance with GAAP. This press release contains statements that are forward-looking, and actual results may differ materially. Please see the Forward-looking Statements - Cautionary Language at the end of this release for factors that may cause actual results to differ materially from the company's current expectations. For other financial information, please refer to the company's first quarter 2021 statistical supplement available on its website, http://www.lfg.com/investor. Lincoln Financial Group will discuss the company's first quarter results with investors in a conference call beginning at 10:00 a.m. Eastern Time on Thursday, May 6, 2021. The conference call will be broadcast live through the company website at www.lfg.com/webcast. Please log on at least fifteen minutes prior to the call to register and download any necessary streaming media software. To participate via phone: (866) 394-4575 (U.S./Canada) or (678) 509-7536 (International). Ask for the Lincoln National Conference Call. A replay of the call will be available by 1:00 p.m. Eastern Time on May 6, 2021 at www.lfg.com/webcast. Audio replay will be available from 1:00 p.m. Eastern Time on May 6, 2021 through 12:00 p.m. Eastern Time on May 13, 2021. To access the re-broadcast, dial: (855) 859-2056 (Domestic) or (404) 537-3406 (International). Enter conference code: 6288902. About Lincoln Financial Group Lincoln Financial Group provides advice and solutions that help people take charge of their financial lives with confidence and optimism. Today, more than 17 million customers trust our retirement, insurance and wealth protection expertise to help address their lifestyle, savings and income goals, and guard against long-term care expenses. Headquartered in Radnor, Pennsylvania, Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. The company had $311 billion in end-of-period account values as of March 31, 2021. Lincoln Financial Group is a committed corporate citizen included on major sustainability indices including the Dow Jones Sustainability Index North America and FTSE4Good. Dedicated to diversity and inclusion, we earned perfect 100 percent scores on the Corporate Equality Index and the Disability Equality Index, and rank among Forbes' Best Large Employers and Best Employers for Women, and Newsweek's Most Responsible Companies. Learn more at: www.LincolnFinancial.com. Follow us on Facebook, Twitter, LinkedIn, and Instagram. Sign up for email alerts at http://newsroom.lfg.com. Explanatory Notes on Use of Non-GAAP Measures Management believes that adjusted income from operations (adjusted operating income), adjusted operating return on equity, adjusted operating revenues, and adjusted operating EPS better explain the results of the company's ongoing businesses in a manner that allows for a better understanding of the underlying trends in the company's current business because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in most instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. Management also believes that using book value excluding accumulated other comprehensive income ("AOCI") enables investors to analyze the amount of our net worth that is primarily attributable to our business operations. Book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. For the historical periods, reconciliations of non-GAAP measures used in this press release to the most directly comparable GAAP measure may be included in this Appendix to the press release and/or are included in the Statistical Reports for the corresponding periods contained in the Earnings section of the Investor Relations page on our website: www.lfg.com/investor. Definitions of Non-GAAP Measures Used in this Press Release Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized adjusted income (loss) from operations are financial measures we use to evaluate and assess our results. Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity ("ROE"), as used in the press release, are non-GAAP financial measures and do not replace GAAP net income (loss), revenues and ROE, the most directly comparable GAAP measures. Adjusted Income (Loss) from Operations Adjusted income (loss) from operations is GAAP net income (loss) excluding the after-tax effects of the following items, as applicable:
Adjusted Operating Revenues Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
Adjusted Operating Return on Equity Adjusted operating return on equity measures how efficiently we generate profits from the resources provided by our net assets.
Definition of Notable Items Adjusted income (loss) from operations, excluding notable items, is a non-GAAP measure that excludes items which, in management's view, do not reflect the company's normal, ongoing operations.
Book Value Per Share, Excluding AOCI Book value per share, excluding AOCI is calculated based upon a non-GAAP financial measure.
Special Note Sales Sales as reported consist of the following:
Forward Looking Statements - Cautionary Language Certain statements made in this press release and in other written or oral statements made by Lincoln or on Lincoln's behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements may contain words like: "anticipate," "believe," "estimate," "expect," "project," "shall," "will," and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in Lincoln's businesses, prospective services or products, future performance or financial results, and the outcome of contingencies, such as legal proceedings. Lincoln claims the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA. Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including:
The risks and uncertainties included here are not exhaustive. Our most recent Form 10-K, as well as other reports that we file with the SEC, include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors. Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, Lincoln disclaims any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this press release. The reporting of Risk Based Capital ("RBC") measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities.
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