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Lincoln National Corporation (LNC - Analyst Report) reported third-quarter 2013 operating earnings of $1.34 per share. The results surpassed the Zacks Consensus Estimate of $1.23 and breezed past the prior-year quarter’s earnings of $1.27 a share.

The upside was driven by growth in sales, positive net flows and a favorable equity market situation.

Further, Lincoln National’s operating net income increased 1.4% year over year to $367 million. Meanwhile, reported net income, including extraordinary items, stood at $337 million or $1.23 per share as against $428 million or $1.51 per share in the year-ago quarter.

Lincoln National’s total operating revenue climbed 6% over the prior-year quarter to $3.1 billion, marginally exceeding the Zacks Consensus Estimate of $3.0 billion. The year-over-year improvement was driven by growth in deposits and sales across all of its operating segments. Further, sales growth of re-priced products as well as change in the business mix to higher return products also aided the upside.

Consolidated account balances of Lincoln National increased 13% year over year to $197 billion, while net flow surged 76% to $2.3 billion, both reflecting growth across segments.

Segment Analysis

Operating income from Lincoln National’s Annuities segment stood at $198 million, increasing 42% from $139 million in the prior-year quarter, driven by higher variable annuity deposit sales. Even account values, gross deposits and net flow showcased improvement over the prior-year quarter.

Operating income from Retirement Plan Services was $33 million, up from $29 million in the prior-year period. The upside was driven by growth in deposits, sales in the Mid-Large market, retention and account balances.

Operating income from Life Insurance was $140 million, down 7.9% year over year, although life insurance sales improved 46% year over year to $163 million. Life insurance in force improved 4% year over year to $608 billion, while aggregate sales of higher return products, including indexed universal life, variable universal life, flexible premium MoneyGuard and term life insurance, increased 124% over the prior-year quarter.

Operating income from Group Protection increased to $23 million from $16 million in the prior-year period. Non-medical loss ratio dipped to 73.4% from 75.7% in the prior quarter. Further, non-medical net earned premiums were $494 million, up 10% over the year-ago period, while Group Protection sales of $107 million grew 10% year over year.

Operating loss in Other operations were $27 million, compared to a gain of $26 million in the prior-year quarter.

Investment Position

Lincoln National’s net realized losses included a net loss from account investments of $7 million compared with $3 million net gain in the prior-year quarter. Additionally, net realized losses included variable annuity net derivatives loss of $16 million during the reported quarter.

As of Sep 30, 2013, pre-tax net unrealized gain on Lincoln National’s available-for-sale securities was approximately $4.3 billion as compared with $9.4 billion in the year-ago period.

Financial Update

At the end of Sep 2013, Lincoln National’s book value per share came in at $50.62, down 8% year-over-year. Excluding accumulated other comprehensive income (AOCI), book value climbed 11% year over year to $44.37 per share. Operating ROE stood at 12.7% at the end of Sep 2013, down from 13.4% at the end of the prior-year quarter.

Additionally, Lincoln National bought back 2.3 million shares for $100 million during the reported quarter. This amounts to a total of 10 million shares bought back for $350 million over the first nine months of 2013.

Dividend Update

On Aug 9, 2013, the board of Lincoln National declared its regular quarterly dividend of 12 cents per share, to be paid on Nov 1, 2013 to the shareholders of record as on Oct 10, 2013.

Business Update

In Oct 2013, Lincoln National entered into a reinsurance treaty to cover the new sales of its flagship variable annuity guaranteed living benefit product. As per the deal, Lincoln National will offer 50% coinsurance on new living benefit guarantee sales up to $8 billion through Dec 31, 2014.  

Others

Genworth Financial Inc. (GNW - Analyst Report) reported third-quarter 2013 net operating income of 24 cents per share. The results fell short of the Zacks Consensus Estimate by 4 cents.

StanCorp Financial Group Inc. (SFG - Analyst Report) reported third-quarter 2013 operating net earnings of $1.45 per share, which exceeded the Zacks Consensus Estimate of $1.04.

Reinsurance Group of America Inc.  (RGA - Analyst Report) reported third quarter 2013 operating income of $2.14 per share, significantly exceeding the Zacks Consensus Estimate of $1.82 per share.

Zacks Rank

Lincoln National carries a Zacks Rank #2 (Buy).

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