Lincoln National Corporation (LNC Quick QuoteLNC - Free Report) 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.

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 Quick QuoteVOYA - Free Report) , The Hartford Financial Services Group, Inc. (HIG Quick QuoteHIG - Free Report) and Assurant, Inc. (AIZ Quick QuoteAIZ - Free Report) 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.