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Lincoln National (LNC) Beats on Q4 Earnings and Revenues

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Lincoln National Corporation’s (LNC - Free Report) fourth-quarter 2017 earnings of $1.98 per share surpassed the Zacks Consensus Estimate by 2.06%. Also, bottom line increased about 12% year over year, led by higher premium and fees.

Operating revenues of $3.78 billion increased 7.3% year over year surpassing the Zacks Consensus Estimate of $3.67 billion.

Insurance premium and fee income increased 18.8% and 9.4% respectively, from the prior-year quarter to $874 million and $1.47 billion.

Lincoln National Corporation Price, Consensus and EPS Surprise

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

Total expenses increased 32.7% to $4.06 billion year over year, mainly led by higher strategic digitization expense, partly offset by lower interest and debt expense.

Quarterly Segment Details

Operating income in each segment except Life insurance has been reportedly higher compared to the prior-year quarter.

Annuities Remains Strong

Operating income increased 10% year over year to $265 million due to higher fees income and average account values.

Total annuity deposits increased 54% from the year-ago quarter to $2.8 billion, driven by growth in all its major products.

Increased Contribution From Retirement Plan Services

Operating income increased 21% year over year to $41 million, driven by growth in fee income from higher average account values and expense ratio improvement.

Total deposits grew 1% from the prior-year quarter to $2.4 billion due to 29% increase in the first year coupled with growth in recurring deposits.

Low Profitability in Life Insurance

Operating income declined 1.3% year over year to $152 million due to higher variable investment income in the prior-year quarter.

Total Life insurance sales increased 5% from the prior-year quarter to $242 million, driven by growth in Executive Benefits, Term and VUL products.

High Profit in Group Protection

Operating income surged 25% from the year-ago quarter to $20 million. The upside was driven by an improvement in non-medical loss ratio. Sales in this segment remained unchanged year over year at $265 million, driven by growth across all product lines and in both employer and employee-paid sales.

Other Operations

The company incurred a loss of $38 million, almost equal to the loss of $37 million in the prior-year quarter.

Financial Update

As of Dec 31, 2017, Lincoln National’s book value per share, excluding accumulated other comprehensive income, climbed 13% year over year to $64.62 per share.

Operating return on equity (ROE), excluding accumulated other comprehensive income and goodwill, declined 70 bps from the year-ago quarter to 14.7%.

The company ended the quarter with long-term debt of $4.89 billion, down 10% year over year.

Share Buyback

During the quarter, the company repurchased 1.7 million shares of stock at a cost of $125 million.

Business Update

In January, the company announced that it will acquire Liberty Life Assurance Company of Boston from Liberty Mutual Insurance Group. Upon completion of the transaction, Lincoln Financial will retain Liberty’s Group Benefits business and reinsure Liberty’s Individual Life and Annuity business to Protective Life Insurance Company.

The acquisition, which is expected to create a single, powerful Group Benefits operation with industry-leading products, services and capabilities, is expected to be completed in the second quarter of 2018.

Zacks Rank and Other Stocks

Lincoln National carries a Zacks Rank #2 (Buy). Among the other players in the same space, the bottom line at Aflac Inc. (AFL - Free Report) beat second-quarter estimates by 3.23%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Other stocks  Torchmark Corp. and Primerica Inc. (PRI - Free Report) look poised to beat their respective earnings estimates in the fourth quarter on the back of their favorable Zacks Rank of 2 and Earnings ESP of +0.12% and +0.68% respectively.

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