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LNC Beats Q2 Earnings Estimates

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Lincoln National Corporation (LNC - Free Report) reported second-quarter 2013 operating earnings of $1.27 per share. The results surpassed the Zacks Consensus Estimate of $1.15 and breezed past the prior-year quarter’s earnings of $1.09 a share.

Further, Lincoln National’s operating net income increased 10% year over year to $351 million. Meanwhile, reported net income, including extraordinary items, stood at $317 million or $1.15 per share as against $321 million or $1.09 per share in the year-ago quarter.

Lincoln National’s total revenue climbed 3.5% over the prior-year quarter to $3.0 billion, marginally exceeding the Zacks Consensus Estimate of $2.99 billion. The year-over-year upside was driven by benefits from product pricing, claims management, risk management and distribution expansion along with higher sales across segments.

Consolidated account balances of Lincoln National increased 12% year over year to $189 billion, while net flow surged 82% to $2.9 billion, both reflecting growth across segments.

Segment Analysis

Operating income from Lincoln National’s Annuities segment stood at $195 million, increasing 23% from $158 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 $39 million, up marginally from $38 million in the prior-year period. The upside was driven by growth in deposits, net flows, sales, retention, and account balances.

Operating income from Life Insurance was $135 million, in-line with the year-ago period, although life insurance sales improved 43% year over year to $183 million. Life insurance in force improved 3% year over year to $601 billion, while aggregate sales of higher return products, including indexed universal life, variable universal life, flexible premium MoneyGuard and term insurance, increased 137% over the prior-year quarter.

Operating income from Group Protection dipped to $22 million from $27 million in the prior-year period. Non-medical loss ratio increased to 73.5% from 72.7% in the prior quarter. Further, non-medical net earned premiums were $482 million, up 9% over the year-ago period, while Group Protection sales of $95 million grew 7% year over year.

Operating loss in Other operations marginally increased to $40 million from $39 million in the year-ago quarter.

Investment Position

Further, Lincoln National’s net realized losses included a net loss from account investments of $22 million compared with $45 million in the prior-year quarter. Additionally, net realized losses included variable annuity net derivatives loss of $11 million during the reported quarter.

As of Jun 30, 2013, pre-tax net unrealized gain on Lincoln National’s available-for-sale securities was approximately $4.8 billion as compared with $7.8 billion in the year-ago period.

Financial Update

At the end of Jun 2013, Lincoln National’s book value per share came in at $50.37, constant on a year-over-year basis. Excluding accumulated other comprehensive income (AOCI), book value climbed 13.2% year over year to $43.21 per share. Operating ROE stood at 12.4% at the end of Jun 2013, up from 12.1% at the end of the prior-year quarter.

Additionally, Lincoln National bought back 4.3 million shares for $150 million during the reported quarter.

Dividend Update

On May 23, 2013, the board of Lincoln National declared its regular quarterly dividend of 12 cents per share, paid on Aug 1, 2013 to the shareholders of record as on Jul 10, 2013.

Zacks Rank

Lincoln National carries a Zacks Rank #3 (Hold). Other life insurers worth considering are China Life Insurance Co. Ltd. (LFC - Free Report) – Zacks Rank #1 (Strong Buy), American Equity Investment Life Holding Co. (AEL - Free Report) – Zacks Rank #2 (Buy) and Health Insurance Innovations, Inc. (HIIQ - Free Report) – Zacks Rank #2 (Buy).

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