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Lincoln National (LNC) Q1 Earnings Beat, Revenues Up Y/Y

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Lincoln National Corporation (LNC - Free Report) reported first-quarter 2021 adjusted earnings of $1.82 per share, which outpaced the Zacks Consensus Estimate by 23%. However, the bottom line declined 18.8% year over year.

The company’s results indicate growing operating revenues and strong expense management across its businesses, partly offset by the adverse impact of the COVID-19 pandemic.

Adjusted operating revenues improved 5.6% year over year to $4.8 billion in the quarter, courtesy of revenue growth in the company’s four business segments. – Annuities, Retirement Plan Services, Life Insurance and Group Protection. However, the top line missed the Zacks Consensus Estimate by 1.7%.

In the quarter, total expenses of $4.3 billion dipped 2.7% year over year attributable to reduced interest credited, commissions and other expenses, and strategic digitization expense.

Segmental Performance

Operating income in the Annuities segment amounted to $290 million, which rose 11% year over year driven by increased account values and favorable returns stemming from the company’s alternative investment portfolio. Operating revenues of $1.2 billion improved 6.6% year over year. Total annuity sales dropped 24% year over year to $2.8 billion in the quarter primarily due to 91.9% decline in fixed annuity sales arising from product actions undertaken as a result of lower interest rates. Nevertheless, a 3% rise in variable annuity sales provided a boost to the segment’s results.  

Retirement Plan Services segment’s operating income of $57 million surged 43% year over year in the quarter, courtesy of rise in account values and strong expense management. Operating revenues of $327 million advanced 10.1% year over year. Total deposits slid 5% year over year to $2.6 billion primarily due to drop in first-year sales, partly offset by increasing recurring deposits.

Life Insurance segment’s operating income totaled $107 million, which slumped 37.4% year over year due to pandemic-linked mortality. Operating revenues of $1.9 billion grew 6.5% year over year. Total life insurance sales fell 32.5% year over year to $114 million on account of 39.9% drop in individual life insurance sales. Nevertheless, a 7.7% rise in executive benefits sales partly benefited total sales.

The company’s Group Protection segment reported an operating loss of $26 million against the prior-year quarter’s operating income of $40 million. The downside was primarily due to the pandemic-related mortality and morbidity experience. Operating revenues improved 2.5% year over year to $1.3 billion. However, total sales in the segment declined 27.5% year over year to $74 million.

Financial Update (as of Mar 31, 2021)

The company exited the first quarter with cash and invested cash of $1.4 billion, which reduced to nearly five-fold year over year. Long-term debt amounted to $6.3 billion, down 6% over year.

During the first quarter, total assets improved 15.1% year over year to $366.8 billion. Shareholders’ equity climbed 18.2% year over year to $19.6 billion.

As of Mar 31, 2021, the company’s book value per share excluding accumulated other comprehensive income (AOCI) grew 3% year over year to $72.36. Adjusted operating return on equity (ROE) excluding AOCI came in at 10.2%, down 330 basis points year over year.

Share Repurchase Update

In the reported quarter, the company bought back shares worth $105 million.

Zacks Rank

Lincoln National currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported first-quarter results so far, the bottom line of Manulife Financial Corporation (MFC - Free Report) , Old Republic International Corporation (ORI - Free Report) and Assurant, Inc. (AIZ - Free Report) beat the Zacks Consensus Estimate.

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