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Lincoln National (LNC) Q3 Earnings Miss Estimates, Up Y/Y

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Lincoln National Corporation (LNC - Free Report) reported third-quarter 2021 adjusted earnings of $1.62 per share, which missed the Zacks Consensus Estimate by 36%. However, the bottom line compared favorably with the prior-year quarter’s loss of 72 cents per share.

The company’s quarterly results benefited from growing sales, pricing discipline, cost-curbing efforts and share buybacks. The upside, however, was partly offset by decline in revenues and escalated COVID-linked claims.

Adjusted operating revenues improved 8.7% year over year to $5.2 billion in the third quarter on account of solid contributions by all the four segments of the company — Annuities, Retirement Plan Services, Life Insurance and Group Protection. The top line beat the consensus mark by 6.7%.

Total expenses of $4.9 billion declined 0.6% year over year primarily due to lower costs related to benefits.

Segmental Performance

The Annuities segment’s operating income soared 72% year over year to $338 million in the third quarter, courtesy of solid equity market performance paving the way for increased account values. Operating revenues advanced 12.5% year over year to $1.3 billion. Total annuity deposits increased 7% year over year to $2.7 billion driven by well-performing fixed annuities and variable annuities with guaranteed living benefits.

The Retirement Plan Services segment reported operating income of $60 million, which climbed 20% year over year. The upside can be attributed to increased account values stemming from robust equity market performance, strong returns from the company’s alternative investment portfolio and consistent expense efficiency. Operating revenues of $328 million rose 5.5% year over year. Total deposits of $2.4 billion inched up 2% year over year in the quarter under review on the back of recurring deposits’ growth.

Operating income in the Life Insurance segment amounted to $93 million, against the prior-year quarter’s loss from operations of $311 million. The substantial growth was supported by solid returns stemming from the company’s alternative investment portfolio. Operating revenues improved 9.3% year over year to $2.3 billion. Total Life Insurance sales, however, declined 10.8% year over year to $166 million in the third quarter.

The Group Protection segment incurred a loss from operations of $32 million, versus the prior-year quarter’s income from operations of $6 million. Results were hurt by elevated mortality impacts stemming from the pandemic. Operating revenues of $1.2 billion grew 5% year over year. Total sales dipped 2% year over year to $48 million in the quarter under review.

Financial Update (as of Sep 30, 2021)

The company exited the third quarter with cash and invested cash of $2.6 billion, which inched up 0.7% year over year.

Total assets of $377.1 billion increased 8.4% year over year.

Long-term debt during the quarter amounted to $6.3 billion, down 5.8% year over year.

Shareholders’ equity declined 1.8% year over year to $21.2 billion.

Book value per share, excluding accumulated other comprehensive income (AOCI), increased 8.2% year over year to $76.96.

Adjusted operating return on equity (ROE) excluding AOCI, came in at 8.6%, against the year-ago quarter’s negative figure of 3.9%.

Share Repurchase Update

The company bought back shares worth $200 million in the third quarter. Via an accelerated share buyback program, the company recently started incremental repurchases linked with its block transaction.

Dividend Hike Announced

Concurrently, the company’s board of directors approved a 7% increase in the quarterly dividend as well. The new dividend of 45 cents per share, compared to the prior payout of 42 cents, will be paid on Feb 1, 2022 to shareholders of record as on Jan 10, 2022.

Zacks Rank

Lincoln National presently 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 third-quarter results so far, the bottom line of Athene Holding Ltd. , MetLife, Inc. (MET - Free Report) and Sun Life Financial Inc. (SLF - Free Report) beat the Zacks Consensus Estimate.

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