Lincoln (LNC) Q3 Earnings Miss on Lower Annuities Profits
Lincoln National Corporation LNC reported third-quarter 2023 adjusted earnings of 23 cents per share, which missed the Zacks Consensus Estimate by 86.9%. However, the bottom line significantly improved from a loss of $11.49 a year ago.
Adjusted operating revenues grew 5.7% year over year to $4.7 billion. The top line missed the consensus mark by 1.6%.
The weaker-than-expected quarterly results were due to higher commissions, benefits and other expenses. Lower profits from Annuities and Retirement Plan Services affected the bottom line, partially offset by improved Life Insurance and Group Protection businesses.
Lincoln National Corporation Price, Consensus and EPS Surprise
Lincoln National Corporation price-consensus-eps-surprise-chart | Lincoln National Corporation Quote
Costs and Expenses
Total expenses plunged 53.4% year over year to $3.2 billion in the quarter under review and remained below our estimate of $3.6 billion due to the incidence of a significant MRB gain. Benefits of $2.2 billion accounted for 67.9% of the quarter’s overall costs, increased marginally and were above our estimate of $2.1 billion. Commissions and other expenses rose 4.3% year over year to $1.3 billion and were above our model estimate.
Inside LNC’s Segments
The Annuities segment recorded an operating income of $248 million, which decreased 9.8% year over year and missed the estimate by 9%. The metric suffered from increased expenses. Operating revenues of $1.2 billion increased 7.5% year over year and comfortably beat our estimate of $1.1 billion. Total annuity deposits fell 15.3% year over year to $2.7 billion in the quarter under review.
Operating income in the Retirement Plan Services segment came in at $43 million, which fell 9% year over year and missed our estimate of $47.1 million due to an elevated expense level, partly offset by increased fee and spread income. Operating revenues of $327 million grew 3.5% year over year in the third quarter and outpaced our estimate of $318 million. Total deposits tumbled 12.6% year over year to $2.7 billion.
The Life Insurance segment reported an operating income of $173 million in the quarter under review, improving 92% year over year, as year-ago income included massive unfavorable notable items. Operating revenues of $1.7 billion inched up 6.2% year over year and comfortably beat our estimate. Total Life Insurance sales dropped 16% year over year to $144 million. Total deposits of $1.3 billion fell 9.5% year over year in the third quarter.
The Group Protection segment recorded an operating income of $68 million in the quarter under review, which rose from $12 million a year ago but remained lower than our estimate. This significant jump can be attributed to better disability underwriting results. Operating revenues increased 4.1% year over year to $1.4 billion, higher than our estimate of $1.3 billion. Insurance premiums of $1.3 billion rose 4.3% year over year. Sales amounted to $71 million in the segment, which decreased 19% year over year.
Other Operations incurred an operating loss of $113 million in the third quarter, marginally wider than the prior quarter and higher than our estimate of $98.4 million.
Financial Update (as of Sep 30, 2023)
Lincoln National exited the third quarter with cash and invested cash of $2.5 million, which fell from $3.3 billion at 2022-end. Total assets of $338.4 billion increased from $334.2 billion at 2022-end.
Long-term debt amounted to $5.9 billion, which declined from almost $6 billion at 2022-end.
Shareholders’ equity of $3.2 billion decreased from $5.1 billion at 2022-end.
Book value per share, excluding accumulated other comprehensive income, came in at $63.03, which rose 9.7% year over year. Adjusted income from operations ROE came in at 1.4%, which improved from negative 60.7% a year ago.
Capital Deployment Update
Lincoln National returned $76 million in the form of common dividends to its shareholders in the third quarter. It did not make any share repurchases in the quarter under review.
Zacks Rank & Key Picks
Lincoln National currently has a Zacks Rank #3 (Hold).
Investors interested in the broader Finance space can consider better-ranked companies like Employers Holdings, Inc. EIG, Trupanion, Inc. TRUP and AMERISAFE, Inc. AMSF. While Employers Holdings currently sports a Zacks Rank #1 (Strong Buy), Trupanion and AMERISAFE carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus mark for Employers Holdings’ current year earnings indicates a 17.8% year-over-year increase. It beat earnings estimates in all the past four quarters, with an average surprise of 26.5%. Furthermore, the consensus estimate for EIG’s revenues in 2023 suggests 19.8% year-over-year growth.
The Zacks Consensus Estimate for Trupanion’s current year earnings has improved by a penny in the past 30 days. It beat earnings estimates twice in the past four quarters and missed on two occasions. Also, the consensus mark for TRUP’s revenues in 2023 suggests 20.1% year-over-year growth.
The Zacks Consensus Estimate for AMERISAFE’s current year earnings is pegged at $2.90 per share, which improved by 2 cents in the past month. It has witnessed one upward estimate revision against none in the opposite direction during this time. It beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 14%.
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