Lincoln National Corp Reports Mixed Results Amidst Strategic Realignments
Net Loss: Lincoln National Corp (NYSE:LNC) reported a net loss of $(1.2) billion, or $(7.35) per diluted share for Q4 2023.
Adjusted Operating Income: Adjusted operating income stood at $246 million, or $1.45 per diluted share.
RBC Ratio: The estimated year-end risk-based-capital (RBC) ratio increased to 400-410%, signaling an improvement in capital strength.
Annuities Sales: Record sales in Annuities, with fixed annuities surpassing the $2 billion mark for the first time in a quarter.
Group Protection: Group Protection business delivered record full-year earnings and strong top-line growth with a margin increase of over 400 basis points year over year.
Life Insurance: Sales declined due to strategic realignment towards more accumulation products.
Retirement Plan Services: Results were below expectations, despite achieving the ninth consecutive year of positive flows.
On February 8, 2024, Lincoln National Corp (NYSE:LNC) released its 8-K filing, detailing its financial performance for the fourth quarter and full year ended December 31, 2023. The company, which operates in the insurance and retirement sectors, faced a challenging quarter with a significant net loss, although it managed to increase its adjusted operating income. The divergence between net income and adjusted operating income was primarily due to non-economic factors such as changes in market risk benefits and the fair value of an embedded derivative related to a reinsurance transaction.
Financial Performance and Strategic Developments
Lincoln National Corp's net loss of $(1.2) billion for the fourth quarter was a stark contrast to the net income of $812 million reported in the same period of the previous year. Adjusted operating income, however, showed resilience at $246 million, compared to $129 million in the prior-year quarter. This performance underscores the volatility in the insurance industry, driven by market fluctuations and interest rate changes, and highlights the importance of the company's strategic initiatives to stabilize its financial position.
The company's Group Protection segment delivered a standout performance with record earnings and margin expansion, demonstrating the effectiveness of disciplined pricing and improved risk results. The Annuities segment also achieved a milestone with record sales, indicating strong market demand for fixed annuity products. However, the Life Insurance segment saw a decline in sales, reflecting the company's strategic shift towards products expected to provide more stable cash flows.
Lincoln National Corp's Retirement Plan Services faced headwinds, with results falling short of expectations. Nonetheless, the segment's positive net flows for the ninth consecutive year and surpassing $100 billion in assets under management for the first time are indicative of underlying strengths in the business.
Capital and Liquidity
The company's RBC ratio, a key measure of capital adequacy, improved significantly, estimated to be in the range of 400-410%. This increase of more than 20 percentage points from the previous quarter is a positive sign of the company's commitment to rebuilding its capital base. The sale of the wealth management business to Osaic, Inc. is expected to further enhance the company's capital position.
Lincoln National Corp's book value per share, including accumulated other comprehensive income (AOCI), stood at $34.81, reflecting the company's net worth and the impact of market conditions on its investment portfolio. The adjusted book value per share, which excludes AOCI and other market-related impacts, was $61.21, providing a measure of the company's value derived from its business operations.
Outlook and Management Commentary
Ellen Cooper, Chairman, President, and CEO of Lincoln Financial Group, commented on the company's progress, stating,
The 2023 fourth quarter marked a significant step forward in rebuilding capital, and we expect our year-end risk-based capital ratio to be above our target of 400%."
She also highlighted the improved operating performance led by the Group Protection business, record sales in Annuities, and more stable Life earnings. The company's focus on profitable organic growth and repositioning product sales for higher risk-adjusted returns is expected to drive future shareholder value.
In summary, Lincoln National Corp's fourth quarter and full-year 2023 results reflect a period of transition and strategic realignment. Despite the reported net loss, the company's improved adjusted operating income and strengthened capital position suggest that its long-term initiatives may yield positive outcomes. Investors and stakeholders will likely monitor the company's progress closely as it continues to navigate the dynamic insurance industry landscape.
For more detailed financial information and to view the full earnings report, please visit the investor relations section of Lincoln Financial Group's website at www.lincolnfinancial.com/investor.
Explore the complete 8-K earnings release (here) from Lincoln National Corp for further details.
This article first appeared on GuruFocus.
