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Why Should You Hold Lincoln National (LNC) in Your Portfolio?

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Lincoln National Corp. LNC is poised for growth amid favorable conditions. The COVID-19 highlighted the importance of getting a life insurance coverage and the improving employment scenario bodes well for the company’s Group insurance business.

At present, the pandemic headwinds seem to recede and vaccines are more widely rolled out. This combination of underlying growth and better mortality results positions the company well for its Life Insurance and Group businesses.

The company’s Retirement business is also poised for benefiting from the tailwinds of economic recovery and an expanding set of retirement solutions products.

Being an insurer, interest rates form an important catalyst for the company’s business. Lincoln National played well on this front. The company has devised product portfolio taking into consideration the low interest rate scenario. It introduced eight products in the first half of this year.

If interest rates remain low, its newly-launched products will remain attractive, given the way the same is been designed. And if rates were to rise in addition to this unveiled product suite, some offerings existing already will once again resonate with consumers, pushing up Lincoln's sales. Lincoln National is adding to its distribution force by attracting insurance advisors.

The company did an impressive job in protecting investment return in the face of low interest rate environment. Its portfolio looks encouraging with high credit quality, which has been improving in recent years. 96% of its fixed income assets are investment-grade with 59% rated A or higher.

Investment income has been rising from the past many years and the trend should continue as the company also invests in alternative avenues, which have showed strength in recent quarters.

Apart from working on growing its top line via product innovation, the company is looking to slash its costs to preserve margins. It continues to report declining expense ratios in most of its businesses. It is investing in client-facing digital tools, which will improve user experience and enhance the company’s efficiency. Expense saving initiatives will continue to contribute to earnings growth.

We cannot overlook the company’s robust balance sheet and a strong free cash flow generation. This combination helps ineffective capital deployment. In fact, on the back of its strong capital position, improving capital market and a positive outlook for its business, the company expects second-quarter share repurchase to be approximately $150 million, in line with the pre-pandemic levels.

Thus, Lincoln National looks like a stable company, which should be retained in your investment portfolio. The stock has rallied 29.6% year to date compared with its industry’s growth of 3.29%.

Zacks Investment Research
Zacks Investment Research


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Other insurers in the same space include Prudential Financial Inc. PRU, Aflac Inc. AFL and MetLife, Inc. MET, which have gained 31.8%, 20.9% and 27%, respectively, over the same time frame.

The stock carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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Lincoln National Corporation (LNC) : Free Stock Analysis Report

MetLife, Inc. (MET) : Free Stock Analysis Report

Prudential Financial, Inc. (PRU) : Free Stock Analysis Report

Aflac Incorporated (AFL) : Free Stock Analysis Report

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Zacks Investment Research