05/04/2022 | Press release | Distributed by Public on 05/04/2022 14:24
RADNOR, Pa. (BUSINESS WIRE), May 04, 2022 - Lincoln Financial Group (NYSE: LNC) today reported net income for the first quarter of 2022 of $104 million, or $0.58 per diluted share available to common stockholders, compared to net income in the first quarter of 2021 of $225 million, or $1.16 per diluted share available to common stockholders. First quarter adjusted income from operations was $294 million, or $1.66 per diluted share available to common stockholders, compared to adjusted income from operations of $350 million, or $1.82 per diluted share available to common stockholders, in the first quarter of 2021.
"First quarter results were solid despite headwinds from the pandemic and a more normal level of alternative investment income. We continued to grow sales, return capital and maintain a strong balance sheet," said Dennis R. Glass, president and CEO of Lincoln Financial Group. "The CEO transition process is going very well, and I am confident that Lincoln, under Ellen Cooper's leadership, will continue to build on our strong foundation with accomplishments that will drive momentum into 2022 and beyond."
As of or For the |
||
(in millions, except per share data) |
2022 |
2021 |
Net Income (Loss) |
$ 104 |
$ 225 |
Net Income (Loss) Available to Common Stockholders |
103 |
225 |
Net Income (Loss) per Diluted Share Available to Common Stockholders |
0.58 |
1.16 |
Revenues |
4,687 |
4,534 |
Adjusted Income (Loss) from Operations |
294 |
350 |
Adjusted Income (Loss) from Operations per Diluted Share Available to Common Stockholders |
1.66 |
1.82 |
Average Diluted Shares |
176.4 |
193.1 |
Return on Equity (ROE), Including Accumulated Other Comprehensive Income (AOCI) (Net Income) |
2.4% |
4.3% |
Adjusted Operating ROE, Excluding AOCI (Adjusted Income from Operations) |
8.6% |
10.2% |
Book Value per Share (BVPS), Including AOCI |
$ 85.59 |
$ 102.50 |
Book Value per Share, Excluding AOCI |
78.32 |
72.36 |
Operating Highlights - First Quarter 2022 vs. First Quarter 2021
There were no notable items within adjusted income from operations for the current quarter or the prior-year quarter. This quarter's adjusted operating EPS results included an estimated unfavorable impact of $0.85 from elevated claims experience related to the pandemic and an unfavorable impact of $0.11 from unusual claims adjustments in Group Protection.
First Quarter 2022 - Segment Results
Annuities
Annuities reported income from operations of $302 million, up 4% over the prior-year quarter. The increase was driven by higher account values from strong equity market performance and expense efficiency.
Total annuity deposits of $2.7 billion were down 4% from the prior-year quarter. Growth in fixed annuity sales to $374 million compared to $86 million was more than offset by a decrease in total variable annuity sales to $2.3 billion compared to $2.7 billion.
Net outflows were $553 million in the quarter. Average account values for the quarter of $164 billion were up 2% over the prior-year quarter, driven by growth in account values without guaranteed living benefits.
Retirement Plan Services
Retirement Plan Services reported income from operations of $55 million, compared to $57 million in the prior-year quarter, due to less favorable returns within the company's alternative investment portfolio partly offset by higher account values from strong equity market performance and positive net flows.
Total deposits for the quarter of $3.4 billion were up 28% from the prior-year quarter driven by a 73% increase in first-year sales and an 11% increase in recurring deposits.
Net flows totaled $946 million for the quarter. Average account values for the quarter of $96 billion were up 7% over the prior-year quarter.
Life Insurance
Life Insurance reported income from operations of $58 million compared to $107 million in the prior-year quarter as improved pandemic-related mortality was more than offset by less favorable returns within the company's alternative investment portfolio and less favorable underlying mortality.
Total Life Insurance sales were $155 million, up 36% from the prior-year quarter, with growth reported across all major product lines.
Average Life Insurance in-force of $985 billion grew 9% over the prior-year quarter. Average account values for the quarter were $51 billion compared to $58 billion in the prior-year quarter reflecting last year's block reinsurance deal.
Group Protection
Group Protection reported a loss from operations of $41 million in the quarter compared to a loss from operations of $26 million in the prior-year quarter. This change was driven by non-pandemic-related morbidity, including unusual claims adjustments, and less favorable returns within the company's alternative investment portfolio.
The total loss ratio was 88% in the current quarter compared to 87% in the prior-year quarter, with the increase driven by unfavorable non-pandemic-related morbidity and unusual claims adjustments.
Group Protection sales increased 42% to $105 million in the quarter compared to the prior-year quarter. Employee-paid sales represented 57% of total sales. Insurance premiums of $1.2 billion in the quarter were up 4% compared to the prior-year quarter.
Other Operations
Other Operations reported a loss from operations of $80 million versus a loss of $78 million in the prior-year quarter.
Realized Gains and Losses / Impacts to Net Income
Realized gains/losses and impacts to net income (after-tax) in the quarter were driven by:
Unrealized Gains and Losses
The company reported a net unrealized gain of $3.1 billion, pre-tax, on its available-for-sale securities at March 31, 2022. This compares to a net unrealized gain of $11.5 billion, pre-tax, at March 31, 2021, with the year-over-year decrease primarily driven by higher interest rates.
Share Count
The quarter's average diluted share count of 176.4 million was down 9% from the first quarter of 2021, the result of repurchasing 20.2 million shares of stock at a cost of $1.4 billion since March 31, 2021.
Book Value
As of March 31, 2022, book value per share, including AOCI, decreased 16% from the prior-year period to $85.59. Book value per share, excluding AOCI, increased 8% from the prior-year period to $78.32.
The tables attached to this release define and reconcile the non-GAAP measures adjusted income from operations, adjusted operating ROE and BVPS, excluding AOCI, to net income, ROE and BVPS, including AOCI, calculated in accordance with GAAP.
This press release contains statements that are forward-looking, and actual results may differ materially. Please see the Forward-looking Statements - Cautionary Language at the end of this release for factors that may cause actual results to differ materially from the company's current expectations.
For other financial information, please refer to the company's first quarter 2022 statistical supplement available on its website, http://www.lincolnfinancial.com/investor.
Conference Call Information
Lincoln Financial Group will discuss the company's first quarter results with investors in a conference call beginning at 10:00 a.m. Eastern Time on Thursday, May 5, 2022.
The conference call will be broadcast live through the company website at www.lincolnfinancial.com/webcast. Please log on to the webcast at least 15 minutes prior to the start of the conference call to download and install any necessary streaming media software. A replay of the call will be available by 1:00 p.m. Eastern Time on May 5, 2022 at www.lincolnfinancial.com/webcast.
About Lincoln Financial Group
Lincoln Financial Group provides advice and solutions that help people take charge of their financial lives with confidence and optimism. Today, approximately 16 million customers trust our retirement, insurance and wealth protection expertise to help address their lifestyle, savings and income goals, and guard against long-term care expenses. Headquartered in Radnor, Pennsylvania, Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. The company had $308 billion in end-of-period account values as of March 31, 2022. Lincoln Financial Group is a committed corporate citizen included on major sustainability indices including the Dow Jones Sustainability Index North America and FTSE4Good and ranks among Newsweek's Most Responsible Companies. Dedicated to diversity, equity and inclusion, we are included on transparency benchmarking tools such as the Corporate Equality Index, the Disability Equality Index and the Bloomberg Gender-Equality Index. Committed to providing our employees with flexible work arrangements, we were named to FlexJobs' list of the Top 100 Companies to Watch for Remote Jobs in 2022. With a long and rich legacy of acting ethically, telling the truth and speaking up for what is right, Lincoln was recognized as one of Ethisphere's 2022 World's Most Ethical Companies®. Learn more at: www.LincolnFinancial.com. Follow us on Facebook, Twitter, LinkedIn, and Instagram. Sign up for email alerts at http://newsroom.lfg.com.
Explanatory Notes on Use of Non-GAAP Measures
Management believes that adjusted income from operations (adjusted operating income), adjusted operating return on equity, adjusted operating revenues, and adjusted operating EPS better explain the results of the company's ongoing businesses in a manner that allows for a better understanding of the underlying trends in the company's current business because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in most instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. Management also believes that using book value excluding accumulated other comprehensive income ("AOCI") enables investors to analyze the amount of our net worth that is primarily attributable to our business operations. Book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.
For the historical periods, reconciliations of non-GAAP measures used in this press release to the most directly comparable GAAP measure may be included in this Appendix to the press release and/or are included in the Statistical Reports for the corresponding periods contained in the Earnings section of the Investor Relations page on our website: www.lincolnfinancial.com/investor.
Definitions of Non-GAAP Measures Used in this Press Release
Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized adjusted income (loss) from operations are financial measures we use to evaluate and assess our results. Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity ("ROE"), as used in the press release, are non-GAAP financial measures and do not replace GAAP net income (loss), revenues and ROE, the most directly comparable GAAP measures.
Adjusted Income (Loss) from Operations
Adjusted income (loss) from operations is GAAP net income (loss) excluding the after-tax effects of the following items, as applicable:
Adjusted Operating Revenues
Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
Adjusted Operating Return on Equity
Adjusted operating return on equity measures how efficiently we generate profits from the resources provided by our net assets.
Definition of Notable Items
Adjusted income (loss) from operations, excluding notable items, is a non-GAAP measure that excludes items which, in management's view, do not reflect the company's normal, ongoing operations.
Book Value Per Share, Excluding AOCI
Book value per share, excluding AOCI is calculated based upon a non-GAAP financial measure.
Special Note
Sales
Sales as reported consist of the following:
Lincoln National Corporation Reconciliation of Net Income to Adjusted Income from Operations |
||||||||
(in millions, except per share data) |
For the Quarter Ended |
|||||||
2022 |
2021 |
|||||||
Total Revenues |
$ |
4,687 |
$ |
4,534 |
||||
Less: |
||||||||
Excluded realized gain (loss) |
(26 |
) |
(229 |
) |
||||
Amortization of DFEL associated with benefit ratio unlocking |
(5 |
) |
1 |
|||||
Total Adjusted Operating Revenues |
$ |
4,718 |
$ |
4,762 |
||||
Net Income (Loss) Available to Common |
||||||||
Stockholders - Diluted |
$ |
103 |
$ |
225 |
||||
Less: |
||||||||
Adjustment for deferred units of LNC stock in our |
||||||||
deferred compensation plans(1) |
(1 |
) |
- |
|||||
Net Income (Loss) |
104 |
225 |
||||||
Less: |
||||||||
Excluded realized gain (loss), after-tax |
(20 |
) |
(180 |
) |
||||
Benefit ratio unlocking, after-tax |
(170 |
) |
55 |
|||||
Net impact from the Tax Cuts and Jobs Act |
- |
- |
||||||
Transaction and integration costs related to mergers, acquisitions and divestitures, after-tax |
- |
- |
||||||
Gain (loss) on modification or early extinguishment of debt, after-tax |
- |
- |
||||||
Total adjustments |
(190 |
) |
(125 |
) |
||||
Adjusted Income (Loss) from Operations |
$ |
294 |
$ |
350 |
||||
Earnings (Loss) Per Common Share - Diluted |
||||||||
Net income (loss) |
$ |
0.58 |
$ |
1.16 |
||||
Adjusted income (loss) from operations |
1.66 |
1.82 |
||||||
Average Stockholders' Equity |
||||||||
Average equity, including average AOCI |
$ |
17,492 |
$ |
21,146 |
||||
Average AOCI |
3,846 |
7,346 |
||||||
Average equity, excluding AOCI |
13,646 |
13,800 |
||||||
Average goodwill |
1,778 |
1,778 |
||||||
Average equity, excluding AOCI and goodwill |
$ |
11,868 |
$ |
12,022 |
||||
Return on Equity, Including AOCI |
||||||||
Net income (loss) with average equity including goodwill |
2.4 |
% |
4.3 |
% |
||||
Adjusted Operating Return on Equity, Excluding AOCI |
||||||||
Adjusted income (loss) from operations with average equity |
||||||||
including goodwill |
8.6 |
% |
10.2 |
% |
||||
Adjusted income (loss) from operations with average equity |
||||||||
excluding goodwill |
9.9 |
% |
11.6 |
% |
(1) |
We exclude deferred units of LNC stock that are antidilutive from our diluted earnings per share calculation. |
Lincoln National Corporation Reconciliation of Book Value per Share |
||||||
As of March 31, |
||||||
2022 |
2021 |
|||||
Book value per share, including AOCI |
$ |
85.59 |
$ |
102.50 |
||
Per share impact of AOCI |
7.27 |
30.14 |
||||
Book value per share, excluding AOCI |
78.32 |
72.36 |
Lincoln National Corporation Digest of Earnings |
|||||||
(in millions, except per share data) |
For the Quarter Ended |
||||||
2022 |
2021 |
||||||
Revenues |
$ |
4,687 |
$ |
4,534 |
|||
Net Income (Loss) |
$ |
104 |
$ |
225 |
|||
Adjustment for deferred units of LNC stock in our |
|||||||
deferred compensation plans(1) |
(1 |
) |
- |
||||
Net Income (Loss) Available to Common |
|||||||
Stockholders - Diluted |
$ |
103 |
$ |
225 |
|||
Earnings (Loss) per Common Share - Basic |
$ |
0.60 |
$ |
1.17 |
|||
Earnings (Loss) per Common Share - Diluted |
0.58 |
1.16 |
|||||
Average Shares - Basic |
174,153,475 |
191,780,135 |
|||||
Average Shares - Diluted |
176,434,549 |
193,066,325 |
(1) |
We exclude deferred units of LNC stock that are antidilutive from our diluted earnings per share calculation. |
FORWARD-LOOKING STATEMENTS - CAUTIONARY LANGUAGE
Certain statements made in this press release and in other written or oral statements made by Lincoln or on Lincoln's behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements may contain words like: "anticipate," "believe," "estimate," "expect," "project," "shall," "will" and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in Lincoln's businesses, prospective services or products, future performance or financial results and the outcome of contingencies, such as legal proceedings. Lincoln claims the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.
Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including:
The risks and uncertainties included here are not exhaustive. Our most recent Form 10-K, as well as other reports that we file with the SEC, include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.
Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, Lincoln disclaims any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this press release.
The reporting of Risk Based Capital ("RBC") measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities.
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