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Lincoln National(LNC) Q1 Earnings, Revenues Miss; Fall Y/Y

Lincoln National Corporation LNC reported first-quarter 2016 operating net income of $1.25 per share that missed the Zacks Consensus Estimate of $1.48 by 15.5%. The bottom line also deteriorated 8% year over year.

Including non-recurring items, Lincoln National’s net income was 82 cents per share, down from $1.15 in the year-ago quarter.

Lincoln National’s total revenue declined 1.9% from the year-ago quarter to $3.2 billion due to a 2% decline in total average account balances. Revenues also missed the Zacks Consensus Estimate of $3.4 billion by 5.4%.

Segment Analysis

Operating income from the Annuities segment decreased 8.8% year over year to $218 million. Lower fee income due to a 4% decline in average account values and lower variable investment income mainly resulted in the reduced operating income. Gross annuity deposits declined by 21% to $2.4 billion in the reported quarter.

Operating income from Retirement Plan Services was $31 million as against $35 million in the prior-year quarter. Lower variable investment income resulted in the downside. Total deposits were $1.8 billion, up 5% year over year due to a 6% increase in recurring deposits and 3% increase in first-year sales. Total average account values of $53 billion fell 2% from the prior-year quarter.

Operating income from Life Insurance plunged to $75 million from $111 million in the year-ago quarter. The decline stemmed from lower long-term returns on alternative investments and higher mortality. Life insurance sales declined 5% year over year to $132 million. Life insurance average in-force amount improved 4% year over year to $665 billion, while account values increased 3% to $44 billion.

Group Protection’s operating income was $5 million. The segment had reported an operating loss of $6 million in the prior-year quarter. This upside was mainly attributable to higher Group Protection sales of $59 million, which increased 5% from the prior-year quarter. The segment’s results were partially offset by $18 million from accelerated amortization of deferred acquisition costs. Non-medical loss ratio improved 850 basis points year over year to 69.6% owing to pricing actions and improvements in disability claims management.

Financial Update

As of Mar 31, 2016, Lincoln National’s book value per share, excluding accumulated other comprehensive income, climbed 7% year over year to $53.25 per share. Operating return on equity was 9.8% in the first quarter, down from 11.2% in the year-ago period.

Share Repurchase and Dividend Update

Lincoln National spent $200 million to buy back 5.5 million shares during the reported quarter. The company repurchased another 15.5 million shares for $750 million fromMar 31, 2015 till date.

Zacks Rank and Performance of Other Insurers

Lincoln National currently carries a Zacks Rank #3 (Hold). Other insurers too recently released their first-quarter earnings results. While the bottom line at Allstate Corporation ALL and RLI Corp. RLI beat their respective Zacks Consensus Estimate, The Travelers Companies, Inc. TRV missed the same.

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LINCOLN NATL-IN (LNC): Free Stock Analysis Report
 
RLI CORP (RLI): Free Stock Analysis Report
 
TRAVELERS COS (TRV): Free Stock Analysis Report
 
ALLSTATE CORP (ALL): Free Stock Analysis Report
 
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