Companies

Lincoln falls short in Q3, but sees ‘path to recovery’

By Doug Bailey

Top executives at Lincoln National Corp. conceded Thursday that the company’s third quarter financial results fell short of expectations but vowed it was making progress on accelerating its “path to recovery.”

The insurance giant was perhaps the most impacted among its peers by the pandemic as higher than expected mortality in its life insurance segment led to major losses. It also spent $7 billion on stock buybacks at high prices, which have now been suspended in the wake of the stock’s serious dive.

Lincoln National's stock has lost nearly half its value in the last year and the company was kicked off the S&P 500 in September due to lackluster performance. S&P requires its companies to have a market capitalization of at least $14.5 billion, which was just about the size of Lincoln’s a year ago. It has since fallen to around $4.5 billion.

Lincoln has taken 'targeted actions'

“Over the past year we have taken swift and targeted actions with a strategic focus in three key areas: rebuild and protect capital, preserve the franchise and grow profitably, and invest in our infrastructure and talent,” Lincoln’s chair, president, and CEO Ellen Cooper said in a Thursday morning call with investors. “While a ship like this takes time, we are on track in all four of our businesses to achieve sales growth that utilizes less capital while meeting or exceeding target returns.”

Cooper said she is looking forward to fourth quarter results that she expects will show gains in sales.

For the third quarter, Lincoln National said its net income of $853 million, compared with a net loss $1.7 billion in the year-ago quarter, resulted in a $4.79 income per share and was severely impacted by the performance of its life insurance business which continues to be battered by losses totaling $173 million in the quarter. It took a $144 million charge to operating income related to this year's assumption review, which was primarily driven by the life business, its policyholder behavior, and mortality assumptions.”

Q4 revenue down slightly

Revenues for the quarter were down slightly, $4.2 billion, compared to $4.67 billion in the same period last year. Lincoln’s annuities segment reported income from operations of $248 million, down 10% from the previous year’s quarter.

“We have a powerful franchise trusted brand, distribution, leadership, and broad diversified product solutions across our four businesses,” Cooper said. “These elements serve as a solid foundation as we reposition the company to deliver increasing value to our shareholders.”

Cooper said the advancements the company is making and efforts to reset and rebuild Lincoln are not always apparent in quarterly financial statements and this third quarter was a clear example of that.

“We have more work to do to deliver strong results consistently and it will take some time,” she said.

Lincoln’s annuities and life insurance businesses serve 2.6 million individuals in the U.S. Sequential sales grew in both businesses and Cooper expects that momentum to continue going forward.

“We saw a sequential growth of 6% as we launched a range of product enhancements and actions with our distribution partners,” she said. “The largest driver of this growth was our fixed annuities business where we saw sales increased 23% As we took actions to strategically position ourselves across fixed product categories, and with select distribution partners.”

Looking ahead, the fourth quarter is generally the company’s highest sales volume quarter and based on its strong pipeline, Cooper said she is expecting robust sales, enabling it to hit into 2024 with solid momentum.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].