Lincoln Gains Traction In 2Q With Indexed Variable Annuities

Lincoln Financial’s shift to registered index-linked annuities and other variable annuity products showed greater traction in the second quarter. The company announced a record-setting increase in income driven primarily by a 28% increase in annuity sales over the second quarter of 2020.

The increase offset a drop in fixed annuity and life insurance sales over the quarter, which aligns with Lincoln’s plan to move toward what it calls indexed variable annuities and variables without guarantees. Lincoln Financial President and CEO Dennis R. Glass said the sales pace puts the company ahead of expectations.

“We have projected total annuity sales to begin the year at a similar pace to what we saw in the fourth quarter then build over the course of the year, benefiting from shelf space we added last year and are adding this year, which is driving indexed variable annuity growth opportunities,” Glass said during an earnings call Thursday. “We’re pleased to see sales year to date ahead of our expectations. Looking forward, near term sales may be impacted by typical summer seasonality. But we are confident that full year sales will remain ahead of our earlier expectations.”

Glass emphasized Lincoln’s commitment to expanding distribution, which he said now covers 100,000 financial professionals.

The CEO gave a few words on what he called "one of Lincoln's key competitive advantages - our industry-leading distribution. He said the company is  known in the marketplace for a consistent distribution presence with broad reach across channels, as demonstrated by its recent life insurance shelf expansion with property/casualty insurer Allstate. "Nearly 100,000 active producers, wholesalers, group representative consultants and other distribution professionals sell our products," he said.

The company is continuing with a virtual-first approach in the long term even as producers increase in-person meetings. Glass said producers will be able to leverage virtual tools to improve service and tightly manage expenses.

Annuities

Total variable annuity sales of $3 billion were up 37% versus the prior-year quarter as strong growth in variable annuity sales without guaranteed living benefits more than offset declines in variable annuity sales with living benefits and fixed annuities.

“Last year, we established ourselves as a leader in index variable annuities,” Glass said during the call. “This year, we are seeing growth in both index variable annuities, and traditional VAs without living benefits. We also see ongoing market demand for VAs with guaranteed living benefits at attractive economics to Lincoln.”

In the question-and-answer section of the call, Glass was asked if Lincoln will be adding a protection rider to its index variable annuities as Prudential did with its IVA.

“That's a possibility,” Glass said, adding that the company will be looking at what consumers value in particular products. “For the most part, the IVA is our asset-protection, consumer-value proposition. That's where our focus is right now, continuing to make improvements in the overall IVA offering. And to the extent that consumers demand some type of guaranteed income, we'll look at that.”

Net outflows were $297 million in the quarter. Average account values for the quarter of $166 billion were up 24% over the prior-year quarter, with 48% of total annuities account values without guaranteed living benefits, up 2 percentage points over the prior-year period.

Life Insurance

Total life insurance sales were down 20% year-over-year, $126 million compared to $159 million in the prior-year quarter. But sales increased 11% quarter over quarter.

Retirement Plan Services

Income of $62 million is up 107% compared to the prior-year quarter with the increase driven by higher account values from strong equity market performance and positive net flows and favorable returns within the company’s alternative investment portfolio. Total deposits for the quarter of $2.8 billion were up 21% compared to the prior-year quarter, driven by double-digit growth in first-year sales and recurring deposits.

Net flows totaled $517 million for the quarter and $1.6 billion over the trailing 12 months. Average account values for the quarter of $94 billion were up 28% over the prior-year quarter.

Group Protection

Income from operations of $46 million is up 18% compared to the prior-year quarter. This improvement was driven by a lower mortality impact from the pandemic, favorable returns within the company’s alternative investment portfolio, and premium growth.

Group protection sales were $79 million in the quarter compared to $105 million in the prior-year quarter. Employee-paid sales represented 56% of total sales. Insurance premiums of $1.1 billion in the quarter were up 2% compared to the prior-year quarter.

Steven A. Morelli is a contributing editor for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at stevenamorelli@gmail.com.

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Steven A. Morelli is a contributing editor for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at steve@innemail.com.