Lincoln ‘selling on our terms’ as it rebounds from lost quarter

Lincoln Financial took a few small steps in its turnaround during the fourth quarter, eking out $6 million in net income.

But after taking a $2.6 billion loss in the third quarter, largely due to a $2.2 billion charge against its life insurance reserves, Lincoln execs were upbeat during a Thursday call with Wall Street analysts.

“We took swift action during the fourth quarter to fortify our balance sheet and improve our capital generation as we remain focused on positioning our franchise for profitable, capital-efficient growth by leveraging our differentiated business model, powerful distribution capabilities, and our high-quality investment portfolio,” said Ellen Cooper, president and CEO of Lincoln.

The Radnor, Pa-based business posted revenue of $4.2 billion in the period. Its adjusted revenue was $4.68 billion, exceeding Wall Street forecasts. Five analysts surveyed by Zacks Investment Research expected $4.52 billion.

For the year, the company reported a loss of $2.23 billion, or $13.10 per share, swinging to a loss in the period. Revenue was reported as $18.67 billion.

Cooper, who succeeded longtime CEO Dennis Glass in May 2022, talked of a new leadership team leading a big pivot for the insurer.

"We are selling on our terms with new sales in all four businesses meeting or exceeding target returns," Cooper said. "We are able to make this pivot by continuing to evolve our products away from long-term guarantees and to provide more options that are attractive for customers involving risk-sharing."

Cooper announced that Christopher Neczypor will be named executive vice president, chief financial officer, effective Feb. 17. Neczypor, who currently serves as executive vice president, chief strategy officer, succeeds Randal Freitag, who is leaving the company after 12 years.

Lincoln offers protection and retirement products through four core businesses: annuities, life insurance, group protection, and retirement plan services.

Life Insurance

The Life Insurance segment reported income from operations of $46 million compared to $80 million in the prior-year quarter. The decrease was "primarily driven by lower returns within the  company's alternative investment portfolio and the run-rate impact from the company’s annual review of DAC and reserve assumptions in the third quarter," Lincoln said in a news release.

The life business is strong, Cooper said.

"Fourth-quarter life insurance sales were up sequentially in all products except for term, where we took pricing actions," she explained. "Fourth-quarter life sales were down from a strong prior-year quarter, though sales were up for the full year, particularly in indexed universal life. We have a broad, diverse product portfolio. And as we previously indicated, our distribution leadership is most effective in permanent life products."

Total life sales for the quarter were $186 million compared to $254 million in the prior-year quarter, the release said. For the full year, sales of $705 million were up 7%. Average life insurance in-force of $1.1 trillion increased 11% over the prior-year quarter. For the quarter, average account values were $48 billion, down 6% compared to the prior-year quarter.

Annuities

Annuities reported income from operations of $238 million, down 28% compared to the prior-year quarter. The decrease was "primarily due to unfavorable equity markets lowering account values," Lincoln said.

Total annuity deposits of $3.2 billion were up 7% from the prior-year quarter as sales growth in fixed annuities and indexed variable annuities more than offset a decline in sales of traditional variable annuities, the company said. For the full year, total annuity sales of $11.9 billion were up 1% from the prior year driven by growth in fixed annuity sales.

Net flows were $137 million in the quarter compared to net outflows of $655 million in the prior-year quarter. For the full year, net outflows totaled $415 million compared to net outflows of $2.6 billion in the prior year.

Average account values for the quarter of $144 billion were down 16% from the prior-year quarter, primarily driven by unfavorable equity markets. Variable annuities with living benefits represented 45% of total annuity account values, a decrease of five percentage points compared to the prior-year quarter, Lincoln said.

Group Protection

Group Protection reported income from operations of $47 million in the quarter compared to a loss from operations of $115 million in the prior-year quarter. The increase was primarily driven by lower pandemic-related claims and improved disability results, Lincoln said.

The total loss ratio was 79% in the current quarter compared to 96% in the prior-year quarter with the decrease "driven primarily by lower pandemic-related life claims and improved disability incidence," the release said.

Group Protection sales for the quarter were $356 million, down 8% compared to the prior-year quarter. Full-year sales were $676 million, up 15% compared to the prior year. Insurance premiums of $1.2 billion in the quarter were up 9% compared to the prior-year quarter. Full-year premiums of $4.8 billion were up 7% from the prior year.

Retirement Plan Services

Retirement Plan Services reported income from operations of $49 million, down 14% compared to the prior-year quarter. The decrease was primarily driven by lower equity markets partly offset by higher spread income.

Total deposits for the quarter of $2.8 billion were down 7% compared to the prior-year quarter. For the full year, total deposits of $11.9 billion were up 10%. Full year growth was driven by a 17% increase in first-year sales and a 6% increase in recurring deposits.

Net flows totaled $235 million for the quarter and $2.9 billion for the year. Average account values for the quarter of $88 billion were down 10% from the prior-year quarter primarily driven by lower equity markets, Lincoln said.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.