Lincoln touts ‘robust’ life insurance sales amid ongoing restructuring

It has been a rough go for Lincoln Financial for several quarters as the company shifts away from capital-intensive products to more shared-risk ones.

But the Radnor, Pa.-based insurer might be turning a corner. During a second-quarter earnings call with analysts today, Lincoln executives spoke of life insurance sales up 53% from the prior-year quarter, and growth of 16% in indexed variable annuities and 40% in fixed annuities.

"Sales remain robust as we continue to benefit from our repricing shift and add new product strategy," President and CEO Ellen Cooper said. "New sales are generating returns at or above target levels, while contributing to an ongoing strategic shift to a broader diversified mix of products that provide a range of customer value proposition and away from traditional long-term guarantees."

Investors apparently want to see more. Lincoln stock fell 7% in response to the earnings report, and is down 31% for the year.

Lincoln reported net income for the second quarter of $238 million, or $1.34 per diluted share available to common stockholders, compared to net income in the second quarter of 2021 of $642 million, or $3.34 per diluted share available to common stockholders.

First quarterly report

It was the first earnings call for new CEO Cooper, who succeeded Dennis Glass in May. She is leading a restructuring that included combining the annuity and life insurance business into one department under a single leader, Matthew Grove, who joined Lincoln in July as executive vice president of individual life and annuities.

Lincoln also recently added James Reid as executive vice president, head of workplace solutions, to lead the organization’s Group Benefits and Retirement Plan Services businesses.

Lincoln's robust life insurance sales were offset by disappointing investment returns. Life insurance reported income from operations of $114 million compared with $255 million in the prior-year quarter driven primarily by less favorable returns within the company’s alternative investment portfolio, the company said in a news release.

Total life insurance sales were $193 million, up 53% from the prior-year quarter.

"Sales of all product categories and sales across all major distribution channels were up compared to both the second quarter of 2021 and the first quarter of this year," Cooper said. "All products are priced to generate new business returns in line with or above target levels. Following the introduction of seven new products and features in 2021, we continue to innovate and expand our offerings as part of our repriced shift and add new product strategy."

Average life insurance in-force of $1 trillion grew 10% from the prior-year quarter. Average account values for the quarter were $49 billion compared to $59 billion in the prior-year quarter, reflecting last year’s block reinsurance deal and lower equity market levels, the release said.

Annuity sales

Annuities reported income from operations of $256 million, down from $323 million in the prior-year quarter. The decrease was driven by a decline in the capital markets as well as $14 million of unfavorable one-time items, the release said.

Total annuity deposits of $2.7 billion were flat sequentially. Growth of 16% in indexed variable annuities and 40% in fixed annuities were offset by a decline in traditional variable annuities of 25%. Compared to the prior-year quarter, total annuity deposits were down 16%.

Growth of 185% in fixed annuities was more than offset by a decline of 24% in indexed variable annuities and 33% in traditional variable annuities, the release said.

Average account values for the quarter of $152 billion were down 8% from the prior-year quarter, primarily driven by a decline in the equity markets. Net outflows were $318 million in the quarter. Annuity account values other than variable annuities with guaranteed living benefits represented 53% of total annuity account values, up five percentage points over the prior-year quarter, the release said.

"For the eighth consecutive quarter, more than 70% of total annuity sales were of products other than variable annuities and guaranteed living benefits," Cooper explained. "This sales mix shift is in turn contributing to a shift in our account value mix as products other than VAs with GLBs represented 53% of our total annuity account value, up five percentage points compared to the prior year period."

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.