Lincoln’s Q1 earnings buffeted, as ‘strategic realignment’ progresses

Executives at Lincoln Financial Group Tuesday said that first quarter earnings exceeded their expectations and if one overlooks  a few negative items in the results, the company’s “strategic realignment” is progressing well.

The Pennsylvania-based insurer, one of the nation’s oldest and largest stock insurance companies, reported net income available to shareholders of $71 million, or $0.41 per diluted share, compared to $260 million, or $1.52 per share, in the first quarter of 2023. By some measures, the company revenue of $4.12 billion, (up more than 8% year over year) missed Wall Street estimates by about $460M.

However, the company said adjusted operating income was “unfavorably impacted” by significant items totaling $164 million, or $0.96 per diluted share, including a legal accrual, severance expense, and tax-related items. And a substantial portion of net income – $1.1 billion, or $6.64 per share – was due to market and interest rate benefits.

Lincoln chairman, president, and CEO Ellen Cooper told investors Thursday that turning around the company is a multi-year effort and progress might not always be linear and emphasized the company's commitment to advancing its strategies in 2024. This includes positioning businesses for profitable growth, building foundational capital, and optimizing the operating model. She said she was confident that the first-quarter results showed a solid foundation for success in the year ahead.

“We are executing well on our strategies to achieve targeted outcomes, and we are confident in our ability to deliver results that will drive long-term value creation for our shareholders,” she said.

Retirement plan services generated more than 1 billion sales, its highest level in seven quarters, and the performance of its life business was in line with expectations, Cooper said.

Cooper pointed out that Lincoln’s annuities business reported its highest earnings quarter in nearly two years, and group protection delivered a strong quarter of year-over-year earnings growth, solid premium growth, and margin expansion.

Though perhaps not as robust as some of its peers, the annuities sales was a highlight in the Q1 results. Annuities contributed $259 million in operating income despite a 5.5% decline, driven by certain unfavorable impacts.

The company’s estimated RBC ratio, a measurement of the statutory minimum level of risk-based capital, ranged between 400%-410% at the end of the quarter. It means Lincoln has approximately four times the minimum required surplus to support its current premium volume.

Lincoln’s Group Protection business delivered operating income of $80 million, representing a nearly 13% increase over the prior-year period. Life Insurance reported an operating loss, primarily due to impacts from its reinsurance transaction with Fortitude Re, as well as strategic realignment efforts. Retirement Plan Services delivered operating income of $36 million, down 16% year over year, attributed to lower spread income.

Wall Street has been “ho-hum” on Lincoln stock for some time, however, the shares have increased 2.6% this year, to 27.69 per share, from its high in high-60s in 2022.

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

© Entire contents copyright 2024 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

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