Le Lézard
Classified in: Business
Subjects: EARNINGS, Conference Call, Webcast

Lincoln Financial Group Reports Fourth Quarter and Full Year 2019 Results


Lincoln Financial Group (NYSE: LNC) today reported net income for the fourth quarter of 2019 of $431 million, or $2.15 per diluted share available to common stockholders, compared to net income in the fourth quarter of 2018 of $399 million, or $1.80 per diluted share available to common stockholders. Fourth quarter adjusted income from operations was $482 million, or $2.41 per diluted share available to common stockholders, compared to adjusted income from operations of $475 million, or $2.15 per diluted share available to common stockholders, in the fourth quarter of 2018.

Net income for the full year of 2019 was $886 million, or $4.38 per diluted share available to common stockholders, compared to $1.6 billion, or $7.40 per diluted share available to common stockholders in 2018. Full year 2019 adjusted income from operations was $1.4 billion, or $6.71 per diluted share available to common stockholders, compared to $1.9 billion, or $8.48 per diluted share, available to common stockholders, for the full year of 2018.

"Fourth quarter results once again demonstrated our long-term track record of strong financial performance as adjusted operating EPS grew 12% and our ROE was nearly 14%," said Dennis R. Glass, president and CEO of Lincoln Financial Group. "Throughout the course of the year we grew sales, diversified our mix of business, appropriately adjusted our assumptions, and continued to execute on our expense initiatives, all of which positions us to continue to drive long-term shareholder value."

 

 

As of or For the
Quarter Ended
December 31,

As of or For the
Year Ended
December 31,

 

(in millions, except per share data)

2019

2018

2019

2018

Net Income (Loss)

$

431

$

399

$

886

$

1,641

Net Income (Loss) Available to Common Stockholders

 

430

 

387

 

886

 

1,623

Net Income (Loss) per Diluted Share Available to Common Stockholders

 

2.15

 

1.80

 

4.38

 

7.40

Revenues

 

4,344

 

4,531

 

17,258

 

16,424

Adjusted Income (Loss) from Operations

 

482

 

475

 

1,355

 

1,880

Adjusted Income (Loss) from Operations per Diluted Share Available to Common Stockholders

 

2.41

 

2.15

 

6.71

 

8.48

Average Diluted Shares

 

200.0

 

215.0

 

202.1

 

219.6

Return on Equity (ROE), Including Accumulated Other Comprehensive Income (AOCI) (Net Income)

 

8.7%

 

10.9%

 

4.9%

 

10.6%

Adjusted Operating ROE, Excluding AOCI (Income from Operations)

 

13.9%

 

13.5%

 

9.7%

 

13.5%

Book Value per Share, Including AOCI

$

100.11

$

69.71

$

100.11

$

69.71

Book Value per Share, Excluding AOCI

 

71.27

 

67.73

 

71.27

 

67.73

Operating Highlights ? Fourth Quarter and Full Year 2019

There were no notable items within adjusted income from operations for the current quarter while the full year included approximately $1.99 of net unfavorable items per share primarily related to the company's annual review of DAC and reserve assumptions. In the prior-year quarter, there were no notable items within adjusted income from operations while the full year included approximately $0.01 of net unfavorable items per share primarily related to the company's annual review of DAC and reserve assumptions.

Fourth Quarter 2019 ? Segment Results

Annuities

Annuities reported income from operations of $269 million compared to $258 million in the prior-year quarter. This increase was primarily driven by higher account values from strong equity market performance and net flows.

Total annuity deposits of $3.9 billion were up 3% from the prior-year quarter. Variable annuity sales were up 10% versus the prior-year quarter while fixed annuity sales decreased 10% over the same period. For the full year, total annuity sales of $14.5 billion increased 17% versus the prior year with growth in both variable and fixed annuity sales.

Net flows were $729 million in the quarter, which included positive flows from both variable and fixed annuities. For the full year, net flows totaled $1.9 billion compared to outflows of $139 million in the prior year. Positive net flows combined with equity market growth led to average account values of $138 billion, up 10% over the prior-year quarter.

Retirement Plan Services

Retirement Plan Services reported income from operations of $47 million compared to $45 million in the prior-year quarter with the increase driven primarily by higher account values from strong equity market performance and net flows.

Total deposits for the quarter of $2.7 billion were up 23% driven by strong first-year sales and an 8% increase in recurring deposits. For the full year, total deposits decreased 6% as growth in recurring deposits was more than offset by a decline in first-year sales.

Net flows totaled $422 million in the quarter and $620 million for the full year. These positive flows combined with equity market growth led to average account values of $76 billion, up 10% over the prior-year quarter.

Life Insurance

Life Insurance reported income from operations of $179 million compared to $175 million in the prior-year quarter. This increase was primarily driven by continued growth in the business and favorable mortality relative to the prior-year quarter.

Total Life Insurance sales were $447 million versus $262 million in the prior-year quarter. This increase was driven by 59% growth in individual life products coupled with strong executive benefits sales. For the full year, sales were $1.1 billion, up 42% versus the prior year driven by growth in IUL and executive benefits sales.

Total Life Insurance in-force of $830 billion grew 12% over the prior-year quarter, and average account values of $53 billion increased 6% over the same period.

Group Protection

Group Protection income from operations was $54 million in the quarter compared to $50 million in the prior-year period. The increase was primarily driven by premium growth and improvement in the overall loss ratio.

The total loss ratio was 74% in the current quarter compared to 76% in the prior-year quarter.

Group Protection sales were $297 million in the quarter, up 9% versus the prior-year quarter driven by growth in both life and disability products. Full-year sales were $752 million, up 30%, with employee-paid sales representing 42% of total sales. Sales growth contributed to 2% growth in insurance premiums over the prior-year quarter.

Other Operations

Other Operations reported a loss from operations of $67 million versus a loss of $53 million in the prior-year quarter.

Realized Gains and Losses / Impacts to Net Income

Realized gains/losses and impacts to net income (after-tax) in the quarter were primarily driven by a $55 million loss from variable annuity non-performance risk.

Unrealized Gains and Losses

The company reported a net unrealized gain of $10.9 billion, pre-tax, on its available-for-sale securities at December 31, 2019. This compares to a net unrealized gain of $1.6 billion at December 31, 2018, with the year-over-year increase primarily driven by lower treasury rates and tighter credit spreads.

Capital

The quarter's average diluted share count of 200.0 million was down 7% from the fourth quarter of 2018, the result of repurchasing 10.4 million shares of stock at a cost of $640 million since December 31, 2018.

Book Value

As of December 31, 2019, book value per share, including AOCI, increased 44% from the prior-year period to $100.11. Book value per share, excluding AOCI, increased 5% from the prior-year period to $71.27.

The tables attached to this release define and reconcile the non-GAAP measures adjusted income from operations, adjusted operating ROE and BVPS, excluding AOCI, to net income, ROE and BVPS, including AOCI, calculated in accordance with GAAP. The tables also include a reconciliation of adjusted operating EPS excluding notable items to adjusted operating EPS.

This press release may contain statements that are forward-looking, and actual results may differ materially. Please see the Forward Looking Statements ? Cautionary Language at the end of this release for factors that may cause actual results to differ materially from our current expectations.

For other financial information, please refer to the company's fourth quarter 2019 statistical supplement available on its website, www.lfg.com/earnings.

Lincoln Financial Group will discuss the company's fourth quarter results with investors in a conference call beginning at 10:00 a.m. Eastern Time on Thursday, February 6, 2020. The conference call will be broadcast live through the company website at www.lfg.com/webcast. Please log on at least fifteen minutes prior to the call to register and download any necessary streaming media software. To participate via phone: (866) 394-4575 (U.S./Canada) or (678) 509-7536 (International). Ask for the Lincoln National Conference Call.

A replay of the call will be available by 1:00 p.m. Eastern Time on February 6, 2020 at www.lfg.com/webcast. Audio replay will be available from 1:00 p.m. Eastern Time on February 6, 2020 through 12:00 p.m. Eastern Time on February 13, 2020. To access the re-broadcast, dial: (855) 859-2056 (Domestic) or (404) 537-3406 (International). Enter conference code: 3788918.

About Lincoln Financial Group

Lincoln Financial Group provides advice and solutions that help empower people to take charge of their financial lives with confidence and optimism. Today, more than 17 million customers trust our retirement, insurance and wealth protection expertise to help address their lifestyle, savings and income goals, as well as to guard against long-term care expenses. Headquartered in Radnor, Pennsylvania, Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. The company had $275 billion in assets under management as of December 31, 2019. Lincoln Financial Group is a committed corporate citizen included on major sustainability indices including the Dow Jones Sustainability Index North America and FTSE4Good. Dedicated to diversity and inclusion, Lincoln earned perfect 100 percent scores on the Corporate Equality Index and the Disability Equality Index. Lincoln has also been recognized in Newsweek's Most Responsible Companies and is among Forbes' World's Best Employers, Best Large Employers, Best Employers for Diversity, Best Employers for Women and ranked on the JUST 100 list. Learn more at: www.LincolnFinancial.com. Follow us on Facebook, Twitter, LinkedIn, and Instagram. Sign up for email alerts at http://newsroom.lfg.com.

Explanatory Notes on Use of Non-GAAP Measures

Management believes that adjusted income from operations (adjusted operating income), adjusted operating return on equity, adjusted operating revenues, and adjusted operating EPS better explain the results of the company's ongoing businesses in a manner that allows for a better understanding of the underlying trends in the company's current business because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in most instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. Management also believes that using book value excluding accumulated other comprehensive income (AOCI) enables investors to analyze the amount of our net worth that is primarily attributable to our business operations. Book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.

For the historical periods, reconciliations of non-GAAP measures used in this press release to the most directly comparable GAAP measure may be included in this Appendix to the press release and/or are included in the Statistical Reports for the corresponding periods contained in the Earnings section of the Investor Relations page on our website: www.lfg.com/investor.

Definitions of Non-GAAP Measures Used in this Press Release

Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized adjusted income (loss) from operations are financial measures we use to evaluate and assess our results. Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity ("ROE"), as used in the press release, are non-GAAP financial measures and do not replace GAAP net income (loss), revenues and ROE, the most directly comparable GAAP measures.

Adjusted Income (Loss) from Operations

Adjusted income (loss) from operations is GAAP net income (loss) excluding the after-tax effects of the following items, as applicable:

Adjusted Operating Revenues

Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:

Adjusted Operating Return on Equity

Adjusted operating return on equity measures how efficiently we generate profits from the resources provided by our net assets.

Definition of Notable Items

Adjusted income (loss) from operations, excluding notable items, is a non-GAAP measure that excludes items which, in management's view, do not reflect the company's normal, ongoing operations.

Book Value Per Share, Excluding AOCI

Book value per share, excluding AOCI is calculated based upon a non-GAAP financial measure.

Special Note

Sales

Sales as reported consist of the following:

Lincoln National Corporation

Reconciliation of Net Income to Adjusted Income from Operations

 

(in millions, except per share data)

For the Quarter Ended

 

For the Year Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

$

4,344

 

$

4,531

 

$

17,258

 

$

16,424

Less:

 

 

 

 

 

 

 

 

 

 

 

Excluded realized gain (loss)

 

(171)

 

 

141

 

 

(794)

 

 

(46)

Amortization of DFEL on benefit ratio unlocking

 

2

 

 

(4)

 

 

6

 

 

(5)

Total Adjusted Operating Revenues

$

4,513

 

$

4,394

 

$

18,046

 

$

16,475

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) Available to Common

Stockholders ? Diluted

 

$

 

 

 

 

$

 

387

 

 

$

 

 

 

$

 

1,623

430

886

Less:

 

 

 

 

 

 

 

 

 

 

 

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 

 

 

 

 

(12)

 

 

 

 

 

 

(18)

(1)

-

Net Income (Loss)

 

431

 

 

399

 

 

886

 

 

1,641

Less:

 

 

 

 

 

 

 

 

 

 

 

Excluded realized gain (loss), after-tax

 

(135)

 

 

111

 

 

(627)

 

 

(37)

Benefit ratio unlocking, after-tax

 

91

 

 

(167)

 

 

277

 

 

(136)

Net impact from the Tax Cuts and Jobs Act

 

17

 

 

-

 

 

17

 

 

19

Acquisition and integration costs related to mergers

and acquisitions, after-tax

 

 

 

 

 

(20)

 

 

 

 

 

 

(67)

(24)

(103)

Gain (loss) on early extinguishment of debt, after-tax

 

-

 

 

-

 

 

(33)

 

 

(18)

Total adjustments

 

(51)

 

 

(76)

 

 

(469)

 

 

(239)

Adjusted Income (Loss) from Operations

$

482

 

$

475

 

$

1,355

 

$

1,880

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) Per Common Share -- Diluted

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

2.15

 

$

1.80

 

$

4.38

 

$

7.40

Adjusted income (loss) from operations

 

2.41

 

 

2.15

 

 

6.71

 

 

8.48

 

 

 

 

 

 

 

 

 

 

 

 

Average Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

Average equity, including average AOCI

$

19,844

 

$

14,710

 

$

17,973

 

$

15,517

Average AOCI

 

5,961

 

 

622

 

 

4,019

 

 

1,602

Average equity, excluding AOCI

 

13,883

 

 

14,088

 

 

13,954

 

 

13,915

Average goodwill

 

1,778

 

 

1,769

 

 

1,778

 

 

1,613

Average equity, excluding AOCI and goodwill

$

12,105

 

$

12,319

 

$

12,176

 

$

12,302

 

 

 

 

 

 

 

 

 

 

 

 

Return on Equity, Including AOCI

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) with average equity including goodwill

 

8.7%

 

 

10.9%

 

 

4.9%

 

 

10.6%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Return on Equity, Excluding

AOCI

 

 

 

 

 

 

 

 

 

 

 

Adjusted income (loss) from operations with average

equity including goodwill

 

 

 

 

 

13.5%

 

 

 

 

 

 

13.5%

13.9%

9.7%

Adjusted income (loss) from operations with average

equity excluding goodwill

 

 

 

 

 

15.4%

 

 

 

 

 

 

15.3%

15.9%

11.1%

 
(1)

The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans if the effect of equity classification would result in a more dilutive EPS

Lincoln National Corporation

Reconciliation of Notable Items

 

 

For the Quarter Ended

 

For the Year Ended

 

December 31,

 

December 31,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Income (Loss) from Operations EPS, As Reported

$

2.41

 

$

2.15

 

$

6.71

 

$

8.48

Less:

 

 

 

 

 

 

 

 

 

 

 

Notable items:

 

 

 

 

 

 

 

 

 

 

 

Unlocking/reserve adjustments

 

-

 

 

-

 

 

(1.99)

 

 

(0.01)

Total notable items

 

-

 

 

-

 

 

(1.99)

 

 

(0.01)

Adjusted Income (Loss) from Operations EPS, Excluding Notable Items

$

2.41

 

$

2.15

 

$

8.70

 

$

8.49

Lincoln National Corporation

Reconciliation of Book Value per Share

 

 

As of December 31,

 

2019

 

2018

 

 

 

 

 

 

Book value per share, including AOCI

$

100.11

 

$

69.71

Per share impact of AOCI

 

28.84

 

 

1.98

Book value per share, excluding AOCI

 

71.27

 

 

67.73

Lincoln National Corporation

Digest of Earnings

 

(in millions, except per share data)

 

 

For the Quarter Ended

December 31,

 

 

2019

 

2018

 

 

 

 

 

 

Revenues

$

4,344

 

$

4,531

 

 

 

 

 

 

Net Income (Loss)

$

431

 

$

399

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 

 

 

(1)

 

 

 

(12)

Net Income (Loss) Available to Common

Stockholders ? Diluted

 

$

 

430

 

 

$

 

387

 

 

 

 

 

 

Earnings (Loss) Per Common Share ? Basic

$

2.18

 

$

1.89

Earnings (Loss) Per Common Share ? Diluted

 

2.15

 

 

1.80

 

 

 

 

 

 

Average Shares ? Basic

 

197,534,951

 

 

211,553,516

Average Shares ? Diluted

 

200,005,404

 

 

214,970,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended

December 31,

 

 

 

 

2019

 

2018

 

 

 

 

 

 

 

Revenues

$

17,258

 

$

16,424

 

 

 

 

 

 

Net Income (Loss)

$

886

 

$

1,641

Adjustment for deferred units of LNC stock in our

deferred compensation plans (1)

 

 

 

-

 

 

 

 

(18)

Net Income (Loss) Available to Common

Stockholders ? Diluted

 

$

886

 

 

$

 

1,623

 

 

 

 

 

 

Earnings (Loss) Per Common Share ? Basic

$

4.41

 

$

7.60

Earnings (Loss) Per Common Share ? Diluted

 

4.38

 

 

7.40

 

 

 

 

 

 

Average Shares ? Basic

 

200,608,737

 

 

215,936,448

Average Shares ? Diluted

 

202,105,134

 

 

219,552,106

(1)

The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans if the effect of equity classification would be more dilutive to our diluted EPS.

Forward Looking Statements ? Cautionary Language

Certain statements made in this press release and in other written or oral statements made by Lincoln or on Lincoln's behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: "believe," "anticipate," "expect," "estimate," "project," "will," "shall" and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in Lincoln's businesses, prospective services or products, future performance or financial results, and the outcome of contingencies, such as legal proceedings. Lincoln claims the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including:

The risks and uncertainties included here are not exhaustive. Our most recent Form 10-K, as well as other reports that we file with the SEC, include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, Lincoln disclaims any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this press release.

The reporting of Risk Based Capital ("RBC") measures is not intended for the purpose of ranking any insurance company or for use in connection with any marketing, advertising or promotional activities.


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