Lincoln Financial Group (NYSE: LNC) today reported net income for the second quarter of 2021 of $642 million, or $3.34 per diluted share available to common stockholders, compared to a net loss in the second quarter of 2020 of $(94) million, or $(0.49) per diluted share available to common stockholders. Second quarter adjusted income from operations was $608 million, or $3.17 per diluted share available to common stockholders, compared to adjusted income from operations of $187 million, or $0.97 per diluted share available to common stockholders, in the second quarter of 2020.1
"Second quarter adjusted income from operations was a record as our diversified business model and sources of earnings benefited from positive underwriting results, equity market tailwinds, and solid investment performance," said Dennis R. Glass, president and CEO of Lincoln Financial Group. "We believe strongly in our ability to deliver on our long-term financial targets given sales momentum, expense management opportunities, balance sheet strength and increased capital return. We are confident that our business model will continue to deliver strong performance."
____________________ |
1 Due to reporting a net loss for the three months ended June 30, 2020, basic shares were used in the diluted EPS and adjusted diluted EPS calculations for those periods as the use of diluted shares would have resulted in a lower loss per share. |
|
As of or For the
|
As of or For the
|
|||||||||
(in millions, except per share data) |
2021 |
2020 |
2021 |
2020 |
|||||||
Net Income (Loss) |
$ |
642 |
$ |
(94) |
$ |
867 |
$ |
(42) |
|||
Net Income (Loss) Available to Common Stockholders |
|
642 |
|
(94) |
|
867 |
|
(52) |
|||
Net Income (Loss) per Diluted Share Available to Common Stockholders (1) |
|
3.34 |
|
(0.49) |
|
4.51 |
|
(0.27) |
|||
Revenues |
|
4,851 |
|
3,517 |
|
9,386 |
|
7,942 |
|||
Adjusted Income (Loss) from Operations |
|
608 |
|
187 |
|
959 |
|
652 |
|||
Adjusted Income (Loss) from Operations per Diluted Share Available to Common Stockholders |
|
3.17 |
|
0.97 |
|
4.98 |
|
3.27 |
|||
Average Diluted Shares |
|
192.2 |
|
193.8 |
|
192.4 |
|
196.2 |
|||
Return on Equity (ROE), Including Accumulated Other Comprehensive Income (AOCI) (Net Income) |
|
12.4% |
|
-2.0% |
|
8.3% |
|
-0.5% |
|||
Adjusted Operating ROE, Excluding AOCI (Adjusted Income from Operations) |
|
17.3% |
|
5.5% |
|
13.8% |
|
9.6% |
|||
Book Value per Share (BVPS), Including AOCI |
$ |
115.00 |
$ |
107.28 |
$ |
115.00 |
$ |
107.28 |
|||
Book Value per Share, Excluding AOCI |
|
75.45 |
|
69.38 |
|
75.45 |
|
69.38 |
1 Due to reporting a net loss for the three months ended June 30, 2020 and six months ended June 30, 2020, basic shares were used in the diluted EPS and adjusted diluted EPS calculations for those periods as the use of diluted shares would have resulted in a lower loss per share. |
Operating Highlights ? Second Quarter 2021 vs. Second Quarter 2020
There were no notable items within adjusted income from operations for the current quarter or the prior-year quarter.
Second Quarter 2021 ? Segment Results
Annuities
Annuities reported income from operations of $323 million, up 36% compared to the prior-year quarter. The increase was driven by higher account values from strong equity market performance and favorable returns within the company's alternative investment portfolio.
Total annuity deposits of $3.2 billion were up 28% from the prior-year quarter. Total variable annuity sales of $3.0 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.
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.
Retirement Plan Services
Retirement Plan Services reported income from operations of $62 million, 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 both first-year sales and recurring deposits.
Net flows totaled $517 million for the quarter and $1.6 billion over the trailing twelve months. Average account values for the quarter of $94 billion were up 28% over the prior-year quarter.
Life Insurance
Life Insurance reported income from operations of $255 million compared to a loss from operations of $(37) million in the prior-year quarter driven by favorable returns within the company's alternative investment portfolio and improved mortality results as pandemic impacts have declined.
Total Life Insurance sales were $126 million compared to $159 million in the prior-year quarter, however sales increased 11% sequentially.
Average Life Insurance in-force of $917 billion grew 7% over the prior-year quarter, and average account values of $59 billion increased 12% over the same period.
Group Protection
Group Protection reported income from operations of $46 million in the quarter, 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.
The total loss ratio was 79% in the current quarter compared to 78% in the prior-year quarter with the slight increase driven by favorable dental utilization in the prior-year quarter.
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.
Other Operations
Other Operations reported a loss from operations of $(78) million versus a loss of $(82) 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:
Unrealized Gains and Losses
The company reported a net unrealized gain of $15.5 billion, pre-tax, on its available-for-sale securities at June 30, 2021. This compares to a net unrealized gain of $14.7 billion, pre-tax, at June 30, 2020, with the year-over-year increase primarily driven by tighter credit spreads.
Share Count
The quarter's average diluted share count of 192.2 million was down 1% from the second quarter of 2020, the result of repurchasing 5.2 million shares of stock at a cost of $305 million since June 30, 2020.
Book Value
As of June 30, 2021, book value per share, including AOCI, increased 7% from the prior-year period to $115.00. Book value per share, excluding AOCI, increased 9% from the prior-year period to $75.45.
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.
This press release contains 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 the company's current expectations.
For other financial information, please refer to the company's second quarter 2021 statistical supplement available on its website, http://www.lfg.com/investor.
Lincoln Financial Group will discuss the company's second quarter results with investors in a conference call beginning at 10:00 a.m. Eastern Time on Thursday, August 5, 2021. 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 August 5, 2021 at www.lfg.com/webcast. Audio replay will be available from 1:00 p.m. Eastern Time on August 5, 2021 through 12:00 p.m. Eastern Time on August 12, 2021. To access the re-broadcast, dial: (855) 859-2056 (Domestic) or (404) 537-3406 (International). Enter conference code: 1735199.
About Lincoln Financial Group
Lincoln Financial Group provides advice and solutions that help people 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, and 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 $324 billion in end-of-period account values as of June 30, 2021. 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, we earned perfect 100 percent scores on the Corporate Equality Index and the Disability Equality Index, and rank among Forbes' Best Large Employers and Best Employers for Women, and Newsweek's Most Responsible Companies. 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 Six Months Ended |
|||||||||
|
June 30, |
|
June 30, |
|||||||||
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|||||
|
|
|
|
|
||||||||
Total Revenues |
$ |
4,851 |
$ |
3,517 |
$ |
9,386 |
$ |
7,942 |
||||
Less: |
|
|
|
|
||||||||
Excluded realized gain (loss) |
|
(53) |
|
(694) |
|
(281) |
|
(770) |
||||
Amortization of DFEL on benefit ratio unlocking |
|
1 |
|
2 |
|
2 |
|
(7) |
||||
Total Adjusted Operating Revenues |
$ |
4,903 |
$ |
4,209 |
$ |
9,665 |
$ |
8,719 |
||||
|
|
|
|
|
||||||||
Net Income (Loss) Available to Common Stockholders ? Diluted | $ |
642 |
$ |
(94) |
$ |
867 |
$ |
(52) |
||||
Less: |
|
|
|
|
||||||||
Adjustment for deferred units of LNC stock in our deferred compensation plans (1) |
|
- |
|
- |
|
- |
|
(10) |
||||
Net Income (Loss) |
|
642 |
|
(94) |
|
867 |
|
(42) |
||||
Less: |
|
|
|
|
||||||||
Excluded realized gain (loss), after-tax |
|
(43) |
|
(548) |
|
(223) |
|
(609) |
||||
Benefit ratio unlocking, after-tax |
|
77 |
|
282 |
|
131 |
|
(67) |
||||
Acquisition and integration costs related to mergers and acquisitions, after-tax |
|
- |
|
(3) |
|
- |
|
(6) |
||||
Gain (loss) on early extinguishment of debt, after-tax |
|
- |
|
(12) |
|
- |
|
(12) |
||||
Total adjustments |
|
34 |
|
(281) |
|
(92) |
|
(694) |
||||
Adjusted Income (Loss) from Operations |
$ |
608 |
$ |
187 |
$ |
959 |
$ |
652 |
||||
|
|
|
|
|
||||||||
Earnings (Loss) Per Common Share ? Diluted (2) |
|
|
|
|
||||||||
Net income (loss) |
$ |
3.34 |
$ |
(0.49) |
$ |
4.51 |
$ |
(0.27) |
||||
Adjusted income (loss) from operations |
|
3.17 |
|
0.97 |
|
4.98 |
|
3.27 |
||||
|
|
|
|
|
||||||||
Average Stockholders' Equity |
|
|
|
|
||||||||
Average equity, including average AOCI |
$ |
20,669 |
$ |
18,653 |
$ |
20,908 |
$ |
18,393 |
||||
Average AOCI |
|
6,620 |
|
5,164 |
|
6,983 |
|
4,751 |
||||
Average equity, excluding AOCI |
|
14,049 |
|
13,489 |
|
13,925 |
|
13,642 |
||||
Average goodwill |
|
1,778 |
|
1,778 |
|
1,778 |
|
1,778 |
||||
Average equity, excluding AOCI and goodwill |
$ |
12,271 |
$ |
11.711 |
$ |
12,147 |
$ |
11,864 |
||||
|
|
|
|
|
||||||||
Return on Equity, Including AOCI |
|
|
|
|
||||||||
Net income (loss) with average equity including goodwill |
|
12.4% |
|
-2.0% |
|
8.3% |
|
-0.5% |
||||
|
|
|
|
|
||||||||
Adjusted Operating Return on Equity, Excluding AOCI |
|
|
|
|
||||||||
Adjusted income (loss) from operations with average equity including goodwill |
|
17.3% |
|
5.5% |
|
13.8% |
|
9.6% |
||||
Adjusted income (loss) from operations with average equity excluding goodwill |
|
19.8% |
|
6.4% |
|
15.8% |
|
11.0% |
(1) |
If the effect of equity classification would result in a more dilutive EPS, 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. |
(2) |
In periods where a net loss or adjusted loss from operations is presented, basic shares are used in the diluted EPS and adjusted diluted EPS calculations, as the use of diluted shares would result in a lower loss per share. |
Lincoln National Corporation |
||||||
Reconciliation of Book Value per Share |
||||||
|
As of June 30, |
|||||
|
2021 |
2020 |
||||
|
|
|
||||
Book value per share, including AOCI |
$ |
115.00 |
$ |
107.28 |
||
Per share impact of AOCI |
|
39.55 |
|
37.90 |
||
Book value per share, excluding AOCI |
|
75.45 |
|
69.38 |
Lincoln National Corporation |
||||||
Digest of Earnings |
||||||
(in millions, except per share data) |
|
|||||
|
For the Quarter Ended
|
|||||
|
2021 |
2020 |
||||
|
|
|
||||
Revenues |
$ |
4,851 |
$ |
3,517 |
||
|
|
|
||||
Net Income (Loss) |
$ |
642 |
$ |
(94) |
||
Adjustment for deferred units of LNC stock in our deferred compensation plans (1) |
|
- |
|
- |
||
Net Income (Loss) Available to Common Stockholders ? Diluted |
$ |
642 |
$ |
(94) |
||
|
|
|
||||
Earnings (Loss) Per Common Share ? Basic |
$ |
3.38 |
$ |
(0.49) |
||
Earnings (Loss) Per Common Share ? Diluted (2) |
|
3.34 |
|
(0.49) |
||
|
|
|
||||
Average Shares ? Basic |
|
189,987,670 |
|
193,228,547 |
||
Average Shares ? Diluted |
|
192,202,398 |
|
193,776,452 |
||
|
|
|
||||
|
|
|
||||
|
|
|
||||
|
For the Six Months Ended
|
|||||
|
2021 |
2020 |
||||
|
|
|
||||
Revenues |
$ |
9,386 |
$ |
7,942 |
||
|
|
|
||||
Net Income (Loss) |
$ |
867 |
$ |
(42) |
||
Adjustment for deferred units of LNC stock in our deferred compensation plans (1) |
|
- |
|
(10) |
||
Net Income (Loss) Available to Common Stockholders ? Diluted |
$ |
867 |
$ |
(52) |
||
|
|
|
||||
Earnings (Loss) Per Common Share ? Basic |
$ |
4.54 |
$ |
(0.22) |
||
Earnings (Loss) Per Common Share ? Diluted (2) |
|
4.51 |
|
(0.27) |
||
|
|
|
||||
Average Shares ? Basic |
|
190,878,951 |
|
194,152,672 |
||
Average Shares ? Diluted |
|
192,362,012 |
|
196,236,491 |
(1) |
If the effect of equity classification would result in a more dilutive EPS, 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. |
(2) |
In periods where a net loss or adjusted loss from operations is presented, basic shares are used in the diluted EPS and adjusted diluted EPS calculations, as the use of diluted shares would result in a lower loss per share. |
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. Forward-looking statements may contain words like: "anticipate," "believe," "estimate," "expect," "project," "shall," "will," 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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