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Lincoln National (LNC) Q2 Earnings Beat on Annuities Strength
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Lincoln National Corporation (LNC - Free Report) reported better-than-expected second-quarter earnings on the back of solid contributions from the Annuities and Group Protection businesses and growing insurance premiums. However, the upside was partly offset by higher expenses, lower fee income and net investment income. Weaker performance in Life Insurance affected the results.
Its second-quarter 2024 adjusted earnings of $1.84 per share beat the Zacks Consensus Estimate by 3.4%. However, the bottom line declined 8.9% year over year.
Adjusted operating revenues of $4.5 billion dropped 4.3% year over year in the quarter under review. The top line lagged the consensus mark by 2.7%.
Lincoln National Corporation Price, Consensus and EPS Surprise
Thanks to its efforts to optimize the operating model, the company’s estimated RBC ratio has risen to more than 420% following the sale of the wealth management business.
Fee income declined 1.9% year over year to $1.3 billion, which missed the Zacks Consensus Estimate by 2.1%. Insurance premiums of $1.6 billion rose 0.8% year over year. The metric beat the consensus mark by 0.7%. Net investment income of $1.3 billion dipped 11.7% year over year and missed the consensus mark by 1.7%. Meanwhile, other revenues fell 5.9% year over year.
Total expenses jumped 74.3% year over year to $4.1 billion in the second quarter. Benefits fell 8.4% year over year, while interest and debt expenses witnessed a year-over-year increase of 2.4% during the same time frame.
Lincoln National’s net income of $895 million grew 75.1% year over year.
Inside Lincoln National’s Segments
The Annuities segment’s operating income of $297 million grew 9.6% year over year in the second quarter and beat the Zacks Consensus Estimate by 4.7%. The unit's operating revenues rose 1.6% year over year to $1.2 billion, driven by 7.5% growth in fee income. This was partly offset by a 37% decline in insurance premiums and a 0.5% fall in net investment income. Total annuity deposits were $3.8 billion, which increased 49.3% year over year.
The Life Insurance segment incurred an operating loss of $35 million against the year-ago quarter’s profit of $33 million. Operating revenues declined 14.1% year over year to $1.5 billion in the second quarter and lagged the consensus mark by 4.4%. Total Life Insurance sales amounted to $105 million, which tumbled 14.6% year over year. Total deposits fell 7.7% year over year to $1.2 billion.
Operating income in the Group Protection segment rose 19.3% year over year to $130 million in the quarter under review and surpassed the Zacks Consensus Estimate by 34.5%. The unit benefited on the back of prudent pricing and growing premiums. Operating revenues of $1.4 billion rose 2.9% year over year in the unit. Insurance premiums improved 2.8% year over year. Sales advanced 67.7% year over year to $161 million in the unit.
The Retirement Plan Services segment recorded an operating income of $40 million in the quarter under review, which fell 14.9% year over year and missed the consensus mark by 0.3%. The metric was hurt by a decline in spread income, partly offset by growing fee income. Operating revenues dipped 2.1% year over year to $327 million, lower than the Zacks Consensus Estimate by 0.8%. Total deposits of $3.3 billion increased 13.3% year over year, driven by strong recurring deposit growth.
Other Operations incurred an operating loss of $102 million in the second quarter, narrower than the year-ago quarter’s loss of $106 million. The metric was wider than the Zacks Consensus Estimate of a loss of $98.8 million.
Financial Update (As of Jun 30, 2024)
Lincoln National exited the second quarter with cash and invested cash of $5.5 billion, which increased from $3.4 billion at 2023-end. Total assets of $384.5 billion increased from the 2023-end level of $372.4 billion.
Long-term debt amounted to $5.72 billion, marginally up from the 2023-end figure of $5.7 billion. Short-term debt was at $450 million.
Stockholders’ equity climbed to $7.9 billion from $6.9 billion at 2023-end.
Book value per share, excluding accumulated other comprehensive income, was $66.37, up from the 2023-end level of $55.30. Adjusted income from operations ROE of 11.2% deteriorated 120 basis points year over year in the quarter under review.
In the first half of 2024, net cash used in operations was $2.2 billion compared with $252 million in the year-ago period.
Capital Deployment Update
Lincoln National did not buy back shares in the second quarter. It paid out quarterly dividends of $77 million.
2024 Previous Guidance
Management expected Annuities’ operating income to be in the range of $1-$1.2 billion in 2024, the midpoint implying growth of 2.5% year over year. Group’s operating income was expected to be in the range of $300-$350 million in 2024, the midpoint implying 8.7% growth from the year-ago figure.
The company expected Retirement Plan Service’s operating income to be in the range of $140-$180 million, indicating a decline of 6.4% year over year. Life Insurance’s operating income was expected to be between break-even and $50 million, up from an operating loss of $159 million in 2023.
The Zacks Consensus Estimate for W. R. Berkley’s current-year earnings is pegged at $3.99 per share, which indicates 21.7% year-over-year growth. It witnessed four upward estimate revisions in the past 30 days against two downward movements. The consensus mark for WRB’s current year revenues suggests an 11.5% increase from a year ago.
The Zacks Consensus Estimate for Progressive’s 2024 earnings indicates a 96.7% year-over-year surge. During the past month, PGR has witnessed 11 upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 24.1%.
The Zacks Consensus Estimate for Marsh & McLennan’s current-year earnings suggests a 9.3% year-over-year jump. During the past month, MMC has witnessed six upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues indicates 6.8% growth from a year ago.
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Lincoln National (LNC) Q2 Earnings Beat on Annuities Strength
Lincoln National Corporation (LNC - Free Report) reported better-than-expected second-quarter earnings on the back of solid contributions from the Annuities and Group Protection businesses and growing insurance premiums. However, the upside was partly offset by higher expenses, lower fee income and net investment income. Weaker performance in Life Insurance affected the results.
Its second-quarter 2024 adjusted earnings of $1.84 per share beat the Zacks Consensus Estimate by 3.4%. However, the bottom line declined 8.9% year over year.
Adjusted operating revenues of $4.5 billion dropped 4.3% year over year in the quarter under review. The top line lagged the consensus mark by 2.7%.
Lincoln National Corporation Price, Consensus and EPS Surprise
Lincoln National Corporation price-consensus-eps-surprise-chart | Lincoln National Corporation Quote
Q2 Key Takeaways
Thanks to its efforts to optimize the operating model, the company’s estimated RBC ratio has risen to more than 420% following the sale of the wealth management business.
Fee income declined 1.9% year over year to $1.3 billion, which missed the Zacks Consensus Estimate by 2.1%. Insurance premiums of $1.6 billion rose 0.8% year over year. The metric beat the consensus mark by 0.7%. Net investment income of $1.3 billion dipped 11.7% year over year and missed the consensus mark by 1.7%. Meanwhile, other revenues fell 5.9% year over year.
Total expenses jumped 74.3% year over year to $4.1 billion in the second quarter. Benefits fell 8.4% year over year, while interest and debt expenses witnessed a year-over-year increase of 2.4% during the same time frame.
Lincoln National’s net income of $895 million grew 75.1% year over year.
Inside Lincoln National’s Segments
The Annuities segment’s operating income of $297 million grew 9.6% year over year in the second quarter and beat the Zacks Consensus Estimate by 4.7%. The unit's operating revenues rose 1.6% year over year to $1.2 billion, driven by 7.5% growth in fee income. This was partly offset by a 37% decline in insurance premiums and a 0.5% fall in net investment income. Total annuity deposits were $3.8 billion, which increased 49.3% year over year.
The Life Insurance segment incurred an operating loss of $35 million against the year-ago quarter’s profit of $33 million. Operating revenues declined 14.1% year over year to $1.5 billion in the second quarter and lagged the consensus mark by 4.4%. Total Life Insurance sales amounted to $105 million, which tumbled 14.6% year over year. Total deposits fell 7.7% year over year to $1.2 billion.
Operating income in the Group Protection segment rose 19.3% year over year to $130 million in the quarter under review and surpassed the Zacks Consensus Estimate by 34.5%. The unit benefited on the back of prudent pricing and growing premiums. Operating revenues of $1.4 billion rose 2.9% year over year in the unit. Insurance premiums improved 2.8% year over year. Sales advanced 67.7% year over year to $161 million in the unit.
The Retirement Plan Services segment recorded an operating income of $40 million in the quarter under review, which fell 14.9% year over year and missed the consensus mark by 0.3%. The metric was hurt by a decline in spread income, partly offset by growing fee income. Operating revenues dipped 2.1% year over year to $327 million, lower than the Zacks Consensus Estimate by 0.8%. Total deposits of $3.3 billion increased 13.3% year over year, driven by strong recurring deposit growth.
Other Operations incurred an operating loss of $102 million in the second quarter, narrower than the year-ago quarter’s loss of $106 million. The metric was wider than the Zacks Consensus Estimate of a loss of $98.8 million.
Financial Update (As of Jun 30, 2024)
Lincoln National exited the second quarter with cash and invested cash of $5.5 billion, which increased from $3.4 billion at 2023-end. Total assets of $384.5 billion increased from the 2023-end level of $372.4 billion.
Long-term debt amounted to $5.72 billion, marginally up from the 2023-end figure of $5.7 billion. Short-term debt was at $450 million.
Stockholders’ equity climbed to $7.9 billion from $6.9 billion at 2023-end.
Book value per share, excluding accumulated other comprehensive income, was $66.37, up from the 2023-end level of $55.30. Adjusted income from operations ROE of 11.2% deteriorated 120 basis points year over year in the quarter under review.
In the first half of 2024, net cash used in operations was $2.2 billion compared with $252 million in the year-ago period.
Capital Deployment Update
Lincoln National did not buy back shares in the second quarter. It paid out quarterly dividends of $77 million.
2024 Previous Guidance
Management expected Annuities’ operating income to be in the range of $1-$1.2 billion in 2024, the midpoint implying growth of 2.5% year over year. Group’s operating income was expected to be in the range of $300-$350 million in 2024, the midpoint implying 8.7% growth from the year-ago figure.
The company expected Retirement Plan Service’s operating income to be in the range of $140-$180 million, indicating a decline of 6.4% year over year. Life Insurance’s operating income was expected to be between break-even and $50 million, up from an operating loss of $159 million in 2023.
Zacks Rank & Key Picks
LNC currently carries a Zacks Rank #3 (Hold).
Investors interested in the broader Finance space may look at some better-ranked players like W. R. Berkley Corporation (WRB - Free Report) , The Progressive Corporation (PGR - Free Report) and Marsh & McLennan Companies, Inc. (MMC - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for W. R. Berkley’s current-year earnings is pegged at $3.99 per share, which indicates 21.7% year-over-year growth. It witnessed four upward estimate revisions in the past 30 days against two downward movements. The consensus mark for WRB’s current year revenues suggests an 11.5% increase from a year ago.
The Zacks Consensus Estimate for Progressive’s 2024 earnings indicates a 96.7% year-over-year surge. During the past month, PGR has witnessed 11 upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 24.1%.
The Zacks Consensus Estimate for Marsh & McLennan’s current-year earnings suggests a 9.3% year-over-year jump. During the past month, MMC has witnessed six upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues indicates 6.8% growth from a year ago.