Shares of Lincoln National Corporation LNC lost 5.7% since it reported third-quarter 2024 results on Oct. 31. Despite an earnings beat, the quarterly results were hurt by a fall in net investment income and an elevated expense level. Nevertheless, the downside was partly offset by growing insurance premiums and strong contributions from Group Protection and Retirement Plan Services segments.
Third-quarter adjusted earnings were $2.06 per share, which surpassed the Zacks Consensus Estimate by 25.6%. The bottom line witnessed a more than seven-fold increase year over year.
Adjusted operating revenues dipped 1.5% year over year to $4.6 billion. The top line missed the consensus mark by 0.4%.
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Lincoln National Corporation Price, Consensus and EPS Surprise
Lincoln National Corporation Price, Consensus and EPS Surprise
Lincoln National Corporation price-consensus-eps-surprise-chart | Lincoln National Corporation Quote
Key Takeaways From LNC’s Q3 Results
LNC’s estimated RBC ratio rose to more than 420% at the third-quarter end on the back of stronger-than-anticipated free cash flow and the divestiture of its wealth management business.
Insurance premiums improved 3.1% year over year to $1.61 billion, marginally lower than the Zacks Consensus Estimate. Fee income of $1.4 billion slipped 0.8% year over year, which marginally missed the consensus mark. Net investment income fell 5.6% year over year to $1.4 billion, higher than the consensus mark of $1.3 billion. Meanwhile, other revenues dropped 29.2% year over year.
Total expenses escalated 51.9% year over year to $4.8 billion. Benefits declined 10% year over year, while interest and debt expenses increased 2.4% year over year.
Lincoln National incurred a net loss of $528 million against the prior-year quarter’s net income of $853 million.
Lincoln National’s Segmental Performances
The Annuities segment recorded an operating income of $301 million, which advanced 21.4% year over year but fell short of the Zacks Consensus Estimate of $302.6 million. The metric benefited on the back of higher account balance and improved spread income. The unit's operating revenues dipped 0.2% year over year to $1.2 billion due to a 2% fall in net investment income and 30.9% decline in other revenues. However, the downside was partly offset by a 58.3% surge in insurance premiums. Total annuity deposits of $3.4 billion rose 23.6% year over year.
The Life Insurance segment reported an operating income of $22 million against the year-ago quarter’s loss of $173 million. Higher-than-expected alternative investment income drove the unit’s results. Operating revenues were $1.59 billion, which tumbled 7.8% year over year but beat the consensus mark of $1.53 billion. Total Life Insurance sales fell 15.3% year over year to $122 million. Total deposits of $1.3 billion dipped 0.8% year over year.
The Group Protection segment reported an operating income of $109 million, which soared 60.3% year over year and was higher than the Zacks Consensus Estimate of $80.6 million. The unit gained from prudent pricing, new business growth and strong persistency rates. Operating revenues grew 3.2% year over year to $1.4 billion, driven by a 3% rise in insurance premiums. Sales advanced 18.3% year over year to $84 million.
The Retirement Plan Services segment’s operating income increased 2.3% year over year to $44 million, higher than the Zacks Consensus Estimate of $39.5 million. The unit was aided by higher account balances, strong equity markets and cost management efforts. Operating revenues of $335 million improved 2.4% year over year. Total deposits climbed 54.8% year over year to $4.2 billion.
Other Operations incurred an operating loss of $84 million, narrower than the year-ago quarter’s loss of $102 million and the consensus mark of $102.9 million.
Financial Update (As of Sept. 30, 2024)
Lincoln National exited the third quarter with cash and invested cash of $6 billion, which climbed 78.7% from 2023-end level. Total assets of $396.8 billion increased 6.6% from the figure at 2023-end.
Long-term debt amounted to $5.9 billion, down 3.5% from the figure as of Dec. 31, 2023. Short-term debt totaled $300 million.
Total stockholders’ equity of $9 billion advanced 30.8% from the 2023-end level.
Book value per share, excluding accumulated other comprehensive income, was $63.03, which advanced 14% from the 2023-end level. Adjusted income from operations ROE improved 1,030 basis points year over year to 12.1% .
In the first nine months of 2024, net cash used in operations was $2.2 billion compared with $206 million in the prior-year comparable period.
LNC’s Capital Deployment Update
Lincoln National did not buy back shares in the third quarter. It paid out quarterly dividends of $80 million.
2024 Previous Guidance
Earlier, management expected Annuities’ operating income to be in the range of $1-$1.2 billion in 2024, the midpoint of which indicates growth of 2.5% year over year. Group Protection’s operating income was expected to be in the range of $300-$350 million, the midpoint of which implies 8.7% improvement from the 2023 figure.
The company expected Retirement Plan Services’ operating income to be in the range of $140-$180 million, the mid-point of which indicates a decline of 6.4% year over year. Life Insurance’s operating income was expected to be between break-even and $50 million, which compares favorably with an operating loss of $159 million in 2023.
LNC’s Zacks Rank
Lincoln National currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Of the insurance industry players that have reported third-quarter 2024 results so far, the bottom-line results of Arch Capital Group Ltd. ACGL, Reinsurance Group of America, Incorporated RGA and AXIS Capital Holdings Limited AXS beat the respective Zacks Consensus Estimate.
Arch Capital reported third-quarter operating income of $1.99 per share, which beat the Zacks Consensus Estimate by 2.6%. The bottom line decreased 13.6% year over year. Gross premiums written improved 20.2% year over year to $5.4 billion. Net premiums written climbed 20.6% year over year to $4 billion. Pre-tax net investment income increased 48.3% year over year to $399 million. Operating revenues of $4.4 billion rose 24.6% year over year. It beat the Zacks Consensus Estimate by 8.1%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $450 million, wider than a loss of $180 million incurred in the year-ago quarter. Arch Capital’s underwriting income decreased 25.4% year over year to $538 million. The combined ratio deteriorated 870 bps to 86.6. In the Insurance segment, net premiums written climbed 19.6% year over year to $1.8 billion. The unit’s underwriting income of $120 million was 7% lower than the year-ago number.
Chubb’s third-quarter core operating income of $5.72 per share beat the Zacks Consensus Estimate by 16%. The bottom line increased 15.6% year over year. Net premiums written improved 5.5% year over year to $13.8 billion. Pre-tax net investment income was $1.5 billion, up 14.7% year over year. Revenues of $15 billion missed the consensus estimate by 1.5% and improved 6.5% year over year.
Property and casualty (P&C) underwriting income was $1.4 billion, up 11.7% year over year. Chubb incurred a pre-tax P&C catastrophe loss, net of reinsurance and including reinstatement premiums of $765 million, which was wider than the year-ago catastrophe loss of $670 million. The P&C combined ratio improved 70 bps on a year-over-year basis to 87.7% . In the North America Commercial P&C Insurance segment, net premiums written increased 7.2% year over year to $5.5 billion.
AXIS Capital posted third-quarter 2024 operating income of $2.71 per share, which beat the Zacks Consensus Estimate by 8.4%. The bottom line increased 16% year over year. Total operating revenues of $1.5 billion beat the consensus estimate by 0.4%. The top line rose 6.2% year over year. Net premiums written increased 27% to $1.2 billion, attributable to a 10% increase in the insurance segment and 189% in the reinsurance segment. Net investment income increased 33% year over year to $205 million.
Pre-tax catastrophe and weather-related losses and net of reinsurance were $78 million. AXIS Capital’s underwriting income of $135.1 million decreased 8% year over year. The combined ratio deteriorated 40 basis points (bps) to 93.1. The Zacks Consensus Estimate was pegged at 94, while our estimate was 93.4. In the Insurance segment, net premiums earned increased 15.6% year over year to $1 billion. Meanwhile, the metric in the Reinsurance unit decreased 21.5% year over year to $342.8 million.
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