Lincoln Financial Group (NYSE: LNC) today reported financial
results for the third quarter ended September 30, 2023.
- Net income available to common stockholders of $4.79 per
diluted share
- Adjusted operating income available to common stockholders of
$0.23 per diluted share and included:
- Net unfavorable notable items of $0.84 per diluted share
related to the company’s annual review of reserve assumptions
and
- An additional unfavorable impact of $0.41 per diluted share
primarily related to items impacting the Life Insurance
business
- Group Protection earnings were impacted by higher life severity
and weaker disability incidence, though underlying margin expansion
remains on track
- Sequential sales growth in Retail Solutions businesses and
strong sales pipeline in Workplace Solutions businesses heading
into the fourth quarter
- Expenses increased year-over-year, pressuring earnings across
all four business segments
- Favorable credit experience this quarter as credit portfolio
continues to be 97% above investment grade
- Estimated RBC ratio was stable and ended the quarter in the 375
- 385% range
- Significant progress made towards expected close of Fortitude
Re transaction
“Our earnings this quarter did not meet our expectations and
reflect that our progress will not always be linear, but I am
confident in our path forward,” said Ellen Cooper, Chairman,
President and CEO of Lincoln Financial Group. “Our Group business,
which produced notably strong performance in the first half of the
year, delivered lower than anticipated results this quarter largely
driven by higher severity in group life. Across the enterprise,
expenses are elevated and are a critical area of focus and
opportunity as we look forward. We achieved sequential sales growth
in our Retail Solutions businesses and have strong sales pipelines
in all four of our businesses heading into the fourth quarter.
Additionally, this year’s annual assumption review was
comprehensive, and I feel confident in our go-forward assumptions.
Our risk-based capital position was stable in the quarter as we
continue to be focused on executing on our strategy to rebuild
capital.”
The company reported net income available to common stockholders
for the third quarter of 2023 of $819 million, or $4.79 per diluted
share, compared to a net loss available to common stockholders in
the third quarter of 2022 of $1.8 billion, or $10.47 per diluted
share. Third quarter adjusted income from operations available to
common stockholders was $39 million, or $0.23 per diluted share,
compared to adjusted loss from operations available to common
stockholders of $2.0 billion, or $(11.49) per diluted share, in the
third quarter of 2022.
As of or For the Three
Months Ended September 30,
As of or For the Nine
Months Ended September 30,
(in millions, except per share data)
2023
2022 (2)
2023
2022 (2)
Net Income (Loss)
$ 853
$(1,776)
$ 483
$ 545
Net Income (Loss) Available to Common
Stockholders
819
(1,777)
410
537
Net Income (Loss) per Diluted Share
Available to Common Stockholders(1)
4.79
(10.47)
2.40
3.10
Revenues
4,203
4,672
10,946
14,969
Adjusted Income (Loss) from Operations
73
(1,949)
715
(1,301)
Adjusted Income (Loss) from Operations
Available to Common Stockholders
39
(1,950)
642
(1,309)
Adjusted Income (Loss) from Operations per
Diluted Share Available to Common Stockholders(1)
0.23
(11.49)
3.77
(7.63)
Average Basic Shares
169.6
169.7
169.5
171.6
Average Diluted Shares
170.9
171.1
170.6
173.4
Net Income (Loss) Return on Equity
("ROE")
75.7%
NM
11.6%
6.2%
Adjusted Income (Loss) from Operations
Available to Common Stockholders, Excluding AOCI and Preferred
Stock ROE
1.5%
-73.1%
8.6%
-16.2%
Adjusted Income (Loss) from Operations
ROE
1.4%
-60.7%
9.3%
-13.3%
Book Value per Share (BVPS), Including
AOCI
$ 13.04
$ 16.45
$ 13.04
$ 16.45
Book Value per Share, Excluding AOCI
63.03
57.46
63.03
57.46
Adjusted Book Value per Share
63.53
68.53
63.53
68.53
(1)
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.
(2)
Prior-year numbers have been adjusted to
reflect LDTI accounting.
The current quarter’s adjusted income from operations available
to common stockholders included net unfavorable notable items of
$144 million, $0.84 per share, related to the company’s annual
review of reserve assumptions. As adjusted for the adoption of
long-duration targeted improvements, or LDTI, the prior-year
quarter included net unfavorable notable items of $2.1 billion, or
$12.47 per share, related to the company’s annual review of reserve
assumptions.
In addition to the impact of unfavorable notable items, this
quarter’s adjusted income from operations available to common
stockholders included an unfavorable impact of $0.41 per diluted
share consisting of:
- $0.13 per diluted share from alternative investment income
below long-term targeted levels,
- $0.13 per diluted share related to unclaimed property
identified by a process enhancement largely impacting Life
Insurance,
- $0.09 per diluted share related to a Life Insurance surrender
benefit program that concluded this quarter, and
- $0.06 per diluted share related to legal accruals.
The prior-year quarter included an unfavorable impact of $0.62
per diluted share from alternative investment income below
long-term targeted levels, and no impact from the other items
listed.
Third Quarter 2023 – Segment Results
Annuities Annuities reported income from operations of
$248 million, down 10% compared to the prior-year quarter. The
decrease was primarily due to higher expenses. Current quarter
income from operations included net unfavorable notable items of
$12 million related to the company’s annual review of reserve
assumptions, while prior-year results included net favorable
notable items of $1 million related to the company’s annual review
of reserve assumptions.
Total annuity sales of $2.7 billion were down 16% from the
prior-year quarter; however, sequentially, total annuity sales
increased by 6% driven by higher fixed and traditional variable
annuity sales. Net outflows were $874 million in the quarter
compared to net inflows of $322 million in the prior-year
quarter.
Average account balances, net of reinsurance, for the quarter of
$151 billion were up 4% from the prior-year quarter. Variable
annuities with living benefits represented 44% of total annuity
account balances, net of reinsurance, a decrease of 3 percentage
points compared to the prior-year quarter. RILA represented 17% of
total annuity account balances, net of reinsurance, an increase of
4 percentage points compared to the prior-year quarter.
Life Insurance Life Insurance reported a loss from
operations of $173 million compared to a loss from operations of
$2.2 billion in the prior-year quarter. Current quarter income from
operations included net unfavorable notable items of $156 million
related to the company’s annual review of reserve assumptions,
while prior-year results included net unfavorable notable items of
$2.1 billion related to the company’s annual review of reserve
assumptions.
Total Life sales of $144 million were down 16% from the
prior-year quarter; sequentially, total Life sales were up 17%,
driven largely by executive benefits sales.
Group Protection Group Protection reported income from
operations of $68 million in the quarter compared to income from
operations of $12 million in the prior-year quarter. The increase
was primarily driven by improved disability underwriting results.
Current quarter income from operations included net favorable
notable items of $24 million related to the company’s annual review
of reserve assumptions, compared to an unfavorable $12 million in
the prior year.
The total loss ratio was 75% in the current quarter compared to
81% in the prior-year quarter with the improvement driven by lower
disability incidence.
Insurance premiums of $1.3 billion in the quarter were up 4%
compared to the prior-year quarter. Group Protection sales for the
quarter were $71 million, down 19% compared to the prior-year
quarter, partially offset by 26% growth in supplemental health
sales.
Retirement Plan Services Retirement Plan Services
reported income from operations of $43 million, down 9% compared to
the prior-year quarter. The decrease was primarily driven by higher
expenses, partially offset by higher fee and spread income. The
current quarter and prior-year quarter included no notable items
related to the company’s annual review of reserve assumptions.
Total deposits for the quarter of $2.7 billion were down 13%
compared to the prior-year quarter. Net outflows totaled $272
million for the quarter while trailing-twelve-months’ net inflows
were $515 million.
Average account balances for the quarter of $96 billion were up
9% from the prior-year quarter.
Other Operations Other Operations reported a loss from
operations of $113 million versus a loss of $112 million in the
prior-year quarter.
Third Quarter Highlights - Realized Gains, Losses, and Other
/ Impacts to Net Income Realized gains/losses and other impacts
to net income (after-tax) in the quarter were primarily driven
by:
- $1.0 billion gain from annuity product market risk benefits and
the associated hedging programs, primarily driven by the rise in
interest rates.
- $369 million after-tax impairment of fixed maturity
available-for-sale (AFS) securities in an unrealized loss position
for the three months ended September 30, 2023, resulting from the
company’s intent to sell these securities as part of the previously
announced Fortitude Re reinsurance transaction. Within the
investment portfolio anticipated to be sold in the transaction,
there are additional fixed maturity AFS securities in an unrealized
gain position of approximately $164 million, after-tax, as of
September 30, 2023. Pursuant to the applicable accounting guidance,
the Company impaired the securities in a loss position down to fair
market value upon entry into the agreement with Fortitude Re in the
second quarter of 2023 and will recognize a gain for any securities
in an unrealized gain position at the time when the transaction
closes.
Unrealized Gains and Losses The company reported a net
unrealized loss of $14.2 billion, pre-tax, on its
available-for-sale securities as of September 30, 2023. This
compares to a net unrealized loss of $13.5 billion, pre-tax, as of
September 30, 2022, with the year-over-year decrease primarily
driven by higher treasury rates.
Capital and Liquidity Holding company available liquidity
was $455 million as of September 30, 2023, compared to $756 million
in the prior-year quarter due to the payment of a $500 million debt
maturity.
As of September 30, 2023, the estimated RBC ratio was in the
375-385% range.
Versus the prior-year period, as of September 30, 2023, book
value per share, including AOCI, decreased 21% to $13.04, book
value per share, excluding AOCI, increased 10% to $63.03, and
adjusted book value per share decreased 7% to $63.53.
There was no negative impact to statutory capital related to the
annual review of reserve assumptions.
The tables attached to this release define and reconcile the
non-GAAP measures adjusted income (loss) from operations, adjusted
income (loss) from operations available to common stockholders,
adjusted income (loss) from operations available to common
stockholders, excluding AOCI and preferred stock ROE, adjusted
income from operations ROE, book value per share, excluding AOCI,
and adjusted book value per share to net income (loss), net income
(loss) available to common stockholders, net income (loss) ROE and
book value per share, 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
third quarter 2023 statistical supplement available on its website
http://www.lincolnfinancial.com/investor.
Conference Call Information Lincoln Financial Group will
discuss the company’s third quarter results with investors in a
conference call beginning at 10:00 a.m. Eastern Time on Thursday,
November 2, 2023.
The conference call will be broadcast live through the company
website at www.lincolnfinancial.com/webcast. Please log on to the
webcast at least 15 minutes prior to the start of the conference
call to download and install any necessary streaming media
software. A replay of the call will be available by 1:00 p.m.
Eastern Time on November 2, 2023 at
www.lincolnfinancial.com/webcast.
About Lincoln Financial Group Lincoln Financial Group
helps people to plan, protect and retire with confidence. As of
Dec. 31, 2022, approximately 16 million customers trust our
guidance and solutions across four core businesses – annuities,
life insurance, group protection and retirement plan services. As
of September 30, 2023, the company had $290 billion in
end-of-period account balances, net of reinsurance. Headquartered
in Radnor, Pa., Lincoln Financial Group is the marketing name for
Lincoln National Corporation (NYSE: LNC) and its affiliates. Learn
more at LincolnFinancial.com.
Explanatory Notes on Use of Non-GAAP
Measures Management believes that adjusted income (loss)
from operations (or adjusted operating income), adjusted income
(loss) from operations available to common stockholders, adjusted
income (loss) from operations available to common stockholders,
excluding AOCI and preferred stock ROE, adjusted income (loss) from
operations ROE, adjusted operating revenues, and adjusted income
(loss) from operations per diluted share available to common
stockholders 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 as 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”),
and adjusted book value per share 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 are
unpredictable and can fluctuate significantly from period to
period, primarily based on changes in interest rates. Adjusted book
value per share is useful to investors because it eliminates the
effect of items that are unpredictable and can fluctuate
significantly from period to period, primarily based on changes in
equity markets and 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 income (loss)
from operations available to common stockholders, adjusted
operating revenues, adjusted income (loss) from operations
available to common stockholders, excluding AOCI and preferred
stock ROE and adjusted income (loss) from operations ROE (in each
case including and excluding the effect of average goodwill), book
value per share, excluding AOCI, and adjusted book value per share
are financial measures we use to evaluate and assess our results.
Adjusted income (loss) from operations, adjusted income (loss) from
operations available to common stockholders, adjusted operating
revenues, adjusted income (loss) from operations available to
common stockholders, excluding AOCI and preferred stock ROE,
adjusted income (loss) from operations ROE, book value per share,
excluding AOCI, and adjusted book value per share, as used in the
press release, are non-GAAP financial measures and do not replace
GAAP net income (loss), net income (loss) available to common
stockholders, revenues, net income (loss) ROE and book value per
share, including AOCI, 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:
- Items related to annuity product features, which include
changes in MRBs, including gains and losses and benefit payments
(“MRB-related impacts”), changes in the fair value of the
derivative instruments we hold to hedge GLB and GDB riders, net of
fee income allocated to support the cost of hedging them, and
changes in the fair value of the embedded derivative liabilities of
our indexed annuity contracts and the associated index options we
hold to hedge them, including collateral expense associated with
the hedge program (collectively, “net annuity product
features”);
- Items related to life insurance product features, which include
changes in the fair value of derivatives we hold as part of VUL
hedging, changes in reserves resulting from benefit ratio unlocking
associated with the impact of capital markets, and changes in the
fair value of the embedded derivative liabilities of our IUL
contracts and the associated index options we hold to hedge them
(collectively, “net life insurance product features”);
- Credit loss-related adjustments on fixed maturity AFS
securities, mortgage loans on real estate and reinsurance-related
assets (“credit loss-related adjustments”);
- Changes in the fair value of equity securities, certain
derivatives, certain other investments and realized gains (losses)
on sales, disposals and impairments of financial assets
(collectively, “investment gains (losses)”);
- Changes in the fair value of reinsurance-related embedded
derivatives, trading securities and mortgage loans on real estate
electing the fair value option (“changes in the fair value of
reinsurance-related embedded derivatives, trading securities and
certain mortgage loans”);
- Income (loss) from the initial adoption of new accounting
standards, regulations and policy changes;
- Income (loss) from reserve changes, net of related
amortization, on business sold through reinsurance;
- Transaction and integration costs related to mergers and
acquisitions including the acquisition or divestiture, through
reinsurance or other means, of businesses or blocks of
business;
- Gains (losses) on modification or early extinguishment of
debt;
- Losses from the impairment of intangible assets and gains
(losses) on other non-financial assets; and
- Income (loss) from discontinued operations.
Adjusted Income (Loss) from Operations Available to Common
Stockholders
Adjusted income (loss) from operations available to common
stockholders is defined as after-tax adjusted income (loss) from
operations less preferred stock dividends and the adjustment for
deferred units of LNC stock in our deferred compensation plans.
Adjusted Operating Revenues
Adjusted operating revenues represent GAAP revenues excluding
the pre-tax effects of the following items, as applicable:
- Changes in the fair value of the derivative instruments we hold
to hedge GLB and GDB riders, net of fee income allocated to support
the cost of hedging them, and changes in the fair value of the
embedded derivative liabilities of our indexed annuity and IUL
contracts and the associated index options we hold to hedge them
(collectively, “revenue adjustments from annuity and life insurance
product features”);
- Credit loss-related adjustments;
- Investment gains (losses);
- Changes in the fair value of reinsurance-related embedded
derivatives, trading securities and certain mortgage loans;
- Revenue adjustments from the initial adoption of new accounting
standards; and
- Amortization of deferred gains arising from reserve changes on
business sold through reinsurance.
Adjusted Income (Loss) From Operations Available to Common
Stockholders, Excluding AOCI and Preferred Stock ROE
Adjusted income (loss) from operations available to common
stockholders, excluding AOCI and preferred stock ROE measures how
efficiently we generate profits from the resources provided by our
net assets.
- It is calculated by dividing annualized adjusted income (loss)
from operations available to common stockholders by average
stockholders’ equity, excluding AOCI and preferred stock.
- Management believes this metric is useful to investors because
it eliminates the effect of market movements on ROE that are
unpredictable and can fluctuate significantly from period to
period, primarily related to changes in interest rates.
- Management evaluates ROE by both including and excluding the
effect of average goodwill.
Adjusted Income (Loss) from Operations ROE
Adjusted income (loss) from operations ROE is calculated based
upon a non-GAAP financial measure.
- It is calculated by dividing annualized adjusted income (loss)
from operations available to common stockholders by adjusted
average stockholders’ equity.
- Management believes this metric is useful to investors because
it eliminates the effect of market movements on ROE that are
unpredictable and can fluctuate significantly from period to
period, primarily related to changes in equity markets and interest
rates.
- Management evaluates ROE by both including and excluding the
effect of average goodwill.
Book Value Per Share, Excluding AOCI
Book value per share, excluding AOCI, is calculated based upon a
non-GAAP financial measure.
- It is calculated by dividing (a) stockholders’ equity,
excluding AOCI and preferred stock, by (b) common shares
outstanding.
- We provide book value per share, excluding AOCI, to enable
investors to analyze the amount of our net worth that is primarily
attributable to our business operations.
- Management believes 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.
- Book value per share is the most directly comparable GAAP
measure.
Adjusted Book Value Per Share
Adjusted book value per share is calculated based upon a
non-GAAP financial measure.
- It is calculated by dividing (a) stockholders’ equity,
excluding AOCI, preferred stock and MRB-related impacts by (b)
common shares outstanding.
- We provide adjusted book value per share to enable investors to
analyze the amount of our net worth that is primarily attributable
to our business operations.
- Management believes adjusted book value per share is useful to
investors because it eliminates the effect of market movements that
are unpredictable that can fluctuate significantly from period to
period, primarily based on changes in equity markets and interest
rates.
- Book value per share is the most directly comparable GAAP
measure.
Other Definitions
Notable Items
Notable items are items which, in management’s view, do not
reflect the company’s normal, ongoing operations.
- We believe highlighting notable items included in adjusted
income (loss) from operations enables investors to better
understand the fundamental trends in its results of operations and
financial condition.
Holding Company Available Liquidity
Holding company available liquidity consists of cash and
invested cash, excluding cash held as collateral, and certain
short-term investments that can be readily converted into cash, net
of commercial paper outstanding.
Special Note
Sales
Sales as reported consist of the following:
- Annuities and Retirement Plan Services – deposits from new and
existing customers; Universal life insurance (“UL”), indexed
universal life insurance (“IUL”), variable universal life insurance
(“VUL”) – first-year commissionable premiums plus 5% of excess
premiums received;
- MoneyGuard® linked-benefit products – MoneyGuard® (UL), 15% of
total expected premium deposits, and MoneyGuard Market Advantage℠
(VUL), 150% of commissionable premiums;
- Executive Benefits – insurance and corporate-owned UL and VUL,
first-year commissionable premiums plus 5% of excess premium
received, and single premium bank-owned UL and VUL, 15% of single
premium deposits;
- Term – 100% of annualized first-year premiums; and
- Group Protection – annualized first-year premiums from new
policies.
Lincoln National
Corporation
Reconciliation of Net Income
to Adjusted Income from Operations
(in millions, except per share data)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2023
2022
2023
2022
Net Income (Loss) Available to Common Stockholders – Diluted
$
819
(1,777
)
$
410
$
537
Less:
Preferred stock dividends declared
(34
)
-
(71
)
-
Adjustment for deferred units of LNC stock in our deferred
compensation plans (1)
-
(1
)
(2
)
(8
)
Net Income (Loss)
853
(1,776
)
483
545
Less:
Net annuity product features,
after-tax
1,045
893
850
2,591
Net life insurance product features,
after-tax
85
20
(133
)
16
Credit loss-related adjustments,
after-tax
(21
)
(104
)
(41
)
(96
)
Investment gains (losses), after-tax
(2)
(306
)
10
(880
)
5
Changes in the fair value of
reinsurance-related embedded derivatives, trading securities and
certain mortgage loans, after-tax
(23
)
(12
)
(21
)
(36
)
Impairment of intangibles
-
(634
)
-
(634
)
Transaction and integration costs related
to mergers, acquisitions and divestitures, after-tax (3)
-
-
(7
)
-
Total adjustments
780
173
(232
)
1,846
Adjusted Income (Loss) from
Operations
$
73
$
(1,949
)
$
715
$
(1,301
)
Earnings (Loss) Per Common Share –
Diluted (4)
Net income (loss)
$
4.79
$
(10.47
)
$
2.40
$
3.10
Adjusted income (loss) from operations
0.23
(11.49
)
3.77
(7.63
)
Stockholders’ Equity, Average
Stockholders’ equity
$
4,509
$
6,057
$
5,567
$
11,645
Less:
Preferred stock
986
-
986
-
AOCI
(6,792
)
(4,610
)
(5,425
)
852
Stockholders’ equity, excluding AOCI and
preferred stock
10,315
10,667
10,006
10,793
MRB-related impacts
986
(2,177
)
(95
)
(2,359
)
GLB and GDB hedge instruments gains
(losses) (5)
(1,519
)
N/A
(921
)
N/A
Adjusted average stockholders’ equity
$
10,848
$
12,844
$
11,022
$
13,152
Return on Equity
Net income (loss) ROE
75.7
%
NM
11.6
%
6.2
%
Adjusted income (loss) from operations available to common
stockholders, excluding AOCI and preferred stock ROE
1.5
%
-73.1
%
8.6
%
-16.2
%
Adjusted income (loss) from operations ROE
1.4
%
-60.7
%
9.3
%
-13.3
%
(1)
We exclude deferred units of LNC stock
that are antidilutive from our diluted earnings per share
calculation.
(2)
Includes a $369 million and $862 million
after-tax impairment of fixed maturity AFS securities in an
unrealized loss position for the three and nine months ended
September 30, 2023, respectively, resulting from the Company’s
intent to sell these securities as part of the previously announced
Fortitude Re reinsurance transaction. Within the investment
portfolio anticipated to be sold in the transaction, there are
additional fixed maturity AFS securities in an unrealized gain
position of approximately $164 million after-tax as of September
30, 2023. Pursuant to the applicable accounting guidance, the
Company impaired the securities in a loss position down to fair
market value upon entry into the agreement in the second quarter
and recognized additional impairment of certain of these securities
during the third quarter due to higher interest rates. The Company
will recognize a gain for any securities in an unrealized gain
position at the time when the transaction closes.
(3)
Includes costs pertaining to the Fortitude
Re reinsurance transaction.
(4)
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.
(5)
For periods beginning on or after January
1, 2023, gains (losses) on our GLB and GDB hedge instruments are
excluded from adjusted stockholders' equity to align to the updated
hedge program.
Lincoln National
Corporation
Reconciliation of Book Value
per Share
As of September 30,
2023
2022
Book Value Per Common Share
Book Value Per Share
$
13.04
$
16.45
Less:
AOCI
(49.99
)
(41.01
)
Book value per share, excluding AOCI
63.03
57.46
Less:
MRB-related gains (losses)
9.11
(11.07
)
GLB and GDB hedge instruments gains
(losses) (1)
(9.61
)
N/A
Adjusted book value per share
$
63.53
$
68.53
(1)
For periods beginning on or after January
1, 2023, gains (losses) on our GLB and GDB hedge instruments are
excluded from adjusted stockholders’ equity to align to the updated
hedge program.
Lincoln National
Corporation
Digest of Earnings
(in millions, except per share data)
For the Three Months
Ended September 30,
2023
2022
Revenues
$
4,203
$
4,672
Net Income (Loss)
$
853
$
(1,776
)
Preferred stock dividends declared
(34
)
-
Adjustment for deferred units of LNC stock
in our deferred compensation plans (1)
-
(1
)
Net Income (Loss) Available to
Common Stockholders – Diluted
$
819
$
(1,777
)
Earnings (Loss) Per Common Share –
Basic
$
4.82
$
(10.46
)
Earnings (Loss) Per Common Share –
Diluted (2)
4.79
(10.47
)
Average Shares – Basic
169,645,881
169,706,526
Average Shares – Diluted
170,890,502
171,095,360
For the Nine Months
Ended September 30,
2023
2022
Revenues
$
10,946
$
14,969
Net Income (Loss)
$
483
$
545
Preferred stock dividends declared
(71
)
-
Adjustment for deferred units of LNC stock
in our deferred compensation plans (1)
(2
)
(8
)
Net Income (Loss) Available to
Common Stockholders – Diluted
$
410
$
537
Earnings (Loss) Per Common Share –
Basic
$
2.43
$
3.18
Earnings (Loss) Per Common Share –
Diluted (2)
2.40
3.10
Average Shares – Basic
169,529,509
171,647,108
Average Shares – Diluted
170,625,444
173,396,079
(1)
We exclude deferred units of LNC stock
that are antidilutive from our diluted earnings per share
calculation.
(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:
- Weak general economic and business conditions that may affect
demand for our products, account balances, investment results,
guaranteed benefit liabilities, premium levels and claims
experience;
- Adverse global capital and credit market conditions that may
affect our ability to raise capital, if necessary, and may cause us
to realize impairments on investments and certain intangible
assets, including goodwill and the valuation allowance against
deferred tax assets, which may reduce future earnings and/or affect
our financial condition and ability to raise additional capital or
refinance existing debt as it matures;
- The inability of our subsidiaries to pay dividends to the
holding company in sufficient amounts, which could harm the holding
company’s ability to meet its obligations;
- Legislative, regulatory or tax changes, both domestic and
foreign, that affect: the cost of, or demand for, our subsidiaries’
products; the required amount of reserves and/or surplus; our
ability to conduct business and our captive reinsurance
arrangements as well as restrictions on the payment of revenue
sharing and 12b-1 distribution fees;
- The impact of U.S. federal tax reform legislation on our
business, earnings and capital;
- The impact of regulations adopted by the Securities and
Exchange Commission (“SEC”), the Department of Labor or other
federal or state regulators or self-regulatory organizations
relating to the standard of care owed by investment advisers and/or
broker-dealers that could affect our distribution model;
- The impact of new and emerging privacy regulations that may
lead to increased compliance costs and reputation risk;
- Increasing scrutiny and evolving expectations and regulations
regarding ESG matters that may adversely affect our reputation and
our investment portfolio;
- Actions taken by reinsurers to raise rates on in-force
business;
- Declines in or sustained low interest rates causing a reduction
in investment income, the interest margins of our businesses and
demand for our products;
- Rapidly increasing interest rates causing policyholders to
surrender life insurance and annuity policies, thereby causing
realized investment losses;
- The impact of the implementation of the provisions of the
European Market Infrastructure Regulation relating to the
regulation of derivatives transactions;
- The initiation of legal or regulatory proceedings against us,
and the outcome of any legal or regulatory proceedings, such as:
adverse actions related to present or past business practices
common in businesses in which we compete; adverse decisions in
significant actions including, but not limited to, actions brought
by federal and state authorities and class action cases; new
decisions that result in changes in law; and unexpected trial court
rulings;
- A decline or continued volatility in the equity markets causing
a reduction in the sales of our subsidiaries’ products; a reduction
of asset-based fees that our subsidiaries charge on various
investment and insurance products; and an increase in liabilities
related to guaranteed benefit riders, which are accounted for as
market risk benefits, of our subsidiaries’ variable annuity
products;
- Ineffectiveness of our risk management policies and procedures,
including our various hedging strategies;
- A deviation in actual experience regarding future policyholder
behavior, mortality, morbidity, interest rates or equity market
returns from the assumptions used in pricing our subsidiaries’
products and in establishing related insurance reserves, which may
reduce future earnings;
- Changes in accounting principles that may affect our
consolidated financial statements;
- Lowering of one or more of our debt ratings issued by
nationally recognized statistical rating organizations and the
adverse effect such action may have on our ability to raise capital
and on our liquidity and financial condition;
- Lowering of one or more of the insurer financial strength
ratings of our insurance subsidiaries and the adverse effect such
action may have on the premium writings, policy retention,
profitability of our insurance subsidiaries and liquidity;
- Significant credit, accounting, fraud, corporate governance or
other issues that may adversely affect the value of certain
financial assets, as well as counterparties to which we are exposed
to credit risk, requiring that we realize losses on financial
assets;
- Interruption in telecommunication, information technology or
other operational systems or failure to safeguard the
confidentiality or privacy of sensitive data on such systems,
including from cyberattacks or other breaches of our data security
systems;
- The effect of acquisitions and divestitures, restructurings,
product withdrawals and other unusual items;
- The inability to realize or sustain the benefits we expect
from, greater than expected investments in, and the potential
impact of efforts related to, our strategic initiatives, including
the Spark Initiative;
- The adequacy and collectability of reinsurance that we have
obtained;
- Pandemics, acts of terrorism, war or other human-caused and
natural catastrophes that may adversely impact liabilities for
policyholder claims, affect our businesses and increase the cost
and availability of reinsurance;
- Competitive conditions, including pricing pressures, new
product offerings and the emergence of new competitors, that may
affect the level of premiums and fees that our subsidiaries can
charge for their products;
- The unknown effect on our subsidiaries’ businesses resulting
from evolving market preferences and the changing demographics of
our client base; and
- The unanticipated loss of key management, financial planners or
wholesalers.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101084081/en/
Adam Cohen 800-237-2920 Investor Relations
InvestorRelations@LFG.com
Sarah Boxler 215-495-8439 Media Relations
Sarah.Boxler@LFG.com
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