Lincoln Financial Group Releases Third Quarter 2014 Financial Results
November 4, 2014 by Proquest LLC
Financial Group reported net income for the third quarter of 2014 of $439 million, or $1.65 per diluted share available to common stockholders, compared to net income in the third quarter of 2013 of $337 million, or $1.23 per diluted share available to common stockholders.
According to its release on October 29, the Company noted that the third quarter income from operations was $414 million, or $1.56 per diluted share available to common stockholders, compared to $367 million, or $1.34 per diluted share available to common stockholders, in the third quarter of 2013.
The board of directors of Lincoln National Corp. approved raising the quarterly dividend on its common shares to $0.20 per share. The dividend represents a 25 percent increase over the prior-year level. The increased dividend on the common stock will be payable February 1, 2015, to shareholders of record at the close of business on January 12, 2015.
“Lincoln once again delivered record levels of operating revenue and earnings in the quarter as all four businesses posted an increase in results from the second quarter,” saidDennis R. Glass, president and CEO ofLincoln Financial Group. “These consistent results were supported by distribution strength and product breadth continuing to drive strong new business returns while diversifying our product mix. Earnings and balance sheet strength allowed us to continue returning capital to our shareholders through share buybacks and a 25 percent increase in our shareholder dividend.”
Operating Highlights – Third Quarter 2014 versus Third Quarter 2013
-Consolidated total account balances of $215 billion up 9 percent
-Annuities operating revenues of $944 million up 12 percent
-Retirement Plan Services recurring deposits of $1.2 billion up 8 percent
-Life Insurance operating revenues of $1.4 billion up 11 percent
-Group Protection non-medical earned premiums of $528 million up 7 percent
The quarter included net favorable items of approximately $0.05 related primarily to the company’s annual review of DAC assumptions.
Third Quarter 2014 – Segment Results
Annuities
The Annuities segment reported income from operations of $245 million in the quarter, up 24 percent from $198 million in the prior- year quarter. Increased fees on assets under management due to positive net flows and equity market performance resulted in higher earnings compared to the prior-year period.
Gross annuity deposits in the third quarter were $3.5 billion, down 5 percent from the prior-year quarter. Variable annuity deposits of $3.2 billion decreased 5 percent from the third quarter of last year in which sales were elevated due to competitor actions, while fixed annuity deposits of $227 million decreased 3 percent due to the low interest rate environment. The percentage of variable annuity sales from products without living benefits increased to 24 percent from 13 percent in the prior-year period.
Positive net flows of $565 million contributed to an 11 percent increase in account values from the prior-year quarter to$120 billion. Annualized variable annuity net flows represented 3 percent of beginning assets under management.
The quarter included net favorable items of$12 million related to the company’s annual review of DAC and reserve assumptions. The prior-year quarter included net favorable items of$4 million related primarily to taxes.
Retirement Plan Services
Retirement Plan Services reported income from operations of $40 million compared to $33 million in the prior-year quarter.
Total deposits of $1.6 billion were down 13 percent from a year ago, attributable to lower new sales in the Mid-Large Market, which can vary from quarter to quarter. This decrease was partially offset by a 24 percent increase in Small Market deposits from the prior- year period. Recurring deposits, representing deposits on business in-force for more than 12 months, increased 8 percent to $1.2 billion in the quarter and 7 percent to $3.7 billion year-to-date.
Favorable equity market performance and retention as well as positive net flows of $50 million in the quarter contributed to an 8 percent increase in account values from a year ago to$53 billion.
Life Insurance
Life Insurance income from operations increased 7 percent to$150 million from$140 million in the prior-year quarter. The quarter’s earnings benefited from strong alternative net investment income.
Total life insurance sales in the quarter were $160 million compared to $168 million in the prior-year quarter. Individual life insurance sales, which exclude COLI and BOLI, increased 1 percent from the prior-year period, driven by strong sales results in variable universal life and indexed universal life, offset by lower sales of guaranteed universal life.
Life insurance average in-force of $632 billion grew 5 percent and average account values of $41 billion increased 7 percent over the prior-year quarter.
The prior-year quarter included net favorable items of approximately$15 million related primarily to DAC unlocking.
Group Protection
For the third quarter, Group Protection income from operations was$8 million compared to$23 million in the prior-year period and$2 million in the second quarter of 2014. The non-medical loss ratio increased to 77.6 percent compared to 73.4 percent in the prior- year quarter as a result of higher disability claim costs. Compared to the second quarter of 2014, the non-medical loss ratio decreased from 80.3 percent primarily due to improvements in life and disability insurance.
Group Protection third quarter sales of$94 million were down 12 percent from the same period last year and up 29 percent from the second quarter. The decrease in sales from the prior-year quarter is in part due to pricing changes and is consistent with the trend in industry sales through the first half of 2014. Employee-paid product sales as a percentage of total sales were 45 percent compared to 43 percent in the prior-year quarter.
Non-medical net earned premiums were$528 million in the third quarter, up 7 percent over the year-ago period.
Other Operations
Other Operations reported a loss from operations of$29 million in the quarter versus a loss of$27 million in the prior-year quarter.
Realized Gains and Losses
Realized gains/losses (after-tax) in the quarter included:
-A net loss from general account investments of$16 million as compared to a$7 million net loss in the prior-year quarter.
-A$32 million variable annuity net derivatives gain, comprising positive hedge program performance of$26 million and a$6 million gain associated with the non-performance risk component.
Unrealized Gains and Losses
The company reported a net unrealized gain of$6.9 billion, pre- tax, on its available-for-sale securities atSeptember 30. This compares to a net unrealized gain of$4.3 billion atSeptember 30, 2013.
Capital
During the quarter, the company repurchased 2.8 million shares of stock at a cost of $150 million. Year-to-date, the company has repurchased 8.9 million shares at a cost of $450 million. The quarter’s average diluted share count of 266.8 million shares was down 3 percent from the third quarter of 2013, the result of repurchasing 10.9 million shares of stock at a cost of $550 million since September 30, 2013.
Book Value
As of September 30, book value per share, including accumulated other comprehensive income, of $59.48 increased 17 percent from a year ago. Book value per share, excluding AOCI, of $48.23 increased 9 percent from the prior-year period.
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