Lincoln Financial Group (NYSE: LNC) today reported financial
results for the fourth quarter and full year ended December 31,
2023.
- Net loss available to common stockholders was $(1.2) billion,
or $(7.35) per diluted share.
- Adjusted operating income available to common stockholders was
$246 million, or $1.45 per diluted share.
- The primary differences between net income and adjusted
operating income resulted from the following non-economic factors:
- $(0.8) billion of the net loss, or $(4.71) per diluted share,
primarily due to changes in market risk benefits driven by lower
interest rates, which more than offset the benefit of higher equity
markets.
- $(0.6) billion of the net loss, or $(3.67) per diluted share,
was driven by a change in the fair value of an embedded derivative
related to the Fortitude Re reinsurance transaction, with a direct
offset in other comprehensive income.
- Expected year-end risk-based-capital (RBC) ratio was in the
range of 400-410%, an estimated increase of more than 20 percentage
points from the 375-385% range at the end of the 2023 third
quarter.
“The 2023 fourth quarter marked a significant step forward in
rebuilding capital, and we expect our year-end risk-based capital
ratio to be above our target of 400%,” said Ellen Cooper, Chairman,
President and CEO of Lincoln Financial Group. “We delivered
improved operating performance led by our Group Protection
business, record sales in Annuities, and more stable Life earnings.
In Retirement Plan Services, we achieved our ninth consecutive year
of positive flows. We are making meaningful progress in resetting
our businesses for profitable organic growth as we reposition our
product sales to a more capital-efficient and higher risk-adjusted
return mix supported by our leading distribution.
“Additionally, we closed a major reinsurance transaction with
Fortitude Re and announced the agreement to sell our wealth
management business to Osaic, Inc. As we look ahead, we will build
on our solid foundation and strong momentum to further strengthen
our balance sheet, improve free cash flow, and grow profitably as
we position our company to deliver increasing shareholder
value.”
Business Highlights
Our 2023 fourth-quarter and full-year results were driven by
substantial progress in each of our businesses and reflect our
focused execution as we advance on our multi-year journey to
transform our business.
- Group Protection delivered record full-year earnings and
strong top-line growth. Group’s margin grew over 400 basis points
year over year to 5.5%, excluding the benefit from the annual
assumption review. This result was attributable to disciplined
pricing and improved risk results.
- Annuities delivered a record sales quarter, driven by
strength in fixed annuities which surpassed the $2 billion mark in
the quarter for the first time. This strong growth was driven by
our strategic positioning across fixed product categories and with
select distribution partners.
- Life Insurance sales declined for the fourth quarter and
full year, driven by our intentional strategic realignment to more
accumulation products, which are expected to deliver more stable
cash flows and higher risk-adjusted margins.
- Retirement Plan Services 2023 fourth-quarter and
full-year results were below expectations, and we are taking
actions to regain momentum and drive long-term sustainable growth.
Retirement achieved its ninth consecutive year of positive flows,
surpassing $100 billion in assets under management for the first
time.
- Our reinsurance transaction with Fortitude Re closed
during the quarter, de-risking and strengthening our balance sheet
while driving increased free cash flow.
- We announced the sale of our wealth management business
to Osaic, Inc., which is expected to close in the first half of
2024 and to provide at least $700 million of capital benefit.
- We continued to invest in our technology and
infrastructure to support future growth, including digital
platforms to enhance the customer experience and innovative tools
to drive more production for our distribution force.
Earnings Summary
For the
Three Months Ended December 31
For the
Twelve Months Ended December 31
(in millions, except per share data)
12/31/2022(2)
12/31/2023
12/31/2022(2)
12/31/2023
Net Income (Loss)
$812
$(1,235)
$1,358
$(752)
Net Income (Loss) Available to Common
Stockholders
807
(1,246)
1,345
(835)
Net Income (Loss) per Diluted Share
Available to Common Stockholders(1)
4.73
(7.35)
7.78
(4.92)
Adjusted Income (Loss) from Operations
134
258
(1,167)
973
Adjusted Income (Loss) from Operations
Available to Common Stockholders
129
246
(1,180)
890
Adjusted Income (Loss) from Operations per
Diluted Share Available to Common Stockholders(1)
$0.76
$1.45
$(6.90)
$5.22
(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.
Condensed Reconciliation of Net Income to Adjusted Income
from Operations(1)
For the
Three Months Ended
For the
Twelve Months Ended
(in millions)
12/31/2022(2)
12/31/2023
12/31/2022(2)
12/31/2023
Net income (loss) available to common
stockholders – diluted
$807
$(1,246)
$1,345
$(835)
Less:
Preferred stock dividends declared
--
(11)
--
(82)
Adjustment for deferred units of LNC stock
in deferred compensation plans
(5)
--
(13)
(1)
Net income (loss)
812
(1,235)
1,358
(752)
Less:
Non-economic market risk benefit impacts,
related to net annuity product, after-tax
674
(797)
3,266
52
Net life insurance product features,
after-tax
6
(178)
21
(310)
Changes in fair value of
reinsurance-related embedded derivatives, trading securities and
certain mortgage loans, after-tax
(5)
(613)
(41)
(633)
Investment gains (losses), after-tax
11
136
16
(744)
Other
(8)
(41)
(737)
(90)
Adjusted income (loss) from
operations
$134
$258
$(1,167)
$973
Adjusted income (loss) from operations
available to common stockholders
$129
$246
$(1,180)
$890
(1)
Refer to the full reconciliation of Net Income to Adjusted
Income from Operations at the back of this press release.
(2)
Prior-year numbers have been adjusted to reflect LDTI
accounting.
- The 2023 fourth quarter included a $(0.8) billion net loss
primarily due to changes in market risk benefits driven by lower
interest rates, which more than offset the benefit of higher equity
markets.
- The 2023 fourth quarter and full year included a $(0.6) billion
net loss driven by the change in fair value of an embedded
derivative related to the Fortitude Re reinsurance transaction,
with a direct offset in other comprehensive income.
- The 2023 full year investment gains (losses), after-tax, of
$(0.7) billion included a $(0.6) billion loss on the sale of fixed
maturity AFS securities as part of the Fortitude Re reinsurance
transaction.
Variable Investment Income
Alternative Investment Income,
after-tax(1)
For the
Three Months Ended
For the Twelve
Months Ended
(in millions)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
12/31/2022
12/31/2023
Annuities
$1
$2
$5
$3
$3
$6
$13
Life Insurance
7
37
53
34
39
38
163
Group Protection
1
2
2
2
2
4
7
Retirement Plan Services
1
1
3
2
2
3
8
Other Operations
—
—
—
—
—
1
1
Consolidated
$10
$42
$63
$41
$46
$52
$192
(1)
Excludes alternative investment income on investments supporting
our modified coinsurance and coinsurance with funds withheld
agreements as we have limited economic interest in those
investments.
Prepayment Income, after-tax
For the
Three Months Ended
For the
Twelve Months Ended
(in millions)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
12/31/2022
12/31/2023
Annuities
$1
$1
$—
$1
$1
$24
$2
Life Insurance
5
2
1
—
2
30
4
Group Protection
—
—
—
—
—
5
1
Retirement Plan Services
1
—
1
—
—
18
1
Other Operations
—
—
—
—
—
5
—
Consolidated
$7
$3
$2
$1
$3
$82
$8
Items Impacting Segment Results
For the
Three Months Ended December 31, 2023
(in millions)
Annuities
Life
Insurance
Group
Protection
Retirement
Plan Services
Other
Operations
After-tax segment impacts:
Alternative investment income compared to
long-term target(1)
$(1)
$(17)
$(1)
—
$(1)
Prepayment income(2)
1
2
—
—
—
Annual assumption review
—
—
—
—
—
Legal accruals
—
—
—
—
—
Total impact
$—
$(15)
$(1)
—
$(1)
(1)
Alternative investment income comparison to long-term target
assumes a 10% annual return on the alternative investment
portfolio.
(2)
Prepayment income is based on actual income reported in the
quarter.
- The Annuities business recorded a one-time favorable item of
$14 million, or $0.08 per diluted share, associated with a model
refinement.
Capital and Liquidity
For the
Three Months Ended
(in millions, except per share data)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
Holding company available liquidity(1)
$460
$454
$457
$455
$458
RBC Ratio(2)
377%
~380%
~380%
375 - 385%
400 - 410%
Book value per share (BVPS), Including
AOCI
$24.32
$33.89
$28.49
$13.04
$34.81
Book value per share (BVPS), Excluding
AOCI
$61.86
$56.04
$58.58
$63.03
$55.30
Adjusted book value per share
$65.72
$66.05
$64.37
$63.53
$61.21
(1)
Holding company available liquidity presented for the quarters
ended 12/31/2022, 3/31/2023 and 6/30/2023 is net of the $500
million prefunding used to repay $500 million of debt that matured
in the third quarter of 2023.
(2)
The RBC ratio is calculated as of December 31 annually, but is
reported in the March statutory reporting, and as such, the
quarterly ratios presented for 2023 are considered estimates until
the statutory statements are filed.
Annuities
For the
Three Months Ended
For the
Twelve Months Ended
(in millions)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023(1)
Change
12/31/2022
12/31/2023(1)
Change
Total operating revenues
$1,125
$1,141
$1,190
$1,197
$(525)
NM
$4,482
$3,002
-33.0%
Total operating expenses
806
841
880
915
(846)
NM
3,136
1,789
-43.0%
Income (loss) from operations before
taxes
319
300
310
282
321
0.6%
1,346
1,213
-9.9%
Federal income tax expense (benefit)
44
26
39
34
42
-4.5%
185
140
-24.3%
Income (loss) from operations
$275
$274
$271
$248
$279
1.5%
$1,161
$1,073
-7.6%
Income (loss) from operations, excluding
impact of annual assumption review
$275
$274
$271
$260
$279
18.2%
$1,160
$1,085
-6.5%
Total sales
$3,210
$3,164
$2,582
$2,728
$4,365
36.0%
$11,879
$12,840
8.1%
Net flows
$152
$(331)
$(1,108)
$(874)
$278
82.9%
$(337)
$(2,034)
NM
Average account balances, net of
reinsurance
$142,099
$146,331
$148,260
$151,312
$147,419
3.7%
$149,591
$148,206
-0.9%
Return on average account balances
77
75
73
66
76
78
72
(1)
Day one impacts related to the reinsurance transaction with
Fortitude Re caused line-item volatility in the fourth quarter and
full-year 2023.
- Income from operations was $279 million for the 2023 fourth
quarter, essentially unchanged compared to the prior-year
quarter.
- Total annuity sales were $4.4 billion for the quarter, up 36%
from the prior-year quarter. For the 2023 full year, total annuity
sales were $12.8 billion, up 8% from the prior year.
- Net inflows were $278 million in the quarter, compared to net
inflows of $152 million in the prior-year quarter. Full-year net
outflows were $2.0 billion, compared to net outflows of $337
million in the prior year.
- Average account balances, net of reinsurance, for the quarter
were $147 billion, up 4%, compared to $142 billion in the
prior-year quarter, primarily driven by growth in RILA. RILA
represented 18% of total annuity end-of-year account balances, net
of reinsurance, an increase of 4 percentage points compared to the
prior-year quarter.
For the
Three Months Ended
For the
Twelve Months Ended
(in millions)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
Change
12/31/2022
12/31/2023
Change
Total operating revenues
$1,688
$1,757
$1,760
$1,723
$1,667
-1.2%
$6,747
$6,907
2.4%
Total operating expenses
1,706
1,780
1,725
1,952
1,681
-1.5%
9,428
7,138
-24.3%
Income (loss) from operations before
taxes
(18)
(23)
35
(229)
(14)
22.2%
(2,681)
(231)
91.4%
Federal income tax expense (benefit)
(9)
(10)
2
(56)
(8)
11.1%
(587)
(72)
87.7%
Income (loss) from operations
$(9)
$(13)
$33
$(173)
$(6)
33.3%
$(2,094)
$(159)
92.4%
Income (loss) from operations, excluding
impact of annual assumption review
$(9)
$(13)
$33
$(17)
$(6)
33.3%
$13
$(3)
NM
Average account balances, net of
reinsurance
$47,963
$49,100
$50,049
$50,130
$45,608
-4.9%
$49,036
$48,722
-0.6%
Total sales
$186
$130
$123
$144
$144
-22.6%
$705
$542
-23.1%
- Loss from operations of $(6) million for the quarter, marginal
improvement compared to a loss from operations of $(9) million in
the prior-year quarter.
- Total sales were approximately 23% lower quarter over quarter
and year over year, driven by our purposeful shift to a
capital-efficient new business mix.
- Average account balances, net of reinsurance, were $46 billion,
down 5% compared to the prior-year quarter.
Group Protection
For the
Three Months Ended
For the
Twelve Months Ended
(in millions)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
Change
12/31/2022
12/31/2023
Change
Total operating revenues
$1,346
$1,388
$1,400
$1,388
$1,387
3.0%
$5,304
$5,563
4.9%
Total operating expenses
1,313
1,299
1,262
1,302
1,322
0.7%
5,252
5,184
-1.3%
Income (loss) from operations before
taxes
33
89
138
86
65
97.0%
52
379
NM
Federal income tax expense (benefit)
7
18
29
18
13
85.7%
11
80
NM
Income (loss) from operations
$26
$71
$109
$68
$52
100.0%
$41
$299
NM
Income (loss) from operations, excluding
impact of annual assumption review
$26
$71
$109
$44
$52
18%
$53
$275
NM
Insurance premiums
$1,213
$1,251
$1,263
$1,251
$1,250
3.1%
$4,768
$5,014
5.2%
Total sales
$356
$128
$96
$71
$398
11.8%
$676
$693
2.5%
Total loss ratio
81.1%
75.0%
71.3%
75.2%
76.6%
82.5%
74.5%
Operating margin
2.1%
5.6%
8.6%
5.4%
4.1%
0.9%
6.0%
Operating margin, excluding
impact of annual reserve assumption review
2.1%
5.6%
8.6%
3.5%
4.1%
1.1%
5.5%
- Income from operations of $52 million in the quarter doubled
compared to $26 million in the prior-year quarter, and the total
loss ratio was 76.6% in the quarter compared to 81.1% in the
prior-year quarter. These results were primarily driven by
favorable experience in Life mortality and disability.
- Full-year margin grew over 400 basis points to 5.5%, excluding
the benefit from the annual reserve assumption review, driven by
disciplined pricing, premium growth, and improved risk results in
life and disability.
- Insurance premiums were $1.3 billion in the quarter, up 3%
compared to the prior-year quarter.
- Group Protection sales for the quarter were $398 million in the
quarter, up 12% compared to the prior-year quarter, driven by
growth across all products and market segments.
Retirement Plan Services
For the
Three Months Ended
For the
Twelve Months Ended
(in millions)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
Change
12/31/2022
12/31/2023
Change
Total operating revenues
$325
$328
$334
$327
$322
-0.9%
$1,274
$1,310
2.8%
Total operating expenses
264
277
279
277
278
5.3%
1,027
1,109
8.0%
Income (loss) from operations before
taxes
61
51
55
50
44
-27.9%
247
201
-18.6%
Federal income tax expense (benefit)
9
8
8
7
6
-33.3%
36
30
-16.7%
Income (loss) from operations
$52
$43
$47
$43
$38
-26.9%
$211
$171
-19.0%
Deposits
$2,973
$3,209
$2,897
$2,700
$2,972
0.0%
$12,902
$11,778
-8.7%
Net flows
$51
$535
$201
$(272)
$(332)
NM
$2,696
$132
-95.1%
Average account balances
$87,987
$91,457
$94,099
$96,473
$96,045
9.2%
$90,960
$94,520
3.9%
Return on average account balances
24
19
20
18
16
23
18
- Income from operations was $38 million in the quarter, a 27%
decline compared to the prior-year quarter, primarily driven by
higher operating expenses and lower spread income.
- Total deposits for the quarter were $3 billion, in line with
the prior-year quarter. 2023 full-year deposits were $11.8 billion,
down 9% compared to full-year 2022.
- Net outflows totaled $332 million for the quarter while the
full-year net inflows were $132 million. RPS recorded its ninth
consecutive year of positive net flows in 2023.
- Average account balances for the quarter were $96 billion,
increasing 9% from the prior-year quarter. Ending account balances
for full-year 2023 were over $100 billion.
Other Operations
For the
Three Months Ended
For the
Twelve Months Ended
(in millions)
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023(1)
Change
12/31/2022
12/31/2023(1)
Change
Total operating revenues
$47
$43
$46
$38
$(884)
NM
$156
$(755)
NM
Total operating expenses
315
150
181
180
(744)
NM
758
(229)
NM
Income (loss) from operations before
taxes
(268)
(107)
(135)
(142)
(140)
47.8%
(602)
(526)
12.6%
Federal income tax expense (benefit)
(58)
(20)
(29)
(29)
(35)
39.7%
(116)
(115)
0.9%
Income (loss) from
operations(2)
$(210)
$(87)
$(106)
$(113)
$(105)
50.0%
$(486)
$(411)
15.4%
(1)
Day one impacts related to the reinsurance transaction with
Fortitude Re caused line-item volatility in the fourth quarter and
full-year 2023.
(2)
Income (loss) from operations does not include preferred
dividends.
- Fourth quarter 2022 loss from operations included the net
impact of an unfavorable notable item of $116 million, primarily
related to legal expenses.
Unrealized Gains and Losses
The Company reported a net unrealized loss of $8.7 billion
(pre-tax) on its available-for-sale securities as of December 31,
2023. This compared to a net unrealized loss of $11.9 billion
(pre-tax) as of December 31, 2022, with the year-over-year decrease
primarily due to the Fortitude Re reinsurance transaction and
tighter spread.
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,
book value per share, excluding AOCI, and adjusted book value per
share to net income (loss), net income (loss) available to common
stockholders, 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
fourth quarter 2023 statistical supplement, which is available in
the investor relations section of its website
http://www.lincolnfinancial.com/investor.
Conference Call Information
Lincoln Financial Group will discuss the company’s
fourth-quarter and full-year 2023 results with the investment and
analyst community in a conference call beginning at 8:30 a.m.
Eastern Time on Thursday, February 8, 2024.
The conference call will be broadcast live through the company’s
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 10:30 a.m.
Eastern Time on February 8, 2024, at
www.lincolnfinancial.com/webcast.
About Lincoln Financial Group
Lincoln Financial Group helps people to plan, protect and retire
with confidence. As of December 31, 2023, approximately 17 million
customers trust our guidance and solutions across four core
businesses – annuities, life insurance, group protection, and
retirement plan services. As of December 31, 2023, the company had
$295 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, 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 Supplements for the
corresponding periods contained in the Earnings section of the
Investor Relations page on our website:
http://www.lincolnfinancial.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, 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, 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, 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.
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
attributable primarily to our business operations.
- Management believes 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.
- 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
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.
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.
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 AdvantageSM
(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
For the
For the
(in millions, except per share data)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2023
2022
2023
2022
Net Income (Loss) Available to
Common
Stockholders – Diluted
$
(1,246
)
$
807
$
(835
)
$
1,345
Less:
Preferred stock dividends declared
(11
)
—
(82
)
—
Adjustment for deferred units of LNC stock
our
deferred compensation plans(1)
—
(5
)
(1
)
(13
)
Net Income (Loss)
(1,235
)
812
(752
)
1,358
Less:
Net annuity product features,
after-tax
(797
)
674
52
3,266
Net life insurance product features,
after-tax
(178
)
6
(310
)
21
Credit loss-related adjustments,
after-tax
(21
)
(8
)
(63
)
(103
)
Investment gains (losses), after-tax
(2)
136
11
(744
)
16
Changes in the fair value of
reinsurance-related
embedded derivatives, trading securities
and
certain mortgage loans, after-tax(3)
(613
)
(5
)
(633
)
(41
)
Impairment of intangibles
—
—
—
(634
)
Transaction and integration costs related
to mergers,
acquisitions and divestitures, after-tax
(4)
(20
)
—
(27
)
—
Total adjustments
(1,493
)
678
(1,725
)
2,525
Adjusted Income (Loss) from
Operations
258
134
973
(1,167
)
Add:
Preferred stock dividends
(11
)
—
(82
)
—
Adjustment for deferred units of LNC stock
in our deferred compensation plans
(1
)
(5
)
(1
)
(13
)
Adjusted income (loss) from operations
available to common stockholders
$
246
$
129
$
890
$
(1,180
)
Diluted (5)
Net income (loss)
$
(7.35
)
$
4.73
$
(4.92
)
$
7.78
Adjusted income (loss) from operations
1.45
0.76
5.22
(6.90
)
Stockholders’ Equity, Average
Stockholders' equity
$
5,046
$
3,943
$
5,437
$
9,719
Less:
Preferred stock
986
493
986
123
AOCI
(5,979
)
(6,646
)
(5,563
)
(1,022
)
Stockholders’ equity, excluding AOCI and
preferred stock
10,038
10,096
10,014
10,618
MRB-related impacts
1,314
(1,262
)
257
(2,085
)
GLB and GDB hedge instruments gains
(losses) (6)
(1,857
)
N/A
(1,155
)
N/A
Adjusted average stockholders' equity
$
10,582
$
11,358
$
10,912
$
12,703
(1)
We exclude deferred units of LNC
stock that are antidilutive from our diluted earnings per share
calculation.
(2)
Includes an $597 million
after-tax loss on the sale of fixed maturity AFS securities as part
of the Fortitude Re reinsurance transaction for year ended December
31, 2023.
(3)
Includes primarily changes in the
fair value of embedded derivatives related to the Fortitude Re
reinsurance transaction effective in the fourth quarter of
2023.
(4)
Includes costs pertaining to the
Fortitude Re reinsurance transaction and the planned sale of our
wealth management business.
(5)
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.
(6)
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 December 31,
2023
2022
Book Value Per Common Share
Book value per share
$
34.81
$
24.32
Less:
AOCI
(20.49
)
(37.54
)
Book value per share, excluding AOCI
55.30
61.86
Less:
MRB-related gains (losses)
6.38
(3.86
)
GLB and GDB hedge instruments gains
(losses)(1)
(12.29
)
N/A
Adjusted book value per share
$
61.21
$
65.72
(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
For the
(in millions, except per share data)
Three Months Ended
December 31,
2023
2022
Revenues
$
700
$
3,841
Net Income (Loss)
$
(1,235
)
$
812
Preferred stock dividends declared
(11
)
—
Adjustment for deferred units of LNC stock
in our
deferred compensation plans (1)
—
(5
)
Net Income (Loss) Available to
Common
Stockholders – Diluted
$
(1,246
)
$
807
Earnings (Loss) Per Common Share –
Basic
$
(7.35
)
$
4.80
Earnings (Loss) Per Common Share –
Diluted (2)
(7.35
)
4.73
Average Shares – Basic
169,661,997
169,217,427
Average Shares – Diluted
170,422,512
170,632,350
For the
Twelve Months Ended
December 31,
2023
2022
Revenues
$
11,645
$
18,810
Net Income (Loss)
$
(752
)
$
1,358
Preferred stock dividends declared
(82
)
—
Adjustment for deferred units of LNC stock
in our
deferred compensation plans (1)
(1
)
(13
)
Net Income (Loss) Available to
Common
Stockholders – Diluted
$
(835
)
$
1,345
Earnings (Loss) Per Common Share –
Basic
$
(4.92
)
$
7.93
Earnings (Loss) Per Common Share –
Diluted (2)
(4.92
)
7.78
Average Shares – Basic
169,562,903
171,034,695
Average Shares – Diluted
170,738,655
172,700,155
(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 that
could adversely affect our distribution model and sales of our
products and result in additional disclosure and other requirements
related to the sale and delivery of our products;
- The impact of new and emerging rules, laws and regulations
relating to privacy, cybersecurity and artificial intelligence that
may lead to increased compliance costs, reputation risk and/or
changes in business practices;
- 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 or sustained high interest rates that may
negatively affect our profitability, value of our investment
portfolio and capital position and may cause policyholders to
surrender annuity and life insurance 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, including the
inability to realize the anticipated benefits of acquisitions and
dispositions of businesses and potential operating difficulties and
unforeseen liabilities relating thereto, as well as the effect of
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 man-made 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
correct or 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/20240208668537/en/
Tina Madon 800-237-2920 Investor Relations
InvestorRelations@LFG.com
Sarah Boxler 215-495-8439 Media Relations
Sarah.Boxler@LFG.com
Grafico Azioni Lincoln National (NYSE:LNC)
Storico
Da Apr 2024 a Mag 2024
Grafico Azioni Lincoln National (NYSE:LNC)
Storico
Da Mag 2023 a Mag 2024