Lincoln(US:LNC)2025-05-08 18:32Financial Performance - Income from operations is emphasized as a key profitability measure, reflecting ongoing business performance [218]. - As of March 31, 2025, the company reported a net income loss of $722 million, a significant decrease from a net income of $1,222 million in the same period of 2024 [259]. - The company's annuity segment generated an income from operations of $290 million for the three months ended March 31, 2025, compared to $259 million in 2024, reflecting a year-over-year increase of approximately 12% [262]. - Total net investment income for Q1 2025 was $571 million, a decrease of 1.7% from $581 million in Q1 2024 [282]. - The total net investment income for the three months ended March 31, 2025, was $1,457 million, an increase from $1,346 million in the same period of 2024, reflecting a growth of 8.3% [353]. Investment Portfolio - As of March 31, 2025, Lincoln National Corporation reported total investments valued at approximately $99.1 billion, with 93% priced using observable inputs [227]. - The total fair value of investments includes $76.1 billion priced by third-party services, representing 76.7% of total investments [227]. - The total investment portfolio, including fixed maturity AFS, trading, and equity securities, was valued at $100,194 million, with a fair value of $90,626 million [332]. - The estimated fair value of private placement securities was $21.5 billion, representing 17% of total investments as of March 31, 2025 [341]. - The company emphasizes diversification across asset classes in its investment policy, which includes fixed maturity securities, mortgage loans, and real estate [328]. Risks and Challenges - The company faces risks from economic conditions, including low interest rates that could reduce investment income and affect product demand [212]. - Legislative and regulatory changes are potential risks that could impact product demand and operational costs [212]. - The company faces risks including changes in accounting principles, credit rating downgrades, and competitive pressures that may impact premium levels and profitability [218]. - A hypothetical 10% decrease in equity market return could result in a $600 million decrease in net income, while a 10% increase could result in a $600 million increase [247]. - The company anticipates managing the effects of interest rate spreads on near-term income from operations through portfolio management strategies [267]. Segment Performance - The company operates through four main segments: Annuities, Life Insurance, Group Protection, and Retirement Plan Services [219]. - Total operating revenues for the annuities segment decreased to $1,198 million in Q1 2025 from $1,269 million in Q1 2024, representing a decline of about 5.6% [262]. - Total operating revenues for Life Insurance segment reached $1,587 million in Q1 2025, up from $1,541 million in Q1 2024, indicating a growth of 3% [273]. - Total operating revenues for Group Protection increased to $1,521 million in Q1 2025, up from $1,425 million in Q1 2024, driven by higher insurance premiums [287]. - Income from operations for Group Protection increased to $101 million in Q1 2025, compared to $80 million in Q1 2024, attributed to growth in business in force [288]. Capital and Liquidity - The company’s liquidity and capital resources are critical for meeting obligations and funding growth initiatives [214]. - The company had an estimated maximum borrowing capacity of $7.0 billion under the Federal Home Loan Bank facility, with outstanding borrowings of $2.5 billion as of March 31, 2025 [381]. - The net collateral payable position decreased to $5.5 billion as of March 31, 2025, down from $7.1 billion as of December 31, 2024 [383]. - The company reported total long-term debt of $5.868 billion as of March 31, 2025, which includes senior notes of $4.510 billion and subordinated notes of $995 million [373]. - The company has access to $2.6 billion through committed repurchase agreements, none of which was utilized as of March 31, 2025 [382]. Regulatory and Legislative Factors - The company noted that legislative changes could impact its effective tax rate, highlighting the importance of ongoing analysis of tax laws and regulations [253]. - The liability for future policy benefits (LFPB) is calculated based on assumptions regarding mortality rates, morbidity, and policyholder behavior, with updates conducted quarterly [233]. - The company conducts a comprehensive review of actuarial assumptions annually to ensure adequate reserves for future policy benefits [233]. - The company utilizes derivatives primarily for hedging against various risks, with fair values fluctuating based on market conditions [228]. - The company expects to optimize its legacy life portfolio and enhance asset sourcing capabilities through the capital raised from the Bain Capital transaction [223].