Lincoln National Q3 Earnings Beat on Strong Premiums, High Costs Ail

Core Viewpoint - Lincoln National Corporation (LNC) experienced a 5.7% decline in share price following the release of its third-quarter 2024 results, despite beating earnings expectations. The results were negatively impacted by a decrease in net investment income and high expense levels, although this was partially mitigated by increased insurance premiums and strong performance in the Group Protection and Retirement Plan Services segments [1]. Financial Performance - Adjusted earnings for the third quarter were $2.06 per share, exceeding the Zacks Consensus Estimate by 25.6% and showing a more than seven-fold increase year over year [2]. - Adjusted operating revenues decreased by 1.5% year over year to $4.6 billion, slightly missing the consensus estimate by 0.4% [2]. - Net investment income fell by 5.6% year over year to $1.4 billion, surpassing the consensus estimate of $1.3 billion [4]. - Total expenses surged by 51.9% year over year to $4.8 billion, with benefits declining by 10% and interest and debt expenses rising by 2.4% [5]. Segment Performance - The Annuities segment reported an operating income of $301 million, a 21.4% increase year over year, but slightly below the consensus estimate. Operating revenues decreased by 0.2% to $1.2 billion [6]. - The Life Insurance segment achieved an operating income of $22 million, recovering from a loss of $173 million in the previous year, despite a 7.8% decline in operating revenues to $1.59 billion [7]. - The Group Protection segment's operating income soared by 60.3% year over year to $109 million, exceeding the consensus estimate, with operating revenues growing by 3.2% to $1.4 billion [8]. - The Retirement Plan Services segment's operating income increased by 2.3% to $44 million, also above the consensus estimate, with operating revenues improving by 2.4% to $335 million [9]. Financial Position - As of September 30, 2024, Lincoln National had cash and invested cash of $6 billion, a 78.7% increase from the end of 2023. Total assets rose by 6.6% to $396.8 billion [10]. - Long-term debt decreased by 3.5% to $5.9 billion, while total stockholders' equity increased by 30.8% to $9 billion [11]. - Book value per share, excluding accumulated other comprehensive income, was $63.03, reflecting a 14% increase from the end of 2023 [11]. Capital Deployment - In the third quarter, Lincoln National did not repurchase any shares but paid out quarterly dividends amounting to $80 million [13]. Guidance - Management previously projected Annuities' operating income to be between $1 billion and $1.2 billion for 2024, indicating a growth of 2.5% year over year. Group Protection's operating income was expected to range from $300 million to $350 million, suggesting an 8.7% improvement [14][15].