Lincoln Financial Group Reports Second Quarter 2011 Results
Net Income of $325 million Up 28% from Second Quarter 2010
Income from Operations of $349 million Up 20%
Second Quarter 2011 Segment Results
| Retirement Solutions
| Insurance Solutions
| Other Operations
| Realized Gains and Losses
| Unrealized Gains and Losses
| Stock Repurchase
| Book Value
| Reconciliation Table
| Digest of Earnings
PHILADELPHIA, August 2, 2011 — Lincoln Financial Group (NYSE:LNC) today reported net income for the second quarter of 2011 of $325 million, or $1.01 per diluted share available to common stockholders, compared to net income in the second quarter of 2010 of $255 million, or $0.33 per diluted share available to common stockholders.
Second quarter income from operations was $349 million, or $1.09 per diluted share available to common stockholders, compared to $290 million, or $0.86 per diluted share available to common stockholders, in the second quarter of 2010.
|($ in millions except per share data)
||For the Quarter Ended
|Net Income (Loss)
|Net Income (Loss) Available to Common Stockholders
|Net Income (Loss) Per Diluted Share Available to Common Stockholders
|Income (Loss) from Operations
|Income (Loss) from Operations Per Diluted Share Available to Common Stockholders
|Average Diluted Shares
"We're pleased with the results in the second quarter, which reflected strong revenue growth and solid operating performance in our businesses," said President and CEO Dennis R. Glass. "Sales across our businesses continued to benefit from broad product offerings and consistent distribution presence while margins in the group protection segment improved over the prior-year period," added Glass. "Solid results in the first half of 2011, a strong capital position and accelerated share repurchases in the quarter underscore our confidence in the outlook for Lincoln Financial."
Second Quarter 2011 Operating Highlights:
Total account balances of $164 billion up 17%
Annuity deposits of $2.9 billion up 4%
Life insurance sales of $157 million up 12%
Defined Contribution pre-tax operating margin increases to 23%
Group Protection non-medical loss ratio improves to 73%
Consolidated deposits of $5.4 billion
Consolidated net flows of $1.4 billion
The quarter included approximately $34 million or $0.11 per share of net favorable items. The details are included in the segment commentary below.
Second Quarter 2011 — Segment Results
The Individual Annuities segment reported income from operations of $150 million in the second quarter of 2011 versus income from operations of $116 million in the year-ago period, reflecting a 21% increase in annuity account values.
Total annuity deposits of $2.9 billion were up 4% over the prior-year quarter. Total net flows in the current quarter were $0.7 billion as compared to $1.2 billion in the 2010 quarter.
The quarter included better than expected investment income of $4 million primarily from alternative investments and prepayment premiums, $8 million of favorable DAC adjustments and $2 million of tax adjustments.
Defined Contribution reported income from operations of $42 million, versus income from operations of $36 million for the same period a year ago, reflecting a 15% increase in account values.
Gross deposits of $1.2 billion were down 13% versus the prior-year quarter. Total net flows in the current quarter were $(178) million as compared to $182 million in the 2010 quarter. Deposits and flows in the quarter reflect the uneven nature of the mid-large case business, and are expected to turn around in the second half of 2011.
The quarter included better than expected investment income of $4 million primarily from prepayment premiums partially offset by $2 million of other expenses.
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Life Insurance income from operations was $152 million, compared to $151 million in the second quarter of 2010.
Life insurance sales of $157 million increased 12% over the prior-year quarter. Life insurance in force of $571 billion grew 3% and account values of $35 billion increased 8% over the prior-year quarter.
The quarter included better than expected investment income of $5 million primarily from alternative investments and prepayment premiums offset by $4 million of other items.
Group Protection's income from operations was $26 million, compared to $23 million in the prior-year period. The non-medical loss ratio of 73% in the current quarter declined from 75% in the second quarter of 2010.
Non-medical net earned premiums were $409 million in the second quarter, up 7% over the year-ago period. Annualized sales of $67 million increased 3%.
The current quarter benefited from $3 million related to better than expected net investment income, DAC adjustments and other expenses.
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The operating loss in Other Operations was $22 million in the quarter versus a loss of $36 million in the prior-year quarter. Results in the quarter benefited from $14 million of favorable items including lower than expected expenses and taxes of $9 million and $2 million, respectively.
Realized Gains and Losses
In the quarter, net realized losses and impairments totaled $27 million, pre-DAC and pre-tax, compared to a gain of $3 million in prior-year quarter.
Unrealized Gains and Losses
The company reported a net unrealized gain of approximately $3.6 billion, pre-tax, on its available-for-sale securities at June 30, 2011. This compares to a net unrealized gain of approximately $3.0 billion at June 30, 2010.
During the quarter the company repurchased 5.1 million shares of stock at a cost of $150 million.
As of June 30, 2011, book value per share of common stock, including accumulated other comprehensive income ("AOCI"), increased 10% to $44.04 from a year ago. Book value per share, excluding AOCI, was $40.43 up 9% from $36.93 a year ago.
This press release may contain statements that are forward looking, and actual results may differ materially, especially given the current economic and credit conditions. Please see the Forward Looking Statements Cautionary Language that follow for additional factors that may cause actual results to differ materially from our current expectations.
The tables attached to this release define and reconcile income from operations, return on equity ("ROE"), and book value per share excluding AOCI, non-GAAP measures, to net income, ROE, and book value per share including AOCI calculated in accordance with GAAP.
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Lincoln Financial Group will discuss the company's second quarter results with investors in a conference call beginning at 11:00 a.m. (ET) on Wednesday, August 3, 2011. Interested persons are invited to listen through the internet. Please go to www.LincolnFinancial.com/webcast at least fifteen minutes prior to the event to register, download and install any necessary streaming media software. Interested persons may also listen to the call by dialing the following numbers:
Dial: 877 776-4049 (Domestic)
914 495-8602 (International)
Ask for the Lincoln National Conference Call.
The company will also post its second quarter 2011 statistical supplement on its Web site, www.LincolnFinancial.com/earnings.
Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. With headquarters in the Philadelphia region, the companies of Lincoln Financial Group had assets under management of $164 billion as of June 30, 2011. Through its affiliated companies, Lincoln Financial Group offers: annuities; life, group life, disability and dental insurance; 401(k) and 403(b) plans; savings plans; and comprehensive financial planning and advisory services. For more information, including a copy of our most recent SEC reports containing our balance sheets, please visit www.LincolnFinancial.com.
Financial data will be posted at www.LincolnFinancial.com/earnings