Lincoln Financial Group Reports Fourth Quarter and Full Year 2013 Results
Fourth Quarter Operating EPS of $1.40 up 27%
Full Year Operating EPS of $5.03 up 13% from 2012 drives ROE of 12%
Book Value per Share, excluding AOCI, of $45.23 up 10% from 2012
$207 billion in Assets Under Management, up 16% from 2012
Fourth Quarter 2013 Segment Results
| Retirement Plan Services
| Life Insurance
| Group Protection
| Other Operations
| Realized Gains and Losses
| Unrealized Gains and Losses
| Book Value
| Reconciliation Table & Digest of Earnings
RADNOR, PA, February 5, 2014 — Lincoln Financial Group (NYSE: LNC) today reported net income for the fourth quarter of 2013 of $351 million, or $1.29 per diluted share, compared to net income in the fourth quarter of 2012 of $320 million, or $1.14 per diluted share. Fourth quarter income from operations was $382 million, or $1.40 per diluted share, compared to $310 million, or $1.10 per diluted share, in the fourth quarter of 2012.
Net income for the full year of 2013 was $1.2 billion, or $4.52 per diluted share, compared to $1.3 billion, or $4.56 per diluted share available to common stockholders, in 2012. For the full year 2013, income from operations was $1.4 billion, or $5.03 per diluted share, compared to $1.3 billion, or $4.47 per diluted share available to common stockholders, for the full year of 2012.
"Lincoln's results for the quarter reflected good momentum from the majority of our businesses and contributed to record full-year operating earnings per share, while assets under management surpassed $200 billion, also a record," said Dennis R. Glass, president and CEO of Lincoln Financial Group. "As we move through 2014, we will continue to focus on the key initiatives of distribution expansion, tempering the sales of long-term guaranteed products, greater product profitability management where necessary and active capital management."
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|Net Income (Loss)
|Net Income (Loss) Per Diluted Share
|Income (Loss) from Operations
|Income (Loss) from Operations Per Diluted Share
|Average Diluted Shares
|ROE (Income from Operations)
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|Book Value per Share, Including AOCI
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Operating Highlights (Full Year 2013 vs. 2012)
Consolidated deposits of $26.7 billion up 17%
Consolidated net flows of $9.5 billion up 41%
Operating revenues of $12.2 billion up 6%
Annuities total deposits of $14.8 billion up 28%
Retirement Plan Services total deposits of $6.8 billion up 6%
Life Insurance sales of $677 million up 15%
Group Protection sales of $541 million up 18%
The quarter included net favorable items of approximately $0.09 primarily related to reserves and taxes.
Fourth Quarter 2013 — Segment Results
The Annuities segment reported income from operations of $199 million in the quarter, up 23% from $162 million in the prior-year quarter. Positive net flows and strong equity market performance contributed to the growth in revenues and earnings.
Gross annuity deposits in the fourth quarter of $3.7 billion drove net flows of $1.2 billion and a 19% increase in account values to $115 billion. Variable annuity deposits were $3.5 billion, up 14% from the prior-year quarter.
During the quarter, the company continued to make progress on its overarching strategy to shift the sales mix of guaranteed versus non-guaranteed products. Variable annuity deposits without a guaranteed living benefit rider as a percentage of total variable annuity deposits were 18%, up from 13% in the third quarter of 2013.
For the full year, gross annuity deposits of $14.8 billion, including $13.7 billion of variable annuity deposits, were up 28% over the prior year. Annuity net flows were $5.0 billion, up 104% over the same period.
The quarter included net unfavorable items of approximately $3 million related to taxes.
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Retirement Plan Services
Retirement Plan Services reported income from operations of $34 million compared to $28 million in the prior-year quarter.
Record account values at the end of the year were over $51 billion, a 17% increase over the prior year. Strong equity markets' performance, a 6% increase in full-year deposits to $6.8 billion and lower year-over-year withdrawal rates contributed to the increase for the year.
Total deposits for the quarter of $1.6 billion were down 12% versus the prior-year quarter. Total net flows were $(107) million in the quarter, reflecting the ordinary fluctuations that can occur in this business, while net flows for the year were $792 million.
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Life Insurance income from operations was $157 million compared to $147 million in the prior-year quarter.
Life insurance sales in the quarter were $181 million compared to $226 million in the prior-year quarter, which included a $51 million COLI sale in Executive Benefits. Full-year sales of $677 million were up 15% from 2012, driven by strong sales in variable universal life and term life insurance products. Full-year sales of less interest rate sensitive products, which include variable universal life, indexed universal life, flexible premium MoneyGuard® and term life insurance products, increased by 51% over the prior year, while sales of guaranteed universal life accounted for 16% of full-year 2013 sales.
Life insurance in-force of $617 billion grew 4% and average account values of $40 billion increased 7% over the prior-year quarter.
The quarter included net favorable items of approximately $11 million related primarily to reserve adjustments. The prior-year quarter included $9 million of net positive items.
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For the fourth quarter, Group Protection income from operations was $11 million compared to $13 million in the prior-year period.
Earnings declined in the quarter primarily from adverse disability claims experience as incidence and average claim size were higher than expected. The quarter included net favorable items of approximately $8 million primarily related to reserve adjustments associated with benefit offsets. The non-medical loss ratio was 74.3%, 77.0% before the reserve adjustments, compared to 74.7% in the prior-year quarter.
Group Protection sales of $268 million for the quarter increased 30% from the same period last year and annualized sales of $541 million increased 18% over 2012. The growth in sales for both the quarter and the full year were driven primarily by increased activity in the employee-paid voluntary and worksite space, business which has a more favorable profitability profile than traditional group or employer-paid business. Sales of employer-paid products were flat for the year.
Non-medical net earned premiums were $502 million in the fourth quarter, up 9% over the year-ago period. For the full year, non-medical net earned premiums were $2 billion, up 9%.
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Other Operations reported a loss from operations of $19 million in the quarter versus a loss of $40 million in the prior-year quarter.
The quarter included net favorable items of approximately $9 million related primarily to taxes. The prior-year quarter included net unfavorable items of approximately $5 million.
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Realized Gains and Losses
Realized gains/losses (after-tax) in the quarter included:
A net gain from general account investments of $2 million as compared to a $2 million net loss in the prior-year quarter.
A $27 million variable annuity net derivatives loss, comprising negative hedge program performance of $12 million and a $15 million loss associated with the non-performance risk component.
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Unrealized Gains and Losses
The company reported a net unrealized gain of $3.8 billion, pre-tax, on its available-for-sale securities at December 31, 2013. This compares to a net unrealized gain of $9.4 billion at December 31, 2012, with the year-over-year decrease driven primarily by higher Treasury rates.
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During the quarter, the company repurchased 2.0 million shares of stock at a cost of $100 million. The quarter's average diluted share count of 272.8 million shares was down 3% from the fourth quarter of 2012, the result of repurchasing 12.0 million shares of stock at a cost of $450 million since December 31, 2012. In addition, the company raised the quarterly common stock dividend 33% to $0.16 per share.
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As of December 31, 2013, book value per share, including accumulated other comprehensive income ("AOCI"), of $51.17 decreased 7% from a year ago. Book value per share, excluding AOCI, of $45.23 increased 10% from the prior-year period.
This press release may contain statements that are forward-looking, and actual results may differ materially, especially given the current economic and capital markets 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 fourth quarter results with investors in a conference call beginning at 10:00 a.m. (ET) on Thursday, February 6, 2014. 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)
Ask for the Lincoln National Conference Call.
The company will also post its fourth quarter 2013 statistical supplement on its website, 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 $207 billion as of December 31, 2013. Through its affiliated companies, Lincoln Financial Group offers: annuities; life, group life, disability and dental insurance; employer-sponsored retirement 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