UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 30, 2019
Date of Report (Date of earliest event reported)
Lincoln National Corporation
(Exact name of registrant as specified in its charter)
Indiana |
1-6028 |
35-1140070 |
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(State or other jurisdiction |
(Commission |
(IRS Employer |
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of incorporation) |
File Number) |
Identification No.) |
150 N. Radnor Chester Road, Radnor, PA 19087
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (484) 583-1400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
__________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
Common Stock |
LNC |
New York Stock Exchange |
__________________________________
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On October 30, 2019, Lincoln National Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2019, a copy of which is attached as Exhibit 99.1 and is incorporated herein by reference. The Company’s statistical supplement for the quarter ended September 30, 2019, is attached as Exhibit 99.2 and is incorporated herein by reference.
The information, including exhibits attached hereto, furnished under this Item 2.02 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits
(d) |
Exhibits. |
The following exhibits are being furnished with this Form 8-K.
Exhibit Number |
Description |
99.1 |
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99.2 |
Lincoln National Corporation Statistical Supplement for the quarter ended September 30, 2019. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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LINCOLN NATIONAL CORPORATION |
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By |
/s/ Christine A. Janofsky |
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Name: |
Christine A. Janofsky |
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Title: |
Senior Vice President and |
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Chief Accounting Officer |
Date: October 30, 2019
FOR IMMEDIATE RELEASE
Lincoln Financial Group reports THIRD quarter 2019 results
and announces increase to dividend
_______________________________________
Net loss EPS of $(0.83) and adjusted operating EPS of $(0.25)
Excluding notable items and alternative investment income, adjusted operating EPS of $2.22
BVPS, including AOCI, of $100.84, up 44%; BVPS, excluding AOCI, of $69.33, up 5%
Increased common stock dividend to $0.40, up 8%
Radnor, PA, October 30, 2019 – Lincoln Financial Group (NYSE: LNC) today reported a net loss for the third quarter of 2019 of $161 million, or $(0.83) per diluted share available to common stockholders, compared to net income in the third quarter of 2018 of $490 million, or $2.24 per diluted share available to common stockholders. Third quarter adjusted loss from operations was $46 million, or $(0.25) per diluted share available to common stockholders, compared to adjusted income from operations of $510 million, or $2.34 per diluted share available to common stockholders, in the third quarter of 2018.
The current quarter’s adjusted operating results included net unfavorable notable items of approximately $403 million, or $2.00 per share, related to the company’s annual review of DAC and reserve assumptions, and approximately $94 million, or $0.47 per share, from underperformance in the alternative investment portfolio, largely driven by a write-down of a large private equity investment. The prior-year quarter included net unfavorable items of approximately $2 million, or $0.01 per share, primarily related to the company’s annual review of DAC and reserve assumptions.
“Appropriate adjustments to our assumptions, including interest rates, as part of our annual review, and fluctuations in key earnings drivers resulted in a significant impact on third quarter results,” said Dennis R. Glass, president and CEO of Lincoln Financial Group. “Importantly, we continue to see momentum in key strategic initiatives, including strong sales growth and further expense improvements.”
The board of directors of Lincoln National Corporation approved raising the quarterly dividend on its common shares to $0.40 per share. The dividend represents an 8% increase over the prior-year level. The increased dividend on
common stock will be payable on February 1, 2020 to shareholders of record at the close of business on January 10, 2020.
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As of or For the |
As of or For the |
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Three Months Ended |
Nine Months Ended |
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September 30, |
September 30, |
||||||||
(in millions, except per share data) |
2019 |
2018 |
2019 |
2018 |
||||||
Net Income (Loss) |
$ |
(161) |
$ |
490 |
$ |
454 |
$ |
1,242 | ||
Net Income (Loss) Available to Common Stockholders |
(164) | 490 | 454 | 1,236 | ||||||
Net Income (Loss) Per Diluted Share Available to Common Stockholders |
(0.83) | 2.24 | 2.24 | 5.59 | ||||||
Revenues |
4,638 | 4,264 | 12,913 | 11,893 | ||||||
Adjusted Income (Loss) from Operations |
(46) | 510 | 873 | 1,405 | ||||||
Adjusted Income (Loss) from Operations per Diluted Share Available to |
||||||||||
Common Stockholders1 |
(0.25) | 2.34 | 4.30 | 6.33 | ||||||
Average Diluted Shares |
201.6 | 218.5 | 203.1 | 221.1 | ||||||
ROE, Including AOCI (Net Income) |
-3.4% |
13.0% | 3.5% | 10.5% | ||||||
Adjusted Operating ROE, Excluding AOCI (Income from Operations) |
-1.3% |
14.5% | 8.3% | 13.5% | ||||||
Book Value per Share, Including AOCI |
$ |
100.84 |
$ |
70.17 |
$ |
100.84 |
$ |
70.17 | ||
Book Value per Share, Excluding AOCI |
69.33 | 66.27 | 69.33 | 66.27 |
1 Due to reporting a net loss for the three months ended September 30, 2019, basic shares were used in the diluted earnings per share calculation for that period as the use of diluted shares would have resulted in a lower loss per share.
Operating Highlights – Third Quarter 2019
· |
General and administrative expenses, net of amounts capitalized, decreased 3% |
· |
Total Annuity sales of $3.5 billion, up 12%, with positive net flows of $253 million |
· |
Retirement Plan Services net flows of $272 million |
· |
Individual life insurance sales of $206 million, up 26% |
· |
Group Protection sales of $242 million, up 53% |
Third Quarter 2019 – Segment Results
Annuities reported income from operations of $169 million compared to $302 million in the prior-year quarter. This decrease was primarily driven by impacts from the company’s annual review of DAC and reserve assumptions, which were unfavorable in the current quarter and favorable in the prior-year quarter. Not including the impact from the review, the decline in income from operations was driven by a decrease in account values from the Athene reinsurance transaction completed in the fourth quarter of 2018 and impacts from underperformance in the alternative investment portfolio.
Total annuity deposits of $3.5 billion were up 12% from the prior-year quarter. Variable annuity sales were up 11% versus the prior-year quarter and fixed annuity sales were up 15% over the same period.
Net flows were $253 million in the quarter compared to net outflows of $81 million in the prior-year period. Average account values of $134 billion decreased 3% over the prior-year quarter. Not including the Athene reinsurance transaction completed in the fourth quarter of 2018, average account values would have increased 2% over the prior-year quarter.
The current quarter included net unfavorable items of $93 million related to the company’s annual review of DAC and reserve assumptions. The prior-year results included net favorable items of $13 million related to the company’s annual review of DAC and reserve assumptions.
Retirement Plan Services reported income from operations of $44 million compared to $40 million in the prior-year quarter with the increase driven by expense management.
Total deposits for the quarter were $2.2 billion compared to $3.3 billion in the prior-year quarter with the decline being driven by one large case in the prior year. Recurring deposits increased 12% over the same period.
Net flows of $272 million combined with equity market growth resulted in average account values of $74 billion, up 4%.
There were no notable items in the current quarter. The prior-year results included net unfavorable items of $2 million related to the company’s annual review of DAC and reserve assumptions.
Life Insurance reported a $245 million loss from operations compared to income from operations of $176 million in the prior-year quarter. This decrease was primarily driven by impacts from the company’s annual review of DAC and reserve assumptions. Not including the impact of the review, the decline in income from operations was driven by underperformance in the alternative investment portfolio and unfavorable mortality relative to the prior-year quarter.
Total Life Insurance sales were $234 million versus $167 million in the prior-year quarter. This increase was driven by 26% growth in individual life products coupled with strong executive benefits sales.
Total Life Insurance in-force of $800 billion grew 9% over the prior-year quarter, and average account values of $52 billion increased 4% over the prior-year quarter.
The current quarter included net unfavorable items of $320 million related to the company’s annual review of DAC and reserve assumptions. The prior-year results included net unfavorable items of $20 million related to the company’s annual review of DAC and reserve assumptions.
Group Protection income from operations was $61 million in the quarter compared to $63 million in the prior-year period. The decrease in earnings was attributable to underperformance in the alternative investment portfolio, which was partially offset by expense savings from the acquisition.
The total loss ratio was 74% in the current quarter and remained relatively flat year over year as the increase in favorable impacts from the annual review of reserve assumptions were largely offset by higher claims experience.
Group Protection sales were $242 million in the quarter, up 53% versus the prior-year quarter driven by strong growth in both life and disability products. Employee-paid sales were 42% of total sales in the quarter.
Insurance premiums were $1 billion in the quarter, up slightly from the prior-year period driven by continued growth.
The current quarter included net favorable items of $10 million related to the company’s annual review of reserve assumptions. The prior-year results included net favorable items of $7 million related to the company’s annual review of reserve assumptions.
Other Operations reported a loss from operations of $75 million versus a loss of $71 million in the prior-year quarter.
There were no notable items in the current quarter or the prior-year quarter.
Realized Gains and Losses / Impacts to Net Loss
Realized gains/losses and impacts to net loss (after-tax) in the quarter were driven by:
· |
A $31 million acquisition and integration expense. |
· |
A $22 million loss from variable annuity net derivative results. |
· |
A $20 million loss from indexed annuity forward-starting options. |
Unrealized Gains and Losses
The company reported a net unrealized gain of $11.5 billion, pre-tax, on its available-for-sale securities at September 30, 2019. This compares to a net unrealized gain of $2.4 billion at September 30, 2018, with the year-over-year increase primarily driven by lower treasury rates.
Capital
The quarter’s average diluted share count of 201.6 million was down 8% from the third quarter of 2018, the result of repurchasing 17.8 million shares of stock at a cost of $1.1 billion since September 30, 2018.
Book Value
As of September 30, 2019, book value per share, including AOCI, increased 44% from the prior-year period to $100.84. Book value per share, excluding AOCI, increased 5% from the prior-year period to $69.33.
The tables attached to this release define and reconcile the non-GAAP measures adjusted income from operations, adjusted operating ROE and BVPS, excluding AOCI, to net income, ROE and BVPS, including AOCI, calculated in accordance with GAAP. The tables also include a reconciliation of adjusted operating EPS excluding notable items and alternative investment income to net income EPS.
This press release may contain 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 our current expectations.
For other financial information, please refer to the company’s third quarter 2019 statistical supplement available on its website, www.lfg.com/earnings.
Lincoln Financial Group will discuss the company’s third quarter results with investors in a conference call beginning at 10:00 a.m. Eastern Time on Thursday, October 31, 2019. The conference call will be broadcast live through the company website at www.lfg.com/webcast. Please log on at least fifteen minutes prior to the call to register and download any necessary streaming media software. To participate via phone: (866) 394-4575 (U.S./Canada) or (678) 509-7536 (International). Ask for the Lincoln National Conference Call.
A replay of the call will be available by 1:00 p.m. Eastern Time on October 31, 2019 at www.lfg.com/webcast. Audio replay will be available from 1:00 p.m. Eastern Time on October 31, 2019 through 12:00 p.m. Eastern Time on November 7, 2019. To access the re-broadcast, dial: (855) 859-2056 (Domestic) or (404) 537-3406 (International). Enter conference code: 6548798.
About Lincoln Financial Group
Lincoln Financial Group provides advice and solutions that help empower people to take charge of their financial lives with confidence and optimism. Today, more than 17 million customers trust our retirement, insurance and wealth protection expertise to help address their lifestyle, savings and income goals, as well as to guard against long-term care expenses. Headquartered in Radnor, Pennsylvania, Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. The company had $261 billion in assets under management as of September 30, 2019. Lincoln Financial Group is a committed corporate citizen included on major sustainability indices including the Dow Jones Sustainability Index North America and FTSE4Good. Dedicated to diversity and inclusion, Lincoln was recognized by Forbes as one of the Best Large Employers, Best Employers for Diversity, and Best Employers for Women. Lincoln also earned perfect 100 percent scores on the Corporate Equality Index and the Disability Equality Index. Learn more at: www.LincolnFinancial.com. Follow us on Facebook, Twitter, LinkedIn, and Instagram. Sign up for email alerts at http://newsroom.lfg.com.
Contacts: |
Chris Giovanni |
Scott Sloat |
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(484) 583-1793 |
(484) 583-1625 |
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Investor Relations |
Media Relations |
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InvestorRelations@LFG.com |
scott.sloat@LFG.com |
Explanatory Notes on Use of Non-GAAP Measures
Management believes that adjusted income from operations (adjusted operating income), adjusted operating return on equity, adjusted operating revenues, and adjusted operating EPS 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 because 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) 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 can fluctuate significantly from period to period, primarily based on changes in interest rates.
For the historical periods, reconciliations of non-GAAP measures used in this presentation to the most directly comparable GAAP measure may be included in this Appendix to the presentation and/or are included in the Statistical Reports for the corresponding periods contained in the Earnings section of the Investor Relations page on our website: www.lfg.com/investor.
Definitions of Non-GAAP Measures Used in this Press Release
Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (including and excluding average goodwill within average equity), excluding AOCI, using annualized adjusted income (loss) from operations are financial measures we use to evaluate and assess our results. Adjusted income (loss) from operations, adjusted operating revenues and adjusted operating return on equity (“ROE”), as used in the presentation, are non-GAAP financial measures and do not replace GAAP net income (loss), revenues and ROE, 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:
· |
Realized gains and losses associated with the following (“excluded realized gain (loss)”): |
o |
Sales or disposals and impairments of securities; |
o |
Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain instruments”); |
o |
Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities; |
o |
Changes in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders reflected within variable annuity net derivative results accounted for at fair value; |
o |
Changes in the fair value of the derivatives we own to hedge our GLB riders reflected within variable annuity net derivative results; |
o |
Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting options”); and |
o |
Changes in the fair value of equity securities; |
· |
Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”); |
· |
Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance; |
· |
Gains (losses) on early extinguishment of debt; |
· |
Losses from the impairment of intangible assets; |
· |
Income (loss) from discontinued operations; |
· |
Acquisition and integration costs related to mergers and acquisitions; and |
· |
Income (loss) from the initial adoption of new accounting standards, regulations and policy changes including the net impact from the Tax Cuts and Jobs Act. |
Adjusted Operating Revenues
Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
· |
Excluded realized gain (loss); |
· |
Revenue adjustments from the initial adoption of new accounting standards; |
· |
Amortization of deferred front-end loads (“DFEL”) arising from changes in GDB and GLB benefit ratio unlocking; and |
· |
Amortization of deferred gains arising from reserve changes on business sold through reinsurance. |
Adjusted Operating Return on Equity
Adjusted operating return on equity measures how efficiently we generate profits from the resources provided by our net assets.
· |
It is calculated by dividing annualized adjusted income (loss) from operations by average equity, excluding accumulated other comprehensive income (loss) ("AOCI"). |
· |
Management evaluates return on equity by both including and excluding average goodwill within average equity. |
Definition of Notable Items
Adjusted income (loss) from operations, excluding notable items, is a non-GAAP measure that excludes 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. |
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 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 primarily attributable to our business operations. |
· |
Management believes book value per share excluding AOCI is useful to investors because it eliminates the effect of items that 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. |
Special Note
Sales
Sales as reported consist of the following:
· |
Annuities and Retirement Plan Services – deposits from new and existing customers; |
· |
MoneyGuard® – 15% of total expected premium deposits; |
· |
Universal life (UL), indexed universal life (IUL), variable universal life (VUL) – first-year commissionable premiums plus 5% of excess premiums received; |
· |
Executive Benefits – single premium bank-owned UL and VUL, 15% of single premium deposits, and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess premium received; |
· |
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 |
Nine Months Ended |
|||||||||
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September 30, |
September 30, |
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2019 |
2018 |
2019 |
2018 |
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|
|||||||||||
Total Revenues |
$ |
4,638 |
$ |
4,264 |
$ |
12,913 |
$ |
11,893 | |||
Less: |
|||||||||||
Excluded realized gain (loss) |
(61) | (98) | (623) | (188) | |||||||
Amortization of DFEL on benefit ratio unlocking |
(1) |
- |
3 |
- |
|||||||
Total Adjusted Operating Revenues |
$ |
4,700 |
$ |
4,362 |
$ |
13,533 |
$ |
12,081 | |||
|
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Net Income (Loss) Available to Common |
|||||||||||
Stockholders – Diluted |
$ |
(164) |
$ |
490 |
$ |
454 |
$ |
1,236 | |||
Less: |
|||||||||||
Adjustment for deferred units of LNC stock in our |
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deferred compensation plans (1) |
(3) |
- |
- |
(6) | |||||||
Net Income (Loss) |
(161) | 490 | 454 | 1,242 | |||||||
Less: |
|||||||||||
Excluded realized gain (loss), after-tax |
(49) | (77) | (492) | (149) | |||||||
Benefit ratio unlocking, after-tax |
(2) | 33 | 186 | 32 | |||||||
Net impact from the Tax Cuts and Jobs Act |
- |
32 |
- |
19 | |||||||
Acquisition and integration costs related to mergers |
|||||||||||
and acquisitions, after-tax |
(31) | (8) | (80) | (47) | |||||||
Gain (loss) on early extinguishment of debt, after-tax |
(33) |
- |
(33) | (18) | |||||||
Adjusted Income (Loss) from Operations |
$ |
(46) |
$ |
510 |
$ |
873 |
$ |
1,405 | |||
|
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Earnings (Loss) Per Common Share – Diluted |
|||||||||||
Net income (loss) |
$ |
(0.83) |
$ |
2.24 |
$ |
2.24 |
$ |
5.59 | |||
Adjusted income (loss) from operations |
(0.25) | 2.34 | 4.30 | 6.33 | |||||||
|
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Average Stockholders' Equity |
|||||||||||
Average equity, including average AOCI |
$ |
19,227 |
$ |
15,124 |
$ |
17,349 |
$ |
15,786 | |||
Average AOCI |
5,292 | 1,019 | 3,372 | 1,929 | |||||||
Average equity, excluding AOCI |
13,935 | 14,105 | 13,977 | 13,857 | |||||||
Average goodwill |
1,778 | 1,754 | 1,779 | 1,560 | |||||||
Average equity, excluding AOCI and goodwill |
$ |
12,157 |
$ |
12,351 |
$ |
12,198 |
$ |
12,297 | |||
|
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Return on Equity, Including AOCI |
|||||||||||
Net income (loss) with average equity including goodwill |
-3.4% |
13.0% | 3.5% | 10.5% | |||||||
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Adjusted Operating Return on Equity, Excluding AOCI |
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Adjusted income (loss) from operations with average equity |
|||||||||||
including goodwill |
-1.3% |
14.5% | 8.3% | 13.5% | |||||||
Adjusted income (loss) from operations with average equity |
|||||||||||
excluding goodwill |
-1.5% |
16.5% | 9.5% | 15.2% | |||||||
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(1) The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC |
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stock in our deferred compensation plans if the effect of equity classification would result in a more dilutive EPS. |
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Lincoln National Corporation
Reconciliation of Net Income EPS to Adjusted Operating EPS Excluding Notable Items and Alternative Investment Income
|
|||||||||||
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For the |
For the |
|||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||
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September 30, |
September 30, |
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|
2019 |
2018 |
2019 |
2018 |
|||||||
Net Income (Loss) EPS, As Reported |
$ |
(0.83) |
$ |
2.24 |
$ |
2.24 |
$ |
5.59 | |||
Less: |
|||||||||||
Excluded realized gain (loss), after-tax |
(0.24) | (0.36) | (2.42) | (0.68) | |||||||
Benefit ratio unlocking, after-tax |
(0.01) | 0.15 | 0.91 | 0.14 | |||||||
Net impact from the Tax Cuts and Jobs Act |
- |
0.15 |
- |
0.09 | |||||||
Acquisition and integration costs related to mergers and acquisitions, |
|||||||||||
after-tax |
(0.16) | (0.04) | (0.39) | (0.21) | |||||||
Gain (loss) on early extinguishment of debt, after-tax |
(0.17) |
- |
(0.16) | (0.08) | |||||||
Adjusted Income (Loss) from Operations EPS, As Reported |
$ |
(0.25) |
$ |
2.34 |
$ |
4.30 |
$ |
6.33 | |||
Less: |
|||||||||||
Notable items: |
|||||||||||
Unlocking/reserve adjustments |
(2.00) | (0.01) | (1.98) | (0.01) | |||||||
Alternative investment income |
(0.47) | 0.04 | (0.52) |
- |
|||||||
Total notable items and alternative investment income |
$ |
(2.47) |
$ |
0.03 |
$ |
(2.50) |
$ |
(0.01) | |||
|
|||||||||||
Adjusted Income (Loss) from Operations EPS, Excluding Notable |
|||||||||||
Items and Alternative Investment Income |
$ |
2.22 |
$ |
2.31 |
$ |
6.80 |
$ |
6.34 |
Lincoln National Corporation
Reconciliation of Book Value per Share
|
|||||
|
As of September 30, |
||||
|
2019 |
2018 |
|||
Book value per share, including AOCI |
$ |
100.84 |
$ |
70.17 | |
Per share impact of AOCI |
31.51 | 3.90 | |||
Book value per share, excluding AOCI |
69.33 | 66.27 |
Lincoln National Corporation
Digest of Earnings
|
|||||
|
For the |
||||
(in millions, except per share data) |
Three Months Ended |
||||
|
September 30, |
||||
|
2019 |
2018 |
|||
|
|||||
Revenues |
$ |
4,638 |
$ |
4,264 | |
|
|||||
Net Income (Loss) |
$ |
(161) |
$ |
490 | |
Adjustment for deferred units of LNC stock in our |
|||||
deferred compensation plans (1) |
(3) |
- |
|||
Net Income (Loss) Available to Common |
|||||
Stockholders – Diluted |
$ |
(164) |
$ |
490 | |
|
|||||
Earnings (Loss) per Common Share – Basic |
$ |
(0.81) |
$ |
2.27 | |
Earnings (Loss) per Common Share – Diluted (2) |
(0.83) | 2.24 | |||
|
|||||
Average Shares – Basic |
199,200,811 | 215,901,268 | |||
Average Shares – Diluted |
201,561,178 | 218,469,229 | |||
|
|||||
|
For the |
||||
|
Nine Months Ended |
||||
|
September 30, |
||||
|
2019 |
2018 |
|||
|
|||||
Revenues |
$ |
12,913 |
$ |
11,893 | |
|
|||||
Net Income (Loss) |
$ |
454 |
$ |
1,242 | |
Adjustment for deferred units of LNC stock in our |
|||||
deferred compensation plans (1) |
- |
(6) | |||
Net Income (Loss) Available to Common |
|||||
Stockholders – Diluted |
$ |
454 |
$ |
1,236 | |
|
|||||
Earnings (Loss) per Common Share – Basic |
$ |
2.25 |
$ |
5.71 | |
Earnings (Loss) per Common Share – Diluted (2) |
2.24 | 5.59 | |||
|
|||||
Average Shares – Basic |
201,644,591 | 217,413,480 | |||
Average Shares – Diluted |
203,135,457 | 221,095,468 | |||
|
|||||
|
|||||
|
|||||
(1) The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC |
|||||
stock in our deferred compensation plans if the effect of equity classification would be more dilutive to our diluted EPS. |
|||||
(2) Due to reporting a net loss for the three months ended September 30, 2019, basic shares were used in the diluted earnings per share |
|||||
calculation for that period as the use of diluted shares would have resulted 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, and may contain words like: "believe," "anticipate," "expect," "estimate," "project," "will," "shall" 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:
· |
Deterioration in general economic and business conditions that may affect account values, investment results, guaranteed benefit liabilities, premium levels, claims experience and the level of pension benefit costs, funding and investment results; |
· |
Adverse global capital and credit market conditions could 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; |
· |
Because of our holding company structure, the inability of our subsidiaries to pay dividends to the holding company in sufficient amounts 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; and the impact of any “best interest” standards of care adopted by the Securities and Exchange Commission (“SEC”) or other regulations adopted by federal or state regulators or self-regulatory organizations relating to the standard of care owed by investment advisers and/or broker dealers; |
· |
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, estimated gross profits and demand for our products; |
· |
Rapidly increasing interest rates causing contract holders to surrender life insurance and annuity policies, thereby causing realized investment losses, and reduced hedge performance related to variable annuities; |
· |
Uncertainty about the effect of continuing promulgation and implementation of rules and regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act on us, the economy and the financial services sector in particular; |
· |
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 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; an acceleration of the net amortization of deferred acquisition costs ("DAC"), value of business acquired ("VOBA"), deferred sales inducements ("DSI") and deferred front-end loads ("DFEL"); and an increase in liabilities related to guaranteed benefit features of our subsidiaries' variable annuity products; |
· |
Ineffectiveness of our risk management policies and procedures, including various hedging strategies used to offset the effect of changes in the value of liabilities due to changes in the level and volatility of the equity markets and interest rates; |
· |
A deviation in actual experience regarding future persistency, mortality, morbidity, interest rates or equity market returns from the assumptions used in pricing our subsidiaries' products, in establishing related insurance reserves and in the net amortization of DAC, VOBA, DSI and DFEL, which may reduce future earnings; |
· |
Changes in accounting principles that may affect our 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 investments in our portfolios, as well as counterparties to which we are exposed to credit risk requiring that we realize losses on investments; |
· |
Inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; |
· |
Interruption in telecommunication, information technology or other operational systems, or failure to safeguard the confidentiality or privacy of sensitive data on such systems from cyberattacks or other breaches of our data security systems; |
· |
The effect of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including the successful implementation of integration strategies or the achievement of anticipated synergies and operational efficiencies related to an acquisition; |
· |
The adequacy and collectability of reinsurance that we have purchased; |
· |
Acts of terrorism, a pandemic, war or other man-made and natural catastrophes that may adversely affect our businesses and 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 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.
|
Lincoln Financial Group |
||
|
Table of Contents |
||
|
|||
|
|||
|
Analyst Coverage and Credit Ratings |
1 | |
|
Notes |
2 | |
|
Consolidated |
||
|
Consolidated Statements of Income (Loss) |
3 | |
|
Consolidated Balance Sheets |
4 | |
|
Earnings, Shares and Return on Equity |
5 | |
|
Key Stakeholder Metrics |
6 | |
|
Segment and Sources of Earnings |
7 | |
|
Select Earnings Drivers By Segment |
8 | |
|
Sales By Segment |
9 | |
|
Operating Revenues and General and Administrative Expenses By Segment |
10 | |
|
Operating Commissions and Other Expenses |
11 | |
|
Interest Rate Yields and Spreads By Segment |
12 | |
|
Select Earnings and Operational Data from Business Segments |
||
|
Annuities |
13 | |
|
Retirement Plan Services |
14 | |
|
Life Insurance |
15 | |
|
Group Protection |
16 | |
|
Other Operations |
17 | |
|
DAC & Account Value Rollforwards |
||
|
Consolidated DAC, VOBA, DSI and DFEL Roll Forwards |
18 | |
|
Account Value Roll Forwards: |
||
|
Annuities |
19 | |
|
Retirement Plan Services |
20 | |
|
Life Insurance |
21 | |
|
Other Information |
||
|
Select Investment Data |
22 | |
|
Realized Gain (Loss) and Benefit Ratio Unlocking, After-DAC |
23 | |
|
Select GAAP to Non-GAAP Reconciliations |
24 | |
|
|||
|
|||
|
|||
|
|
Lincoln Financial Group |
|||||||||
|
Analyst Coverage and Credit Ratings |
|||||||||
|
||||||||||
|
||||||||||
|
Firm |
Analyst |
Phone Number |
|||||||
|
Autonomous Research U.S., L.P. |
Erik Bass |
646-561-6248 |
|||||||
|
B. Riley FBR |
Randy Binner |
703-312-1890 |
|||||||
|
Bank of America Merrill Lynch |
Jay Cohen |
646-855-5716 |
|||||||
|
Barclays Capital |
Jay Gelb |
212-526-1561 |
|||||||
|
Citi Research |
Suneet Kamath |
212-816-3457 |
|||||||
|
Credit Suisse |
Andrew Kligerman |
212-325-5069 |
|||||||
|
Deutsche Bank |
Joshua Shanker |
212-250-7127 |
|||||||
|
Dowling & Partners |
Humphrey Lee |
860-676-7324 |
|||||||
|
Evercore |
Thomas Gallagher |
212-446-9439 |
|||||||
|
Goldman Sachs |
Alex Scott |
917-343-7160 |
|||||||
|
J.P. Morgan Securities |
Jimmy Bhullar |
212-622-6397 |
|||||||
|
Keefe, Bruyette & Woods, Inc. |
Ryan Krueger |
860-722-5930 |
|||||||
|
Morgan Stanley |
Nigel Dally |
212-761-4132 |
|||||||
|
RBC Capital Markets |
Mark Dwelle |
804-782-4008 |
|||||||
|
Sandler O’Neill & Partners, L.P. |
John Barnidge |
312-281-3412 |
|||||||
|
UBS |
John Nadel |
212-713-4299 |
|||||||
|
Wells Fargo |
Elyse Greenspan |
212-214-8031 |
|||||||
|
||||||||||
|
This list is provided for informational purposes only. Lincoln Financial Group does not endorse the analyses, conclusions or recommendations contained in any report issued by these |
|||||||||
|
or any other analysts. |
|||||||||
|
||||||||||
|
Ratings as of October 30, 2019 |
|||||||||
|
Standard |
|||||||||
|
A.M Best |
Fitch |
Moody's |
& Poor's |
||||||
|
Senior Debt Ratings |
a- |
BBB+ |
Baa1 |
A- |
|||||
|
Financial Strength Ratings |
|||||||||
|
The Lincoln National Life Insurance Company |
A+ |
A+ |
A1 |
AA- |
|||||
|
First Penn-Pacific Life Insurance Company |
A |
A+ |
A1 |
A- |
|||||
|
Lincoln Life & Annuity Company of New York |
A+ |
A+ |
A1 |
AA- |
|||||
|
Liberty Life Assurance Company of Boston |
A |
AA- |
|||||||
|
||||||||||
|
Investor Inquiries May Be Directed To: |
|||||||||
|
Chris Giovanni, Senior Vice President, Investor Relations |
|||||||||
|
Email: Christopher.Giovanni@lfg.com |
|||||||||
|
Phone: 484-583-1793 |
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|
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|
Page 1 |
|
Lincoln Financial Group |
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|
Notes |
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|
||||||||||||||||||||||||||
|
Computations |
|||||||||||||||||||||||||
|
• The quarterly financial information for the current year may not sum to the corresponding year-to-date amount as both are rounded to millions. |
|||||||||||||||||||||||||
|
• The financial ratios reported herein are calculated using whole dollars instead of dollars rounded to millions. |
|||||||||||||||||||||||||
|
• If the effect of equity classification would result in a more dilutive Earnings Per Share (“EPS”), the numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market |
|||||||||||||||||||||||||
|
adjustment for deferred units of LNC stock in our deferred compensation plans. In addition, for any period where a loss from continuing operations is experienced, shares used in the diluted EPS |
|||||||||||||||||||||||||
|
calculation represent basic shares, as using dilutive shares would be anti-dilutive to the calculation. In these periods, we would also exclude the deferred compensation adjustment. |
|||||||||||||||||||||||||
|
• Return on equity (“ROE”) measures how efficiently we generate profits from the resources provided by our net assets. ROE is calculated by dividing annualized net income (loss) (or adjusted income (loss) |
|||||||||||||||||||||||||
|
from operations) by average equity, excluding accumulated other comprehensive income (loss) (“AOCI”). Management evaluates consolidated ROE by both including and excluding the effect |
|||||||||||||||||||||||||
|
of average goodwill. |
|||||||||||||||||||||||||
|
• Book value per share, excluding AOCI, is calculated by dividing stockholders’ equity, excluding AOCI, by 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 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. |
|||||||||||||||||||||||||
|
• Pre-tax net margin is calculated by dividing adjusted income (loss) from operations before taxes by net revenue, which is defined as total adjusted operating revenues less interest credited. |
|||||||||||||||||||||||||
|
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|
Definitions |
|||||||||||||||||||||||||
|
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. |
|||||||||||||||||||||||||
|
Sales as reported consist of the following: |
|||||||||||||||||||||||||
|
• Annuities and Retirement Plan Services – deposits from new and existing customers; |
|||||||||||||||||||||||||
|
• MoneyGuard®, our linked-benefit product – 15% of total expected premium deposits; |
|||||||||||||||||||||||||
|
• Universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”) – first-year commissionable premiums plus 5% of excess premiums received; |
|||||||||||||||||||||||||
|
• Executive Benefits – single premium bank-owned UL and VUL, 15% of single premium deposits, and corporate-owned UL and VUL, first-year commissionable premiums plus 5% of excess |
|||||||||||||||||||||||||
|
premium received; |
|||||||||||||||||||||||||
|
• Term – 100% of annualized first-year premiums; and |
|||||||||||||||||||||||||
|
• Group Protection – annualized first-year premiums from new policies. |
|||||||||||||||||||||||||
|
Throughout the document, “after-DAC” refers to the associated amortization expense of deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred sales inducements (“DSI”) |
|||||||||||||||||||||||||
|
and deferred front-end loads (“DFEL”) and changes in other contract holder funds. |
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|
Page 2a |
|
Lincoln Financial Group |
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|
Notes |
|||||||||||||||||||||||||
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|
||||||||||||||||||||||||||
|
Sources of earnings are defined as follows: |
|||||||||||||||||||||||||
|
• Investment spread earnings consist primarily of net investment income, net of interest credited earned on the underlying general account investments supporting our fixed products less related |
|||||||||||||||||||||||||
|
expenses. |
|||||||||||||||||||||||||
|
• Mortality/morbidity earnings result from mortality margins, morbidity margins, and certain expense assessments and related fees that are a function of the rates priced into the product and level |
|||||||||||||||||||||||||
|
of insurance in force. |
|||||||||||||||||||||||||
|
• Fees on assets under management (“AUM”) earnings results consist primarily of asset-based fees charged based on variable account values less associated benefits and related expenses. |
|||||||||||||||||||||||||
|
• Variable annuity (“VA”) riders earnings consist of fees charged to the contract holder related to guaranteed benefit rider features, less the net valuation premium and associated change in |
|||||||||||||||||||||||||
|
benefit reserves and related expenses. |
|||||||||||||||||||||||||
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||||||||||||||||||||||||||
|
Non-GAAP Performance Measures |
|||||||||||||||||||||||||
|
Non-GAAP measures do not replace the most directly comparable GAAP measures, and we have included detailed reconciliations herein. |
|||||||||||||||||||||||||
|
Adjusted income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable: |
|||||||||||||||||||||||||
|
• Realized gains and losses associated with the following (“excluded realized gain (loss)”): |
|||||||||||||||||||||||||
|
▪ Sales or disposals and impairments of securities; |
|||||||||||||||||||||||||
|
▪ Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain instruments”); |
|||||||||||||||||||||||||
|
▪ Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit (“GDB”) riders within our variable annuities; |
|||||||||||||||||||||||||
|
▪ Changes in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders reflected within variable annuity net derivative results accounted for at fair value; |
|||||||||||||||||||||||||
|
▪ Changes in the fair value of the derivatives we own to hedge our GLB riders reflected within variable annuity net derivative results; |
|||||||||||||||||||||||||
|
▪ Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future |
|||||||||||||||||||||||||
|
reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting options”); and |
|||||||||||||||||||||||||
|
▪ Changes in the fair value of equity securities; |
|||||||||||||||||||||||||
|
• Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders (“benefit ratio unlocking”); |
|||||||||||||||||||||||||
|
• Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance; |
|||||||||||||||||||||||||
|
• Gains (losses) on early extinguishment of debt; |
|||||||||||||||||||||||||
|
• Losses from the impairment of intangible assets; |
|||||||||||||||||||||||||
|
• Income (loss) from discontinued operations; |
|||||||||||||||||||||||||
|
• Acquisition and integration costs related to mergers and acquisitions; and |
|||||||||||||||||||||||||
|
• Income (loss) from the initial adoption of new accounting standards, regulations and policy changes including the net impact from the Tax Cuts and Jobs Act. |
|||||||||||||||||||||||||
|
Adjusted operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable: |
|||||||||||||||||||||||||
|
• Excluded realized gain (loss); |
|||||||||||||||||||||||||
|
• Revenue adjustments from the initial adoption of new accounting standards; |
|||||||||||||||||||||||||
|
• Amortization of DFEL arising from changes in GDB and GLB benefit ratio unlocking; and |
|||||||||||||||||||||||||
|
• Amortization of deferred gains arising from reserve changes on business sold through reinsurance. |
|||||||||||||||||||||||||
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|
Page 2b |
|
Lincoln Financial Group |
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|
Notes |
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||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Management believes that the non-GAAP performance measures previously discussed explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying |
|||||||||||||||||||||||||
|
trends in our 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 many |
|||||||||||||||||||||||||
|
instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. In addition, we believe that our definitions of adjusted operating revenues and adjusted |
|||||||||||||||||||||||||
|
income from operations provide investors with more valuable measures of our performance as they better reveal trends in our business. |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Prior year interest rate spreads for the Life Insurance segment have been restated to conform to the current year presentation. |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Due to reporting a net loss for the three months ended September 30, 2019, basic shares were used in the diluted earnings per share calculation for that period as the use of diluted shares would have |
|||||||||||||||||||||||||
|
resulted in a lower loss per share. |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Statistical Supplement is Dated |
|||||||||||||||||||||||||
|
The financial data in this document is dated October 30, 2019, and has not been updated since that date. Lincoln Financial Group does not intend to update this document. |
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Page 2c |
|
Lincoln Financial Group |
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|
Consolidated Statements of Income (Loss) |
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|
Unaudited (millions of dollars, except per share data) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Revenues |
|||||||||||||||||||||||||
|
Insurance premiums |
$ |
1,323 |
$ |
1,336 |
$ |
1,446 |
$ |
1,398 |
$ |
1,325 | 0.2% |
$ |
3,265 |
$ |
4,170 | 27.7% | |||||||||
|
Fee income |
1,550 | 1,511 | 1,475 | 1,517 | 1,934 | 24.8% | 4,475 | 4,925 | 10.1% | ||||||||||||||||
|
Net investment income |
1,271 | 1,349 | 1,251 | 1,355 | 1,235 |
-2.8% |
3,736 | 3,842 | 2.8% | ||||||||||||||||
|
Realized gain (loss): |
|||||||||||||||||||||||||
|
Other-than-temporary impairment (“OTTI”) |
(2) | (2) | (8) | (4) | (2) | 0.0% | (5) | (14) |
NM |
||||||||||||||||
|
Realized gain (loss), excluding OTTI |
(53) | 193 | (354) | (113) | (9) | 79.2% | (46) | (477) |
NM |
||||||||||||||||
|
Total realized gain (loss) |
(55) | 191 | (362) | (117) | (11) | 80.0% | (51) | (491) |
NM |
||||||||||||||||
|
Amortization of deferred gains on business |
|||||||||||||||||||||||||
|
sold through reinsurance |
- |
8 | 8 | 8 | 8 |
NM |
1 | 23 |
NM |
||||||||||||||||
|
Other revenues |
175 | 136 | 147 | 149 | 147 |
-16.0% |
467 | 444 |
-4.9% |
||||||||||||||||
|
Total revenues |
4,264 | 4,531 | 3,965 | 4,310 | 4,638 | 8.8% | 11,893 | 12,913 | 8.6% | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||
|
Interest credited |
652 | 663 | 678 | 680 | 705 | 8.1% | 1,954 | 2,063 | 5.6% | ||||||||||||||||
|
Benefits |
1,626 | 2,142 | 1,757 | 1,852 | 2,502 | 53.9% | 4,644 | 6,112 | 31.6% | ||||||||||||||||
|
Commissions and other expenses |
1,367 | 1,162 | 1,176 | 1,272 | 1,552 | 13.5% | 3,600 | 3,999 | 11.1% | ||||||||||||||||
|
Interest and debt expense |
69 | 69 | 71 | 70 | 113 | 63.8% | 228 | 254 | 11.4% | ||||||||||||||||
|
Strategic digitization expense |
18 | 28 | 15 | 15 | 16 |
-11.1% |
49 | 47 |
-4.1% |
||||||||||||||||
|
Total expenses |
3,732 | 4,064 | 3,697 | 3,889 | 4,888 | 31.0% | 10,475 | 12,475 | 19.1% | ||||||||||||||||
|
Income (loss) before taxes |
532 | 467 | 268 | 421 | (250) |
NM |
1,418 | 438 |
-69.1% |
||||||||||||||||
|
Federal income tax expense (benefit) |
42 | 68 | 16 | 58 | (89) |
NM |
176 | (16) |
NM |
||||||||||||||||
|
Net income (loss) |
490 | 399 | 252 | 363 | (161) |
NM |
1,242 | 454 |
-63.4% |
||||||||||||||||
|
Adjustment for LNC stock units in our |
|||||||||||||||||||||||||
|
deferred compensation plans |
- |
(12) |
- |
- |
(3) |
NM |
(6) |
- |
100.0% | ||||||||||||||||
|
Net income (loss) available to common |
|||||||||||||||||||||||||
|
stockholders – diluted |
$ |
490 |
$ |
387 |
$ |
252 |
$ |
363 |
$ |
(164) |
NM |
$ |
1,236 |
$ |
454 |
-63.3% |
|||||||||
|
||||||||||||||||||||||||||
|
Earnings (Loss) Per Common Share – Diluted |
|||||||||||||||||||||||||
|
Net income (loss) |
$ |
2.24 |
$ |
1.80 |
$ |
1.22 |
$ |
1.79 |
$ |
(0.83) |
NM |
$ |
5.59 |
$ |
2.24 |
-59.9% |
|||||||||
|
||||||||||||||||||||||||||
|
ROE, including AOCI |
|||||||||||||||||||||||||
|
Net income (loss) |
13.0% | 10.9% | 6.6% | 8.3% |
-3.4% |
10.5% | 3.5% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 3 |
|
Lincoln Financial Group |
|||||||||||||||||
|
Consolidated Balance Sheets |
|||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||
|
||||||||||||||||||
|
As of |
|||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
||||||||||||
|
ASSETS |
|||||||||||||||||
|
Investments: |
|||||||||||||||||
|
Fixed maturity available-for-sale (“AFS”) securities: |
|||||||||||||||||
|
Corporate bonds |
$ |
80,080 |
$ |
80,348 |
$ |
83,208 |
$ |
84,790 |
$ |
87,910 | 9.8% | ||||||
|
U.S. government bonds |
409 | 417 | 423 | 430 | 438 | 7.1% | |||||||||||
|
State and municipal bonds |
5,218 | 5,345 | 5,569 | 5,669 | 5,800 | 11.2% | |||||||||||
|
Foreign government bonds |
459 | 448 | 453 | 440 | 444 |
-3.3% |
|||||||||||
|
Residential mortgage-backed securities |
3,287 | 3,373 | 3,414 | 3,292 | 3,287 | 0.0% | |||||||||||
|
Commercial mortgage-backed securities |
748 | 804 | 885 | 965 | 1,033 | 38.1% | |||||||||||
|
Asset-backed securities |
2,347 | 2,696 | 3,484 | 3,542 | 4,172 | 77.8% | |||||||||||
|
Hybrid and redeemable preferred securities |
613 | 593 | 614 | 605 | 575 |
-6.2% |
|||||||||||
|
Total fixed maturity AFS securities |
93,161 | 94,024 | 98,050 | 99,733 | 103,659 | 11.3% | |||||||||||
|
Trading securities |
1,440 | 1,950 | 3,314 | 4,522 | 4,691 | 225.8% | |||||||||||
|
Equity securities |
112 | 99 | 153 | 196 | 158 | 41.1% | |||||||||||
|
Mortgage loans on real estate |
12,561 | 13,260 | 13,997 | 15,090 | 15,947 | 27.0% | |||||||||||
|
Policy loans |
2,490 | 2,509 | 2,498 | 2,484 | 2,475 |
-0.6% |
|||||||||||
|
Derivative investments |
706 | 1,107 | 981 | 1,510 | 2,201 | 211.8% | |||||||||||
|
Other investments |
2,216 | 2,267 | 2,752 | 2,845 | 3,389 | 52.9% | |||||||||||
|
Total investments |
112,686 | 115,216 | 121,745 | 126,380 | 132,520 | 17.6% | |||||||||||
|
Cash and invested cash |
1,460 | 2,345 | 1,593 | 3,314 | 2,939 | 101.3% | |||||||||||
|
DAC and VOBA |
10,014 | 10,264 | 9,441 | 8,588 | 7,492 |
-25.2% |
|||||||||||
|
Premiums and fees receivable |
592 | 570 | 607 | 553 | 440 |
-25.7% |
|||||||||||
|
Accrued investment income |
1,168 | 1,119 | 1,184 | 1,146 | 1,182 | 1.2% | |||||||||||
|
Reinsurance recoverables |
18,271 | 17,748 | 17,660 | 17,481 | 17,353 |
-5.0% |
|||||||||||
|
Funds withheld reinsurance assets |
566 | 557 | 549 | 548 | 543 |
-4.1% |
|||||||||||
|
Goodwill |
1,757 | 1,782 | 1,778 | 1,778 | 1,778 | 1.2% | |||||||||||
|
Other assets |
9,644 | 15,713 | 16,373 | 16,196 | 15,939 | 65.3% | |||||||||||
|
Separate account assets |
147,692 | 132,833 | 143,369 | 146,275 | 145,092 |
-1.8% |
|||||||||||
|
Total assets |
$ |
303,850 |
$ |
298,147 |
$ |
314,299 |
$ |
322,259 |
$ |
325,278 | 7.1% | ||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
Page 4a |
|
Lincoln Financial Group |
|||||||||||||||||
|
Consolidated Balance Sheets |
|||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||
|
||||||||||||||||||
|
As of |
|||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
||||||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||||||||||
|
Liabilities |
|||||||||||||||||
|
Future contract benefits |
$ |
33,988 |
$ |
34,648 |
$ |
34,009 |
$ |
34,890 |
$ |
36,108 | 6.2% | ||||||
|
Other contract holder funds |
89,906 | 91,233 | 93,959 | 94,947 | 95,283 | 6.0% | |||||||||||
|
Short-term debt |
- |
- |
300 | 300 | 300 |
NM |
|||||||||||
|
Long-term debt by rating agency leverage definitions: |
|||||||||||||||||
|
Operating (see note (2) on page 6 for details) |
865 | 866 | 866 | 866 | 866 | 0.1% | |||||||||||
|
Financial |
4,939 | 4,973 | 4,706 | 4,755 | 5,204 | 5.4% | |||||||||||
|
Reinsurance related embedded derivatives |
20 | 3 | 177 | 310 | 339 |
NM |
|||||||||||
|
Funds withheld reinsurance liabilities |
1,733 | 1,740 | 1,762 | 1,796 | 1,817 | 4.8% | |||||||||||
|
Payables for collateral on investments |
4,212 | 4,805 | 5,362 | 5,632 | 5,528 | 31.2% | |||||||||||
|
Other liabilities |
5,425 | 12,696 | 13,372 | 14,033 | 14,742 | 171.7% | |||||||||||
|
Separate account liabilities |
147,692 | 132,833 | 143,369 | 146,275 | 145,092 |
-1.8% |
|||||||||||
|
Total liabilities |
288,780 | 283,797 | 297,882 | 303,804 | 305,279 | 5.7% | |||||||||||
|
||||||||||||||||||
|
Stockholders’ Equity |
|||||||||||||||||
|
Common stock |
5,619 | 5,392 | 5,285 | 5,241 | 5,192 |
-7.6% |
|||||||||||
|
Retained earnings |
8,615 | 8,551 | 8,679 | 8,878 | 8,559 |
-0.7% |
|||||||||||
|
AOCI: |
|||||||||||||||||
|
Unrealized investment gains (losses) |
1,138 | 729 | 2,773 | 4,658 | 6,572 |
NM |
|||||||||||
|
Foreign currency translation adjustment |
(20) | (23) | (20) | (24) | (29) |
-45.0% |
|||||||||||
|
Funded status of employee benefit plans |
(282) | (299) | (300) | (298) | (295) |
-4.6% |
|||||||||||
|
Total AOCI |
836 | 407 | 2,453 | 4,336 | 6,248 |
NM |
|||||||||||
|
Total stockholders’ equity |
15,070 | 14,350 | 16,417 | 18,455 | 19,999 | 32.7% | |||||||||||
|
Total liabilities and stockholders’ equity |
$ |
303,850 |
$ |
298,147 |
$ |
314,299 |
$ |
322,259 |
$ |
325,278 | 7.1% | ||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
||||||||||||||||||
|
Page 4b |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Earnings, Shares and Return on Equity |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars, except per share data) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
As of or For the Three Months Ended |
As of or For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Income (Loss) |
|||||||||||||||||||||||||
|
Net income (loss) |
$ |
490 |
$ |
399 |
$ |
252 |
$ |
363 |
$ |
(161) |
NM |
$ |
1,242 |
$ |
454 |
-63.4% |
|||||||||
|
Pre-tax adjusted income (loss) from operations |
599 | 563 | 507 | 566 | (104) |
NM |
1,650 | 969 |
-41.3% |
||||||||||||||||
|
After-tax adjusted income (loss) from operations (1) |
510 | 475 | 441 | 478 | (46) |
NM |
1,405 | 873 |
-37.9% |
||||||||||||||||
|
Adjusted operating tax rate |
14.9% | 15.6% | 13.0% | 15.5% | 55.8% | 14.8% | 9.9% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Average Stockholders’ Equity |
|||||||||||||||||||||||||
|
Average equity, including AOCI |
$ |
15,124 |
$ |
14,710 |
$ |
15,384 |
$ |
17,436 |
$ |
19,227 | 27.1% |
$ |
15,786 |
$ |
17,349 | 9.9% | |||||||||
|
Average AOCI |
1,019 | 622 | 1,430 | 3,394 | 5,292 |
NM |
1,929 | 3,372 | 74.8% | ||||||||||||||||
|
Average equity, excluding AOCI |
$ |
14,105 |
$ |
14,088 |
$ |
13,954 |
$ |
14,042 |
$ |
13,935 |
-1.2% |
$ |
13,857 |
$ |
13,977 | 0.9% | |||||||||
|
||||||||||||||||||||||||||
|
ROE, excluding AOCI |
|||||||||||||||||||||||||
|
Net income (loss) |
13.9% | 11.3% | 7.2% | 10.4% |
-4.6% |
12.0% | 4.3% | ||||||||||||||||||
|
Adjusted income (loss) from operations |
14.5% | 13.5% | 12.6% | 13.6% |
-1.3% |
13.5% | 8.3% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Per Share |
|||||||||||||||||||||||||
|
Net income (loss) (diluted) |
$ |
2.24 |
$ |
1.80 |
$ |
1.22 |
$ |
1.79 |
$ |
(0.83) |
NM |
$ |
5.59 |
$ |
2.24 |
-59.9% |
|||||||||
|
Adjusted income (loss) from operations (diluted) |
2.34 | 2.15 | 2.14 | 2.36 | (0.25) |
NM |
6.33 | 4.30 |
-32.1% |
||||||||||||||||
|
Dividends declared during the period |
0.33 | 0.37 | 0.37 | 0.37 | 0.37 | 12.1% | 0.99 | 1.11 | 12.1% | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Book value, including AOCI |
$ |
70.17 |
$ |
69.71 |
$ |
80.88 |
$ |
91.92 |
$ |
100.84 | 43.7% |
$ |
70.17 |
$ |
100.84 | 43.7% | |||||||||
|
Per share impact of AOCI |
3.90 | 1.98 | 12.09 | 21.60 | 31.51 |
NM |
3.90 | 31.51 |
NM |
||||||||||||||||
|
Book value, excluding AOCI |
$ |
66.27 |
$ |
67.73 |
$ |
68.79 |
$ |
70.32 |
$ |
69.33 | 4.6% |
$ |
66.27 |
$ |
69.33 | 4.6% | |||||||||
|
||||||||||||||||||||||||||
|
Shares |
|||||||||||||||||||||||||
|
Repurchased during the period |
2.7 | 9.1 | 3.9 | 2.3 | 2.5 |
-7.4% |
4.1 | 8.7 | 112.2% | ||||||||||||||||
|
End-of-period – basic |
214.8 | 205.9 | 203.0 | 200.8 | 198.3 |
-7.7% |
214.8 | 198.3 |
-7.7% |
||||||||||||||||
|
End-of-period – diluted |
217.4 | 209.0 | 204.2 | 202.2 | 200.7 |
-7.7% |
217.4 | 200.7 |
-7.7% |
||||||||||||||||
|
Average for the period – diluted |
218.5 | 215.0 | 206.0 | 202.9 | 201.6 |
-7.7% |
221.1 | 203.1 |
-8.1% |
||||||||||||||||
|
||||||||||||||||||||||||||
|
(1) See reconciliation to net income (loss) on page 24. |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 5 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Key Stakeholder Metrics |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars, except per share data) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
As of or For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Cash Returned to Common Stockholders |
|||||||||||||||||||||||||
|
Shares repurchased |
$ |
175 |
$ |
535 |
$ |
240 |
$ |
150 |
$ |
150 |
-14.3% |
$ |
275 |
$ |
540 | 96.4% | |||||||||
|
Common dividends |
72 | 70 | 76 | 75 | 74 | 2.8% | 216 | 225 | 4.2% | ||||||||||||||||
|
Total cash returned to common stockholders |
$ |
247 |
$ |
605 |
$ |
316 |
$ |
225 |
$ |
224 |
-9.3% |
$ |
491 |
$ |
765 | 55.8% | |||||||||
|
||||||||||||||||||||||||||
|
Leverage Ratio |
|||||||||||||||||||||||||
|
Short-term debt |
$ |
- |
$ |
- |
$ |
300 |
$ |
300 |
$ |
300 |
NM |
||||||||||||||
|
Long-term debt |
5,804 | 5,839 | 5,572 | 5,621 | 6,070 | 4.6% | |||||||||||||||||||
|
Total debt (1) |
5,804 | 5,839 | 5,872 | 5,921 | 6,370 | 9.8% | |||||||||||||||||||
|
Less: |
|||||||||||||||||||||||||
|
Operating debt (2) |
865 | 866 | 866 | 866 | 866 | 0.1% | |||||||||||||||||||
|
25% of capital securities |
302 | 302 | 302 | 302 | 302 | 0.0% | |||||||||||||||||||
|
Carrying value of fair value hedges and other items |
155 | 189 | 222 | 270 | 331 | 113.5% | |||||||||||||||||||
|
Total numerator |
$ |
4,482 |
$ |
4,482 |
$ |
4,482 |
$ |
4,483 |
$ |
4,871 | 8.7% | ||||||||||||||
|
||||||||||||||||||||||||||
|
Stockholders’ equity, excluding unrealized |
|||||||||||||||||||||||||
|
investment gains (losses) |
$ |
13,932 |
$ |
13,621 |
$ |
13,644 |
$ |
13,797 |
$ |
13,427 |
-3.6% |
||||||||||||||
|
Add: 25% of capital securities |
302 | 302 | 302 | 302 | 302 | 0.0% | |||||||||||||||||||
|
Total numerator |
4,482 | 4,482 | 4,482 | 4,483 | 4,871 | 8.7% | |||||||||||||||||||
|
Total denominator |
$ |
18,716 |
$ |
18,405 |
$ |
18,428 |
$ |
18,582 |
$ |
18,600 |
-0.6% |
||||||||||||||
|
||||||||||||||||||||||||||
|
Leverage ratio |
23.9% | 24.4% | 24.3% | 24.1% | 26.2% | ||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Holding Company Available Liquidity |
$ |
465 |
$ |
465 |
$ |
481 |
$ |
474 |
$ |
765 | 64.5% | ||||||||||||||
|
||||||||||||||||||||||||||
|
(1) Excludes obligations under finance leases and certain financing arrangements of $413 million that are reported in other liabilities on our Consolidated Balance Sheets. |
|||||||||||||||||||||||||
|
(2) We have categorized as operating debt the senior notes issued in October 2007 and June 2010 because the proceeds were used as a long-term structured solution to reduce the strain |
|||||||||||||||||||||||||
|
on increasing statutory reserves associated with secondary guarantee UL and term policies. |
|||||||||||||||||||||||||
|
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|
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|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
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|
||||||||||||||||||||||||||
|
Page 6 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Segment and Sources of Earnings |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Income (Loss) from Operations, Pre-Tax |
|||||||||||||||||||||||||
|
Annuities |
$ |
350 |
$ |
300 |
$ |
287 |
$ |
309 |
$ |
185 |
-47.1% |
$ |
985 |
$ |
781 |
-20.7% |
|||||||||
|
Retirement Plan Services |
47 | 54 | 43 | 49 | 49 | 4.3% | 146 | 141 |
-3.4% |
||||||||||||||||
|
Life Insurance |
217 | 218 | 195 | 207 | (318) |
NM |
574 | 85 |
-85.2% |
||||||||||||||||
|
Group Protection |
79 | 64 | 70 | 86 | 78 |
-1.3% |
173 | 233 | 34.7% | ||||||||||||||||
|
Other Operations |
(94) | (73) | (88) | (85) | (98) |
-4.3% |
(228) | (271) |
-18.9% |
||||||||||||||||
|
Adjusted income (loss) from operations, before |
|||||||||||||||||||||||||
|
income taxes |
$ |
599 |
$ |
563 |
$ |
507 |
$ |
566 |
$ |
(104) |
NM |
$ |
1,650 |
$ |
969 |
-41.3% |
|||||||||
|
||||||||||||||||||||||||||
|
Income (Loss) from Operations, After-Tax |
|||||||||||||||||||||||||
|
Annuities |
$ |
302 |
$ |
258 |
$ |
250 |
$ |
266 |
$ |
169 |
-44.0% |
$ |
844 |
$ |
686 |
-18.7% |
|||||||||
|
Retirement Plan Services |
40 | 45 | 39 | 42 | 44 | 10.0% | 125 | 125 | 0.0% | ||||||||||||||||
|
Life Insurance |
176 | 175 | 157 | 168 | (245) |
NM |
470 | 79 |
-83.2% |
||||||||||||||||
|
Group Protection |
63 | 50 | 55 | 68 | 61 |
-3.2% |
137 | 184 | 34.3% | ||||||||||||||||
|
Other Operations |
(71) | (53) | (60) | (66) | (75) |
-5.6% |
(171) | (201) |
-17.5% |
||||||||||||||||
|
Adjusted income (loss) from operations |
$ |
510 |
$ |
475 |
$ |
441 |
$ |
478 |
$ |
(46) |
NM |
$ |
1,405 |
$ |
873 |
-37.9% |
|||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Trailing Twelve Months |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Sources of Earnings, Pre-Tax |
|||||||||||||||||||||||||
|
Investment spread |
$ |
169 |
$ |
161 |
$ |
151 |
$ |
164 |
$ |
(126) |
NM |
$ |
705 |
$ |
351 |
-50.2% |
|||||||||
|
Mortality/morbidity |
198 | 182 | 179 | 196 | (119) |
NM |
645 | 438 |
-32.1% |
||||||||||||||||
|
Fees on AUM |
264 | 274 | 243 | 269 | 262 |
-0.8% |
1,017 | 1,044 | 2.7% | ||||||||||||||||
|
VA riders |
62 | 19 | 22 | 22 | (23) |
NM |
157 | 40 |
-74.5% |
||||||||||||||||
|
Total sources of earnings, before income taxes |
693 | 636 | 595 | 651 | (6) |
NM |
2,524 | 1,873 |
-25.8% |
||||||||||||||||
|
Other Operations |
(94) | (73) | (88) | (85) | (98) |
-4.3% |
(292) | (343) |
-17.5% |
||||||||||||||||
|
Adjusted income (loss) from operations, before |
|||||||||||||||||||||||||
|
income taxes |
$ |
599 |
$ |
563 |
$ |
507 |
$ |
566 |
$ |
(104) |
NM |
$ |
2,232 |
$ |
1,532 |
-31.4% |
|||||||||
|
||||||||||||||||||||||||||
|
Sources of Earnings, Pre-Tax, Percentage By Component |
|||||||||||||||||||||||||
|
Investment spread |
24.4% | 25.4% | 25.5% | 25.2% | 1829.1% | 27.9% | 18.7% | ||||||||||||||||||
|
Mortality/morbidity |
28.5% | 28.5% | 30.1% | 30.2% | 1720.6% | 25.6% | 23.4% | ||||||||||||||||||
|
Fees on AUM |
38.2% | 43.0% | 40.7% | 41.1% |
-3785.1% |
40.3% | 55.8% | ||||||||||||||||||
|
VA riders |
8.9% | 3.1% | 3.7% | 3.5% | 335.4% | 6.2% | 2.1% | ||||||||||||||||||
|
Total |
100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 7 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Select Earnings Drivers By Segment |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Annuities |
|||||||||||||||||||||||||
|
Operating revenues |
$ |
1,118 |
$ |
1,086 |
$ |
1,174 |
$ |
1,156 |
$ |
1,117 |
-0.1% |
$ |
3,297 |
$ |
3,447 | 4.5% | |||||||||
|
Deposits |
3,080 | 3,774 | 3,508 | 3,654 | 3,461 | 12.4% | 8,589 | 10,623 | 23.7% | ||||||||||||||||
|
Net flows |
(81) | 675 | 492 | 377 | 253 |
NM |
(814) | 1,122 | 237.8% | ||||||||||||||||
|
Average account values |
138,639 | 124,869 | 127,185 | 131,675 | 133,922 |
-3.4% |
137,915 | 130,941 |
-5.1% |
||||||||||||||||
|
||||||||||||||||||||||||||
|
Retirement Plan Services |
|||||||||||||||||||||||||
|
Operating revenues |
$ |
294 |
$ |
300 |
$ |
293 |
$ |
299 |
$ |
298 | 1.4% |
$ |
878 |
$ |
890 | 1.4% | |||||||||
|
Deposits |
3,328 | 2,163 | 2,496 | 2,073 | 2,234 |
-32.9% |
7,905 | 6,803 |
-13.9% |
||||||||||||||||
|
Net flows |
1,411 | 173 | (381) | 307 | 272 |
-80.7% |
2,373 | 199 |
-91.6% |
||||||||||||||||
|
Average account values |
71,293 | 69,518 | 69,977 | 72,612 | 74,201 | 4.1% | 69,477 | 72,166 | 3.9% | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Life Insurance |
|||||||||||||||||||||||||
|
Operating revenues |
$ |
1,766 |
$ |
1,815 |
$ |
1,700 |
$ |
1,802 |
$ |
2,098 | 18.8% |
$ |
5,106 |
$ |
5,600 | 9.7% | |||||||||
|
Deposits |
1,523 | 1,863 | 1,537 | 1,683 | 1,685 | 10.6% | 4,575 | 4,907 | 7.3% | ||||||||||||||||
|
Net flows |
1,080 | 1,439 | 1,020 | 1,217 | 1,227 | 13.6% | 3,240 | 3,464 | 6.9% | ||||||||||||||||
|
Average account values |
50,201 | 50,088 | 50,355 | 51,495 | 52,050 | 3.7% | 49,638 | 51,300 | 3.3% | ||||||||||||||||
|
Average in-force face amount |
733,216 | 740,047 | 753,441 | 772,231 | 790,667 | 7.8% | 727,793 | 772,113 | 6.1% | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Group Protection |
|||||||||||||||||||||||||
|
Operating revenues |
$ |
1,128 |
$ |
1,139 |
$ |
1,138 |
$ |
1,155 |
$ |
1,137 | 0.8% |
$ |
2,618 |
$ |
3,430 | 31.0% | |||||||||
|
Insurance premiums |
1,011 | 1,018 | 1,023 | 1,032 | 1,024 | 1.3% | 2,366 | 3,079 | 30.1% | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Consolidated |
|||||||||||||||||||||||||
|
Adjusted operating revenues (1) |
$ |
4,362 |
$ |
4,394 |
$ |
4,362 |
$ |
4,470 |
$ |
4,700 | 7.7% |
$ |
12,081 |
$ |
13,533 | 12.0% | |||||||||
|
Deposits |
7,931 | 7,800 | 7,541 | 7,410 | 7,380 |
-6.9% |
21,069 | 22,333 | 6.0% | ||||||||||||||||
|
Net flows |
2,410 | 2,287 | 1,131 | 1,901 | 1,752 |
-27.3% |
4,799 | 4,785 |
-0.3% |
||||||||||||||||
|
Average account values |
260,133 | 244,475 | 247,517 | 255,782 | 260,173 | 0.0% | 257,030 | 254,407 |
-1.0% |
||||||||||||||||
|
||||||||||||||||||||||||||
|
(1) See reconciliation to total revenues on page 24. |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 8 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Sales By Segment |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Sales |
|||||||||||||||||||||||||
|
Annuities: |
|||||||||||||||||||||||||
|
With guaranteed living benefits |
$ |
1,416 |
$ |
1,347 |
$ |
1,060 |
$ |
1,241 |
$ |
1,243 |
-12.2% |
$ |
4,361 |
$ |
3,543 |
-18.8% |
|||||||||
|
Without guaranteed living benefits |
774 | 1,122 | 864 | 1,115 | 1,191 | 53.9% | 1,958 | 3,171 | 62.0% | ||||||||||||||||
|
Variable |
2,190 | 2,469 | 1,924 | 2,356 | 2,434 | 11.1% | 6,319 | 6,714 | 6.3% | ||||||||||||||||
|
Fixed |
890 | 1,305 | 1,584 | 1,298 | 1,027 | 15.4% | 2,270 | 3,909 | 72.2% | ||||||||||||||||
|
Total Annuities |
$ |
3,080 |
$ |
3,774 |
$ |
3,508 |
$ |
3,654 |
$ |
3,461 | 12.4% |
$ |
8,589 |
$ |
10,623 | 23.7% | |||||||||
|
||||||||||||||||||||||||||
|
Retirement Plan Services: |
|||||||||||||||||||||||||
|
First-year sales |
$ |
1,977 |
$ |
835 |
$ |
829 |
$ |
610 |
$ |
723 |
-63.4% |
$ |
3,618 |
$ |
2,161 |
-40.3% |
|||||||||
|
Recurring deposits |
1,351 | 1,328 | 1,667 | 1,463 | 1,511 | 11.8% | 4,287 | 4,642 | 8.3% | ||||||||||||||||
|
Total Retirement Plan Services |
$ |
3,328 |
$ |
2,163 |
$ |
2,496 |
$ |
2,073 |
$ |
2,234 |
-32.9% |
$ |
7,905 |
$ |
6,803 |
-13.9% |
|||||||||
|
||||||||||||||||||||||||||
|
Life Insurance: |
|||||||||||||||||||||||||
|
UL |
$ |
9 |
$ |
14 |
$ |
11 |
$ |
15 |
$ |
11 | 22.2% |
$ |
29 |
$ |
37 | 27.6% | |||||||||
|
MoneyGuard® |
53 | 58 | 51 | 56 | 67 | 26.4% | 168 | 174 | 3.6% | ||||||||||||||||
|
IUL |
13 | 22 | 16 | 25 | 37 | 184.6% | 41 | 79 | 92.7% | ||||||||||||||||
|
VUL |
62 | 103 | 52 | 53 | 54 |
-12.9% |
164 | 159 |
-3.0% |
||||||||||||||||
|
Term |
26 | 33 | 30 | 37 | 37 | 42.3% | 80 | 105 | 31.3% | ||||||||||||||||
|
Total individual life insurance |
163 | 230 | 160 | 186 | 206 | 26.4% | 482 | 554 | 14.9% | ||||||||||||||||
|
Executive Benefits |
4 | 32 | 31 | 24 | 28 |
NM |
20 | 81 |
NM |
||||||||||||||||
|
Total Life Insurance |
$ |
167 |
$ |
262 |
$ |
191 |
$ |
210 |
$ |
234 | 40.1% |
$ |
502 |
$ |
635 | 26.5% | |||||||||
|
||||||||||||||||||||||||||
|
Group Protection: |
|||||||||||||||||||||||||
|
Life |
$ |
69 |
$ |
100 |
$ |
64 |
$ |
42 |
$ |
131 | 89.9% |
$ |
122 |
$ |
237 | 94.3% | |||||||||
|
Disability |
73 | 123 | 42 | 40 | 96 | 31.5% | 134 | 179 | 33.6% | ||||||||||||||||
|
Dental |
16 | 49 | 13 | 13 | 15 |
-6.3% |
52 | 40 |
-23.1% |
||||||||||||||||
|
Total Group Protection |
$ |
158 |
$ |
272 |
$ |
119 |
$ |
95 |
$ |
242 | 53.2% |
$ |
308 |
$ |
456 | 48.1% | |||||||||
|
Percent employee-paid |
40.0% | 42.1% | 52.6% | 45.8% | 41.5% | 42.3% | 45.3% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 9 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Operating Revenues and General and Administrative Expenses By Segment |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Operating Revenues |
|||||||||||||||||||||||||
|
Annuities |
$ |
1,118 |
$ |
1,086 |
$ |
1,174 |
$ |
1,156 |
$ |
1,117 |
-0.1% |
$ |
3,297 |
$ |
3,447 | 4.5% | |||||||||
|
Retirement Plan Services |
294 | 300 | 293 | 299 | 298 | 1.4% | 878 | 890 | 1.4% | ||||||||||||||||
|
Life Insurance |
1,766 | 1,815 | 1,700 | 1,802 | 2,098 | 18.8% | 5,106 | 5,600 | 9.7% | ||||||||||||||||
|
Group Protection |
1,128 | 1,139 | 1,138 | 1,155 | 1,137 | 0.8% | 2,618 | 3,430 | 31.0% | ||||||||||||||||
|
Other Operations |
56 | 54 | 57 | 58 | 50 |
-10.7% |
182 | 166 |
-8.8% |
||||||||||||||||
|
Total adjusted operating revenues |
$ |
4,362 |
$ |
4,394 |
$ |
4,362 |
$ |
4,470 |
$ |
4,700 | 7.7% |
$ |
12,081 |
$ |
13,533 | 12.0% | |||||||||
|
||||||||||||||||||||||||||
|
General and Administrative Expenses, |
|||||||||||||||||||||||||
|
Net of Amounts Capitalized (1) |
|||||||||||||||||||||||||
|
Annuities |
116 |
$ |
120 |
$ |
117 |
$ |
126 |
$ |
118 | 1.7% |
$ |
343 |
$ |
361 | 5.2% | ||||||||||
|
Retirement Plan Services |
75 | 78 | 75 | 76 | 73 |
-2.7% |
226 | 223 |
-1.3% |
||||||||||||||||
|
Life Insurance |
119 | 121 | 121 | 131 | 123 | 3.4% | 350 | 376 | 7.4% | ||||||||||||||||
|
Group Protection |
174 | 166 | 156 | 167 | 162 |
-6.9% |
392 | 486 | 24.0% | ||||||||||||||||
|
Other Operations |
34 | 33 | 40 | 37 | 25 |
-26.5% |
91 | 103 | 13.2% | ||||||||||||||||
|
Total |
$ |
518 |
$ |
518 |
$ |
509 |
$ |
537 |
$ |
501 |
-3.3% |
$ |
1,402 |
$ |
1,549 | 10.5% | |||||||||
|
||||||||||||||||||||||||||
|
General and Administrative Expenses, |
|||||||||||||||||||||||||
|
Net of Amounts Capitalized, as a Percentage |
|||||||||||||||||||||||||
|
of Operating Revenues |
|||||||||||||||||||||||||
|
Annuities |
10.4% | 11.1% | 10.0% | 10.9% | 10.6% | 10.4% | 10.5% | ||||||||||||||||||
|
Retirement Plan Services |
25.6% | 25.8% | 25.5% | 25.4% | 24.6% | 25.8% | 25.1% | ||||||||||||||||||
|
Life Insurance |
6.8% | 6.7% | 7.1% | 7.3% | 5.9% | 6.9% | 6.7% | ||||||||||||||||||
|
Group Protection |
15.3% | 14.6% | 13.7% | 14.4% | 14.1% | 15.0% | 14.1% | ||||||||||||||||||
|
Other Operations |
59.9% | 59.8% | 69.9% | 64.3% | 49.6% | 50.2% | 61.7% | ||||||||||||||||||
|
Total |
11.9% | 11.8% | 11.7% | 12.0% | 10.7% | 11.6% | 11.4% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
(1) See page 11 for general and administrative expenses capitalized. |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 10 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Operating Commissions and Other Expenses |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Operating Commissions and |
|||||||||||||||||||||||||
|
Other Expenses Incurred |
|||||||||||||||||||||||||
|
General and administrative expenses |
$ |
572 |
$ |
591 |
$ |
563 |
$ |
593 |
$ |
569 |
-0.5% |
$ |
1,546 |
$ |
1,727 | 11.7% | |||||||||
|
Commissions |
650 | 737 | 649 | 689 | 707 | 8.8% | 1,869 | 2,045 | 9.4% | ||||||||||||||||
|
Taxes, licenses and fees |
82 | 80 | 100 | 74 | 86 | 4.9% | 240 | 260 | 8.3% | ||||||||||||||||
|
Interest and debt expense |
69 | 69 | 71 | 70 | 71 | 2.9% | 205 | 212 | 3.4% | ||||||||||||||||
|
Expenses associated with reserve financing |
|||||||||||||||||||||||||
|
and unrelated letters of credit |
21 | 22 | 22 | 22 | 22 | 4.8% | 62 | 65 | 4.8% | ||||||||||||||||
|
Total adjusted operating commissions and other |
|||||||||||||||||||||||||
|
expenses incurred |
1,394 | 1,499 | 1,405 | 1,448 | 1,455 | 4.4% | 3,922 | 4,309 | 9.9% | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Less Amounts Capitalized |
|||||||||||||||||||||||||
|
General and administrative expenses |
(54) | (73) | (54) | (56) | (68) |
-25.9% |
(144) | (178) |
-23.6% |
||||||||||||||||
|
Commissions |
(313) | (406) | (326) | (348) | (374) |
-19.5% |
(894) | (1,046) |
-17.0% |
||||||||||||||||
|
Taxes, licenses and fees |
(9) | (59) | (15) | (15) | (14) |
-55.6% |
(29) | (42) |
-44.8% |
||||||||||||||||
|
Total amounts capitalized |
(376) | (538) | (395) | (419) | (456) |
-21.3% |
(1,067) | (1,266) |
-18.7% |
||||||||||||||||
|
Total expenses incurred, net of amounts |
|||||||||||||||||||||||||
|
capitalized, excluding amortization |
1,018 | 961 | 1,010 | 1,029 | 999 |
-1.9% |
2,855 | 3,043 | 6.6% | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Amortization |
|||||||||||||||||||||||||
|
Amortization of DAC, VOBA and other intangibles |
420 | 308 | 209 | 280 | 601 | 43.1% | 942 | 1,088 | 15.5% | ||||||||||||||||
|
Total adjusted operating commissions and |
|||||||||||||||||||||||||
|
other expenses |
$ |
1,438 |
$ |
1,269 |
$ |
1,219 |
$ |
1,309 |
$ |
1,600 | 11.3% |
$ |
3,797 |
$ |
4,131 | 8.8% | |||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
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|
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|
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|
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|
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|
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|
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|
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|
||||||||||||||||||||||||||
|
Page 11 |
|
Lincoln Financial Group |
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|
Interest Rate Yields and Spreads By Segment |
|||||||||||||||||||||||||
|
Unaudited |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Annuities |
|||||||||||||||||||||||||
|
Earned rate on reserves |
3.89% | 3.92% | 3.97% | 4.09% | 4.04% | 15 | 3.86% | 4.03% | 17 | ||||||||||||||||
|
Variable investment income on reserves (1) |
0.13% | 0.07% | 0.05% | 0.09% | 0.09% | (4) | 0.11% | 0.08% | (3) | ||||||||||||||||
|
Net investment income yield on reserves |
4.02% | 3.99% | 4.02% | 4.18% | 4.13% | 11 | 3.97% | 4.11% | 14 | ||||||||||||||||
|
Interest rate credited to contract holders |
2.24% | 2.31% | 2.41% | 2.35% | 2.46% | 22 | 2.26% | 2.40% | 14 | ||||||||||||||||
|
Interest rate spread |
1.78% | 1.68% | 1.61% | 1.83% | 1.67% | (11) | 1.71% | 1.71% |
- |
||||||||||||||||
|
Base spreads excluding variable investment income |
1.65% | 1.61% | 1.56% | 1.74% | 1.58% | (7) | 1.60% | 1.63% | 3 | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Retirement Plan Services |
|||||||||||||||||||||||||
|
Earned rate on reserves |
4.19% | 4.20% | 4.18% | 4.13% | 4.13% | (6) | 4.24% | 4.15% | (9) | ||||||||||||||||
|
Variable investment income on reserves (1) |
0.10% | 0.06% | 0.05% | 0.07% | 0.16% | 6 | 0.11% | 0.09% | (2) | ||||||||||||||||
|
Net investment income yield on reserves |
4.29% | 4.26% | 4.23% | 4.20% | 4.29% |
- |
4.35% | 4.24% | (11) | ||||||||||||||||
|
Interest rate credited to contract holders |
2.90% | 2.89% | 2.92% | 2.90% | 2.90% |
- |
2.90% | 2.91% | 1 | ||||||||||||||||
|
Interest rate spread |
1.39% | 1.37% | 1.31% | 1.30% | 1.39% |
- |
1.45% | 1.33% | (12) | ||||||||||||||||
|
Base spreads excluding variable investment income |
1.29% | 1.31% | 1.26% | 1.23% | 1.23% | (6) | 1.34% | 1.24% | (10) | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Life Insurance – Interest-Sensitive |
|||||||||||||||||||||||||
|
Earned rate on reserves |
4.85% | 4.92% | 4.85% | 4.87% | 4.86% | 1 | 4.93% | 4.86% | (7) | ||||||||||||||||
|
Variable investment income on reserves (1) |
0.38% | 0.61% | 0.06% | 0.46% |
-0.38% |
(76) | 0.27% | 0.04% | (23) | ||||||||||||||||
|
Net investment income yield on reserves |
5.23% | 5.53% | 4.91% | 5.33% | 4.48% | (75) | 5.20% | 4.90% | (30) | ||||||||||||||||
|
Interest rate credited to contract holders |
3.72% | 3.73% | 3.69% | 3.68% | 3.71% | (1) | 3.72% | 3.69% | (3) | ||||||||||||||||
|
Interest rate spread |
1.51% | 1.80% | 1.22% | 1.65% | 0.77% | (74) | 1.48% | 1.21% | (27) | ||||||||||||||||
|
Base spreads excluding variable investment income |
1.13% | 1.19% | 1.16% | 1.19% | 1.15% | 2 | 1.21% | 1.17% | (4) | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Total (2) |
|||||||||||||||||||||||||
|
Earned rate (3) |
4.37% | 4.43% | 4.33% | 4.35% | 4.39% | 2 | 4.45% | 4.36% | (9) | ||||||||||||||||
|
Variable investment income (1) (3) |
0.29% | 0.43% | 0.06% | 0.32% |
-0.19% |
(48) | 0.22% | 0.06% | (16) | ||||||||||||||||
|
Net investment income yield (3) |
4.66% | 4.86% | 4.39% | 4.67% | 4.20% | (46) | 4.67% | 4.42% | (25) | ||||||||||||||||
|
||||||||||||||||||||||||||
|
(1) Variable investment income consists of commercial mortgage loan prepayment and bond make-whole premiums and investment income on alternative investments. |
|||||||||||||||||||||||||
|
(2) Includes the results of all of our business segments and Other Operations. |
|||||||||||||||||||||||||
|
(3) Includes investment yields on reserves and surplus. |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
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|
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|
||||||||||||||||||||||||||
|
Page 12 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Annuities – Select Earnings and Operational Data |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
As of or For the Three Months Ended |
As of or For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Income (Loss) from Operations |
|||||||||||||||||||||||||
|
Operating revenues: |
|||||||||||||||||||||||||
|
Insurance premiums |
$ |
102 |
$ |
108 |
$ |
208 |
$ |
137 |
$ |
79 |
-22.5% |
$ |
282 |
$ |
424 | 50.4% | |||||||||
|
Fee income |
598 | 571 | 568 | 586 | 596 |
-0.3% |
1,771 | 1,751 |
-1.1% |
||||||||||||||||
|
Net investment income |
251 | 261 | 257 | 286 | 287 | 14.3% | 743 | 831 | 11.8% | ||||||||||||||||
|
Operating realized gain (loss) |
46 | 50 | 41 | 46 | 51 | 10.9% | 142 | 137 |
-3.5% |
||||||||||||||||
|
Amortization of deferred gain |
- |
8 | 8 | 8 | 8 |
NM |
- |
23 |
NM |
||||||||||||||||
|
Other revenues |
121 | 88 | 92 | 93 | 96 |
-20.7% |
359 | 281 |
-21.7% |
||||||||||||||||
|
Total operating revenues |
1,118 | 1,086 | 1,174 | 1,156 | 1,117 |
-0.1% |
3,297 | 3,447 | 4.5% | ||||||||||||||||
|
Operating expenses: |
|||||||||||||||||||||||||
|
Interest credited |
145 | 150 | 162 | 163 | 183 | 26.2% | 437 | 508 | 16.2% | ||||||||||||||||
|
Benefits |
149 | 196 | 284 | 219 | 273 | 83.2% | 477 | 775 | 62.5% | ||||||||||||||||
|
Commissions incurred |
278 | 291 | 268 | 287 | 295 | 6.1% | 787 | 850 | 8.0% | ||||||||||||||||
|
Other expenses incurred |
233 | 241 | 230 | 244 | 240 | 3.0% | 687 | 717 | 4.4% | ||||||||||||||||
|
Amounts capitalized |
(147) | (176) | (147) | (161) | (175) |
-19.0% |
(401) | (484) |
-20.7% |
||||||||||||||||
|
Amortization |
110 | 84 | 90 | 95 | 116 | 5.5% | 325 | 300 |
-7.7% |
||||||||||||||||
|
Total operating expenses |
768 | 786 | 887 | 847 | 932 | 21.4% | 2,312 | 2,666 | 15.3% | ||||||||||||||||
|
Income (loss) from operations before taxes |
350 | 300 | 287 | 309 | 185 |
-47.1% |
985 | 781 |
-20.7% |
||||||||||||||||
|
Federal income tax expense (benefit) |
48 | 42 | 37 | 43 | 16 |
-66.7% |
141 | 95 |
-32.6% |
||||||||||||||||
|
Income (loss) from operations |
$ |
302 |
$ |
258 |
$ |
250 |
$ |
266 |
$ |
169 |
-44.0% |
$ |
844 |
$ |
686 |
-18.7% |
|||||||||
|
||||||||||||||||||||||||||
|
Effective Federal Income Tax Rate |
13.6% | 13.8% | 12.8% | 13.9% | 8.4% | 14.3% | 12.2% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Average Equity, Excluding Goodwill and AOCI |
$ |
5,045 |
$ |
5,000 |
$ |
4,785 |
$ |
4,741 |
$ |
4,846 |
-3.9% |
$ |
5,001 |
$ |
4,791 |
-4.2% |
|||||||||
|
||||||||||||||||||||||||||
|
ROE, Excluding Goodwill and AOCI |
23.9% | 20.7% | 20.9% | 22.5% | 14.0% | 22.5% | 19.1% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Return on Average Account Values |
87 | 83 | 79 | 81 | 51 | (36) | 82 | 70 | (12) | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Income (Loss) from Operations |
|||||||||||||||||||||||||
|
Variable annuity |
264 | 232 | 214 | 232 | 198 |
-25.0% |
708 | 645 |
-8.9% |
||||||||||||||||
|
Fixed annuity |
38 | 26 | 36 | 34 | (29) |
NM |
136 | 41 |
-69.9% |
||||||||||||||||
|
||||||||||||||||||||||||||
|
Account Values |
|||||||||||||||||||||||||
|
Variable annuity account values: |
|||||||||||||||||||||||||
|
Average |
$ |
118,838 |
$ |
112,615 |
$ |
113,785 |
$ |
117,254 |
$ |
118,680 |
-0.1% |
$ |
118,271 |
$ |
116,593 |
-1.4% |
|||||||||
|
End-of-period |
119,430 | 108,536 | 116,514 | 119,005 | 118,424 |
-0.8% |
119,430 | 118,424 |
-0.8% |
||||||||||||||||
|
Fixed annuity account values: |
|||||||||||||||||||||||||
|
Average |
19,801 | 12,254 | 13,400 | 14,421 | 15,242 |
-23.0% |
19,644 | 14,348 |
-27.0% |
||||||||||||||||
|
End-of-period |
19,855 | 12,743 | 13,944 | 14,839 | 15,611 |
-21.4% |
19,855 | 15,611 |
-21.4% |
||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 13 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Retirement Plan Services – Select Earnings and Operational Data |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
As of or For the Three Months Ended |
As of or For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Income (Loss) from Operations |
|||||||||||||||||||||||||
|
Operating revenues: |
|||||||||||||||||||||||||
|
Fee income |
$ |
65 |
$ |
62 |
$ |
61 |
$ |
62 |
$ |
63 |
-3.1% |
$ |
194 |
$ |
187 |
-3.6% |
|||||||||
|
Net investment income |
223 | 232 | 226 | 231 | 229 | 2.7% | 668 | 686 | 2.7% | ||||||||||||||||
|
Other revenues |
6 | 6 | 6 | 6 | 6 | 0.0% | 16 | 17 | 6.3% | ||||||||||||||||
|
Total operating revenues |
294 | 300 | 293 | 299 | 298 | 1.4% | 878 | 890 | 1.4% | ||||||||||||||||
|
Operating expenses: |
|||||||||||||||||||||||||
|
Interest credited |
140 | 142 | 145 | 145 | 147 | 5.0% | 414 | 437 | 5.6% | ||||||||||||||||
|
Benefits |
- |
- |
- |
1 | 1 |
NM |
1 | 1 | 0.0% | ||||||||||||||||
|
Commissions incurred |
20 | 18 | 19 | 19 | 20 | 0.0% | 60 | 60 | 0.0% | ||||||||||||||||
|
Other expenses incurred |
83 | 86 | 85 | 83 | 80 |
-3.6% |
250 | 248 |
-0.8% |
||||||||||||||||
|
Amounts capitalized |
(5) | (6) | (5) | (5) | (5) | 0.0% | (15) | (15) | 0.0% | ||||||||||||||||
|
Amortization |
9 | 6 | 6 | 7 | 6 |
-33.3% |
22 | 18 |
-18.2% |
||||||||||||||||
|
Total operating expenses |
247 | 246 | 250 | 250 | 249 | 0.8% | 732 | 749 | 2.3% | ||||||||||||||||
|
Income (loss) from operations before taxes |
47 | 54 | 43 | 49 | 49 | 4.3% | 146 | 141 |
-3.4% |
||||||||||||||||
|
Federal income tax expense (benefit) |
7 | 9 | 4 | 7 | 5 |
-28.6% |
21 | 16 |
-23.8% |
||||||||||||||||
|
Income (loss) from operations |
$ |
40 |
$ |
45 |
$ |
39 |
$ |
42 |
$ |
44 | 10.0% |
$ |
125 |
$ |
125 | 0.0% | |||||||||
|
||||||||||||||||||||||||||
|
Effective Federal Income Tax Rate |
15.9% | 15.9% | 8.5% | 14.3% | 9.3% | 14.1% | 10.8% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Average Equity, Excluding Goodwill and AOCI |
$ |
1,316 |
$ |
1,356 |
$ |
1,402 |
$ |
1,429 |
$ |
1,447 | 10.0% |
$ |
1,310 |
$ |
1,426 | 8.9% | |||||||||
|
||||||||||||||||||||||||||
|
ROE, Excluding Goodwill and AOCI |
12.1% | 13.3% | 11.2% | 11.7% | 12.2% | 12.8% | 11.7% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Pre-tax Net Margin |
30.7% | 34.0% | 29.1% | 31.7% | 32.4% | 31.5% | 31.1% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Return on Average Account Values |
22 | 26 | 22 | 23 | 24 | 2 | 24 | 23 | (1) | ||||||||||||||||
|
||||||||||||||||||||||||||
|
Net Flows by Market |
|||||||||||||||||||||||||
|
Small Market |
110 | 248 | 189 | 25 | 117 | 6.4% |
$ |
42 |
$ |
330 |
NM |
||||||||||||||
|
Mid - Large Market |
1,573 | 264 | (283) | 532 | 436 |
-72.3% |
3,137 | 685 |
-78.2% |
||||||||||||||||
|
Multi-Fund® and Other |
(272) | (339) | (287) | (250) | (281) |
-3.3% |
(806) | (816) |
-1.2% |
||||||||||||||||
|
||||||||||||||||||||||||||
|
Net Flows – Trailing Twelve Months |
$ |
2,813 |
$ |
2,546 |
$ |
1,702 |
$ |
1,510 |
$ |
371 |
-86.8% |
$ |
2,813 |
$ |
371 |
-86.8% |
|||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 14 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Life Insurance – Select Earnings and Operational Data |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
As of or For the Three Months Ended |
As of or For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Income (Loss) from Operations |
|||||||||||||||||||||||||
|
Operating revenues: |
|||||||||||||||||||||||||
|
Insurance premiums |
$ |
205 |
$ |
210 |
$ |
213 |
$ |
224 |
$ |
219 | 6.8% |
$ |
606 |
$ |
656 | 8.3% | |||||||||
|
Fee income |
886 | 881 | 844 | 868 | 1,275 | 43.9% | 2,510 | 2,985 | 18.9% | ||||||||||||||||
|
Net investment income |
671 | 719 | 643 | 707 | 601 |
-10.4% |
1,979 | 1,952 |
-1.4% |
||||||||||||||||
|
Operating realized gain (loss) |
(3) |
- |
(3) | (2) | (1) | 66.7% | (5) | (5) | 0.0% | ||||||||||||||||
|
Other revenues |
7 | 5 | 3 | 5 | 4 |
-42.9% |
16 | 12 |
-25.0% |
||||||||||||||||
|
Total operating revenues |
1,766 | 1,815 | 1,700 | 1,802 | 2,098 | 18.8% | 5,106 | 5,600 | 9.7% | ||||||||||||||||
|
Operating expenses: |
|||||||||||||||||||||||||
|
Interest credited |
352 | 357 | 354 | 355 | 360 | 2.3% | 1,057 | 1,069 | 1.1% | ||||||||||||||||
|
Benefits |
742 | 913 | 902 | 913 | 1,426 | 92.2% | 2,431 | 3,240 | 33.3% | ||||||||||||||||
|
Commissions incurred |
173 | 241 | 186 | 197 | 212 | 22.5% | 519 | 595 | 14.6% | ||||||||||||||||
|
Other expenses incurred |
202 | 210 | 212 | 214 | 215 | 6.4% | 600 | 640 | 6.7% | ||||||||||||||||
|
Amounts capitalized |
(199) | (318) | (220) | (232) | (246) |
-23.6% |
(596) | (697) |
-16.9% |
||||||||||||||||
|
Amortization |
279 | 194 | 71 | 148 | 449 | 60.9% | 521 | 668 | 28.2% | ||||||||||||||||
|
Total operating expenses |
1,549 | 1,597 | 1,505 | 1,595 | 2,416 | 56.0% | 4,532 | 5,515 | 21.7% | ||||||||||||||||
|
Income (loss) from operations before taxes |
217 | 218 | 195 | 207 | (318) |
NM |
574 | 85 |
-85.2% |
||||||||||||||||
|
Federal income tax expense (benefit) |
41 | 43 | 38 | 39 | (73) |
NM |
104 | 6 |
-94.2% |
||||||||||||||||
|
Income (loss) from operations |
$ |
176 |
$ |
175 |
$ |
157 |
$ |
168 |
$ |
(245) |
NM |
$ |
470 |
$ |
79 |
-83.2% |
|||||||||
|
||||||||||||||||||||||||||
|
Effective Federal Income Tax Rate |
18.7% | 19.8% | 19.6% | 19.1% | 22.9% | 18.0% | 6.0% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Average Equity, Excluding Goodwill and AOCI |
$ |
8,047 |
$ |
8,147 |
$ |
8,399 |
$ |
8,697 |
$ |
8,601 | 6.9% |
$ |
7,942 |
$ |
8,566 | 7.9% | |||||||||
|
||||||||||||||||||||||||||
|
ROE, Excluding Goodwill and AOCI |
8.8% | 8.6% | 7.5% | 7.7% |
-11.4% |
7.9% | 1.2% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Average Account Values |
$ |
50,201 |
$ |
50,088 |
$ |
50,355 |
$ |
51,495 |
$ |
52,050 | 3.7% |
$ |
49,638 |
$ |
51,300 | 3.3% | |||||||||
|
||||||||||||||||||||||||||
|
In-Force Face Amount |
|||||||||||||||||||||||||
|
UL and other |
$ |
342,455 |
$ |
343,922 |
$ |
346,292 |
$ |
347,674 |
$ |
348,836 | 1.9% |
$ |
342,455 |
$ |
348,836 | 1.9% | |||||||||
|
Term insurance |
393,839 | 399,877 | 416,789 | 433,706 | 451,117 | 14.5% | 393,839 | 451,117 | 14.5% | ||||||||||||||||
|
Total in-force face amount |
$ |
736,294 |
$ |
743,799 |
$ |
763,081 |
$ |
781,380 |
$ |
799,953 | 8.6% |
$ |
736,294 |
$ |
799,953 | 8.6% | |||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 15 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Group Protection – Select Earnings and Operational Data |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Income (Loss) from Operations |
|||||||||||||||||||||||||
|
Operating revenues: |
|||||||||||||||||||||||||
|
Insurance premiums |
$ |
1,011 |
$ |
1,018 |
$ |
1,023 |
$ |
1,032 |
$ |
1,024 | 1.3% |
$ |
2,366 |
$ |
3,079 | 30.1% | |||||||||
|
Net investment income |
76 | 80 | 74 | 81 | 72 |
-5.3% |
179 | 226 | 26.3% | ||||||||||||||||
|
Other revenues |
41 | 41 | 41 | 42 | 41 | 0.0% | 73 | 125 | 71.2% | ||||||||||||||||
|
Total operating revenues |
1,128 | 1,139 | 1,138 | 1,155 | 1,137 | 0.8% | 2,618 | 3,430 | 31.0% | ||||||||||||||||
|
Operating expenses: |
|||||||||||||||||||||||||
|
Interest credited |
1 | 2 | 1 | 1 | 2 | 100.0% | 3 | 4 | 33.3% | ||||||||||||||||
|
Benefits |
744 | 769 | 753 | 758 | 756 | 1.6% | 1,686 | 2,267 | 34.5% | ||||||||||||||||
|
Commissions incurred |
89 | 101 | 92 | 92 | 88 |
-1.1% |
238 | 272 | 14.3% | ||||||||||||||||
|
Other expenses incurred |
218 | 218 | 203 | 208 | 212 |
-2.8% |
499 | 624 | 25.1% | ||||||||||||||||
|
Amounts capitalized |
(25) | (39) | (23) | (20) | (29) |
-16.0% |
(55) | (72) |
-30.9% |
||||||||||||||||
|
Amortization |
22 | 24 | 42 | 30 | 30 | 36.4% | 74 | 102 | 37.8% | ||||||||||||||||
|
Total operating expenses |
1,049 | 1,075 | 1,068 | 1,069 | 1,059 | 1.0% | 2,445 | 3,197 | 30.8% | ||||||||||||||||
|
Income (loss) from operations before taxes |
79 | 64 | 70 | 86 | 78 |
-1.3% |
173 | 233 | 34.7% | ||||||||||||||||
|
Federal income tax expense (benefit) |
16 | 14 | 15 | 18 | 17 | 6.3% | 36 | 49 | 36.1% | ||||||||||||||||
|
Income (loss) from operations |
$ |
63 |
$ |
50 |
$ |
55 |
$ |
68 |
$ |
61 |
-3.2% |
$ |
137 |
$ |
184 | 34.3% | |||||||||
|
||||||||||||||||||||||||||
|
Effective Federal Income Tax Rate |
21.0% | 21.0% | 21.0% | 21.0% | 21.0% | 21.0% | 21.0% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Average Equity, Excluding Goodwill and AOCI |
$ |
2,105 |
$ |
2,082 |
$ |
2,165 |
$ |
2,360 |
$ |
2,492 | 18.4% |
$ |
1,605 |
$ |
2,339 | 45.7% | |||||||||
|
||||||||||||||||||||||||||
|
ROE, Excluding Goodwill and AOCI |
11.9% | 9.6% | 10.1% | 11.5% | 9.9% | 11.4% | 10.5% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
Loss Ratios by Product Line |
|||||||||||||||||||||||||
|
Life |
70.6% | 70.8% | 71.4% | 71.2% | 70.5% | 68.0% | 71.0% | ||||||||||||||||||
|
Disability |
75.8% | 79.6% | 75.4% | 74.9% | 76.4% | 73.5% | 75.6% | ||||||||||||||||||
|
Dental |
72.2% | 70.6% | 72.2% | 75.0% | 73.4% | 73.4% | 73.5% | ||||||||||||||||||
|
Total |
73.6% | 75.8% | 73.7% | 73.6% | 74.1% | 71.4% | 73.8% | ||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 16 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Other Operations – Select Earnings and Operational Data |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Other Operations |
|||||||||||||||||||||||||
|
Operating revenues: |
|||||||||||||||||||||||||
|
Insurance premiums |
$ |
4 |
$ |
- |
$ |
2 |
$ |
5 |
$ |
3 |
-25.0% |
$ |
12 |
$ |
10 |
-16.7% |
|||||||||
|
Net investment income |
50 | 57 | 51 | 50 | 46 |
-8.0% |
167 | 147 |
-12.0% |
||||||||||||||||
|
Amortization of deferred gain on |
|||||||||||||||||||||||||
|
business sold through reinsurance |
- |
- |
- |
- |
- |
NM |
1 |
- |
-100.0% |
||||||||||||||||
|
Other revenues |
2 | (3) | 4 | 3 | 1 |
-50.0% |
2 | 9 |
NM |
||||||||||||||||
|
Total operating revenues |
56 | 54 | 57 | 58 | 50 |
-10.7% |
182 | 166 |
-8.8% |
||||||||||||||||
|
Operating expenses: |
|||||||||||||||||||||||||
|
Interest credited |
14 | 13 | 15 | 15 | 14 | 0.0% | 43 | 44 | 2.3% | ||||||||||||||||
|
Benefits |
38 | 20 | 20 | 25 | 42 | 10.5% | 85 | 88 | 3.5% | ||||||||||||||||
|
Commissions and other expenses |
11 | (3) | 24 | 18 | 5 |
-54.5% |
28 | 46 | 64.3% | ||||||||||||||||
|
Interest and debt expenses |
69 | 69 | 71 | 70 | 71 | 2.9% | 205 | 212 | 3.4% | ||||||||||||||||
|
Strategic digitization expense |
18 | 28 | 15 | 15 | 16 |
-11.1% |
49 | 47 |
-4.1% |
||||||||||||||||
|
Total operating expenses |
150 | 127 | 145 | 143 | 148 |
-1.3% |
410 | 437 | 6.6% | ||||||||||||||||
|
Income (loss) from operations before taxes |
(94) | (73) | (88) | (85) | (98) |
-4.3% |
(228) | (271) |
-18.9% |
||||||||||||||||
|
Federal income tax expense (benefit) |
(23) | (20) | (28) | (19) | (23) | 0.0% | (57) | (70) |
-22.8% |
||||||||||||||||
|
Income (loss) from operations |
$ |
(71) |
$ |
(53) |
$ |
(60) |
$ |
(66) |
$ |
(75) |
-5.6% |
$ |
(171) |
$ |
(201) |
-17.5% |
|||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 17 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Consolidated – DAC, VOBA, DSI and DFEL Roll Forwards |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
DAC, VOBA and DSI |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
10,162 |
$ |
10,278 |
$ |
10,512 |
$ |
9,689 |
$ |
8,832 |
-13.1% |
$ |
8,641 |
$ |
10,512 | 21.7% | |||||||||
|
Deferrals |
387 | 550 | 406 | 427 | 459 | 18.6% | 1,103 | 1,291 | 17.0% | ||||||||||||||||
|
Operating amortization |
(424) | (311) | (209) | (279) | (604) |
-42.5% |
(959) | (1,092) |
-13.9% |
||||||||||||||||
|
Deferrals, net of operating amortization |
(37) | 239 | 197 | 148 | (145) |
NM |
144 | 199 | 38.2% | ||||||||||||||||
|
Amortization associated with benefit ratio unlocking |
(5) | 36 | (25) | (7) | 3 | 160.0% | 1 | (29) |
NM |
||||||||||||||||
|
Business acquired |
- |
- |
- |
- |
- |
NM |
30 |
- |
-100.0% |
||||||||||||||||
|
Business sold through reinsurance |
- |
(278) |
- |
- |
- |
NM |
- |
- |
NM |
||||||||||||||||
|
Adjustment related to realized gains (losses) |
- |
(38) | 31 | 11 | (9) |
NM |
(12) | 33 |
NM |
||||||||||||||||
|
Adjustment related to unrealized gains (losses) |
158 | 275 | (1,026) | (1,009) | (950) |
NM |
1,474 | (2,984) |
NM |
||||||||||||||||
|
Balance as of end-of-period |
$ |
10,278 |
$ |
10,512 |
$ |
9,689 |
$ |
8,832 |
$ |
7,731 |
-24.8% |
$ |
10,278 |
$ |
7,731 |
-24.8% |
|||||||||
|
||||||||||||||||||||||||||
|
DFEL |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
2,294 |
$ |
2,442 |
$ |
2,769 |
$ |
2,203 |
$ |
1,647 |
-28.2% |
$ |
1,445 |
$ |
2,769 | 91.6% | |||||||||
|
Deferrals |
214 | 251 | 217 | 245 | 264 | 23.4% | 624 | 732 | 17.3% | ||||||||||||||||
|
Operating amortization |
(165) | (146) | (112) | (142) | (547) |
NM |
(393) | (803) |
NM |
||||||||||||||||
|
Deferrals, net of operating amortization |
49 | 105 | 105 | 103 | (283) |
NM |
231 | (71) |
NM |
||||||||||||||||
|
Amortization associated with benefit ratio unlocking |
(1) | 4 | (3) | (1) |
- |
100.0% |
- |
(5) |
NM |
||||||||||||||||
|
Adjustment related to realized (gains) losses |
(3) | (10) | 3 | (3) | (3) | 0.0% | (11) | (4) | 63.6% | ||||||||||||||||
|
Adjustment related to unrealized (gains) losses |
103 | 228 | (671) | (655) | (879) |
NM |
777 | (2,207) |
NM |
||||||||||||||||
|
Balance as of end-of-period |
$ |
2,442 |
$ |
2,769 |
$ |
2,203 |
$ |
1,647 |
$ |
482 |
-80.3% |
$ |
2,442 |
$ |
482 |
-80.3% |
|||||||||
|
||||||||||||||||||||||||||
|
DAC, VOBA, DSI and DFEL |
|||||||||||||||||||||||||
|
Balance as of End-of-Period, After-Tax |
$ |
6,190 |
$ |
6,117 |
$ |
5,914 |
$ |
5,676 |
$ |
5,727 |
-7.5% |
$ |
6,190 |
$ |
5,727 |
-7.5% |
|||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 18 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Annuities – Account Value Roll Forwards |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Fixed Annuities |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
20,722 |
$ |
21,116 |
$ |
21,666 |
$ |
22,941 |
$ |
23,836 | 15.0% |
$ |
20,305 |
$ |
21,666 | 6.7% | |||||||||
|
Gross deposits |
890 | 1,305 | 1,584 | 1,298 | 1,027 | 15.4% | 2,270 | 3,909 | 72.2% | ||||||||||||||||
|
Full surrenders and deaths |
(555) | (501) | (469) | (501) | (441) | 20.5% | (1,445) | (1,411) | 2.4% | ||||||||||||||||
|
Other contract benefits |
(161) | (186) | (151) | (135) | (145) | 9.9% | (469) | (431) | 8.1% | ||||||||||||||||
|
Net flows |
174 | 618 | 964 | 662 | 441 | 153.4% | 356 | 2,067 |
NM |
||||||||||||||||
|
Contract holder assessments |
(8) | (9) | (8) | (10) | (10) |
-25.0% |
(22) | (28) |
-27.3% |
||||||||||||||||
|
Reinvested interest credited |
228 | (59) | 319 | 243 | 181 |
-20.6% |
477 | 743 | 55.8% | ||||||||||||||||
|
Balance as of end-of-period, gross |
21,116 | 21,666 | 22,941 | 23,836 | 24,448 | 15.8% | 21,116 | 24,448 | 15.8% | ||||||||||||||||
|
Reinsurance ceded |
(1,261) | (8,923) | (8,997) | (8,997) | (8,837) |
NM |
(1,261) | (8,837) |
NM |
||||||||||||||||
|
Balance as of end-of-period, net |
$ |
19,855 |
$ |
12,743 |
$ |
13,944 |
$ |
14,839 |
$ |
15,611 |
-21.4% |
$ |
19,855 |
$ |
15,611 |
-21.4% |
|||||||||
|
||||||||||||||||||||||||||
|
Variable Annuities |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
116,901 |
$ |
119,430 |
$ |
108,536 |
$ |
116,514 |
$ |
119,005 | 1.8% |
$ |
117,479 |
$ |
108,536 |
-7.6% |
|||||||||
|
Gross deposits |
2,190 | 2,469 | 1,924 | 2,356 | 2,434 | 11.1% | 6,319 | 6,714 | 6.3% | ||||||||||||||||
|
Full surrenders and deaths |
(1,523) | (1,414) | (1,458) | (1,722) | (1,711) |
-12.3% |
(4,681) | (4,891) |
-4.5% |
||||||||||||||||
|
Other contract benefits |
(922) | (998) | (938) | (919) | (911) | 1.2% | (2,808) | (2,768) | 1.4% | ||||||||||||||||
|
Net flows |
(255) | 57 | (472) | (285) | (188) | 26.3% | (1,170) | (945) | 19.2% | ||||||||||||||||
|
Contract holder assessments |
(629) | (617) | (601) | (619) | (636) |
-1.1% |
(1,868) | (1,857) | 0.6% | ||||||||||||||||
|
Change in market value and reinvestment |
3,413 | (10,334) | 9,051 | 3,395 | 243 |
-92.9% |
4,989 | 12,690 | 154.4% | ||||||||||||||||
|
Balance as of end-of-period, gross and net |
$ |
119,430 |
$ |
108,536 |
$ |
116,514 |
$ |
119,005 |
$ |
118,424 |
-0.8% |
$ |
119,430 |
$ |
118,424 |
-0.8% |
|||||||||
|
||||||||||||||||||||||||||
|
Total |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
137,623 |
$ |
140,546 |
$ |
130,202 |
$ |
139,455 |
$ |
142,841 | 3.8% |
$ |
137,784 |
$ |
130,202 |
-5.5% |
|||||||||
|
Gross deposits |
3,080 | 3,774 | 3,508 | 3,654 | 3,461 | 12.4% | 8,589 | 10,623 | 23.7% | ||||||||||||||||
|
Full surrenders and deaths |
(2,078) | (1,915) | (1,927) | (2,223) | (2,152) |
-3.6% |
(6,126) | (6,302) |
-2.9% |
||||||||||||||||
|
Other contract benefits |
(1,083) | (1,184) | (1,089) | (1,054) | (1,056) | 2.5% | (3,277) | (3,199) | 2.4% | ||||||||||||||||
|
Net flows |
(81) | 675 | 492 | 377 | 253 |
NM |
(814) | 1,122 | 237.8% | ||||||||||||||||
|
Contract holder assessments |
(637) | (626) | (609) | (629) | (646) |
-1.4% |
(1,890) | (1,885) | 0.3% | ||||||||||||||||
|
Change in market value and reinvestment |
3,641 | (10,393) | 9,370 | 3,638 | 424 |
-88.4% |
5,466 | 13,433 | 145.8% | ||||||||||||||||
|
Balance as of end-of-period, gross |
140,546 | 130,202 | 139,455 | 142,841 | 142,872 | 1.7% | 140,546 | 142,872 | 1.7% | ||||||||||||||||
|
Reinsurance ceded |
(1,261) | (8,923) | (8,997) | (8,997) | (8,837) |
NM |
(1,261) | (8,837) |
NM |
||||||||||||||||
|
Balance as of end-of-period, net |
$ |
139,285 |
$ |
121,279 |
$ |
130,458 |
$ |
133,844 |
$ |
134,035 |
-3.8% |
$ |
139,285 |
$ |
134,035 |
-3.8% |
|||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 19 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Retirement Plan Services – Account Value Roll Forwards |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
General Account |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
19,046 |
$ |
19,511 |
$ |
19,766 |
$ |
19,914 |
$ |
20,076 | 5.4% |
$ |
18,724 |
$ |
19,766 | 5.6% | |||||||||
|
Gross deposits |
704 | 489 | 458 | 393 | 469 |
-33.4% |
1,557 | 1,319 |
-15.3% |
||||||||||||||||
|
Withdrawals |
(442) | (544) | (519) | (470) | (490) |
-10.9% |
(1,405) | (1,479) |
-5.3% |
||||||||||||||||
|
Net flows |
262 | (55) | (61) | (77) | (21) |
NM |
152 | (160) |
NM |
||||||||||||||||
|
Transfers between fixed and variable accounts |
65 | 169 | 70 | 97 | 136 | 109.2% | 230 | 303 | 31.7% | ||||||||||||||||
|
Contract holder assessments |
(3) | (3) | (3) | (3) | (3) | 0.0% | (8) | (8) | 0.0% | ||||||||||||||||
|
Reinvestment interest credited |
141 | 144 | 142 | 145 | 149 | 5.7% | 413 | 436 | 5.6% | ||||||||||||||||
|
Balance as of end-of-period |
$ |
19,511 |
$ |
19,766 |
$ |
19,914 |
$ |
20,076 |
$ |
20,337 | 4.2% |
$ |
19,511 |
$ |
20,337 | 4.2% | |||||||||
|
||||||||||||||||||||||||||
|
Separate Account and Mutual Funds |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
50,137 |
$ |
52,994 |
$ |
47,289 |
$ |
51,885 |
$ |
53,938 | 7.6% |
$ |
48,645 |
$ |
47,289 |
-2.8% |
|||||||||
|
Gross deposits |
2,624 | 1,674 | 2,038 | 1,680 | 1,765 |
-32.7% |
6,348 | 5,484 |
-13.6% |
||||||||||||||||
|
Withdrawals |
(1,475) | (1,446) | (2,358) | (1,296) | (1,472) | 0.2% | (4,127) | (5,125) |
-24.2% |
||||||||||||||||
|
Net flows |
1,149 | 228 | (320) | 384 | 293 |
-74.5% |
2,221 | 359 |
-83.8% |
||||||||||||||||
|
Transfers between fixed and variable accounts |
(134) | (170) | (210) | (141) | (190) |
-41.8% |
(366) | (542) |
-48.1% |
||||||||||||||||
|
Contract holder assessments |
(53) | (52) | (51) | (52) | (54) |
-1.9% |
(158) | (158) | 0.0% | ||||||||||||||||
|
Change in market value and reinvestment |
1,895 | (5,711) | 5,177 | 1,862 | 240 |
-87.3% |
2,652 | 7,279 | 174.5% | ||||||||||||||||
|
Balance as of end-of-period |
$ |
52,994 |
$ |
47,289 |
$ |
51,885 |
$ |
53,938 |
$ |
54,227 | 2.3% |
$ |
52,994 |
$ |
54,227 | 2.3% | |||||||||
|
||||||||||||||||||||||||||
|
Total |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
69,183 |
$ |
72,505 |
$ |
67,055 |
$ |
71,799 |
$ |
74,014 | 7.0% |
$ |
67,369 |
$ |
67,055 |
-0.5% |
|||||||||
|
Gross deposits |
3,328 | 2,163 | 2,496 | 2,073 | 2,234 |
-32.9% |
7,905 | 6,803 |
-13.9% |
||||||||||||||||
|
Withdrawals |
(1,917) | (1,990) | (2,877) | (1,766) | (1,962) |
-2.3% |
(5,532) | (6,604) |
-19.4% |
||||||||||||||||
|
Net flows |
1,411 | 173 | (381) | 307 | 272 |
-80.7% |
2,373 | 199 |
-91.6% |
||||||||||||||||
|
Transfers between fixed and variable accounts |
(69) | (1) | (140) | (44) | (54) | 21.7% | (136) | (239) |
-75.7% |
||||||||||||||||
|
Contract holder assessments |
(56) | (55) | (54) | (55) | (57) |
-1.8% |
(166) | (166) | 0.0% | ||||||||||||||||
|
Change in market value and reinvestment |
2,036 | (5,567) | 5,319 | 2,007 | 389 |
-80.9% |
3,065 | 7,715 | 151.7% | ||||||||||||||||
|
Balance as of end-of-period |
$ |
72,505 |
$ |
67,055 |
$ |
71,799 |
$ |
74,014 |
$ |
74,564 | 2.8% |
$ |
72,505 |
$ |
74,564 | 2.8% | |||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
8 |
Page 20 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Life Insurance – Account Value Roll Forwards |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
General Account |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
36,955 |
$ |
37,054 |
$ |
37,289 |
$ |
37,275 |
$ |
37,438 | 1.3% |
$ |
36,791 |
$ |
37,289 | 1.4% | |||||||||
|
Deposits |
1,024 | 1,133 | 1,027 | 1,117 | 1,137 | 11.0% | 3,137 | 3,281 | 4.6% | ||||||||||||||||
|
Withdrawals and deaths |
(266) | (197) | (331) | (195) | (243) | 8.6% | (896) | (770) | 14.1% | ||||||||||||||||
|
Net flows |
758 | 936 | 696 | 922 | 894 | 17.9% | 2,241 | 2,511 | 12.0% | ||||||||||||||||
|
Contract holder assessments |
(1,024) | (1,051) | (1,043) | (1,107) | (1,094) |
-6.8% |
(3,062) | (3,242) |
-5.9% |
||||||||||||||||
|
Reinvested interest credited |
365 | 350 | 333 | 348 | 344 |
-5.8% |
1,084 | 1,024 |
-5.5% |
||||||||||||||||
|
Balance as of end-of-period, gross |
37,054 | 37,289 | 37,275 | 37,438 | 37,582 | 1.4% | 37,054 | 37,582 | 1.4% | ||||||||||||||||
|
Reinsurance ceded |
(683) | (677) | (669) | (666) | (660) | 3.4% | (683) | (660) | 3.4% | ||||||||||||||||
|
Balance as of end-of-period, net |
$ |
36,371 |
$ |
36,612 |
$ |
36,606 |
$ |
36,772 |
$ |
36,922 | 1.5% |
$ |
36,371 |
$ |
36,922 | 1.5% | |||||||||
|
||||||||||||||||||||||||||
|
Separate Account |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
14,420 |
$ |
15,102 |
$ |
13,735 |
$ |
15,346 |
$ |
15,941 | 10.5% |
$ |
13,851 |
$ |
13,735 |
-0.8% |
|||||||||
|
Deposits |
499 | 730 | 510 | 566 | 548 | 9.8% | 1,438 | 1,626 | 13.1% | ||||||||||||||||
|
Withdrawals and deaths |
(177) | (227) | (186) | (271) | (215) |
-21.5% |
(439) | (673) |
-53.3% |
||||||||||||||||
|
Net flows |
322 | 503 | 324 | 295 | 333 | 3.4% | 999 | 953 |
-4.6% |
||||||||||||||||
|
Contract holder assessments |
(187) | (210) | (193) | (195) | (197) |
-5.3% |
(546) | (585) |
-7.1% |
||||||||||||||||
|
Change in market value and reinvestment |
547 | (1,660) | 1,480 | 495 | 59 |
-89.2% |
798 | 2,033 | 154.8% | ||||||||||||||||
|
Balance as of end-of-period, gross |
15,102 | 13,735 | 15,346 | 15,941 | 16,136 | 6.8% | 15,102 | 16,136 | 6.8% | ||||||||||||||||
|
Reinsurance ceded |
(886) | (758) | (832) | (844) | (829) | 6.4% | (886) | (829) | 6.4% | ||||||||||||||||
|
Balance as of end-of-period, net |
$ |
14,216 |
$ |
12,977 |
$ |
14,514 |
$ |
15,097 |
$ |
15,307 | 7.7% |
$ |
14,216 |
$ |
15,307 | 7.7% | |||||||||
|
||||||||||||||||||||||||||
|
Total |
|||||||||||||||||||||||||
|
Balance as of beginning-of-period |
$ |
51,375 |
$ |
52,156 |
$ |
51,024 |
$ |
52,621 |
$ |
53,379 | 3.9% |
$ |
50,642 |
$ |
51,024 | 0.8% | |||||||||
|
Deposits |
1,523 | 1,863 | 1,537 | 1,683 | 1,685 | 10.6% | 4,575 | 4,907 | 7.3% | ||||||||||||||||
|
Withdrawals and deaths |
(443) | (424) | (517) | (466) | (458) |
-3.4% |
(1,335) | (1,443) |
-8.1% |
||||||||||||||||
|
Net flows |
1,080 | 1,439 | 1,020 | 1,217 | 1,227 | 13.6% | 3,240 | 3,464 | 6.9% | ||||||||||||||||
|
Contract holder assessments |
(1,211) | (1,261) | (1,236) | (1,302) | (1,291) |
-6.6% |
(3,608) | (3,827) |
-6.1% |
||||||||||||||||
|
Change in market value and reinvestment |
912 | (1,310) | 1,813 | 843 | 403 |
-55.8% |
1,882 | 3,057 | 62.4% | ||||||||||||||||
|
Balance as of end-of-period, gross |
52,156 | 51,024 | 52,621 | 53,379 | 53,718 | 3.0% | 52,156 | 53,718 | 3.0% | ||||||||||||||||
|
Reinsurance ceded |
(1,569) | (1,435) | (1,501) | (1,510) | (1,489) | 5.1% | (1,569) | (1,489) | 5.1% | ||||||||||||||||
|
Balance as of end-of-period, net |
$ |
50,587 |
$ |
49,589 |
$ |
51,120 |
$ |
51,869 |
$ |
52,229 | 3.2% |
$ |
50,587 |
$ |
52,229 | 3.2% | |||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
Page 21 |
|
Lincoln Financial Group |
||||||||||||||||||
|
Select Investment Data |
||||||||||||||||||
|
Unaudited (millions of dollars) |
||||||||||||||||||
|
|||||||||||||||||||
|
As of 9/30/18 |
As of 12/31/18 |
As of 9/30/19 |
||||||||||||||||
|
Amount |
% |
Amount |
% |
Amount |
% |
|||||||||||||
|
Fixed Maturity AFS, Trading and Equity Securities, at Fair Value |
||||||||||||||||||
|
Fixed maturity AFS securities: |
||||||||||||||||||
|
Corporate bonds |
$ |
80,080 | 84.6% |
$ |
80,348 | 83.7% |
$ |
87,910 | 81.2% | |||||||||
|
U.S. government bonds |
409 | 0.4% | 417 | 0.4% | 438 | 0.4% | ||||||||||||
|
State and municipal bonds |
5,218 | 5.5% | 5,345 | 5.6% | 5,800 | 5.3% | ||||||||||||
|
Foreign government bonds |
459 | 0.5% | 448 | 0.5% | 444 | 0.4% | ||||||||||||
|
Residential mortgage-backed securities |
3,287 | 3.5% | 3,373 | 3.5% | 3,287 | 3.0% | ||||||||||||
|
Commercial mortgage-backed securities |
748 | 0.8% | 804 | 0.8% | 1,033 | 1.0% | ||||||||||||
|
Asset-backed securities |
2,347 | 2.5% | 2,696 | 2.8% | 4,172 | 3.8% | ||||||||||||
|
Hybrid and redeemable preferred securities |
613 | 0.6% | 593 | 0.6% | 575 | 0.5% | ||||||||||||
|
Total fixed maturity AFS securities |
93,161 | 98.4% | 94,024 | 97.9% | 103,659 | 95.6% | ||||||||||||
|
Trading securities |
1,440 | 1.5% | 1,950 | 2.0% | 4,691 | 4.3% | ||||||||||||
|
Equity securities |
112 | 0.1% | 99 | 0.1% | 158 | 0.1% | ||||||||||||
|
Total fixed maturity AFS, trading and equity securities |
$ |
94,713 | 100.0% |
$ |
96,073 | 100.0% |
$ |
108,508 | 100.0% | |||||||||
|
|||||||||||||||||||
|
Fixed Maturity AFS, Trading and Equity Securities, at Amortized Cost |
||||||||||||||||||
|
Fixed maturity AFS securities |
$ |
90,808 | 98.5% |
$ |
92,429 | 98.0% |
$ |
88,176 | 95.4% | |||||||||
|
Trading securities |
1,300 | 1.4% | 1,823 | 1.9% | 4,093 | 4.4% | ||||||||||||
|
Equity securities |
109 | 0.1% | 116 | 0.1% | 185 | 0.2% | ||||||||||||
|
Total fixed maturity AFS, trading and equity securities |
$ |
92,217 | 100.0% |
$ |
94,368 | 100.0% |
$ |
92,454 | 100.0% | |||||||||
|
|||||||||||||||||||
|
Percentage of Fixed Maturity AFS Securities, at Amortized Cost |
||||||||||||||||||
|
Investment grade |
96.1% | 96.2% | 96.4% | |||||||||||||||
|
Below investment grade |
3.9% | 3.8% | 3.6% | |||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
|||||||||||||||||||
|
Page 22 |
|
Lincoln Financial Group |
|||||||||||||||||||||||||
|
Realized Gain (Loss) and Benefit Ratio Unlocking, After-DAC |
|||||||||||||||||||||||||
|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Realized Gain (Loss), Pre-Tax |
|||||||||||||||||||||||||
|
Total adjusted operating realized gain (loss) |
$ |
43 |
$ |
50 |
$ |
38 |
$ |
44 |
$ |
50 | 16.3% |
$ |
137 |
$ |
132 |
-3.6% |
|||||||||
|
Total excluded realized gain (loss) |
(98) | 141 | (400) | (161) | (61) | 37.8% | (188) | (623) |
NM |
||||||||||||||||
|
Total realized gain (loss), pre-tax |
$ |
(55) |
$ |
191 |
$ |
(362) |
$ |
(117) |
$ |
(11) | 80.0% |
$ |
(51) |
$ |
(491) |
NM |
|||||||||
|
||||||||||||||||||||||||||
|
Excluded Realized Gain (Loss) Net of |
|||||||||||||||||||||||||
|
Benefit Ratio Unlocking, After-Tax |
|||||||||||||||||||||||||
|
Total excluded realized gain (loss) |
$ |
(77) |
$ |
111 |
$ |
(316) |
$ |
(128) |
$ |
(49) | 36.4% |
$ |
(149) |
$ |
(492) |
NM |
|||||||||
|
Benefit ratio unlocking |
33 | (167) | 142 | 46 | (2) |
NM |
32 | 186 |
NM |
||||||||||||||||
|
Net gain (loss), after-tax |
$ |
(44) |
$ |
(56) |
$ |
(174) |
$ |
(82) |
$ |
(51) |
-15.9% |
$ |
(117) |
$ |
(306) |
NM |
|||||||||
|
||||||||||||||||||||||||||
|
Realized Gain (Loss) Net of Benefit Ratio |
|||||||||||||||||||||||||
|
Unlocking, After-Tax |
|||||||||||||||||||||||||
|
Realized gain (loss) related to investments |
$ |
(15) |
$ |
(37) |
$ |
(110) |
$ |
(37) |
$ |
(9) | 40.0% |
$ |
(21) |
$ |
(155) |
NM |
|||||||||
|
Variable annuity net derivative results: |
|||||||||||||||||||||||||
|
Hedge program performance, including unlocking |
|||||||||||||||||||||||||
|
for GLB reserves hedged |
(19) | (53) | (15) | (19) | (65) |
NM |
(85) | (99) |
-16.5% |
||||||||||||||||
|
GLB non-performance risk component |
(5) | 56 | (27) | (2) | 43 |
NM |
2 | 14 |
NM |
||||||||||||||||
|
Total variable annuity net derivative results |
(24) | 3 | (42) | (21) | (22) | 8.3% | (83) | (85) |
-2.4% |
||||||||||||||||
|
Indexed annuity forward-starting option |
(5) | (22) | (22) | (24) | (20) |
NM |
(13) | (66) |
NM |
||||||||||||||||
|
Excluded realized gain (loss) net of |
|||||||||||||||||||||||||
|
benefit ratio unlocking, after-tax |
$ |
(44) |
$ |
(56) |
$ |
(174) |
$ |
(82) |
$ |
(51) |
-15.9% |
$ |
(117) |
$ |
(306) |
NM |
|||||||||
|
||||||||||||||||||||||||||
|
Components of Realized Gain (Loss) |
|||||||||||||||||||||||||
|
Related to Investments, After-Tax |
|||||||||||||||||||||||||
|
OTTI |
$ |
(2) |
$ |
(2) |
$ |
(6) |
$ |
(3) |
$ |
(2) | 0.0% |
$ |
(4) |
$ |
(11) |
NM |
|||||||||
|
Other realized gain (loss) related to certain investments |
(7) | (13) | (15) | (7) | (12) |
-67.4% |
(34) | (33) | 2.9% | ||||||||||||||||
|
Gain (loss) on the mark-to-market on equity investments |
- |
(15) | 5 | 1 | (14) |
NM |
2 | (8) |
NM |
||||||||||||||||
|
Gain (loss) on the mark-to-market on certain instruments |
(6) | (7) | (94) | (28) | 19 |
NM |
15 | (103) |
NM |
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|
Total realized gain (loss) related |
|||||||||||||||||||||||||
|
to investments, after-tax |
$ |
(15) |
$ |
(37) |
$ |
(110) |
$ |
(37) |
$ |
(9) | 40.0% |
$ |
(21) |
$ |
(155) |
NM |
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|
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|
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Page 23 |
|
Lincoln Financial Group |
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Select GAAP to Non-GAAP Reconciliations |
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|
Unaudited (millions of dollars) |
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||
|
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||||||||||||
|
9/30/18 |
12/31/18 |
3/31/19 |
6/30/19 |
9/30/19 |
Change |
9/30/18 |
9/30/19 |
Change |
|||||||||||||||||
|
Revenues |
|||||||||||||||||||||||||
|
Total revenues |
$ |
4,264 |
$ |
4,531 |
$ |
3,965 |
$ |
4,310 |
$ |
4,638 | 8.8% |
$ |
11,893 |
$ |
12,913 | 8.6% | |||||||||
|
Less: |
|||||||||||||||||||||||||
|
Excluded realized gain (loss) |
(98) | 141 | (400) | (161) | (61) | 37.8% | (188) | (623) |
NM |
||||||||||||||||
|
Amortization of DFEL associated with |
|||||||||||||||||||||||||
|
benefit ratio unlocking |
- |
(4) | 3 | 1 | (1) |
NM |
- |
3 |
NM |
||||||||||||||||
|
Adjusted operating revenues |
$ |
4,362 |
$ |
4,394 |
$ |
4,362 |
$ |
4,470 |
$ |
4,700 | 7.7% |
$ |
12,081 |
$ |
13,533 | 12.0% | |||||||||
|
||||||||||||||||||||||||||
|
Net Income |
|||||||||||||||||||||||||
|
Net income (loss) |
$ |
490 |
$ |
399 |
$ |
252 |
$ |
363 |
$ |
(161) |
NM |
$ |
1,242 |
$ |
454 |
-63.4% |
|||||||||
|
Less: |
|||||||||||||||||||||||||
|
Excluded realized gain (loss), after-tax |
(77) | 111 | (316) | (128) | (49) | 36.4% | (149) | (492) |
NM |
||||||||||||||||
|
Benefit ratio unlocking, after-tax |
33 | (167) | 142 | 46 | (2) |
NM |
32 | 186 |
NM |
||||||||||||||||
|
Net impact from the Tax Cuts and Jobs Act |
32 |
- |
- |
- |
- |
-100.0% |
19 |
- |
-100.0% |
||||||||||||||||
|
Acquisition and integration costs related to |
|||||||||||||||||||||||||
|
mergers and acquisitions, after-tax |
(8) | (20) | (15) | (33) | (31) |
NM |
(47) | (80) |
-70.2% |
||||||||||||||||
|
Gain (loss) on early extinguishment of debt, after-tax |
- |
- |
- |
- |
(33) |
NM |
(18) | (33) |
-83.3% |
||||||||||||||||
|
Adjusted income (loss) from operations |
$ |
510 |
$ |
475 |
$ |
441 |
$ |
478 |
$ |
(46) |
NM |
$ |
1,405 |
$ |
873 |
-37.9% |
|||||||||
|
||||||||||||||||||||||||||
|
Earnings (Loss) Per Common Share – Diluted |
|||||||||||||||||||||||||
|
Net income (loss) |
$ |
2.24 |
$ |
1.80 |
$ |
1.22 |
$ |
1.79 |
$ |
(0.83) |
NM |
$ |
5.59 |
$ |
2.24 |
-59.9% |
|||||||||
|
Less: |
|||||||||||||||||||||||||
|
Excluded realized gain (loss), after-tax |
(0.36) | 0.53 | (1.54) | (0.63) | (0.24) | 33.3% | (0.68) | (2.42) |
NM |
||||||||||||||||
|
Benefit ratio unlocking, after-tax |
0.15 | (0.78) | 0.69 | 0.22 | (0.01) |
NM |
0.14 | 0.91 |
NM |
||||||||||||||||
|
Net impact from the Tax Cuts and Jobs Act |
0.15 |
- |
- |
- |
- |
-100.0% |
0.09 |
- |
-100.0% |
||||||||||||||||
|
Acquisition and integration costs related to mergers |
|||||||||||||||||||||||||
|
and acquisitions, after-tax |
(0.04) | (0.10) | (0.07) | (0.16) | (0.16) |
NM |
(0.21) | (0.39) |
-85.7% |
||||||||||||||||
|
Gain (loss) on early extinguishment of debt, after-tax |
- |
- |
- |
- |
(0.17) |
NM |
(0.08) | (0.16) |
-100.0% |
||||||||||||||||
|
Adjusted income (loss) from operations |
$ |
2.34 |
$ |
2.15 |
$ |
2.14 |
$ |
2.36 |
$ |
(0.25) |
NM |
$ |
6.33 |
$ |
4.30 |
-32.1% |
|||||||||
|
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|
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|
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|
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Page 24 |
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