Lincoln Financial Group Reports Third Quarter Earnings; Solid Quarter Despite Economic Pressures.PHILADELPHIA -- Lincoln National Corporation Lincoln National Corporation (NYSE: LNC) is a holding company, which operates multiple insurance and investment management businesses through subsidiary companies. LNC was organized under the laws of the state of Indiana in 1968, and maintains its principal executive offices (NYSE NYSE See: New York Stock Exchange :LNC LNC Legal Nurse Consultant LNC Libertarian National Committee LNC Low Noise Converter LNC Lloyd Noble Center (University of Oklahoma, Norman campus) LNC Local Node Clock LNC Chief Legalman (Naval Rating) ), the parent company of the Lincoln Financial Group of companies, today reported net income of $199.7 million, or $1.12 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for its third quarter of 2004. By comparison, net income for the third quarter of 2003 was $133.3 million, or $0.74 per diluted share. Income from operations for the third quarter of 2004 was $178.2 million, after-tax, or $1.00 per diluted share, compared with $156.0 million, after-tax, or $0.87 per diluted share, in the third quarter of 2003. The attached table defines and reconciles income from operations for the corporation and business segments to GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income. For the third quarter, investment income in the Life and Retirement segments from commercial mortgage loan prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. and bond make-whole premiums continued to contribute to strong results. The quarter was also positively impacted by $0.05 per diluted share related to the cumulative amortization from an adjustment of the deferred gain on the sale of the reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. business. These positive contributors, in the quarter, were partially offset by higher expenses, including increased expenses related to Guaranteed Minimum Death Benefit (GMDB GMDB Guaranteed Minimum Death Benefit (insurance) ) reserves, now substantially hedged and not expected to be a significant item in future quarters. After adjusting for the sale of Delaware International Advisors Ltd. (DIAL), consolidated domestic deposits, which include annuities, mutual funds, life insurance and other personal wealth accumulation products, reached a third quarter record of $5.75 billion. In addition, total net flows in the quarter increased 50 percent over the year ago period, which established a third quarter record. As of September 30, 2004, assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. were $132.6 billion. "Our deposits and net flows maintained the strong pace established earlier this year and also set third quarter records, despite the challenges of lackluster lack·lus·ter adj. Lacking brightness, luster, or vitality; dull. See Synonyms at dull. Adj. 1. lackluster - lacking brilliance or vitality; "a dull lackluster life"; "a lusterless performance" equity markets and stubborn stubborn Vox populi → medtalk Refractory; unresponsive to therapy interest rates," said Jon A. Boscia, chairman and chief executive officer of Lincoln Financial Group. "We continue to build market share in our Retirement and Investment Management segments while our Life segment results reflect the competitive pressures that continue to dominate the Universal Life (UL) marketplace," added Boscia. Lincoln completed its annual comprehensive review of prospective assumptions underlying the amortization of Deferred Acquisition Costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ), Present Value of In-Force Value of In-Force is a life insurance term for the present value of the profits that will emerge from a block of life insurance policies over time. The value of in-force business is the present value of expected future earnings on in-force business less the present value (PVIF PVIF Present Value Interest Factor PVIF present value of in-force PVIF Prime Value Imputation Fund (Australia) ), Deferred Front-End Loads Front-End Load A commission or sales fee charged at the time of the initial purchase for an investment, usually mutual funds and insurance policies. It is deducted from the investment amount and thus, lowers the size of the investment. (DFEL) and GMDB reserves. The overall effect on earnings was virtually neutral when combined with the results from the retrospective unlocking of DAC and GMDB reserves, which included the impact from the movement in the equity markets during the quarter. While neutral overall, it did have a substantial effect on individual segments. Lincoln Retirement Net income for the Retirement segment was $90.8 million, compared to $102.0 million for the third quarter of 2003. Third quarter income from operations for the segment was $110.2 million versus $94.3 million in the year ago period. The Retirement segment's results for the third quarter were favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by DAC unlocking and income from commercial mortgage loan prepayment and bond make-whole premiums. In the quarter, variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. deposits reached a record $2 billion, with variable annuity net flows achieving a record level of $782 million. "The Retirement segment delivered solid deposits and had record net flows in the third quarter, which underscores the importance of innovative products and distribution strength," said Boscia. Life Insurance Life Insurance net income was $52.0 million versus $55.8 million for the same period a year ago. Income from operations for the segment was $55.4 million, compared to $58.7 million in the third quarter of 2003. Third quarter 2004 income for this segment was negatively impacted by DAC unlocking and higher expenses, partially offset by continued income from commercial mortgage loan prepayment and bond make-whole premiums. Total retail life first year premiums declined in the quarter due to competitive pressure in the UL marketplace. "Despite the competitive pressures, we remain focused on maintaining the balance between sound risk management and pricing discipline in order to create long-term value for our clients and shareholders," Boscia added. Investment Management The Investment Management segment reported net income of $58.1 million in the quarter, up from $6.3 million in the same period a year ago. Income from operations for the segment was $12.5 million in the third quarter, which compares to $9.7 million in the third quarter of 2003. During the quarter, Lincoln completed the sale of DIAL and recognized $45.8 million, after-tax, of gain. Also, in the quarter, Lincoln migrated $776 million in assets previously administered by this segment to third parties, primarily to BISYS under a previously announced outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. arrangement. "We are focused on research and portfolio management, our core areas of expertise, which resulted in strong investment performance in our retail and institutional products," said Boscia. Lincoln UK For the third quarter, the UK segment's net income was $9.9 million versus $11.5 million in the third quarter of 2003. Income from operations was $10.1 million for the quarter, versus $11.3 million in the same year ago period. Corporate and Other Corporate and Other, which includes financing, distribution losses, and the results flowing from the reinsurance business sold in 2001, reported a net loss of $11.1 million for the third quarter versus a net loss of $42.3 million for the same period a year ago. The operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the third quarter of 2004 was $10.0 million, of which $9.8 million was related to distribution losses. For the third quarter of 2003, the company reported an operating loss of $18.0 million, with $15.0 million attributed to distribution losses. As of September 30, 2004, the book value of Lincoln National Corporation common stock, excluding accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as , was $29.23, compared with $26.87 a year ago. Book value, including accumulated other comprehensive income, was $34.15, compared with $31.34 a year ago. In the third quarter, 1.638 million shares were repurchased at a total cost of $73.2 million. Lincoln National Corporation will discuss the company's third quarter results with investors in a conference call beginning at 10 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ) on Wednesday, November 3, 2004. The conference call will be available via a live webcast on the company's Website, www.LFG LFG Landfill Gas LFG Lincoln Financial Group (insurance & financial planning company) LFG Looking For Group (Everquest) LFG Lexical-Functional Grammar (computational linguistics) .com/webcast. The company's third quarter 2004 statistical supplement will be available on its Website, www.LFG.com/investor. Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. With headquarters in Philadelphia, Lincoln Financial Group has consolidated assets of $110 billion at September 30, 2004, and had annual consolidated revenues of $5.3 billion in 2003. Through its wealth accumulation and protection businesses, the company provides annuities, life insurance, 401(k) and 403(b) plans, 529 college savings plans, mutual funds, managed accounts, institutional investment and financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against and advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal . Definition of Income from Operations Income from operations represents after-tax results excluding, as applicable, realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. or losses on investments and derivatives, cumulative effect of accounting changes, restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , reserve changes on business sold through reinsurance, gain on sale of subsidiaries and block of business and loss on retirement of subordinate debt See Junior debt. . Income from operations is a non-GAAP financial measure and does not replace net income (loss) as the GAAP measure of our consolidated results of operations. Income from operations is an internal measure used by the company in the management of its operations. Management believes that this performance measure explains the results of the company's ongoing operations in a manner that allows for a better understanding of the underlying trends in the company's current business because the excluded items are either unpredictable and/or not related to decisions regarding the underlying businesses.
(amounts in millions, except EPS)
For the Quarter Ended Lincoln Life Investment
September 30, 2004 Retirement Insurance Management
--------------------------------
Net Income $90.8 $52.0 $58.1
Less:
Net realized gain/loss on
investments and derivatives (15.6) (1.6) (0.2)
Restructuring charges (1.7) (0.6) -
Reserve development and related
amortization on business sold
through reinsurance - - -
Net Change in Mark-to-Market on
Reinsurance
Embedded Derivative/Trading
Account Securities (2.1) (1.2) -
Gain on Sale of Subsidiary - - 45.8
--------------------------------
Income from Operations $110.2 $55.4 $12.5
(amounts in millions, except EPS)
For the Quarter Ended
September 30, 2004 Lincoln Corporate
UK & Other Total
--------------------------------
Net Income $9.9 ($11.1) $199.7
Less:
Net realized gain/loss on
investments and derivatives (0.2) (0.2) (17.8)
Restructuring charges - (0.6) (2.9)
Reserve development and related
amortization on business sold
through reinsurance - 0.2 0.2
Net Change in Mark-to-Market on
Reinsurance
Embedded Derivative/Trading
Account Securities - (0.5) (3.8)
Gain on Sale of Subsidiary - - 45.8
--------------------------------
Income from Operations $10.1 ($10.0) $178.2
Earnings per share (diluted)
Net Income $1.12
Income from Operations $1.00
(amounts in millions, except EPS)
For the Quarter Ended Lincoln Life Investment
September 30, 2003 Retirement Insurance Management
--------------------------------
Net Income $102.0 $55.8 $6.3
Less:
Net realized gain/loss on
investments and derivatives 13.2 (1.3) 0.1
Restructuring charges (5.5) (1.6) (3.5)
Loss on retirement of subordinated
debt - - -
Reserve development and related
amortization on business sold
through reinsurance - - -
--------------------------------
Income from Operations $94.3 $58.7 $9.7
(amounts in millions, except EPS)
For the Quarter Ended Lincoln Corporate
September 30, 2003 UK & Other Total
--------------------------------
Net Income $11.5 ($42.3) $133.3
Less:
Net realized gain/loss on
investments and derivatives 0.2 0.1 12.3
Restructuring charges - (2.3) (12.9)
Loss on retirement of subordinated
debt - (3.7) (3.7)
Reserve development and related
amortization on business sold
through reinsurance - (18.4) (18.4)
--------------------------------
Income from Operations $11.3 ($18.0) $156.0
Earnings per share (diluted)
Net Income $0.74
Income from Operations $0.87
LINCOLN NATIONAL CORPORATION
Digest of Earnings
For the Quarter Ended
September 30
2004 2003
Revenue 1,406,058,000 1,268,849,000
Net Income 199,677,000 133,313,000
Share Earnings (Basic)
Net Income $1.14 $0.75
Share Earnings (Diluted)
Net Income $1.12 $0.74
Average Number of Shares (Basic) 175,173,100 177,483,351
Average Number of Shares (Diluted) 177,695,247 179,857,804
For the Nine Months Ended
September 30
2004 2003
Revenue 4,023,808,000 3,581,329,000
Net Income 517,138,000 317,604,000
Share Earnings (Basic)
Net Income $2.92 $1.79
Share Earnings (Diluted)
Net Income $2.88 $1.77
Average Number of Shares (Basic) 176,928,001 177,238,951
Average Number of Shares (Diluted) 179,713,761 179,122,313
Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. - Cautionary Language Certain statements made in this press release and in other written or oral statements made by Lincoln National Corporation ("LNC") or on LNC's behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 ("PSLRA PSLRA Private Securities Litigation Reform Act PSLRA Public Service Labour Relations Act (Canada) "). 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. LNC claims the protection afforded by the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for forward-looking statements provided by the PSLRA. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results contained in the forward-looking statements. Risks and uncertainties that may cause actual results to vary materially, some of which are described with the forward-looking statements include, among others: --Legislative, regulatory or tax changes, both domestic and foreign, that affect the cost of, or demand for, our products, the required amount of reserves and/or surplus, or otherwise affect our ability to conduct business, including changes to statutory reserves and/or risk-based capital requirements Risk-Based Capital Requirement A stated requirement of liquid reserves placed upon banks and institutions that deal in risky ventures. Notes: These requirements exist for the protection of investors who hold an interest in these types of businesses. related to secondary guarantees under universal life and variable annuity products; restrictions on revenue sharing revenue sharing Funding arrangement in which one government unit grants a portion of its tax income to another government unit. For example, provinces or states may share revenue with local governments, or national governments may share revenue with provinces or states. and 12b-1 payments; and the repeal The Annulment or abrogation of a previously existing statute by the enactment of a later law that revokes the former law. The revocation of the law can either be done through an express repeal of the federal estate tax; --The institution of legal or regulatory proceedings against LNC or its subsidiaries and the outcome of any legal or regulatory proceedings, such as: (a) adverse actions related to present or past business practices common in businesses in which LNC and its subsidiaries compete; (b) adverse decisions in significant actions including, but not limited to, actions brought by federal and state authorities, and extra-contractual and class action damage cases; (c) new decisions which change the law; and (d) unexpected trial court rulings; --Changes in interest rates causing a reduction of investment income, asset fees and demand for our products as well as on the margins of LNC's fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. and life insurance businesses; --A decline in the equity markets causing a reduction of asset fees that LNC charges on various investment and insurance products, an acceleration of amortization of deferred acquisition costs (DAC) and an increase in liabilities related to guaranteed benefit features of LNC's variable annuity products as well as related to the effectiveness of LNC's various hedging strategies used to offset the impact of changes in the equity markets; --A deviation in actual experience regarding future persistency, mortality, morbidity, interest rates and equity market returns from LNC's assumptions used in pricing its products, in establishing related insurance reserves, and in the amortization of intangibles that may result in an increase in reserves and a decrease in net income; --Changes in accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. that may result in unanticipated changes to LNC's net income; --Lowering of one or more of the LNC's debt ratings issued by nationally recognized statistical rating organizations A Nationally Recognized Statistical Rating Organization (or "NRSRO") is a credit rating agency which issues credit ratings that the U.S. Securities and Exchange Commission (SEC) permits other financial firms to use for certain regulatory purposes. , and the adverse impact such action may have on LNC's ability to raise capital and on its liquidity and financial condition; --Lowering of one or more of the insurer financial strength ratings of LNC's insurance subsidiaries, and the adverse impact such action may have on the premium writings and profitability of its insurance subsidiaries; --Significant credit, accounting, fraud or corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. issues that may adversely affect the value of certain investments in the portfolios of LNC's companies requiring that LNC realize losses on such investments; --The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including LNC's ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions; --The adequacy and collectibility of reinsurance that LNC has purchased; --Acts of terrorism or war that may adversely affect LNC's businesses and the cost and availability of reinsurance; --Competitive conditions that may affect the level of premiums and fees that LNC can charge for its products; --The unknown impact on LNC's business resulting from changes in the demographics The attributes of people in a particular geographic area. Used for marketing purposes, population, ethnic origins, religion, spoken language, income and age range are examples of demographic data. of LNC's client base, as aging baby-boomers move from the asset-accumulation stage to the asset-distribution stage of life; and --Changes in general economic or business conditions, both domestic and foreign, that may be less favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. than expected and may affect premium levels, claims experience, the level of pension benefit costs and funding, and investment results. The risks included here are not exhaustive. LNC's annual reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , current reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and other documents filed with the Securities and Exchange Commission include additional factors which could impact LNC's business and financial performance. Moreover, LNC operates 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 impact of all risk factors on LNC's business 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 undo To restore the last editing operation that has taken place. For example, if a segment of text has been deleted or changed, performing an undo will restore the original text. Programs may have several levels of undo, including being able to reconstruct the original data for all edits reliance on forward-looking statements as a prediction of actual results. In addition, LNC disclaims any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this report. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion