Close Close
ThinkAdvisor

Life Health > Annuities

Lincoln Shows Investors It Has Sturdy Investments: Earnings

X
Your article was successfully shared with the contacts you provided.

Lincoln Financial has responded to the COVID-19 pandemic chill by making extra efforts to reassure shareholders about the quality of its own investments.

The Radnor, Pennsylvania-based life insurer has provided an investment portfolio supplement along with its earnings release for the first quarter.

The supplement shows, for example, that Lincoln has 96% of its $119 billion assets invested in investment-grade holdings, with the holdings diversified across asset classes, sectors and issuers.

(Related: Primerica Wrestles With Agent Licensing Exam Delays)

Since the first quarter of 2015, the company has “repositioned the portfolio to prepare for the next credit cycle,” according to one section heading.

The percentage of assets in holding right near the cutoff between investment-grade and junk has fallen to 7.9%, from 9.3%, and only 5% of holdings are in holdings that could be affected by oil prices, down from 10%, according to the supplement.

Lincoln was a number of insurers to release earnings Wednesday.

Lincoln (stock symbol: LNC) is reporting $52 million in net income for the latest quarter on $4.4 billion in revenue, compared with $252 million in net income on $4 billion in revenue for the first quarter of 2019.

The annuities unit is reporting $302 million in pre-tax operating income on $1.1 billion in operating revenue, up from $287 million in pre-tax operating income on $1.2 billion in revenue for the year-earlier quarter.

Commissions incurred increased to $311 million, from $268 million.

Here’s what happened to deposits into three types of annuities between the first quarter of 2019 and the latest quarter:

  • Traditional fixed annuities: $1.1 billion (down from $1.6 billion)
  • Variable annuities with guaranteed living benefits: $1.2 billion (up from $1.1 billion)
  • Variable annuities without guaranteed living benefits: $1.5 billion (up from $864 million)

The life unit is reporting $209 million in pre-tax operating income on $1.8 billion in operating revenue, up from $195 million in pre-tax operating income on $1.7 billion in operating revenue for the year-earlier quarter.

Commissions incurred increased to $191 million, from $186 million.

Here’s what happened to first-year premiums for some types of life products between the first quarter of 2019 and the latest quarter:

  • Universal life: $9 million (down from $11 million)
  • Indexed universal life: $21 million (up from $16 million)
  • Variable universal life: $44 million (down from $52 million)
  • MoneyGuard: $34 million (down from $51 million)
  • Term life: $35 million (up from $30 million)
  • Executive benefits: $26 million (down from $31 million)

In other earnings news:

American Equity Investment Life Holding Company, West Des Moines, Iowa (Stock symbol: AEL)

American Equity Life is reporting $243 million in net income for the first quarter on negative $324 million in revenue, compared with a $30 million net loss on $1 billion in revenue for the first quarter of 2019.

The negative revenue figure for the latest quarter was caused by a change in the fair value of the derivatives American Equity uses to hedge annuities against stock market ups and downs.

American Equity gets more than 80% of its ordinary revenue from investment income. Net investment income increased to $573 million, from $558 million.

Overall annuity sales fell to $705 million, down 43% from the total for the year-earlier quarter, the company said.

Anant Bhalla, American Equity’s chief executive officer, said in a comment included in the earnings release that sales fell because some competitors were offering unsustainably high deals in an effort to gain market share. Those competitors have now lowered their rates to more sustainable levels, he said.

Bhalla said it will be tightening the terms it offers customers.

More on this topic

“Due to the continued elevated levels of market implied volatility since March, which impacts the cost of buying options for certain index strategies, we will begin reducing renewal participation rates on $4.3 billion of policyholder funds starting June 1,” Bhalla said. “We intend to be financially prudent and disciplined in managing in-force and new money cost, while staying true to our core beliefs in always doing the right thing by our clients and producers. Therefore, if market implied volatility levels were to fall back to February levels, we could begin to unwind some of these rate actions in the future.”

FGL Holdings , Des Moines, Iowa (Stock symbol: FG)

FGL is reporting a $338 million net loss for the first quarter on negative $335 million in revenue, compared with $171 million in net income on $600 million in revenue for the first quarter of 2019.

FGL is the parent of Fidelity & Guaranty Life Insurance Company.

The company’s revenue figures include the effects of movements in the value of the derivatives used to support the company’s annuities.

The company gets most of its ordinary revenue from net investment income. Net investment income increased to $317 million, from $289 million.

The company’s adjusted operating income, which leaves out the effects of efforts to mark the value of derivatives and other instruments to market, fell to $33 million, from $82 million.

Here’s what happened to net deposits for two types of annuities the company sells, between the first quarter of 2019 and the latest quarter:

  • Indexed annuities: $831 million (up from $668 million)
  • Multi-year guaranteed: $114 million (down from $280 million)

Chris Blunt, the company’s chief executive officer, said in a comment that the company is moving ahead with efforts to be acquired by Fidelity National Financial Inc., a title, insurer, and that 96% of employees are working at home, due to the COVID-19 pandemic.

“The company has taken pricing action, in light of lower available investment yields and in line with the competitive environment, to maintain our disciplined approach to new business and in-force profitability and capital management,” company said.

MetLife Inc., New York (Stock symbol: MET)

MetLife is reporting $4.4 billion in net income for the first quarter on $18 billion in revenue, compared with $1.4 billion in net income on $16 billion in revenue for the first quarter of 2019.

The New York-based company’s U.S. group benefits unit is reporting $312 million in adjusted earnings for the latest quarter on $5.1 billion in premiums, fees and other revenues, up from $342 million in adjusted earnings on $4.8 billion in premiums, fees and other revenues for the year-earlier quarter.

The retirement and income solutions unit is reporting $359 million in adjusted earnings for the latest quarter on $1.9 billion in premiums, fees and other revenues, compared with $285 million in adjusted earnings on $2 billion in premiums, fees and other revenues for the year-earlier quarter.

CVS Health Corp., Woonsocket, Rhode Island (Stock symbol: CVS)

CVS is reporting $2 billion in net income for the first quarter on $63 billion in revenue, up from $1.4 billion in net income on $62 billion in revenue for the first quarter of 2019.

The drug store company’s health care benefits unit, which now includes Aetna and some other operations, is reporting $1.5 billion in adjusted operating income for the latest quarter on $19 billion in revenue, compared with $1.6 billion in operating income on $18 billion in revenue for the year-earlier quarter.

CVS ended the quarter providing or administering coverage for 23 million people, or about 3% more than it was covering a year earlier.

— Read Earnings: Prudential, Genworth, CNO, RGA, Sun Lifeon ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on FacebookLinkedIn and Twitter.