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.
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.