A street sign on Wall Street (Photo: Allison Bell/ALM)

Lincoln Financial shifted during the second quarter more toward selling variable annuities that give it flexibility, and away from selling contracts with built-in account value protection.

The Radnor, Pennsylvania-based company — which is officially known as Lincoln National Corp. — said variable annuity sales fell just 6% between the second quarter of 2019 and the latest quarter, in spite of the effects of the COVID-19 social distancing rules and investment market turmoil.

“Fixed annuity sales decreased 77% over the same period due to product actions taken to respond to lower interest rates,” the company said Wednesday, in its earnings announcement.

Lincoln is reporting a $94 million net loss for the second quarter on $3.5 billion in revenue, compared with $363 million in net income on $4.3 billion in revenue for the second quarter of 2019.

The company noted that it is being careful about capital and debt. It has 444% risk-based capital ratio, which means that its actual level of capital is much higher than the minimum level of capital regulators expect it to have.

Lincoln said it has already paid off any debts that were scheduled to mature before 2023.

Annuities

Lincoln’s annuities unit is reporting $237 million in pre-tax operating income on $1 billion in operating revenue, compared with $266 million in pre-tax operating income on $1.2 billion in revenue for the year-earlier quarter.

Commissions incurred fell to $246 million, from $287 million.

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

  • Fixed annuities: $299 million (down from $1.3 billion)
  • Variable annuities: $2.2 billion (down from $2.4 billion)

Life

Lincoln’s life unit is reporting a $52 million pre-tax operating loss on $1.6 billion in operating revenue, compared with $207 million in pre-tax operating income on $1.8 billion in operating revenue for the year-earlier quarter.

Commissions incurred fell to $173 million, from $197 million.

Lincoln said it expects to incur about $90 million in earnings impact for every 100,000 in U.S. COVID-19-related deaths.

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

  • Universal life: $5 million (down from $15 million)
  • Indexed universal life: $23 million (down from $25 million)
  • Variable universal life: $55 million (up from $53 million)
  • MoneyGuard: $36 million (down from $56 million)
  • Term life: $36 million (down from $37 million)
  • Executive benefits: $4 million (down from $24 million)

Athene Holding Ltd. (NYSE:ATH)

Athene is reporting $720 million in net income for the latest quarter on $3.4 billion in revenue, compared with $824 million in net income on $4.4 billion in revenue for the second quarter of 2019.

The Pembroke, Bermuda-based life insurer recorded $1.3 billion in investment gains for the quarter, down from $2.5 billion in investment gains for the year-earlier quarter.

American Equity Investment Life Holding Co. (NYSE:AEL)

American Equity Life is reporting a $253 million net loss for the second quarter on $920 million in revenue, compared with $19 million in net income on $706 million in revenue for the second quarter of 2019.

The net results were affected partly by a $1.2 billion change in the fair value of embedded derivatives.

Operating income, which excludes the effects of that value change and some other items, fell to $93 million, from $100 million.

Overall annuity sales fell to $559 million, down 63% from the total for the year-earlier quarter, the company said.

Anant Bhalla, the company’s chief executive officer, said in a comment, included in the company’s earnings announcement, that annuity sales slowed in the second quarter due to COVID-19-related social distancing, and the company decided to focus on updating operations and products.

He said the company launched the Destinations 9 and Destinations 10 index annuities, which includes an index developed with Bank of America, and that he company is now starting to offer those products through independent agents.

Primerica (NYSE:PRI)

Primerica is reporting $72 million in net income for the second quarter on $525 million in revenue, compared with $97 million in net income on $505 million in revenue for the second quarter of 2019.

Here are how some of the Duluth, Georgia-based company’s distribution indicator numbers changed, year-over year:

  • Year-end life-licensed sales force: 134,157 (up from 129,550)
  • Recruits: 133,123 (up from 63,223)
  • Average number of policies sold per rep per month: 0.24 (up form 0.20)

The number of life insurance policies sold increased to 94,044 policies, from 78,664 policies.

Spending on sales-based sales commissions increased to $57 million, from $51 million.

Asset-based compensation held steady at about $36 million.

MetLife (NYSE:MET)

MetLife is reporting $68 million in net income for the second quarter on $14 billion in revenue, compared with $1.7 billion in net income on $17 billion in revenue for the second quarter of 2019.

The New York-based company’s results reflect a $710 million drop in the value of derivatives.

Operating earnings, which exclude the effects of the derivatives value change and some other charges and adjustments, fell to $758 million, from $1.3 billion.

U.S. group benefits unit is reporting $248 million in adjusted earnings for the latest quarter on $4.6 billion in premiums, fees and other revenues, compared with $311 million in adjusted earnings on $5 billion in premiums, fees and other revenues for the year-earlier quarter.

The retirement and income solutions unit is reporting $192 million in adjusted earnings for the latest quarter on $1.6 billion in premiums, fees and other revenues, compared with $351 million in adjusted earnings on $2.7 billion in premiums, fees and other revenues for the year-earlier quarter.

Voya Financial (NYSE:VOYA)

Voya is reporting a $71 million net loss for the second quarter on $1.7 billion in revenue, compared with $226 million in net income on $1.7 billion in revenue for the second quarter of 2019.

Adjusted operating earnings, which exclude the effects of $136 million of losses on operations Voya has discontinued, or is exiting, fell to $20 million, from $159 million.

Voya sells a large amount of group life and group disability coverage, through a unit that also offers medical stop-loss coverage, or insurance for employers’ self-insured health plans.

The ratio of claim costs to premiums for the benefits products fell to 69.3% in the latest quarter, from 71.6% in the year-earlier.

The company said it could end up with about $10 million to $20 million in COVID-19-related claims for every 100,000 increase in the number of U.S. COVID-19 deaths.

CVS Health (Aetna) (NYSE:CVS)

CVS is reporting $3 billion in net income for the second quarter on $65 billion in revenue, up from $1.9 billion in net income on $63 billion in revenue for the second quarter of 2019.

The Woonsocket, Rhode Island-based drug store company’s health care benefits unit, which now includes Aetna and some other operations, is reporting $3.5 billion in adjusted operating income for the latest quarter on $18 billion in revenue, compared with $1. billion in operating income on $17 billion in revenue for the year-earlier quarter.

CVS ended the quarter providing or administering coverage for 24 million people, up from 23 million people a year earlier.

CVS said that, because of a COVID-19-related reduction in use of routine care, its ratio of medical benefits costs to premiums plummeted to 70.3%, from 84% a year earlier.

Here’s how CVS health coverage utilization levels have compared with the year-earlier levels, starting in April:

  • April: Down 30%
  • March: Down 25%
  • June: Done 5%
  • July: Flat

Humana Inc. (NYSE:HUM)

Humana is reporting $1.8 billion in net income for the second quarter on $19 billion in revenue, compared with $940 million in net income on $16 billion in revenue for the second quarter of 2019.

The Louisville, Kentucky-based company ended the year providing or administering health coverage for 17 million people, up from 16.5 million people a year earlier.

Here’s what happened to seven types of health plan enrollment:

  • Individual Medicare Advantage: 3.9 million (up from 3.5 million)
  • Group Medicare Advantage: 608,300 (up from 519,100)
  • Medicare supplement: 324,600 (up from 276,000)
  • Fully insured employer plans: 820,800 (down from 942,500)
  • Self-insured employer plans: 506,200 (up from 496,000)
  • Military plans: 6 million (flat)

Humana said that, because of a COVID-19-related reduction in use of routine care, its ratio of medical benefits costs to premiums fell to 76.4%, from 84.4% a year earlier, even though it waived testing costs, eliminated Medicare Advantage plan enrollees’ out-of-pocket costs for use of telehealth services, and sent its enrollees face masks.

The company said it believes pent-up demand for care could make its medical loss ratio higher than normal for the rest of the year.

Triple-S Management Corp. (NYSE:GTS)

Triple-S — the San Juan, Puerto Rico-based Blue Cross and Blue Shield carrier for Puerto Rico, the U.S. Virgin Islands, the British Virgin Islands, Costa Rica and Anguilla  — is reporting $44 million in net income for the second quarter on $904 million in revenue, up from $31 million in net income on $886 million in revenue for the second quarter of 2019.

The company ended the quarter providing or administering medical coverage for about 932,000 people, up from about 930,000 a year earlier.

Here’s what happened to enrollment for some types of coverage between the second quarter of 2019 and the latest quarter:

  • Medicare plans: 134,601 (up from 128,670)
  • Medicaid plans: 364,157 (down from 364,495)
  • Commercial plans: 433,471 (down from 436,407)

Triple-S said the COVID-19 social-distancing rules reduced overall use of medical care in its market area and cut the ratio of medical benefits costs to premiums to 79.4%, from 84.5% a year earlier.

— Read Life, Health and Annuity Issuer Earnings Season Beginson ThinkAdvisor.

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