AFL AFLAC Inc

Lincoln National Corporation’s (LNC) first quarter operating earnings per share of $1.08 came in substantially ahead of the Zacks Consensus Estimate of 92 cents and 83 cents recorded in the prior-year quarter. Meanwhile, operating income surged 26.6% year over year to $349.5 million.

Conversely, net income for the reported quarter, available to common shareholders, was $339.4 million or $1.05 per share compared with $265.0 million or 85 cents per share in the year-ago quarter. GAAP net income also came in at $339.4 million, though up from $283.0 million in the year-ago period.

Results were impacted by net realized loss of $15.3 million (after tax), partially offset by benefit ratio unlocking (after tax) of $4.8 million and income from reserve changes (after-tax) of $0.4 million.

Lincoln’s total revenue increased to $2.71 billion from $2.53 billion in the prior-year quarter. This also exceeded the Zacks Consensus Estimate of $2.66 billion. Segment analysis is as follows:

Retirement Solutions

Operating income from Individual Annuities was $147 million compared with $119 million in the prior-year quarter due to a 14% year-over-year increase in the average variable annuity account values. Total annuity deposits were $2.6 billion (up 16% year over year), reflecting growth in both variable and fixed indexed annuities, while net flows were $483 million (down 16% year over year).

However, the reported quarter also included $6 million of alternative investment income and excess premiums, $7 million of favorable mortality and $5 million of other items. 

Operating income from Defined Contributions was $49 million, up from $36 million in the prior-year period. Gross deposits of $1.3 billion were up 3% versus prior year owing to revived sales growth in mid-to-large and small case markets. Besides, total net outflows were $134 million versus $109 million in the year-ago quarter, reflecting stability. The reported quarter also included $7 million of alternative investment income and excess premiums and $2 million of other items.

Insurance Solutions

Operating income from Life Insurance of $166 million increased from the $137 million recorded in the year-ago period. The life insurance segment's results included investment income of $8 million, attributable to alternative investments and a $6 million favorable mortality fluctuation.

Life insurance sales were $159 million, up 12% year over year. Life insurance in force grew 4% year over year to $567 billion while account values of $34 billion increased 7% over the prior-year quarter.

Operating income from Group Protection increased to $24 million, compared to $21 million in the prior-year period. Non-medical loss ratio was 74%, down from 75% in the year-ago quarter.

Net earned premiums were $403 million, up 7% over the year-ago period while annualized sales of $45 million decreased 28% year over year due to challenging market conditions. The reported quarter benefited from $5 million of several favorable items.

Other

Operating loss was $37 million, in line with the year-ago quarter. Net realized losses and impairments totalled $6 million, pre-DAC and pre-tax, compared with a loss of $59 million in prior-year quarter.

Lincoln reported improved consolidated deposits of $5.3 billion, up 13% year over year. Ending account balances increased 11% year over year to $162 billion, primarily driven by positive net flows and equity market appreciation. Total net flows at the Retirement Solutions improved by 12% year over year to $1.4 billion.

As of March 31, 2011, net unrealized gain was approximately $2.8 billion (pre tax) on its available-for-sale securities as compared with a net unrealized gain of $1.2 million as of March 31, 2010.

Financial Update

On March 31, 2011, book value per share came in at $41.74, up from $38.19 at the end of March 2010. Excluding accumulated other comprehensive income (AOCI), book value increased 6% year over year to $39.24 per share. The quarterly operating ROE, excluding AOCI and goodwill, was 15.3%, up from 12.3% at the end of prior-year quarter.

During the reported quarter, Lincoln bought back 2.4 million shares for a cost of $75 million. During the fourth quarter of 2010, the company had announced its objective of buying back common equity shares worth approximately $125 million, over the following 15 months.

Industry Moves

Yesterday, Aflac Inc. (AFL) reported first quarter operating earnings per share of $1.63 that came in modestly higher than the Zacks Consensus Estimate of $1.52 and $1.41 reported in the year-ago quarter. Meanwhile, Prudential Financial Inc. (PRU) is scheduled to release its results on May 4, 2011.

 
AFLAC INC (AFL): Free Stock Analysis Report
 
LINCOLN NATL-IN (LNC): Free Stock Analysis Report
 
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
 
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