MET MetLife Inc

Lincoln National Corporation’s (LNC) second quarter operating earnings of $1.09 per share came in substantially ahead of the Zacks Consensus Estimate of 94 cents and 86 cents recorded in the prior-year quarter. Meanwhile, operating income surged 20.2% year over year to $348.8 million.

Conversely, net income for the reported quarter, available to common shareholders, was $324.4 million or $1.01 per share compared with $104.4 million or 33 cents per share in the year-ago quarter. GAAP net income also came in at $325.4 million, up from $255.2 million in the year-ago period. Results were impacted by $34.0 million or 11 cents per share of net favorable items in the reported quarter.

Lincoln’s total revenue increased 7.7% to $2.80 billion from $2.60 billion in the prior-year quarter. This also exceeded the Zacks Consensus Estimate of $2.73 billion. Segment-analysis is as follows:

Retirement Solutions

Operating income from Individual Annuities was $150 million compared with $116 million in the prior-year quarter due to a 21% year-over-year increase in the average variable annuity account values. Total annuity deposits were $2.9 billion (up 4% year over year), reflecting growth in both variable and fixed indexed annuities, although net flows were $0.7 billion (down 42% year over year).

However, the reported quarter also included $4 million of alternative investment income and prepayment premiums, $8 million of favorable DAC adjustments and $2 million of tax adjustments.

Operating income from Defined Contributions was $42 million, up from $36 million in the prior-year period, reflecting a 15% year-over-year increase in account values. Gross deposits of $1.2 billion were down 13% versus prior-year period while total net outflows were $178 million versus net inflows of $182 million in the year-ago quarter, reflecting volatile sales growth in mid-to-large case markets.

The reported quarter also included $4 million of investment income from excess premiums, partially offset by $2 million of other expenses.

Insurance Solutions

Operating income from Life Insurance of $152 million increased marginally from $151 million recorded in the year-ago period. The life insurance segment's results included investment income of $5 million, attributable to alternative investments and prepayment premiums offset by $4 million of other items.

Life insurance sales were $157 million, up 12% year over year. Life insurance in force grew 3% year over year to $571 billion while account values of $35 billion increased 8% over the prior-year quarter.

Operating income from Group Protection increased to $26 million, compared to $23 million in the prior-year period. Non-medical loss ratio was 73%, down from 75% in the year-ago quarter.

Net earned premiums were $409 million, up 7% over the year-ago period while annualized sales of $67 million improved 3% year over year after consistent declines. The reported quarter benefited from $3 million of net investment income, DAC adjustments and other expenses.

Other

Operating loss from Other operations was $22 million, down from $36 million in the year-ago quarter. The reported quarter benefited from $14 million of favorable items that included lower-than-expected expenses and taxes of $9 million and $2 million, respectively.

Net realized losses and impairments totaled $27 million, pre-DAC and pre-tax, compared with a gain of $3 million in the prior-year quarter. As of June 30, 2011, net unrealized gain was approximately $3.6 billion (pre tax) on its available-for-sale securities as compared with a net unrealized gain of $3.0 million as of June 30, 2010.

Lincoln reported improved consolidated deposits of $5.4 billion, up from $5.3 billion in the prior quarter. Total account balances increased 17% year over year to $164 billion, primarily driven by positive net flows and equity market appreciation. Total net flows were flat from prior-quarter at $1.4 billion.

Financial Update

On June 30, 2011, book value per share came in at $44.04, up 10% over prior-year quarter. Excluding accumulated other comprehensive income (AOCI), book value increased 9% year over year to $40.43 per share. The quarterly operating ROE, excluding AOCI and goodwill, was 14.9%, up from 13.1% at the end of prior-year quarter. Additionally, Lincoln bought back 5.1 million shares for a cost of $75 million during the reported quarter.

Industry Moves

Last week, MetLife Inc. (MET) reported second quarter operating earnings per share of $1.24, surpassing the Zacks Consensus Estimate of $1.11 and $1.10 in the year-ago quarter. As a result, operating earnings jumped 45% year over year to $1.33 billion from $914 million in the year-ago period. Meanwhile, Prudential Financial Inc. (PRU) is scheduled to release its results after the market closes today.

 
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