Top executives at Lincoln Financial Group insist they are progressing in their mission to right their ship in the face of continued losses but probably aren’t navigating the choppy waters as fast as they’d like. The Pennsylvania-based insurer, one of the oldest and largest stock insurance companies in the United States, Thursday reported a net loss of $1.2 billion, or $-7.35 per share for the fourth quarter of 2023, and a loss of $835 million or $-4.92 per share for the full year.
But in a Thursday morning conference call Lincoln Financial executives urged investors and analysts to focus on aspects of the year-end results other than losses that they said demonstrated progress in strengthening the company’s balance sheet and returning it to profitability.
“We closed a major reinsurance transaction, which marked a big step forward in our efforts to de-risk our balance sheet and improve our capital position and ongoing free cash flow,” said Ellen Cooper, chairman, president and CEO. “We also announced an agreement to sell our wealth management business to Osaic. This transaction is expected to provide a capital benefit of at least $700 million upon closing, which we anticipate in the first half of this year with no expected material impact on ongoing free cash flow for earnings.”
Risk Based Capital position touted
Moreover, Cooper pointed to the company’s Risk Based Capital position as perhaps the most positive sign of turnaround. The measurement, a method of calculating the minimum capital that financial institutions are required to hold, ended 2023 above the company’s target of 400%, a substantial increase from the 375% to 385% range at the end of the fourth quarter.
“When the sale of our wealth management business is finalized, we expect this will further improve our RBC ratio, and provide us with additional financial flexibility,” Cooper said.
Cooper noted Lincoln’s group protection business delivered substantial year over year margin expansion, while also generating solid premium growth.
“A larger and more profitable group business is a core tenet of our long-term strategy to achieve a balanced mix of earnings from businesses and products with higher stable cash flows,” she said.
Record annuities sales reported
The company also reported record annuities sales and said its declines in life insurance sales were intentional, driven by the company’s strategic realignment to more accumulation products, which are which are expected to deliver more stable cash flows and higher risk-adjusted margins. Lincoln’s retirement plan services achieved its ninth consecutive year of positive flows.
“We are making meaningful progress in resetting our businesses for profitable organic growth as we reposition our product sales to a more capital-efficient and higher risk-adjusted return mix supported by our leading distribution,” Cooper said. She also highlighted the company’s commitment to strengthening the balance sheet, improving free cash flow, and delivering increasing shareholder value in the future.
“Overall, we reported solid results for the fourth quarter, tapping a year of consistent progress across our business,” said Chief Financial Officer Christopher Neczypor. “We are executing well against our strategic priorities, strengthening our balance sheet, improving free cash flow and focusing on profitable growth.”
Lincoln Financial stock, which has fallen more than 26% in the last year, dropped another 3% in early trading Thursday, to $26.11 per share.
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at firstname.lastname@example.org.
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