Life insurance service provider, Lincoln Financial Group (LNC), Monday reported a swing to profit in its fourth quarter, buoyed by robust performance of its retirement and insurance solutions segments. Earnings missed estimates, as did revenues despite improving from a year ago level.
Net income available to common stockholders of Radnor, Pennsylvania-based Lincoln was $84.1 million or $0.27 per share for the quarter, compared to a loss of $505.5 million or $1.98 per share in the same quarter a year ago.
On average, 19 analysts' polled by Thomson Reuters expected earnings of $0.83 per share for the quarter. Analysts' estimate typically exclude one-time items.
Results included a non-cash charge of $109 million, after tax, for the impairment of intangibles related to the company's media assets and net realized losses of $98 million, after tax, which includes the results of the variable annuity hedge program. Net income was $102.3 million for the quarter.
Lincoln's revenue increased to $2.40 billion from $2.15 billion in the year-earlier quarter but missed Street estimates of $2.54 billion for the quarter.
Lincoln were one amongst the six major life insurers in the Wall Street that were handpicked by the US Treasury department to receive aid under the financial rescue program to cover the losses incurred from investments, amid economic meltdown.
Now with the economy indicating signs of recovery, Lincoln has also showed some strength by reporting back to back profits after reporting three consecutive quarters of losses ending with the second quarter. In the third quarter profit was $137.0 million or $0.44 per share and revenues were $2.08 billion.
Recently, the company has signed a $550 million, 10-year letter of credit transaction with Credit Suisse AG to support regulatory capital requirements for its life insurance business, expected to provide about $400 million of initial statutory capital relief as of December 31, 2009 to Lincoln's primary insurance subsidiary, the Lincoln National Life Insurance Co.
Income from operations was $297.2 million or $0.90 per share, compared to loss from operations of $127.1 million or $0.50 per share in the same quarter last year.
Income from operations of Individual Annuities segment was $120 million, compared to a loss from operations of $172 million in the year-ago period.
Defined Contribution reported income from operations of $33 million, versus a loss from operations of $1 million in the prior-year quarter.
Life Insurance income from operations was $158 million, compared to $83 million in the fourth quarter of 2008.
Group Protection's income from operations was $30 million, compared to $18 million in the prior-year period.
Operating loss in Other Operations was $44 million in the quarter, compared to $55 million in the prior-year quarter.
Income from operations included alternative investment income of $22 million, after tax, compared to a loss of $35 million, after tax, in the 2008 period.
Total gross realized losses on general account investments were $212 million, pre DAC and tax, primarily related to select financial-sector bonds, commercial real estate equity, and residential mortgage backed securities.
As of December 31, 2009, the book value per share of common stock, including accumulated other comprehensive income or AOCI, was $36.02 compared to $31.15 a year ago. Book value per share, excluding AOCI, was $36.89, compared to $42.09 a year ago.
Amongst others in the industry, Dutch financial firm ING Groep NV (ING), in its third quarter, said it turned to a profit reflecting strong banking segment performance, less severe negative market impacts, and cost savings initiatives amid stabilizing financial market conditions. Net income was 499 million euros or 0.25 euros per share.
Another peer, Prudential Financial Inc. (PRU) reported third-quarter consolidated net income attributable to the company of $1.082 billion, compared to a loss of $176 million last year. Consolidated revenues increased to $8.564 billion from $7.030 billion last year.
For full year 2009, net loss available to common stockholders of Lincoln Financial was $519.3 million or $1.85 per share, compared to a profit of $56.2 million or $0.22 per share in the prior year. Revenues decreased to $8.50 billion from $9.22 billion last year. Street expected earnings of $3.14 per share on revenues of $9.55 billion for the year.
On September 18, 2009, brokerage FBR Capital initiated an 'Outperform' rating on Lincoln shares, with a mean target of $31.00.
LNC closed Monday's regular trading at $23.50, down $0.22 or 0.93%, on a volume of 5.01 million shares. In after-hours trading, the stock further dropped $0.45 or 1.91%, to trade at $23.05. In the last 52-week period, the stock traded in a range of $4.90 to $28.44, with a three-month average volume of 4.28 million shares.
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