Lincoln National Corporation (NYSE: LNC) reported first-quarter 2024 financial results that exceeded analyst expectations on adjusted earnings per share, driven by robust insurance premiums and improved operational performance, especially in its Group Protection segment. However, despite the earnings beat, the company’s stock experienced a decline on investor concerns over rising expenses and the long-term disability (LTD) results.
According to financial statements released by Lincoln National, adjusted operating income for the quarter was $71 million, or $0.41 per diluted share, surpassing Wall Street forecasts. The company's operating revenues increased year-over-year, buoyed by higher insurance premiums, solid annuity deposits, improved mortality outcomes, and strong net investment income. However, revenues fell short of consensus estimates, clouding the otherwise positive quarterly momentum.
A major contributor to investor unease was the marked increase in total expenses for the quarter, which more than doubled compared to the same period last year. This expense surge included significant one-off items totaling $164 million, consisting of a $90 million legal accrual and $39 million in severance expenses, as outlined in the quarterly earnings call transcript.
At the business segment level, the Group Protection unit recorded higher operating income, supported by favorable results in disability insurance and supplemental health growth. Despite these improvements, the LTD loss ratio rose by approximately three percentage points to 74% year-over-year, mainly due to short-term disability claims, though overall metrics remained within management’s desired range. The Retirement Plan Services segment reduced its operating loss, aided by better mortality results and lower administrative expenses. Conversely, the Life Insurance segment’s operating income decreased, affected by a plan termination event, but benefited from improvements in core insurance business. The Annuities division also reported narrowing losses when compared to the previous year.
Financially, Lincoln National ended the quarter with lower cash and invested assets than in the prior year, while debt levels increased and shareholder equity declined. The company maintained its quarterly dividend payout and indicated there could be fluctuating key metrics across segments for the rest of 2024. Management forecast a seasonally higher loss ratio in Group Protection during the fourth quarter and anticipated continued favorable mortality experience in the second half of the year for other business areas.
Despite exceeding profit expectations, the reaction in the capital markets was negative. As of the latest trade at 00:19:00 UTC on Friday, May 16, shares of Lincoln National Corp. traded at $34.10, down $0.39 or 0.01% from the previous close. The day’s trading opened at $34.25 with an intraday high of $34.41 and low of $33.78 on a volume of 1,810,215 shares.
The quarterly results suggest that while Lincoln National is benefitting from growth in new insurance business and healthy investment returns, sharply higher expenses and mixed performance in certain segments continue to weigh on the company’s profitability. The overall response underscores lingering investor caution as the insurer navigates ongoing pressures in its long-term disability line and the impact of elevated operating costs.