Lincoln Financial Posts $2.6B Loss on Reserve and Goodwill Changes

What You Need to Know

The annuity, retirement plan and group benefits units all recorded operating profits.
New information about policyholder behavior led to a $2.2 billion increase in life insurance reserves.
The reserve change will have no effect on cash flow but will cut statutory capital by $550 million.

Lincoln Financial has posted a big loss for the third quarter due to unusual items, without separating the unusual items from ordinary revenues and expenses.

The Radnor, Pennsylvania-based life insurer reported a $2.6 billion net loss for the quarter on $4.8 billion in revenue, compared with $318 million in net income on $5.2 billion in revenue for the third quarter of 2021.

The loss was due mainly to a $2.2 billion increase in life insurance reserves, based on data showing that people ages 75 and older are more likely to keep guaranteed universal life insurance policies than the company had expected, and to a $634 million reduction in life insurance unit goodwill, according to the company’s earnings announcement.

The net loss will have no affect on Lincoln’s cash flow, but it will cut the company’s statutory capital by about $550 million in the fourth quarter, the company said.

Executives will discuss the results with securities analysts during a conference call set to start at 10 a.m. Eastern Daylight Time Thursday. Members of the public can listen to the live and recorded versions of the call.

Performance by Unit

Here’s how some of Lincoln’s units performed, according to the company’s earnings release supplement.

Group Protection

This unit sells products such as group life insurance and group disability insurance.

The unit reported $46 million in after-tax operating income on $1.3 billion in revenue, compared with an operating loss of $40 million on $1.2 billion in revenue for the year-earlier quarter,

Sales increased to $88 million, from $48 million.

Commissions incurred increased 15% at the group protection unit, to $101 million.

Individual Annuities

The individual annuity unit is reporting $449 million in after-tax operating income on $1.2 billion in revenue, compared with $338 million in operating income on $1.3 billion in revenue for the year-earlier quarter.