Lincoln National Corporation (NYSE:LNC) Q3 2019 Earnings Conference Call - Final Transcript

Oct 31, 2019 • 10:00 am ET

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Lincoln National Corporation (NYSE:LNC) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning and thank you for joining Lincoln Financial Group's Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

Now I'd like to turn the conference over to the Corporate Treasurer, Chris Giovanni. Please go ahead, sir.

Executive
Christopher Giovanni

Thank you, Catherine. Good morning and welcome to Lincoln Financial's third quarter earnings call. Before we begin, I have an important reminder. Any comments made during the call regarding future expectations, trends and market conditions, including comments about sales and deposits, expenses, income from operations, share repurchases, and liquidity and capital resources are forward-looking statements under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include those described in the cautionary statement disclosures in our earnings release issued yesterday as well as those detailed in our 2018 Annual Report on Form 10-K, most recent quarterly report on Form 10-Q, and from time to time in our other filings with the SEC.

These forward-looking statements are made only as of today and we undertake no obligation to update or revise any of them to reflect events or circumstances that occur after this date. We appreciate your participation today and invite you to visit Lincoln's website www.lincolnfinancial.com, where you can find our press release and statistical supplement, which include a full reconciliation to the non-GAAP measures used in the call, including adjusted return on equity and adjusted income from operations or adjusted operating income to their most comparable GAAP measures. Presenting on today's call are Dennis Glass, President and Chief Executive Officer; and Randy Freitag, Chief Financial Officer and Head of Individual Life. After their prepared remarks, we will move to the question-and-answer portion of the call.

I would now like to turn the call over to Dennis.

Executive
Dennis R. Glass

Thank you, Chris. Good morning everyone. Third quarter earnings were disappointing, but I am confident that our strategies and management actions are driving and are going to continue to drive earnings growth. I also want to emphasize that our franchise and business model have the strength to deal with low interest rates, a headwind facing us and the industry.

First, on the quarter's negative operating earnings results. There were three primary impacts. Number one, our annual review included a significant charge with a component related to interest rates. While our interest rate assumptions were already more conservative than most competitors, we still filed our rigorous process and made appropriate changes. Number two, alternatives meaningfully underperformed as we wrote down a large private equity holding. This is an investment we've owned for many years. The third impact was quarterly fluctuations we see from time to time. Randy will cover each of these in more detail shortly.

Turning to the ongoing strength of the franchise. We continue to benefit from actions taken by management to accelerate growth, diversify sales, achieve appropriate returns and tactically tilt our sales mix towards shorter duration products, which are less sensitive to interest rates. These