Lincoln National Corporation (NYSE:LNC) Q1 2020 Earnings Conference Call - Final Transcript

May 07, 2020 • 10:00 am ET

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Lincoln National Corporation (NYSE:LNC) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Dennis Glass

with you, the connectivity and productivity of our employees working from home has been excellent. We have maintained our commitments to our customers and partners during this difficult time with service at the same high standards we have always delivered.

Finally, we remain committed to honoring our namesake through our actions as a responsible Company. Our foundation has made significant financial commitments to help distribute food throughout the communities where we operate, and as a founding sponsor of People Plus Work Connect, we are bringing companies together to help get people back to work faster.This morning, we are going to handle our prepared remarks a little differently. I will briefly touch on the first quarter results before detailing the current environment and the potential impacts to Lincoln, along with the strategies and actions, we have in place to successfully manage through this period of uncertainty. Randy will then cover results in greater detail and speak to our strong financial position.

So our first quarter results were solid and largely unaffected by the virus. While we are now in a different environment, it is important to highlight that we continue to execute on our long-term strategic plan and this quarter's results, once again, demonstrate that. Adjusted operating earnings per share were up 5% compared to the prior-year quarter. Adjusted operating revenues increased 3%. Net flows nearly doubled and we generated a return on equity excluding AOCI of over 13%.

The annuity business had a strong quarter as both the top and bottom line grew in the mid-single digits over the prior-year quarter, and we produced positive net flows in both variable and fixed annuities. Notably, sales of VAs without guarantees exceeded VAs with guarantees for the first time in recent history, as sales of our indexed variable annuity, which is much less sensitive to interest rates, gained further momentum. We expect this shift to continue as we expand shelf space and add new producers.

In retirement plan services, we also grew both the top and bottom line versus the prior year period. Net flows were once again positive in the quarter with strong growth in recurring deposits and low withdrawal rates being the biggest drivers. Our high-touch high tech-focused service model distinguishes us from the competitors and is a differentiator in our target markets. We are leveraging these capabilities which are more important now in these uncertain times to drive positive outcomes for planned sponsors and participants.

Turning to life insurance, operating revenues and operating income each grew in the high single digits compared to the first quarter of 2019. As expected, sales decreased compared to the prior year as increases in IUL and term, which are strategic focuses and less sensitive to interest rates were offset by declines in other products, in part driven by pricing actions. We remain focused on leveraging our broad product portfolio, to maintain product diversification.

Lastly, on group protection, operating income decreased year-over-year, driven primarily by higher than expected mortality. This offset strong premium growth