Lincoln Financial Group has reported a net loss available to common stockholders for Q1 2023 of $909 million, compared to net income available to common stockholders in Q1 2022 of $1.481 billion.
The company reported the reason for this net loss was primarily driven by unfavourable impacts from a portion of the MRB and hedge instrument fair value changes. A loss of $506 million is associated with unfavourable impacts from a portion of the MRB fair value change, as a result of the adoption of LDTI. A favourable portion of the MRB fair value change flowed through AOCI more than offsetting the impact on total stockholders’ equity.
The group also saw a loss of $377 million associated with changes in the fair value of Guaranteed Living Benefits and Guaranteed Death Benefits hedge instruments, net of hedge allowance and $49 million of net realized credit losses.
LincoIn’s adjusted income from operations available to common stockholders was $260 million, compared to adjusted income from operations available to common stockholders of $273 million, in Q1 2022.
Ellen Cooper, the president and CEO of Lincoln Financial Group commented, “We are continuing to take swift action and I am pleased with the substantial progress we have made to rebuild capital and increase our ongoing pace of capital generation. We are delivering profitable new-business growth with a more capital-efficient product mix in 2023 across our retail and workplace solutions businesses while maintaining a robust level of sales. Last week’s announcement of our $28 billion block reinsurance transaction with Fortitude Re is an important step to further advance our enterprise’s strategic objectives and continue bolstering the balance sheet. While we are experiencing earnings headwinds in 2023, as we continue to execute, I remain confident that the earnings power of the business will begin to re-emerge more materially in 2024 and beyond.”
The company reported a net unrealized loss of $9.6 billion, pre-tax, on its available-for-sale securities on March 31. This is compared to a net unrealized gain of $3.1 billion, pre-tax, in Q1 of 2022, with the year-over-year decrease primarily driven by higher treasury rates.
The quarter’s average diluted share count of 170.5 million was down 3% from Q1 2022, this was the result of repurchasing 2.8 million shares of stock at a cost of $150 million since March 31, 2022.
The company’s annuities reported income from operations of $274 million, which was down 14% compared to the prior-year quarter. The decrease was primarily due to lower fee income driven by unfavourable capital markets, and partially by a favourable tax adjustment in the current quarter. Total annuity deposits of $3.2 billion were up 17% from Q1 2022 as sales growth in fixed annuities and indexed variable annuities more than offset a decline in sales of traditional variable annuities. Net outflows were $331 million in the quarter compared to net outflows of $525 million in the prior-year quarter.
The company reported life insurance losses from operations of $13 million compared to income of $23 million in Q1 2022. The decrease was driven by the run-rate impact from the company’s Q3 2022 annual review of DAC and reserve assumptions and lower alternative investment income, prepayment income and base spreads, partially offset by an improvement in the COVID-19 mortality experience.
The total life sales for the quarter were also down to $130 million compared to $155 million in the prior-year quarter, due to the shift to a more capital-efficient product mix with lower sales of Variable Universal Life, Executive Benefits and Term products, partially offset by increased sales of Indexed Universal Life products.
Although, the average life insurance in-force of $1.1 trillion increased by 9% over the prior-year quarter. For the quarter, average account balances were $49 billion, down 4% compared to the prior-year quarter.
