LNC - Earnings call transcript Q4 2017 | Lincoln National Corporation

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Operator

Good morning, and thank you for joining Lincoln Financial Group’s Fourth Quarter 2017 Earnings Conference Call. [Operator Instructions] Now I’d like to turn the conference over to the Senior Vice President of Investor Relations, Chris Giovanni. Please go ahead Sir.

Chris Giovanni

Thank you, Chelsea. Good morning, and welcome to Lincoln Financial’s fourth quarter earnings call.

have reminder. I begin, we an important Before liquidity Any trends about and during the the Private repurchases sales statements Reform are future expectations, call regarding and share market operations, of deposits, Securities income comments capital under expenses, resources forward-looking made and from and Act conditions, XXXX. Litigation including comments forward-looking involve risks actual materially differ to expectations. statements and cause These from results uncertainties that current could yesterday uncertainties and the our described in our statement X-K cautionary Forms in issued SEC. with are the earnings disclosures and release These and filed on reports risks XX-Q you We measures. can visit operations and appreciate call, your and a participation GAAP today equity, press non-GAAP on our return of website, and statistical you the their invite measures where reconciliation income which most in comparable include to full including www.lincolnfinancial.com, from release to supplement, Lincoln’s find the used Dennis today’s and Financial Freitag, Chief call on Executive Chief Presenting Head Life. Officer; are President Randy Individual and Glass, Officer and of will question-and-answer remarks, their to portion call. move After of the prepared we the would the to to over turn call like Dennis. I now

Dennis Glass

EPS, included in Thank ROE. XX% everyone. and capped results operating with a strong year. up Fourth year, XX% to per you, book share record value which morning, per were earnings XX% in This increase quarter increase compared good a a Chris. XX% last a share

our we build know, we to management. results these believe are profitable importantly, and strong of we growth sustainable focused and continue on you As time capital results have a record stay multi-year financial and over as keenly track franchise

forward-looking these as the touch XXXX briefly of thoughts. as some on me Let in each well impact

First, growth.

opportunities, growth growth highest sales includes all an distribution of together for a to and This gains decade, XXXX, sales back annuity first a of term RPS X% outlook positioning products, back is encouraging, we and the in or compensation including are four with to the to smaller The options, years Group benefit record deposits. fee-based increase near-term in breadth reported franchise, Protection at sales long-term sales since life profitability, this faced all level in operating sales time businesses. which annuities is product Lincoln broad-based, broad also powerful looking and on generated capitalize brings year’s further earnings linked portfolio increases retail group as When strong of XX%. deposit XX%. were RPS Each with in benefits. annuities, and of group across insurance driving earnings least at Our in employee-paid

periods, Life growth. Excluding reported Insurance notable both items in double-digit also

business. should the positive momentum, for robust of lower each impact remain growth tax Given coupled this this with year rates, earnings

acquire year-end, Subsequent capacity Group and return optimizes transaction our dividend. per price, sheet share business. XX% generation In Lastly, solid capital more shareholders. average price announced while approximately an XX% capital we also we management. leverage common to otherwise us increase the share, and to under the in repurchases. intention financial enabled a Buybacks below benefits the several for XXXX, than This provides stock $XX completed to $X Liberty’s were by billion at current also to share excess available announced capital using strategic not balance and

of story. capital forward, Lincoln important Looking remain management part will an the

a benefited for turning starting up in a demand line, again strong once were Total strong year prior combined with VUL in quarter prior from Earnings gains solid from Now to term Benefit million were X% and results $XXX and consistent the quarter with Insurance sales the Executive year, MoneyGuard. as sound, and continued the with Life Individual finish business Life. sales the were contributed to year.

and a we hallmarks product sales For a broad total Life the full year, portfolio distribution in X% nearly as benefit highest $XXX to increased million, the of level Insurance breadth, again, from Lincoln. decade,

of business and prior actions coming XX% our returns XX% new resulted to adapt top on ability end to addition, in returns. targeted the unique a pricing in In at

and continue sales favorable impact on This of more allowing growth, returns point, backdrop new We limited still while Quickly balancing To us a is IUL. help business. focus returns. risk on this on appropriate in diversification competitive on diversification, see macro position and sales growth to management, the achieve to Insurance enabling improve and targeted UL to impact. tax us Life We will with reform products. our

benefit of less. the of our as the Insurance the business, by place, Our will on we strong, important for expect more and although we distribution. over would result estate Americans. new core growth perspectives protecting subject will products, Bottom tax impact breadth the important with depth remains Life not sales exclusion, line, basic a some and provide market after solutions, to is also away time, remains go outlook the for protection business scheduled and along driven to which to and remain Randy needs diversification XXXX. Life Insurance which estate the accumulation unmatched critically planning pricing the to with position of linked an expect to continue, combined in product to larger in the remain solution leadership

Earnings over prior in increase and year driven the quarter, Group. X% by increased premiums. to a Turning ratios significantly favorable loss

year, $XXX and both and the all sales growth. contributed year grew year For employer the target, our margin were margins were sales in X%, X% sales full to a product ahead modestly million of X% Fourth as of employee-paid plan. within quarter full to lines up

improved renewal We products. percentage are life by points disability XXXX, core also persistency and encouraged trends driven in stronger in by trends, four which

scale, our meaningfully expand ago, pleased distribution capabilities. channels agreement As and further we and increase By weeks acquire business. base I to the a our couple with forces, Liberty’s Group customer noted are of broaden our very combining we

transaction expect the in the business. will I positive this group momentum already forward, accelerate strong Going

flexibility playbook our summer and results gains out improved combining and strategy the and driven the of experienced which annuity with all non-qualified Turning with and both investment with half provide variable year Notably, and throughout year sales product to represented more Total tailwinds. annuity full we improved reinsurance encouraging Digging annuity high- are to This benefit arrangement to delay, strength Athene sales Recall, laid and in strong increased the annuities newer risk equity have we prior momentum ongoing and restore payout sales. effectiveness. by qualified expanded across sales distribution backdrop, When consumers. leveraged the quarter, increased and the the product legacy the billion, channels posted combined fourth operating for enabling XX% combined best share. quarter, Fixed the distribution VA’s wholesalers focuses fixed were year, deeper managed sales year, as categories, advisors total We VA were while mix. sales variable both accelerated in-force up the billion living over in years. Annuities. remain with in product quarter, significant products, customers market consistently XX% in just planning into reach plan and our also to actions the strong us propositions to as versus options seeing compared to business, with contributor an broad-based funds quality post markets. largest experienced of XX% bank deferral as annuity and sales effectively post-DOL increased competitive in growth fourth quarter predictable exceeding with $X.X were last a quarter $X portfolio to the year-over-year as our position our categories, diversifying prior channels, two with regain early continue guarantees trends the sales resonate earnings benefits our and annuities. and After sales value XX% XX% with living to advantage. year sales the annuity where and as in strong we product all up XXXX, market we sales on for business. in broker-dealer distribution more tax was without

annuity business sales and for step for quarter a year plan the since in strong time action big annuity XXXX. resulted a forward the increasing took So sales the full first as

Looking in XXXX. and more products distribution ahead, adding be we’ll even

a year some grow. $XXX The track $X.X expect growth deposits $X.X year the were to year Plan in strong very increase of In small quarter record XX% remain marked Total seasonality as on solid increased a up and see billion. but for profitability. consecutive million quarter to and quarter quarter due deposits with of to meaningfully capped build flows. this and the and for full to were Services, results XX% the billion. This first year. delivered both an confident fourth We record the in the deposits was strong gain total Net flows in a continue and and impressive positive increase markets sales in sales eighth deposits the mid-large significantly recurring to earnings ability Retirement for

billion. flows employee and than momentum. double more time totaled For and Strategies the wholesaler a year, the net initiatives prior remain of net drivers contributions productivity, into full $X marked experience to annual increase to first solid $X.X billion, the customer improve key our flows the year, investments exceeded

XXXX, Looking we strong to flows. expect year another ahead of

target in model, the great in return year, growth leverage at our the So for which XX% our above money flows, business to earnings. and briefly and results, yield on strength both RPS the double-digit assets highlight private had billion. target growth. a grew for portfolio X.X% our in distribution results with quarter. below our annualized performance although target strength average positive the deposits, compete quarter And net XXXX further markets the the a equity had an portfolio and a investments alternative to funds, new year, pretax positioned effectively invested from These which of We to full XX% of accelerate $X.X is achieved and hedge return investment

at Day, points noted new the to projections we put money will consistent investment we income crediting basis prior up year, For great above high continue from compression of abate. X%, diversified XX% XX Overall, represent investment-grade portfolio A-, rate XXXX with the shape, Investor and nearly remains quality percentage an work point spread to the where year the of quarter. from fixed average in broadly one portfolio, with assets and full

the am fourth a produced organic again solid sales accelerated businesses, positive results. momentum. lot We and quarter momentum the Notably, record results once operating of So year solid pleased as with the drivers our other I annuity XXXX. are growth with quarter in EPS strong, and entered fourth new in

expense discipline, set control. success distribution our of key trends leading expect Given remain these within drivers combined of financial these When our with well customer to and continue. solutions, broad we

business, benefit us to expect attractive to an total acquisition of enable our also add balance more from and will in market earnings announced Liberty’s recently We Group increase which earnings.

this enable In and Lastly, our will and expect key over from external are continue. tax are initiatives financial I benefit an rates our strong to higher. interest of ongoing we performance year the started strategic reform. long-term are markets turn as that the and to am tailwinds, very will factors Randy. equity objectives call closing, Furthermore, I that now we proud confident

Randy Freitag

Last this in as impact tax undiscounted $XXX Thank in the $XXX liability largest you, per our items. Net result tax share the reform discounted is offsetting impact, year. operations Dennis. whereas included which billion the night, fourth income of impairment value, share, the from tax or a from benefit immediate was a million was noncash $X.X or value an The on the couple increase attributable from in fair is quarter, million for impact. our we driven deferred of to prior This a of increase is $X.XX a increase the a increase goodwill in results Life business. totaled XX% directly a book our million book $XXX nonrecurring reform. of item Partially as income per reported $X.XX value

reform. may X again test most picture impairment we to goodwill in comfortably of of you be test, XXXX. beginning give while eliminating the Step you we Additionally, complete of post X balance tax sheet aware is FASB the our impairment Step goodwill the the passed that Therefore, wanted

So we early adopted the accounting change.

on the financial performance metrics. touch key me of let Now

year, XX%. the full was $X.XX reported and EPS For a up operating of record

XX% equity Our $XX.XX. on record, was XX% was notable at share, EPS, Book quarter. Operating return XX%. a in strong the items, excluding up to excluding grew nearly also AOCI, value per

of basis XXX revenues. operating consolidated in in points $XXX helped equity X% the strength, billion. XX.X%. increase all Sales record to full growth drive market led a For flows combined to increased ROE values year, segments account with net Positive

reserve our business. any balance Liberty’s adequacy, of capital reserve and the billion nearly and of highlighting sheet, do anticipate acquisition not Year-end strength all we generation the remain flow deficiencies. sheet cash sources to return the point of testing of credit following agencies year. for rating continues capital significant Group and the recently statutory shareholders Further ratings announced enabled to our of to important Our balance $X full us to affirmed strength

financials, me Before tax minutes perspectives. let on the reform additional our shifting of provide to implications results, some well segment as a few as spend discussing

already deferred I a First, goodwill. impact one-time liability as was GAAP noted, and to our tax there

to will a range XX% to benefit tax Protection. ratio year for be end estimate the of impact reform the Shifting for includes reduction tax effective our XX% Group an for we XX% an to over the assets. estimate tax from in provide Insurance range will XX% This statutory includes XX% XX% statutory. rate Next, for will to ongoing deferred RBC a Life and percentage of XXX%, an Lincoln. XX% approximate XX% We XX annuities, point We with in XX% the to which near-term. RPS, to GAAP

year. statutory as stands at strong up million $X.X prior from $XXX billion, surplus is the position capital overall Our

result after-tax to capital be I points. change consider reflect to make factors. is rates. item on the RBC on estimate Based calculations, long-term note a last RBC more could to XX% which cash to We free reform. strategy and ratio impact. generation. in earnings, of the not on annual affected contingent flow. percentage And financial implies XXXX this taking view free an the factors year generation could refinements reduce any next that change tax of $XXX reduction rates holistic in by XX do believe the XX% required a our million capital material would We free $XXX want is tax due increase this RBC flow ratio in action cover in approximately to to NAIC million we tax management would NAIC target to capital The our as or also impact to the flow RBC change about the cash RBC Our by absolute I cash anticipate could

new let business some viewpoints profitability me in-force and provide Finally, on pricing.

the States capital-intensive, you are and United our generated all know, comes majority earnings of liabilities. As in from long-duration the

a pricing, the however, after-tax should annual would earnings through in a business be expect As tax the to for modest. into result, increase pass gradually vast earnings rate to We majority future. persist lower of the new the should foreseeable impact

of likely life back, discussed a of very benefits, given the we and favorable This should persistent strong couple annuity call is in-force. acquisition Liberty products are would solutions make and our more our to growth. like recognize customer duration more It will group pricing also while line even to impacted bottom on important attractive. gradual, all products, shorter top As be and be weeks sooner, ultimately that accelerate

Insurance. strong, prior Now $XXX were turning to segments million quarter and mortality starting with periods the with the of Both year Earnings favorable results. consistent Life quarter. in included

year, this $X and results expenses seasonality leading at the coming For earnings. remained year. the reflect a Base points momentum favorable held Protection full in investment the range drivers the was prior income, year’s sales strong Earnings to of in basis including prior incidents variable million within this mirroring XX.X% up quarter. XXX business actual $XX loss in experienced and XX% a experience to risk basis or year, loss account new severity. million. reported increase I for accelerating quarter items. mortality we items, the point X%. XX%, back solid estimate higher the lower earnings good we steady impact from and continue higher few results expected better which point Overall, disability, solid XX negatively reported attributable variable with and combined support X% ratio growth earnings remains non-medical a prior year, to by in excluding The growth lower driver quarter, line and performance-based total, in-force X impacted slightly the with growth to notable up the Group year Overall, X% compressed Life excluding driven costs, on with both Group XX%, improvement in a average million X by the long-term basis was momentum. discussed. $XX for Strong this top amortization. full Protection earnings In claim were by balances to Notably, Insurance have compared to with and basis spreads, up solid,

in steady than year, positive in contributed Premium which growth better year premiums line, full the product loss as ratios aiding annual a also with business such indicators, direction. to earnings. every X% the as For and leading increase year trending a increased were or the XX% in prior is from prior the group quarter, persistency sales

for excellent the So business. group year overall an

consistent income in growth has earnings over average fee account XX%, ratio continue XX% we quarter. is revenue in more quarter the at most as to well as and were momentum year the increase double-digit from points, net in past XX in from resulted higher both XX% values positive risk this to Earnings annuities, with basis quarter, has prior metrics in $XXX Notably, ROA across equity return while strength solid driven a Liberty’s the averaged year decade In as strong. on was close competitors. expect and the prior negative integrate Operating offset was an the quarter. vintages ROE than in improving quarter XXX basis business. equity for leverage amount million, and Group Return below growth remains XXXX for remained the We up net market all strong low a points. nearly X% expense by flows. came year at begin

book. highlights high-quality of which All annuity our differentiated and

Retirement The In earnings significant earnings sales, XX% from growth fee into primarily higher the periods. Positive $X.X of culminated flows basis variable expect million net So a notable for expense $XX markets great another combined and account positioned we to excluding and highlighted business $XX Fourth just billion capitalized guidance in increase about X%, momentum management. while range. of XXXX full the equity due well RPS G&A leaves of quarter. million account amounts reported up $XX in quarter drove year earnings expenses X% momentum XX earnings to Services, carry revenue the and prior values excluding increased our combination of spreads, was year we were strong was business annuity the compressed basis The disciplined average with annuity points income points this Plan strong up with in increase. year XX% with XXXX. by billion, XX and both Base for values was had year, a The quarter. favorable a compared to and for investment at full of reported for in ROA the the future improvement the in year returns. items earnings management X%. expense consistently top net year to good for line fourth retirement growth. low-end

So an share an conclude, and performance Operating expanded an EPS has XXXX has up up where rate follows at to XX%. high year’s per XX% and ROE and book XX%, XX% Book stands of was value increased a basis ROE excellent a five-year EPS and rate per was nearly XX%. exceeded value XX annual record year. our at a $XX, at all-time increased share strong period has points. This

over should to earnings products benefit an the The firmly to call we back tax financial to momentum strong strong let is With well Chris. make ongoing and us our strong continue reform me consumers. and balance Bottom positioned turn to look generate provides attractive are As forward, we intact. ability delivering more results. capital also is to remains line, sheet and enable that, earnings

Chris Giovanni

and Randy. Dennis you, Thank

begin the now of We question-and-answer will call. the portion

we ask it reminder, and let please that, Chelsea. turn for follow-up question you questions. With and one additional limit only to that re-queue one over yourself to As a me

Operator

with Erik question from you. Instructions] Thank line of our first comes And the Autonomous [Operator Research. Bass

open. line Your is

Erik Bass

you. thank Hi,

dollar I generation that we clarify should earnings should generation your of or comments tax the comment prior capital First, take unchanged about to ratio be your following capital amount is as of to projected the on expectations? XX% want consistent with And reform. absolute XX% GAAP

Randy Freitag

on. dollar Erik. The would I million amount capital latter, million, what of the focus $XXX $XXX in is to generation, It’s

amount. little been couple years reminder, Just a of and we things done as exceed the as some we the better we focus a do last a to than have to couple in got little on last go can leverage to of we’ve years, state, better, but we we’ve a I’d able the everything that that. target We’ve dollar

Erik Bass

that Thanks. does cash timing differences given taxes, over time? the between GAAP and And change

Randy Freitag

No.

you million. but between taxes million – I numbers there it to I ability impact on that difference cash where on a to out, think I it’s not $XXX a taxes. There’s pointed the has and ability enough, impact would any any our generate our say small really taxes is have $XXX GAAP about cash on talked our

Erik Bass

to you And recent finally, the more you sales less been given Thanks. capital, in we now, life Should to you more have to recently? growth strong and annuities, then capital years? momentum I allocate just than in assume growth guess, have case and in expect has going the do buybacks to

Dennis Glass

a we of in of reduction put to We sales. work. was that the as past, last mentioned annuity capital think one the over the in we I years items couple leveraged

as will I a capital us sales done change we there I required again, allocated. years the last five that point go efficient everything out of them in our would dollar standpoint. where from cash expect over also. more make up, not flow a free amount be We’ve Once I’d naturally the to as as products or the generate. possible can all to point to capital So so

mix this we sales, have sales of the having lower Life pretty the much amount the that capital see substantially past instance, to especially business issue the over You required today brought down five business GUL with of years. on for

Erik Bass

All right. you. Thank

Dennis Glass

You bet.

Operator

Thank comes line with our you. question And Jimmy from Bhullar the JPMorgan. of next

open. is line Your

Jimmy Bhullar

morning. good Hi,

identified payout – issues and to business? noticed on benefits you’ve any whether on Have group annuity by annuity its have not comments MetLife you at payments do group or your business. or have might your related just the business looked and you announcement First, issues similar you in

Dennis Glass

in Yes, Lincoln. no connection Jimmy. to see that issue I

payment accumulation with invested when We’re dealt is everybody would We’ve ago unclaimed went through property a were dollars issues process. primarily few are ability the that annuities. significantly Lincoln. Any have our they owed we by make of the the to in we years sure in business getting

And so no here. of have impact expectations an

Jimmy Bhullar

Okay. just the think business about we expected the re-priced lose you business, how to next guess your sales? – on obviously, you much expect, to and two to book. go the And I three should you then How as up, margins Mutual in Liberty years an will assuming or just you you are are or in you in planning, raise decline persistency prices as that get

Randy Freitag

Jimmy, that as that is call, we that we of the to Lincoln at attractive the – mentioned on was as so between we price were a overlap where things deal, and there Liberty little one sells. us where is sell very

think of persistency terms in bit than but we the dissynergies transaction, little noise, standpoint, priced we also to a of the market in of The persistency is typically small persistency a little see once so Lincoln don’t just bit where in a you And typically specialized. that noise, would From sales, see. we there’s higher large is mid, case again, in but not much.

modest prior have did to we at. we impacts, we’ve were some price compared I dissynergies what So say those that would would deals looked priced in in

Jimmy Bhullar

then And if more. one ask lastly, could Okay. I just

in you to annuity significant flows whole improvement sales sales? Just or business in or as of seen year? in positive be on end the expecting annuity your a the by Are annuity have flow, you XXXX the net

Dennis Glass

flows develops, firm breakeven as net more sales. to And have the XXXX than improvements still we’ll be we in our thought, The getting in confidence we’re expectations. but watching sooner more give us

Jimmy Bhullar

Thank you.

Operator

next from line our Thank Josh you. Bank. with Shanker question the And of comes Deutsche

line open. Your is

Josh Shanker

wondering When it of the you selling versus plan What for you talked that product variable a into selling? to annuity At the the that getting launch Yes. the guys items And sell? you meeting year, be investor outlook risk that market might Good of conducted morning, P&L the everybody. index last something is that you I’m impact about there that? market. end at else it? other cannibalizes you what

Dennis Glass

market, both May. proposition other index we is fixed, variable is expect And be marketplace. an the the I answer from in think the have The we in value and think very to the we different variable in that Yes. products, of annuity

sales. of that predominantly So a we replacement not view existing addition, as an

Josh Shanker

Is it of it the is buying who’s purchasing kind customer? customer different with things a other a or as they’re suite

Dennis Glass

new there – participating And customers in but are Perhaps it’s the proposition. in and other again, is the be market market both, will marketplace. market it will are us yes, with vibrant that But share. already, they’ll a that the our to should products value capability so value and attracted very some it very compare possibly and a to and the broaden distribution take propositions

Josh Shanker

– it And to to your how you effect where an it long would you on think take take it would get ramped has up earnings?

Dennis Glass

out pretty we XX I this is up the actually might think over that going incremental little late. ramp – that be to significantly a think next months, so contributions earnings to

Josh Shanker

you Good thank Well, luck. very Okay. much.

Dennis Glass

you. Thank

Operator

the from Evercore. Tom Gallagher line comes question next with our of And

open. is line Your

Tom Gallagher

Good morning.

that were year able the per year through. contributions I subsidiary York those making believe question, SGUL, supposed New run First XXXX to you’ve that on if to Randy, some there’s was the $XX mean you’re million your contributions. a those year does last tail capital? right contributions to to see or generate that now wanted just extra if so, if I been of to for million $XX be still going And that’s an

Randy Freitag

the The second that year. question is no. answer is XXXX Yes, to final

couple in reinsurance away that transaction New we If that a you and taken has Lincoln ago strength. did reinsurance years transaction a of York of remember,

it’s going out part this in we’ve up million while the reinsurance transaction. of as reserves, $XX been so putting And been

Tom Gallagher

Got you.

be financial implications, no no may longer that that cost than additional So strength. reinsurance the of other needing for to use

Randy Freitag

Correct.

Tom Gallagher

the Athene want the number? sales aggregate you for not Does $XXX I all. have deal are coinsurance? you do follow-up something that and that right? that I like as B, part more generated being is like have And with right to be to I half clear, – sales of my the is is, Okay. of And mean that understand that The just million Or of right? that then million A, Is keeping like that $XXX does quarter that coinsurance $XXX generated this. million looks for you’re

Dennis Glass

sales, half total The total as you the not the of profitability the amount recall, of so what without But as full sold – the over sales. reinsurance. time, the total retain much if is, as we almost it’s on it’s Tom, we

Tom Gallagher

Got you.

the would is to the that of $XXX million, correct? sale So total amount be million Dennis, $XXX directionally, the

Dennis Glass

about is million Tom. It $XXX

Tom Gallagher

XXX, okay.

Dennis Glass

the our of non-reinsurance traditional profitability the the of the much million would $XXX again half so have But $XXX as made of nearly portion about on is what as basis, we – million. the in

Tom Gallagher

a it relatively And know is Dennis, decent new. accelerating? would Is you rate? run say Because it's the that $XXX I million,

Randy Freitag

I about if us run Tom I as back rates. I sort specific to and am talk Randy line, both of reluctant and reported, product a top we've up the could And billion $XXX, or middle new either that from million in in fourth that introduced, in $X.X About of out the XX% XXXX, products sold late is of we've quarter. $XXX XXXX. the

product we coming additional year. As mentioned, have this introductions I

I top got will take product a personally, our of being help breadth you've grow to market strength introductions, So new lot say the us confidence, on distribution, would know distribution of of – consistently I the sales. this the

Tom Gallagher

Okay, thanks.

Operator

from comes the of question Krueger next Ryan line our And with KBW.

response, no next your now Krueger to Mr. go we'll open. open. is question. And is line line due to the Your

Citi. the with Kamath from Our of next comes question line Suneet

is line Your open.

Suneet Kamath

Thanks.

to XXXX? to momentum with annuity quarter's Has gave what in on sales, us see through. So into is look a to that good continued of call, seeing quarter in fourth it variable Dennis, last kind come you're you the that respect

Dennis Glass

continue our I about annuity first for to out lines in the higher is have encourage for XXXX. talk of adjusting in that things will so Fourth our total sales we quarter, the to quarter product would sales growth continue than seasonality. first fact, of most in show Lets all that us say that that place typically

Suneet Kamath

because for us it. down expectation rate. sense then the you I Protection, can change? the just Got guess on think you Can I price help tax on And of terms you your talked in come rate – what Group how the call, give would Liberty a just benefit of think is pricing Mutual a much us lower adjusting through Liberty tax of call, about

Dennis Glass

to us to moment. that get back come number factors expect at statement, be that tax I to X% get X% I to precise X%. to answer there don’t have which like Randy's margins, But that is a X% respect and to our we time, combined the to with will open over to would to the of

Suneet Kamath

tax about on the things to I just Other investment talking anything It like doesn't seem that. your that that. like companies accelerating comments. last are to confirm And and one just maybe spending just terms rate. you're guiding of wanted in like

Dennis Glass

one that have about talking interesting. happening happens this tax essentially cost. be, talk about. lower tax is in to reform, reform that It's we're what's from case, We the you It but

discussed, is we've lower well. digital significantly As program to costs our expected our as

further incremental focused not other reform for need program, on we're that perspective. as of now, one that that program magnitude reduction from ongoing any is investment and So at in things the amount reform from, we both the an well balance well this as that there – specific digital we're we'll have is again, tax investment. reduction but tax Right nothing mind, cost major be of into cost and our could is moment putting before announced

Suneet Kamath

Got it, thanks.

Operator

Scott Goldman question line And you. with Alex our from Sachs. of Thank comes next the

is Your open. line

Alex Scott

for the just more the occurring lot happening pretty the repricing. the the end tax near year of of group year. but the next the One I won't be kind a repricing Is on more pricing, of with Thanks. it of to mean fair and late end of the in most reform conversations around be will say XXXX at year? it of kind that really that going through

Dennis Glass

A Group liabilities and short couple re-priced. the Let’s rates and business those just aren’t of so duration years a for guaranteed about lot has of talk Protection.

a course of business story. different New is

expectation due product. tax on liabilities into part As reduction shorter be rate expense will in duration charter to Randy an put that on reform tax the there's the – time, the over said,

Now I shareholder through much that's think a proposition great. increased and The got sales. consumers value to the see benefits we better

Alex Scott

grandfathered in One way Got as NAIC's sort do sort at just agencies that of aren't or coming are calculation AG about of see all? on with. I XX. group like they're it. that even ratio they of Do are they transactions that rating up sounds the ratio? will risk care capital reinsurance the any care mean about life you more captive may the that some It be the

Randy Freitag

NAIC calculation changes is rating are policy the agencies. the are by be discussion and going they The to going lot into there by consideration what captives working to agencies make. is the of what the guided NAIC that With group to it's rating used The not on, taken will be what respect continues about for. a to and be

it's for industry. don't a expect the issue it's so – I it's major situation. be And going evolving an a to

Alex Scott

you. Okay, thank

Operator

from Sandler comes the And Thank our of Barnidge next line with you. O'Neill. John question

is line open. Your

John Barnidge

you. Thank

your anything one maybe far, headlines season be If December, in that year could experience And to you far about decades. the could so is worst are mortality may seen talk say the thus about this you’ve date. suggesting what of flu you in

Dennis Glass

not quarter about seen terms specifics are we about for we've any it the John mortality. what talk of in fourth to quarter, good But XXXX. a in going Well was

of very was XXXX. the it fourth think I to quarter similar

I elevated the third fourth in the the to it back led year, XX% right think almost was and for all the It pattern. we first for in had year, in and very a mortality is XXXX, in stereotypical it a it us gave the quarter. which year, XXXX. ADE we of line And quarter same got

even so us have same we going the mortality that good had reality have good what History but really the of would throughout seen is I but who that a first quarter mortality to some in that’s lot we'll the say. of articles fourth quarter. mortality specifics, that, in flu than in you we us tell that any we've had people and we’re the History So in fourth know all had read That's elevated the mortality quarter. other think I terms the quarter. would typically, do, tell I the elevated first

John Barnidge

you And or definitely feel products post my across-the-board a particular benefits maybe demand I that. in reform? is follow-up products do and tax appreciate then like you’re massive influx seeing for

Dennis Glass

What products, kind of John?

John Barnidge

products. Protection Group Benefits,

Dennis Glass

of change. reform I’ve perspective, individual sort individual big tax is, a on which got an view from this, Yes, a

take get it’s to me, a and excuse it think brackets the that go tax this going short-term is all I know what across really down, while We for – see or, or When what February beginning guess certain the you cash of subtracts to I adds to yet that year, is elimination April, to more effective effect of income so paychecks. people in their going in means. understand rate to to to same. be that the people deductions,

and just settled we’re advisers not consumers and at hearing this taking paying So not But I is financial our customers. are their to what rate the whole point attention think yet. action in individual tax they’re from

John Barnidge

Thank sense. makes you. That

Operator

Thank with comes you. Lee Partners. next from & our line And the question of Humphrey Dowling

Your open. line is

Humphrey Lee

Good morning and question. thank my you for taking

talked the growth average. the call, lot Just run good on quarter Insurance, in But some highlighted quarterly to have looking a spread XXXX, million being Obviously, I about think question still is than Investor the you the X% you Life $XXX quarter on the stronger as the sales in on last a year improve. same a you sorry, the compression – X% at Day. growth, earnings at that rate

pretty should the being how process into run about as about quarterly rate in be XXXX? we as then about XXXX? robust new I think talk near-term first guess, move you we would what think should growth we the, So of all, the And how

Randy Freitag

thanks the Humphrey, question. for

little year I time million, last Life at think and talked was the about the a think since this I improved we about more then. when $XXX than talked ago, I a we business

had the X% to range, taken of growth, that, compression, away and netted over year. of So X% which spread we’ve is you’ve to seen X% as to a in X% noted, the couple which some we’ve has years last

roll So $XXX now. in we’d million years, right that range is somewhere in over you get onto when X% a couple which X% that expect, largely million $XXX I $XXX to what your think line with of million to

We quarter. end results million. the good strong little range fourth some up range. in a at that Expenses probably higher, maybe were had look We that you we’d mortality. upper the the fourth so at in $XXX have If typically quarter, we seasonally made end of

at you full million, we If the look million $XXX normalized. $XXX year, made

mentioned, results of the in the the some the – portfolio, alternative quarter Life primary featured Dennis that. beneficiary is year As featured strong pretty

that once $XXX million, you I So $XXX end end of towards again, up the range, think that. million in probably upper would

Humphrey Lee

Got it. thank you.

Randy Freitag

reform. before tax that’s again, Once

ranges at those look models you reform. provided have to for tax tax rates that – adjust So and now we your

Humphrey Lee

really Okay. And My about and block, the to Protection, on participation customers about Liberty Mutual, Group a you’re targeting have XX%. the is don’t Day, talked benefits. lot the to is in to the voluntary related then understanding Liberty your of you among Investor – at XX% benefits specifically get Mutual voluntary back they

the of the target? try still in like participation voluntary do good in to XX% through longer term? So million you near as could what that a XX ultimately, of cross-sell terms And kind to benefits you the individuals, expect term come is

Dennis Glass

Yes, respond let general. to in me that

the I new be it’s ancillary of First, purchase you also sale correction in percentage remind think months and Today, employee stand-alone may business, a employee-paid that next have Lincoln six year little are on on out, going that sales. XX% products. or next so products in coming we the

come across businesses. with back existing going high quality really a to products the and Liberty momentum, So to is momentum, in good – a I’m XX% organization of Liberty terms Liberty more for moment. just

quality very business, very good. purchase really Group that capabilities quality We’re service so of is of is just quality good, we delighted to of the are which the people really able the business,

So it’s markets, very pointed really good different Randy complementary, acquisition. a as – out, and it’s

opportunity, we pricing any we include transaction The question, great development, not second did opportunities. transaction, than say, go discussed of your see is on the thing side road. less employee-paid revenue the the as at And I we said that in think the is at penetration would what here specifically we response further the down for a to Liberty revenue we we’ve it’s when But Lincoln. the as and

Humphrey Lee

the for you color. Thank

Operator

from Ryan Thank you. KBW. with our And the line question of next comes Krueger

Your open. line is

Ryan Krueger

Hi, thanks, morning. good

Sorry about that earlier.

at that On quarter? deal. a good fourth the RBC XXX% DTA from the the changed guided you impact point all XX still Liberty Is the to ratio, after had Does that in number? previously

Randy Freitag

the of points. $XXX million that using XX off about roughly So sheet, balance the impact is capital of

talked just at X.XX, right we ended So line in I a with year below little earlier. almost in line, the about think what we’re exactly so we

Ryan Krueger

by rating changed number? denominator to in that NAIC, just any need may a has I then how rebuild may of time if And at point if you terms to over that? this RBC the need react rebuild it. lower agencies the to And Got you thoughts reset to guess – the or

Randy Freitag

tax happen think reform that long ago. that I Yes, didn’t look,

they’re So I’m we a that our at going they I’m sure were the already. to them, majority Liberty were thinking when financing Lincoln have their of thoughts could the and models sure own our things ratings. and along be but still the affirmed equally they I’m sure about acquisition capital we look them how they ultimately thought that about capital transaction the The taking formulating all ratings were their they also took as and levels. of

models. the capital We consistent strength in their show with have we that ratings

which ratings our reflect AA So different already has. their capital are the models, anything from NAIC

do, So thought that some we this, very but to I’m do. thinking rating have sure about the as more agencies all have comfortable they

Dennis Glass

it. call credit I’d were in the we add their just Moody’s in to fact sought a And improvement, indicated very that, addition pleased that it as that has release what

Randy Freitag

Credit positive.

Dennis Glass

same that Credit the reasons positive. And statement, the we we of listed for exploring were as as opportunity. many saw

Ryan Krueger

Thank you.

Operator

back Thank like for remarks. to you. showing Chris turn closing this now further time. would to at Giovanni the no I questions call I’m

Chris Giovanni

all Perfect. for us this Thank morning. you joining

we Relations have through line will (XXX) on your at at day. Investor all question take or e-mail our always, a investorrelations@lfg.com. Thank XXX-XXXX you As and great

Operator

participating great for conclude you conference. the Everyone program, day. may gentlemen, in disconnect. thank you and have does and all Ladies today’s This a

Lincoln National (LNC) 1 Feb 182017 Q4 Earnings call transcript