LNC - Earnings call transcript Q1 2019 | Lincoln National Corporation

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Operator

Good morning, and thank you for joining Lincoln Financial Group's First 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.

Christopher Giovanni

Thank you, Crystal. to First welcome Earnings and morning, Lincoln Quarter Financial's Call. Good

described conditions, filings of important in begin, obligation future the will I cautionary comments GAAP report our on the market repurchases events XX-Q are to risks detailed will sales I Financial to are and Day actual the time in in forward-looking and I York like under include current and Randy hope operations, quarterly Private we Glass, income We statements Form in reminder. City, those supplement, deposits, statements expectations, be comments invite expenses, of Chief your other to Dennis the website, and release question-and-answer have those and any to full uncertainties and would yesterday and in liquidity would adjusted involve and regarding Before and share Freitag, measures from only annual Litigation on find XXXX which are uncertainties no to recent XX or call the Form occur an results Any to we on from our undertake Lincoln's used about after we join that and the include issued to made revise earnings this trends President and These date. Individual comparable on them remarks, Officer to call our release we including differ you Investor move statistical Act from and our of call made or Reform will today's June SEC. and cause as materially as you to today, resources you These we capital XX-K, can reflect reconciliation over press adjusted of from disclosures circumstances call, on Chief well as prepared appreciate the of including forward-looking of update in Officer; measures. and non-GAAP most hosting expectations. person. that risks that our statement visit statements Securities participation us Executive with XXXX. Presenting forward-looking today could to time report www.lincolnfinancial.com, portion of you turn These Head remind a equity in the their where many call. the and Dennis. now Life. After income their most like operations during return New also

Dennis Glass

Thank X% second year operating sales you, excluding AOCI. initiatives. and In first Chris, as and good start building quarter, the all strong segments four the morning, a increase revenues. very quarter into is earnings grew momentum the We on had execute key and everyone. effectively operating We we share had value management in and book growth both per adjusted strong business per share, to

process Notably, profitable on the our near-term ratios capabilities. we continue as expense top outlooks remains distribution diverse drive franchise, attractive advantage was sales Lincoln, portfolio of the powerful and leverage fast-growing highlights growth. efficiency also to businesses line encouraging. broad-based taken saw market Most expense of segments improve in a product through our to strength maximize to Our digital in our and actions sales and competitive focus expanding for redesign

consistently committed dividends well quarter business returns are shareholders. growth over through buybacks and and positioned deployed fund to the remaining of capital million to during to while at new continue to also returning We attractive $XXX capital

prior the from Now decreased of turning the year predominantly segments, our million to of income impact the starting with $XXX transaction. business annuities. Athene Operating from quarter

year. to robust and reach decision annuity This billion more additional of continued another we continue $X.X our to while segments to targets. sales continuing to XX% in Fixed shelf as the with customers. resulted quarter achieve we sales nearly the profitability marketplace participate $X.X billion enabled and of inflows and momentum sales in strategic net broaden from increasing advisers of Our as portfolio product diversified space benefited in growth FIA than billion the every annuity, $X.X customized benefits, indexed in sales bank sales products. increased channels. as the without some Variable significant totaled year XX% our including as distribution generated VAs more increase and Sales living expansion the compared bank and $X.X variable include channel annuity and gains, broker-dealer wholesalers which billion to sales quarter prior over of of prior tripled

quarter guarantees the the and sales increased sales we decreased, benefit to momentum VAs Although sequentially sales with expect during improve in of living quarter. second

the for significantly quarter business sales flows. of start positive we strong a another net as and increased So annuity delivered

expect income sales we income $X.X from And recurring in spread growth of Total are mix coming operating and Retirement of quarter when quarter well strength, growth equity deposits our operating first ahead, Plan more were with combined and both year balanced $X prior million with continue. sales for to to over lower investment variable year up billion the income. the decreased In ago on Services, from in year deposits. market we X% Looking a improve. income positioned and

Our to higher our and rates. high-touch, high-tech drive markets model and increases continues contribution resonate in in target service participation

new net experience This million termination flows of of case negative included for over product years. for capabilities quarter going $XXX customer the addition, and outflows Net mark $XXX avenues large in growth a In X first were the innovation approximately quarter and forward. provide million.

coupled results leads momentum Although with quarter-to-quarter, flows outlook rates sales a be low termination to positive can net on forward. lumpy moving

a and give line top our and future growth. innovation bottom in solid investment Continued product retirement business capabilities distribution, for foundation digital

a year. Life year and are product we and Executive including momentum overcome great income X% the us the strong with The where we and VUL. Benefits, the allowing highlighting continue solid, remains strong Life marketplace Sales in up solid Term to to penetrating this were results. broad UL on growth IUL saw outlook was segments XX%, sales up declines expect operating underrepresented, Strategically, IUL. quarter from faster-growing in in and sales start bottom in Term, of off Growth to We the the continue benefits our as line we Insurance. got Turning to focus MoneyGuard to of prior business portfolio.

Turning driven the Protection. increased over income Group quarter, Liberty Operating year by acquisition. to prior XX% the

sales sales. more also access driving scale, growth, than the about our ability premiums resulted broader First attributable both to persistency increase all quarter given sustaining remain doubled, to in and and and acquisition, sales by increased capabilities. and paid which our optimistic lines product expanded employee distribution growth in employer We

our developing solid to well The emerging We Protection. expectations for are quarter with ahead on profit remains and margins original our and investment results. target Group of integration range. with within track positively another expense pleased synergies Shifting

X.X%. quarter, we an the average yield pretax in billion During of invested $X

yield just The had investment income a decreased alternatives fixed portfolio X modest X% return Our point. basis in quarter. portfolio the

equity on the a results offset. decline XXXX strong, X recorded are fund so reported returns, month were in performance. lag, prices As you at equity lag, know, quarter and end X of on which a private the partial markets energy are providing negatively impacted Hedge a

alternatives in we XX%. the Given quarter expect the equity Overall, long-term to strength great return second our continue market portfolio the and of significant in remains improvement from investment pretax target shape. year-to-date, our

In flows. grow strong assets growth. positive the net just capabilities start to actions our persistency, defensively Insurance Life credit to sales sales to net consistently we our sales, with benefiting grow carrying ability forward. with We drivers closing, of operating are diversify portfolio deposits premium demonstrated am and are more year below-investment-grade and as and gains our and its positive continue X.X% mix. solid from product Notably, focus distribution income with to risk should group combined are organic I steady representing annuity in the sustain on credit And income and has fixed sales flows. RPS sales good managing pleased resulting losses. and momentum growth minimal are

number market operating in on growth In earnings fee days an and boost should of the sources terms management. of under increase from of in equity quarters fees subsequent income assets tailwinds,

and noted, remainder continue expense experience typically alternative we will XXXX saving and why improvement use contribute on significant I shaping up results. investments. our the over over more is now year our also we on returns to expect Randy. to results. As meaningfully sustain the can initiatives we of in it provide Mortality Investor strong to more will year, is be confident turn Day another to are to insight better successful upcoming we will I our

Randal Freitag

Thank you, Dennis.

strong operating with quarter revenues over X of acquisition. X up many boosted the balance have adjusted these total for quarter, businesses return or decade. improved XX% for value with us to prior revenue allowing X%. by First X%, XX.X% excluding or ratios expense performance a no nearly reflects year's themes exhibited nearly line $XXX Strong the operating year adjusted quarter. income and of diluted that book discipline share, million and last of equity. prior X notable items Expense growth as count the together current X% our AOCI in on showing sheet within the quarter, drove by our share Bringing prior per share the business There a operating per growing year a from we and all reduce increase average were items a top $X.XX year

as totaled the However, Net I these of more experienced we some the in volatility there The within below $XXX were line will items and the businesses. to variability reported. few some speak was within impact have in items than quarter X, a resulted million historically segments. net these that the income of we business

through we sheet offsetting difference operating this primarily transaction, income for fair the Over result of the coming items Athene portfolio and subside. in balance income majority be impact the statement. while reverse was the would value will $XXX with our impact asset time, income between the of through of noneconomic million run consider runs where to Importantly, change the the in noneconomic the most changes adjusted the net vast and from

acquisition income of program well, as Excluding the were losses and the VA with our income represented net impacts, consistent performed and adjusted expenses hedge noneconomic expectations. credit minimal were operating integration XX%

for completed death $XX value operating lower living business values ROA equity prior contributed benefits million $X.X the in XX%. account decline positioned as and annuities. less of X/XX income at investment in of year. average quarter sits Plan alternative XX versus billion, Base an Risk prior Retirement our with were to prior markets risk income ratio annuities segment with to the continue X% which quarter, the points most compressed quarter results essentially the values. billion is expense amount values business. flows for spreads, returns XX G&A in drove solid significant the million. $XXX was alternatives, provide XX to to from for income, a million net of and higher which well account recovery with with our with X% combined X%. The Now with the in values are over to of was compared This, $XX $XX fee of primary transaction strong quarter. in was the ROE compared improved net to basis trailing reinsurance compared ratio. basis capitalized remained revenues, coupled the year year-over-year, prior sales values an X% million expense as by Retirement outstanding and we turning million growth for with income. increase net metrics to When reduced higher than capitalized than were points should year driver of basis impacting net XX the account point operating income drivers at and reported at Athene, operating average decreased improvement Return results. Reported were for quarter. also benefited consistent account quarter. of operating the to metrics flat In Services, expenses end-of-period X% benefits. days the serve first expectations. G&A and strong in starting basis up item the positive results, spread the End-of-period account account The When quarters, to $XXX year annuities combined of Positive the Similar business, momentum X% amounts first $XX the variable in additional in average the billion, excluding points expenses than subsequent the $XXX XX quarter. amounts months

quarter the Operating to Life items most Insurance our of million quarter. income from million operating of The the year Turning in significant favorable X% increased segment. $XXX mortality. $XX impacting prior included income

see you elevated annual As first within our typically know, quarter. we the expectation, mortality in experience

year in-force However, expected. quarter the offsetting and experience investment up results with this year-over-year account the the variable mortality favorable amortization out million Base of over values spreads, prior $XX our income, Underlying X% were drivers Life weak Insurance Largely basis points stable, low increasing X%. Expense were less adverse average down our and results quarter. we average were than in solid X portfolio. ratio of investment were favorable excluding had expectations. remains expenses end of alternative at

start business. great year for the a the So to Life

Better ratio million the positive, the our to resulted period. are in particularly $XX risk remainder lower in the mortality typically group that of in million. given Liberty average Protection we with in of increase in was $XX investments. primarily quarter elevated returns the fact from did which on of life. experience income compared XX.X% year, of encouraged Consistent business coming alternative The offset loss year favorable. was amortization improvement in with largest quarters, size margin We loss million This operating quarter and quarter first over the incidents expect acquisition. is the experience prior by approximately due significant prior first partially to be results higher $XX after-tax represents continue Group trends from the we an better to renewal remained disability DAC Overall, the X.X%. claim first as reported

the ratios As another a reminder, different impact quarter increases in blocks X of acquisition Group with year-over-year for as we was reflect combined Protection. of It business excellent the the characteristics. loss loss

factors quarter-to-quarter, can target continues to positive always to and These sound be our a our be volatility and to on us margins X% enable X% the fundamentals sustain Liberty there claim management within trajectory. and range. While well trending pricing are integration should favorable

to capital $XXX target. at approximately our ratio Holding capital our ended above Turning the $X.X and RBC quarter quarter at ended cash XXX%. Statutory management. stands million, surplus billion slightly million at and company the $XXX

from quarter, $XXX December which returned program in million, million included million to an In share part $XX To average million repurchase X%. into of the share that our commenced remaining the per down During of of as $XX conclude, while business the accelerated totaled Athene shareholders. capital buybacks at $XXX deal. we deploy Athene $XXX we bringing transaction allowed share, buybacks count the total, us to price average returning XX.X%. capital an AOCI high. share X%, was was share value continued to in long-term strong Book remains all-time attractive X% from Lincoln. first at EPS $XX.XX, focus. with Revenue expense significant And while up a investing operating growth quarter consistent a operating discipline per Adjusted our new was target. of growth Adjusted excluding returns increased to we excellent are ROE also amount shareholders. Share an

of are Looking type help forward, well will financial let which drive back Chris. we value. delivering positioned call shareholder turn to the results, over continue long-term me that, to this With

Christopher Giovanni

Dennis Thank you, Randy. and

me of let begin [Operator We call. to portion the will turn the With call the now question-and-answer that, the operator. Instructions]. back

Operator

Instructions]. [Operator

Suneet from comes from question Citi. first Our Kamath

Suneet Kamath

in overall that? RPS talked the with thoughts start Just then Was drove color wanted to that about. you large it case competition just or in on what And on pricing? RPS the had termination M&A Any market.

Dennis Glass

That oftentimes, an acquiring company always, acquisition who And had provider not outcome of mentioned that in the Yes. than it. win a the or acquired a Suneet, an merger. will different you company situation. was

what customer, it So the smaller and and the M&A client was, we our business. lost that's

We we focus did environment. guess Now government pricing. case on We're where the healthcare. first. come small match we active it, XXX(k) markets on couldn't the Overall, participate but back and we bid market. I'd in competitive to other education, I

very in bring to those Competition with well. the cases. we continue our with tough, We think we have can good table market positions strategy, is what pricing to and but we do

Suneet Kamath

hearing pivoting benefits. Got about been over lot Group a Protection. just voluntary it. to And then We've

price certain there, about competition lines. particularly companies Some in talking

what give side? on color in you're some new particularly of voluntary terms in the business, terms seeing of can So us you

Dennis Glass

Yes.

see answer a I the think little think paid to voluntary don't is We any rational. I pricing would more way. irrational the it and question say both employee other pricing, broadly. the in We

employee opportunity sales So their we'll less well markets. to mix. in those had continue do that increase to us Liberty an gives acquisition both in because of they The

us a opportunity forward. So it's for big going

Operator

question KBW. Krueger next our comes And from from Ryan

Ryan Krueger

as you during how Could normalize? VA of meaningfully quarter give sense the market improved sales a

Dennis Glass

Yes.

in of the talk of me terms percentage Let sales.

XX-XX. in was back annuities mix were annuity X/X April, sales annuities selling that January, X/X the has fixed By annuity So variable and The about XX-XX. of from XX-XX fixed switched sales. and at variable end to we

we and And so continue that's they're far the trend to up sales. total expect that overall so

Ryan Krueger

it. Got you this where of, I And expenses Protection, Randy, a in just a to your give at could are fair relative point then Group to on you sense -- look save improve guidance? guess, expense amount.

Randal Freitag

Sure, Ryan.

rate and run the now run at expecting and XXXX to exiting then the XXXX to say goal on in XXX remember, you exit XXXX of a roughly If of roughly XX year. rate that run get beyond. and of rate track of rate run by talked at a XXX end adding we're I'd to about at to of a right a of XX, we our

group I talked synergies business and a did expense about. from on an quarter executing really think we standpoint the management which the good have

I in think to been nothing may bit out of of but have that and there line execution. consider timing just expense overall really management would good be I expenses, little a outside with their of

Operator

from question Elyse next Fargo. comes our Greenspan And from Wells

Elyse Greenspan

on the first My annuities is business. question

fee You sales you but days you'll subsequent in did the strong sales and in did quarter, momentum fixed stronger quarters. mention get obviously in VA and some had additional

that seems you what -- when trying So announced for Athene than sales better I'm the in to overall the business transaction. outlook

you you than that reinsurance have on us to be you some there? lost Can if sooner might earn block able will thoughts expected? earnings from update the I'm you just that So back wondering deals

Dennis Glass

in maybe results months. that liabilities better sold had XX-month we'd back because that of anticipated might come seen, a the so, When a we quicker. we what we've And little anticipated, the or bit increasing did than XX deal, always we the that replace period

Elyse Greenspan

Okay. or quantify Can wait to just see? you and want that

Dennis Glass

quarter, It's today. variable split annuities difficult year you annuities or and saw last is to between was last quantify -- me, as fixed because it than excuse the different

Some of consumer that is preference.

of advisers will say reasonable we don't Some market But are and that think a -- just consumer financial that for of decision time. amount in obviously capital recommending. the let me income replace impacts we that is differently,

Elyse Greenspan

on there then in my color some your Did business. great. second question And season late the results benefit Okay. group the Just quarter? be flu will the

Randal Freitag

Elyse, thanks the question. for

ratio higher in very that Life incidents and season. a as I the don't specifically loss the claim on severity disability of strong little featured side. lower I flu think then I quarter the noted, the in side to our related was the think nature

think there I think the with impact on business. consistent overall quarter. what it's just oftentimes in and was about group typically the first we we'll anything outstanding or our season don't flu I its see

Operator

And our Gallagher from Tom from comes next Evercore. question

Thomas Gallagher

First you Or saw this of level higher down net on to you volatility time? question, income over referenced come you you quarter, Can related comment reinsurance that I going remain just volatility to should and that to expect that expect would we the transaction. whether the was think forward?

Randal Freitag

Tom, the thanks for question.

the we particular said that I on it expect topic, I I said as and end think paragraph of my at to subside. reverse

the the and quarter repositions gave -- should subside that of in asset It so we million it large own through gain. the out. Athene in that's It's but will to was reversed don't asked number an will with both associated the still The and the That the that had gets had runs reversed will which is subside. fairly and the and of it available rates reverse of which just change it you in And as subside. bad gain noneconomic Why positive So a with through that give the get positive income. accountants -- reality. It's transaction, a balance out a as first it will net change Where in in about remain this. said, $XX unrealized assets quarter, portfolio. classification, I've which size for amount I reverse the economics change accounting, unrealized first that obviously to amount change, do the interest that of sale the it subside? has business, our we sheet, just in

Thomas Gallagher

Randy, only, GAAP Got statutory, not you. that's And correct?

Randal Freitag

Correct.

Thomas Gallagher

Okay.

the on mortality Just experience.

XQ, some I'm in I Individual the recovered it and and some favorable observation? then think now I what think to about to if a I all had I also, that seems adverse bit Life a XQ. correct, see be experience with think of how higher for -- pretty can fair Is recall And like much you in looks Individual XQ. you essentially you're normalizing than that And playing Life somewhat pretty year. talk you -- anyway, asking favorability the balance XQ the your run perceiving least way year? assuming the that thoughts taking my I'm or favorable. at But reason of there. I was -- last throughout Individual level the continued question, but for the I is I'm rate, your was you're had any But some of And results similar maybe year Life long-winded if sorry margins continued you last level out

Randal Freitag

Tom. problem, No

We are very the happy first quarter. with

mentioned, in As million $XX last $X it was year roughly was the quarter. I first million. That

third I've relative roughly first talked our quarter mortality Life the And in in as and to in seasonality our expectations. a high quarter, that's our about at and expectations. Individual in is mortality XX% -- XXX% quarter. we second fourth XXX% typically do XX% the and level the That in have seasonality before, Now

typically the out seasonality plays how that's business. So in our

big Now expectations. a those got around of and inside move business we've longer-term course, can

I XXX% with tune I better our as better in that. So expectations mortality. $XX We that changes don't the quarter, think we mentioned. did of did the million, to than it first expectation on that longer-term than

X which said within XXXX back a was the year, which caveat, years, second was -- we when recollection I've is. over at at of X% exception below X my XXX I quarter, either had with above or we're XXX, the As you look you year, before, or every the of exactly bad can if

year, a XXX%. that to over we time find strong about reversion So longer-term to will you of look our changed that thing you when mean one The periods know is nothing longer we a tend have volatility like expectations. But has of quarter-to-quarter.

Operator

from Bhullar Jimmy Morgan. Our from comes JP next question

Jamminder Bhullar

the So if been investment alternate annuity spreads. both just your even retirement In on exclude first businesses, and for spreads down we Randy, have income.

to So of expectations recently rates what the yields the so versus are just that the this bonds going or new where the yield money the drop spread compression to expect And stand your interest your that books? extent any And do abate? quantify can year far are? on with sort you are comments in off you where the on when

Randal Freitag

if think pressure. the at I is Jimmy, look spread businesses there you annuity no business, two and those

We of plenty have flexibility to manage spreads.

You will see will a quarter-to-quarter consistency spreads. volatility. you But over strong time, annuity our see to

you down year-over-year, we're at expectations. Retirement In versus fact, excluding investment last X.XX% consistent is we noted as basis This income our this so script. In if business, X.XX% I in year-over-year variable look were with year, points very XX my the year. longer-term

XX there XX, of lower end at that. guidance a have out we're to of so We the

I over we expect couple disappears. of to number that think looking forward, before would eventually it the continue years to decline next

Dennis, you money new yields, we're Dennis mentioned, in anything X.XX% in quarter. add? there if the think I And at of think have as the terms I to

Dennis Glass

that income speak X.XX% be as So Rates yield so the at we're X.XX%. might Jimmy, dropped lower quarter. little bit, a we off is book today. in Fixed

abate. spread the what's rolling of go around will to into the new completely compression see the and rate at investment is investor conference what we when greater issue expect We off, detail

Jamminder Bhullar

for this interest purely if a bit have abates And spread year, the remember impact maturing little securities compression, higher you So think a correctly, beyond that rates, yielding reason. assuming this lot stable right? of of that I I year, are

Dennis Glass

You're exactly right, Jimmy.

Jamminder Bhullar

annuity just then on And variable more business. one the

stronger sequential decline reasons You decent Seasonally, amount XQ. industry expect sounding mentioned on for improvement But sales be optimistic an sales-related for you you in the to a there QX overall. a other on tends basis. in are

Dennis Glass

or about sales Are individual just annuity variables? talking you

Jamminder Bhullar

Yes, sales. variable annuity

Dennis Glass

Variable and fixed seen Yes. in in between forward. the reason, was mix it change the is last mix different going that again, we've than annuity for some April quarter sales, and variable

been making. that So same comments we've

variable with index continuing financial annuity is partners and then to in. advisers gain Our distribution new bringing both traction

provided our products. lines mentioned fixed we're other IMOs and product the would spike, added line, in additional we've So create customized I and a distribution. that adding annuity some in some

it's fixed of next of participating taking annuity of think we And both that's So over annuity growth that us strength we industry segments hadn't much years, advantage the of in before. than we annuity total averages the really can the distribution, would in our why drive been better market, very what be. couple the

Operator

comes Humphrey Lee question from our from & Partners. Dowling And next

Humphrey Lee

annuity follow-up sales. to Just on

in business? annuities. for talked your X/X that That's from X/X pursue would a fixed you're You've I like to that April, mix is the guess I expecting forward. mix perspective, mix think, the But is about, the VA, desirable the, going you longer-term that annuity

Dennis Glass

very Yes. Humphrey, that's a when good that considerations. And a lot question. of you ask question, there's

they're variable and just let me to have both. as and say, for between -- So because fixed you ROA annuities manage different annuities,

long- long You because have the to manage have liabilities. the over discussed both. ROE of short-term they're balance managed different and for term, we And then as we've

-- our efforts. considerations of our all the to are. going extent, gross within products the those into what is putting But sales the To we're go of we permits the the ROA them want So to market of and categories maximize to our X in to the liabilities. where with of ROE strength our some determine and achieve system term long-term some that to -- balance short- -- us distribution extent, sales migrate, short

Humphrey Lee

I we going And the that wondering have about as In block? progress? Randy. I deeper the you of on how you think Liberty question that Group should just about efforts talk for we can And progress forward the appreciate color. was then Protection, a the repricing

Dennis Glass

Yes.

and -- start that I'll by me saying of one, think I on the let this. just to comment say take we're expectations well ahead

We on some to had about reprice you specifics Let me $X.X in that. give premiums. billion

$X.X premiums. in repriced billion already have We

had rate stayed, on and lower we margins billion, about $X.X we've the an including the that higher what both X%. left of stayed margins of plus improvement repricing the on On the that X% in from the business got improvement about what on increase

So that all math earnings of the of repricing do when picked on million the from we $XX already. you that, up about

is and up will balance Some that in showed XXXX. in XXXX XXXX. The show of up

million $XXX the have left We to reprice.

similar of sort results we'll that. still on expect get We

was The other because cycle, done very that that merger, this needed. pricing started at on time the cycles Lincoln Actually, comment we before, the of now all that what was to we we we're would make involved, of the presentation Liberty repricing we're pleased take would think of end indicated X-, I the essentially repricing. of helpful. X-year at is it And the get first

Operator

comes question from from our And next Nadel UBS. John

John Nadel

Randy, question. comment. I a I'll guess, with first start

mean guess I'd we maybe just -- larger a quantifying really and items, of simplicity on notable ask offsetting items. help income were of think was some in think, items rate. consolidated for of help low. quantifying variable I Mortality I little the of your I'll your bit income I was these lack or all and terms that the bit a netted guess guess, earnings the I I ask alternative case. a DAC basis zero. just I the tax I There maybe obviously, for appreciate items some investment little more investment larger the in favorable. that's of

Randal Freitag

John. No problem,

As to X. script, they see I up in add we my as mentioned them,

$XX million of the do business with in in experience items to our expenses, has mentioned, then those in what than included, I as favorable which So just in Life favorable that of mortality assumptions zero? coming up Items add better are the Life amortization $XX model. and million to

that's million side on $XX ledger. the of So the positive

and $XX On Life primarily occurs the the $XX which returns, another with alt annuity group. is million. the entire organization was little the in a that in and lower have of negative across retirement business bit $X side, million million in the you

to of elevated DAC of Additionally, you $XX X. $XX have million million group positives, million get negatives, the you back amortization, $XX

don't I to tax a to questions. much I think that. go was the there guided over rate. have enacted, we me really notes see reading the so I some there, range. tax was reform some let on of XX% been XX% When

over think is I year so being will of the that what look year, effective the level we in et fewer items very of tax because you the seasonal It's business, cetera. rate. last lot have the else Individual ever that, mortality, year, et and Higher of whereas the we'll as tax full because cetera, year, about. preference inside items at rate? lowest the is equal, first will see at effective lowest quarter range. pretax in talked the the quarter, largely it our days, tax at income the XX%, came in so annuity fee typically right the of Why end low full are And I've a you Life XXXX, retirement first that all lowest

would were we I at I small I feel there rate small a And that you tax it difference, X attribute of but spread effective XX.X% in amount small across year, a three would then John? year, small last other other that million help, went very first had that items, had XX%. we note that bit numbers. against Did we quarter. think, and So This we're benefit, That DRD true-up had businesses. of little the like

John Nadel

-- portfolio having trouble that on understand this is your understanding differential I realized what what point. But that Absolutely. that? has and what your that I'm going of or to Mechanically, helpful, happen? is does then actually the coinsured going it -- portfolio. what's to to Randy. when accounting -- is cause to I geography gain/loss Athene is And understand And sort why impact Yes, reverse. I what reinsured the going the guess between AOCI

Randal Freitag

Sure.

first as because the which which mentioned, -- we as significant unrealized I quarter. gain through classified to sale, and available and for run and unrealized of portfolio, amount there is a it gains still balance transferred sheet about the losses an the in was which So comes Athene,

that the of business anymore, because Now entry. we can't we there's own the so have offsetting economics this don't

the it cause If number over you would be that assets would would trading the offsetting until the and the the one get If maturity, And were Athene are entry. Because reverse? So asset, gain time, quarter, of asset in when the asset. down unrealized they can or if gain with income course, reposition, held the the a for portfolio. offsetting changes things. opposite trading value of like went away. in a impact. what just through you entries way the back do drift And repositions statement next to would available when unrealized There of see course, run the asset the sale that becomes

John? help, that did So

John Nadel

there quick entirely is entirely Is arrangement $X.X that of coinsurance one Yes. fixed one. with at in Athene? I've or really the almost last It's looking And That's under And the true billion annuity hopeful. fixed quarter, of fixed just indexed indexed deposits in is and that annuities the there? got annuities? all any deferred

Dennis Glass

Yes.

about that you Athene if quarter fixed billion, in So $XXX $XXX talk with billion. -- about about it's there's $X.X in is transaction. in SPIAs that index million fixed that $X.X category one rest -- and I think million the million. associated And about $XXX rate, of the The

Operator

O'Neill. next question from from comes Barnidge Our Sandler John

John Barnidge

it, Apologies to to something life continuing annuity transaction you're about but you talked evaluating prior missed calls block for free Is up do? the if that capital. I on and book

Dennis Glass

every value. Yes. opportunity at advance shareholder We to look

kinds the so won't mature And of remain other. analysis. under a or into not comment way transaction, Whether or they those would we ideas one

John Barnidge

Or the Is follow-up. And the Okay. that opinion that of else? greatly it anything in economy's either you're seeing border are been gives channel, pause across Sales the is slowdown rumors or distribution then strong. exaggerated? my have you customer your demand there anything

Dennis Glass

predicting into economy the change And that of getting important I it's the from leave flow and say we'll growth of will this who's hands lot to more people retirement of cohorts wealth on in sell coming we and the insurance age of what's business, meeting. plans wealth There's the that is the the investor statistics we experts. of show the the wealth. though I'll [indiscernible] some the going a that our of lot into a going cohorts to. the sell to, of at out

the long-term GDP. think so I So of more and than ebb opportunities our flow drives that

Operator

from Erik Autonomous comes next Our from Research. question Bass

Erik Bass

And life much to currently? on any distributions the to what do see Or opportunities How further products? distributors scope shelf annuities large other Allstate? other expand with where do you're do for similar potential see not you or able to you're there you are

Dennis Glass

selling there. annuity Well, that the with company so are PNC Allstate, in business, now is opportunities be we only there'd the

annuity penetrate we to every at talking about on -- further opportunity in banks business in. have think moment. We're to some additional the just some I the channel participate the that we

Insurance there's but more we not States major individual to to So I in ought to than And opportunity the get sales. where -- Life companies. United over to places you speak we're in are the this, the have other Randy business, and go we mutual the when think can player more in

we every share XX, think. significant XXth should me, have And have I in a segment out we the -- a IUL do, of typically of or so and of in segment, except every -- excuse marketplace individual significant we

and Randy, to -- be for Life United a is me Randy Insurance happens biggest increase things our to if introduced here, correct and really to the trying is that We've the kind opportunity an new example an where there to And So I example sorry that market And States. in your sales of behalf. going but on speaking I'm position. an there's the of do. product we're I'm misspeak

Randal Freitag

don't the disagree. No. I thanks question. Erik, for

I of it's think may products we that side, markets be on more Life a the fully function and not participating.

the little better little the and term I'll And with faced Term things his a We're in in of aggregator really We're quarter. onto team a there's insurance. couple smaller connection the doing underrepresented first great examples, product space. doing give us to represented. and market, all job so platforms. getting in somewhat sales of there, are underrepresented the a Will together strong a we're That because And you in distribution and be term those of TermAccel growth like to a some came

mentioned, absolutely standpoint, represent come with in and those improve us correct. some But did indexed give speaking, And channels think From that a which those to also that -- broadly are sold. the products, position. should a an competitive couple out markets distribution that Dennis access improvement. and we where products will Dennis is UL to of in February I space, products are with underrepresented we As

size of the representation broadness people the of pretty strong have our Life the business, who product Insurance. we sell among portfolio, our life With a

Erik Bass

persistency. And on then group questions

to of If you that kind is out the was And you of I know amortization of reissue in on called -- can sort just business? comment earnings it where impact the on group higher. trends you're due a more there. there's bit activity Or is no And that forward lapses?

Dennis Glass

Yes.

a down may quarter, combined on about. first I'll over It's not steady. Our And persistency Randy, holding pretty question be bit to turn block little -- the... anything is but this the worry

Randal Freitag

more. I couldn't agree

for Inside think, our I some subsegments are worst may in with have persistency, had there line you there, overall our persistency where right of is example. absolutely, little expectations. a

And the a right that We shock little run have fact, line of the actually the the expected. expectations. into have from old portfolio voluntary think higher-than-expected I amortization. And that with worse continues lapses overall, we, Lincoln an book than arising to we persistency But Liberty deal. DAC old was priced persistency in seen drove in our some where not

Operator

Our Kligerman next question from Andrew comes Crédit from Suisse.

Andrew Kligerman

Just the kind of following on up group.

And after-tax pickup million due that an Liberty and the of would additional guided X% on X.X% probably the that $XX to to -- savings if earnings versus pretax midpoint a the the I had You acquisition. of the of X% X%. expense took repricing X%, margin imply to close to

$XX-or-so another million mentioned you on Randy, think, I So coming side. the expense

about I from little benefits think repricing. bit continued Dennis was talking a

get get X%? the the million assume that? more to Or than course repricing that the pickup $XX another we is should of Do closer the expenses year? in next just I So and over there

Randal Freitag

in denominator we I using your you And Andrew, we talk what are total use when margins, believe our about what revenues. denominator premiums. that in is is

-- the was in the X.X%. which quarter the way. margin first by industry the margin So is in an quarter standard, The first

said, and upper I half think come between But we both range. Dennis to be long term the expect improved move that can given as we've scale, in, to synergies the X% and I of we over the expect given X%. our have we that

quarter or be another a of would earnings So million $XX so, another X% so...

Andrew Kligerman

Okay.

maybe to the biggest XX-ish with in there talk the know a go. me area. on annuity the helpful. but is you a trajectory lot business, was can help And maybe spread of So yields then forth, the That's bit so call little I another and which about just

You a X.XX%. went yield to X.XX% of from

Athene You went I this X.XX% transaction from rate, X.XX%. to is crediting due a the of and suspect to

said think, So X the no there's by of And just where spread spread wondering points. you kind I'm Randy, pressure. -- basis shrank that I

to spread give expecting the Where to go? maybe trajectory the interest. little and it I And on you consistent. be the expect a credited be should could You yield

Randal Freitag

the Andrew, latest phrase say a is have the I where I greatest.

which I very what so far quarter, as which I too year from was in the was mentioned and think level wouldn't reported move earlier, X.XX% I the quarter. And ago -- we with

latest stick greatest. I'm my, the to the with is So going

Operator

And Scott Alex our question next comes from Goldman Sachs. from

Taylor Scott

about guess, et uses the about that simpler So specific table knowing you position you about know as it's that the are sort is are horizon, a hedging that, you reporting what in investors of different wanted consistency of better get When still value far looking the sort transition FASB in, to structure, we you probably just Lincoln's levers the different that of you're can volatility. think to impact book it's and coming earnings, of strategies, at closer product But specific maybe on on color to of that talk ask whether cetera. I sort and volatility know you I early that sort I too changes are to structures? have reinsurance, of appreciated Any provide. put

Randal Freitag

investors And an have think, see way a we to I I of at That's shown wish we've of appreciate aside, Alex, the the us the as you over there. any implementation it, Alex, your consistency accounting reflected there results. going aside. well, I little at yes, think been to of I are what We're still we working the in specifics to get I noise. off our through it our appreciate be guidance. years. absolutely the within better manage levers, far comment everything the getting all use you on we're when our a through little may company was think disposal give that valuation too

and company, all the And our we will a seen similar the Lincoln a tools and you which use in to consistency have expectations, results, we returns our you there. which is to high have see what past, quality above get will has that's disposal think our I at peers.

Operator

does session like over is questions, that you time, I Giovanni afternoon. at would question-and-answer our closing Chris to follow-up any there turn And the remarks. any left company able will in to later any conclude back the to with And today's conference. one be for If with for conference this the

Christopher Giovanni

this joining for all you thank and us Crystal, you, Thank morning.

Investor at investorrelations@lfg.com. take a have via and we'll great our at day. questions all, e-mail or always, you your Thank Relations As on XXX-XXX-XXXX line

Operator

does Ladies standby. may Speakers, conclude you Everyone, This participating today's day. have please you conference. and and program, all the wonderful in gentlemen, thank for disconnect. a

Lincoln National (LNC) 2 May 192019 Q1 Earnings call transcript