LNC - Earnings call transcript Q4 2019 | Lincoln National Corporation

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Operator

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

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

Christopher Giovanni

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

conditions, important begin, Act future comments market repurchases sales and I are operations, we Reform capital statements income reminder. deposits, expectations, comments expenses, and have and liquidity regarding Before Litigation share call under an Any the of from Securities about XXXX. the made trends resources and including forward-looking during Private

time current our to SEC. expectations. risks involve our uncertainties filings or reflect today, could to after differ -- and circumstances most our include recent revise forward-looking materially quarterly Form These report results and date. obligation that described to could well report only from statement from issued XXXX time risks These the with forward-looking we statements on other to in as on XX-K, as those the These update cause that are those uncertainties them and earnings Form made and statements cautionary no actual recently of detailed most yesterday this or annual as undertake in in disclosures release in events occur XX-Q

participation you Lincoln's www.lincolnfinancial.com, press measures equity income adjusted used to operating to you including return and appreciate call, website, adjusted a our today income supplement, on GAAP adjusted measures. release and can to visit find which the statistical the or non-GAAP We where and from include your reconciliation invite most full comparable in operations the

Life. prepared we the of Chief Financial and Randy the Chief to today's call Officer their question-and-answer Executive President are remarks, Individual Officer; of call. on Dennis and move portion and Presenting Glass, will Head Freitag, After

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

Dennis Glass

morning, good and everyone. Chris, you, Thank

consistent record expectations model business execution quarter Our results communicated in share dynamic continued the call. we during fourth quarter, third operating earnings our with produced per and

XX%. EPS and XX%; value, adjusted ROE grew we excluding nearly record; a increased was our to over For $XX, the book quarter, adjusted AOCI,

of the financial culture course our year, business of continued balance strategic us and advanced line leveraged risk the management success. maintained initiatives drive expense Over high-quality growth, executed to a priorities top our for position of and which the sheet, all benefits profitable further and we model successfully

on touch of me these. Let each

line complemented product proprietary actions drove portfolio. our our First, indexed product top products, as annuity date our on such growth. best-in-class new profitable retirement gains Strategic variable YourPath, product, sales and target as

than from as We also powerful leverage franchise the XX,XXX channels, that we We year, gained to our a product channels, other property past sold organizations. the in new more prior independent now participate more such in as X% momentum reach marketing up months, distribution casualty, customers. over distribution Lincoln as have producers XX and and such

and year. expansion quarter resulted This combination distribution of in the growth the in product and full fourth strong

changes. including positive net the business XXXX, in benefited of annuity Life Specifically, capitalized the in on upcoming delivered flows the every quarter. billion fourth quarter, And in $X in and the product we fourth flows year positive both for variable regulatory portfolio. as we broad our from exceeded quarter annuities fixed sales

capabilities its the RPS quarter our net flows positive our for the of generated segments. all full increased year sales the in as year, we And leveraged flows. consecutive Protection employer-size to Group broader and and for quarter to positive year marking offering overall enhance fifth

segment business year. to the quarter results line contributed top operating growth and during fourth both strong full the revenue These in every

products, mix product towards disciplined, of the shorter-duration our we repricing with which the sales we interest year, to Importantly, interest stayed -- or and rates. less sensitive are -- shift less throughout continue to shift occurring

to our line top shareholders. fiercely focused are on We the attractive on growing terms

programs to the we on continue significant seasonality, to successfully expense fourth in strong saving were expenses X sales execute the and Though quarter elevated due volumes year. during

as well up offset progressing and digital consistent savings year. to we this savings in our ramp our initiative XXXX expect investments is plan, net with First,

of expense our well way achieving to million $XXX end Second, in XXXX. of our savings we acquisition from on are target by the the Liberty

Prudent management Lincoln. balance shareholders. In management have invest assumptions, high-quality utilized growth and active our evident assumptions, to to to made flow at capital return maintained asset been disciplined liability sheet. long risk XXXX, adjustments opportunistic cash appropriate and disciplined significant in matching on capital and Lastly, our we both

balance we is As ratios capital our XXXX, strong and positioned. sheet enter are our well

Annuities. turning Now the starting business segments, to with

and broaden participate organic of to sales our a mix. in rate meet decision segments customer growth and strategic maintain distribution, enables more the to Our portfolio us improve the marketplace diversified expand product varying needs,

XX% For in sales variable annuities the the quarter, positive fourth fifth including consecutive the total for full both were fixed quarter. and increased year, and flows net in

flows year net for the positive time first since were Full XXXX.

has increased points we growth rate producers more than improved as launched X products and total just in Our XX% new years, by percentage successfully while repricing needed. X where by

indexed sales a our in helped annuity, increase new drive VAs variable guarantees. successful benefit most without of Our which XX% has been living product

a mix expand X/X living guarantees, result, we each without living benefit as continue space represented total annuity we of new we sales. and a expect As to VAs without very guarantees sales VAs the VAs and year shift guarantees producers. full balanced with benefit a to approximately further as This shelf had annuities year, for fixed

are strong to and model of and for well respond set adjusting interest quarter to broad pricing product growth hedge we as the to market our results. industry-leading lower with from prudently solutions, consistent business combined appropriate and When assumptions metrics rates, consumer and deliver operating benefiting are presence. our multichannel positioned year strong features clearly another Annuities So distribution program,

result have retention drives us our customers focused model. This a in Services, our sales service as advantage a Retirement resulting from model contribution we growth. high-touch, competitive rates, of in attracts markets competitors, and distinguishes digitally higher strong new high-tech, and target participation In our Plan and

to year target to target-date In alternative in in the with proprietary differentiate first expansion continue all increased funds, our sales fourth quarter, us Distribution across XX% growth marketplace. the markets. YourPath,

and full target billion for both the in it than and and the the year positive totaled more retirement X% in XXXX. Net our also to positioned was year, Overall, are quarter well for for flows the quarter again we growth business, strong once small with strong and $X.X deposits quarter compete were the a mid-large markets. markets. and in Recurring increased

Turning returns. boosted This opportunistically to billion strong sales Insurance. full focused $X Sales Life recent Life fourth and Insurance expanded momentum in to as we quarter a has have segments. as strengthened total the particularly at attractive increased exceeding fast-growing for year, by sales distribution industry we quarters on led

include market in and are fast-growing were earlier underrepresented. the segments market year, IUL greater a strong we where the Specific growth benefiting of actions taken drove focus areas IUL, where that from in we product

year. result, more a our quarter sales As doubled and the for the than full

in than to year the and were lower interest rates. up ahead more lastly, and of quarter also of for table. new new mortality year, particularly can for sales, sales of XX% Benefits be ahead Executive were a the price lumpy, increases, And strong MoneyGuard the reserving changes transition doubled which principal-based the reflecting most

to of past increased network our Additionally, strong contributed producers the has our X% year, growth. over which

under continued returns levels anticipate on this XXXX capitals we new As operate to principals-based sales, strong we given year, on appropriate reserving. focus decline sales maintaining we and enter

to Group Turning Protection.

prior lines on acquisition expanding advantages to sequentially. XX% both fourth cross-sell again effectively business retention, and competitive quarter markets. year, of X% increased compared to in including with When premiums We solid for the strong with and and the the employer and the by of capitalize increased to growth execute created on coverage. additional capabilities objectives, full larger employee-paid year leveraging the strategic combined continue once Sales book our in

basis efficiencies new the the treasury average us noted pricing Looking rate. yield upfront more to to pretax at achieving an margins. over points will than the and forward, on XX-year maintaining invested we of levers Briefly disciplined results, that X.X% are investment money both year, during average achieve the X% full important I for and quarter attractive continue enable XXX

continue corporate We have attractive diversified public structured as with illiquidity where assets. also and of less-liquid value purchasing percentage decreasing high-quality, and have mortgage strategies to privates, portfolio, grow. we securities the good premiums room such ample find bonds achieved assets invested loans, further to as These a in

we below for rate large our of the investment write-down pretax the Additionally, X%. of alternative X% The derisking, selective holding holdings full year, following and sharply focused a and a private the by lower for quarter return in annualized bonds remain and achieved on BBBs the investment-grade portfolio equity we quarter. reduced recovered third

return first We in continue pretax target XXXX. long-term results solid of to XX% a quarter and expect of the

continued end the successfully of closing, pleased our a and remain Low this year we with have headwind, In interest years. execution. for many but dealt rates the with am strong I

as and digital to expect mitigated be We expense initiatives, spread with by compression additional combined growth. programs, such discipline our incremental normal

and necessary, where meeting products past. extent products. expect the redirect or the the sales actions, that in decline net our front, implemented capital new add To our we successfully we'll or because the to return exceeding reprice to additional continue run existing pricing to On emphasis all Again, requirements in buybacks. short to disciplined products actions of share have we flows are product well-priced shift

action-oriented can shareholder and of add excellent performance our value. confident I'm our further financial management business model team and sustain record track

to turn I Randy. call now over the will

Randal Freitag

and no income XX% a driving There Thank year in notable I those you, and a quarter however, some items Dennis. will $X.XX on segments. the few over reported down, night, were of prior both within the current per quarter, or we million the $XXX were adjusted variability, up prior year operating up there record items Last fourth touch and or business share, quarter.

me quarter key including in quarter XX.X%. costs in in $XX.XX, ending sales, compared all-time briefly service increased to high. share, X% agreements of items, ROE elevated were an operating and value revenues number basis associated Touching net financial the to income, XX%. our to on quarter. let increased per consolidated Book strong operating segment to reported performance year quarter. fourth note operating volatility XX excluding points the typical in Every AOCI, Adjusted and metrics But fourth transitional and a the Liberty an flows increase business the increased that of expenses due the prior with

to was income. the loss relative decrease share by variable this adjusting from per income impact, net noneconomic income for nonperformance XXX% adjusted Finally, driven annuity with a of When EPS, operating was operating risk. net $X.XX

The turning flows. prior in driven income X% prior was revenues starting from operating year the Annuities. quarter. Operating Reported increase by from equity to in quarter earnings to net compared primarily million growth $XXX million values the and market full higher year was X% segment increased the and with $XXX results, year. positive for the Now account quarter for

in increase mentioned were in due quarter sales I a expenses typical seasonality. higher fourth and to the earlier, quarter XX% As sequential

variable our mix spreads, by driven the excluding will income, business. that You note of down quarter, investment in base came

growth growth. earnings annuities fixed However, with line value account was in

subject results, with quarter's I our Return XX forward, this notable in a to Looking expect consistent spreads basis the net to points be solid for benefits. ROA full Risk sit consistent benefits quarter year remained items. also basis with both below remained risk and sales XX% would at ROE, the for at value and mix. amount as with of metrics metrics strong points largely points adjusting XX account as a for basis percent living XX death when

very continue totaled Plan and So million In in X% Services, organic delivering $XX the income average we to and compared billion operating average well higher to the flows reported values performance, Retirement compared year account $XX positioned for strong of prior quarter, quarter. the good and year in earnings by with the combined performance. growth, positive values the values financial to driven quarter increase higher quarter, to end-of-period year. with account When prior values. million are another account million million full for quarter Annuities increased than we the average With XX% strong up business. Net the market equity in account $XXX $XXX $XX primarily for

quarter variable serve to basis year prior basis points expense G&A retirement in XX versus of business which down ROA year full year investment with for average. and quarter, expectations. the ratio and drivers year, in forward. The with slightly at the flat ended and as expense a our compressed in capitalized, basis point point should the in sales drove Base a momentum expenses, going improvement spreads, income, year compared positive amounts net above were quarter, in basis the the strong the full results, management came XX excluding the points consistent XX XXXX. prior

life quarter, Turning driven Operating income average year up Underlying increased from expectations. the growth values X% to in average favorable our quarter $XXX by mortality quarter, year up the excluding insurance-in-force investment variable down year account million prior of X prior points segment. prior relative income, our continued with to Insurance over basis to the strong, quarter, consistent year were the business earnings compared and lower prior investment XX%. drivers and with Life X% variable by offset spreads, Base income. were the

in In the our the fourth quarter, line quarter. expectations mortality was for with

year, For came point the result. mortality annual percentage our within expectation, solid of full X a

quarter, the back more As first typically expect mortality we the the into year half I would we early you the year. move seasonally remind in in favorable mortality of and higher that

the were expenses to was expectation, G&A sales of quarter, favorable amortization our this by amounts to growth. but capitalized, net higher related During expenses primarily offset strong

life Over growth as sales, the and the business year year, course positioning enter driver business produced with well culminated the very steady of the XXXX. we the strong

came and which a quarter. $XX in million, XX.X% X% favorable from operating the year compared prior driven the loss XX.X% growth to by at overall quarter, prior up Protection ratio, premium in more year Group of reported income

net This loss to by life seasonality more million. loss part was impacted $X disability actions as driven fourth approximately that helped a included improve by quarter increase in than more compared a million of favorable by claims normal an management quarter's a loss by This ratio $XX a efficiency. in offset quarter, benefit severity earnings higher and ratio ratio, driven

Liberty prior the other we over X% associated of costs with incurred exit increased million expenses transitional onetime nonrecurring $X quarter the G&A year and expenses. the agreements service as of

was expense XX comparable the The the up continue X.X% full XX ratio For benefited to synergies, margin basis quarter expense for the both trend expect I and in points the full as and the down. integration we from year, points after-tax to X.X% over improved basis year, the ratio periods.

we forward, initiatives. as sustain and to we our expense-saving expect Looking margins attractive execute on growth

to RBC We ratio capital the legal associated at an statutory with upcoming go of maturity. ended our XX approximately and we goodwill noneconomic of with points will which RBC the management. million includes debt February the that Liberty pay XXX%, of from completion Turning $XXX $X.X surplus merger. as to acquisition year company prepare away capital exceeded Holding a entity cash billion and off

We continue the to at target $XXX cash company. million holding of

million the of quarterly quarter, returns. to million of we recent the new and During million allocated $XXX below opportunistically $XXX $XXX were quarter as year. buybacks more average shareholders full Fourth capital returned business slightly capital for to we attractive our with

EPS be $XX adjusted fourth record reported we share, XXXX, million. at return operating all-time ROE $XXX capital book conclude, in shareholders X% To expect AOCI, the Looking XX.X% value, quarter, and per to ahead least to we high. to adjusted increased a operating excluding over to an

for down X assumption we quarter business XXXX every year, to the to share flows, tailwind which third impacted brought and in positive in run our account reduction provide a and past us average increase achieve annual to an well saving of beyond; programs years. the segment; X% year values, which average see our contributed the our million operating earnings; over count full EPS savings buybacks, growth, rate values sales including, strong with While exceeded in future expense to review positioned continue end-of-period leave results, drivers $XXX net meaningful for revenues account solid consistent

we We attractive our while X% be well also dividend when Bottom capital XXXX. will new focus achieved. deliver diligently shareholder an investing returning forward, results. line, to to capital are for to And announced financial we returns shareholders business looking to on continue strong to in can share increase positioned

call the over back turn me let that, With Chris. to

Christopher Giovanni

and Thank you, Randy. Dennis

Instructions]. will will that, of please call. up you question-and-answer We Catherine, the begin the now portion open [Operator Q&A? With

Operator

Jimmy Bhullar question first And JPMorgan. our Instructions]. comes with [Operator from

Jamminder Bhullar

Can business? the Liberty transition have you off of of in the because TSAs this group might quantify with extra First, Randy. the had for the you expenses quarter

Randal Freitag

in $XX or about mentioned I so script, million onetime elevated roughly of $X after as tax, million so Jim, pretax my expenses...

Jamminder Bhullar

gone be would those And this year?

Randal Freitag

Some which which associated exit of were or from the most with of TSA.

Jamminder Bhullar

be Okay. And gone those to expecting right? in beginning XXXX, you're

Randal Freitag

Yes.

Jamminder Bhullar

since Any last the for buybacks, amount you quarter X dropped $XXX on think the had this And was amount reason quarters the -- to this buybacks. why or weakest in the lowest million? buybacks resumed I you've in

Randal Freitag

And very had sales to were also going very the new sales clear very fourth were we those had in returns we we be visibility strong. quarter. get we very strong to going clear the on Jimmy, visibility going were that to have that

we to did quarter to in new the so we business the a made And capital allocate than to more little decision buybacks.

when I move practices. mentioned to into our script, standpoint, Now from expect in and line a fully into my with you as first the historic quarter XXXX, be we back buyback in

expectation million mentioned, is XXXX capital return I our to $XXX of shareholders. As at least for

million over $XXX With dividend I where we $XXX implication average At just is buybacks the running. quarter, have the of million. a or little increase What's dividends be least which million of shareholder mentioned, on will been a that? $XXX

And doing everything price a is we expect based going is from like can, we past as below because our we I both it for and value; to standpoint, when we been performance nearly well be well environment share key going especially subjectively, thing exists where and see upon used have we're below least, an does decade, which should do a at that objectively today, book is that it is forward. what

of You fully do everything we're in to that to, do shareholders we at I XXXX. going can $XXX can capital as expect mentioned, total return least million to

Jamminder Bhullar

in should do Would the year XXXX, -- And more the and and at them done more sort your position in early? Or be throughout more it least past, year of we be given capital bit a the buybacks like, to year? the line try off little you went tapered you've more you then in did to flat on. expect early as opportunistic

Randal Freitag

believe average past, that And we the when as it sense. accelerate makes the it we everything going makes today, I And I'd to we any that over arises, coming had always, do believe the we've out Jimmy, share within we as start think, when to discussion year. understand the price where opportunity with the it believe with can I into ratably year then we're this is mentioned, sense.

going believe to the everything can above $XXX do it it's we're accelerate do when million, to we are extent we to So we going the to opportunistic.

Operator

next question Our Erik from Research. comes Autonomous Bass with

Erik Bass

to Can to immediately you in head down XXXX? or in a you've the outlook bit how the of for is the through business more see quarter room little And come as course the now will that And year? there talk the exited will group we those we over about start just that bring it expenses the first much TSAs? into

Randal Freitag

Well, expenses expect in them say, they're the quarter. onetime gone, nonrecurring We wouldn't repeat, I the mentioned, right? should first I to

take to those And ratios think So I business. in XXXX. relative out to in we would I away. use that speaking, will that's group right continue in down you when expenses where about mentioned they Broadly script, to were trend what expense expect in my the XXXX where be

XXXX, If I in ratio you expect quarter, to absent the expense level. that in XX.X%. our nonrecurring like expenses over go believe of And quarter improve we'd back occurred came first fourth at to the

Erik Bass

given be down to I target opportunity margins? be for Got the at would expect guess the you it. reasonable to X% of bring X% And to then expenses, the kind the -- it to upper end of range

Randal Freitag

the with XXXX, through standpoint, obviously of And X.X% the $XXX exited expect line we I'd ultimately ahead the over occur acquisition we integration points we we million grow came savings was for we'd expect the we in closed look the to $XXX to ratably well better That that to as an It's year. Liberty roughly XX we XXXX our business. thought were would million. in basis year. where that From We at of preceding when be year. than expectation.

think to going savings. the integration-related with very year's I from get additional results. some you're happy we're So benefit But

range. business can X%. acquisition this scale in we a earlier, we time, the about over said additional expectation believe to the that achieved with for talked we as over we've that our And half upper We is X% group of with that that time perform

I'll So at it leave I that. think

in in perform X% we additional savings some of X% should and over upper integration that range. that XXXX, have half we will We the believe time, to

Operator

Krueger with next question from KBW. comes Ryan our And

Ryan Krueger

out you price, reconsider I transaction I clearly, buyers of before, this market's to your but I third-party And the thinks know is guess, seem greatly the value than view market guess, I've any view comments annuity the there's it I your of of it you lot to sort have following than up to differs is? own small your Randy, piece there value for -- block. that, a you asked the think, higher third-party I just on VA a used related of value like would guess on be. of variable block stock the prove now more from, does

So perspective on I just wanted to hear your that.

Dennis Glass

we've over it's Ryan, a and a quite bit And of this Dennis. touched on good last is it years. couple question, the

more better than is the book consistent a we thing to it industry, on grow that. first continue rest The cleaner, that and our of basis is with and profitable the

with So an from our we're VA economic comfortable business very perspective.

revaluation skeptical the sell really economics in to as our shareholders? tell years sense are premise of idea attractively proceeds transaction. trying I an Now a sort yes, I'll a did to my how of we're you the economic more The I'm use the sphere, point going those VAs, to certainly economics, broader a we VA block be Athene of continue motive. that as to We as the a more in as an including at comfort right driven valued. about more to question, consistently by by the give we'll business, do it's basis. and of being little business, benefit will economics Over blocks on use driven Street makes But have it action. to of the the never sale something, counted I to but look on revaluations the from with get we M&A of it: we're for

Ryan Krueger

on $XXX XXXX? Randy, of to view that million capital case the do same still $XXX million for you in Understood, at then is million, for range Dennis. but this your least cash guidance And based $XXX free I management assume flow

Randal Freitag

it range. with $XXX company. Yes, bit million $XXX grow least the said that's why the the little talked continues at Ryan, growth before. to largely to I million mean a opposed about to $XXX that I we the as And of million we're in that

Operator

And our from comes Gallagher question with next ISI. Evercore Thomas

Thomas Gallagher

Dennis, Voya follow-up sold from to at X more transacted, our block. was question, approaching variable Life Ryan's and a in to just was by side valuation of Lincoln's quality that, not XXx individual the but Individual calculation, they their life my block. the a least when it And runoff annuity a to from side. about the that view, inferior block

market that, what you a number relative block's valued I So certainly have private value think, being shows a to your pretty think at. life good I

So is maybe you like for treaty your is, I guess partial exist business, in Insurance? would like call arb I kind Life a my there may that an that market question Life consider would question. first That's -- Insurance even deal, something of my the it reinsurance that on or if considerable in-force

Dennis Glass

absolutely. Tom,

we for We our businesses that have find our the And all for on an term, something if that. M&A these execute of to public group. can We're in of in market, benefit the market can, types do private the arbitrage of versus your absolutely, where the we flow you of shareholders, transactions. we we'll any use will, if

Thomas Gallagher

I that you raising to you in was as view is, a of a you Life that's and saying the was to capital deployment And you're lower-returning presume, MoneyGuard you. in the my and I prices, -- reason process slug about of question the sales opportunity that made of Randy, IRR the is, going process Insurance. guess the do and meaningfully life be imply question the you're in other the attractive quarter? prices, Life opportunity of that the to you're life like significant if an kind attractiveness the how Got attractive terms of -- my an other in then Insurance comment quarter sales? Or doesn't how reconcile there raising fact yet in of, that pivot sales

Randal Freitag

a with the to quarter, environment for Tom, sales, selling company the in The I question. when Insurance fourth would among is it perfect the the describe strongest space business. for as life the what thanks insurance Life comes in capabilities

the there reasons different little value dig our I the price side, the me very that a of on by strong products, demand increases for that I consumer along regulatory strong, which initiatives a do in mean be some to were we including number driving mean a that by there perfect let consumers. so bit, And a place, or prop for into couple that of changes selling a couple environment. on And what driven had of were existence was items, the sales strong with very returns contributed put growth. of very to

impacted the Really go and understand the to phenomenon need product-by-product to quarter. how it

start Benefits was is let's business. So that with Executive accumulation-focused business is This the in the a business, quarter. which up significantly an

happens With the accumulation mortality what table underlying in dollars. the that XXXX, products in change in less to is they have capability to put

prop value life in dollars the changes. less of put so unit each can insurance, For you

a that to to lot And what into saw at a that companies is had companies from of these accelerating you benefited take there We establish very big cases. returns. plans factor huge So was account. attractive their

big with the economics product. by as we've to the year products way, talked year, product of in the entered lowering strong of on about really course a a the year. of the space and first cap on that We the IUL the result those that the IUL the were go initiatives into sales in that actually had Let's we of quarter on Term. called what's over the We last half moved and product the Those competitive. was improved

with execution X had returns. in again, spaces attractive you initiatives product once So on very

MoneyGuard. you Now have

a coming think in me, So increase sale, coming you returns MoneyGuard, mentioned first quarter you but Tom. increase sale. subpar fire sale? the it case didn't In that? were quarter. the strong in to in product have the fourth quarter. fourth It's related XXXX. to word increase price and which fire the into of requires a Well, have when price current that about price the of the getting definition product. fire is the MoneyGuard To the still the next is significant in of PBR, quarter, implementation Why of case quarter hurts returns a I in a What is put the It a you're more capital we that upfront. the in exist because of is have the piece the

some down. I the admit increases because have price come Now of rates

we And little two were a still -- they below our where the so were means returns quarter but before, were returns. quarters or that before attractive they weren't

to Tom, took again, fourth think attractive and sell So quarter environment environment, products. of overall, a us it. existed the advantage a we buy for our I consumers And for attractive very once very to products in

Thomas Gallagher

sense, That Randy. makes

So MoneyGuard to statutory return. side, a more the lower economic as opposed on strain being

Randal Freitag

Yes. that a I'll insurance with PBR, why happens explain try PBR. something little helped instance, Term was that the bit for to business.

a a happens looked like get no move MoneyGuard why It diversity product it So is for It products regulators. in longer working a of you industry does and relatively a work by was was because to the our that great product. exist single needed, PBR was forward. the if hurt? or it long going wasn't MoneyGuard formula,

company and which with flows, cash up of reserve discounts a establishes makes PBR, ton back -- where came projects its out they sense. a So come a

future the the product one for those assumptions. a margin you flows projection a margins assumption a project took margin prices. significant of the that part opposed why to PBR, that like the you and to into was downsides cash product the MoneyGuard, gives longer PBR had as of And those goes a put really the that's the a of like expected on discount cash present of On those of they reason approach that flows each hurt on when to into One each of redundancy a was return the and MoneyGuard, raise is value. amount product, we out on

Dennis Glass

we're up, our Yes. to It's as are simple prices. going going quarter the costs next have in as raise to

Our in and could not costs fourth prices. did increase quarter, the so hold we

Operator

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

Humphrey Lee

sales the Life question XXXX. I sales. us was remind first expectation wondering dollar of the for related you in in My is Insurance to sales stream can lower every just if for for terms

sales of about should the Annuities think us the but maybe think in for space? dollar terms I given strength in that you've just of how past, in number life we remind every

Randal Freitag

speaking, because Humphrey, $X.XX. XXXX. product varies little I the on like it down sales roughly it's talked it bit reasons was you product. one a by about in MoneyGuard. will It's see up going come And what in a But of XXXX, of in XXXX broadly

Humphrey Lee

it. Got

terms So some kind of capital in sales of think repurchases. your of and additional thinking -- anticipate I or about is remarks, alluded I share any offset you would you from sort historically, but return that also in guess to decline that prepared

represent the from $XXX return, above kind the of sales I -- million XXXX? million $XXX for capital million least of guess, in potential will So of strength lower the $XXX at

Randal Freitag

I whether retained would some transaction. be there reflect It including whether, block sales can Dennis or generated down we are come Humphrey, about, at of sort talked mean we Lincoln. did ways everything, more capital than expect; as that many

believe advantage is think there's a the of what focused And opportunity that to our everything as we assured we very you we do stock we're I So I have rest on in as buy a take number back. of to, mentioned, can attractive factors. can past,

Humphrey Lee

it. Got related color. then a the Group appreciate to Protection. question And I

I come of are where the would then from much us how could about realized the end, guess, of the synergy XXXX. at $XXX compared would quarter? the Is at the And savings end cost expense excess the talked XXXX? have the million you you benefits in also emerge in savings along So to how think help you still the So about some expectation? how

Randal Freitag

to run in to million year. We million was line by expect rate the of with our $XXX end or grow the ended we a guidance, $XXX the which and year that so, of

better, assume the of lack I'd that occurs over ratably just year. For say,

Operator

question And with Suisse. from Kligerman comes Andrew Crédit next

Andrew Kligerman

your so Just trying the then the were quarter, Life years. a and that lines to robust capital couple has which X% sales in bit little the that I'm life those reconcile incredibly along over the with allocated roughly of segment, been of past to

returns, give were zero as range what exactly, Randy. very don't strong you think these a -- if maybe give maybe So us said, of could -- you I us want in these to you maybe

Randal Freitag

at give the Andrew, or we're you they Insurance to specifics, were not XX% I target that is for we to but above what would going Life business, the XX%. tell which

Andrew Kligerman

it. Got

up the rates, XX yield Annuities shifting went for On looked And the segment. basis annuities actually off X crediting bps came to then it rate Okay. your normalized over fixed and about crediting like point.

what questions I don't blocks deal? about question the the annuity there So the Athene-like annuity there's is, throw know selling variable blocks rate is fixed why your in so there? any another were the And life flexibility blocks, if and crediting ask I and of possibility doing

Randal Freitag

There different to question. are that halves very two

about a take let one, is question So spreads. me the first which

our what really script, the in business. business spread mix. mentioned I look my you'll there If quarter, down the that this came see annuity you about see you And in but at is

so And I There's I'd what me X point mean to by mix. business let say out. I when really things dig

a over up sale business. young your we of we then business the fixed targeted The that the is spread the is the of period. very in is modestly early life, And annuity have little bit Athene, first and post of charge lower did that the policy years book thing nature to you the a grade from surrender

products point the than in did sell other spreads? past. Commissions have we I'd targeted they sold spreads years XXXX targeted or we today have come lower down. The in Why have XXXX have thing do products that out in lower sell is we

lower down, targeted commission economics. drives come the spread without the So which average a has changing

the calculations. sell, can noneconomic can excuse me, third -- the pay of annuities, occur. options fixed when the It that the they The the versus describe thing, when products to inherent annuities, I as in anniversaries off just with would we some variable do volatility nature indexed FIAs have indexed create

our can earnings and annuity this on The comp earnings the in some business, you You the values XX%, Andrew, just average can inherent you fixed get the see I'd grew while to, statutory What volatility. grew XX%. point is supplement.

had maintained the So as economics noise, reported the but of spread, business I being the are that know spread growth. earnings some by evidenced

Andrew Kligerman

then blocks? That's And helpful. divestiture the potential of

Dennis Glass

Andrew, focused shareholder any a through minute we much add economic some what our have of And that to do sound we're than more if we'll can in-force, I is said ago, of business, do think, we in our maximizing on value. don't very a it. which I transaction of selling

Andrew Kligerman

is challenging rate maybe this these now low environment do it Dennis, of in right transactions? type very to

Dennis Glass

Well, into sell buy perspective. business, put a of let's shares we expect to our If that would absolutely. Andrew, back. we Yes. block

so both much side. those X in things for that it And moment And is have so there block back Athene deal, transaction transaction, where balancing on share at we come parties, either the the that's I together. the but room and the to left what's economics why to of or did the the economics, our when price price work from worked and wasn't

it both was transaction a parties. good So for

did Our the share interest transaction. that from down we is that from a price a likewise, did bit rates bit little when down that transaction. point are And little

Randal Freitag

The would I I have to deployment completely. which about reduction, caveat correct, response, you only Dennis' about you when deals, allocate you the think the more instance. for do, some you deals debt to is of to The agree think do smaller-sized for add have capital bigger the to

Operator

Our next Kamath Citi. question from with comes Suneet

Suneet Kamath

not will block I'm going rates. interest ask deals, about to ask but about I

kind of $XX low still of Is million think where talked in rates. you your I that about Randy, sit quarter, from today? So of drag view incremental terms last we an

Randal Freitag

of quarters, that we a we the end range. at And to said in EPS traveling about there, to think headwind I few growth of back to X% time, from X% the back I way we Suneet, was were if the you year, a beginning spread The Yes. compression. go talked got lower go the

we is of the of is end that end of Moving $XX the our more to what earnings the X% million. upper about and said and range, in year simply we're

end XXXX, X% I are, the that into X%. we think same. We're think they to of upper that traveling rates that move I where fact with as remains in

Suneet Kamath

there. was know then on impact And $XX year-over-year. expense million maybe numbers -- And amortization I there when other and it some I It up Okay. the was was the had Annuities of looked what fourth much quarter a amortization the with of how on any happened the basis? terms what the was go-forward markets. quarter just in over But versus the in in expect sense you'd like

Randal Freitag

thanks for question. Suneet, the Yes,

If they're variable you annuity at flat. earnings, relatively the look

fourth the XXXX they think I compared to quarter XXXX up. fact account fourth values that were grew despite million $X quarter

that why would I value in didn't account noise. And grow do to vast is amortization-related line what We how to particular a perform in markets equity the majority patterns of having having in was quarter. a noise? have with So amortization the earnings our explain phenomena do with amortization-related with

you'll where strong benefit the we have what is base see a when amount quarter, their So policies equity have market higher-than-average we that resets performance during very of higher.

get back lot value amortization elevated about in that reversion account of phenomena. get of create into Go to some down million will then that pulled were $X put was our will by quarter will fourth quarter We immediately those policies of amortization. and $X XXXX, to and process the That a markets the million quarter. the XXXX process opposite fourth the extra you the down the when in

So $X roughly year-over-year, it's to million million. $XX

Suneet Kamath

then And just Got I proof, for could. if last it. the one

a anything Another in some about that commissions I be seeing voluntary increased sort business of the of in get little high like related to is to upfront sense want churn. that churn just a company the this if commission-driven of may voluntary your some space in particularly space voluntary talked you're think had in causing different, competition, And I but terms space.

Dennis Glass

markets. our in Not

pricing. to across-the-board business, group far the rational fairly we and So see continue

Operator

Fargo. comes question with Our Wells from next Elyse Greenspan

Elyse Greenspan

disability on was allude the strong question of My business. We've also companies first some the kind leading heard pretty economy to results. good group to pretty

Liberty cross-sell of more things think I announced give about some to sense cross-selling expected opportunities. you your Dennis, that interim And where I pretty Can XXXX, are sit you would from the you good the come also us group As a business in expecting side trends guess, mentioned you have of still acquisition? the in what when you within versus and just today think you business? about you remarks,

Dennis Glass

the come of -- good Elyse, the the latter benefits of cost that There's transaction take maybe I'll first. questions. lot out And saves. a one besides

Lincoln the voluntary Liberty -- coming had from voluntary before the of sales did. total Lincoln, space, old old the than example, For sales merger, in more percentage

the some of we book. And companies' and that we advantages the we Lincoln can the together, at TWO so programs companies as apply that merged we brought had had or them take to

would an So that be example.

we and into management X,XXX old capabilities, the that of were to sales much sort -- employee absence had Liberty because bring to able be and better of our would increased we X,XXX example segment combination. those there Another

potential So of we variety of the good ways. in from to company see combination a continue the

Randal Freitag

longer-term I are, question, average, part Elyse, completely should over results create of on better low that, economy a agree your strong that disability one of on book time, expectations. the first why the and in the specifically XXXX. did than your unemployment expectations think, reasons we the business when that's, Liberty of that And had outperformed of the I acquisition we we have

noise. some get can you quarter-to-quarter, Now

we I fourth quarter, the this expect as seasonally saw higher mentioned, the So that disability in in and we year. loss ratios business

Elyse Greenspan

a Or you terms accounting of changes, And adopting That's XXXX? guys start guys are Okay. in the those X-year of you using then the are annuity phase-in? as variable helpful.

Randal Freitag

I to Oliver changes think you that are talking and going about or VA adopt -- we're VA the statutory on X/X/XXXX. reform, Wyman driven

noise? by move What I the -- I mean that. economics I reform noise a from or As and on the tails RBC reform improved business has what statutory believe get. reminder, statutory can capital, you the any the that impact that not reduces the differently do in expect it and can is do we we statutory the that mean of good mean of

Operator

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

Taylor Scott

some one And the block. First I part a guess, in to guys had little block Liberty had XQ I typically I you on have and repricing guess, existing DAC, been then, of I in I it's know, seasonal and group. the was think Mutual related

so to TSAs specifically, guess, know persistency, as in if that to XQ transition continue? interested also just DAC thus, and impact expect And the And I the if you'd was would the well? I of sort off

Randal Freitag

You are correct.

been good memory, last a improving have has years. That the Alex. three over You

year. level excess I but be of a it phenomena think bit than quarter, in the that first smaller will may to last was at a little it due have we amortization

amortization I numbers, thing in can those a intangibles up. will of little step-up would amortizing have The some is remind bit do the about we you it XXXX. you acquisition, the some intangibles with exact what give and step the other Chris will associated

Taylor Scott

up be darn Okay. a I little Annuities segment. about just have held guess, the pretty a flows. on mean talk interested helpful. rate I if interest could well the as I'd That's those environment. follow-up, bit then you And with

the you Do just kind interested So of what you're XXXX? I can to you that's driving was positive flows think doing continue know into that.

Dennis Glass

have affect across types could to sales Yes. positive/negative the of about products. Alex, level the the different without, volume, were today the of changes we'll we've the guarantees what does. positive on price competition predict or fixed XXXX negative And VAs whether in annuities -- from positive in hard that the talking and of flows. all flows It's been consequently, flows or VAs either one dependent with it's, of part, because

But share our buyback. that a that we I from extent that take are negative per earnings guess flow, be We'll lower. shares reduced perspective, capital we have to to -- buy because I say from expect would we the come sales did an would would back sales that to and

will little economic outcomes. to down X between So growth indifferent EPS from the a those line, bottom -- be

the our on organization, distribution quality focus franchise strength that's quality and our keeping partners. sales to level with continue distribution consistent maintaining We a of

so earnings it's from negative things all comes around or dynamics of it long-term into a And that flows out the those go and combination perspective. positive where

Operator

Chris to And any Giovanni Mr. back I'm I'd closing to time. questions like remarks. showing at turn no further the call for this

Christopher Giovanni

Thank this all us morning. you joining for

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

Operator

Ladies and Thank call. gentlemen, for you this conference concludes today's participating.

stand please Speakers, by. disconnect. may now You

Lincoln National (LNC) 6 Feb 202019 Q4 Earnings call transcript