Lincoln, Other Insurers Reverse Year-Ago Losses: Q2 Earnings

By Allison Bell

News August 05, 2021 at 02:17 PM

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Lincoln Financial (LNC) — the Radnor, Pennsylvania-based company officially known as Lincoln National Corp. — says an easing of the COVID-19 pandemic and pandemic-related restrictions gave it a big earnings boost in the second quarter.

Lincoln is reporting $642 million in net income for the quarter on $4.9 billion in revenue, compared with a $94 million net loss on $3.5 billion in revenue for the second quarter of 2020.

Lincoln's annuities unit is reporting $323 million in operating income on $1.2 billion in operating revenue, up from $237 million in operating income on $1 billion in revenue for the year-earlier quarter.

Commissions incurred increased to $297 million from $245 million.

The quarter ended June 30.

Here's what happened to sales of two major classes of annuities between the second quarter of 2020 and the latest quarter:

Fixed Annuities: $184 million (down from $299 million)
Variable Annuities: $3 billion (up from $2.2 billion)

Lincoln's life insurance unit is reporting $255 million in operating income on $2 billion in operating revenue, compared with a $37 million operating loss on $1.6 billion in operating revenue for the year-earlier quarter.

Commissions incurred fell to $130 million, from $173 million.

Here's what happened to first-year premiums for some types of life insurance products between the second quarter of 2020 and the latest quarter:

Universal Life: $2 million (down from $5 million)
Indexed Universal Life: $18 million (down from $23 million)
Variable Universal Life: $27 million (down from $55 million)
MoneyGuard: $23 million (down from $36 million)
Term Life: $35 million (down from $36 million)

Here's what happened to sales for some types of insurance benefits products:

Group Life: $37 million (down from $47 million)
Group Disability: $37 million (down from $47 million)
Group Dental: $5 million (down from $11 million)

The group life loss ratio fell to 79.6% for the latest quarter, from 101% in the first quarter, thanks to the easing of the COVID-19 pandemic.

The group dental loss ratio increased to 81.6% from 40.2% a year earlier as the easing of the lockdown let use of dental services return to pre-pandemic levels.

Here's a look at some of the life, health and annuity market players that posted earnings so far this week.

Equitable Holdings (EQH)

Equitable Holdings Inc. is reporting $123 million in net income for the second quarter on $3 billion in revenue, compared with a $4 billion net loss on $2.6 billion in negative revenue for the second quarter of 2020.

The New York-based life insurer uses derivatives to protect annuities and other products against changes in stock prices, interest rates and other variables. Earnings increased partly because net derivatives losses decreased to $1.2 billion from $6 billion in the year-earlier quarter.

The company's individual retirement products unit is reporting $414 million in operating earnings for the latest quarter on $979 million in revenue, compared with $350 million in operating earnings on $800 million in revenue for the year-earlier quarter.

Individual retirement unit spending on commissions and other distribution-related payments increased to $75 million from $60 million.

First-year premiums and deposits increased to $2.8 billion from $1.6 billion.

Here's what happened to first-year premiums for three types of classes of annuities between the second quarter of 2020 and the latest quarter:

Structured Capital Strategies: $1.9 billion (up from $987 million)
Retirement Cornerstone: $454 million (down from $465 million)
Investment Edge: $301 million (up from $89 million)

The company's protection solutions unit, which sells life insurance, is reporting $63 million in operating earnings for the latest quarter on $832 million in revenue, compared with a $12 operating loss on $728 million in revenue for the year-earlier quarter.

Protection solutions unit spending on commissions and other distribution-related payments increased to $42 million from $35 million.

Here's what happened to first-year premiums for some types of protection unit products between the second quarter of 2020 and the latest quarter:

Indexed Universal Life: $10 million (down from $41 million)
Variable Universal Life: $67 million (up from $29 million)
Term Life: $4 million (down from $5 million)
Employee Benefits: $19 million (up from $14 million)

Prudential Financial (PRU)

Prudential is reporting $2.2 billion in net income for the second quarter on $13 billion in revenue, compared with a $2.4 billion net loss on $13 billion in revenue for the second quarter of 2020.

At the Newark, New Jersey-based company's U.S. individual annuities unit, adjusted operating income before income taxes increased to $472 million on $1.2 billion in revenue from $249 million on $953 million in revenue in the year-earlier quarter.

The U.S. individual life insurance unit is reporting a $44 million adjusted operating loss before income taxes on $1.6 billion in revenue, compared with a $64 million loss on $1.6 billion in revenue.

Here's what happened to sales, expressed in annualized new premiums, for key life and annuity products between the second quarter of 2020 and the latest quarter:

U.S. Individual Life Insurance

Sales

Term Life: $34 million (down from $40 million)
Guaranteed Universal Life: $18 million (down from $34 million)
Other Universal Life: $16 million (down from $23 million)
Variable Life: $112 million (up from $87 million)

Other Indicators

Life Sales through Prudential Advisors: $40 million (up from $35 million)
Sales Through Outside Distributors: $140 million, (down from $149 million)
Total U.S. Individual Life Coverage in Force: $483 billion (up from $464 billion)

U.S. Individual Annuities

Sales

Variable Annuities: $1.6 billion (up from $1.1 billion)
Fixed Annuities: $58 million (down from $295 million)

Other indicators

Insurance Agents: $630 million (up from $496 million)
Wirehouses: $131 million (down from $160 million)
Independent Marketing Organizations: $3 million (down from $82 million)
Independent Financial Planners $860 million (up from $536 million)

Fidelity National Financial (Fidelity & Guaranty) (FNF)

Fidelity National Financial is a Jacksonville, Florida-based property and casualty insurer with a large annuity business.

The company is reporting $552 million in net income for the second quarter on $3.9 billion in revenue, compared with $309 million in net income on $2.4 billion in revenue for the second quarter of 2020.

The company completed the acquisition of FGL Holdings, the parent of a large annuity issuer, Fidelity & Guaranty Life (F&G), in June 2020.

F&G is reporting $82 million in net income for the latest quarter on $802 million in revenue. Fidelity National says the earnings for the latest quarter are not comparable to F&G's earnings for the second quarter of 2020.

F&G recorded a total of $1.6 billion in annuity sales in the second quarter, up from $913 million in annuity sales for the year-earlier quarter.

Non-variable indexed annuities increased to $1.1 billion in the latest quarter from $866 million.

Horace Mann Educators Corp. (HMN)

Horace Mann — a Springfield, Illinois-based insurer that serves educators — is reporting $47 million in net income for the second quarter on $347 million in revenue, up from $30 million in net income on $315 million in revenue for the second quarter of 2020.

The company's retirement unit is reporting $11.5 million in core earnings on $117 million in annuity contract deposits, up from $9.7 million in core earnings on $102 million in contract deposits a year earlier.

The total number of annuity contracts in force fell to 229,000 from 230,000.

Here's what happened to contract deposits for two types of annuities between the second quarter of 2020 and the latest quarter:

Fixed Annuities: $50 million (up from $49 million)
Variable Annuities: $68 million (up from $52 million)

Core earnings at the life insurance unit increased to $5 million on $30 million in premiums and contract deposits from $1.9 million on $28 million in premiums and contract deposits.

The number of life insurance policies in force held fell to 200,000 from 201,000.

The amount of life insurance in force increased to $20.1 billion from $19.6 billion.

Kansas City Life Insurance Company (KCLI)

Kansas City Life Insurance Company is reporting $4.3 million in net income for the second quarter on $125 million in revenue, compared with $17 million in net income on $147 million in revenue for the second quarter of 2020.

Deaths related to COVID-19 accounted for about 6% of the Kansas City, Missouri-based company's total mortality costs in the second quarter.

MetLife (MET)

MetLife, a New York-based life insurer, is reporting $3.4 billion in net income for the second quarter on $19 billion in revenue, compared with $150 million in net income on $14 billion in revenue for the second quarter of 2020.

The company is focusing in the U.S. mainly on the sale of group benefits insurance products and retirement plan products and services.

The U.S. group benefits unit is reporting $248 million in adjusted earnings for the latest quarter on $5.9 billion in premiums, fees and other revenues, compared with $248 million in adjusted earnings on $4.6 billion in premiums, fees and other revenues for the year-earlier quarter.

The easing of the COVID-19 pandemic that occurred in the second quarter helped reduce the group life mortality ratio to 94.3% from 95.9% for the year-earlier quarter.

MetLife estimates that, in the latest quarter, COVID-19-related deaths increased the group life mortality ratio by about 4.5 percentage points.

The group non-medical health benefits ratio increased to 71.1% from 58.5% in the second quarter of 2020, because the easing of the pandemic and related lockdowns helped use of dental care return to normal levels.

The retirement and income solutions unit is reporting $537 million in adjusted earnings for the latest quarter on $2.2 billion in total adjusted revenues, up from $511 million in adjusted earnings on $1.6 billion in total adjusted revenues for the year-earlier quarter.

Unum Group (UNM)

Unum Group — a Chattanooga, Tennessee-based issuer of group disability insurance and other products sold through employer-paid group plans, voluntary group plans and sales of individual products at the worksite — is reporting $183 million in net income for the second quarter on $3 billion in revenue, compared with $265 million in net income on $3 billion in revenue for the second quarter of 2020.

Overall commission spending fell to $260 million from $273 million.

Unum US

Unum US, the company's traditional group insurance unit, is reporting $179 million in adjusted operating income for the latest quarter on $1.7 billion in revenue, compared with $232 million in adjusted operating income on $1.7 billion in revenue.

Commission spending fell to $148 million from $154 million.

Here's what happened to sales revenue for some key products between the year-earlier quarter and the latest quarter:

Group Long-Term Disability: $42 million (down from $55 million)
Group Short-Term Disability: $31 million (up from $30 million)
Group Life and AD&D: $64 million (up from $57 million)

Colonial Life

Colonial Life, Unum's worksite marketing unit, is reporting $96 million in adjusted operating income on $462 million in adjusted operating revenue, compared with $91 million in adjusted operating income on $476 million in adjusted operating revenue.

Commission spending fell to $78 million from $87 million.

Here's what happened year-over-year to Colonial Life sales for several key products:

Accident, Sickness and Disability: $69 million (up from $45 million)
Life: $26 million (up from $16 million)
Cancer and Critical Illness: $16 million (up from $11 million)

Genworth Financial (GNW)

Genworth — a Richmond, Virginia-based issuer of life insurance, annuities and long-term care insurance — is reporting $240 million in net income for the second quarter on $2 billion in revenue, compared with a $418 million net loss on $2 billion in revenue for the second quarter of 2020.

Genworth's life insurance unit is reporting $71 million in adjusted operating income on $1.7 billion in revenue, compared with a $5 million adjusted operating loss on $1.7 billion in revenue for the year-earlier quarter.

The company's long-term care insurance (LTCI) unit produced $98 million in adjusted operating income for the quarter on $1.2 billion in revenue, up from $48 million in adjusted operating income on $1.2 billion in revenue for the year-earlier quarter.

LTCI unit net investment income increased to $509 million from $422 million, and LTCI benefits fell to $822 million from $876 million.

A key measure of life unit solvency, the U.S. life insurance companies' consolidated risk-based capital ratio, increased to 270% in the latest quarter from 222% a year earlier.

CVS Health (CVS)

CVS — a Woonsocket, Rhode Island-based drug store company and health insurer — is reporting $2.8 billion in net income for the second quarter on $73 billion in revenue, compared with $3 billion in net income on $65 billion in revenue for the second quarter of 2020.

CVS administered about 6 million COVID-19 tests and about 17 million COVID-19 vaccines in the second quarter.

The company's health care benefits unit, which now includes Aetna and some other operations, ended the quarter providing or administering coverage for 23 million people, or about as many people as it was covering a year earlier.

The unit reported $1.6 billion in adjusted operating income for the latest quarter on $20 billion in revenue, compared with $3.5 billion in adjusted operating income on $18 billion in revenue for the year-earlier quarter.

Earnings fell partly because COVID-19 lockdowns severely depressed use of routine health care services in the second quarter of 2020. Use of ordinary health care recovered to normal levels in the latest quarter.

Here's what happened to enrollment in four types of coverage between the second quarter of 2020 and the latest quarter.

Commercial Insured: 3.2 million (down from 3.3 million)
Medicare Advantage: 2.9 million (up from 2.7 million)
Medicare Supplement: 1.2 million (up from 954,000)
Medicaid: 2.2 million (up from 1.9 million)

Bright Health Group (BHG)

Bright Health Group — a Minneapolis-based health insurer that runs its own primary care clinics and other clinics — is reporting a $44 million net loss for the second quarter on $1.1 billion in revenue, compared with an $18 million net loss on $297 million in revenue for the second quarter of 2020.

The company ended the quarter providing or administering medical coverage for about 663,000 people, up from about 207,000 a year earlier.

Here's what happened to enrollment for Medicare and commercial coverage between the second quarter of 2020 and the latest quarter:

Commercial plans: 552,759 (up from 153,083)
Medicare plans: 110,066 (up from 54,141)

Lemonade (LMND)

Lemonade, a New York-based company that sells insurance online, is reporting a $56 million net loss for the second quarter on $28 million in revenue, compared with a $21 million net loss on $30 million in revenue for the second quarter of 2020.

The total number of customers increased to 1.2 million from 814,000 a year earlier, and the average amount of premiums per customer increased to $246 from $190.

Lemonade has started selling life insurance but is better known for selling insurance for renters, homeowners and pet owners.

The company did not break out separate figures for its life operations.

"Relative to pet, our life product has been a bit slower out of the gate," the company said in a letter to shareholders.

But the second quarter was the first time Lemonade has allocated meaningful advertising dollars to life insurance, and its executives are "encouraged by the trends we are seeing in the life business," the company added.