Lincoln National (LNC) Q4 2008 earnings summary

Executive summary

• FY08 revenue $9.883B, down 6% YoY; net income $57M versus $1.215B in FY07, with a $505M Q4 loss. Diluted EPS was $0.22 for FY08 and $(1.98) in Q4.

• Equity-market declines, investment impairments, adverse reserve unlocking and goodwill/intangible charges weighed on results; operating income fell across most segments.

Financial highlights

• Income from continuing operations was $62M versus $1.321B in FY07; pre-tax continuing loss was $25M, with an $87M federal tax benefit.

• Realized loss was $537M versus $169M in FY07; net realized investment loss excluding trading securities was $1.05B, including $1.075B of other-than-temporary impairment write-downs.

• Net cash from operating activities was $1.259B, down from $1.955B; year-end cash and invested cash rose to $5.926B from $1.665B.

• Assets were $163.136B and stockholders’ equity $7.977B at year-end, versus $191.435B and $11.718B a year earlier.

Outlook and guidance

• Annuities, Defined Contribution, Investment Management and Lincoln UK expected lower FY09 earnings than FY08, excluding unlocking impacts; pressures include reduced account values, weaker fees, alternative investment returns and higher pension costs.

• 2009 priorities included reducing risk in variable-annuity guarantees, aggressive expense management, completing platform/system consolidation and evaluating non-core asset sales or other capital-raising options.

• Management expected sufficient liquidity to meet 2009 obligations, but warned continued market weakness could constrain subsidiary dividends and require capital preservation or new capital.