Lincoln National Corporation (LNC Quick Quote) reported fourth-quarter 2021 adjusted earnings per share of $1.56, down from the Zacks Consensus Estimate of $1.98. In addition, the summary was down from $1.78 per share last year. Profits were impacted by higher costs and expenses and lower alternative portfolio returns in the life insurance business.

Adjusted operating income increased to $4,769 million in the fourth quarter, up from $4,655 million a year ago. In addition, it surpassed the consensus mark of $4,687 million. Revenue benefited from sales growth, pricing discipline and solid stock market performance.

Costs and Fees

Total expenses were $4,367 million, up from $4,046 million a year ago, primarily due to increased costs related to benefits, Spark, strategic digitalization and commissions. Benefits accounted for 51.5% of total expenses.

Segment Performance

Annuity segment operating income soared to $332 million in the fourth quarter, up from $289 million a year ago, helped by solid equity market performance that paved the way for increased account value. Operating income increased to $1,282 million from $1,163 million a year ago. Total annuity deposits increased 20 percent year-over-year to $3,011 million.

The Retirement Plan Services segment reported operating income of $57 million, up 16.3 percent from the prior year. The upside can be attributed to strong equity market performance, strong returns from the company's alternative investment portfolio and increased account value from continued expense efficiencies. Operating income was $335 million, up 3.7 percent from the prior year. Total deposits for the quarter were $3.0 billion, up 17.3 percent from the prior year.

Operating income in the life insurance segment was $80 million, down from $144 million in the same period last year. The decline was due to lower returns in the alternative investment portfolio. Operating income declined 4.4 percent year-over-year to $1,844 million. However, total life insurance sales increased 120.9 percent year-over-year to $254 million in the fourth quarter, as sales of all major products increased.

The Group's Protection segment reported an operating loss of $115 million, up from a loss of $42 million in the same period last year. Results were impacted by higher mortality and morbidity rates due to the pandemic. Operating income was $1,252 million, up 5.7 percent year-over-year. Premiums increased 6.5 percent year-over-year to $1,117 million. However, total sales for the quarter declined 14.4 percent year-over-year to $385 million.

Financial Update (as of December 31, 2021)

Lincoln National removed cash in the fourth quarter, with cash invested of $2,612 million, up 52.9 percent from the prior year. Total assets were $387.3 billion, an increase of 5.8 percent from the prior year.

Long-term debt at the end of the quarter was $6.325 billion, down 5.3 percent year-over-year. Short-term debt was $300 million. As of February 2, 2022, its senior debt was rated "A-" and "BBB+" by Standard & Poor's and Fitch, respectively. Shareholders' equity declined 10.7% year-over-year to $20,272 million.

Book value per share, excluding the increase in other comprehensive income (AOCI), increased 9 percent year-over-year to $78.05.

Adjusted return on operating equity, excluding AOCI, was 8.1 percent compared to 10.1 percent a year ago.

Cash returned to shareholders

Lincoln National repurchased $650 million worth of stock during the fourth quarter. In addition, it paid $78 million in ordinary dividends. The company used $500 million from its bulk reinsurance transactions through an accelerated share repurchase program.

Appearance

Earnings per share are expected to rise on the back of the Spark Initiative, although the ongoing pandemic will likely continue to hurt the company's results.

Zacks Rankings and Key Picks

Lincoln National currently owns the Zacks Rank #3 (Hold). Some of the higher ranking players in this space include Atlas Corp. (ATCO Quick Quote – ), Enact Holdings, Inc. (ACT Quick Quote – ) and Veritex Holdings, Inc. Quick Quote – ), each of which has a Zacks Rank #2 (Buy). As you can see.

Based in London, Atlas Corp. is a global asset management company. The Zacks Consensus Estimate for ATCO's 2021 profit shows a 77.3% increase from a year ago. Atlas Corp. has beaten earnings estimates three times and missed them once in the last four quarters, with an average surprise of 25.7%.

Raleigh, N.C.-based Enact Holdings offers private pledge loan insurance products in the U.S. The Zacks Consensus Estimate for ACT's current year summary indicates a 5.3% increase over the same period last year. Enact Holdings' current year summary has undergone one upward revision in the last 30 days and has not moved downward.

Headquartered in Dallas, Texas, Veritex offers a wide range of business banking products and services to a diverse set of businesses. The Zacks Consensus Estimate for VBTX's 2021 profit indicates an 11.9% increase over the same quarter last year. Veritex has beaten earnings estimates three times in the last four quarters and met with one surprise of 10.3% on average.