On Dec 23, 2015, we issued an updated research report on Lincoln National Corporation LNC.
Lincoln National holds a leading market position in terms of its Life and Annuity segments. The company continuously strives to de-risk its product portfolio by curtailing the sales of longer-dated products that expose it to involuntary forces like interest rate or equity market volatility.
Lincoln National’s Life Insurance segment is also performing well. The segment registered an increase of 10.5% in overall life sales in the first nine months of 2015. The company would witness further improvement its market position as it ramps up a few key product areas.
Moreover, the company has a strong enterprise risk management practice in place, thanks to its in-force blocks. It manages risk via strong product and investment cash flow hedging as well as regular stress testing of risk-adjusted capital. The company also uses external reinsurance for a portion of the new variable annuity sales that carry living benefit guarantees.
Lincoln National has also been able to maintain strong operating performance due to updates in its product portfolio and underwriting discipline. The company displays its prudence by introducing modifications in these metrics according to changing economy and regulations. Lincoln National also maintains adequate cash holdings and has good access to additional cash sources. These provide the insurer with the necessary financial flexibility.
However, Lincoln National’s substantial in-force blocks of secondary guarantee universal life, variable annuities with living benefit guarantees and interest-sensitive fixed annuities expose it to interest rate risk and equity market volatility. Moreover, earnings from the company’s Retirement Plan Services and Group Protection segments have remained under pressure due to stiff competition.
Currently, Lincoln National carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the insurance sector are American Equity Investment Life Holding Company AEL, Primerica, Inc. PRI, and Symetra Financial Corporation SYA. All these stocks hold a Zacks Rank #2 (Buy).
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