Lincoln National Corp.’s April 3 closing of its purchase of Jefferson-Pilot Corp. allowed it to report an enormous second-quarter profit increase, but analysts said that, without the deal, the results were up only mildly.
The Philadelphia insurer announced late Tuesday that earnings had risen 76.4%, to $349 million, or $1.23 per diluted share, compared with the second quarter last year. It beat the average of analysts’ earnings estimates by nine cents, according to Thomson First Call.
The company posted a record quarter for variable annuity sales, including a 79% increase in the bank channel.
Jefferson-Pilot contributed about $145 million of the earnings. Lincoln agreed last year to pay more than $7 billion for Jefferson-Pilot, a rival based in Greensboro, N.C. The second quarter was the first that combined the two businesses’ results.
Analysts said that, without the Jefferson-Pilot merger and better than expected investment results, Lincoln’s quarter was fairly flat. Excluding Jefferson’s contribution, Lincoln’s earnings were up 4.1%, to $206 million.
Jon A. Boscia, Lincoln’s chairman and chief executive officer, said during the quarterly earnings call Wednesday that the purchase was important for his company’s strong results but that all of Lincoln’s major businesses had strong organic growth.
Consolidated domestic retail deposits, which include individual annuities, mutual funds, life insurance, and other personal wealth-accumulation products together with retirement products sold in the employer-sponsored marketplace, grew 6%, to $7.5 billion, from a year earlier.
Lincoln reported consolidated retail net flows for the quarter of $1.9 billion. Investment management institutional deposits were $2.8 billion for the quarter, after $687 million of net flows. Consolidated assets under management rose 15%, to $212 billion. Jefferson-Pilot added about $29 billion to the latter tally.
In the quarter, gross deposits reached $2.8 billion, and net flows were $844 million, both fueled by strong growth in variable annuity deposits, up 31%, to $2.4 billion.
Dennis R. Glass, Lincoln’s chief operating officer, said this was the strongest quarter for variable annuity sales in the company’s history. “We expect sales to remain solid and consistent despite the increased competition,” he said.
But despite this growth, the biggest story of the quarter for Lincoln remained its integration with Jefferson-Pilot. The company said it saved $18 million in the quarter by merging the two businesses. It said it will close two offices — one in Illinois and one in Maine — by the middle of next year.
Frederick J. Crawford, the company’s chief financial officer, said during the conference call that Lincoln remains “on course” to achieve its target of $90 million of annual cost savings in the first year after the deal’s closing. He said he expects $20 million of cost savings in each quarter this year related to the integration.
