What happened
Lincoln National (LNC +1.38%) had another rough week as its share price fell 17.8% from last Friday's close through 2 p.m. ET on Friday, according to S&P Global Market Intelligence. The insurance stock is down about 53% year to date, trading at just over $31 per share as of Dec. 9.
The market was down slightly this week as the Dow Jones Industrial Average fell 2.1%, the S&P 500 was down 2.7%, and the Nasdaq Composite was off 3.3% this week, as of 2 p.m. ET Friday.
So what
Lincoln National continues to have fallout from a subpar third-quarter earnings report. The stock price dropped more than 30% on Nov. 3 upon the release of the report, which saw the insurer and asset manager post a net loss of $2.6 billion, or negative $15.17 per diluted share, compared to earnings of $318 million, or $1.68 per diluted share a year ago.
It missed earnings estimates by a wide margin as the adjusted loss from operations was $1.7 billion, or negative $10.23 per diluted share, which was more than $12 per share lower than the consensus $1.97 earnings per share (EPS) predicted by analysts.
NYSE: LNC
Key Data Points
The firm got hit with about $2 billion in charges, an $11.62-per-share impact, from the company's annual review of deferred acquisition costs (DAC) relating primarily to updated guaranteed universal life insurance lapse assumptions.
The impact was felt again this week as Lincoln National CEO Ellen Cooper said at the Goldman Sachs US Financial Services Conference this week that the company was suspending its stock buyback program in 2023 as it works to recover the massive Q3 losses. This was likely a major catalyst for this week's sell-off.
Now what
On the third-quarter earnings call with investors, Cooper said the charges are expected to result in a $180 million decline in annual run rate operating earnings, so the effects will linger.
The stock is extremely cheap with a price-to-earnings (P/E) ratio of 3.51 and it plans to maintain its dividend, Cooper said on the earnings call.
But there's work to be done in strengthening the balance sheet, rebuilding risk-based capital, diversifying revenue, and enhancing earnings, so keep an eye on some of the forthcoming initiatives over the next few quarters to accomplish these goals.
