IB Net Payout Yields Model

Lincoln Financial Book Value Soars 20% in 2011

Lincoln Financial (LNC) reported after the close that earnings for Q4'11 were $1 which helped increase the book value 20% for the year. Now try explaining to a non investor why the stock price for Lincoln declined for the year. The company is worth more by every measure, but the stock is worth a lot less.

Another mind boggler is that the short term earnings picture remains reasonable, even though low interest rates are keeping income artificially low. So not only did Lincoln report huge earnings in 2011, but it also has the potential for higher earnings down the road.

Speaking of book value, it increased to $48.59. The main increase was due to earnings, but Lincoln also repurchased $575M shares during 2011 reducing the diluted shares by 6%. Anytime a company can buy shares at 50% of book value it provides huge value to shareholders.

The company also raised the quarterly dividend 60% to $.08 to yield 1.3%.  It also repaid $250M of Senior Notes.

The question still remains what will kick investors into buying the stock. The value is cheap, earnings remain solid, and future will get better with higher interest rates. Investors though just ignore the stock.

Some other details from the PR:

Fourth Quarter 2011 Operating Highlights:
  • Consolidated deposits of $5.5 billion
  • Consolidated net flows of $1.6 billion up 21%
  • Total account balances of $160 billion
  • Life Insurance sales of $229 million up 11%
  • Retirement Plan Services net flows of $219 million
  • Group Protection sales of $207 million up 33%
Full Year 2011 Operating Highlights:
  • Consolidated deposits of $21.6 billion
  • Variable annuity deposits of $8.7 billion up 6%
  • Retirement Plan Services net flows of $0.5 billion versus $(0.3) billion in 2010
  • Life Insurance sales of $0.7 billion up 10%
  • Group Protection loss ratio of 72.9% versus 76.2% in 2010

The chart formed a nice base in the fall and is the process of breaking out. Just reclaiming the July highs get the stock quickly back to $30. 

Disclosure: Long LNC. Please review the disclaimer page for more details. 


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