Valens Equity Weekly Insights - 2023 08 22
Lincoln National (LNC) has a significant profitability tailwind from rising interest rates and is set to see improved returns following a year in which the company weathered multiple transitory issues. Uniform Accounting highlights the company's profitability potential that the market is missing, indicating equity upside.Lincoln is one of the largest life insurance companies in the world, offering services in life
insurance, annuities, group protection, and retirement. The company has taken advantage of high interest rates in the past by reinvesting assets into fixed income investments. In recent years Uniform ROE has declined as interest rate have fallen. However, with interest rates at their highest level since 2008, Lincoln has the potential to ramp up Uniform ROE to
levels last seen when rates were elevated.
Lincoln's management team is aligned to focus on margins, and growth, which should contribute to ROE expansion.
Management confidence in the Q2 earnings call about sales improvements in its life insurance division support further ROE expansion and continued growth.
3M (MMM) is being removed from the Conviction Long List. The company is continuing to deal with legal fees associated with its earplug and PFAS lawsuits, and its core business has slowed down as a result of supply chain issues.
LNC
Lincoln National operates multiple insurance and retirement businesses through its subsidiary companies. The company provides products and services through four segments as follows: Annuities, which provides tax-deferred investment growth and lifetime income opportunities for its clients by providing variable annuities, fixed annuities and indexed variable annuities; Retirement Plan Services, which provides employers with retirement plan products and services, primarily in the defined contribution retirement plan marketplace; Life Insurance, which focuses on the creation and protection of wealth for its clients; and Group Protection, which provides group non-medical insurance products.
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