Lincoln National (Radnor PA) Earnings Call Nuggets: The Goodwill Balance and Variable Annuities
The Goodwill Balance
Randy Binner – FBR Capital Markets Co.: Hard to know where to start, but I guess I’ll address the lack of the goodwill charge. Just wondering if you could give any color on kind of how that process worked in determining the fair value versus the carrying value and if it’s still the same evaluation of new business and value of business in-force, but any color on the lack of development there would be helpful?
Dennis R. Glass – President and CEO: As always, every year we do a real thorough analysis on goodwill, includes both internal and external resources, so we bring in a lot of opinions into the process. Last year when we did that analysis that led us to the impairment of $750 million, I think when I said coming out of that that I felt really good about the goodwill balance and when we did the analysis this year it led to no impairment. We feel real good about those results and we’ll provide some more details in the 10-K, but outside of that we feel real good about where we ended up.
John Hall – Wells Fargo Securities: I was going to ask a question about the variable annuities and Dennis you mentioned I guess managing the process of not getting too much market share, which based on the competitive environment out there; there could be a fair amount of market share available? How you do that?
Dennis R. Glass – President and CEO: First let me say, I’d repeat what I said in my remarks. John, we repriced in December and we’ll already seen decline in Av account as a result of that repricing. We do expect growth but not outsized growth in 2013. I’d also point out that for five years running we have maintained the same market share and we prefer to modulate demand by pricing adjustments. I don’t like to take unofficial actions like pulling a hot product for a short process for a short period. So if somebody does something like that or somebody changes their supply in the market place and we start getting a little bit more share we will move our pricing up. So in the quarter you could see some adjustments or increased market share because of actions other people have taken. But we have been very successful, again I will repeat it, our market share has remained consistent at 5 for the last five or six years despite the fact that number one, two, three and four, some of them aren’t in the market anymore, some of them have moved around. So pricing adjustments is the way we want to modulate demand – or temper demand. As to supply in the market place, actually it’s not as clear to me that it’s going to decrease; I think that was the point of your question, as actually a lot of people who are coming back into the market. So we will have to see what the supply demand situation is in 2013. I’d also comment, you didn’t ask this question, but I think it is very encouraging to see smart money coming back into the variable annuity space. We have seen some acquisitions of blocks and some reinsurance transactions, one was just announced yesterday, which I think are – it’s not what I think, but the people who are doing this are pretty smart people. So I think that ought to be helpful to people better understanding this marketplace over time.
John Hall – Wells Fargo Securities: Then I just have a second question on leverage here, your debt capital ratio as per the supplement is now below 20%. Is there a thought process around leverage capital management buybacks that you could talk about?
Randal J. Freitag – CFO: Yeah John, this is Randy. I think as I said in my comments, we expect to continue as we come into the year to deploy roughly $400 million of capital with the majority of that going into buybacks, share buybacks. I do expect that when given the opportunity, we may do some modest monetary leveraging. We feel pretty good about where we are from a leverage standpoint but we will continue to allocate small amounts. To give you an example, I think early in 2014, we have $500 million of debt coming due for ourselves, so that’s really the next big opportunity we would have to do anything. But for the near-term, over the next year, I would say most of the capital would be allocated to share buybacks.
A Closer Look: Lincoln National Earnings Cheat Sheet>>