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On Thursday, Lincoln National Corporation (NYSE:LNC) maintained its Market Perform rating and a price target of $38.00, as reiterated by analysts at Keefe, Bruyette & Woods. The reaffirmation follows Lincoln National's announcement of a strategic partnership with Bain Capital. This collaboration includes Bain Capital acquiring a 9.9% equity stake in Lincoln National at $44 per share, alongside a non-exclusive investment management agreement.
The transaction is expected to bring in $825 million in equity for Lincoln National, which currently maintains strong liquidity with a current ratio of 2.33. The company has outlined potential applications for these funds, such as accelerating the growth of spread-based earnings, optimizing its legacy life insurance block through asset repositioning and potential reinsurance, reducing its leverage ratio, and enhancing the flexibility for future capital returns. Notably, the company has maintained dividend payments for 55 consecutive years, demonstrating consistent shareholder returns.
The strategic move is anticipated to unfold over the next 18 months, with the goal of increasing free cash flow (FCF) per share by the year 2027. The partnership with Bain Capital represents a significant step for Lincoln National as it seeks to strengthen its financial position and drive long-term growth. With annual revenue of $17.97 billion and trading at a P/E ratio of just 1.75, InvestingPro subscribers can access detailed analysis of Lincoln National's valuation metrics and growth potential in the comprehensive Pro Research Report, along with 6 additional ProTips for informed investment decisions.
The agreement between Lincoln National and Bain Capital is a notable development for the insurer, as it aims to leverage the investment to bolster various aspects of its business. The equity stake sale at $44 per share also signifies a vote of confidence in Lincoln National's future prospects from Bain Capital.
Lincoln National's strategic partnership with Bain Capital is set to unfold over the coming year and a half, with the company's leadership aiming to utilize the proceeds in ways that will enhance shareholder value and contribute to a stronger financial performance in the years ahead.
In other recent news, Lincoln National Corporation reported fourth-quarter 2024 earnings that exceeded analyst expectations. The company achieved adjusted operating earnings of $1.91 per share, surpassing the consensus estimate of $1.83, and reported revenue of $5.06 billion, beating the expected $4.67 billion. In a strategic move, Lincoln National entered into a partnership with Bain Capital, which acquired a 9.9% stake in the company for $825 million. This transaction, priced at $44 per share, represents a 25% premium over the 30-day average price. The partnership includes a three-year lockup period and allows Bain to manage a segment of Lincoln's general account, with initial funds expected to increase significantly over time.
Additionally, Lincoln Financial, the parent company of Lincoln National, announced the appointment of James Morris, former CEO of Pacific Life Insurance (NSE:LIFI), to its Board of Directors. The board expansion aims to leverage Morris's extensive experience in the insurance industry. Evercore ISI has maintained an In Line rating for Lincoln National with a price target of $44.00. Lincoln Financial plans to use the capital from the Bain Capital deal to reduce debt and expand its spread business. The transaction is subject to regulatory approvals and is anticipated to close in the second half of 2025.
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