RADNOR, Pa.--(BUSINESS WIRE)--Lincoln Financial Group (NYSE: LNC) today reported net income for the second quarter of 2016 of $325 million, or $1.35 per diluted share available to common stockholders, compared to net income in the second quarter of 2015 of $344 million, or $1.35 per diluted share available to common stockholders. Second quarter income from operations was $373 million, or $1.56 per diluted share available to common stockholders, compared to $371 million, or $1.46 per diluted share available to common stockholders, in the second quarter of 2015.

“Earnings significantly recovered from depressed levels in the first quarter, and we achieved strong growth in operating EPS and book value per share compared to the prior year,” said Dennis R. Glass, president and CEO of Lincoln Financial Group. “As highlighted at our recent Investor Day, we remain confident in our ability to generate top and bottom-line growth and actively deploy capital in the current macro environment.”

Operating Highlights – Second Quarter 2016

• Operating EPS of $1.56, up 7% versus the prior year
• Income from operations of $373 million, up 19% sequentially
• Total individual life insurance sales of $164 million, up 6% versus the prior year
• Group Protection sales of $71 million, up 15% versus the prior year
• Share repurchases of $275 million; retired 3% of shares outstanding

There were no notable items in the current quarter. The prior-year quarter included net unfavorable items of approximately $0.03 related to legal expenses.

Second Quarter 2016 – Segment Results

Annuities

The Annuities segment reported income from operations of $235 million in the quarter, down 8% from $255 million in the prior-year quarter driven primarily by a decrease in fee income from lower average account values.

Gross annuity deposits in the second quarter of $2.1 billion decreased 37% from the prior-year quarter as a decline in variable annuity sales was partially offset by an increase in fixed annuity sales. Variable annuity sales continue to be negatively impacted by market volatility; however, on a sequential basis sales decreased just 3%. The percentage of variable annuity sales from products without living benefits increased to 29% from 28% in the prior-year quarter. Fixed annuity sales of $478 million were up 31% from the prior-year quarter driven by new product introductions. Net flows of $(452) million were negatively impacted by lower sales. Average account values decreased 3% to $122 billion compared to the prior-year quarter.

Retirement Plan Services

Retirement Plan Services reported income from operations of $31 million compared to $30 million in the prior-year quarter. The increase in earnings is primarily driven by lower expenses compared to the prior-year period.

Total deposits for the quarter of $1.7 billion were down 11% versus the prior year. Small market deposits increased 8% while mid-large market deposits declined due to timing of first-year sales. Total net flows of $4 million in the quarter resulted in average account values remaining flat at $55 billion.

Life Insurance

Life Insurance reported income from operations of $120 million, up 14% from $105 million in the prior-year quarter. The increase in earnings compared to the prior-year period was driven by mortality performing in line with expectations compared to elevated mortality in the prior-year period.

Individual life insurance sales in the quarter were $164 million, a 6% increase from the prior-year quarter. Increased Term, Linked-benefit, and UL sales were offset by decreases in IUL and VUL. Executive Benefit sales, which can fluctuate quarter to quarter, added $9 million to total life insurance sales in the quarter while the prior-year quarter contributed $46 million driven by one large case.

Total life insurance in-force of $675 billion grew 4% over the prior-year quarter, and average account values of $44 billion increased 3%.

Group Protection

Group Protection income from operations was $15 million in the quarter compared to $19 million in the prior-year period. The decline in earnings was driven by lower premiums and net investment income offset by the improvement in the non-medical loss ratio to 72.5% from 73.6% in the prior-year quarter.

Group Protection sales of $71 million were up 15% from the same period last year as sales momentum continues following the disruption caused by our repricing actions. Employee-paid product sales as a percentage of total sales were 46% in the quarter, up two percentage points from the prior-year quarter.

Non-medical net earned premiums were $478 million in the second quarter, down 11% from the year-ago period.

Other Operations

Other Operations reported a loss from operations of $28 million versus a loss of $38 million in the prior-year quarter.

The prior-year results included net unfavorable items of $8 million related to legal expenses.

Realized Gains and Losses

Realized gains/losses (after-tax) in the quarter included:

• A net loss from general account investments of $47 million compared to a $14 million net loss in the prior-year quarter.
• A $1 million variable annuity net derivatives gain in the quarter.

Unrealized Gains and Losses

The company reported a net unrealized gain of $8.4 billion, pre-tax, on its available-for-sale securities at June 30, 2016. This compares to a net unrealized gain of $5.0 billion at June 30, 2015, with the year-over-year increase driven primarily by a decline in interest rates.

Capital

During the quarter, the company repurchased 6.2 million shares of stock at a cost of $275 million. The quarter’s average diluted share count of 239.9 million shares was down 6% from the second quarter of 2015, the result of repurchasing 19.1 million shares of stock at a cost of $875 million since June 30, 2015.

Book Value

As of June 30, 2016, book value per share, including accumulated other comprehensive income (“AOCI”), of $68.39 increased 17% from a year ago. Book value per share, excluding AOCI, of $54.67 increased 8% from the prior-year period.

The tables attached to this release define and reconcile income from operations, return on equity (“ROE”), and book value per share excluding AOCI, non-GAAP measures, to net income, ROE, and book value per share including AOCI calculated in accordance with GAAP.

This press release may contain statements that are forward-looking, and actual results may differ materially, especially given the current economic and capital markets conditions. Please see the Forward Looking Statements – Cautionary Language that follow for additional factors that may cause actual results to differ materially from our current expectations.

For other financial information, please refer to the company’s second quarter 2016 statistical supplement available on its website, www.LincolnFinancial.com/earnings.

About Lincoln Financial Group

Lincoln Financial Group provides advice and solutions that help empower Americans to take charge of their financial lives with confidence and optimism. Today, more than 17 million customers trust our retirement, insurance and wealth protection expertise to help address their lifestyle, savings and income goals, as well as to guard against long-term care expenses. Headquartered in Radnor, Pennsylvania, Lincoln Financial Group is the marketing name for Lincoln National Corporation (NYSE:LNC) and its affiliates. The company had $223 billion in assets under management as of June 30, 2016. Learn more at: www.LincolnFinancial.com. Find us on Facebook, Twitter, LinkedIn and YouTube. To sign up for email alerts, please visit our Newsroom at http://newsroom.lfg.com.