UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 30, 2002
LINCOLN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 1-6028 35-1140070
(State of Incorporation) (Commission File Number (I.R.S. Employer
Identification No.)
1500 Market Street, Suite 3900, Centre Square West Tower, Philadelphia, PA 19102
(Address of principal executive offices)
Registrant's telephone number 215-448-1400
Item 5
Statistical Report for the quarter ended June 30, 2002.
PAGE 1
Financial Highlights
Unaudited [Amounts in Millions,
except Per Share]
For the Quarter Ended June 30 For the Six Months Ended June 30
2002 2001 2002 2001
Amount Amount Change % Change Amount Amount Change % Change
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations
Lincoln Retirement* 47.8 90.8 (43.0) (47.4%) 128.2 173.1 (44.9) (25.9%)
Life Insurance 73.5 67.1 6.4 9.5% 144.6 135.7 8.9 6.6%
Investment Management 6.6 3.7 2.9 78.4% 14.6 6.1 8.5 139.3%
Lincoln UK 6.7 16.2 (9.5) (58.6%) 21.1 30.6 (9.5) (31.0%)
Corporate & Other** (7.3) (9.7) 2.4 (19.3) 1.2 (20.5)
------- ------- ------- ------- ------- ------- ------- -------
Total Income from Operations 127.2 168.1 (40.9) (24.3%) 289.2 346.7 (57.5) (16.6%)
Realized gains (losses) on
investments (52.7) (11.4) (41.3) (120.3) (24.8) (95.5)
Gains (losses) on derivatives 0.3 0.2 0.1 0.4 0.1 0.3
Reserve increase on business sold
through reinsurance (14.4) 0.0 (14.4) (14.4) 0.0 (14.4)
Restructuring charges (1.0) (3.9) 2.9 (1.0) (4.5) 3.5
------- ------- ------- ------- ------- -------
Income before Accounting Changes 59.4 153.0 (93.6) 153.9 317.5 (163.6)
Cumulative effect of accounting
changes*** 0.0 (11.3) 11.3 0.0 (15.6) 15.6
------- ------- ------- ------- ------- ------- ------- -------
Net Income 59.4 141.7 (82.3) (58.1%) 153.9 301.9 (148.1) (49.0%)
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share (diluted)
Income from Operations $0.67 $0.88 ($0.21) (23.9%) $1.52 $1.80 ($0.28) (15.6%)
Realized gain (losses) on
investments ($0.27) ($0.06) ($0.21) ($0.62) ($0.13) ($0.49)
Gains (losses) on derivatives $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Reserve increase on business sold
through reinsurance ($0.08) $0.00 ($0.08) ($0.08) $0.00 ($0.08)
Restructuring charges ($0.01) ($0.02) $0.01 ($0.01) ($0.02) $0.01
------- ------- ------- ------- ------- -------
Income before Accounting Changes $0.31 $0.80 ($0.49) $0.81 $1.65 ($0.84)
Cumulative effect of accounting
changes*** $0.00 ($0.06) $0.06 $0.00 ($0.08) $0.08
------- ------- ------- ------- ------- -------
Net Income $0.31 $0.74 ($0.43) (58.1%) $0.81 $1.57 ($0.76) (48.4%)
======= ======= ======= ======= ======= ======= ======= =======
Inc. from Oper.- before Goodwill
Amort.
Lincoln Retirement* 47.8 91.1 (43.3) (47.5%) 128.2 173.7 (45.5) (26.2%)
Life Insurance 73.5 73.0 0.5 0.6% 144.6 147.6 (2.9) (2.0%)
Investment Management 6.6 7.7 (1.1) (14.4%) 14.6 14.2 0.4 2.6%
Lincoln UK 6.7 16.4 (9.7) (59.3%) 21.1 30.9 (9.8) (31.8%)
Corporate & Other** (7.3) (9.2) 1.9 (19.3) 2.0 (21.3)
------- ------- ------- ------- ------- ------- ------- -------
Total 127.2 179.0 (51.7) (28.9%) 289.2 368.5 (79.2) (21.5%)
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share (diluted)
Inc. from Oper.- before Goodwill
Amort. $0.67 $0.93 ($0.26) (28.0%) $1.52 $1.91 ($0.39) (20.4%)
------- ------- ------- ------- ------- ------- ------- -------
Net Income - before Goodwill
Amort.
Lincoln Retirement* 10.2 80.2 (70.0) (87.3%) 57.8 157.1 (99.3) (63.2%)
Life Insurance 57.4 59.5 (2.1) (3.5%) 101.6 128.3 (26.7) (20.8%)
Investment Management 6.2 6.9 (0.8) (11.0%) 13.2 13.0 0.2 1.6%
Lincoln UK 9.8 17.8 (8.0) (44.7%) 20.7 32.7 (12.1) (36.8%)
Corporate & Other** (24.2) (11.8) (12.4) (39.4) (7.4) (32.0)
------- ------- ------- ------- ------- ------- ------- -------
Total 59.4 152.6 (93.2) (61.1%) 153.9 323.7 (169.8) (52.5%)
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share (diluted)
Net Income - before Goodwill
Amort. $0.31 $0.79 ($0.48) (60.8%) $0.81 $1.68 ($0.87) (51.8%)
Operating Revenue ------- ------- ------- ------- ------- ------- ------- -------
Lincoln Retirement* 498.8 522.1 (23.3) (4.5%) 1002.3 1034.9 (32.6) (3.1%)
Life Insurance 464.6 465.5 (0.9) (0.2%) 929.9 933.4 (3.4) (0.4%)
Investment Management 103.1 111.4 (8.3) (7.5%) 208.1 224.4 (16.2) (7.2%)
Lincoln UK 63.4 66.9 (3.4) (5.1%) 122.2 151.2 (29.0) (19.2%)
Corporate & Other** 96.1 450.7 (354.6) (78.7%) 193.2 992.1 (798.9) (80.5%)
------- ------- ------- ------- ------- ------- ------- -------
Total Operating Revenue 1226.0 1616.5 (390.5) (24.2%) 2455.8 3336.0 (880.2) (26.4%)
======= ======= ======= ======= ======= ======= ======= =======
Total Revenue
Lincoln Retirement* 442.6 512.1 (69.6) (13.6%) 895.6 1022.5 (126.9) (12.4%)
Life Insurance 439.8 455.7 (15.8) (3.5%) 863.8 915.3 (51.6) (5.6%)
Investment Management 102.4 110.3 (7.9) (7.2%) 205.9 222.6 (16.6) (7.5%)
Lincoln UK 68.0 68.9 (0.9) (1.3%) 121.6 153.8 (32.2) (20.9%)
Corporate & Other** 92.2 452.0 (359.8) (79.6%) 184.5 983.6 (799.1) (81.2%)
------- ------- ------- ------- ------- ------- ------- -------
Total Revenue 1145.0 1599.0 (454.0) (28.4%) 2271.4 3297.8 1,026.4) (31.1%)
======= ======= ======= ======= ======= ======= ======= =======
Operational Data by Segment:
(Billions except where noted)
Lincoln Retirement*
Gross Deposits 1.640 1.371 0.269 19.6% 3.354 2.818 0.536 19.0%
Net Cash Flows 0.223 (0.196) 0.419 213.8% 0.311 (0.787) 1.098 139.6%
Account Values (Gross) 49.886 53.658 (3.772) (7.0%) 49.886 53.658 (3.772) (7.0%)
Account Values (Net of
Reinsurance) 48.116 52.512 (4.396) (8.4%) 48.116 52.512 (4.397) (8.4%)
Life Insurance Segment
First Year Premium- Retail (in
millions) 155.801 134.596 21.205 15.8% 295.178 258.836 36.343 14.0%
First Year Premium- COLI (in
millions) 46.631 20.976 25.655 122.3% 53.504 28.032 25.473 90.9%
First Year Premium- Total (in
millions) 202.432 155.572 46.860 30.1% 348.682 286.867 61.815 21.5%
In-force 244.750 223.272 21.478 9.6% 244.750 223.272 21.479 9.6%
Account Values 11.759 11.066 0.693 6.3% 11.759 11.066 0.693 6.3%
Investment Management Segment
Retail Deposits 1.356 0.884 0.472 53.4% 2.558 2.050 0.508 24.8%
Retail Net Cash Flows 0.167 (0.148) 0.315 212.8% 0.257 (0.167) 0.424 253.9%
Institutional In-flows 1.232 1.056 0.176 16.7% 2.708 2.247 0.461 20.5%
Institutional Net Cash Flows 0.455 0.445 0.010 2.2% 1.185 0.027 1.158 4288.9%
Total Net Cash Flows 0.622 0.297 0.325 109.4% 1.442 (0.140) 1.582 1130.2%
Assets Under Management- Retail
and Inst'l 48.738 50.737 (1.998) (3.9%) 48.738 50.737 (1.999) (3.9%)
Assets Under Management -
Insurance Assets 38.476 36.018 2.458 6.8% 38.476 36.018 2.458 6.8%
Assets Under Management - Total
Segment 87.214 86.755 0.460 0.5% 87.214 86.755 0.459 0.5%
Consolidated
Consolidated Domestic Retail
Deposits 3.203 2.534 0.669 26.4% 6.250 5.305 0.945 17.8%
Consolidated Domestic Retail
Account Balances 77.644 83.250 (5.606) (6.7%) 77.644 83.250 (5.606) (6.7%)
Total Retail Net Cash Flows 0.688 (0.073) 0.761 1038.5% 1.066 (0.427) 1.494 349.6%
Total Net Cash Flows 1.143 0.372 0.771 207.4% 2.252 (0.400) 2.652 662.5%
Total Assets Under Management 123.036 128.507 (5.471) (4.3%) 123.036 128.507 (5.471) (4.3%)
* Effective March 7, 2002, the Annuities segment became known as Lincoln
Retirement.
** Upon the closing of Swiss Re's acquisition of LNC's reinsurance
business on December 7, 2001, all historical financial data for the former
Reinsurance segment was moved into "Other Operations." In addition,
ongoing amortization of the deferred gain on indemnity reinsurance is shown
in "Other Operations."
*** The cumulative effect of accounting changes relates to the adjustment
recorded upon adoption of FAS #133 in the 1st qtr. 2001.
PAGE 2
Financial Highlights
Unaudited [Amounts in Millions, except Per Share]
For the Quarter Ended June 30 For the Six Months Ended June 30
-------------------------------------------- --------------------------------------------
2002 2001 2002 2001
Amount Amount Change % Change Amount Amount Change % Change
-------------------------------------------- --------------------------------------------
Consolidated Operational Data:
(Millions)
Balance Sheet Assets - End of
Period 95069.2 96431.2 (1362.0) (1.4%) 95069.2 96431.2 (1362.0) (1.4%)
Shareholders' Equity
Beg of Period (Securities at
Market) 5131.1 5096.4 34.7 5263.5 4954.1 309.4
End of Period (Securities at
Market) 5311.4 5055.9 255.5 5311.4 5055.9 255.5
End of Period (Securities at
Cost) 4963.1 4952.8 10.3 4963.1 4952.8 10.3
Average Equity (Securities at
Cost) 5081.3 4920.2 161.1 5082.3 4936.9 145.4
Return on Equity
Inc from Operations/Average
Equity 10.0% 13.7% (3.7%) 11.4% 14.0% (2.7%)
Net Income/Average Equity 4.7% 11.5% (6.8%) 6.1% 12.2% (6.2%)
Return on Capital
Inc from Operations/Average
Capital 8.4% 11.3% (2.9%) 9.4% 11.6% (2.2%)
Common Stock Outstanding
Average for the Period - Diluted 189.7 192.0 (2.3) (1.2%) 190.7 192.8 (2.1) (1.1%)
End of Period - Assuming Conv of
Pref. 184.5 188.2 (3.7) (2.0%) 184.5 188.2 (3.7) (2.0%)
End of Period - Diluted 186.9 192.9 (6.0) (3.1%) 186.9 192.9 (6.0) (3.1%)
Book Value (Securities at Market) $28.79 $26.87 1.92 7.1% $28.79 $26.87 1.92 7.1%
Book Value (Securities at Cost) $26.90 $26.32 0.58 2.2% $26.90 $26.32 0.58 2.2%
Cash Returned to Shareholders
Share Repurchase - dollar amount 175.7 35.1 140.6 226.7 186.8 39.9
Dividends Declared to
Shareholders 59.6 56.2 3.4 119.6 114.2 5.4
-------- -------- -------- -------- -------- --------
Total Cash Returned to
Shareholders 235.3 91.3 144.0 346.3 301.0 45.3
======== ======== ======== ======== ======== ========
Share Repurchase - number of
shares 3.885 0.750 3.135 4.885 4.300 0.585
Dividend Declared on Common Stock
- per share $0.320 $0.305 $0.015 4.9% $0.640 $0.610 $0.030 4.9%
For the Quarter Ended June 30 For the Six Months Ended June 30
-------------------------------------------- --------------------------------------------
Comprehensive Income 2002 2001 2002 2001
(millions) Amount Amount Amount Amount
-------------------------------------------- --------------------------------------------
Net Income 59.4 141.7 153.9 301.9
Foreign Currency Translation 42.8 (19.5) 30.0 (37.3)
Net Unrealized Gains (Losses) on
Securities 293.9 (114.2) 130.0 64.2
Gains (Losses) on Derivatives 0.1 3.7 1.2 9.4
Cumulative Effect of Accounting
Change 0.0 0.0 0.0 17.6
Minimum Pension Liability
Adjustment (2.6) 0.0 (1.9) 0.0
-------- -------- -------- --------
Comprehensive Income 393.6 11.7 313.2 355.8
======== ======== ======== ========
PAGE 3
Financial Highlights
Unaudited [Amounts in Millions]
For the Quarter Ended June 30 For the Six Months Ended June 30
----------------------------------------- --------------------------------------
2002 2001 2002 2001
Amount Amount Change % Change Amount Amount Change % Change
Consolidated Condensed Statements
of Income
Revenue:
Insurance Premiums and Fees 443.2 833.5 (390.3) (46.8%) 881.4 1,746.9 (865.5) (49.5%)
Investment Advisory Fees 47.8 49.6 (1.9) (3.7%) 95.8 99.0 (3.3) (3.3%)
Net Investment Income 651.0 673.1 (22.0) (3.3%) 1,299.1 1,346.8 (47.7) (3.5%)
Realized Gains (Losses) on
Investments (81.5) (17.9) (63.6) (185.0) (38.4) (146.6)
Gains (Losses) on Derivatives 0.4 0.2 0.2 0.6 0.1 0.5
Other 84.0 60.4 23.7 39.2% 179.5 143.2 36.3 25.3%
------- ------- ------- ------- ------- ------- ------- -------
Total Revenue 1,145.0 1,599.0 (454.0) (28.4%) 2,271.4 3,297.8 (1,026.4) (31.1%)
Benefits and Expenses:
Benefits 626.1 855.0 (228.9) (26.8%) 1,229.5 1,761.7 (532.2) (30.2%)
Underwriting, Acquisition,
Insurance and Other Expenses 457.7 540.3 (82.5) (15.3%) 874.7 1,111.3 (236.6) (21.3%)
------- ------- ------- ------- ------- ------- ------- -------
Total Benefits and Expenses 1,083.9 1,395.3 (311.4) (22.3%) 2,104.3 2,873.0 (768.7) (26.8%)
------- ------- ------- ------- ------- ------- ------- -------
Net Income
before Federal Taxes 61.1 203.7 (142.6) 167.2 424.8 (257.6)
Federal Income Taxes 1.7 50.7 (49.0) 13.3 107.3 (94.0)
------- ------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 59.4 153.0 (93.6) 153.9 317.5 (163.6)
Cumulative Effect of Accounting
Changes -- (11.3) 11.3 -- (15.6) 15.6
------- ------- ------- ------- ------- ------- ------- -------
Net Income 59.4 141.7 (82.3) (58.1%) 153.9 301.9 (148.1) (49.0%)
======= ======= ======= ======= ====== ======= ======= =======
Income before Tax and Cumulative
Effect
of Accounting Changes By Segment
Lincoln Retirement (0.6) 102.6 (103.2) 46.1 197.9 (151.8)
Life Insurance 80.5 90.9 (10.4) 144.3 190.0 (45.7)
Investment Management 7.4 4.6 2.8 15.6 8.1 7.5
Lincoln UK 9.6 21.2 (11.6) 20.1 40.8 (20.7)
Corporate and Other (35.9) (15.6) (20.3) (59.0) (12.0) (47.0)
------- ------- ------- ------ ------- -------
Income before Tax and
Cumulative Effect of Accounting
Changes 61.1 203.7 (142.6) 167.2 424.8 (257.6)
Pre-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (56.3) (10.0) (46.3) (106.7) (12.3) (94.4)
Life Insurance (24.7) (9.8) (14.9) (66.2) (18.0) (48.2)
Investment Management (0.7) (1.1) 0.4 (2.2) (1.8) (0.4)
Lincoln UK 4.5 2.0 2.5 (0.6) 2.6 (3.2)
Corporate and Other (3.9) 1.4 (5.3) (8.8) (8.7) (0.1)
------- ------- ------- ------ ------- -------
Pre-Tax Realized Gains (Losses)
on Investments and Derivatives (81.1) (17.5) (63.6) (184.4) (38.2) (146.2)
After-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (36.6) (6.5) (30.1) (69.4) (8.0) (61.4)
Life Insurance (16.0) (6.3) (9.7) (43.1) (11.7) (31.4)
Investment Management (0.4) (0.7) 0.3 (1.4) (1.2) (0.2)
Lincoln UK 3.2 1.4 1.8 (0.4) 1.8 (2.2)
Corporate and Other (2.7) 0.9 (3.5) (5.6) (5.6) --
------- ------- ------- ------ ------- -------
After-Tax Realized Gains (Losses)
on Investments and Derivatives (52.4) (11.2) (41.2) (119.9) (24.7) (95.2)
* Includes both realized gains (losses) on investments and
gains (losses) on derivatives.
PAGE 4
Financial Highlights
Unaudited [Amounts in Millions, except Retail Account Balances and Assets Managed]
As of
---------------------------------------------------------------------
June December
2002 2001
Amount Amount Change % Change
---------------------------------------------------------------------
Consolidated Condensed Balance
Sheets
Assets:
Investments:
Securities Available for Sale:
Fixed Maturities 29,724.6 28,345.7 1,378.9 4.9%
Equities 419.5 470.5 (51.0) (10.8%)
Mortgage Loans on Real Estate 4,395.4 4,535.5 (140.2) (3.1%)
Real Estate 258.7 267.9 (9.2) (3.4%)
Policy Loans 1,906.1 1,939.7 (33.6) (1.7%)
Other Long-Term Investments 456.0 553.8 (97.9) (17.7%)
--------- --------- --------- ---------
Total Investments 37,160.1 36,113.1 1,047.0 2.9%
Other Assets:
Assets Held in Separate Accounts 40,579.6 44,833.4 (4,253.8) (9.5%)
Other Assets 17,329.5 17,054.8 274.7 1.6%
--------- --------- --------- ---------
Total Assets 95,069.2 98,001.3 (2,932.1) (3.0%)
========= ========= ========= =========
Liabilities and Shareholders'
Equity
Liabilities:
Insurance and Investment Contract
Liabilities 41,862.1 40,857.2 1,005.0 2.5%
Liabilities Related to Separate
Accounts 40,579.6 44,833.4 (4,253.8) (9.5%)
Other Liabilities 7,316.1 7,047.2 268.8 3.8%
--------- --------- --------- ---------
Total Liabilities 89,757.8 92,737.8 (2,980.0) (3.2%)
Shareholders' Equity:
Net Unrealized Gains(Losses) on
Securities
and Derivatives 348.4 217.2 131.1 60.4%
Other Shareholders' Equity 4,963.1 5,046.3 (83.2) (1.6%)
--------- --------- --------- ---------
Total Shareholders' Equity 5,311.4 5,263.5 47.9 0.9%
Total Liabilities and --------- --------- --------- ---------
Shareholders' Equity 95,069.2 98,001.3 (2,932.1) (3.0%)
========= ========= ========= =========
---------------------------------------------------------------------
As of June 30
---------------------------------------------------------------------
($ billions) 2002 2001
Amount Amount Change % Change
---------------------------------------------------------------------
Domestic Retail Account Balances:
Lincoln Retirement - Fixed
Annuities 16.909 15.551 1.358 8.7%
Lincoln Retirement - Variable
Annuities 31.206 36.961 (5.755) (15.6%)
Lincoln Retirement - Life
Insurance -- 0.157 (0.157) (100.0%)
Life Insurance Segment - Life
Insurance 11.759 11.066 0.693 6.3%
Investment Management - Annuities 10.896 12.532 (1.636) (13.1%)
Investment Management - Mutual
Funds 11.033 12.215 (1.182) (9.7%)
Investment Management - Wrap Fee
& Other 1.847 1.774 0.073 4.1%
Consolidating Adjustments (6.007) (7.007) 1.000 14.3%
--------- --------- --------- ---------
Total Domestic Account Balance 77.644 83.250 (5.606) (6.7%)
========= ========= ========= =========
Assets Managed by Advisor:
Investment Management Segment 87.214 86.755 0.459 0.5%
Lincoln UK 6.753 7.027 (0.274) (3.9%)
Policy Loans (within business
units) 1.906 1.947 (0.041) (2.1%)
Non-LNC Affiliates 27.162 32.778 (5.615) (17.1%)
--------- --------- --------- ---------
Total Assets Managed 123.036 128.507 (5.471) (4.3%)
========= ========= ========= =========
PAGE 5
Eleven-Year Summary
Unaudited [Millions of Dollars except Per Share Data]
For the Year Ended December 31 2001 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- -------
Revenue
Lincoln Retirement 1968.3 2133.7 2115.8 2068.1 2023.0 1805.0
Life Insurance 1840.6 1819.0 1760.4 1378.5 544.8 549.2
Investment Management 433.7 490.3 495.5 491.9 459.1 410.5
Lincoln UK 293.3 438.2 446.6 439.7 427.3 393.2
Corporate & Other 1844.7 1970.4 1985.4 1708.9 1444.3 1575.6
------- ------- ------- ------- ------- -------
Total Revenue 6380.6 6851.5 6803.7 6087.1 4898.5 4733.6
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 320.3 362.0 299.4 262.4 223.0 174.6
Life Insurance 279.0 259.9 212.0 149.2 39.9 41.2
Investment Management 14.6 44.1 61.0 43.9 18.1 18.6
Lincoln UK 60.2 61.0 (13.9) 70.9 (108.3) 66.0
Corporate & Other 14.8 (8.0) (83.1) 4.0 (223.3) (1.7)
------- ------- ------- ------- ------- -------
Total Income from Cont Oper 689.0 719.1 475.5 530.4 (50.6) 298.8
Discontinued Operations 110.1 135.3
------- ------- ------- ------- ------- -------
Income from Operations 689.0 719.1 475.5 530.4 59.4 434.1
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 269.2 358.6 291.5 273.8 263.3 204.3
Life Insurance 233.1 249.3 211.5 127.5 39.1 51.8
Investment Management 11.8 37.0 51.6 44.4 25.1 25.0
Lincoln UK 68.9 (13.2) (18.2) 71.7 (106.8) 66.0
Corporate & Other 7.2 (10.2) (76.1) (7.6) (198.4) 9.3
------- ------- ------- ------- ------- -------
Total Net Inc from Cont Oper 590.2 621.4 460.4 509.8 22.2 356.4
Discontinued Operations 911.8 157.2
------- ------- ------- ------- ------- -------
Total Net Income 590.2 621.4 460.4 509.8 934.0 513.6
------- ------- ------- ------- ------- -------
OTHER DATA
Assets 98001.3 99844.1 103095.7 93836.3 77174.7 71713.4
Shareholders' Equity:
Securities and Derivatives at
Market 5263.5 4954.1 4263.9 5387.9 4982.9 4470.0
Securities and Derivatives at
Cost 5046.3 4942.0 4729.6 4835.6 4546.9 4057.1
Average Equity (Sec & Deriv at
Cost) 5022.6 4831.9 4818.7 4685.6 4214.1 3866.0
Common Shares Outstanding:
(millions)
End of Period - Diluted 191.1 195.2 197.0 203.4 204.7 209.5
Average for the Period - Diluted 193.3 194.9 200.4 203.3 208.0 210.7
Per Share Data (Diluted)
Income (Loss) from Continuing
Operations $3.56 $3.69 $2.37 $2.61 ($0.24) $1.42
Income from Operations * $3.56 $3.69 $2.37 $2.61 $0.29 $2.06
Net Income from Continuing
Operations $3.05 $3.19 $2.30 $2.51 $0.11 $1.69
Net Income $3.05 $3.19 $2.30 $2.51 $4.49 $2.44
Shareholders' Equity:
Shareholders' Equity (Sec & Deriv
at Market) $28.10 $25.92 $21.76 $26.59 $24.63 $21.50
Shareholders' Equity (Sec & Deriv
at Cost) $26.94 $25.85 $24.14 $23.86 $22.48 $19.51
Dividends Declared (Common Stock) $1.235 $1.175 $1.115 $1.055 $0.995 $0.935
Return on Equity (see page 30)
Net Income/Average Equity 11.8% 12.9% 9.6% 10.9% 22.2% 13.3%
Inc from Operations/Average
Equity 13.7% 14.9% 9.9% 11.3% 1.4% 11.2%
Market Value of Common Stock
High for the Year $52.750 $56.375 $57.500 $49.438 $39.063 $28.500
Low for the Year $38.000 $22.625 $36.000 $33.500 $24.500 $20.375
Close for the Year $48.570 $47.313 $40.000 $40.907 $39.063 $26.250
PAGE 5
Eleven-Year Summary (continued)
Unaudited [Millions of Dollars except Per Share Data] Ten-year
compound
For the Year Ended December 31 1995 1994 1993 1992 1991 annual growth
------- ------- ------- ------- ------- -------------
Revenue
Lincoln Retirement 1877.1 1506.2 1603.8 1336.2 1216.7 4.9%
Life Insurance 514.9 466.2 477.5 444.4 417.3 16.0%
Investment Management 290.5
Lincoln UK 351.5 216.0 174.9 180.6 169.6 5.6%
Corporate & Other 1552.5 1744.1 2680.9 2780.9 3721.0
------- ------- ------- ------- ------- -------
Total Revenue 4586.5 3932.5 4937.1 4742.1 5524.6 1.5%
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 175.2 142.4 127.1 89.4 58.3 18.6%
Life Insurance 35.4 34.2 37.8 46.8 31.5 24.4%
Investment Management 20.6
Lincoln UK 45.9 17.2 11.9 9.2 14.3 15.5%
Corporate & Other (136.2) 24.8 20.8 6.5 4.2
------- ------- ------- ------- ------- -------
Total Income from Cont Oper 140.8 218.6 197.6 151.9 108.3 20.3%
Discontinued Operations 165.6 171.1 145.9 88.7 69.4
------- ------- ------- ------- ------- -------
Income from Operations 306.5 389.7 343.5 240.6 177.7 14.5%
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 248.8 142.4 127.1 89.4 58.3 16.5%
Life Insurance 40.6 34.2 37.8 46.8 31.5 22.2%
Investment Management 27.4
Lincoln UK 45.7 18.5 12.6 9.2 14.3
Corporate & Other (61.1) (29.6) (101.1) 125.1 28.4
------- ------- ------- ------- ------- -------
Total Net Inc from Cont Oper 301.4 165.5 76.4 270.5 132.5 16.1%
Discontinued Operations 180.8 184.4 242.5 88.7 69.4
------- ------- ------- ------- ------- -------
Total Net Income 482.2 349.9 318.9 359.2 201.9 11.3%
------- ------- ------- ------- ------- -------
OTHER DATA
Assets 63257.7 48864.8 47825.1 39042.2 33660.3 11.3%
Shareholders' Equity:
Securities and Derivatives at
Market 4378.1 3042.1 4072.3 2826.8 2655.8 7.1%
Securities and Derivatives at
Cost 3679.9 3353.1 3157.6 2664.1 2445.8 7.5%
Average Equity (Sec & Deriv at
Cost) 3550.5 3288.6 3009.0 2575.0 2335.3 8.0%
Common Shares Outstanding:
(millions)
End of Period - Diluted 210.3 208.3 208.3 187.7 185.4
Average for the Period - Diluted 209.5 208.7 206.1 186.8 189.2
Per Share Data (Diluted)
Income (Loss) from Continuing
Operations $0.67 $1.05 $0.96 $0.81 $0.57 20.1%
Income from Operations * $1.46 $1.87 $1.67 $1.29 $0.94 14.3%
Net Income from Continuing
Operations $1.44 $0.79 $0.37 $1.45 $0.70 15.9%
Net Income $2.30 $1.68 $1.55 $1.92 $1.07 11.1%
Shareholders' Equity:
Shareholders' Equity (Sec & Deriv
at Market) $20.95 $14.67 $19.69 $15.13 $14.35 7.0%
Shareholders' Equity (Sec & Deriv
at Cost) $17.61 $16.17 $15.27 $14.26 $13.21 7.4%
Dividends Declared (Common Stock) $0.875 $0.830 $0.775 $0.738 $0.693 5.9%
Return on Equity (see page 30)
Net Income/Average Equity 13.6% 10.6% 10.6% 13.9% 8.6%
Inc from Operations/Average
Equity 8.6% 11.8% 11.4% 9.3% 7.6%
Market Value of Common Stock
High for the Year $26.875 $22.188 $24.125 $19.032 $13.813
Low for the Year $17.313 $17.313 $17.344 $12.625 $9.500
Close for the Year $26.875 $17.500 $21.750 $18.500 $13.688 13.5%
* "Income from Operations" is defined as "Net income less realized gain (loss)
on investments, derivative instruments and associated items, gain (loss)
on sale of subsidiaries, restructuring charges, and cumulative effect of
accounting changes, all net of taxes." Income from operations also
excludes the recognition of losses and related changes to the deferred
gain amortization under indemnity reinsurance resulting from future
developments in the business sold through indemnity reinsurance.
PAGE 6
Quarterly Summary
Unaudited [Millions of Dollars
except Per Share Data]
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 1999 1999 2000 2000 2000 2000
------ ------ ------ ------ ------ ------
Revenue
Lincoln Retirement 520.5 538.0 548.7 530.5 532.1 522.3
Life Insurance 437.1 473.1 441.7 444.2 453.2 479.9
Investment Management 118.8 126.6 125.8 120.7 123.8 120.0
Lincoln UK 110.5 103.8 112.8 108.2 112.8 104.3
Corporate & Other 455.2 566.4 440.2 489.0 494.1 547.0
------ ------ ------ ------ ------ ------
Total Revenue 1642.1 1807.9 1669.2 1692.7 1716.1 1773.5
====== ====== ====== ====== ====== ======
Income from Operations*
Lincoln Retirement 75.4 73.7 88.5 84.1 102.9 86.4
Life Insurance 52.6 57.0 60.4 62.4 66.5 70.6
Investment Management 14.7 16.5 12.4 13.1 9.9 8.7
Lincoln UK 16.2 (67.1) 15.7 19.3 10.6 15.5
Corporate & Other (27.5) (43.5) (6.5) (5.9) 0.9 3.5
------ ------ ------ ------ ------ ------
Income from Operations 131.4 36.6 170.6 173.0 190.7 184.7
====== ====== ====== ====== ====== ======
Net Income
Lincoln Retirement 68.4 69.9 91.2 84.4 93.8 89.2
Life Insurance 54.0 59.7 58.1 58.4 67.4 65.4
Investment Management 14.4 19.8 12.3 8.4 9.7 6.6
Lincoln UK 16.4 (72.6) 15.5 19.1 (29.9) (17.9)
Corporate & Other (20.9) (42.2) (6.8) (6.8) (2.3) 5.7
------ ------ ------ ------ ------ ------
Total Net Income 132.3 34.6 170.2 163.6 138.6 148.9
====== ====== ====== ====== ====== ======
OTHER DATA
Assets 96500.7 103095.7 106340.0 103847.6 103243.1 99844.1
Shareholders' Equity
Beg of Period (Sec & Deriv at
Market) 4817.4 4662.2 4263.9 4340.4 4223.7 4538.6
End of Period (Sec & Deriv at
Market) 4662.2 4263.9 4340.4 4223.7 4538.6 4954.1
End of Period (Sec & Deriv at
Cost) 4766.0 4729.6 4751.6 4780.3 4876.3 4942.0
Average Equity (Sec & Deriv at
Cost) 4793.9 4774.2 4791.5 4753.0 4867.2 4915.7
Common Shares Outstanding
Average for the Period - Diluted 199.0 197.1 195.8 194.0 195.6 195.6
End of Period - Diluted 196.9 197.0 195.1 193.7 196.2 195.2
Per Share Data (Diluted)
Income from Operations * $0.66 $0.19 $0.87 $0.89 $0.98 $0.94
Net Income $0.66 $0.18 $0.87 $0.84 $0.71 $0.76
Shareholders' Equity
Shareholders' Equity (Sec & Deriv
at Market) $23.76 $21.76 $22.45 $22.10 $23.67 $25.92
Shareholders' Equity (Sec & Deriv
at Cost) $24.28 $24.14 $24.58 $25.01 $25.43 $25.85
Dividends Declared (Com Stk) $0.275 $0.290 $0.290 $0.290 $0.290 $0.305
Return on Equity (see page 30)
Net Income/Average Equity 11.0% 2.9% 14.2% 13.8% 11.4% 12.1%
Inc from Operations/Average
Equity 11.0% 3.1% 14.2% 14.6% 15.7% 15.0%
Market Value of Common Stock
Highest Price $57.500 $48.313 $41.375 $40.063 $56.375 $50.938
Lowest Price $36.000 $36.500 $22.625 $29.000 $35.625 $40.875
Closing Price $37.563 $40.000 $33.500 $36.125 $48.125 $47.313
Quarterly Summary (Continued)
Unaudited [Millions of Dollars
except Per Share Data]
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2001 2001 2001 2001 2002 2002
------ ------ ------ ------ ------ ------
Revenue
Lincoln Retirement 510.4 512.1 478.2 467.5 453.0 442.6
Life Insurance 459.6 455.7 460.6 464.7 423.9 439.8
Investment Management 112.3 110.3 104.7 106.5 103.5 102.4
Lincoln UK 84.9 68.9 76.3 63.2 53.6 68.0
Corporate & Other 531.6 452.0 489.5 371.7 92.3 92.2
------ ------ ------ ------ ------ ------
Total Revenue 1698.8 1599.0 1609.3 1473.6 1126.4 1145.0
====== ====== ====== ====== ====== ======
Income from Operations*
Lincoln Retirement 82.3 90.8 72.4 74.8 80.4 47.8
Life Insurance 68.6 67.1 70.1 73.2 71.1 73.5
Investment Management 2.4 3.7 3.5 5.1 8.0 6.6
Lincoln UK 14.4 16.2 10.1 19.5 14.4 6.7
Corporate & Other 10.9 (9.7) (12.9) 26.5 (12.0) (7.3)
------ ------ ------ ------ ------ ------
Income from Operations 178.6 168.1 143.2 199.1 162.0 127.2
====== ====== ====== ====== ====== ======
Net Income
Lincoln Retirement 76.6 79.9 58.6 54.2 47.6 10.2
Life Insurance 62.9 53.5 64.7 51.9 44.2 57.4
Investment Management 2.0 2.9 2.9 4.0 7.0 6.2
Lincoln UK 14.8 17.6 14.0 22.5 10.8 9.8
Corporate & Other 4.0 (12.2) (21.2) 36.7 (15.2) (24.2)
------ ------ ------ ------ ------ ------
Total Net Income 160.2 141.7 119.1 169.2 94.5 59.4
====== ====== ====== ====== ====== ======
OTHER DATA
Assets 94122.4 96431.2 90206.0 98001.3 97846.4 95069.2
Shareholders' Equity
Beg of Period (Sec & Deriv at
Market) 4954.1 5096.4 5055.9 5368.6 5263.5 5131.1
End of Period (Sec & Deriv at
Market) 5096.4 5055.9 5368.6 5263.5 5131.1 5311.4
End of Period (Sec & Deriv at
Cost) 4882.7 4952.8 5100.4 5046.3 5076.6 4963.1
Average Equity (Sec & Deriv at
Cost) 4953.7 4920.2 5085.0 5131.4 5083.3 5081.3
Common Shares Outstanding
Average for the Period - Diluted 193.7 192.0 194.8 192.8 191.7 189.7
End of Period - Diluted 191.3 192.9 193.3 191.1 191.7 186.9
Per Share Data (Diluted)
Income from Operations * $0.92 $0.88 $0.74 $1.03 $0.84 $0.67
Net Income $0.83 $0.74 $0.61 $0.88 $0.49 $0.31
Shareholders' Equity
Shareholders' Equity (Sec & Deriv
at Market) $27.09 $26.87 $28.29 $28.10 $27.30 $28.79
Shareholders' Equity (Sec & Deriv
at Cost) $25.96 $26.32 $26.87 $26.94 $27.02 $26.90
Dividends Declared (Com Stk) $0.305 $0.305 $0.305 $0.320 $0.320 $0.320
Return on Equity (see page 30)
Net Income/Average Equity 12.9% 11.5% 9.4% 13.2% 7.4% 4.7%
Inc from Operations/Average
Equity 14.4% 13.7% 11.3% 15.5% 12.7% 10.0%
Market Value of Common Stock
Highest Price $48.250 $52.300 $52.750 $49.450 $53.650 $52.540
Lowest Price $38.000 $41.280 $41.000 $40.000 $47.200 $40.750
Closing Price $42.470 $51.750 $46.630 $48.570 $50.730 $42.000
* "Income from Operations" is defined as "Net income less realized gain
(loss) on investments, derivative instruments and associated items, gain
(loss) on sale of subsidiaries, restructuring charges, and cumulative
effect of accounting changes, all net of taxes." Income from operations
also excludes the recognition of losses and related changes to the
deferred gain amortization under indemnity reinsurance resulting from
future developments in the business sold through indemnity reinsurance.
PAGE 7
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Quarter Ended June 30 Lincoln Retirement Life Insurance Management Lincoln UK
Jun Jun Jun Jun Jun Jun Jun Jun
2002 2001 2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue
Life and annuity premiums 13.1 32.5 47.5 50.7 11.4 8.8
Surrender charges 7.2 8.5 13.5 13.5
Mortality assessments 123.9 124.8 8.3 8.9
Expense assessments 127.1 138.0 47.2 45.3 27.8 31.4
Health premiums 0.1 0.0 0.7 0.7
Investment advisory fees 68.4 72.7
Other revenue and fees (1.3) 3.9 6.7 3.8 22.0 25.7 0.0 0.1
Net investment income 352.7 339.3 225.7 227.4 12.7 13.0 15.3 16.9
Earnings in Unconsolidated
Affiliates
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue 498.8 522.1 464.6 465.5 103.1 111.4 63.4 66.9
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 72.5 72.6 103.6 103.5 15.5 15.9
Div accum & div to policyholders 18.2 19.0
Interest credited to policy bal. 221.8 209.7 148.9 141.2
Health policy benefits 0.0 0.0 3.5 2.0
Underwriting, acquisition,
insurance and other expenses 147.2 126.0 88.5 92.0 95.0 101.6 39.3 29.7
Goodwill amortization 0.3 5.9 4.1 0.2
Interest 0.0
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses 441.5 408.6 359.3 361.7 95.0 105.7 58.4 47.7
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations Before Tax 57.3 113.6 105.3 103.8 8.1 5.7 5.1 19.1
Federal income taxes 9.5 22.8 31.8 36.7 1.5 2.0 (1.6) 2.9
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations 47.8 90.8 73.5 67.1 6.6 3.7 6.7 16.2
-------- -------- -------- -------- -------- -------- -------- --------
Restructuring charges (1.0) (0.6) (2.0)
Realized gains (losses) on
investments (36.6) (6.7) (16.4) (6.4) (0.4) (0.7) 3.2 1.4
Gains (losses) on derivatives 0.1 0.1 0.3 0.1
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries
-------- -------- -------- -------- -------- -------- -------- --------
Income before Accounting Changes 10.2 83.6 57.4 58.8 6.2 3.0 9.8 17.6
Cumulative effect of accounting
changes (3.7) (5.3) (0.1)
-------- -------- -------- -------- -------- -------- -------- --------
Net Income 10.2 79.9 57.4 53.5 6.2 2.9 9.8 17.6
======== ======== ======== ======== ======== ======== ======== ========
Inc. from Oper.-before Goodwill
-------- -------- -------- -------- -------- -------- -------- --------
Amort. 47.8 91.1 73.5 73.0 6.6 7.7 6.7 16.4
-------- -------- -------- -------- -------- -------- -------- --------
Net Income-before Goodwill Amort. 10.2 80.2 57.4 59.5 6.2 6.9 9.8 17.8
-------- -------- -------- -------- -------- -------- -------- --------
Corporate and Consolidating
Other Operations Adjustments Consolidated
Jun Jun Jun Jun Jun Jun
2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- --------
Operating Revenue
Life and annuity premiums (3.4) 261.9 68.7 353.9
Surrender charges 0.4 0.6 0.5 21.3 22.8
Mortality assessments (1.7) 0.0 130.5 133.7
Expense assessments 1.7 (0.0) 10.7 12.8 214.4 227.5
Health premiums 7.6 94.9 8.3 95.7
Investment advisory fees (20.7) (23.1) 47.8 49.6
Other revenue and fees 98.5 83.2 (41.3) (56.3) 84.7 60.3
Net investment income 66.5 102.0 (21.8) (25.6) 651.0 673.1
Earnings in Unconsolidated
Affiliates (0.6) 0.0 (0.6) 0.0
-------- -------- -------- -------- -------- --------
Operating Revenue 168.6 542.4 (72.5) (91.7) 1226.0 1616.5
-------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits (0.1) 181.6 191.5 373.6
Div accum & div to policyholders 0.0 1.2 18.2 20.2
Interest credited to policy bal. 3.7 8.7 8.0 10.0 382.5 369.7
Health policy benefits 30.4 89.5 33.9 91.5
Underwriting, acquisition,
insurance and other expenses 97.9 218.3 (58.6) (76.1) 409.3 491.4
Goodwill amortization 0.4 (0.0) 10.9
Interest 46.5 57.7 (21.8) (25.6) 24.6 32.0
-------- -------- -------- -------- -------- --------
Operating Benefits and Expenses 178.4 557.4 (72.5) (91.7) 1060.1 1389.3
-------- -------- -------- -------- -------- --------
Income from Operations Before Tax (9.8) (15.0) 0.0 166.0 227.2
Federal income taxes (2.5) (5.3) 38.7 59.1
-------- -------- -------- -------- -------- --------
Income from Operations (7.3) (9.7) 0.0 127.2 168.1
Restructuring charges (1.2) (1.0) (3.9)
Realized gains (losses) on
investments (2.3) 0.2 (0.0) 0.8 (52.7) (11.5)
Gains (losses) on derivatives (0.1) (0.1) 0.3 0.2
Reserve increase on business sold
through reinsurance (14.4) (14.4)
Gain on sale of subsidiaries
-------- -------- -------- -------- -------- --------
Income before Accounting Changes (24.2) (10.8) (0.0) 0.8 59.4 153.0
Cumulative effect of accounting
changes (2.2) (11.3)
-------- -------- -------- -------- -------- --------
Net Income (24.2) (13.0) (0.0) 0.8 59.4 141.7
======== ======== ======== ======== ======== ========
Inc. from Oper.-before Goodwill
Amort. (7.3) (9.2) 127.2 179.0
-------- -------- -------- -------- -------- --------
Net Income-before Goodwill Amort. (24.2) (12.6) (0.0) 0.8 59.4 152.6
-------- -------- -------- -------- -------- --------
PAGE 7A
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Six Months Ended June 30 Lincoln Retirement Life Insurance Management Lincoln UK
Jun Jun Jun Jun Jun Jun Jun Jun
2002 2001 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 25.3 51.6 98.6 101.5 22.8 21.0
Surrender charges 15.1 17.5 25.2 30.6
Mortality assessments 247.8 249.1 14.8 18.3
Expense assessments 254.8 279.5 94.1 92.7 53.1 75.1
Health premiums 0.1 0.1 1.4 1.4
Investment advisory fees 137.6 145.3
Other revenue and fees 4.5 5.6 12.4 8.9 45.0 52.0 0.3 0.7
Net investment income 702.6 680.7 451.7 450.4 25.5 27.1 29.9 34.8
Earnings in Unconsolidated
Affiliates
------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue 1002.3 1034.9 929.9 933.4 208.1 224.4 122.2 151.2
------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 127.9 142.4 207.7 203.4 30.5 35.7
Div accum & div to policyholders 36.0 36.6
Interest credited to policy bal. 447.9 419.1 295.2 279.5
Health policy benefits 0.0 0.0 6.8 6.2
Underwriting, acquisition,
insurance and other expenses 272.1 260.6 180.6 190.8 190.4 206.4 64.2 70.8
Goodwill amortization 0.6 11.8 8.1 0.3
Interest 0.0
------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 847.9 822.7 719.5 722.1 190.4 214.5 101.6 113.0
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 154.4 212.2 210.4 211.2 17.8 9.9 20.6 38.2
Federal income taxes 26.2 39.1 65.8 75.5 3.2 3.8 (0.5) 7.6
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations 128.2 173.1 144.6 135.7 14.6 6.1 21.1 30.6
------- ------- ------- ------- ------- ------- ------- -------
Restructuring charges (1.0) (1.3) (2.0)
Realized gains (losses) on
investments (69.5) (8.1) (43.4) (11.8) (1.4) (1.2) (0.4) 1.8
Gains (losses) on derivatives 0.1 0.0 0.3 0.1
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries ------- ------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 57.8 163.8 101.6 122.0 13.2 4.9 20.7 32.4
Cumulative effect of accounting
changes (7.3) (5.5) (0.1)
------- ------- ------- ------- ------- ------- ------- -------
Net Income 57.8 156.5 101.6 116.5 13.2 4.8 20.7 32.4
======= ======= ======= ======= ======= ======= ======= =======
Inc. from Oper.-before Goodwill ------- ------- ------- ------- ------- ------- ------- -------
Amort. 128.2 173.7 144.6 147.6 14.6 14.2 21.1 30.9
------- ------- ------- ------- ------- ------- ------- -------
Net Income-before Goodwill Amort. 57.8 157.1 101.6 128.3 13.2 13.0 20.7 32.7
------- ------- ------- ------- ------- ------- ------- -------
Corporate and Consolidating
Other Operations Adjustments Consolidated
Jun Jun Jun Jun Jun Jun
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums (3.4) 581.9 143.4 756.0
Surrender charges 1.2 1.1 1.2 41.4 50.6
Mortality assessments (1.7) 0.0 260.9 267.4
Expense assessments 1.7 (0.0) 21.3 25.0 425.0 472.4
Health premiums 9.3 199.1 10.8 200.5
Investment advisory fees (41.9) (46.2) 95.8 99.0
Other revenue and fees 199.9 169.4 (82.0) (94.2) 180.1 142.3
Net investment income 133.0 203.0 (43.5) (49.3) 1299.1 1346.8
Earnings in Unconsolidated
Affiliates (0.6) 0.9 (0.6) 0.9
------- ------- ------- ------- ------- -------
Operating Revenue 338.2 1155.6 (144.9) (163.5) 2455.8 3336.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 1.5 411.1 367.6 792.5
Div accum & div to policyholders 0.0 2.5 36.0 39.1
Interest credited to policy bal. 29.5 17.9 16.1 20.2 788.6 736.7
Health policy benefits 30.4 187.1 37.3 193.3
Underwriting, acquisition,
insurance and other expenses 211.7 426.4 (117.5) (138.8) 801.5 1016.2
Goodwill amortization 0.9 (0.0) 21.7
Interest 92.9 115.8 (43.5) (49.3) 49.5 66.5
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 366.1 1161.6 (144.9) (167.8) 2080.5 2866.1
------- ------- ------- ------- ------- -------
Income from Operations Before Tax (27.9) (6.0) 4.3 375.4 469.9
Federal income taxes (8.6) (4.1) 1.3 86.1 123.2
------- ------- ------- ------- ------- -------
Income from Operations (19.3) (1.8) 3.0 289.2 346.7
Restructuring charges (1.2) (1.0) (4.5)
Realized gains (losses) on
investments (5.6) (6.3) (0.0) 0.8 (120.3) (24.8)
Gains (losses) on derivatives (0.0) (0.0) 0.4 0.1
Reserve increase on business sold
through reinsurance (14.4) (14.4)
Gain on sale of subsidiaries
------- ------- ------- ------- ------- -------
Income before Accounting Changes (39.4) (9.4) (0.0) 3.8 153.9 317.5
Cumulative effect of accounting
changes (2.7) (15.6)
------- ------- ------- ------- ------- -------
Net Income (39.4) (12.1) (0.0) 3.8 153.9 301.9
======= ======= ======= ======= ======= =======
Inc. from Oper.-before Goodwill ------- ------- ------- ------- ------- -------
Amort. (19.3) (1.0) 3.0 289.2 368.5
------- ------- ------- ------- ------- -------
Net Income-before Goodwill Amort. (39.4) (11.2) (0.0) 3.8 153.9 323.7
------- ------- ------- ------- ------- -------
PAGE 8
Statement of Consolidated Income
Unaudited [Millions of Dollars]
YTD YTD
Jun Jun
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------ ------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 756.2 985.6 1183.0 1403.3 1363.4 756.0 143.4
Surrender charges 45.4 91.5 110.2 114.7 101.5 50.6 41.4
Mortality assessments 186.4 380.1 496.4 496.5 533.3 267.4 260.9
Expense assessments 600.3 803.0 930.9 1050.2 909.2 472.4 425.0
Health premiums 572.6 635.1 698.5 409.8 340.6 200.5 10.8
Investment advisory fees 204.9 227.1 223.8 213.1 197.2 99.0 95.8
Other revenue and fees 157.3 261.0 344.5 445.4 351.8 142.3 180.1
Net investment income 2250.8 2681.4 2807.5 2747.1 2679.6 1346.8 1299.1
Earnings in Unconsolidated
Affiliates 2.1 3.3 5.8 (0.4) 5.7 0.9 (0.6)
------ ------- ------- ------- ------- ------- -------
Operating Revenue 4775.9 6068.0 6800.7 6879.8 6482.2 3336.0 2455.8
------ ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 1090.2 1237.7 1546.6 1546.4 1517.9 792.5 367.6
Div accum & div to policyholders 29.7 78.0 88.4 87.6 83.7 39.1 36.0
Interest credited to policy bal. 1238.7 1446.2 1510.4 1474.2 1506.0 736.7 788.6
Health policy benefits 833.1 566.9 659.7 449.0 302.1 193.3 37.3
Underwriting, acquisition,
insurance and other expenses 1557.3 1844.2 2218.5 2168.4 2004.5 1016.2 801.5
Goodwill amortization 15.6 44.5 49.2 45.1 43.4 21.7
Interest 92.5 117.1 133.7 139.5 121.0 66.5 49.5
------ ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 4857.2 5334.6 6206.4 5910.3 5578.6 2866.1 2080.5
------ ------- ------- ------- ------- ------- -------
Income from Operations Before Tax (81.3) 733.4 594.4 969.6 903.6 469.9 375.4
Federal income taxes (30.6) 203.0 118.9 250.5 214.7 123.2 86.1
------ ------- ------- ------- ------- ------- -------
Income from Continuing Operations (50.6) 530.4 475.5 719.1 689.0 346.7 289.2
------ ------- ------- ------- ------- ------- -------
Discontinued Operations 911.8
Restructuring charges (34.3) (18.9) (80.2) (24.7) (4.5) (1.0)
Realized gains (losses) on
investments 72.9 13.7 3.8 (17.5) (68.7) (24.8) (120.3)
Gains (losses) on derivatives (4.9) 0.1 0.4
Reserve increase on business sold
through reinsurance (14.4)
Gain on sale of subsidiaries 15.0
------ ------- ------- ------- ------- ------- -------
Income before Accounting Changes 934.0 509.8 460.4 621.4 605.8 317.5 153.9
Cumulative Effect of Accounting
Changes (15.6) (15.6)
------ ------- ------- ------- ------- ------- -------
Net Income 934.0 509.8 460.4 621.4 590.2 301.9 153.9
====== ======= ======= ======= ======= ======= =======
Statement of Consolidated Income (Continued)
Unaudited [Millions of Dollars]
For the Quarter Ended Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 263.8 361.1 331.2 337.1 339.0 396.1
Surrender charges 28.4 29.2 28.7 29.8 25.9 30.3
Mortality assessments 118.2 118.7 118.5 122.5 125.9 129.6
Expense assessments 245.9 238.3 261.1 258.6 273.4 257.1
Health premiums 149.6 233.6 58.4 144.0 117.9 89.4
Investment advisory fees 54.6 54.1 54.0 52.2 53.3 53.6
Other revenue and fees 77.9 71.2 106.1 88.7 106.0 144.6
Net investment income 697.1 700.1 711.1 673.8 690.0 672.1
Earnings in Unconsolidated
Affiliates 1.2 1.8 1.0 (3.6) 1.6 0.6
------- ------- ------- ------- ------- -------
Operating Revenue 1636.7 1808.2 670.2 1703.0 733.1 1773.5
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 294.0 572.5 356.1 370.1 390.2 430.0
Div accum & div to policyholders 21.2 23.3 21.7 20.2 18.2 27.4
Interest credited to policy bal. 369.7 388.5 373.9 366.8 362.0 371.5
Health policy benefits 189.8 157.8 114.3 119.9 123.0 91.8
Underwriting, acquisition,
insurance and other expenses 533.4 630.5 525.7 537.5 532.4 572.9
Goodwill amortization 12.9 14.6 10.2 12.0 12.0 10.9
Interest 33.3 34.7 36.3 35.4 34.4 33.4
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1454.1 1821.8 438.2 1461.9 472.2 1537.9
------- ------- ------- ------- ------- -------
Income from Operations before
Tax/Min Int. 182.6 (13.6) 232.0 241.1 260.8 235.6
Federal income taxes 51.2 (50.2) 61.6 67.9 70.1 50.9
Inc from Operations before Min ------- ------- ------- ------- ------- -------
Int 131.4 36.6 170.4 173.2 190.7 184.7
------- ------- ------- ------- ------- -------
Minority Interest (0.2) 0.2 (0.0) 0.0
------- ------- ------- ------- ------- -------
Income from Operations 131.4 36.6 170.6 173.0 190.7 184.7
------- ------- ------- ------- ------- -------
Restructuring charges (3.2) (3.6) (2.7) (40.5) (37.0)
Realized gains (losses) on
investments 4.1 1.6 (0.4) (6.7) (11.6) 1.2
Gains (losses) on derivatives
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries ------- ------- ------- ------- ------- -------
Income before Accounting Changes 132.3 34.6 170.2 163.6 138.6 148.9
------- ------- ------- ------- ------- -------
Cumulative Effect of Accounting
Changes
Net Income 132.3 34.6 170.2 163.6 138.6 148.9
======= ======= ======= ======= ======= =======
Statement of Consolidated Income (Continued)
Unaudited [Millions of Dollars]
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------ ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 402.1 353.9 336.8 270.7 74.7 68.7
Surrender charges 27.8 22.8 23.2 27.7 20.2 21.3
Mortality assessments 133.7 133.7 133.3 132.6 130.4 130.5
Expense assessments 244.9 227.5 224.4 212.4 210.5 214.4
Health premiums 104.8 95.7 103.9 36.1 2.4 8.3
Investment advisory fees 49.4 49.6 47.2 50.9 48.0 47.8
Other revenue and fees 82.0 60.3 91.5 118.0 95.5 84.7
Net investment income 673.7 673.1 686.2 646.6 648.1 651.0
Earnings in Unconsolidated
Affiliates 0.9 0.0 0.4 4.3 (0.6)
------- ------- ------- ------- ------- -------
Operating Revenue 1719.5 1616.5 1646.9 1499.3 1229.8 1226.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 418.9 373.6 422.6 302.8 176.1 191.5
Div accum & div to policyholders 18.9 20.2 18.0 26.6 17.8 18.2
Interest credited to policy bal. 367.1 369.7 378.7 390.6 406.2 382.5
Health policy benefits 101.8 91.5 83.8 25.0 3.3 33.9
Underwriting, acquisition,
insurance and other expenses 524.8 491.4 516.0 472.3 392.2 409.3
Goodwill amortization 10.9 10.9 10.9 10.7
Interest 34.4 32.0 29.6 25.0 24.8 24.6
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1476.7 1389.3 1459.6 1252.9 1020.4 1060.1
------- ------- ------- ------- ------- -------
Income from Operations before
Tax/Min Int. 242.7 227.2 187.3 246.5 209.4 166.0
Federal income taxes 64.1 59.1 44.1 47.4 47.4 38.7
Inc from Operations before Min ------- ------- ------- ------- ------- -------
Int 178.6 168.1 143.2 199.1 162.0 127.2
------- ------- ------- ------- ------- -------
Minority Interest (0.0) (0.0) (0.0) (0.0)
------- ------- ------- ------- ------- -------
Income from Operations 178.6 168.1 143.2 199.1 162.0 127.2
------- ------- ------- ------- ------- -------
Restructuring charges (0.7) (3.9) 0.0 (20.2) (1.0)
Realized gains (losses) on
investments (13.4) (11.5) (23.8) (20.0) (67.6) (52.7)
Gains (losses) on derivatives (0.1) 0.2 (0.4) (4.6) 0.1 0.3
Reserve increase on business sold
through reinsurance (14.4)
Gain on sale of subsidiaries 15.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes 164.5 153.0 119.1 169.2 94.5 59.4
Cumulative Effect of Accounting
Changes (4.3) (11.3) (0.0)
------- ------- ------- ------- ------- -------
Net Income 160.2 141.7 119.1 169.2 94.5 59.4
======= ======= ======= ======= ======= =======
PAGE 9
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Lincoln Retirement Life Insurance Management Lincoln UK
------------------- ------------------- ------------------- -------------------
ASSETS Jun Dec Jun Dec Jun Dec Jun Dec
2002 2001 2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- -------- -------- --------
Investments
Corporate bonds 11681.1 10956.5 7273.7 7088.2 439.9 424.2 574.3 512.3
U.S. government bonds 13.3 13.2 74.2 78.2 0.1 0.2
Foreign government bonds 192.8 145.8 121.5 114.6 1.4 1.9 278.2 326.2
Asset/Mortgage backed securities 2318.4 1945.8 769.8 779.1 38.0 42.5
State and municipal bonds 24.6 24.3 25.0 17.4
Preferred stocks-redeemable 55.7 62.7 12.5 13.0 8.8 8.8
Common stocks 20.5 6.4 7.6 141.9 211.3
Preferred stocks-equity 32.8 38.5 0.7 5.6 2.6 2.6
Mortgage loans 2297.2 2378.1 1653.2 1701.6 88.5 92.4 0.3 0.3
Real estate 0.2 0.2
Policy loans 474.6 491.4 1423.3 1439.7 8.1 8.6
Other long-term investments 15.2 11.7 19.3 20.9
-------- -------- -------- -------- -------- -------- -------- --------
Total Investments 17126.3 16068.0 11379.6 11265.9 579.3 572.6 1003.0 1058.8
-------- -------- -------- -------- -------- -------- -------- --------
Allocated investments 3877.4 3481.0 1338.8 1154.7 111.2 102.4
Notes receivable from LNC 581.1 333.3 136.4 27.6 30.2 82.9
Invest in unconsol affiliates
Cash and invested cash (107.3) (24.7) (23.1) (36.4) 68.9 55.4 230.0 181.2
Property and equipment 8.0 8.5 44.7 36.5 21.1 39.3
Premium and fees receivable 0.4 0.0 22.4 8.2 35.6 38.5
Accrued investment income 249.6 245.0 184.2 187.6 9.6 8.9 20.5 20.9
Assets held in separate accounts 30741.3 34324.6 1341.8 1491.0 5520.0 5607.2
Federal income tax recoverable
Amount recoverable from
reinsurers 1149.0 1211.6 879.6 859.5
Deferred acquisition costs 967.8 912.8 1404.9 1265.6 591.0 587.3
Other intangible assets 146.8 154.5 930.7 964.0 45.8 50.1 243.9 244.0
Goodwill 43.9 43.9 855.1 855.1 300.7 300.7 12.7 12.1
Other 167.4 138.1 393.7 358.4 202.9 212.5 35.7 37.9
-------- -------- -------- -------- -------- -------- -------- --------
Total Assets 54943.7 56888.2 18852.2 18409.7 1429.1 1460.5 7678.0 7788.8
======== ======== ======== ======== ======== ======== ======== ========
Corporate and Consolidating
Other Operations Adjustments Consolidated
------------------- ------------------- -------------------
ASSETS Jun Dec Jun Dec Jun Dec
2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- --------
Investments
Corporate bonds 4024.7 4123.9 23993.6 23105.1
U.S. government bonds 353.9 318.9 441.6 410.5
Foreign government bonds 526.1 586.2 1120.1 1174.7
Asset/Mortgage backed securities 904.8 757.3 4031.0 3524.7
State and municipal bonds 9.1 3.0 58.8 44.7
Preferred stocks-redeemable 2.5 1.4 79.6 85.9
Common stocks 98.9 100.5 267.7 319.3
Preferred stocks-equity 115.8 104.5 151.8 151.2
Mortgage loans 356.1 363.0 4395.4 4535.5
Real estate 259.7 269.0 (1.3) (1.3) 258.7 267.9
Policy loans 1906.1 1939.7
Other long-term investments 1671.6 1771.3 (1250.0) (1250.0) 456.0 553.8
-------- -------- -------- -------- -------- --------
Total Investments 8323.3 8399.1 (1251.3) (1251.3) 37160.1 36113.1
-------- -------- -------- -------- -------- --------
Allocated investments (1122.3) 50.0 (4205.1) (4788.2)
Notes receivable from LNC (747.2) (443.7) (0.5) (0.1) 0.0 0.0
Invest in unconsol affiliates 7.5 8.1 7.5 8.1
Cash and invested cash 2096.9 3130.5 (210.5) 2265.4 3095.5
Property and equipment 179.6 173.2 253.5 257.5
Premium and fees receivable 417.1 365.6 (14.2) (12.2) 461.4 400.1
Accrued investment income 111.9 101.0 (19.5) 556.3 563.5
Assets held in separate accounts 2976.5 3410.5 40579.6 44833.4
Federal income tax recoverable 438.4 15.1 438.4 15.1
Amount recoverable from
reinsurers 4660.0 4150.6 (178.7) (191.4) 6509.9 6030.4
Deferred acquisition costs 2.3 33.9 90.6 85.6 3056.6 2885.3
Other intangible assets 1367.3 1412.6
Goodwill (0.0) (0.0) 1212.4 1211.8
Other 1028.9 1032.7 (628.0) (604.7) 1200.6 1174.9
-------- -------- -------- -------- -------- --------
Total Assets 14958.0 17001.1 (2791.8) (3547.1) 95069.2 98001.3
======== ======== ======== ======== ======== ========
PAGE 10
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Lincoln Retirement Life Insurance Management Lincoln UK
-------------------------------------------------------------------------------------
LIABILITIES and SHAREHOLDERS'
EQUITY Jun Dec Jun Dec Jun Dec Jun Dec
2002 2001 2002 2001 2002 2001 2002 2001
-------------------------------------------------------------------------------------
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 2664.9 2622.7 13339.2 12955.8 1327.5 1338.1
Health reserves 0.4 0.3 47.2 46.0
Unpaid claims - life and health 40.2 31.3 100.3 92.9 40.2 42.4
Unearned premiums 0.0 0.0
Premium deposit funds 18503.4 17838.9 10.0 13.9 30.1 29.2
Participating policyholders'
funds 91.9 100.2
Other policyholders' funds 577.3 555.2
Liab related to separate accounts 30741.3 34324.6 1341.8 1491.0 5520.0 5607.2
------- ------- ------- ------- ------- ------- ------- -------
Total Insurance and Inv Contract
Liabilities 51949.8 54817.5 15460.9 15209.5 6965.0 7063.0
Federal income taxes 80.0 (5.7) (7.3) (13.5) 41.7 43.3 (1.8) (12.2)
Short-term debt 10.0
Long-term debt
Minority Interest in pref.
securities of sub.
Notes payable to LNC 9.3
Other liabilities 363.1 168.4 460.5 436.3 819.8 866.2 203.3 192.0
Deferred gain on indemnity
reinsurance
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities 52392.9 54980.3 15914.2 15642.2 861.6 918.8 7166.5 7242.8
------- ------- ------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on
securities 137.6 79.9 48.5 13.6 2.4 1.5 25.1 15.3
Gains (losses) on derivatives 7.5 0.3 15.5 4.5
Other shareholders' equity 2405.7 1824.9 2874.1 2738.5 565.1 540.3 524.3 566.7
S/Hs' equity-minimum pension
liability adjustment (37.8) (36.0)
Cumulative effect of accounting
change 2.8 10.9
------- ------- ------- ------- ------- ------- ------- -------
Shareholders' Equity 2550.8 1907.9 2938.0 2767.5 567.6 541.7 511.5 546.0
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs'
Equity 54943.7 56888.2 18852.2 18409.7 1429.1 1460.5 7678.0 7788.8
======= ======= ======= ======= ======= ======= ======= =======
Corporate and Consolidating
Other Operations Adjustments Consolidated
-------------------------------------------------------------------------------------
LIABILITIES and SHAREHOLDERS'
EQUITY Jun Dec Jun Dec Jun Dec
2002 2001 2002 2001 2002 2001
-------------------------------------------------------------------------------------
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 1397.5 1122.8 (117.8) (122.4) 18611.2 17917.0
Health reserves 2128.4 2491.5 2176.1 2537.9
Unpaid claims - life and health 905.4 920.9 1086.1 1087.5
Unearned premiums 154.3 66.9 154.3 66.9
Premium deposit funds 29.3 105.5 585.0 597.5 19157.8 18585.0
Participating policyholders'
funds 91.9 100.2
Other policyholders' funds 7.4 7.4 584.7 562.7
Liab related to separate accounts 2976.5 3410.5 40579.6 44833.4
Total Insurance and Inv Contract ------- ------- ------- ------- ------- -------
Liabilities
4622.3 4715.0 3443.7 3885.6 82441.8 85690.6
Federal income taxes (550.3) (26.3) 437.6 14.3
Short-term debt 211.0 550.7 (210.5) 211.0 350.2
Long-term debt 2362.3 2111.8 (1250.0) (1250.0) 1112.3 861.8
Minority Interest in pref.
securities of sub. 380.0 474.7 380.0 474.7
Notes payable to LNC 361.8 335.0 (361.8) (344.3) 0.0 0.0
Other liabilities 3499.6 3392.6 (848.9) (839.5) 4497.5 4216.1
Deferred gain on indemnity
reinsurance 1115.2 1144.5 1115.2 1144.5
------- ------- ------- ------- ------- -------
Total Liabilities 12002.1 12698.0 1420.6 1255.7 89757.8 92737.8
------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on
securities 103.8 77.2 8.3 8.2 325.7 195.7
Gains (losses) on derivatives (0.3) (0.8) 22.7 3.9
Other shareholders' equity 2852.4 4222.9 (4220.7) (4811.0) 5000.9 5082.2
S/Hs' equity-minimum pension
liability adjustment (37.8) (36.0)
Cumulative effect of accounting
change 3.9 17.6
------- ------- ------- ------- ------- -------
Shareholders' Equity 2955.9 4303.1 (4212.4) (4802.8) 5311.4 5263.5
------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs'
Equity 14958.0 17001.1 (2791.8) (3547.1) 95069.2 98001.3
======= ======= ======= ======= ======= =======
PAGE 11
Five Year Comparative Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
ASSETS 1997 1998 1999 2000 2001
------- ------- ------- ------- -------
Investments
Corporate bonds 16633.3 22505.2 21119.5 21249.7 23105.1
U.S. government bonds 662.4 1134.6 538.3 542.9 410.5
Foreign government bonds 1804.4 1321.2 1447.5 1321.1 1174.7
Mortgage backed securities 4529.3 5080.5 4404.0 4160.4 3524.7
State and municipal bonds 241.4 16.7 14.7 14.6 44.7
Preferred stocks-redeemable 195.5 174.6 164.7 161.2 85.9
Common stocks 572.3 463.1 514.5 436.6 319.3
Preferred stocks-equity 88.2 79.8 89.5 113.1 151.2
Mortgage loans 3288.1 4393.1 4735.4 4663.0 4535.5
Real estate 576.0 488.7 256.2 282.0 267.9
Policy loans 763.1 1840.0 1892.4 1960.9 1939.7
Other long-term investments 464.8 432.0 401.8 463.3 553.8
------- ------- ------- ------- -------
Total Investments 29818.8 37929.5 35578.4 35368.6 36113.1
------- ------- ------- ------- -------
Invest in unconsol affiliates 21.0 18.8 25.8 6.4 8.1
Cash and invested cash 3794.7 2433.4 1895.9 1927.4 3095.5
Property and equipment 189.8 174.8 203.8 228.2 257.5
Premiums and fees receivable 197.5 246.2 259.6 296.7 400.1
Accrued investment income 423.0 528.5 533.2 546.4 563.5
Assets held in separate accounts 37138.8 43408.9 53654.2 50579.9 44833.4
Federal income taxes recoverable 204.1 345.0 207.5 15.1
Amounts recoverable from
reinsurers 2350.8 3127.1 3954.3 3747.7 6030.4
Deferred acquisition costs 1623.8 1964.4 2800.3 3070.5 2885.3
Other intangible assets 613.9 1848.4 1746.5 1557.0 1412.6
Goodwill 457.7 1484.3 1423.0 1286.0 1211.8
Other 544.8 468.0 675.7 1021.6 1174.9
------- ------- -------- ------- -------
Total Assets 77174.7 93836.3 103095.7 99844.1 98001.3
======= ======= ======== ======= =======
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 8228.7 16434.2 17071.4 17841.2 17917.0
Health reserves 2300.4 2600.1 2507.8 2523.8 2537.9
Unpaid claims-life and health 682.0 1043.4 1269.8 1316.6 1087.5
Unearned premiums 55.3 62.3 75.8 46.5 66.9
Premium deposit funds 19803.0 20171.9 19624.1 17715.5 18585.0
Participating policyholders'
funds 79.8 142.7 132.0 139.4 100.2
Other policyholders' funds 180.6 438.4 472.6 522.2 562.7
Liab related to separate accounts 37138.8 43408.9 53654.2 50579.9 44833.4
------- ------- -------- ------- -------
Total Ins and Inv Contr
Liabilities 68468.5 84301.9 94807.7 90685.1 85690.6
Federal income taxes 487.8
Short-term debt 297.2 314.6 460.2 312.9 350.2
Long-term debt 511.0 712.2 712.0 712.2 861.8
Minority Interest - pref sec of a
sub 315.0 745.0 745.0 745.0 474.7
Other liabilities 2112.2 2374.6 2107.0 2434.7 4216.1
Deferred gain on indemnity
reinsurance 1144.5
------- ------- -------- ------- -------
Total Liabilities 72191.8 88448.3 98831.9 94890.0 92737.8
------- ------- -------- ------- -------
S/Hs' equity-unrealized gains
(losses)-cont op. 436.0 552.4 (465.7) 12.0 199.6
S/Hs' equity-foreign currency 46.2 50.0 30.0 21.9 (8.1)
S/Hs' equity-minimum pension
liability adjustment (36.0)
S/Hs' equity-other 4500.7 4785.5 4699.6 4920.2 5090.4
Cumulative effect of accounting
change 17.6
------- ------- -------- ------- -------
Total Shareholders' Equity 4982.9 5387.9 4263.9 4954.1 5263.5
------- ------- -------- ------- -------
Total Liabilities ------- ------- -------- ------- -------
and Shareholders' Equity 77174.7 93836.3 103095.7 99844.1 98001.3
======= ======= ======== ======= =======
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $22.48 $23.86 $24.14 $25.85 $26.94
Common shares outstanding 202.3 202.6 196.0 191.2 187.3
PAGE 12
Quarterly Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
ASSETS
Investments
Corporate bonds 21560.5 21119.5 21188.0 20719.1 21064.7 21249.7
U.S. government bonds 991.0 538.3 572.4 566.2 575.5 542.9
Foreign government bonds 1369.6 1447.5 1416.4 1377.4 1277.7 1321.1
Mortgage backed securities 4601.2 4404.0 4393.4 4242.4 4172.5 4160.4
State and municipal bonds 14.8 14.7 14.7 14.1 14.3 14.6
Preferred stocks - redeemable 171.3 164.7 159.7 159.2 159.5 161.2
Common stocks 423.9 514.5 496.4 467.8 479.9 436.6
Preferred stocks-equity 82.7 89.5 91.3 92.2 90.3 113.1
Mortgage loans 4772.7 4735.4 4833.9 4783.8 4767.3 4663.0
Real estate 280.3 256.2 283.4 282.1 297.6 282.0
Policy loans 1863.2 1892.4 1896.3 1914.7 1935.6 1960.9
Other long-term investments 401.2 401.8 428.8 438.2 470.5 463.3
------- ------- ------- ------- ------- -------
Total Investments 36532.4 35578.4 35774.6 35057.2 35305.4 35368.6
------- ------- ------- ------- ------- -------
Invest in unconsol affiliates 23.4 25.8 (0.9) 5.8 6.4
Cash and invested cash 2342.9 1895.9 1510.1 1619.3 1435.9 1927.4
Property and equipment 191.9 203.8 207.7 205.5 213.8 228.2
Premiums and fees receivable 296.0 259.6 190.2 247.8 240.8 296.7
Accrued investment income 602.9 533.2 575.0 544.0 569.2 546.4
Assets held in separate accounts 46228.8 53654.2 56907.6 54924.2 54410.9 50579.9
Federal income taxes recoverable 457.3 345.0 300.4 246.1 267.3 207.5
Amount recoverable from
reinsurers 3315.6 3954.3 3851.0 3775.3 3774.7 3747.7
Deferred acquisition costs 2614.5 2800.3 2870.4 2968.0 3048.0 3070.5
Other intangible assets 1760.6 1746.5 1705.5 1646.7 1598.4 1557.0
Goodwill 1435.0 1423.0 1349.6 1335.4 1296.6 1286.0
Other 699.3 675.7 1097.8 1279.1 1076.4 1021.6
------- -------- -------- -------- -------- --------
Total Assets 96500.7 103095.7 106340.0 103847.6 103243.1 99844.1
======= ======== ======== ======== ======== ========
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 16760.5 17071.4 17172.1 17247.3 17500.0 17841.2
Health reserves 2511.3 2507.8 2547.4 2494.2 2520.2 2523.8
Unpaid claims-life and health 1162.6 1269.8 1177.3 1204.1 1202.8 1316.6
Unearned premiums 62.5 75.8 57.1 52.8 51.8 46.5
Premium deposit funds 19988.9 19624.1 18899.3 18407.2 18072.1 17715.5
Participating policyholders'
funds 120.2 132.0 130.7 130.4 135.4 139.4
Other policyholders' funds 445.9 472.6 478.9 490.6 500.7 522.2
Liab related to separate accounts 46228.8 53654.2 56907.6 54924.2 54410.9 50579.9
------- -------- -------- -------- -------- --------
Total Ins and Inv Contr
Liabilities 87280.8 94807.7 97370.5 94950.8 94394.0 90685.1
Federal income taxes
Short-term debt 367.7 460.2 474.2 355.7 330.3 312.9
Long-term debt 712.0 712.0 712.0 712.1 712.2 712.2
Minority Interest - pref sec of a
sub 745.0 745.0 745.0 745.0 745.0 745.0
Notes payable to LNC
Other liabilities 2733.0 2107.0 2697.9 2860.3 2522.9 2434.7
Deferred gain on indemnity
reinsurance
------- -------- -------- -------- -------- --------
Total Liabilities 91838.5 98831.9 101999.6 99623.9 98704.5 94890.0
------- -------- -------- -------- -------- --------
S/Hs' equity-unrealized gns
(losses)- inv. (103.8) (465.7) (411.2) (556.6) (337.7) 12.0
S/Hs' equity- gains
(losses)-derivatives
S/Hs' equity-foreign currency 40.2 30.0 22.8 21.8 19.9 21.9
S/Hs' equity-minimum pension
liability adj
S/Hs' equity-other 4725.8 4699.6 4728.9 4758.5 4856.4 4920.1
Cumulative effect of accounting
change
------- -------- -------- -------- -------- --------
Total Shareholders' Equity 4662.2 4263.9 4340.4 4223.7 4538.6 4954.1
------- -------- -------- -------- -------- --------
Total Liabilities
and Shareholders' Equity 96500.7 103095.7 106340.0 103847.6 103243.1 99844.1
======= ======== ======== ======== ======== ========
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $24.28 $24.14 $24.58 $25.01 $25.43 $25.85
Common shares outstanding 196.3 196.0 193.3 191.1 191.8 191.2
Quarterly Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
ASSETS
Investments
Corporate bonds 21855.2 22116.6 23424.3 23105.1 23470.4 23993.6
U.S. government bonds 536.6 510.0 467.7 410.5 429.1 441.6
Foreign government bonds 1240.8 1236.3 1160.3 1174.7 1180.1 1120.1
Mortgage backed securities 4009.8 3844.6 3765.6 3524.7 3613.9 4031.0
State and municipal bonds 14.7 14.1 14.4 44.7 62.6 58.8
Preferred stocks - redeemable 154.1 152.2 99.3 85.9 84.6 79.6
Common stocks 388.6 373.3 311.2 319.3 284.4 267.7
Preferred stocks-equity 170.9 160.8 166.5 151.2 154.2 151.8
Mortgage loans 4641.2 4652.8 4663.1 4535.5 4448.2 4395.4
Real estate 308.1 306.9 288.8 267.9 258.2 258.7
Policy loans 1947.0 1947.4 1943.4 1939.7 1918.0 1906.1
Other long-term investments 477.4 480.9 483.4 553.8 459.6 456.0
------- ------- ------- ------- ------- -------
Total Investments 35744.5 35796.0 36788.0 36113.1 36363.1 37160.1
------- ------- ------- ------- ------- -------
Invest in unconsol affiliates 7.3 6.1 6.5 8.1 8.1 7.5
Cash and invested cash 2015.2 1501.9 1996.3 3095.5 1699.5 2265.4
Property and equipment 242.1 251.4 261.0 257.5 266.4 253.5
Premiums and fees receivable 282.8 303.7 264.5 400.1 376.3 461.4
Accrued investment income 581.9 573.2 615.1 563.5 577.1 556.3
Assets held in separate accounts 44506.2 47140.2 39479.8 44833.4 44916.7 40579.6
Federal income taxes recoverable 106.6 177.5 35.3 15.1 551.3 438.4
Amount recoverable from
reinsurers 3706.4 3662.0 3818.3 6030.4 6096.3 6509.9
Deferred acquisition costs 2963.4 3129.1 3087.2 2885.3 3114.9 3056.6
Other intangible assets 1505.3 1479.0 1451.5 1412.6 1384.0 1367.3
Goodwill 1274.5 1263.6 1253.2 1211.8 1211.5 1212.4
Other 1186.3 1147.7 1149.4 1174.9 1280.9 1200.6
------- -------- -------- -------- -------- --------
Total Assets 94122.4 96431.2 90206.0 98001.3 97846.4 95069.2
======= ======== ======== ======== ======== ========
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 17733.0 17865.3 17990.8 17917.0 18014.6 18611.2
Health reserves 2534.8 2533.9 2573.2 2537.9 2492.4 2176.1
Unpaid claims-life and health 1255.3 1136.5 1206.6 1087.5 1153.6 1086.1
Unearned premiums 45.9 19.0 8.1 66.9 66.5 154.3
Premium deposit funds 17667.1 17715.9 18509.7 18585.0 18669.6 19157.8
Participating policyholders'
funds 145.0 135.2 118.3 100.2 98.6 91.9
Other policyholders' funds 532.1 541.4 554.3 562.7 571.9 584.7
Liab related to separate accounts 44506.2 47140.2 39479.8 44833.4 44916.7 40579.6
------- -------- -------- -------- -------- --------
Total Ins and Inv Contr
Liabilities 84419.3 87087.2 80440.8 85690.6 85983.9 82441.8
Federal income taxes
Short-term debt 415.3 351.3 539.0 350.2 510.2 211.0
Long-term debt 712.3 712.4 712.4 861.8 861.8 1112.3
Minority Interest - pref sec of a
sub 745.0 745.0 305.0 474.7 376.2 380.0
Notes payable to LNC (0.0) 0.0
Other liabilities 2734.2 2479.4 2840.2 4216.1 3864.6 4497.5
Deferred gain on indemnity
reinsurance 1144.5 1118.6 1115.2
------- -------- -------- -------- -------- --------
Total Liabilities 89026.0 91375.3 84837.4 92737.8 92715.3 89757.8
------- -------- -------- -------- -------- --------
S/Hs' equity-unrealized gns
(losses)- inv. 190.4 76.2 247.9 195.7 31.8 325.7
S/Hs' equity- gains
(losses)-derivatives 5.7 9.4 2.9 3.9 22.6 22.7
S/Hs' equity-foreign currency 4.1 (15.3) 6.9 (8.1) (20.9) 21.9
S/Hs' equity-minimum pension
liability adj (36.0) (35.2) (37.8)
S/Hs' equity-other 4878.5 4968.2 5093.4 5090.4 5132.7 4979.0
Cumulative effect of accounting
change 17.6 17.6 17.6 17.6
------- -------- -------- -------- -------- --------
Total Shareholders' Equity 5096.4 5055.9 5368.6 5263.5 5131.1 5311.4
------- -------- -------- -------- -------- --------
Total Liabilities
and Shareholders' Equity 94122.4 96431.2 90206.0 98001.3 97846.4 95069.2
======= ======== ======== ======== ======== ========
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $25.96 $26.32 $26.87 $26.94 $27.02 $26.90
Common shares outstanding 188.1 188.2 189.8 187.3 187.9 184.5
PAGE 13
Lincoln Retirement
Income Statements & Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Jun Jun
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 84.2 53.9 65.2 64.3 77.5 51.6 25.3
Surrender charges 29.8 33.5 37.9 41.8 31.2 17.5 15.1
Expense assessments 367.2 459.9 536.2 628.4 537.7 279.5 254.8
Other revenue and fees 1.2 1.7 14.5 11.0 16.7 5.6 4.5
Net investment income 1477.1 1501.6 1474.2 1393.5 1370.0 680.7 702.6
------- ------- ------- ------- ------- ------- -------
Operating Revenue 1959.5 2050.6 2128.0 2138.9 2033.1 1034.9 1002.3
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 292.6 271.6 259.1 254.7 263.9 142.4 127.9
Interest credited to policy bal. 974.4 955.2 925.2 866.1 863.8 419.1 447.9
Underwriting, acquisition,
insurance and other expenses 415.0 498.8 560.8 575.5 524.5 260.6 272.1
Goodwill amortization 0.0 2.2 2.0 (0.6) 1.2 0.6 0.0
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1682.0 1727.8 1747.1 1695.7 1653.5 822.7 847.9
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 277.5 322.8 380.9 443.2 379.6 212.2 154.4
Federal income taxes 54.5 60.4 81.4 81.2 59.3 39.1 26.2
------- ------- ------- ------- ------- ------- -------
Income from Operations 223.0 262.4 299.4 362.0 320.3 173.1 128.2
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 40.3 11.4 (7.9) (3.4) (42.3) (8.1) (69.5)
Gains (losses) on derivatives (0.2) 0.0 0.1
Restructuring charges (1.3) (1.3) (1.0)
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 263.3 273.8 291.5 358.6 276.5 163.8 57.8
Cumulative effect of accounting
changes (7.3) (7.3) 0.0
------- ------- ------- ------- ------- ------- -------
Net Income 263.3 273.8 291.5 358.6 269.2 156.5 57.8
======= ======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 223.0 264.6 301.5 361.4 321.5 173.7 128.2
Net Income -before Goodwill
Amort. 263.3 276.0 293.6 358.0 270.5 157.1 57.8
Effective tax rate 19.6% 18.7% 21.4% 18.3% 15.6% 18.4% 17.0%
Operating Revenue 1959.5 2050.6 2128.0 2138.9 2033.1 1034.9 1002.3
Realized gains (losses) on
investments 63.5 17.5 (12.1) (5.2) (64.5) (12.4) (106.7)
Gains (losses) on derivatives (0.3) 0.0 (0.0)
------- ------- ------- ------- ------- ------- -------
Total Revenue 2023.0 2068.1 2115.8 2133.7 1968.3 1022.5 895.6
======= ======= ======= ======= ======= ======= =======
Average capital 1373.0 1592.6 1562.0 1601.8 1828.2 1792.5 2216.4
Return on average capital 16.2% 16.5% 19.2% 22.6% 17.5% 19.3% 11.6%
Page 14
Lincoln Retirement
Income Statements & Operational Data
Unaudited [Millions of Dollars]
Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 13.1 21.0 13.3 16.8 18.0 16.2
Surrender charges 10.1 9.8 11.1 11.2 10.4 9.1
Expense assessments 142.6 140.5 155.1 155.7 163.4 154.2
Other revenue and fees 0.9 6.4 2.2 0.6 4.6 3.5
Net investment income 364.5 366.0 362.9 345.8 349.8 335.0
------- ------- ------- ------- ------- -------
Operating Revenue 531.2 543.7 544.6 530.1 546.2 518.1
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 55.0 77.2 61.6 65.7 68.4 59.0
Interest credited to policy
balances 230.1 234.1 228.2 219.4 205.4 213.2
Underwriting, acquisition,
insurance and other expenses 146.5 134.7 144.5 139.8 147.9 143.2
Goodwill amortization 0.6 0.5 (1.5) 0.3 0.3 0.3
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 432.2 446.5 432.8 425.2 421.9 415.7
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 99.0 97.2 111.8 104.8 124.2 102.3
Federal income taxes 23.6 23.5 23.3 20.7 21.3 15.9
------- ------- ------- ------- ------- -------
Income from Operations 75.4 73.7 88.5 84.1 102.9 86.4
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (7.0) (3.7) 2.7 0.3 (9.1) 2.8
Gains (losses) on derivatives
Restructuring charges
------- ------- ------- ------- ------- -------
Income before Accounting Changes 68.4 69.9 91.2 84.4 93.8 89.2
Cumulative effect of accounting
changes
------- ------- ------- ------- ------- -------
Net Income 68.4 69.9 91.2 84.4 93.8 89.2
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 76.0 74.2 87.0 84.4 103.2 86.7
Net Income -before Goodwill
Amort. 69.1 70.4 89.7 84.7 94.1 89.5
Effective tax rate 23.8% 24.2% 20.8% 19.7% 17.1% 15.6%
Operating Revenue 531.2 543.7 544.6 530.1 546.2 518.1
Realized gains (losses) on
investments (10.7) (5.8) 4.2 0.4 (14.1) 4.2
Gains (losses) on derivatives
------- ------- ------- ------- ------- -------
Total Revenue 520.5 538.0 548.7 530.5 532.1 522.3
======= ======= ======= ======= ======= =======
Average capital 1471.2 1559.0 1438.4 1647.7 1635.2 1686.0
Return on average capital 20.5% 18.9% 24.6% 20.4% 25.2% 20.5%
Lincoln Retirement
Income Statements & Operational Data (Continued)
Unaudited [Millions of Dollars]
Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 19.1 32.5 13.2 12.7 12.2 13.1
Surrender charges 9.1 8.5 6.5 7.2 7.9 7.2
Expense assessments 141.6 138.0 132.0 126.2 127.7 127.1
Other revenue and fees 1.7 3.9 1.2 10.0 5.8 (1.3)
Net investment income 341.3 339.3 346.6 342.6 349.9 352.7
------- ------- ------- ------- ------- -------
Operating Revenue 512.8 522.1 499.5 498.7 503.5 498.8
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 69.8 72.6 66.3 55.3 55.4 72.5
Interest credited to policy
balances 209.4 209.7 217.2 227.5 226.1 221.8
Underwriting, acquisition,
insurance and other expenses 134.6 126.0 132.8 131.1 124.9 147.2
Goodwill amortization 0.3 0.3 0.3 0.3
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 414.1 408.6 416.6 414.2 406.4 441.5
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 98.7 113.6 82.9 84.5 97.1 57.3
Federal income taxes 16.3 22.8 10.4 9.7 16.7 9.5
------- ------- ------- ------- ------- -------
Income from Operations 82.3 90.8 72.4 74.8 80.4 47.8
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (1.4) (6.7) (13.5) (20.7) (32.8) (36.6)
Gains (losses) on derivatives (0.1) 0.1 (0.3) 0.1 0.0 0.1
Restructuring charges (0.7) (0.6) 0.0 0.0 0.0 (1.0)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 80.2 83.6 58.6 54.2 47.6 10.2
Cumulative effect of accounting
changes (3.6) (3.7) 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income 76.6 79.9 58.6 54.2 47.6 10.2
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 82.6 91.1 72.7 75.1 80.4 47.8
Net Income -before Goodwill
Amort. 76.9 80.2 58.9 54.5 47.6 10.2
Effective tax rate 16.6% 20.1% 12.6% 11.5% 17.2% 16.5%
Operating Revenue 512.8 522.1 499.5 498.7 503.5 498.8
Realized gains (losses) on
investments (2.2) (10.3) (20.8) (31.3) (50.5) (56.2)
Gains (losses) on derivatives (0.2) 0.2 (0.5) 0.2 0.0 (0.1)
------- ------- ------- ------- ------- -------
Total Revenue 510.4 512.1 478.2 467.5 453.0 442.6
======= ======= ======= ======= ======= =======
Average capital 1797.9 1787.1 1902.9 1824.9 2041.6 2391.2
Return on average capital 18.3% 20.3% 15.2% 16.4% 15.8% 8.0%
Page 15
Lincoln Retirement
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
YTD YTD
Jun Jun
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities- Bal Beg-of-Year 17.634 17.214 18.111 18.210 16.615 16.615 18.004
Gross Deposits 1.632 1.452 2.563 2.074 3.342 1.228 1.759
Withdrawals (incl charges) &
deaths (2.220) (2.468) (2.521) (3.283) (2.448) (1.361) (1.281)
-------- -------- -------- -------- -------- -------- --------
Net cash flows (0.588) (1.016) 0.042 (1.209) 0.894 (0.134) 0.478
Transfer from (to) var annuities (1.336) (0.356) (0.783) (1.329) (0.428) (0.236) (0.264)
Interest credited 0.978 0.994 0.840 0.944 0.923 0.451 0.461
Acq of new business/companies 0.527 1.274
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities-Gross 17.214 18.111 18.210 16.615 18.004 16.697 18.679
Reinsurance Ceded (1.757) (1.606) (1.419) (1.221) (1.514) (1.146) (1.770)
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities-Bal End -of-Year 15.458 16.505 16.791 15.394 16.491 15.551 16.909
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities Incremental
Deposits * 1.412 1.265 2.310 1.918 3.213 1.147 1.720
Variable Annuities-Bal
Beg-of-Year 20.383 27.346 33.358 41.493 39.427 39.427 34.638
Gross Deposits 2.695 2.791 2.553 3.165 3.067 1.590 1.595
Withdrawals (incl charges) &
deaths (2.038) (3.019) (3.760) (4.830) (3.856) (2.243) (1.762)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.657 (0.228) (1.207) (1.665) (0.789) (0.653) (0.167)
Transfer from (to) fixed
annuities 1.335 0.389 0.787 1.320 0.428 0.238 0.266
Invest inc & change in mkt value 4.971 5.414 8.555 (1.721) (4.428) (2.051) (3.531)
Acq(sale) of new
business/companies 0.437
-------- -------- -------- -------- -------- -------- --------
Var Annuities-Bal End-of-Year 27.346 33.358 41.493 39.427 34.638 36.961 31.206
-------- -------- -------- -------- -------- -------- --------
Variable Annuities Incremental
Deposits * 2.585 2.641 2.409 2.667 2.624 1.295 1.469
Total Annuities - Bal Beg-of-Year 38.017 44.561 51.469 59.704 56.043 56.043 52.643
Gross Deposits 4.327 4.244 5.116 5.239 6.409 2.818 3.354
Withdrawals (incl charges) &
deaths (4.258) (5.487) (6.281) (8.113) (6.304) (3.604) (3.043)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.069 (1.244) (1.165) (2.874) 0.105 (0.787) 0.311
Transfers (0.001) 0.033 0.004 (0.009) 0.000 0.002 0.002
Interest credited & change in mkt
value 5.949 6.408 9.395 (0.777) (3.505) (1.600) (3.070)
Acq of new business/companies 0.527 1.711
-------- -------- -------- -------- -------- -------- --------
Total Gross Annuities-Bal
End-of-Year 44.561 51.469 59.704 56.043 52.643 53.658 49.886
Reinsurance Ceded (1.757) (1.606) (1.419) (1.221) (1.514) (1.146) (1.770)
-------- -------- -------- -------- -------- -------- --------
Total Annuities (Net of Ceded) -
Bal End-of-Year 42.804 49.863 58.284 54.821 51.129 52.512 48.116
======== ======== ======== ======== ======== ======== ========
Total Annuities Incremental
Deposits * 3.997 3.906 4.719 4.585 5.837 2.442 3.189
Var Ann Under Agree - Included
above 0.649 0.719 0.941 1.077 0.975 1.175
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.709 0.459 1.712 0.489 0.935
Withdrawals (1.367) (2.271) (1.604) (0.912) (0.730)
Net Flows (0.658) (1.812) 0.108 (0.423) 0.205
Variable Annuities - including
fixed portion of variable
contracts
Deposits 4.407 4.780 4.697 2.329 2.419
Withdrawals (4.915) (5.842) (4.700) (2.692) (2.313)
Net Flows (0.508) (1.062) (0.003) (0.363) 0.106
Fixed Portion of Variable
Contracts
Deposits 1.853 1.615 1.630 0.739 0.824
Withdrawals (1.154) (1.012) (0.844) (0.449) (0.551)
Net Flows 0.699 0.603 0.786 0.290 0.273
* Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Retirement products.
PAGE 16
Lincoln Retirement
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Fixed Annuities-Bal
Beg-of-Quarter 18.303 18.406 18.210 17.615 17.200 16.930
Gross Deposits 0.678 0.741 0.589 0.490 0.513 0.482
Withdrawals (incl charges) &
deaths (0.567) (0.782) (0.875) (0.796) (0.802) (0.810)
------- ------- ------- ------- ------- -------
Net cash flows 0.111 (0.040) (0.287) (0.307) (0.288) (0.328)
Transfer from (to) var annuities (0.238) (0.300) (0.550) (0.346) (0.217) (0.216)
Interest credited 0.231 0.144 0.241 0.238 0.235 0.230
Acq of new business/companies
------- ------- ------- ------- ------- -------
Fixed Annuities-Gross 18.406 18.210 17.615 17.200 16.930 16.615
Reinsurance Ceded (1.473) (1.419) (1.371) (1.316) (1.270) (1.221)
------- ------- ------- ------- ------- -------
Fixed Annuities-Bal
End-of-Quarter 16.934 16.791 16.244 15.884 15.660 15.394
------- ------- ------- ------- ------- -------
Fixed Annuities Incremental
Deposits * 0.644 0.582 0.560 0.447 0.464 0.447
Variable Annuities-Bal
Beg-of-Quarter 37.233 35.613 41.493 44.640 43.097 42.743
Gross Deposits 0.634 0.634 0.797 0.793 0.729 0.846
Withdrawals (incl charges) &
deaths (0.938) (1.084) (1.210) (1.168) (1.253) (1.199)
------- ------- ------- ------- ------- -------
Net cash flows (0.304) (0.450) (0.413) (0.375) (0.524) (0.353)
Transfer from (to) fixed
annuities 0.237 0.303 0.549 0.343 0.216 0.212
Invest inc & change in mkt value (1.553) 6.027 3.011 (1.511) (0.046) (3.175)
Acq(sale) of new
business/companies
------- ------- ------- ------- ------- -------
Var Annuities-Bal End-of-Quarter 35.613 41.493 44.640 43.097 42.743 39.427
------- ------- ------- ------- ------- -------
Variable Annuities Incremental
Deposits 0.589 0.592 0.732 0.699 0.586 0.650
Total Annuities -Bal
Beg-of-Quarter 55.536 54.020 59.704 62.255 60.297 59.673
Gross Deposits 1.312 1.375 1.386 1.283 1.242 1.328
Withdrawals (incl charges) &
deaths (1.505) (1.865) (2.085) (1.964) (2.055) (2.009)
------- ------- ------- ------- ------- -------
Net cash flows (0.193) (0.490) (0.700) (0.682) (0.812) (0.681)
Transfers (0.001) 0.003 (0.001) (0.003) (0.001) (0.004)
Interest credited & change in mkt
value (1.322) 6.171 3.252 (1.273) 0.189 (2.945)
Acq of new business/companies
Total Gross Annuities-Bal ------- ------- ------- ------- ------- -------
End-of-Quarter 54.020 59.704 62.255 60.297 59.673 56.043
Reinsurance Ceded (1.473) (1.419) (1.371) (1.316) (1.270) (1.221)
------- ------- ------- ------- ------- -------
Total Annuities (Net of Ceded) -
Bal End-of-Qtr 52.547 58.284 60.884 58.981 58.403 54.821
======= ======= ======= ======= ======= =======
Total Annuities Incremental
Deposits * 1.233 1.174 1.292 1.145 1.050 1.097
Var Ann Under Agree - Included
above 0.639 0.719 0.866 0.868 0.962 0.941
* Incremental Deposits represent gross deposits reduced by transfers from other
Lincoln Retirement products.
------------------------------------------------------------------------------------------------------
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.147 0.275 0.134 0.126 0.114 0.085
Withdrawals (0.329) (0.428) (0.612) (0.557) (0.532) (0.570)
Net Flows (0.182) (0.152) (0.479) (0.431) (0.417) (0.485)
Variable Annuities - including
fixed portion of variable
contracts
Deposits 1.165 1.100 1.252 1.157 1.128 1.243
Withdrawals (1.176) (1.438) (1.473) (1.408) (1.523) (1.439)
Net Flows (0.011) (0.338) (0.221) (0.251) (0.395) (0.196)
Fixed Portion of Variable
Contracts
Deposits 0.531 0.466 0.455 0.364 0.399 0.397
Withdrawals (0.238) (0.354) (0.263) (0.240) (0.270) (0.240)
Net Flows 0.293 0.112 0.192 0.124 0.129 0.157
Lincoln Retirement
Annuity Account Value Roll Forward (Continued)
Unaudited [Billions of Dollars]
Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Fixed Annuities-Bal
Beg-of-Quarter 16.615 16.599 16.697 17.317 18.004 18.178
Gross Deposits 0.560 0.668 0.896 1.218 0.906 0.853
Withdrawals (incl charges) &
deaths (0.787) (0.574) (0.525) (0.562) (0.730) (0.551)
------- ------- ------- ------- ------- -------
Net cash flows (0.227) 0.094 0.372 0.656 0.176 0.302
Transfer from (to) var annuities (0.014) (0.222) 0.021 (0.213) (0.232) (0.032)
Interest credited 0.225 0.226 0.228 0.244 0.230 0.231
Acq of new business/companies
------- ------- ------- ------- ------- -------
Fixed Annuities-Gross 16.599 16.697 17.317 18.004 18.178 18.679
Reinsurance Ceded (1.169) (1.146) (1.266) (1.514) (1.645) (1.770)
------- ------- ------- ------- ------- -------
Fixed Annuities-Bal
End-of-Quarter 15.430 15.551 16.051 16.491 16.533 16.909
------- ------- ------- ------- ------- -------
Fixed Annuities Incremental
Deposits * 0.536 0.611 0.873 1.193 0.881 0.839
Variable Annuities-Bal
Beg-of-Quarter 39.427 34.733 36.961 30.506 34.638 35.150
Gross Deposits 0.887 0.703 0.684 0.793 0.808 0.787
Withdrawals (incl charges) &
deaths (1.250) (0.993) (0.795) (0.818) (0.896) (0.866)
------- ------- ------- ------- ------- -------
Net cash flows (0.363) (0.290) (0.111) (0.025) (0.088) (0.079)
Transfer from (to) fixed
annuities 0.011 0.227 (0.023) 0.213 0.234 0.032
Invest inc & change in mkt value (4.342) 2.291 (6.321) 3.944 0.366 (3.897)
Acq(sale) of new
business/companies
------- ------- ------- ------- ------- -------
Var Annuities-Bal End-of-Quarter 34.733 36.961 30.506 34.638 35.150 31.206
------- ------- ------- ------- ------- -------
Variable Annuities Incremental
Deposits 0.683 0.612 0.604 0.725 0.725 0.744
Total Annuities -Bal
Beg-of-Quarter 56.043 51.332 53.658 47.824 52.643 53.329
Gross Deposits 1.447 1.371 1.580 2.011 1.714 1.640
Withdrawals (incl charges) &
deaths (2.037) (1.567) (1.320) (1.380) (1.626) (1.417)
------- ------- ------- ------- ------- -------
Net cash flows (0.590) (0.196) 0.261 0.631 0.088 0.223
Transfers (0.003) 0.005 (0.002) 0.002 0.000
Interest credited & change in mkt
value (4.117) 2.517 (6.093) 4.188 0.596 (3.666)
Acq of new business/companies
Total Gross Annuities-Bal ------- ------- ------- ------- ------- -------
End-of-Quarter 51.332 53.658 47.824 52.643 53.329 49.886
Reinsurance Ceded (1.169) (1.146) (1.266) (1.514) (1.645) (1.770)
------- ------- ------- ------- ------- -------
Total Annuities (Net of Ceded) -
Bal End-of-Qtr 50.163 52.512 46.558 51.129 51.684 48.116
======= ======= ======= ======= ======= =======
Total Annuities Incremental
Deposits * 1.219 1.223 1.477 1.918 1.606 1.583
Var Ann Under Agree - Included
above 0.904 0.975 0.907 1.077 1.207 1.175
* Incremental Deposits represent gross deposits reduced by transfers from other
Lincoln Retirement products.
--------------------------------------------------------------------------------------------------
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.160 0.329 0.489 0.734 0.505 0.430
Withdrawals (0.556) (0.356) (0.340) (0.352) (0.463) (0.267)
Net Flows (0.396) (0.027) 0.149 0.382 0.042 0.163
Variable Annuities - including
fixed portion of variable
contracts
Deposits 1.287 1.042 1.091 1.277 1.209 1.210
Withdrawals (1.481) (1.211) (0.979) (1.028) (1.163) (1.150)
Net Flows (0.194) (0.169) 0.112 0.249 0.046 0.060
Fixed Portion of Variable
Contracts
Deposits 0.400 0.339 0.407 0.484 0.401 0.423
Withdrawals (0.231) (0.218) (0.184) (0.210) (0.267) (0.284)
Net Flows 0.169 0.121 0.223 0.274 0.134 0.139
PAGE 17
Life Insurance Segment
Income Statements & Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Jun Jun
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 64.8 185.9 235.8 227.3 212.4 101.6 98.7
Surrender charges 9.8 52.1 66.3 66.4 66.1 30.6 25.2
Mortality assessments 161.2 350.1 444.6 465.2 499.4 249.1 247.8
Expense assessments 28.6 146.2 165.8 191.8 191.4 92.7 94.1
Other revenue and fees 9.0 2.6 9.8 14.2 17.9 8.9 12.4
Net investment income 268.2 642.6 840.1 871.5 910.2 450.4 451.7
------- ------- ------- ------- ------- ------- -------
Operating Revenue 541.5 379.5 1762.6 1836.4 1897.5 933.4 929.9
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 143.6 371.2 430.5 411.5 418.5 203.4 207.7
Div accum & div to policyholders 20.4 70.7 81.5 80.8 78.5 36.6 36.0
Interest credited to policy bal. 153.0 393.1 493.8 525.4 569.9 279.5 295.2
Underwriting, acquisition,
insurance and other expenses 172.1 293.1 399.1 384.8 374.7 190.8 180.6
Goodwill amortization 0.1 19.7 23.4 23.7 23.7 11.8 0.0
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 489.3 1147.8 1428.2 1426.3 1465.4 722.1 719.5
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 52.3 231.6 334.3 410.1 432.1 211.2 210.4
Federal income taxes 12.4 82.4 122.3 150.1 153.0 75.5 65.8
------- ------- ------- ------- ------- ------- -------
Income from Operations 39.9 149.2 212.0 259.9 279.0 135.7 144.6
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (0.8) (1.7) (0.5) (10.7) (38.5) (11.8) (43.4)
Gains (losses) on derivatives 1.6 0.1 0.3
Restructuring charges 0.0 (20.0) 0.0 0.0 (3.5) (2.0) 0.0
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 39.1 127.5 211.5 249.3 238.6 122.0 101.6
Cumulative effect of accounting
changes (5.5) (5.5) 0.0
------- ------- ------- ------- ------- ------- -------
Net Income 39.1 127.5 211.5 249.3 233.1 116.5 101.6
======= ======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 40.0 168.9 235.4 283.6 302.7 147.6 144.6
Net Income -before Goodwill
Amort. 39.2 147.1 234.9 273.0 256.7 128.3 101.6
Effective tax rate 23.7% 35.6% 36.6% 36.6% 35.4% 35.7% 31.3%
Operating Revenue 541.5 1,379.5 1,762.6 1836.4 1897.5 933.4 929.9
Realized gains (losses) on
investments 3.2 (1.0) (2.2) (17.4) (57.6) (18.2) (66.8)
Gains (losses) on derivatives 0.7 0.1 0.6
------- ------- ------- ------- ------- ------- -------
Total Revenue 544.8 1378.5 1760.4 1819.0 1840.6 915.3 863.8
======= ======= ======= ======= ======= ======= =======
Average capital 384.9 1948.0 2712.3 2640.2 2731.5 2722.7 2833.8
Return on average capital 10.4% 7.7% 7.8% 9.8% 10.2% 10.0% 10.2%
----------------------------------------------------------------------------------------------------------
First Year Premiums by Product
(Millions)
Universal Life 114.0 233.0 342.9 289.3 292.7 127.7 185.3
Variable Universal Life 52.9 101.3 142.2 218.7 228.6 108.3 81.4
Whole Life 5.4 20.0 23.9 22.4 26.3 9.2 11.6
Term 33.0 48.0 45.9 41.9 30.8 13.7 16.8
------- ------- ------- ------- ------- ------- -------
Total Retail 205.3 402.3 555.0 572.3 578.4 258.8 295.2
Corporate Owned Life Insurance
(COLI) 0.0 4.0 14.7 87.0 47.3 28.0 53.5
------- ------- ------- ------- ------- ------- -------
Total 205.3 406.3 569.7 659.3 625.6 286.9 348.7
======= ======= ======= ======= ======= ======= =======
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 71.0 35.0 188.3 200.6 196.1 86.2 89.8
Lincoln Financial Distributors 134.3 356.3 367.9 444.7 413.0 193.1 252.5
Other* 0.0 15.0 13.5 14.0 16.6 7.6 6.4
------- ------- ------- ------- ------- ------- -------
Total by Distribution 205.3 406.3 569.7 659.3 625.6 286.9 348.7
======= ======= ======= ======= ======= ======= =======
Life Insurance In-Force
(Billions)
Universal Life & Other 32.827 105.837 109.288 115.872 121.168 118.007 123.674
Term Insurance 30.337 67.076 85.701 100.130 113.226 105.265 121.076
------- ------- ------- ------- ------- ------- -------
Total Life Segment In-Force 63.164 172.914 194.988 216.002 234.394 223.272 244.750
======= ======= ======= ======= ======= ======= =======
*Other consists of distribution
arrangements with third-party
intermediaries.
6/30/2002 PAGE 18
Life Insurance Segment
Income Statements & Operational Data
Unaudited [Millions of Dollars]
For the Quarter Ended Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 52.4 71.1 53.0 56.3 50.9 67.1
Surrender charges 17.1 18.0 16.2 16.5 13.8 19.9
Mortality assessments 110.5 113.9 112.2 114.5 116.3 122.1
Expense assessments 42.8 48.0 45.3 44.1 46.9 55.5
Other revenue and fees 2.4 3.9 3.2 3.6 3.8 3.7
Net investment income 209.6 214.8 215.6 215.5 220.6 219.7
------- ------- ------- ------- ------- -------
Operating Revenue 434.9 469.6 445.5 450.5 452.4 488.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 105.4 112.8 98.4 96.3 95.8 121.0
Div accum & div to policyholders 19.2 21.0 20.4 18.7 16.4 25.3
Interest credited to policy bal. 122.8 122.3 126.3 128.7 134.0 136.5
Underwriting, acquisition,
insurance and other expenses 99.1 117.8 99.4 100.9 94.9 89.6
Goodwill amortization 6.4 6.0 5.9 5.9 5.9 5.9
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 353.0 379.9 350.3 350.6 347.0 378.4
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 82.0 89.8 95.2 99.9 105.4 109.6
Federal income taxes 29.4 32.8 34.8 37.4 38.9 39.0
------- ------- ------- ------- ------- -------
Income from Operations 52.6 57.0 60.4 62.4 66.5 70.6
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.4 2.8 (2.4) (4.0) 1.0 (5.2)
Gains (losses) on derivatives
Restructuring charges
------- ------- ------- ------- ------- -------
Income before Accounting Changes 54.0 59.7 58.1 58.4 67.4 65.4
Cumulative effect of accounting
changes ------- ------- ------- ------- ------- -------
Net Income 54.0 59.7 58.1 58.4 67.4 65.4
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 59.0 63.0 66.3 68.4 72.4 76.5
Net Income -before Goodwill
Amort. 60.4 65.8 64.0 64.4 73.4 71.3
Effective tax rate 35.9% 36.5% 36.5% 37.5% 36.9% 35.6%
Operating Revenue 434.9 469.6 445.5 450.5 452.4 488.0
Realized gains (losses) on
investments 2.1 3.4 (3.8) (6.3) 0.8 (8.1)
Gains (losses) on derivatives
------- ------- ------- ------- ------- -------
Total Revenue 437.1 473.1 441.7 444.2 453.2 479.9
======= ======= ======= ======= ======= =======
Average capital 2707.4 2686.0 2655.3 2615.0 2650.5 2640.0
Return on average capital 7.8% 8.5% 9.1% 9.6% 10.0% 10.7%
First Year Premiums by Product
(Millions)
Universal Life 75.6 113.2 72.3 63.7 72.4 80.9
Variable Universal Life 30.0 55.6 44.0 44.5 55.1 75.1
Whole Life 6.4 8.0 3.9 4.5 6.0 8.0
Term 10.5 11.0 13.1 12.1 9.1 7.6
------- ------- ------- ------- ------- -------
Total Retail 122.5 187.8 133.3 124.8 142.6 171.6
Corporate Owned Life Insurance
(COLI) 2.3 4.0 12.7 19.5 5.8 49.0
------- ------- ------- ------- ------- -------
Total 124.8 191.9 146.0 144.3 148.4 220.7
------- ------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 39.4 72.8 46.1 37.0 51.3 66.2
Lincoln Financial Distributors 82.0 115.0 96.8 104.4 92.9 150.6
Other* 3.4 4.1 3.0 2.9 4.2 3.9
------- ------- ------- ------- ------- -------
Total by Distribution 124.8 191.9 146.0 144.3 148.4 220.7
======= ======= ======= ======= ======= =======
Insurance In-Force (Billions)
Universal Life & Other 106.945 109.288 108.817 110.448 112.884 115.872
Term Insurance 81.963 85.701 92.857 97.039 98.424 100.130
------- ------- ------- ------- ------- -------
Total Segment In-Force 188.908 194.988 201.674 207.487 211.308 216.002
======= ======= ======= ======= ======= =======
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 50.9 50.7 46.4 64.4 51.1 47.6
Surrender charges 17.2 13.5 15.6 19.9 11.7 13.5
Mortality assessments 124.3 124.8 124.7 125.5 123.9 123.9
Expense assessments 47.4 45.3 46.0 52.8 46.9 47.2
Other revenue and fees 5.1 3.8 3.0 6.0 5.7 6.7
Net investment income 223.0 227.4 233.2 226.6 226.0 225.7
------- ------- ------- ------- ------- -------
Operating Revenue 467.9 465.5 468.9 495.2 465.3 464.6
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 99.9 103.5 102.3 112.9 104.1 103.6
Div accum & div to policyholders 17.5 19.0 16.5 25.4 17.8 18.2
Interest credited to policy bal. 138.3 141.2 143.5 146.9 146.3 148.9
Underwriting, acquisition,
insurance and other expenses 98.8 92.0 92.5 91.4 92.1 88.5
Goodwill amortization 5.9 5.9 5.9 5.9 0.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 360.5 361.7 360.8 382.5 360.2 359.3
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 107.4 103.8 108.1 112.7 105.1 105.3
Federal income taxes 38.8 36.7 38.1 39.5 34.0 31.8
------- ------- ------- ------- ------- -------
Income from Operations 68.6 67.1 70.1 73.2 71.1 73.5
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (5.4) (6.4) (5.3) (21.3) (26.9) (16.4)
Gains (losses) on derivatives (0.0) 0.1 (0.0) 1.5 0.0 0.3
Restructuring charges (2.0) (1.5)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 63.2 58.8 64.7 51.9 44.2 57.4
Cumulative effect of accounting
changes (0.2) (5.3) 0.0 (0.0) 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income 62.9 53.5 64.7 51.9 44.2 57.4
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 74.5 73.0 76.0 79.1 71.1 73.5
Net Income -before Goodwill
Amort. 68.9 59.5 70.6 57.8 44.2 57.4
Effective tax rate 36.1% 35.3% 35.2% 35.0% 32.3% 30.2%
Operating Revenue 467.9 465.5 468.9 495.2 465.3 464.6
Realized gains (losses) on
investments (8.2) (10.0) (8.2) (31.1) (41.4) (25.4)
Gains (losses) on derivatives (0.0) 0.2 (0.1) 0.6 0.0 0.6
------- ------- ------- ------- ------- -------
Total Revenue 459.6 455.7 460.6 464.7 423.9 439.8
======= ======= ======= ======= ======= =======
Average capital 2729.8 2715.7 2736.3 2744.4 2801.9 2865.8
Return on average capital 10.1% 9.9% 10.2% 10.7% 10.2% 10.3%
First Year Premiums by Product
(Millions)
Universal Life 57.7 70.0 67.4 97.5 86.4 98.9
Variable Universal Life 56.0 52.2 50.1 70.2 39.0 42.4
Whole Life 4.1 5.1 6.7 10.4 5.2 6.4
Term 6.5 7.2 8.1 9.1 8.7 8.1
------- ------- ------- ------- ------- -------
Total Retail 124.2 134.6 132.4 187.2 139.4 155.8
Corporate Owned Life Insurance
(COLI) 7.1 21.0 5.1 14.2 6.9 46.6
------- ------- ------- ------- ------- -------
Total 131.3 155.6 137.4 201.3 146.3 202.4
------- ------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 38.1 48.2 41.8 68.0 41.5 48.3
Lincoln Financial Distributors 89.1 104.0 90.4 129.5 100.9 151.6
Other* 4.2 3.4 5.2 3.8 3.8 2.6
------- ------- ------- ------- ------- -------
Total by Distribution 131.3 155.6 137.4 201.3 146.3 202.4
======= ======= ======= ======= ======= =======
Insurance In-Force (Billions)
Universal Life & Other 116.747 118.007 119.029 121.168 122.316 123.674
Term Insurance 102.467 105.265 108.723 113.226 117.752 121.076
------- ------- ------- ------- ------- -------
Total Segment In-Force 219.214 223.272 227.751 234.394 240.068 244.750
======= ======= ======= ======= ======= =======
*Other consists of distribution arrangements with third-party intermediaries.
6/30/2002 PAGE 19
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
YTD YTD
Jun Jun
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- -------- -------- -------- --------
Universal Life-Bal Beg-of-Year 2.530 2.558 6.259 6.650 6.976 6.976 7.508
Deposits 0.278 0.675 1.017 0.955 1.043 0.497 0.612
Withdrawals & deaths (0.399) (0.701) (0.452) (0.426) (0.319) (0.161) (0.193)
-------- -------- -------- -------- -------- -------- --------
Net cash flows (0.121) (0.026) 0.564 0.528 0.724 0.335 0.419
Policyholder assessments (0.544) (0.584) (0.598) (0.294) (0.316)
Interest credited 0.149 0.350 0.370 0.382 0.405 0.198 0.210
Acq of new business/transfers
between segments 0.000 3.378 0.000 0.000 0.000 0.000 0.018
-------- -------- -------- -------- -------- -------- --------
Universal Life-Bal End of Year(1) 2.558 6.259 6.650 6.976 7.508 7.216 7.838
-------- -------- -------- -------- -------- -------- --------
Variable Universal Life-Bal Beg-of-Year 0.339 0.480 1.200 1.605 1.808 1.808 1.746
Deposits 0.106 0.193 0.326 0.607 0.584 0.273 0.277
Withdrawals & deaths (0.040) (0.100) (0.099) (0.132) (0.251) (0.108) (0.112)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.065 0.093 0.228 0.475 0.332 0.165 0.164
Policyholder assessments 0.000 (0.084) (0.141) (0.170) (0.082) (0.093)
Invest inc & chg in mkt value 0.076 0.105 0.370 (0.130) (0.225) (0.125) (0.173)
Acq of new business/transfers
between segments 0.000 0.522 (0.110) 0.000 0.000 0.000 0.132
-------- -------- -------- -------- -------- -------- --------
Variable Universal Life -Bal
End-of-Year 0.480 1.200 1.605 1.808 1.746 1.766 1.776
-------- -------- -------- -------- -------- -------- --------
Interest Sensitive Whole Life -Bal
Beg-of-Year 1.784 1.963 2.062 2.062 2.123
Deposits 0.340 0.355 0.322 0.307 0.125 0.129
Withdrawals & deaths (0.294) (0.162) (0.168) (0.200) (0.084) (0.091)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.046 0.193 0.154 0.107 0.041 0.038
Policyholder assessments (0.168) (0.168) (0.164) (0.076) (0.081)
Interest credited 0.096 0.109 0.113 0.118 0.058 0.065
Acq of new business/transfers
between segments 1.642 0.045
-------- -------- -------- -------- -------- -------- --------
Int Sensitive Whole Life-Bal End
-of -Year 1.784 1.963 2.062 2.123 2.084 2.145
Total Segment- Life Insurance Account Values
Bal Beg-of-Year 2.869 3.038 9.243 10.217 10.847 10.847 11.377
Deposits 0.384 1.207 1.698 1.884 1.934 0.895 1.018
Withdrawals & deaths (0.439) (1.095) (0.713) (0.727) (0.771) (0.354) (0.396)
-------- -------- -------- -------- -------- -------- --------
Net cash flows (0.056) 0.113 0.985 1.158 1.163 0.541 0.621
Policyholder assessments (0.795) (0.893) (0.931) (0.453) (0.490)
Invest inc & change in market
value 0.225 0.551 0.849 0.364 0.299 0.132 0.101
Acq of new business/transfers
between segments 5.542 (0.065) 0.150
-------- -------- -------- -------- -------- -------- --------
Total Segment -Bal End-of-Year 3.038 9.243 10.217 10.847 11.377 11.066 11.759
======== ======== ======== ======== ======== ======== ========
(1) Includes fixed investment option of VUL products.
PAGE 20
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
For the Quarter Ended Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Universal Life-Bal Beg-of-Quarter 6.434 6.519 6.650 6.729 6.782 6.878
Deposits 0.239 0.306 0.252 0.212 0.227 0.265
Withdrawals & deaths (0.109) (0.124) (0.121) (0.111) (0.080) (0.114)
------- ------- ------- ------- ------- -------
Net cash flows 0.129 0.182 0.131 0.101 0.146 0.151
Policyholder assessments (0.136) (0.145) (0.145) (0.143) (0.146) (0.150)
Interest credited 0.091 0.093 0.093 0.095 0.096 0.097
Acq of new business/transfers between segments 0.000 0.000
------- ------- ------- ------- ------- -------
Universal Life-Bal End-of-Quarter (1) 6.519 6.650 6.729 6.782 6.878 6.976
------- ------- ------- ------- ------- -------
Variable Universal Life-Bal Beg of Quarter 1.298 1.285 1.605 1.771 1.764 1.812
Deposits 0.074 0.107 0.112 0.128 0.123 0.245
Withdrawals & deaths (0.049) (0.025) (0.019) (0.028) (0.037) (0.048)
------- ------- ------- ------- ------- -------
Net cash flows 0.025 0.082 0.093 0.100 0.085 0.197
Policyholder assessments (0.020) (0.024) (0.032) (0.033) (0.036) (0.041)
Invest inc & chg in mkt value (0.018) 0.262 0.105 (0.074) (0.001) (0.160)
Acq of new business/transfers between segments 0.000
------- ------- ------- ------- ------- -------
Variable Universal Life -Bal End-of-Quarter 1.285 1.605 1.771 1.764 1.812 1.808
------- ------- ------- ------- ------- -------
Interest Sensitive Whole Life -Bal
Beg-of-Quarter 1.895 1.922 1.963 1.970 1.993 2.026
------- ------- ------- ------- ------- -------
Deposits 0.086 0.113 0.060 0.071 0.079 0.113
Withdrawals & deaths (0.044) (0.050) (0.042) (0.037) (0.033) (0.056)
------- ------- ------- ------- ------- -------
Net cash flows 0.043 0.062 0.018 0.034 0.045 0.057
Policyholder assessments (0.042) (0.048) (0.039) (0.040) (0.040) (0.050)
Interest credited 0.027 0.026 0.028 0.028 0.027 0.029
Acq of new business/transfers between segments
------- ------- ------- ------- ------- -------
Int Sensitive Whole Life-Bal End-of-Quarter 1.922 1.963 1.970 1.993 2.026 2.062
------- ------- ------- ------- ------- -------
Total Segment- Life Insurance Account Values
Bal Beg-of-Quarter 9.628 9.726 10.217 10.470 10.538 10.716
Deposits 0.399 0.526 0.424 0.411 0.428 0.622
Withdrawals & deaths (0.202) (0.199) (0.182) (0.176) (0.151) (0.218)
------- ------- ------- ------- ------- -------
Net cash flows 0.197 0.327 0.242 0.235 0.277 0.404
Policyholder assessments (0.198) (0.216) (0.215) (0.216) (0.221) (0.241)
Invest inc & change in market value 0.100 0.381 0.227 0.048 0.123 (0.033)
Acq of new business/transfers between segments 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Total Segment -Bal End-of-Quarter 9.726 10.217 10.470 10.538 10.716 10.847
======= ======= ======= ======= ======= =======
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Universal Life-Bal Beg-of-Quarter 6.976 7.063 7.216 7.315 7.508 7.622
Deposits 0.227 0.270 0.233 0.314 0.248 0.364
Withdrawals & deaths (0.091) (0.071) (0.085) (0.073) (0.098) (0.096)
------- ------- ------- ------- ------- -------
Net cash flows 0.136 0.199 0.147 0.241 0.150 0.268
Policyholder assessments (0.147) (0.147) (0.150) (0.153) (0.158) (0.158)
Interest credited 0.098 0.100 0.102 0.105 0.104 0.106
Acq of new business/transfers between segments 0.000 0.018
------- ------- ------- ------- ------- -------
Universal Life-Bal End-of-Quarter (1) 7.063 7.216 7.315 7.508 7.622 7.838
------- ------- ------- ------- ------- -------
Variable Universal Life-Bal Beg of Quarter 1.808 1.633 1.766 1.527 1.746 1.919
Deposits 0.136 0.138 0.124 0.186 0.129 0.147
Withdrawals & deaths (0.049) (0.060) (0.055) (0.088) (0.055) (0.057)
------- ------- ------- ------- ------- -------
Net cash flows 0.087 0.078 0.069 0.098 0.074 0.090
Policyholder assessments (0.041) (0.041) (0.042) (0.045) (0.047) (0.046)
Invest inc & chg in mkt value (0.221) 0.096 (0.266) 0.166 0.013 (0.186)
Acq of new business/transfers between segments 0.000 0.000 0.132
------- ------- ------- ------- ------- -------
Variable Universal Life -Bal End-of-Quarter 1.633 1.766 1.527 1.746 1.919 1.776
------- ------- ------- ------- ------- -------
Interest Sensitive Whole Life -Bal
Beg-of-Quarter 2.062 2.068 2.084 2.096 2.123 2.126
Deposits 0.056 0.069 0.077 0.105 0.063 0.066
Withdrawals & deaths (0.041) (0.043) (0.054) (0.061) (0.051) (0.039)
------- ------- ------- ------- ------- -------
Net cash flows 0.014 0.027 0.022 0.044 0.012 0.026
Policyholder assessments (0.037) (0.040) (0.041) (0.047) (0.042) (0.039)
Interest credited 0.028 0.030 0.030 0.030 0.033 0.032
Acq of new business/transfers between segments
------- ------- ------- ------- ------- -------
Int Sensitive Whole Life-Bal End-of-Quarter 2.068 2.084 2.096 2.123 2.126 2.145
------- ------- ------- ------- ------- -------
Total Segment- Life Insurance Account Values
Bal Beg-of-Quarter 10.847 10.764 11.066 10.939 11.377 11.667
Deposits 0.418 0.477 0.434 0.605 0.440 0.577
Withdrawals & deaths (0.181) (0.173) (0.195) (0.222) (0.204) (0.192)
------- ------- ------- ------- ------- -------
Net cash flows 0.237 0.304 0.239 0.383 0.236 0.385
Policyholder assessments (0.225) (0.228) (0.232) (0.246) (0.246) (0.244)
Invest inc & change in market value (0.094) 0.226 (0.134) 0.301 0.151 (0.049)
Acq of new business/transfers between segments 0.000 0.000 0.000 0.000 0.150 0.000
------- ------- ------- ------- ------- -------
Total Segment -Bal End-of-Quarter 10.764 11.066 10.939 11.377 11.667 11.759
======= ======= ======= ======= ======= =======
(1) Includes fixed investment option of VUL products.
PAGE 21
Investment Management
Income Statements
Unaudited [Millions of Dollars]
YTD YTD
Jun Jun
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Investment advisory fees -
External 229.9 249.0 248.6 231.6 197.2 101.6 95.8
Investment advisory fees -
Insurance Assets 68.5 82.5 83.6 88.9 87.5 43.6 41.9
Other revenue and fees 76.3 92.5 106.6 115.9 99.2 52.0 45.0
Net investment income 72.8 67.0 56.9 57.7 53.6 27.1 25.5
------- ------- ------- ------- ------- ------- -------
Operating Revenue 447.5 491.0 495.6 494.2 437.4 224.4 208.1
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses 396.1 401.5 384.3 408.7 397.8 206.4 190.4
Goodwill amortization 15.5 16.3 16.2 16.2 16.2 8.1 0.0
Interest on notes payable 0.1 0.4 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 411.8 418.2 400.5 425.0 414.1 214.5 190.4
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 35.8 72.8 95.1 69.2 23.4 9.9 17.8
Federal income taxes 17.7 28.9 34.1 25.1 8.7 3.8 3.2
------- ------- ------- ------- ------- ------- -------
Income from Operations 18.1 43.9 61.0 44.1 14.6 6.1 14.6
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 7.0 0.5 (0.1) (2.5) (2.4) (1.2) (1.4)
Gains (losses) on derivatives 0.0 0.0 0.0
Restructuring charges 0.0 0.0 (9.2) (4.6) (0.4) 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 25.1 44.4 51.6 37.0 11.9 4.9 13.2
Cumulative effect of accounting
changes (0.1) (0.1)
------- ------- ------- ------- ------- ------- -------
Net Income 25.1 44.4 51.6 37.0 11.8 4.8 13.2
======= ======= ======= ======= ======= ======= =======
Income from Operations- before
Goodwill Amortization 33.6 60.3 77.2 60.3 30.9 14.2 14.6
Income from Operations - before
Goodwill & Intang. Amort 45.2 72.6 88.7 70.9 37.9 18.3 17.3
Net Income -before Goodwill
Amortization 40.6 60.8 67.9 53.2 28.0 13.0 13.2
Net Income -before Goodwill &
Intang. Amort. 52.2 73.1 79.4 63.8 35.0 17.0 15.9
Operating Revenue 447.5 491.0 495.6 494.2 437.4 224.4 208.1
Realized gains (losses) on
investments 11.6 0.9 (0.1) (3.9) (3.7) (1.8) (2.2)
Gains (losses) on derivatives
------- ------- ------- ------- ------- ------- -------
Total Revenue 459.1 491.9 495.5 490.3 433.7 222.6 205.9
======= ======= ======= ======= ======= ======= =======
Average Capital (Securities at
Cost) 653.3 642.3 593.9 575.2 543.7 545.6 557.4
Return on Capital 2.8% 6.8% 10.3% 7.7% 2.7% 2.2% 5.2%
-----------------------------------------------------------------------------------------------------------------
For the Quarter Ended Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Operating Revenue
Investment advisory fees -
External 60.7 60.3 60.0 57.9 56.9 56.7
Investment advisory fees -
Insurance Assets 19.9 22.1 21.0 22.3 22.5 23.1
Other revenue and fees 24.9 29.8 31.9 31.0 26.4 26.6
Net investment income 13.9 13.9 13.0 12.6 18.3 13.8
------- ------- ------- ------- ------- -------
Operating Revenue 119.3 126.1 126.0 123.8 124.1 120.2
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses 92.8 96.3 102.5 99.3 103.9 103.0
Goodwill amortization 4.1 4.1 4.1 4.1 4.1 4.1
Interest on notes payable 0.0 0.0 0.0 0.0 0.0 (0.0)
------- ------- ------- ------- ------- -------
Operating Benefits & Expenses 96.8 100.4 106.6 103.3 107.9 107.1
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 22.5 25.7 19.4 20.5 16.2 13.1
Federal income taxes 7.7 9.1 7.0 7.4 6.3 4.4
------- ------- ------- ------- ------- -------
Income from Operations 14.7 16.5 12.4 13.1 9.9 8.7
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (0.3) 0.4 (0.1) (2.0) (0.2) (0.2)
Gains (losses) on derivatives 0.0 0.0
Restructuring charges 0.0 2.9 0.0 (2.7) 0.0 (1.9)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 14.4 19.8 12.3 8.4 9.7 6.6
Cumulative effect of accounting
changes 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income 14.4 19.8 12.3 8.4 9.7 6.6
======= ======= ======= ======= ======= =======
Inc from Oper -before
Goodwill Amortization 18.8 20.6 16.5 17.1 14.0 12.7
Inc from Oper -before
Goodwill & Intang. Amort 21.7 23.3 19.4 19.7 16.6 15.2
Net Income -before
Goodwill Amortization 18.5 23.9 16.4 12.4 13.7 10.6
Net Income -before
Goodwill & Intang. Amort 21.3 26.6 19.2 15.0 16.3 13.1
Operating Revenue 119.3 126.1 126.0 123.8 124.1 120.2
Realized gains (losses) on
investments (0.5) 0.6 (0.2) (3.1) (0.4) (0.3)
Gains (losses) on derivatives 0.0
------- ------- ------- ------- ------- -------
Total Revenue 118.8 126.6 125.8 120.7 123.8 120.0
======= ======= ======= ======= ======= =======
Average Capital (Securities at
Cost) 587.2 584.2 581.5 593.0 567.7 558.5
Return on Capital 10.0% 11.3% 8.6% 8.8% 7.0% 6.2%
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Investment advisory fees -
External 50.5 51.1 46.2 49.3 48.0 47.8
Investment advisory fees -
Insurance Assets 22.1 21.6 21.8 22.0 21.2 20.7
Other revenue and fees 26.3 25.7 23.9 23.4 23.0 22.0
Net investment income 14.1 13.0 13.6 12.8 12.8 12.7
------- ------- ------- ------- ------- -------
Operating Revenue 113.0 111.4 105.5 107.6 105.1 103.1
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses 104.7 101.6 95.1 96.4 95.4 95.0
Goodwill amortization 4.1 4.1 4.1 4.1 0.0
Interest on notes payable 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Operating Benefits & Expenses 108.8 105.7 99.2 100.4 95.4 95.0
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 4.2 5.7 6.3 7.1 9.7 8.1
Federal income taxes 1.8 2.0 2.9 2.1 1.7 1.5
------- ------- ------- ------- ------- -------
Income from Operations 2.4 3.7 3.5 5.1 8.0 6.6
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (0.5) (0.7) (0.5) (0.7) (1.0) (0.4)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0
Restructuring charges 0.0 0.0 0.0 (0.4) 0.0 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes 2.0 3.0 2.9 4.0 7.0 6.2
Cumulative effect of accounting
changes (0.1) 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income 2.0 2.9 2.9 4.0 7.0 6.2
======= ======= ======= ======= ======= =======
Inc from Oper -before
Goodwill Amortization 6.5 7.7 7.5 9.1 8.0 6.6
Inc from Oper -before
Goodwill & Intang. Amort 9.1 9.2 9.0 10.6 9.4 7.9
Net Income -before
Goodwill Amortization 6.0 6.9 7.0 8.1 7.0 6.2
Net Income -before
Goodwill & Intang. Amort 8.6 8.4 8.5 9.5 8.4 7.5
Operating Revenue 113.0 111.4 105.5 107.6 105.1 103.1
Realized gains (losses) on
investments (0.7) (1.1) (0.8) (1.1) (1.5) (0.7)
Gains (losses) on derivatives 0.0
------- ------- ------- ------- ------- -------
Total Revenue 112.3 110.3 104.7 106.5 103.5 102.4
======= ======= ======= ======= ======= =======
Average Capital (Securities at
Cost) 548.3 542.8 543.1 540.6 546.1 568.6
Return on Capital 1.8% 2.7% 2.5% 3.8% 5.8% 4.6%
PAGE 22
Investment Management
Assets Under Management Roll Forward
Unaudited [Billions of Dollars]
YTD YTD
Jun Jun
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Retail Fixed - Bal Beg-of-Year 5.853 8.125 8.217 7.423 6.608 6.608 7.120
Fund Sales 0.961 1.165 0.991 0.770 0.876 0.452 0.564
Redemptions (1.271) (1.235) (1.424) (1.401) (1.050) (0.547) (0.597)
Net Money Market (0.069) (0.140) (0.110) (0.207) (0.047) (0.020) (0.005)
Transfers (0.220) 0.132 0.177 (0.168) 0.403 0.044 (0.020)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.599) (0.078) (0.366) (1.006) 0.183 (0.071) (0.057)
Market 0.324 0.170 (0.428) 0.097 0.329 0.231 0.105
Acquisitions/addition of Assets
under Administration(1) 2.547 0.094
------- ------- ------- ------- ------- ------- -------
Balance End-of-Year 8.125 8.217 7.423 6.608 7.120 6.768 7.168
------- ------- ------- ------- ------- ------- -------
Retail Equity - Bal Beg-of-Year 13.152 17.754 22.080 23.384 21.523 21.523 17.987
Fund Sales 2.953 3.581 3.271 4.116 2.816 1.598 1.994
Redemptions (1.926) (2.460) (4.971) (4.431) (2.839) (1.578) (1.671)
Net Money Market 0.000 (0.002) (0.001) 0.001 0.000
Transfers 0.209 0.730 (0.143) (0.178) (0.538) (0.116) (0.008)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows(1) 1.236 1.849 (1.844) (0.493) (0.561) (0.096) 0.314
Market 3.323 2.476 3.148 (1.710) (2.974) (1.673) (1.690)
Acquisitions/addition of Assets
under Administration(1) 0.043 0.342
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 17.754 22.080 23.384 21.523 17.987 19.753 16.611
------- ------- ------- ------- ------- ------- -------
Total Retail - Bal Beg-of-Year 19.005 25.879 30.297 30.807 28.130 28.130 25.107
Retail Sales-Annuities 2.163 2.238 1.561 1.782 1.702 0.944 1.191
Retail Sales-Mutual Funds 1.218 1.913 2.153 2.578 1.522 0.838 1.014
Retail Sales-Managed Acct. &
Other 0.533 0.596 0.550 0.525 0.468 0.268 0.354
------- ------- ------- ------- ------- ------- -------
Total Retail Sales 3.914 4.747 4.264 4.886 3.692 2.050 2.558
Redemptions (3.197) (3.695) (6.395) (5.833) (3.889) (2.125) (2.268)
Net Money Market (0.068) (0.141) (0.111) (0.206) (0.047) (0.020) (0.005)
Transfers (0.011) 0.862 0.034 (0.346) (0.135) (0.072) (0.028)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows(1) 0.637 1.773 (2.208) (1.499) (0.379) (0.167) 0.257
Market 3.647 2.647 2.720 (1.613) (2.645) (1.442) (1.586)
Acquisitions/addition of Assets
under Administration(1) 2.590 0.435
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 25.879 30.297 30.807 28.130 25.107 26.522 23.778
------- ------- ------- ------- ------- ------- -------
Institutional Fixed - Bal
Beg-of-Year 3.580 5.708 6.955 6.936 6.111 6.111 5.490
Inflows 2.509 2.169 2.000 0.771 0.643 0.543 1.467
Withdrawals/Terminations (0.787) (1.242) (1.699) (1.973) (1.228) (0.544) (0.400)
Transfers 0.013 (0.074) (0.001) (0.005) 0.017 0.013 (0.001)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows 1.735 0.853 0.300 (1.207) (0.568) 0.012 1.067
Market 0.343 0.394 (0.319) 0.382 (0.053) (0.314) 0.287
Acquisitions 0.051
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 5.708 6.955 6.936 6.111 5.490 5.809 6.844
------- ------- ------- ------- ------- ------- -------
Institutional Equity - Bal
Beg-of-Year 22.886 24.871 24.235 23.631 19.112 19.112 17.814
Inflows 2.465 3.840 5.248 2.730 3.182 1.704 1.241
Withdrawals/Terminations (6.447) (7.441) (7.801) (7.209) (2.878) (1.700) (1.147)
Transfers (0.068) 0.047 0.011 (0.008) 0.036 0.011 0.024
------- ------- ------- ------- ------- ------- -------
Net Cash Flows (4.049) (3.555) (2.542) (4.487) 0.340 0.015 0.119
Market 6.035 2.919 1.938 (0.032) (1.638) (0.721) 0.183
Acquisitions
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 24.871 24.235 23.631 19.112 17.814 18.406 18.116
------- ------- ------- ------- ------- ------- -------
Total Institutional - Bal
Beg-of-Year 26.465 30.579 31.191 30.568 25.223 25.223 23.304
Inflows 4.975 6.009 7.248 3.501 3.825 2.247 2.708
Withdrawals/Terminations (7.234) (8.683) (9.500) (9.182) (4.106) (2.244) (1.547)
Transfers (0.055) (0.027) 0.010 (0.014) 0.053 0.024 0.024
------- ------- ------- ------- ------- ------- -------
Net Cash Flows (2.314) (2.702) (2.242) (5.694) (0.228) 0.027 1.185
Market 6.377 3.313 1.619 0.350 (1.691) (1.035) 0.470
Acquisitions 0.051
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 30.579 31.191 30.568 25.223 23.304 24.215 24.959
------- ------- ------- ------- ------- ------- -------
Total Retail/Institutional - At
End-of-Year 56.458 61.488 61.375 53.354 48.411 50.737 48.738
------- ------- ------- ------- ------- ------- -------
Insurance Assets - At End-of-Year 35.684 39.432 35.934 35.686 38.119 36.018 38.476
------- ------- ------- ------- ------- ------- -------
Total Assets Under Management
At End-of-Year 92.142 100.920 97.309 89.040 86.530 86.755 87.214
======= ======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include
assets under administration beginning in January of 2000.
Net Cash Flows from Assets Under Administration are: 0.018 0.081 0.040 0.151
PAGE 23
Investment Management
Assets Under Management Roll Forward
Unaudited [Billions of Dollars]
Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Retail Fixed - Bal-Beg-of-Qtr 7.945 7.680 7.424 7.057 6.764 6.631
Fund Sales 0.231 0.181 0.168 0.166 0.223 0.212
Redemptions (0.342) (0.403) (0.456) (0.339) (0.328) (0.277)
Net Money Market (0.029) (0.030) (0.067) (0.058) (0.031) (0.051)
Transfers 0.034 0.154 (0.102) (0.046) (0.031) 0.010
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.106) (0.098) (0.457) (0.277) (0.167) (0.106)
Market (0.159) (0.158) (0.003) (0.017) 0.035 0.081
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.094 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 7.680 7.424 7.057 6.764 6.631 6.606
------- ------- ------- ------- ------- -------
Retail Equity - Bal-Beg-of-Qtr 22.340 20.873 23.383 24.478 23.496 24.047
Fund Sales 0.730 0.894 1.234 0.884 0.927 1.071
Redemptions (0.865) (1.120) (1.565) (0.989) (1.040) (0.837)
Net Money Market 0.000 0.000 0.000 0.000 0.001 0.000
Transfers (0.060) (0.086) (0.091) 0.018 (0.036) (0.069)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.195) (0.312) (0.423) (0.087) (0.148) 0.165
Market (1.272) 2.822 1.176 (0.895) 0.699 (2.689)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.342 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 20.873 23.383 24.478 23.496 24.047 21.524
------- ------- ------- ------- ------- -------
Total Retail - Bal-Beg-of-Qtr 30.285 28.553 30.807 31.535 30.260 30.679
Retail Sales-Annuities 0.332 0.409 0.379 0.358 0.456 0.589
Retail Sales-Mutual Funds 0.514 0.587 0.876 0.586 0.554 0.562
Retail Sales-Managed Acct. &
Other 0.116 0.079 0.148 0.106 0.140 0.131
------- ------- ------- ------- ------- -------
Total Retail Sales 0.962 1.075 1.403 1.050 1.150 1.283
Redemptions (1.207) (1.523) (2.021) (1.329) (1.368) (1.114)
Net Money Market (0.029) (0.030) (0.067) (0.058) (0.030) (0.051)
Transfers (0.026) 0.068 (0.193) (0.027) (0.067) (0.059)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.300) (0.410) (0.879) (0.364) (0.315) 0.059
Market (1.431) 2.664 1.173 (0.911) 0.734 (2.608)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.435 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 28.553 30.807 31.535 30.260 30.679 28.130
------- ------- ------- ------- ------- -------
---------------------------------------------------------------------------------------------------------
Institutional Fixed -
Bal-Beg-of-Qtr 7.264 7.218 6.937 6.873 6.485 6.276
Inflows 0.446 0.420 0.180 0.148 0.308 0.135
Withdrawals/Terminations (0.294) (0.781) (0.353) (0.520) (0.532) (0.568)
Transfers (0.002) 0.001 (0.005) (0.001) 0.000 0.001
------- ------- ------- ------- ------- -------
Net Cash Flows 0.150 (0.360) (0.178) (0.373) (0.224) (0.433)
Market (0.196) 0.079 0.114 (0.015) 0.015 0.269
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 7.218 6.937 6.873 6.485 6.276 6.112
------- ------- ------- ------- ------- -------
Institutional Equity -
Bal-Beg-of-Qtr 23.962 23.098 23.631 20.304 20.241 19.044
Inflows 1.839 0.934 0.904 0.669 0.407 0.750
Withdrawals/Terminations (1.165) (2.043) (3.333) (1.354) (1.154) (1.368)
Transfers (0.008) (0.010) (0.004) 0.002 (0.013) 0.007
------- ------- ------- ------- ------- -------
Net Cash Flows 0.666 (1.119) (2.433) (0.683) (0.760) (0.611)
Market (1.530) 1.652 (0.894) 0.620 (0.438) 0.680
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 23.098 23.631 20.304 20.241 19.044 19.113
------- ------- ------- ------- ------- -------
Total Institutional -
Bal-Beg-of-Qtr 31.226 30.316 30.568 27.177 26.726 25.320
Inflows 2.285 1.354 1.084 0.817 0.715 0.885
Withdrawals/Terminations (1.459) (2.824) (3.686) (1.874) (1.686) (1.936)
Transfers (0.010) (0.009) (0.009) 0.001 (0.012) 0.008
------- ------- ------- ------- ------- -------
Net Cash Flows 0.816 (1.479) (2.611) (1.056) (0.983) (1.043)
Market (1.726) 1.731 (0.780) 0.605 (0.423) 0.949
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 30.316 30.568 27.177 26.726 25.320 25.225
------- ------- ------- ------- ------- -------
Total Retail/Inst - At End-of-Qtr 58.869 61.375 58.712 56.986 55.998 53.355
Insurance Assets-End-of-Qtr 36.820 35.934 35.541 34.891 34.981 35.686
Total Assets Under Management ------- ------- ------- ------- ------- -------
At End-of-Qtr 95.689 97.309 94.253 91.877 90.979 89.041
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to
include assets under administration beginning in January of 2000.
Net Cash Flows from Assets Under
Administration are: 0.006 0.000 0.011 0.001
Investment Management
Assets Under Management Roll Forward (Continued)
Unaudited [Billions of Dollars]
Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Retail Fixed - Bal-Beg-of-Qtr 6.606 6.750 6.767 7.205 7.120 7.087
Fund Sales 0.248 0.204 0.206 0.218 0.292 0.272
Redemptions (0.261) (0.286) (0.262) (0.242) (0.291) (0.306)
Net Money Market 0.010 (0.030) 0.005 (0.031) (0.003) (0.002)
Transfers 0.047 (0.003) 0.388 (0.027) (0.040) 0.021
------- ------- ------- ------- ------- -------
Net Cash Flows(1) 0.044 (0.115) 0.337 (0.083) (0.042) (0.015)
Market 0.100 0.131 0.101 (0.002) 0.009 0.096
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 6.750 6.767 7.205 7.120 7.087 7.168
------- ------- ------- ------- ------- -------
Retail Equity - Bal-Beg-of-Qtr 21.524 18.254 19.754 15.871 17.988 18.255
Fund Sales 0.916 0.681 0.638 0.580 0.910 1.084
Redemptions (0.911) (0.667) (0.654) (0.607) (0.791) (0.881)
Net Money Market 0.000 0.000 0.000 0.000 0.000 0.000
Transfers (0.070) (0.046) (0.441) 0.019 0.014 (0.022)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.064) (0.032) (0.456) (0.008) 0.133 0.182
Market (3.205) 1.532 (3.427) 2.125 0.134 (1.826)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 18.254 19.754 15.871 17.988 18.255 16.611
------- ------- ------- ------- ------- -------
Total Retail - Bal-Beg-of-Qtr 28.130 25.005 26.521 23.076 25.108 25.342
Retail Sales-Annuities 0.542 0.403 0.434 0.324 0.590 0.601
Retail Sales-Mutual Funds 0.484 0.354 0.335 0.348 0.452 0.562
Retail Sales-Managed Acct. &
Other 0.140 0.127 0.074 0.126 0.160 0.194
------- ------- ------- ------- ------- -------
Total Retail Sales 1.166 0.884 0.843 0.798 1.202 1.356
Redemptions (1.172) (0.952) (0.915) (0.850) (1.082) (1.186)
Net Money Market 0.010 (0.030) 0.005 (0.031) (0.003) (0.002)
Transfers (0.023) (0.049) (0.053) (0.008) (0.027) (0.001)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.019) (0.148) (0.120) (0.091) 0.091 0.167
Market (3.105) 1.663 (3.326) 2.123 0.143 (1.730)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 25.005 26.521 23.076 25.108 25.342 23.778
------- ------- ------- ------- ------- -------
-----------------------------------------------------------------------------------------------------
Institutional Fixed -
Bal-Beg-of-Qtr 6.112 5.891 5.810 5.640 5.490 6.018
Inflows 0.310 0.233 0.020 0.080 0.804 0.663
Withdrawals/Terminations (0.432) (0.112) (0.493) (0.191) (0.239) (0.161)
Transfers 0.003 0.010 0.001 0.002 (0.001) 0.000
------- ------- ------- ------- ------- -------
Net Cash Flows (0.119) 0.131 (0.472) (0.109) 0.564 0.503
Market (0.102) (0.212) 0.302 (0.041) (0.036) 0.323
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 5.891 5.810 5.640 5.490 6.018 6.844
------- ------- ------- ------- ------- -------
Institutional Equity -
Bal-Beg-of-Qtr 19.113 17.312 18.406 16.241 17.814 18.641
Inflows 0.881 0.823 0.863 0.615 0.672 0.569
Withdrawals/Terminations (1.199) (0.501) (0.555) (0.624) (0.512) (0.635)
Transfers 0.019 (0.008) 0.009 0.016 0.006 0.018
------- ------- ------- ------- ------- -------
Net Cash Flows (0.299) 0.314 0.317 0.007 0.166 (0.047)
Market (1.502) 0.780 (2.482) 1.566 0.661 (0.477)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 17.312 18.406 16.241 17.814 18.641 18.116
------- ------- ------- ------- ------- -------
Total Institutional -
Bal-Beg-of-Qtr 25.225 23.203 24.216 21.881 23.304 24.659
Inflows 1.191 1.056 0.883 0.695 1.476 1.232
Withdrawals/Terminations (1.631) (0.613) (1.048) (0.815) (0.751) (0.796)
Transfers 0.022 0.002 0.010 0.018 0.005 0.019
------- ------- ------- ------- ------- -------
Net Cash Flows (0.418) 0.445 (0.155) (0.102) 0.730 0.455
Market (1.604) 0.568 (2.180) 1.525 0.625 (0.154)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 23.203 24.216 21.881 23.304 24.659 24.960
------- ------- ------- ------- ------- -------
Total Retail/Inst - At End-of-Qtr 48.208 50.737 44.957 48.413 50.001 48.738
Insurance Assets-End-of-Qtr 36.324 36.018 37.337 38.119 37.171 38.476
Total Assets Under Management ------- ------- ------- ------- ------- -------
At End-of-Qtr 84.532 86.755 82.294 86.532 87.172 87.214
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to
include assets under administration beginning in January of 2000.
Net Cash Flows from Assets Under
Administration are: 0.027 0.013 0.007 0.034 0.090 0.061
PAGE 24
Lincoln UK
Income Statements & Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Jun Jun
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 145.4 156.6 145.1 148.4 46.1 22.3 24.1
Mortality assessments 25.2 29.3 27.1 31.4 33.9 18.3 14.8
Expense assessments 166.1 153.6 182.3 178.1 134.8 75.1 53.1
Other revenue and fees 3.3 11.2 13.8 6.9 1.3 0.7 0.3
Net investment income 85.1 87.9 75.3 70.3 64.8 34.8 29.9
------- ------- ------- ------- ------- ------- -------
Operating Revenue 425.2 438.6 443.6 435.0 280.9 151.2 122.2
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 339.6 151.0 306.2 178.5 83.4 41.9 37.3
Underwriting, acquisition,
insurance and other expenses 184.5 175.6 223.5 180.0 147.6 70.8 64.2
Goodwill amortization 0.0 6.3 7.0 4.0 0.6 0.3 0.0
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 524.1 332.9 536.7 362.6 231.7 113.0 101.6
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax (99.0) 105.8 (93.1) 72.4 49.2 38.2 20.6
Federal income taxes 9.3 34.8 (79.2) 11.3 (11.1) 7.6 (0.5)
------- ------- ------- ------- ------- ------- -------
Income from Operations (108.3) 70.9 (13.9) 61.0 60.2 30.6 21.1
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.5 0.8 2.1 2.3 8.7 1.8 (0.4)
Restructuring charges 0.0 0.0 (6.5) (76.5) 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes (106.8) 71.7 (18.2) (13.2) 68.9 32.4 20.7
Cumulative effect of accounting
changes 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Net Income (106.8) 71.7 (18.2) (13.2) 68.9 32.4 20.7
======= ======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. (108.3) 77.2 (6.9) 65.1 60.9 30.9 21.1
Net Income -before Goodwill
Amort. (106.8) 78.0 (11.3) (9.2) 69.6 32.7 20.7
Effective tax rate (9.4%) 32.9% 85.1% 15.7% (22.5%) 20.0% (2.2%)
Operating revenue 425.2 438.6 443.6 435.0 280.9 151.2 122.2
Realized gains (losses) on
investments 2.1 1.1 3.0 3.2 12.4 2.6 (0.6)
Gains(losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Total Revenue 427.3 439.7 446.6 438.2 293.3 153.8 121.6
======= ======= ======= ======= ======= ======= =======
Average capital 618.1 517.7 551.2 488.2 559.7 550.9 497.6
Return on average capital (17.5%) 13.7% (2.5%) 12.5% 10.8% 11.1% 8.5%
----------------------------------------------------------------------------------------------------------------
Unit Linked Assets - Beg-of-Year 5.074 5.643 6.265 7.220 6.441 6.441 5.607
Deposits 0.569 0.473 0.537 0.554 0.481 0.242 0.229
Withdrawals (incl. chgs) & Deaths (0.503) (0.547) (0.566) (0.644) (0.529) (0.277) (0.264)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows 0.066 (0.074) (0.029) 0.090) (0.048) (0.035) (0.035)
Inv Inc & Chg in Mkt Val 0.682 0.662 1.154 (0.154) (0.617) (0.306) (0.338)
Acq of new business/companies 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Foreign currency adjustment (0.179) 0.035 (0.170) (0.536) (0.169) (0.332) 0.286
------- ------- ------- ------- ------- ------- -------
Unit Linked Assets - End-of-Year 5.643 0.265 7.220 6.441 5.607 5.768 5.520
======= ======= ======= ======= ======= ======= =======
Individual Life In-force
(Billions) 25.026 25.002 25.698 4.290 20.878 21.519 20.401
Exchange Rate - Dollars to Pounds
For-the-Year 1.644 1.658 1.617 1.518 1.441 1.438 1.443
End-of-Year 1.651 1.660 1.615 1.493 1.456 1.415 1.532
PAGE 25
Lincoln UK
Income Statements & Operational Data
Unaudited [Millions of Dollars]
For the Quarter Ended Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 33.5 38.7 39.0 36.3 32.5 40.5
Mortality assessments 7.7 5.0 6.3 8.0 9.6 7.5
Expense assessments 49.3 37.2 46.5 44.3 52.6 34.6
Other revenue and fees 3.6 3.8 2.4 1.3 2.0 1.3
Net investment income 16.2 17.7 18.9 18.5 16.1 16.7
------- ------- ------- ------- ------- -------
Operating Revenue 110.3 102.4 113.2 108.4 112.8 100.6
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 27.2 211.8 35.0 37.4 51.9 54.2
Underwriting, acquisition,
insurance and other expenses 61.6 51.4 56.4 43.5 45.2 34.9
Goodwill amortization 1.2 3.3 1.3 1.3 1.2 0.2
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 90.1 266.6 92.8 82.2 98.3 89.3
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 20.2 (164.2) 20.4 26.2 14.5 11.3
Federal income taxes 4.0 (97.1) 4.7 6.9 3.9 (4.2)
------- ------- ------- ------- ------- -------
Income from Operations 16.2 (67.1) 15.7 19.3 10.6 15.5
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 0.2 1.0 (0.2) (0.1) (0.0) 2.6
Restructuring charges 0.0 (6.5) 0.0 0.0 (40.5) (36.1)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 16.4 (72.6) 15.5 19.1 (29.9) (17.9)
Cumulative effect of accounting
changes
------- ------- ------- ------- ------- -------
Net Income 16.4 (72.6) 15.5 19.1 (29.9) (17.9)
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 17.4 (63.8) 17.1 20.5 11.8 15.7
Net Income -before Goodwill
Amort. 17.6 (69.3) 16.8 20.4 (28.7) (17.8)
Effective tax rate 20.0% 59.1% 22.9% 26.4% 27.2% (37.1%)
Operating revenue 110.3 102.4 113.2 108.4 112.8 100.6
Realized gains (losses) on
investments 0.3 1.4 (0.4) (0.2) (0.0) 3.8
------- ------- ------- ------- ------- -------
Total Revenue 110.5 103.8 112.8 108.2 112.8 104.3
======= ======= ======= ======= ======= =======
Average capital 573.5 585.0 516.4 500.8 486.5 448.9
Return on average capital 11.3% (45.9%) 12.2% 15.4% 8.7% 13.8%
---------------------------------------------------------------------------------------------------------
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 6.503 6.568 7.220 7.031 6.726 6.499
Deposits 0.130 0.156 0.159 0.134 0.145 0.116
Withdrawals (incl. chgs) & Deaths (0.136) (0.158) (0.170) (0.162) (0.159) (0.153)
------- ------- ------- ------- ------- -------
Net Cash Flows (0.005) (0.002) (0.011) (0.028) (0.014) (0.037)
Inv Inc & Chg in Mkt Val (0.214) 0.784 (0.077) 0.047 (0.025) (0.100)
Acq of new business/companies
Foreign currency adjustment 0.284 (0.130) (0.101) (0.324) (0.189) 0.078
------- ------- ------- ------- ------- -------
Unit Linked Assets -
End-of-Quarter 6.568 7.220 7.031 6.726 6.499 6.441
======= ======= ======= ======= ======= =======
Individual Life In-force
(Billions) 26.235 25.698 26.514 25.225 24.535 24.290
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.614 1.625 1.599 1.536 1.482 1.454
End-of-Quarter 1.647 1.615 1.591 1.517 1.475 1.493
Lincoln UK
Income Statements & Operational Data (Continued)
Unaudited [Millions of Dollars]
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 12.8 9.6 11.8 11.9 12.1 12.1
Mortality assessments 9.4 8.9 8.5 7.1 6.5 8.3
Expense assessments 43.7 31.4 35.5 24.1 25.3 27.8
Other revenue and fees 0.6 0.1 0.0 0.6 0.3 0.0
Net investment income 17.9 16.9 14.8 15.2 14.7 15.3
------- ------- ------- ------- ------- -------
Operating Revenue 84.4 66.9 70.7 58.9 58.8 63.4
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 24.0 17.9 20.7 20.8 18.3 19.0
Underwriting, acquisition,
insurance and other expenses 41.1 29.7 40.3 36.5 24.9 39.3
Goodwill amortization 0.2 0.2 0.2 0.2
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 65.3 47.7 61.1 57.5 43.2 58.4
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 19.1 19.1 9.6 1.4 15.6 5.1
Federal income taxes 4.7 2.9 (0.5) (18.1) 1.1 (1.6)
------- ------- ------- ------- ------- -------
Income from Operations 14.4 16.2 10.1 19.5 14.4 6.7
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 0.4 1.4 3.9 3.0 (3.6) 3.2
Restructuring charges 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes 14.8 17.6 14.0 22.5 10.8 9.8
Cumulative effect of accounting
changes 0.0
------- ------- ------- ------- ------- -------
Net Income 14.8 17.6 14.0 22.5 10.8 9.8
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 14.5 16.4 10.3 19.7 14.4 6.7
Net Income -before Goodwill
Amort. 14.9 17.8 14.2 22.7 10.8 9.8
Effective tax rate 24.6% 15.3% (5.7%) (1337.4%) 7.3% (31.3%)
Operating revenue 84.4 66.9 70.7 58.9 58.8 63.4
Realized gains (losses) on
investments 0.6 2.0 5.5 4.3 (5.1) 4.5
------- ------- ------- ------- ------- -------
Total Revenue 84.9 68.9 76.3 63.2 53.6 68.0
======= ======= ======= ======= ======= =======
Average capital 548.7 553.2 575.4 561.3 510.0 485.3
Return on average capital 10.5% 11.7% 7.0% 13.9% 11.3% 5.5%
-----------------------------------------------------------------------------------------------------
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 6.441 5.677 5.768 5.218 5.607 5.618
Deposits 0.132 0.111 0.128 0.111 0.114 0.115
Withdrawals (incl. chgs) & Deaths (0.147) (0.131) (0.136) (0.115) (0.127) (0.137)
------- ------- ------- ------- ------- -------
Net Cash Flows (0.015) (0.020) (0.009) (0.004) (0.013) (0.022)
Inv Inc & Chg in Mkt Val (0.421) 0.115 (0.768) 0.457 0.141 (0.479)
Acq of new business/companies
Foreign currency adjustment (0.328) (0.004) 0.226 (0.063) (0.117) 0.403
------- ------- ------- ------- ------- -------
Unit Linked Assets -
End-of-Quarter 5.677 5.768 5.218 5.607 5.618 5.520
======= ======= ======= ======= ======= =======
Individual Life In-force
(Billions) 21.894 21.519 21.299 20.878 20.010 20.401
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.455 1.421 1.442 1.448 1.423 1.464
End-of-Quarter 1.416 1.415 1.474 1.456 1.426 1.532
PAGE 26
Other Operations
Unaudited [Millions of Dollars]
YTD YTD
Jun Jun
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 125.3 286.4 317.0 377.5 360.7 165.0 154.0
Lincoln Financial Distributors 20.5 33.5 107.5 119.9 113.4 46.4 58.7
------- ------- ------- ------- ------- ------- -------
Total Distribution 145.8 319.9 424.4 497.4 474.0 211.4 212.7
Reinsurance 1362.3 1581.2 1824.1 1770.6 1699.4 966.5 0.0
Amortization of deferred gain on
indemnity reinsurance* 20.4 0.0 46.2
Other [Including
Consolidating Adjustments] (105.9) (192.7) (277.5) (292.6) (360.4) (185.7) (65.7)
------- ------- ------- ------- ------- ------- -------
Operating Revenue 1402.2 1708.3 1971.0 1975.4 1833.4 992.1 193.2
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 42.1 0.5 14.4 (5.0) 8.2 (8.5) (8.7)
Gains (losses) on derivatives (9.7) (0.0) (0.0)
Gain on sale of reinsurance
subsidiaries 12.8 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Total Revenue 1444.3 1708.9 1985.4 1970.4 1844.7 983.6 184.5
======= ======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (5.3) (23.7) (20.8) (11.7) (15.9) (19.1) (16.9)
Lincoln Financial Distributors (11.2) (8.2) (14.0) (18.5) (30.7) (18.4) (13.5)
------- ------- ------- ------- ------- ------- -------
Total Distribution (16.5) (31.9) (34.8) (30.2) (46.6) (37.5) (30.4)
Reinsurance (150.1) 104.9 40.1 122.5 128.8 80.9
Amortization of deferred gain on
indemnity reinsurance* 12.9 30.0
LNC Financing (31.6) (51.5) (83.5) (84.9) (77.9) (43.7) (17.8)
Other Corporate (25.1) (17.5) (5.0) (15.4) (2.4) 1.5 (1.1)
------- ------- ------- ------- ------- ------- -------
Inc (Loss) from Operations (223.3) 4.0 (83.1) (8.0) 14.8 1.2 (19.3)
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 24.9 2.7 10.2 (3.2) 5.9 (5.6) (5.7)
Gains (losses) on derivatives (6.3) (0.0) (0.0)
Gain on sale of reinsurance
subsidiaries 15.0 0.0 0.0
Reserve increase on business sold
through reinsurance (14.4)
Restructuring charges 0.0 (14.3) (3.2) 1.0 (19.5) (1.2) 0.0
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes (198.4) (7.6) (76.1) (10.2) 9.9 (5.6) (39.4)
Cumulative effect of accounting
changes (2.7) (2.7) 0.0
------- ------- ------- ------- ------- ------- -------
Total Net Income (Loss) (198.4) (7.6) (76.1) (10.2) 7.2 (8.3) (39.4)
======= ======= ======= ======= ======= ======= =======
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 75.7 104.0 86.4 90.0 91.3 109.8
Lincoln Financial Distributors 26.4 34.2 29.3 28.1 27.5 35.0
------- ------- ------- ------- ------- -------
Total Distribution 102.1 138.2 115.8 118.1 118.8 144.8
Reinsurance 403.7 575.1 392.7 458.9 457.9 461.0
Amortization of deferred gain on
indemnity reinsurance*
Other [Including
Consolidating Adjustments] (64.8) (147.0) (67.6) (86.7) (79.2) (59.2)
------- ------- ------- ------- ------- -------
Operating Revenue 441.0 566.4 440.9 490.3 497.5 546.6
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 14.2 0.0 (0.8) (1.3) (3.4) 0.4
Gains (losses) on derivatives
Gain on sale of reinsurance
subsidiaries
------- ------- ------- ------- ------- -------
Total Revenue 455.2 566.4 440.2 489.0 494.1 547.0
======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (5.3) 2.7 (7.4) (2.9) (3.1) 1.6
Lincoln Financial Distributors (2.1) (3.7) (3.3) (5.2) (5.0) (5.1)
------- ------- ------- ------- ------- -------
Total Distribution (7.4) (1.0) (10.7) (8.1) (8.0) (3.4)
Reinsurance 2.2 (19.5) 31.9 25.8 28.2 36.6
Amortization of deferred gain on
indemnity reinsurance*
LNC Financing (19.9) (21.6) (21.9) (22.2) (20.9) (19.8)
Other Corporate (2.4) (1.4) (5.7) (1.5) 1.6 (9.8)
------- ------- ------- ------- ------- -------
Inc (Loss) from Oper (27.5) (43.5) (6.5) (5.9) 0.9 3.5
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 9.8 1.3 (0.4) (0.8) (3.2) 1.2
Gains (losses) on derivatives
Gain on sale of reinsurance
subsidiaries
Reserve increase on business
sold through reinsurance
Restructuring charges (3.2) 0.0 0.0 0.0 0.0 1.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes (20.9) (42.2) (6.8) (6.8) (2.3) 5.7
Cumulative effect of accounting
changes
------- ------- ------- ------- ------- -------
Total Net Income (Loss) (20.9) (42.2) (6.8) (6.8) (2.3) 5.7
======= ======= ======= ======= ======= =======
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 81.2 83.8 78.9 116.7 75.9 78.1
Lincoln Financial Distributors 25.7 20.7 32.0 35.0 29.4 29.3
------- ------- ------- ------- ------- -------
Total Distribution 106.9 104.5 111.0 151.7 105.3 107.4
Reinsurance 515.1 451.4 467.4 265.6
Amortization of deferred gain on
indemnity reinsurance* 20.4 24.1 22.1
Other [Including
Consolidating Adjustments] (80.5) (105.2) (76.0) (98.7) (32.2) (33.4)
------- ------- ------- ------- ------- -------
Operating Revenue 541.5 450.7 502.3 339.0 97.1 96.1
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (10.0) 1.4 (12.8) 29.5 (4.9) (3.8)
Gains (losses) on derivatives 0.1 (0.1) (0.0) (9.7) 0.1 (0.1)
Gain on sale of reinsurance
subsidiaries 12.8
------- ------- ------- ------- ------- -------
Total Revenue 531.6 452.0 489.5 371.7 92.3 92.2
======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (6.8) (12.3) (4.2) 7.4 (9.1) (7.7)
Lincoln Financial Distributors (6.9) (11.5) (7.8) (4.5) (6.2) (7.3)
------- ------- ------- ------- ------- -------
Total Distribution (13.8) (23.8) (12.0) 3.0 (15.4) (15.0)
Reinsurance 46.8 34.1 17.2 30.7 0.0
Amortization of deferred gain on
indemnity reinsurance* 12.9 15.7 14.4
LNC Financing (21.7) (22.0) (19.5) (14.7) (8.2) (9.6)
Other Corporate (0.5) 2.0 1.5 (5.3) (4.1) 2.9
------- ------- ------- ------- ------- -------
Inc (Loss) from Oper 10.9 (9.7) (12.9) 26.5 (12.0) (7.3)
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (6.5) 1.0 (8.3) 19.7 (3.3) (2.4)
Gains (losses) on derivatives 0.1 (0.1) (0.0) (6.3) 0.1 (0.1)
Gain on sale of reinsurance
subsidiaries 0.0 0.0 0.0 15.0 0.0
Reserve increase on business
sold through reinsurance (14.4)
Restructuring charges 0.0 (1.2) 0.0 (18.3) 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes 4.4 (10.0) (21.2) 36.7 (15.2) (24.2)
Cumulative effect of accounting
changes (0.4) (2.2) 0.0 (0.0) 0.0
------- ------- ------- ------- ------- -------
Total Net Income (Loss) 4.0 (12.2) (21.2) 36.7 (15.2) (24.2)
======= ======= ======= ======= ======= =======
* The amortization of deferred gain on sale of reinsurance business represents the
amortization of deferred gain recognized on the business sold through indemnity
reinsurance to Swiss Re.
PAGE 27
Consolidated Domestic Retail
Deposits/Account Balances
Unaudited [Billions of Dollars]
YTD YTD
Jun Jun
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Deposits - For the Year
Lincoln Retirement - Fixed
Annuities 1.632 1.452 2.563 2.074 3.342 1.228 1.759
Lincoln Retirement - Variable
Annuities 2.695 2.791 2.553 3.165 3.067 1.590 1.595
Lincoln Retirement - Life
Insurance 0.000 0.000 0.017 0.014 0.012 0.007
Life Insurance Segment - Life
Insurance 0.384 1.207 1.698 1.884 1.934 0.895 1.018
Inv Mgmt - Annuities 2.163 2.238 1.561 1.782 1.702 0.944 1.191
Inv Mgmt - Mutual Funds(1) 1.218 1.913 2.153 2.578 1.522 0.838 1.014
Inv Mgmt - Wrap Fee & Other 0.533 0.596 0.550 0.525 0.468 0.268 0.354
Consolidating Adjustments (0.966) (1.041) (0.499) (0.406) (1.039) (0.465) (0.680)
------- ------- ------- ------- ------- ------- -------
Gross Deposits 7.658 9.157 10.597 11.617 11.008 5.305 6.250
Account Balances - End of Year
Lincoln Retirement - Fixed
Annuities 15.458 16.505 16.791 15.394 16.491
Lincoln Retirement - Variable
Annuities 27.346 33.358 41.493 39.427 34.638
Lincoln Retirement - Life
Insurance 0.155 0.160 0.149
Life Insurance Segment - Life
Insurance 3.038 9.243 10.217 10.847 11.377
Inv Mgmt - Annuities 10.991 14.257 15.557 13.527 11.835
Inv Mgmt - Mutual Funds(1) 12.484 13.528 13.632 13.261 11.552
Inv Mgmt - Wrap Fee & Other 2.403 2.512 1.618 1.342 1.719
Consolidating Adjustments (6.806) (8.891) (9.175) (7.753) (6.717)
------- ------- ------- ------- -------
Account Balances 64.914 80.512 90.288 86.205 81.044
Sep Dec Mar Jun Sep Dec
1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Lincoln Retirement - Fixed
Annuities 0.678 0.741 0.589 0.490 0.513 0.482
Lincoln Retirement - Variable
Annuities 0.634 0.634 0.797 0.793 0.729 0.846
Lincoln Retirement - Life
Insurance 0.004 0.005 0.003 0.003 0.004 0.004
Life Insurance Segment - Life
Insurance 0.399 0.526 0.424 0.411 0.428 0.622
Inv Mgmt - Annuities 0.332 0.409 0.379 0.358 0.456 0.589
Inv Mgmt - Mutual Funds(1) 0.514 0.587 0.876 0.586 0.554 0.562
Inv Mgmt - Managed Acct. & Other 0.116 0.079 0.148 0.106 0.140 0.131
Consolidating Adjustments (0.096) (0.118) (0.099) (0.062) (0.100) (0.145)
------- ------- ------- ------- ------- -------
Gross Deposits 2.581 2.864 3.116 2.685 2.724 3.091
------- ------- ------- ------- ------- -------
Account Balances - End of Quarter
Lincoln Retirement - Fixed
Annuities 16.934 16.791 16.244 15.884 15.660 15.394
Lincoln Retirement - Variable
Annuities 35.613 41.493 44.640 43.097 42.743 39.427
Lincoln Retirement - Life
Insurance 0.128 0.155 0.169 0.165 0.166 0.160
Life Insurance Segment - Life
Insurance 9.726 10.217 10.470 10.538 10.716 10.847
Inv Mgmt - Annuities 14.036 15.557 15.557 14.888 14.853 13.527
Inv Mgmt - Mutual Funds(1) 12.938 13.632 14.671 14.069 14.571 13.261
Inv Mgmt - Managed Acct. & Other 1.579 1.618 1.309 1.304 1.256 1.342
Consolidating Adjustments (8.387) (9.175) (8.768) (8.419) (8.644) (7.753)
------- ------- ------- ------- ------- -------
Account Balances 82.567 90.288 94.292 91.526 91.322 86.205
------- ------- ------- ------- ------- -------
Mar Jun Sep Dec Mar Jun
2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Lincoln Retirement - Fixed
Annuities 0.560 0.668 0.896 1.218 0.906 0.853
Lincoln Retirement - Variable
Annuities 0.887 0.703 0.684 0.793 0.808 0.787
Lincoln Retirement - Life
Insurance 0.003 0.004 0.003 0.002
Life Insurance Segment - Life
Insurance 0.418 0.477 0.434 0.605 0.440 0.577
Inv Mgmt - Annuities 0.542 0.403 0.434 0.324 0.590 0.601
Inv Mgmt - Mutual Funds(1) 0.484 0.354 0.335 0.348 0.452 0.562
Inv Mgmt - Managed Acct. & Other 0.140 0.127 0.074 0.126 0.160 0.194
Consolidating Adjustments (0.262) (0.202) (0.295) (0.279) (0.309) (0.371)
------- ------- ------- ------- ------- -------
Gross Deposits 2.771 2.534 2.566 3.137 3.047 3.203
------- ------- ------- ------- ------- -------
Account Balances - End of Quarter
Lincoln Retirement - Fixed
Annuities 15.430 15.551 16.051 16.491 16.533 16.909
Lincoln Retirement - Variable
Annuities 34.733 36.961 30.506 34.638 35.150 31.206
Lincoln Retirement - Life
Insurance 0.147 0.157 0.134 0.149
Life Insurance Segment - Life
Insurance 10.764 11.066 10.939 11.377 11.667 11.759
Inv Mgmt - Annuities 11.822 12.532 10.714 11.835 11.920 10.896
Inv Mgmt - Mutual Funds(1) 11.530 12.215 10.726 11.552 11.597 11.033
Inv Mgmt - Managed Acct. & Other 1.653 1.774 1.635 1.719 1.821 1.847
Consolidating Adjustments (6.834) (7.007) (6.023) (6.717) (6.684) (6.007)
------- ------- ------- ------- ------- -------
Account Balances 79.245 83.250 74.682 81.044 82.005 77.644
------- ------- ------- ------- ------- -------
Total Domestic Net Flows
Unaudited [Billions of Dollars]
YTD YTD
Jun Jun
For the Year 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- -------
Lincoln Retirement (1.244) (1.165) (2.874) 0.105 (0.787) 0.311
Life Insurance Segment 0.113 0.985 1.158 1.163 0.541 0.621
Investment Management Segment-
Retail(1) 1.772 (2.209) (1.499) (0.379) (0.167) 0.257
Consolidating Adjustments (0.158) 1.276 1.406 (0.150) (0.016) (0.123)
------- ------- ------- ------- ------- -------
Total Retail Net Flows 0.483 (1.114) (1.810) 0.739 (0.427) 1.066
Investment Management Segment-
Institutional (2.702) (2.240) (5.694) (0.228) 0.027 1.185
------- ------- ------- ------- ------- -------
Total Net Flows (2.219) (3.354) (7.504) 0.511 (0.400) 2.252
------- ------- ------- ------- ------- -------
Sep Dec Mar Jun Sep Dec
For the Quarter 1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Lincoln Retirement (0.193) (0.490) (0.700) (0.682) (0.812) (0.681)
Life Insurance Segment 0.197 0.327 0.242 0.235 0.277 0.404
Investment Management Segment-
Retail(1) (0.300) (0.410) (0.879) (0.364) (0.315) 0.059
Consolidating Adjustments 0.313 0.463 0.717 0.342 0.194 0.152
------- ------- ------- ------- ------- -------
Total Retail Net Flows 0.016 (0.111) (0.620) (0.470) (0.656) (0.065)
Investment Management Segment-
Instit. 0.816 (1.479) (2.611) (1.056) (0.983) (1.043)
------- ------- ------- ------- ------- -------
Total Net Flows 0.832 (1.590) (3.231) (1.526) (1.639) (1.109)
------- ------- ------- ------- ------- -------
Total Domestic Net Flows (Continued)
Unaudited [Billions of Dollars]
Mar Jun Sep Dec Mar Jun
For the Quarter 2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Lincoln Retirement (0.590) (0.196) 0.261 0.631 0.088 0.223
Life Insurance Segment 0.237 0.304 0.239 0.383 0.236 0.385
Investment Management Segment-
Retail(1) (0.019) (0.148) (0.120) (0.091) 0.091 0.167
Consolidating Adjustments 0.019 (0.034) (0.081) (0.053) (0.037) (0.086)
------- ------- ------- ------- ------- -------
Total Retail Net Flows (0.354) (0.073) 0.299 0.870 0.378 0.688
Investment Management Segment-
Instit. (0.418) 0.445 (0.155) (0.102) 0.730 0.455
------- ------- ------- ------- ------- -------
Total Net Flows (0.772) 0.372 0.144 0.768 1.108 1.143
------- ------- ------- ------- ------- -------
NOTE: Excludes amounts reported as Assets Under Management - Insurance Assets
(1) Retail assets under management have been restated to include assets under administration beginning
in January of 2000. See details on pages 22 and 23.
PAGE 28
Consolidated Investment Data -
Assets Managed
Unaudited [Billions of Dollars]
December 31 1997 1998 1999 2000 2001
------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 24.066 30.233 27.689 27.450 28.346
Equity securities 0.660 0.543 0.604 0.550 0.470
Other investments 5.092 7.154 7.286 7.369 7.297
------- ------- ------- ------- -------
Total LNC Investments(1) 29.819 37.929 35.578 35.369 36.113
Separate accounts 37.139 43.409 53.654 50.580 44.833
Cash and Invested Cash 3.795 2.433 1.896 1.927 3.095
Discontinued Operations ------- ------- ------- ------- -------
Total LNC 70.752 83.772 91.128 87.876 84.042
------- ------- ------- ------- -------
Non-affiliate assets managed 48.331 50.061 49.314 43.397 42.199
------- ------- ------- ------- -------
Total Assets Managed 119.083 133.833 140.443 131.273 126.241
======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 56.457 61.488 61.374 53.354 48.411
(See page 22 for additional
detail)
DLIA-Corp 35.684 39.432 35.934 35.686 38.119
(Assets managed internally-see
page 22)
Lincoln (UK) 6.775 7.573 8.589 7.873 6.847
Policy Loans (within business
units) 0.763 1.840 1.892 1.961 1.940
Non-LNC Affiliates 19.404 23.500 32.654 32.399 30.924
------- ------- ------- ------- -------
Total Assets Managed 119.083 133.833 140.443 131.273 126.241
======= ======= ======= ======= =======
Sep Dec Mar Jun Sep Dec
End of Quarter 1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 28.708 27.689 27.745 27.078 27.264 27.450
Equity securities 0.507 0.604 0.588 0.560 0.570 0.550
Other investments 7.317 7.286 7.442 7.419 7.471 7.369
------- ------- ------- ------- ------- -------
Total LNC Investments(1) 36.532 35.578 35.775 35.057 35.305 35.369
Separate accounts 46.229 53.654 56.908 54.924 54.411 50.580
Cash and invested cash 2.343 1.896 1.510 1.619 1.436 1.927
------- ------- ------- ------- ------- -------
Total LNC 85.104 91.128 94.192 91.601 91.152 87.876
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 48.068 49.314 47.150 45.945 45.119 43.397
------- ------- ------- ------- ------- -------
Total Assets Managed 133.172 140.443 141.342 137.546 136.271 131.273
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 58.869 61.375 58.712 56.986 55.998 53.355
(See page 23 for additional
detail)
DLIA-Corp 36.820 35.934 35.541 34.891 34.981 35.686
(Assets managed internally-see
page 23)
Lincoln (UK) 7.849 8.589 8.423 8.058 7.838 7.873
Policy Loans (within business
units) 1.863 1.892 1.896 1.915 1.936 1.961
Non-LNC Affiliates 27.771 32.653 36.770 35.696 35.518 32.397
------- ------- ------- ------- ------- -------
Total Assets Managed 133.172 140.443 141.342 137.546 136.271 131.273
======= ======= ======= ======= ======= =======
Mar Jun Sep Dec Mar Jun
End of Quarter 2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 27.811 27.874 28.932 28.346 28.841 29.725
Equity securities 0.560 0.534 0.478 0.470 0.439 0.419
Other investments 7.374 7.388 7.379 7.297 7.084 7.016
------- ------- ------- ------- ------- -------
Total LNC Investments(1) 35.744 35.796 36.788 36.113 36.363 37.160
Separate accounts 44.506 47.140 39.480 44.833 44.917 40.580
Cash and invested cash 2.015 1.502 1.996 3.095 1.700 2.265
------- ------- ------- ------- ------- -------
Total LNC 82.266 84.438 78.264 84.042 82.979 80.005
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 41.904 44.069 39.198 42.199 43.708 43.031
------- ------- ------- ------- ------- -------
Total Assets Managed 124.170 128.507 117.462 126.241 126.687 123.036
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 48.208 50.737 44.957 48.413 50.001 48.738
(See page 23 for additional
detail)
DLIA-Corp 36.324 36.018 37.337 38.119 37.171 38.476
(Assets managed internally-see
page 23)
Lincoln (UK) 7.012 7.027 6.474 6.847 6.772 6.753
Policy Loans (within business
units) 1.947 1.947 1.943 1.940 1.918 1.906
Non-LNC Affiliates 30.679 32.778 26.750 30.923 30.825 27.162
------- ------- ------- ------- ------- -------
Total Assets Managed 124.170 128.507 117.462 126.241 126.687 123.036
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets under administration beginning
in January of 2000. See details on pages 22 and 23.
PAGE 29
Consolidated Investment Data
Unaudited [Millions of Dollars
except as noted]
YTD YTD
Jun Jun
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 1832.1 2065.8 2232.9 2148.7 2121.0 1053.9 1046.3
Equity Securities 19.1 22.8 20.1 19.5 17.6 8.8 7.6
Mortgage loans on real estate 279.2 383.6 369.2 373.8 374.5 188.0 179.7
Real estate 99.4 86.8 64.1 51.8 49.5 25.9 24.2
Policy loans 44.5 99.5 116.5 125.0 125.3 62.8 61.3
Invested cash 102.4 156.8 110.3 87.2 68.4 42.3 21.5
Other investments 20.6 88.4 51.8 66.8 69.5 37.9 17.7
------- ------- ------- ------- ------- ------- -------
Investment revenue 2397.3 2903.7 2964.8 2872.8 2825.8 1419.5 1358.1
Investment expense 146.6 222.3 157.3 125.7 146.2 72.8 59.1
------- ------- ------- ------- ------- ------- -------
Net Investment Income 2250.8 2681.4 2807.5 2747.1 2679.6 1346.8 1299.1
------- ------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 12.7 11.6 8.1 7.8 7.2 3.5 3.5
------- ------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 2263.5 2693.0 2815.6 2754.9 2686.8 1350.3 1302.6
======= ======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 30337.3 36573.8 39027.5 37471.3 37616.9 37166.3 38202.7
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.46% 7.36% 7.21% 7.35% 7.14% 7.27% 6.82%
Investment Gains
Realized Gains (Losses) on
Investments 72.9 13.7 3.8 (17.5) (68.7) (24.8) (120.3)
Gains(Losses) on Derivatives 0.0 0.0 0.0 0.0 (4.9) 0.1 0.4
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) 159.6 116.4 (1018.1) 477.7 183.7 64.1 129.9
Incr (Decr) on Derivatives* 3.9 27.0 1.3
Incr (Decr) in Foreign Exchange (20.3) 3.8 (19.9) (8.1) (30.0) (37.3) 30.0
Incr (Decr) in minimum pension
liability (36.0) 0.0 (1.9)
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 24.066 30.233 27.689 27.450 28.346 27.874 29.725
Fixed Maturity Sec (Adjusted
Cost) 22.624 28.640 28.357 27.373 27.956 27.681 29.133
Equity Securities (Market) 0.660 0.543 0.604 0.550 0.470 0.534 0.419
Equity Securities (Adjusted Cost) 0.518 0.437 0.482 0.458 0.444 0.477 0.374
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 27.6% 25.6% 22.8% 22.1% 17.2% 19.3% 18.2%
AA or better 35.1% 32.6% 29.8% 29.2% 23.6% 26.0% 25.0%
BB or less 7.3% 7.0% 8.0% 6.7% 8.3% 7.8% 6.4%
-----------------------------------------------------------------------------------------------------------------
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 551.2 548.0 541.3 544.4 525.3 537.7
Equity Securities 3.9 6.9 3.7 5.7 3.6 6.5
Mortgage loans on real estate 94.7 94.5 92.0 95.1 94.4 92.3
Real estate 13.7 12.5 11.2 12.5 11.8 16.3
Policy loans 29.4 29.9 30.7 30.9 30.5 32.9
Invested cash 32.4 22.0 27.2 15.1 26.5 18.4
Other investments 9.9 20.9 35.1 2.0 26.9 2.9
------- ------- ------- ------- ------- -------
Investment revenue 735.2 734.9 741.1 705.7 719.1 706.9
Investment expense 38.1 34.8 30.0 31.8 29.0 34.8
------- ------- ------- ------- ------- -------
Net Investment Income 697.1 700.1 711.1 673.8 690.0 672.1
------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 1.7 2.6 1.5 2.3 1.4 2.6
------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 698.7 702.7 712.6 676.1 691.5 674.7
======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 39111.8 38438.6 38237.4 37306.1 37250.8 37090.8
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.15% 7.31% 7.45% 7.25% 7.43% 7.28%
Investment Gains
Realized Gains (Losses) on
Investments 4.1 1.6 (0.4) (6.7) (11.6) 1.2
Gains (Losses) on Derivatives 0.0 0.0 0.0 0.0 0.0 0.0
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) (102.7) (361.9) 54.5 (145.4) 218.8 349.8
Incr (Decr) on Derivatives*
Incr (Decr) in Foreign Exchange 19.6 (10.2) (7.3) (0.9) (2.0) 2.0
Incr (Decr) in minimum pension
liability
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 28.708 27.689 27.745 27.078 27.264 27.450
Fixed Maturity Sec (Adjusted
Cost) 28.974 28.357 28.295 27.788 27.727 27.373
Equity Securities (Market) 0.507 0.604 0.588 0.560 0.570 0.550
Equity Securities (Adjusted Cost) 0.414 0.482 0.475 0.446 0.450 0.458
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 24.2% 22.8% 22.7% 22.3% 22.3% 22.1%
AA or better 31.1% 29.8% 29.5% 29.3% 29.4% 29.2%
BB or less 7.5% 8.0% 7.4% 7.4% 6.8% 6.7%
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 526.9 527.0 536.9 530.1 522.5 523.8
Equity Securities 1.0 7.8 3.7 5.1 3.4 4.3
Mortgage loans on real estate 95.7 92.4 94.2 92.4 89.5 90.2
Real estate 12.8 13.1 12.7 10.9 12.3 11.9
Policy loans 31.4 31.4 31.0 31.6 30.2 31.1
Invested cash 22.5 19.8 14.8 11.3 12.4 9.1
Other investments 19.6 18.2 28.2 3.5 7.8 9.8
------- ------- ------- ------- ------- -------
Investment revenue 709.9 709.7 721.4 684.8 678.0 680.2
Investment expense 36.1 36.6 35.2 38.2 29.9 29.2
------- ------- ------- ------- ------- -------
Net Investment Income 673.7 673.1 686.2 646.6 648.1 651.0
------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 0.5 3.0 1.5 2.1 1.5 2.0
------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 674.2 676.1 687.7 648.7 649.7 653.0
======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 37238.0 37094.5 37685.8 38449.3 38169.9 38235.5
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.24% 7.29% 7.30% 6.75% 6.81% 6.83%
Investment Gains
Realized Gains (Losses) on
Investments (13.4) (11.5) (23.8) (20.0) (67.6) (52.7)
Gains (Losses) on Derivatives (0.1) 0.2 (0.4) (4.6) 0.1 0.3
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) 178.4 (114.2) 171.8 (52.2) (163.9) 293.8
Incr (Decr) on Derivatives* 23.3 3.7 (6.7) 1.2 1.2 0.0
Incr (Decr) in Foreign Exchange (17.8) (19.5) 22.2 (14.9) (12.8) 42.8
Incr (Decr) in minimum pension
liability (36.0) 0.7 (2.6)
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 27.811 27.874 28.932 28.346 28.841 29.725
Fixed Maturity Sec (Adjusted
Cost) 27.367 27.681 28.253 27.956 28.831 29.133
Equity Securities (Market) 0.560 0.534 0.478 0.470 0.439 0.419
Equity Securities (Adjusted Cost) 0.507 0.477 0.453 0.444 0.398 0.374
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 20.3% 19.3% 17.9% 17.2% 17.8% 18.2%
AA or better 27.1% 26.0% 24.3% 23.6% 24.7% 25.0%
BB or less 7.2% 7.8% 7.2% 8.3% 7.5% 6.4%
* 2001 includes the cumulative effect of accounting change
related to the adjustment recorded upon adoption of FAS #133.
PAGE 30
Common Stock/Debt Information
Unaudited [Dollars per Share,
except Percentages]
For the Year Ended December 31 1991 1992 1993 1994 1995
------- ------- ------- ------- -------
Common Stock [1]
Highest Price 13.813 19.032 24.125 22.188 26.875
Lowest Price 9.500 12.625 17.344 17.313 17.313
Closing Price 13.688 18.500 21.750 17.500 26.875
Dividend Payout Ratio [2] 63.5% 38.9% 52.6% 51.0% 39.7%
Yield [3] 5.3% 4.1% 3.8% 4.9% 3.4%
Preferred Stock Dividend
(Millions) 13.033 17.246 17.212 17.119 8.644
Debt: (End of Period)
Senior Debt Ratings
A.M. Best
Fitch AA AA- AA- AA-
Moody's A2 A2 A1 A2
Standard and Poors A+ A+ A+ A
Claims Paying Ratings:
Lincoln Life - A.M. Best A+ A+ A+ A+
Lincoln Life - Fitch AAA AAA AAA AA+
Lincoln Life - Moody's A1 A1 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA-
First Penn - A.M. Best* A A+ A+ A+
First Penn - Fitch
First Penn - Moody's
First Penn - Standard & Poors* AA- AA- AA- AA-
LLA of New York - A.M. Best*
LLA of New York - Fitch*
LLA of New York - Moody's
LLA of New York - Standard &
Poors*
Ratios
Debt to Total Capitalization [4] 25.7% 21.1% 19.9% 22.8%
Debt to Equity [4] 34.7% 26.7% 24.9% 29.5%
Common Stock/Debt Information (Continued)
Unaudited [Dollars per Share,
except Percentages]
For the Year Ended December 31 1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
Common Stock [1]
Highest Price 28.500 39.063 49.438 57.500 56.375 52.750
Lowest Price 20.375 24.500 33.500 36.000 22.625 38.000
Closing Price 26.250 39.063 40.907 40.000 47.313 48.570
Dividend Payout Ratio [2] 38.2% 22.8% 43.9% 50.5% 38.3% 41.9%
Yield [3] 3.7% 2.7% 2.7% 2.9% 2.6% 2.6%
Preferred Stock Dividend
(Millions) 0.112 0.106 0.100 0.089 0.078 0.071
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a
Fitch AA- AA- A+ A+ A+ A+
Moody's A2 A2 A2 A2 A3 A3
Standard and Poors A A A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A+ A+ A A A A
Lincoln Life - Fitch AA+ AA+ AA+ AA+ AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A+ A+ A A A A
First Penn - Fitch AA+ AA+ AA+ AA AA
First Penn - Moody's A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A+ A+ A A A A
LLA of New York - Fitch* AA+ AA+ AA+ AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 18.8% 17.0% 21.2% 23.2% 20.8% 21.4%
Debt to Equity [4] 23.1% 20.5% 26.9% 30.3% 26.3% 27.2%
------------------------------------------------------------------------------------------------------
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 1999 1999 2000 2000 2000 2000
------- ------- ------- ------- ------- -------
Common Stock:
Highest Price 57.500 48.313 41.375 40.063 56.375 50.938
Lowest Price 36.000 36.500 22.625 29.000 35.625 40.875
Closing Price 37.563 40.000 33.500 36.125 48.125 47.313
Yield [3] 2.9% 2.9% 3.5% 3.2% 2.4% 2.6%
Preferred Stock Dividend 0.027 0.014 0.022 0.022 0.021 0.013
(Millions)
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a
Fitch A+ A+ A+ A+ A+ A+
Moody's A2 A2 A2 A2 A2 A3
Standard and Poors A- A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A A A A A A
Lincoln Life - Fitch AA+ AA+ AA+ AA+ AA+ AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A A A A A
First Penn - Fitch AA+ AA+ AA+ AA+ AA+ AA
First Penn - Moody's A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A A A A A A
LLA of New York - Fitch* AA+ AA+ AA+ AA+ AA+ AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 22.0% 23.2% 23.3% 21.8% 21.2% 20.8%
Debt to Equity [4] 28.3% 30.3% 30.4% 28.0% 27.0% 26.3%
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2001 2001 2001 2001 2002 2002
------- ------- ------- ------- ------- -------
Common Stock:
Highest Price 48.250 52.300 52.750 49.450 53.650 52.540
Lowest Price 38.000 41.280 41.000 40.000 47.200 40.750
Closing Price 42.470 51.750 46.630 48.570 50.730 42.000
Yield [3] 2.9% 2.4% 2.6% 2.6% 2.5% 3.0%
Preferred Stock Dividend 0.019 0.018 0.017 0.017 0.017 0.016
(Millions)
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a a a a a
Fitch A+ A+ A+ A+ A+ A+
Moody's A3 A3 A3 A3 A3 A3
Standard and Poors A- A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A A A A A A+
Lincoln Life - Fitch AA AA AA AA AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A A A A A+
First Penn - Fitch AA AA AA AA AA AA
First Penn - Moody's A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A A A A A A+
LLA of New York - Fitch* AA AA AA AA AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 22.2% 21.2% 21.1% 21.4% 22.7% 22.6%
Debt to Equity [4] 28.5% 27.0% 26.7% 27.2% 29.4% 29.2%
* Rating based on affiliation with Lincoln Life
[1] Stock prices shown above include 2-for-1 splits in June 1993, and June 1999
[2] Indicated dividend divided by net income
[3] Indicated dividend divided by the closing price
[4] Equity used in calculation assumes securities at cost. Minority interest-preferred
securities of subsidiary companies (hybrid securities) are considered 50%
debt and 50% equity.
Return on Equity/Return on Capital:
In order to accommodate the various perspectives, LNC presents two separate Return on Equity numbers on
pages 2, 5 and 6 of this Statistical Report. "Net Income Divided by Average Shareholders' Equity"
tends to fluctuate from period to period due to the realization of gains and losses on investments or
sale of subsidiaries. "Income from Operations Divided by Average Shareholders' Equity" is less volatile
but leaves out an important element of earnings for a company that has a long-term goal of enhancing
shareholder value by realizing investment gains.
Return on capital measures the effectiveness of LNC's use of its total capital, which is made up of
equity, debt and hybrid securities. Return on capital is calculated by dividing income from operations
(after adding back after-tax interest expense) by average capital. The difference between return on
capital and return on equity presents the effect of leveraging on LNC's consolidated results.