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: September 30, 2001
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 219-448-1400
Item 9
Financial Report for the quarter ended September 30, 2001.
9/30/01 PAGE 1
Financial Highlights
Unaudited [Amounts in Millions, except Per Share]
For the Quarter Ended September 30
2001 2000
Amount Amount Change % Change
-------- -------- -------- --------
Income from Operations
Annuities 72.4 102.9 (30.5) (29.6%)
Life Insurance 70.1 66.5 3.6 5.4%
Reinsurance 17.2 28.2 (11.0) (39.0%)
Investment Management 3.5 9.9 (6.4) (64.6%)
Lincoln UK 10.1 10.6 (0.5) (4.7%)
Corporate & Other (30.1) (27.3) (2.8)
-------- -------- -------- --------
Total Income from Operations* 143.2 190.7 (47.5) (24.9%)
Realized gains (losses) on investments (23.8) (11.6) (12.2)
Gains (losses) on derivatives (0.4) 0.0 (0.4)
Restructuring charges 0.0 (40.5) 40.5
-------- -------- -------- --------
Income before Accounting Changes 119.1 138.6 (19.6)
Cumulative effect of accounting changes** 0.0 0.0 0.0
-------- -------- -------- --------
Net Income* 119.1 138.6 (19.5) (14.1%)
======== ======== ======== ========
Earnings per share (diluted)
Income from Operations* $0.74 $0.98 ($0.24) (24.5%)
Realized gain (losses) on investments ($0.13) ($0.06) ($0.07)
Gains (losses) on derivatives $0.00 $0.00 $0.00
Restructuring charges $0.00 ($0.21) $0.21
-------- -------- -------- --------
Income before Accounting Changes $0.61 $0.71 ($0.10)
Cumulative effect of accounting changes** $0.00 $0.00 -
-------- -------- -------- --------
Net Income* $0.61 $0.71 ($0.10) (14.1%)
======== ======== ======== ========
Inc. from Oper.- before Goodwill Amort.
Annuities 72.7 103.2 (30.5) (29.6%)
Life Insurance 76.0 72.4 3.6 5.0%
Reinsurance 17.7 28.6 (11.0) (38.3%)
Investment Management 7.5 14.0 (6.4) (46.2%)
Lincoln UK 10.3 11.8 (1.5) (12.7%)
Corporate & Other (30.1) (27.3) (2.8)
-------- -------- -------- --------
Total 154.1 202.7 (48.6) (24.0%)
======== ======== ======== ========
Earnings per share (diluted)
Inc. from Oper.- before Goodwill Amort. $0.79 $1.04 ($0.25) (24.0%)
Operating Revenue
Annuities 499.5 546.2 (46.7) (8.5%)
Life Insurance 468.9 452.4 16.5 3.6%
Reinsurance 467.4 457.9 9.4 2.1%
Investment Management 105.5 124.1 (18.7) (15.0%)
Lincoln UK 70.7 112.8 (42.1) (37.3%)
Corporate & Other 35.0 39.6 (4.6) (11.7%)
-------- -------- -------- --------
Total Operating Revenue 1646.9 1733.1 (86.2) (5.0%)
======== ======== ======== ========
Revenue (Including Investment Gains/Losses)
Annuities 478.2 532.1 (53.9) (10.1%)
Life Insurance 460.6 453.2 7.4 1.6%
Reinsurance 460.5 454.4 6.1 1.3%
Investment Management 104.7 123.8 (19.1) (15.4%)
Lincoln UK 76.3 112.8 (36.6) (32.4%)
Corporate & Other 29.0 39.7 (10.7) (27.0%)
-------- -------- -------- --------
Total Revenue 1609.3 1716.1 (106.8) (6.2%)
======== ======== ======== ========
Operational Data by Segment: (Billions)
Annuities Segment
Annuity Gross Deposits 1.580 1.242 0.338 27.2%
Annuity Net Cash Flows 0.261 (0.812) 1.073
Annuity Account Values 46.810 58.443 (11.633) (19.9%)
Life Insurance Segment
Life Insurance First Year Premium 0.134 0.145 (0.011) (7.6%)
Life Insurance In-force 227.751 211.308 16.443 7.8%
Life Insurance Account Values 10.939 10.716 0.223 2.1%
Reinsurance Segment
Individual Life In-force Sales 28.6 37.2 (8.6) (23.1%)
Reinsurance Life In-force 497.3 412.6 84.7 20.5%
Investment Management Segment
Retail Deposits 0.800 1.118 (0.318) (28.4%)
Retail Net Cash Flows (0.126) (0.326) 0.200
Institutional In-flows 0.883 0.715 0.168 23.5%
Institutional Net Cash Flows (0.155) (0.983) 0.828
Total Net Cash Flows (0.281) (1.309) 1.028
Assets Under Management 44.530 55.527 (10.996) (19.8%)
Assets Under Management - Insurance Assets 37.337 34.981 2.356 6.7%
Assets Under Management - Total Segment 81.867 90.508 (8.640) (9.5%)
Consolidated
Consolidated Domestic Retail Deposits 2.785 2.691 0.093 3.5%
Consolidated Domestic Retail Account Balances 74.509 90.893 (16.384) (18.0%)
Annuities & Investment Management Net Flows 0.162 (1.927) 2.089
Total Assets Under Management 117.462 136.271 (18.809) (13.8%)
Financial Highlights
Unaudited [Amounts in Millions, except Per Shares] (Continued)
For the Nine Months Ended September 30
2001 2000
Amount Amount Change % Change
-------- -------- -------- --------
Income from Operations
Annuities 245.5 275.6 (30.1) (10.9%)
Life Insurance 205.8 189.3 16.5 8.7%
Reinsurance 98.1 85.9 12.2 14.2%
Investment Management 9.6 35.4 (25.8) (72.9%)
Lincoln UK 40.7 45.5 (4.8) (10.5%)
Corporate & Other (109.8) (97.4) (12.4)
-------- -------- -------- --------
Total Income from Operations* 489.9 534.4 (44.5) (8.3%)
Realized gains (losses) on investments (48.6) (18.7) (29.9)
Gains (losses) on derivatives (0.2) 0.0 (0.2)
Restructuring charges (4.5) (43.2) 38.7
-------- -------- -------- --------
Income before Accounting Changes 436.6 472.5 (35.9)
Cumulative effect of accounting changes** (15.6) 0.0 (15.6)
-------- -------- -------- --------
Net Income* 421.0 472.5 (51.5) (10.9%)
======== ======== ======== ========
Earnings per share (diluted)
Income from Operations* $2.53 $2.74 ($0.21) (7.7%)
Realized gain (losses) on investments ($0.25) ($0.10) ($0.15)
Gains (losses) on derivatives $0.00 $0.00 $0.00
Restructuring charges ($0.02) ($0.22) $0.20
-------- -------- -------- --------
Income before Accounting Changes $2.26 $2.42 ($0.16)
Cumulative effect of accounting changes** ($0.08) $0.00 ($0.08)
-------- -------- -------- --------
Net Income* $2.18 $2.42 ($0.24) (9.9%)
======== ======== ======== ========
Inc. from Oper.- before Goodwill Amort.
Annuities 246.4 274.6 (28.2) (10.3%)
Life Insurance 223.6 207.1 16.5 7.9%
Reinsurance 99.5 87.2 12.2 14.0%
Investment Management 21.7 47.6 (25.9) (54.4%)
Lincoln UK 41.2 49.4 (8.2) (16.6%)
Corporate & Other (109.8) (97.4) (12.5)
-------- -------- -------- --------
Total 522.6 568.6 (46.0) (8.1%)
======== ======== ======== ========
Earnings per share (diluted)
Inc. from Oper.- before Goodwill Amort. $2.70 $2.92 ($0.22) (7.5%)
Operating Revenue
Annuities 1534.4 1620.8 (86.4) (5.3%)
Life Insurance 1402.2 1348.4 53.8 4.0%
Reinsurance 1433.8 1309.5 124.3 9.5%
Investment Management 329.9 374.0 (44.1) (11.8%)
Lincoln UK 222.0 334.4 (112.4) (33.6%)
Corporate & Other 60.6 119.2 (58.6) (49.2%)
-------- -------- -------- --------
Total Operating Revenue 4982.9 5106.3 (123.4) (2.4%)
======== ======== ======== ========
Revenue (Including Investment Gains/Losses)
Annuities 1500.7 1611.3 (110.6) (6.9%)
Life Insurance 1375.9 1339.1 36.8 2.7%
Reinsurance 1417.2 1306.1 111.2 8.5%
Investment Management 327.2 370.3 (43.1) (11.6%)
Lincoln UK 230.1 333.9 (103.8) (31.1%)
Corporate & Other 55.8 117.3 (61.5) (52.4%)
-------- -------- -------- --------
Total Revenue 4907.0 5078.0 (170.9) (3.4%)
======== ======== ======== ========
Operational Data by Segment: (Billions)
Annuities Segment
Annuity Gross Deposits 4.398 3.911 0.487 12.5%
Annuity Net Cash Flows (0.526) (2.193) 1.667
Annuity Account Values 46.810 58.443 (11.634) (19.9%)
Life Insurance Segment
Life Insurance First Year Premium 0.416 0.431 (0.015) (3.5%)
Life Insurance In-force 227.751 211.308 16.443 7.8%
Life Insurance Account Values 10.939 10.716 0.223 2.1%
Reinsurance Segment
Individual Life In-force Sales 87.8 104.3 (16.5) (15.8%)
Reinsurance Life In-force 497.3 412.6 84.7 20.5%
Investment Management Segment
Retail Deposits 2.778 3.505 (0.727) (20.7%)
Retail Net Cash Flows (0.334) (1.575) 1.241
Institutional In-flows 3.130 2.616 0.514 19.6%
Institutional Net Cash Flows (0.127) (4.651) 4.524
Total Net Cash Flows (0.461) (6.226) 5.765
Assets Under Management 44.530 55.527 (10.996) (19.8%)
Assets Under Management - Insurance Assets 37.337 34.981 2.356 6.7%
Assets Under Management - Total Segment 81.867 90.508 (8.640) (9.5%)
Consolidated
Consolidated Domestic Retail Deposits 8.017 8.427 (0.409) (4.9%)
Consolidated Domestic Retail Account Balances 74.509 90.893 (16.384) (18.0%)
Annuities & Investment Management Net Flows (0.820) (7.168) 6.348
Total Assets Under Management 117.462 136.271 (18.809) (13.8%)
* Income from operations and net income include special charges of $33.2 million after-tax
($51.1 million pre-tax) or $0.17 per share recorded in the 3rd quarter of 2001
related to the events of September 11, 2001.
** The cumulative effect of accounting changes relates to the adjustment recorded upon adoption
of FAS #133 in the 1st qtr. 2001 and the adjustment recorded upon the adoption of EITF 99-20
in the 2nd qtr. 2001.
9/30/01 PAGE 2
Financial Highlights
Unaudited [Amounts in Millions, except Per Share]
For the Quarter Ended September 30
2001 2000
Amount Amount Change % Change
-------- -------- -------- --------
Consolidated Operational Data: (Millions)
Balance Sheet Assets - End of Period 90206.0 103243.1 (13037.1) (12.6%)
Shareholders' Equity
Beg of Period (Securities at Market) 5055.9 4223.7 832.2
End of Period (Securities at Market) 5368.6 4538.6 830.0
End of Period (Securities at Cost) 5100.4 4876.3 224.1
Average Equity (Securities at Cost) 5085.0 4867.2 217.8
Return on Equity
Inc from Operations/Average Equity 11.3% 15.7% (4.4%)
Net Income/Average Equity 9.4% 11.4% (2.0%)
Return on Capital
Inc from Operations/Average Capital 9.7% 12.7% (3.0%)
Common Stock Outstanding
Average for the Period - Diluted 194.8 195.6 (0.8) (0.4%)
End of Period - Assuming Conv of Pref. 189.8 191.8 (2.0) (1.0%)
End of Period - Diluted 193.3 196.2 (2.9) (1.5%)
Book Value (Securities at Market) $28.29 $23.67 4.62 19.5%
Book Value (Securities at Cost) $26.87 $25.43 1.44 5.7%
Cash Returned to Shareholders
Share Repurchase - dollar amount 182.6 0.0 182.6
Dividends Declared to Shareholders 57.7 55.8 1.9
-------- -------- -------- --------
Total Cash Returned to Shareholders 240.3 55.8 184.5
======== ======== ======== ========
Share Repurchase - number of shares 4.084 0.000 4.084
Dividend Declared on Common
Stock - per share $0.305 $0.290 $0.015 5.2%
For the Quarter Ended September 30
Comprehensive Income 2001 2000
(millions) Amount Amount
-------- -------- -------- --------
Net Income 119.1 138.6
Foreign Currency Translation 22.2 (2.0)
Net Unrealized Gains (Losses)
on Securities 171.7 218.9
Gains (Losses) on Derivatives (6.6) 0.0
Cumulative Effect of
Accounting Change 0.0 0.0
-------- -------- -------- --------
Comprehensive Income 306.4 355.5
======== ======== ======== ========
Financial Highlights
Unaudited [Amounts in Millions, except Per Share] (Continued)
For the Nine Months Ended September 30
2001 2000
Amount Amount Change % Change
-------- -------- -------- --------
Consolidated Operational Data:
(Millions)
Balance Sheet Assets - End of Period 90206.0 103243.1 (13037.1) (12.6%)
Shareholders' Equity
Beg of Period (Securities at Market) 4954.1 4263.9 690.2
End of Period (Securities at Market) 5368.6 4538.6 830.0
End of Period (Securities at Cost) 5100.4 4876.3 224.1
Average Equity (Securities at Cost) 4986.3 4803.9 182.4
Return on Equity
Inc from Operations/Average Equity 13.1% 14.8% (1.7%)
Net Income/Average Equity 11.3% 13.1% (1.9%)
Return on Capital
Inc from Operations/Average Capital 11.0% 12.0% -1.0%
Common Stock Outstanding
Average for the Period - Diluted 193.5 194.9 (1.4) (0.7%)
End of Period - Assuming Conv of Pref. 189.8 191.8 (2.0) (1.0%)
End of Period - Diluted 193.3 196.2 (2.9) (1.5%)
Book Value (Securities at Market) $28.29 $23.67 4.62 19.5%
Book Value (Securities at Cost) $26.87 $25.43 1.44 5.7%
Cash Returned to Shareholders
Share Repurchase - dollar amount 369.5 158.3 211.2
Dividends Declared to Shareholders 171.9 165.9 6.0
Total Cash Returned to Shareholders 541.4 324.2 217.2
Share Repurchase - number of shares 8.384 5.109 3.275
Dividend Declared on Common
Stock - per share $0.915 $0.870 $0.045 5.2%
For the Nine Months Ended September 30
Comprehensive Income 2001 2000
(millions) Amount Amount
-------- -------- -------- --------
Net Income 421.0 472.5
Foreign Currency Translation (15.0) (10.2)
Net Unrealized Gains (Losses)
on Securities 235.9 128.0
Gains (Losses) on Derivatives 2.8 0.0
Cumulative Effect of
Accounting Change 17.6 0.0
------- -------
Comprehensive Income 662.3 590.3
======= =======
9/30/01 PAGE 3
Financial Highlights
Unaudited [Amounts in Millions]
For the Quarter Ended September 30 For the Nine Months Ended September 30
2001 2000 2001 2000
Amount Amount Change % Change Amount Amount Change % Change
------- ------- ------- ------- ------- ------- ------- --------
Consolidated Condensed Statements of Income
Revenue:
Insurance Premiums and Fees 821.6 882.0 (60.4) (6.9%) 2,568.5 2,571.9 (3.4) (0.1%)
Investment Advisory Fees 47.2 53.3 (6.1) (11.4%) 146.3 159.5 (13.2) (8.3%)
Net Investment Income 686.2 690.0 (3.8) (0.6%) 2,033.0 2,075.0 (42.0) (2.0%)
Realized Gains (Losses) on Investments (37.1) (17.0) (20.2) (75.5) (28.3) (47.2)
Gains (Losses) on Derivatives (0.4) - (0.4) (0.2) - (0.2)
Other 91.9 107.7 (15.8) (14.7%) 235.1 299.9 (64.8) (21.6%)
------- ------- ------- ------- ------- ------- ------- --------
Total Revenue 1,609.3 1,716.1 (106.8) (6.2%) 4,907.0 5,078.0 (170.9) (3.4%)
Benefits and Expenses:
Benefits 903.1 893.5 9.7 1.1% 2,664.8 2,636.4 28.4 1.1%
Underwriting, Acquisition,
Insurance and Other Expenses 556.5 632.3 (75.8) (12.0%) 1,667.8 1,793.6 (125.7) (7.0%)
------- ------- ------- ------- ------- ------- ------- --------
Total Benefits and Expenses 1,459.6 1,525.7 (66.1) (4.3%) 4,332.7 4,430.0 (97.4) (2.2%)
------- ------- ------- ------- ------- ------- ------- --------
Net Income
before Federal Taxes 149.6 190.4 (40.7) 574.4 648.0 (73.6) (11.4%)
Federal Income Taxes 30.6 51.8 (21.2) 137.9 175.5 (37.6) (21.4%)
------- ------- ------- ------- ------- ------- ------- --------
Income before Accounting Changes 119.1 138.6 (19.5) 436.5 472.5 (36.0)
Cumulative Effect of Accounting Changes - - - (15.6) - (15.6)
Net Income 119.1 138.6 (19.6) (14.1%) 421.0 472.5 (51.5) (10.9%)
======= ======= ======= ======= ======= ======= ======= ========
Income before Tax and Cumulative Effect
of Accounting Changes By Segment
Annuities 61.6 110.2 (48.6) 259.5 331.4 (71.9)
Life Insurance 99.9 106.2 (6.3) 289.9 291.2 (1.3)
Reinsurance 18.9 38.5 (19.6) 131.5 120.9 10.6
Investment Management 5.5 15.9 (10.4) 13.6 48.3 (34.7)
Lincoln UK 15.1 (39.0) 54.1 55.9 7.0 48.9
Corporate and Other (51.4) (41.4) (10.0) (176.0) (150.8) (25.2)
------- ------- ------- ------- ------- ------- ------- --------
Income before Tax and
Cumulative Effect of Accounting
Changes 149.6 190.4 (40.8) 574.4 648.0 (73.6)
Pre-Tax Realized Gains (Losses) by Segment*
Annuities (21.3) (14.1) (7.2) (33.6) (9.5) (24.1)
Life Insurance (8.2) 0.8 (9.0) (26.3) (9.3) (17.0)
Reinsurance (6.9) (3.5) (3.4) (16.5) (3.5) (13.0)
Investment Management (0.8) (0.4) (0.4) (2.6) (3.6) 1.0
Lincoln UK 5.5 - 5.5 8.1 (0.5) 8.6
Corporate and Other (5.9) 0.1 (6.0) (4.8) (1.9) (2.9)
------- ------- ------- ------- ------- ------- ------- --------
Pre-Tax Realized Gains (Losses)
on Investments and Derivatives (37.6) (17.0) (20.6) (75.8) (28.3) (47.5)
After-Tax Realized Gains (Losses) by Segment*
Annuities (13.8) (9.1) (4.7) (21.9) (6.2) (15.7)
Life Insurance (5.3) 1.0 (6.3) (17.1) (5.4) (11.7)
Reinsurance (4.5) (2.2) (2.3) (10.7) (2.1) (8.6)
Investment Management (0.5) (0.2) (0.3) (1.7) (2.4) 0.7
Lincoln UK 3.9 - 3.9 5.7 (0.4) 6.1
Corporate and Other (3.9) (1.0) (2.9) (3.1) (2.3) (0.8)
------- ------- ------- ------- ------- ------- ------- --------
After-Tax Realized Gains (Losses)
on Investments and Derivatives (24.1) (11.6) (12.5) (48.8) (18.7) (30.1)
* Includes both realized gains (losses) on investments and gains (losses) on derivatives.
9/30/01 PAGE 4
Financial Highlights
Unaudited [Amounts in Millions, except Retail Account Balances and Assets Managed]
As of
--------------------------------------------------------------------
September December
2001 2000
Amount Amount Change % Change
-------------- ------------- ------------- -------------
Consolidated Condensed Balance Sheets
Assets:
Investments:
Securities Available for Sale:
Fixed Maturities 28,931.6 27,449.8 1,481.8 5.4%
Equities 477.7 549.7 (72.0) (13.1%)
Mortgage Loans on Real Estate 4,663.1 4,663.0 0.1 0.0%
Real Estate 288.8 282.0 6.8 2.4%
Policy Loans 1,943.4 1,960.9 (17.5) (0.9%)
Other Long-Term Investments 483.4 463.3 20.2 4.4%
-------------- ------------- ------------- -------------
Total Investments 36,788.0 35,368.6 1,419.4 4.0%
Other Assets:
Assets Held in Separate Accounts 39,479.8 50,579.9 (11,100.1) (21.9%)
Other Assets 13,938.2 13,895.5 42.7 0.3%
-------------- ------------- ------------- -------------
Total Assets 90,206.0 99,844.1 (9,638.0) (9.7%)
============== ============= ============= =============
Liabilities and Shareholders' Equity
Liabilities:
Insurance and Investment Contract Liabilities 40,961.0 40,105.2 855.8 2.1%
Liabilities Related to Separate Accounts 39,479.8 50,579.9 (11,100.1) (21.9%)
Other Liabilities 4,396.6 4,204.9 191.7 4.6%
-------------- ------------- ------------- -------------
Total Liabilities 84,837.4 94,890.0 (10,052.6) (10.6%)
Shareholders' Equity:
Net Unrealized Gains(Losses) on Securities 268.2 12.0 256.2 2126.5%
Other Shareholders' Equity 5,100.4 4,942.0 158.4 3.2%
-------------- ------------- ------------- -------------
Total Shareholders' Equity 5,368.6 4,954.1 414.6 8.4%
-------------- ------------- ------------- -------------
Total Liabilities and Shareholders' Equity 90,206.0 99,844.1 (9,638.0) (9.7%)
============== ============= ============= =============
As of September 30
---------------------------------------------------------------------
($ billions) 2001 2000
Amount Amount Change % Change
-------------- ------------- ------------- -------------
Domestic Retail Account Balances:
Annuities Segment - Fixed Annuities 16.303 15.700 0.603 3.8%
Annuities Segment - Variable Annuities 30.506 42.743 (12.237) (28.6%)
Annuities Segment - Life Insurance 0.134 0.166 (0.032) (19.3%)
Life Insurance Segment - Life Insurance 10.939 10.716 0.222 2.1%
Investment Management - Annuities 10.665 14.824 (4.159) (28.1%)
Investment Management - Mutual Funds 10.301 14.102 (3.801) (27.0%)
Investment Management - Wrap Fee & Other 1.684 1.285 0.399 31.1%
Consolidating Adjustments (6.023) (8.644)
-------------- ------------- ------------- -------------
Total Domestic Account Balance 74.509 90.893 (16.384) (18.0%)
============== ============= ============= =============
Assets Managed by Advisor:
Investment Management Segment 81.867 90.508 (8.641) (9.5%)
Lincoln UK 6.474 7.838 (1.364) (17.4%)
Policy Loans (within business units) 1.943 1.936 0.008 0.4%
Non-LNC Affiliates 27.177 35.989 (8.812) (24.5%)
-------------- ------------- ------------- -------------
Total Assets Managed 117.462 136.271 (18.809) (13.8%)
============== ============= ============= =============
9/30/01 PAGE 5
Eleven-Year Summary
Unaudited [Millions of Dollars except Per Share Data]
For the Year Ended December 31 2000 1999 1998 1997 1996 1995
------ ------ ------ ------ ------ ------
Revenue
Annuities 2133.7 2115.8 2068.1 2023.0 1805.0 1877.1
Life Insurance 1819.0 1760.4 1378.5 544.8 549.2 514.9
Reinsurance 1769.3 1829.7 1577.7 1387.5 1561.8 1417.4
Investment Management 490.3 495.5 491.9 459.1 410.5 290.5
Lincoln UK 438.2 446.6 439.7 427.3 393.2 351.5
Employee Life - Health Benefits
Corporate & Other 201.1 155.7 131.1 56.8 13.8 135.1
------ ------ ------ ------ ------ ------
Total Revenue 6851.5 6803.7 6087.1 4898.5 4733.6 4586.5
====== ====== ====== ====== ====== ======
Income from Operations*
Annuities 362.0 299.4 262.4 223.0 174.6 175.2
Life Insurance 259.9 212.0 149.2 39.9 41.2 35.4
Reinsurance 122.5 40.1 104.9 (150.1) 74.8 (70.5)
Investment Management 44.1 61.0 43.9 18.1 18.6 20.6
Lincoln UK 61.0 (13.9) 70.9 (108.3) 66.0 45.9
Employee Life - Health Benefits
Corporate & Other (130.5) (123.2) (100.9) (73.2) (76.5) (65.7)
------ ------ ------ ------ ------ ------
Total Income from Cont Oper 719.1 475.5 530.4 (50.6) 298.8 140.8
Discontinued Operations 110.1 135.3 165.6
------ ------ ------ ------ ------ ------
Income from Operations 719.1 475.5 530.4 59.4 434.1 306.5
====== ====== ====== ====== ====== ======
Net Income
Annuities 358.6 291.5 273.8 263.3 204.3 248.8
Life Insurance 249.3 211.5 127.5 39.1 51.8 40.6
Reinsurance 122.3 40.6 102.3 (133.8) 86.8 (59.6)
Investment Management 37.0 51.6 44.4 25.1 25.0 27.4
Lincoln UK (13.2) (18.2) 71.7 (106.8) 66.0 45.7
Employee Life - Health Benefits
Corporate & Other (132.5) (116.7) (109.9) (64.6) (77.5) (1.4)
------ ------ ------ ------ ------ ------
Total Net Inc from Cont Oper 621.4 460.4 509.8 22.2 356.4 301.4
Discontinued Operations 911.8 157.2 180.8
====== ====== ====== ====== ====== ======
Total Net Income 621.4 460.4 509.8 934.0 513.6 482.2
====== ====== ====== ====== ====== ======
OTHER DATA
Assets 99844.1 103095.7 93836.3 77174.7 71713.4 63257.7
Shareholders' Equity:
Securities and Derivatives at Market 4954.1 4263.9 5387.9 4982.9 4470.0 4378.1
Securities and Derivatives at Cost 4942.0 4729.6 4835.6 4546.9 4057.1 3679.9
Average Equity (Sec & Deriv at Cost) 4831.9 4818.7 4685.6 4214.1 3866.0 3550.5
Common Shares Outstanding: (millions)
End of Period - Diluted 195.2 197.0 203.4 204.7 209.5 210.3
Average for the Period - Diluted 194.9 200.4 203.3 208.0 210.7 209.5
Per Share Data (Diluted)
Income (Loss) from Continuing Operations $3.69 $2.37 $2.61 ($0.24) $1.42 $0.67
Income from Operations * $3.69 $2.37 $2.61 $0.29 $2.06 $1.46
Net Income from Continuing Operations $3.19 $2.30 $2.51 $0.11 $1.69 $1.44
Net Income $3.19 $2.30 $2.51 $4.49 $2.44 $2.30
Shareholders' Equity:
Shareholders' Equity (Sec & Deriv at Market) $25.92 $21.76 $26.59 $24.63 $21.50 $20.95
Shareholders' Equity (Sec & Deriv at Cost) $25.85 $24.14 $23.86 $22.48 $19.51 $17.61
Dividends Declared (Common Stock) $1.175 $1.115 $1.055 $0.995 $0.935 $0.875
Return on Equity (see page 32)
Net Income/Average Equity 12.9% 9.6% 10.9% 22.2% 13.3% 13.6%
Inc from Operations/Average Equity 14.9% 9.9% 11.3% 1.4% 11.2% 8.6%
Market Value of Common Stock
High for the Year $56.375 $57.500 $49.438 $39.063 $28.500 $26.875
Low for the Year $22.625 $36.000 $33.500 $24.500 $20.375 $17.313
Close for the Year $47.313 $40.000 $40.907 $39.063 $26.250 $26.875
Eleven-Year Summary
Unaudited [Millions of Dollars except Per Share Data]
Ten-year
compound
For the Year Ended December 31 1994 1993 1992 1991 1990 annual growth
------ ------ ------ ------ ------ -------------
Revenue
Annuities 1506.2 1603.8 1336.2 1216.7 1073.7 7.1%
Life Insurance 466.2 477.5 444.4 417.3 371.7 17.2%
Reinsurance 1267.4 1101.9 1074.6 774.3 741.6 9.1%
Investment Management
Lincoln UK 216.0 174.9 180.6 169.6 161.1 10.5%
Employee Life - Health Benefits 314.9 1297.3 1241.6 2646.3 2454.2
Corporate & Other 161.8 281.7 464.7 300.4 173.2
------ ------ ------ ------ ------ ------
Total Revenue 3932.5 4937.1 4742.1 5524.6 4975.5 3.3%
====== ====== ====== ====== ====== ======
Income from Operations*
Annuities 142.4 127.1 89.4 58.3 55.2 20.7%
Life Insurance 34.2 37.8 46.8 31.5 25.9 25.9%
Reinsurance 51.6 22.4 38.7 31.4 55.7 14.0%
Investment Management
Lincoln UK 17.2 11.9 9.2 14.3 13.3 27.0%
Employee Life - Health Benefits 14.1 54.3 40.8 43.5 53.2
Corporate & Other (40.9) (55.9) (73.0) (70.7) (90.4)
------ ------ ------ ------ ------ ------
Total Income from Cont Oper 218.6 197.6 151.9 108.3 112.9 21.7%
Discontinued Operations 171.1 145.9 88.7 69.4 100.9
------ ------ ------ ------ ------ ------
Income from Operations 389.7 343.5 240.6 177.7 213.8 12.9%
====== ====== ====== ====== ====== ======
Net Income
Annuities 142.4 127.1 89.4 58.3 55.2 20.6%
Life Insurance 34.2 37.8 46.8 31.5 25.9 25.4%
Reinsurance 52.2 20.7 38.7 31.4 55.7 8.2%
Investment Management
Lincoln UK 18.5 12.6 9.2 14.3 13.3
Employee Life - Health Benefits 14.4 55.3 40.8 43.5 53.2
Corporate & Other (96.2) (177.1) 45.6 (46.5) (127.6)
------ ------ ------ ------ ------ ------
Total Net Inc from Cont Oper 165.5 76.4 270.5 132.5 75.7 23.4%
Discontinued Operations 184.4 242.5 88.7 69.4 100.9
------ ------ ------ ------ ------ ------
Total Net Income 349.9 318.9 359.2 201.9 176.6 13.4%
====== ====== ====== ====== ====== ======
OTHER DATA
Assets 48864.8 47825.1 39042.2 33660.3 27597.3 13.7%
Shareholders' Equity:
Securities and Derivatives at Market 3042.1 4072.3 2826.8 2655.8 2279.5 8.1%
Securities and Derivatives at Cost 3353.1 3157.6 2664.1 2445.8 2213.2 8.4%
Average Equity (Sec & Deriv at Cost) 3288.6 3009.0 2575.0 2335.3 2086.6 8.8%
Common Shares Outstanding: (millions)
End of Period - Diluted 208.3 208.3 187.7 185.4 176.3
Average for the Period - Diluted 208.7 206.1 186.8 189.2 175.2
Per Share Data (Diluted)
Income (Loss) from Continuing Operations $1.05 $0.96 $0.81 $0.57 $0.64 19.1%
Income from Operations * $1.87 $1.67 $1.29 $0.94 $1.22 11.7%
Net Income from Continuing Operations $0.79 $0.37 $1.45 $0.70 $0.43 22.1%
Net Income $1.68 $1.55 $1.92 $1.07 $1.01 12.2%
Shareholders' Equity:
Shareholders' Equity (Sec & Deriv at Market) $14.67 $19.69 $15.13 $14.35 $12.95 7.2%
Shareholders' Equity (Sec & Deriv at Cost) $16.17 $15.27 $14.26 $13.21 $12.57 7.5%
Dividends Declared (Common Stock) $0.830 $0.775 $0.738 $0.693 $0.658 6.0%
Return on Equity (see page 32)
Net Income/Average Equity 10.6% 10.6% 13.9% 8.6% 8.5%
Inc from Operations/Average Equity 11.8% 11.4% 9.3% 7.6% 10.2%
Market Value of Common Stock
High for the Year $22.188 $24.125 $19.032 $13.813 $15.338
Low for the Year $17.313 $17.344 $12.625 $9.500 $7.688
Close for the Year $17.500 $21.750 $18.500 $13.688 $10.750 16.0%
* "Income from Operations" is defined as "Net income less realized gain
(loss) on investments and associated items, gain (loss) on sale of
subsidiaries, restructuring charges, and cumulative effect of accounting
changes, all net of taxes."
9/30/01 PAGE 6
Quarterly Summary
Unaudited [Millions of Dollars except Per Share Data]
Dec Mar Jun Sep Dec Mar
For the Quarter Ended 1998 1999 1999 1999 1999 2000
------ ------ ------ ------ ------ ------
Revenue
Annuities 512.9 524.4 533.0 520.5 538.0 548.7
Life Insurance 470.7 424.0 426.3 437.1 473.1 441.7
Reinsurance 457.2 420.6 426.2 404.1 578.8 394.4
Investment Management 127.9 126.8 123.2 118.8 126.6 125.8
Lincoln UK 109.2 119.1 113.1 110.5 103.8 112.8
Corporate & Other 35.9 60.4 56.6 51.1 (12.4) 45.7
------ ------ ------ ------ ------ ------
Total Revenue 1714.0 1675.4 1678.3 1642.1 1807.9 1669.2
------ ------ ------ ------ ------ ------
Income from Operations*
Annuities 63.2 74.4 75.9 75.4 73.7 88.5
Life Insurance 51.9 48.1 54.4 52.6 57.0 60.4
Reinsurance 25.3 33.8 23.7 2.2 (19.5) 31.9
Investment Management 14.6 15.4 14.3 14.7 16.5 12.4
Lincoln UK 18.8 18.1 19.0 16.2 (67.1) 15.7
Corporate & Other (34.3) (34.0) (35.6) (29.7) (23.9) (38.3)
------ ------ ------ ------ ------ ------
Income from Operations 139.4 155.7 151.8 131.4 36.6 170.6
------ ------ ------ ------ ------ ------
Net Income
Annuities 64.9 76.8 76.4 68.4 69.9 91.2
Life Insurance 45.8 46.3 51.5 54.0 59.7 58.1
Reinsurance 23.9 34.5 24.0 (0.7) (17.1) 33.1
Investment Management 16.4 3.4 14.0 14.4 19.8 12.3
Lincoln UK 19.2 18.0 20.0 16.4 (72.6) 15.5
Corporate & Other (44.6) (33.9) (37.6) (20.2) (25.1) (39.9)
------ ------ ------ ------ ------ ------
Total Net Income 125.6 145.1 148.4 132.3 34.6 170.2
====== ====== ====== ====== ====== ======
OTHER DATA
Assets 93836.3 95350.3 98261.4 96500.7 103095.7 106340.0
Shareholders' Equity
Beg of Period (Sec & Deriv at Market) 5527.6 5387.9 5107.4 4817.4 4662.2 4263.9
End of Period (Sec & Deriv at Market) 5387.9 5107.4 4817.4 4662.2 4263.9 4340.4
End of Period (Sec & Deriv at Cost) 4835.6 4852.8 4818.5 4766.0 4729.6 4751.6
Average Equity (Sec & Deriv at Cost) 4795.4 4872.5 4834.2 4793.9 4774.2 4791.5
Common Shares Outstanding
Average for the Period - Diluted 203.3 203.6 201.9 199.0 197.1 195.8
End of Period - Diluted 203.4 203.2 200.9 196.9 197.0 195.1
Per Share Data (Diluted)
Income from Operations * $0.69 $0.76 $0.75 $0.66 $0.19 $0.87
Net Income $0.62 $0.71 $0.73 $0.66 $0.18 $0.87
Shareholders' Equity
Shareholders' Equity (Sec & Deriv at Market) $26.59 $25.30 $24.18 $23.76 $21.76 $22.45
Shareholders' Equity (Sec & Deriv at Cost) $23.86 $24.04 $24.18 $24.28 $24.14 $24.58
Dividends Declared (Com Stk) $0.275 $0.275 $0.275 $0.275 $0.290 $0.290
Return on Equity (see page 32)
Net Income/Average Equity 10.5% 11.9% 12.3% 11.0% 2.9% 14.2%
Inc from Operations/Average Equity 11.6% 12.8% 12.6% 11.0% 3.1% 14.2%
Market Value of Common Stock
Highest Price $43.344 $50.250 $53.438 $57.500 $48.313 $41.375
Lowest Price $33.500 $39.281 $45.688 $36.000 $36.500 $22.625
Closing Price $40.906 $49.438 $52.313 $37.563 $40.000 $33.500
Quarterly Summary (continued)
Unaudited [Millions of Dollars except Per Share Data]
Jun Sep Dec Mar Jun Sep
For the Quarter Ended 2000 2000 2000 2001 2001 2001
------ ------ ------ ------ ------ ------
Revenue
Annuities 530.5 532.1 522.3 510.4 512.1 478.2
Life Insurance 444.2 453.2 479.9 459.6 455.7 460.6
Reinsurance 457.2 454.4 463.2 508.0 448.7 460.5
Investment Management 120.7 123.8 120.0 112.3 110.3 104.7
Lincoln UK 108.2 112.8 104.3 84.9 68.9 76.3
Corporate & Other 31.9 39.7 83.8 23.5 3.3 29.0
------ ------ ------ ------ ------ ------
Total Revenue 1692.7 1716.1 1773.5 1698.8 1599.0 1609.3
------ ------ ------ ------ ------ ------
Income from Operations*
Annuities 84.1 102.9 86.4 82.3 90.8 72.4
Life Insurance 62.4 66.5 70.6 68.6 67.1 70.1
Reinsurance 25.8 28.2 36.6 46.8 34.1 17.2
Investment Management 13.1 9.9 8.7 2.4 3.7 3.5
Lincoln UK 19.3 10.6 15.5 14.4 16.2 10.1
Corporate & Other (31.7) (27.3) (33.1) (35.9) (43.8) (30.1)
------ ------ ------ ------ ------ ------
Income from Operations 173.0 190.7 184.7 178.6 168.1 143.2
------ ------ ------ ------ ------ ------
Net Income
Annuities 84.4 93.8 89.2 76.6 79.9 58.6
Life Insurance 58.4 67.4 65.4 62.9 53.5 64.7
Reinsurance 24.7 26.0 38.5 42.0 30.2 12.8
Investment Management 8.4 9.7 6.6 2.0 2.9 2.9
Lincoln UK 19.1 (29.9) (17.9) 14.8 17.6 14.0
Corporate & Other (31.4) (28.3) (32.8) (38.1) (42.4) (33.9)
------ ------ ------ ------ ------ ------
Total Net Income 163.6 138.6 148.9 160.2 141.7 119.1
====== ====== ====== ====== ====== ======
OTHER DATA
Assets 103847.6 103243.1 99844.1 94122.4 96431.2 90206.0
Shareholders' Equity
Beg of Period (Sec & Deriv at Market) 4340.4 4223.7 4538.6 4954.1 5096.4 5055.9
End of Period (Sec & Deriv at Market) 4223.7 4538.6 4954.1 5096.4 5055.9 5368.6
End of Period (Sec & Deriv at Cost) 4780.3 4876.3 4942.0 4882.7 4952.8 5100.4
Average Equity (Sec & Deriv at Cost) 4753.0 4867.2 4915.7 4953.7 4920.2 5085.0
Common Shares Outstanding
Average for the Period - Diluted 194.0 195.6 195.6 193.7 192.0 194.8
End of Period - Diluted 193.7 196.2 195.2 191.3 192.9 193.3
Per Share Data (Diluted)
Income from Operations * $0.89 $0.98 $0.94 $0.92 $0.88 $0.74
Net Income $0.84 $0.71 $0.76 $0.83 $0.74 $0.61
Shareholders' Equity
Shareholders' Equity (Sec & Deriv at Market) $22.10 $23.67 $25.92 $27.09 $26.87 $28.29
Shareholders' Equity (Sec & Deriv at Cost) $25.01 $25.43 $25.85 $25.96 $26.32 $26.87
Dividends Declared (Com Stk) $0.290 $0.290 $0.305 $0.305 $0.305 $0.305
Return on Equity (see page 32)
Net Income/Average Equity 13.8% 11.4% 12.1% 12.9% 11.5% 9.4%
Inc from Operations/Average Equity 14.6% 15.7% 15.0% 14.4% 13.7% 11.3%
Market Value of Common Stock
Highest Price $40.063 $56.375 $50.938 $48.250 $52.300 $52.750
Lowest Price $29.000 $35.625 $40.875 $38.000 $41.280 $41.000
Closing Price $36.125 $48.125 $47.313 $42.470 $51.750 $46.630
* "Income from Operations" is defined as "net income less realized gain (loss) on investments and associated items,
gain (loss) on sale of subsidiaries, restructuring charges, and cumulative effect of accounting changes,
all net of taxes."
9/30/2001 PAGE 7
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Quarter Ended September 30 Annuities Life Insurance Reinsurance Management
--------------- --------------- --------------- ---------------
Sep Sep Sep Sep Sep Sep Sep Sep
2001 2000 2001 2000 2001 2000 2001 2000
----- ----- ----- ----- ----- ----- ----- -----
Operating Revenue
Life and annuity premiums 13.2 18.0 46.4 50.9 265.9 238.9
Surrender charges 6.5 10.4 15.6 13.8 0.6 0.9
Mortality assessments 124.7 116.3 0.0 0.0
Expense assessments 132.0 163.4 46.0 46.9 (0.0) (0.0)
Health premiums 0.0 0.0 103.3 116.5
Investment advisory fees 68.0 79.4
Other revenue and fees 1.2 4.6 3.0 3.8 19.6 22.9 23.9 26.4
Net investment income 346.6 349.8 233.2 220.6 77.5 78.5 13.6 18.3
Earnings in Unconsolidated Affiliates 0.4 0.2
----- ----- ----- ----- ----- ----- ----- -----
Operating Revenue 499.5 546.2 468.9 452.4 467.4 457.9 105.5 124.1
----- ----- ----- ----- ----- ----- ----- -----
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 66.3 68.4 102.3 95.8 235.6 178.0
Div accum & div to policyholders 16.5 16.4 1.5 1.8
Interest credited to policy bal. 217.2 205.4 143.5 134.0 8.7 12.8
Health policy benefits 0.0 0.0 81.6 119.7
Underwriting, acquisition,
insurance and other expenses 132.8 147.9 92.5 94.9 111.7 100.1 95.1 103.9
Goodwill amortization 0.3 0.3 5.9 5.9 0.5 0.4 4.1 4.1
Interest 1.9 3.0 0.0
----- ----- ----- ----- ----- ----- ----- -----
Operating Benefits and Expenses 416.6 421.9 360.8 347.0 441.6 415.9 99.2 107.9
----- ----- ----- ----- ----- ----- ----- -----
Income from Operations Before Tax 82.9 124.2 108.1 105.4 25.8 42.0 6.3 16.2
Federal income taxes 10.4 21.3 38.1 38.9 8.6 13.8 2.9 6.3
----- ----- ----- ----- ----- ----- ----- -----
Income from Operations 72.4 102.9 70.1 66.5 17.2 28.2 3.5 9.9
----- ----- ----- ----- ----- ----- ----- -----
Restructuring charges
Realized gains (losses) on investments (13.5) (9.1) (5.3) 1.0 (4.4) (2.2) (0.5) (0.2)
Gains (losses) on derivatives (0.3) (0.0) (0.1)
----- ----- ----- ----- ----- ----- ----- -----
Income before Accounting Changes 58.6 93.8 64.7 67.4 12.8 26.0 2.9 9.7
Cumulative effect of accounting changes
----- ----- ----- ----- ----- ----- ----- -----
Net Income 58.6 93.8 64.7 67.4 12.8 26.0 2.9 9.7
===== ===== ===== ===== ===== ===== ===== =====
Inc. from Oper.-before Goodwill Amort. 72.7 103.2 76.0 72.4 17.7 28.6 7.5 14.0
----- ----- ----- ----- ----- ----- ----- -----
Corporate and Consolidating
Lincoln UK Other Operations Adjustments Consolidated
--------------- --------------- --------------- ---------------
Sep Sep Sep Sep Sep Sep Sep Sep
2001 2000 2001 2000 2001 2000 2001 2000
----- ----- ----- ----- ----- ----- ----- -----
Operating Revenue
Life and annuity premiums 11.2 31.2 336.8 339.0
Surrender charges 0.5 0.7 23.2 25.9
Mortality assessments 8.5 9.6 133.3 125.9
Expense assessments 35.5 52.6 0.0 10.9 10.5 224.4 273.4
Health premiums 0.6 1.3 0.0 0.0 103.9 117.9
Investment advisory fees (20.8) (26.1) 47.2 53.3
Other revenue and fees 0.0 2.0 72.1 84.8 (28.3) (38.5) 91.5 106.0
Net investment income 14.8 16.1 24.2 23.0 (23.6) (16.3) 686.2 690.0
Earnings in Unconsolidated Affiliates 1.4 0.4 1.6
----- ----- ----- ----- ----- ----- ----- -----
Operating Revenue 70.7 112.8 96.2 109.2 (61.3) (69.6) 1646.9 1733.1
----- ----- ----- ----- ----- ----- ------ ------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 18.5 48.1 422.6 390.2
Div accum & div to policyholders 18.0 18.2
Interest credited to policy bal. 9.3 9.9 378.7 362.0
Health policy benefits 2.2 3.9 0.0 (0.6) 83.8 123.0
Underwriting, acquisition,
insurance and other expenses 40.3 45.2 90.4 96.8 (46.9) (56.5) 516.0 532.4
Goodwill amortization 0.2 1.2 0.0 (0.0) 10.9 12.0
Interest 51.3 54.3 (23.6) (23.0) 29.6 34.4
----- ----- ----- ----- ----- ----- ----- -----
Operating Benefits and Expenses 61.1 98.3 141.7 150.6 (61.3) (69.6) 1459.6 1472.2
----- ----- ----- ----- ----- ----- ------ ------
Income from Operations Before Tax 9.6 14.5 (45.5) (41.5) 0.0 0.0 187.3 260.8
Federal income taxes (0.5) 3.9 (15.4) (14.2) 44.1 70.1
----- ----- ----- ----- ----- ----- ----- -----
Income from Operations 10.1 10.6 (30.1) (27.3) 0.0 0.0 143.2 190.7
Restructuring charges (40.5) 0.0 0.0 (40.5)
Realized gains (losses) on investments 3.9 (0.0) (2.9) (0.0) (1.0) (1.0) (23.8) (11.6)
Gains (losses) on derivatives 0.0 (0.4)
----- ----- ----- ----- ----- ----- ----- -----
Income before Accounting Changes 14.0 (29.9) (33.0) (27.3) (1.0) (1.0) 119.1 138.6
Cumulative effect of accounting changes
----- ----- ----- ----- ----- ----- ----- -----
Net Income 14.0 (29.9) (33.0) (27.3) (1.0) (1.0) 119.1 138.6
===== ===== ===== ===== ===== ===== ===== =====
Inc. from Oper.-before Goodwill Amort. 10.3 11.8 (30.1) (27.3) 154.1 202.7
----- ----- ----- ----- ----- ----- ----- -----
9/30/01 PAGE 7A
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Nine Months Ended September 30 Annuities Life Insurance Reinsurance Management
----------------- ----------------- --------------- ----------------
Sep Sep Sep Sep Sep Sep Sep Sep
2001 2000 2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 64.8 48.1 147.9 160.1 847.8 695.4
Surrender charges 24.0 32.7 46.3 46.5 1.8 2.9
Mortality assessments 373.8 343.0 0.1 0.0
Expense assessments 411.5 474.1 138.6 136.3 (0.0) (0.0)
Health premiums 0.1 0.1 302.4 316.0
Investment advisory fees 213.3 240.6
Other revenue and fees 6.7 7.5 11.9 10.6 45.9 50.6 75.9 89.4
Net investment income 1027.3 1058.5 683.6 651.8 234.5 243.2 40.8 43.9
Earnings in Unconsolidated Affiliates 1.3 1.5
------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue 1534.4 1620.8 1402.2 1348.4 1433.8 1309.5 329.9 374.0
------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 208.6 195.7 305.7 290.4 646.6 516.9
Div accum & div to policyholders 53.1 55.5 4.0 4.6
Interest credited to policy bal. 636.3 652.9 423.0 388.9 26.6 30.3
Health policy benefits 0.0 0.1 268.7 346.5
Underwriting, acquisition,
insurance and other expenses 393.4 432.3 283.3 295.3 331.3 277.4 301.5 305.7
Goodwill amortization 0.9 (0.9) 17.8 17.8 1.4 1.3 12.2 12.2
Interest 7.1 8.0 0.0
------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1239.3 1280.0 1082.9 1047.9 1285.7 1185.1 313.6 317.9
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 295.1 340.9 319.3 300.5 148.1 124.4 16.2 56.1
Federal income taxes 49.6 65.3 113.5 111.1 50.0 38.5 6.7 20.7
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations 245.5 275.6 205.8 189.3 98.1 85.9 9.6 35.4
------- ------- ------- ------- ------- ------- ------- -------
Restructuring charges (1.3) (2.0) (2.7)
Realized gains (losses) on investments (21.6) (6.2) (17.2) (5.4) (10.7) (2.1) (1.7) (2.4)
Gains (losses) on derivatives (0.3) 0.1 (0.0)
------- ------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 222.4 269.4 186.7 183.9 87.4 83.8 7.9 30.4
Cumulative effect of accounting changes (7.3) (5.5) (2.4) (0.1)
------- ------- ------- ------- ------- ------- ------- -------
Net Income 215.1 269.4 181.2 183.9 85.0 83.8 7.8 30.4
======= ======= ======= ======= ======= ======= ======= =======
Inc. from Oper.-before Goodwill Amort. 246.4 274.6 223.6 207.1 99.5 87.2 21.7 47.6
------- ------- ------- ------- ------- ------- ------- -------
Corporate and Consolidating
Lincoln UK Other Operations Adjustments Consolidated
----------------- ----------------- --------------- ----------------
Sep Sep Sep Sep Sep Sep Sep Sep
2001 2000 2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 32.2 103.7 1092.8 1007.2
Surrender charges 1.7 2.3 73.8 84.4
Mortality assessments 26.8 23.9 400.7 366.9
Expense assessments 110.7 143.5 0.0 36.0 39.2 696.8 793.1
Health premiums 2.0 4.2 0.0 0.0 304.5 320.4
Investment advisory fees (67.0) (81.2) 146.3 159.5
Other revenue and fees 0.7 5.6 215.2 262.9 (122.5) (125.7) 233.8 300.9
Net investment income 49.6 53.6 70.2 68.5 (72.9) (44.5) 2033.0 2075.0
Earnings in Unconsolidated Affiliates (2.4) 1.3 (1.0)
------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue 222.0 334.4 285.4 329.0 (224.7) (209.9) 4982.9 5106.3
------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 54.1 113.4 1215.1 1116.4
Div accum & div to policyholders 57.2 60.1
Interest credited to policy bal. 29.5 30.6 1115.4 1102.7
Health policy benefits 8.4 11.0 (0.1) (0.4) 277.1 357.2
Underwriting, acquisition,
insurance and other expenses 111.1 145.1 297.2 315.6 (185.6) (175.8) 1532.2 1595.6
Goodwill amortization 0.5 3.9 0.0 (0.0) 32.6 34.2
Interest 161.9 165.8 (72.9) (67.7) 96.1 106.1
------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 174.1 273.4 459.1 481.0 (229.1) (212.9) 4325.7 4372.4
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 47.8 61.1 (173.7) (152.0) 4.4 3.1 657.2 734.0
Federal income taxes 7.1 15.5 (60.9) (51.5) 1.3 (0.0) 167.3 199.6
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations 40.7 45.5 (112.8) (100.5) 3.0 3.1 489.9 534.4
------- ------- ------- ------- ------- ------- ------- -------
Restructuring charges (40.5) (1.2) (4.5) (43.2)
Realized gains (losses) on investments 5.7 (0.4) (2.9) 9.2 (0.2) (11.5) (48.6) (18.7)
Gains (losses) on derivatives (0.2)
------- ------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 46.4 4.7 (116.9) (91.3) 2.8 (8.4) 436.6 472.5
Cumulative effect of accounting changes (0.3) (15.6)
------- ------- ------- ------- ------- ------- ------- -------
Net Income 46.4 4.7 (117.2) (91.3) 2.8 (8.4) 421.0 472.5
======= ======= ======= ======= ======= ======= ======= =======
Inc. from Oper.-before Goodwill Amort. 41.2 49.4 (112.8) (100.4) 3.0 3.1 522.6 568.6
------- ------- ------- ------- ------- ------- ------- -------
PAGE 8
Statement of Consolidated Income
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1996 1997 1998 1999 2000 2000 2001
------ ------ ------ ------ ------ ------ ------
Operating Revenue
Life and annuity premiums 728.7 756.2 985.6 1183.0 1403.3 1007.2 1092.8
Surrender charges 40.9 45.4 91.5 110.2 114.7 84.4 73.8
Mortality assessments 180.8 186.4 380.1 496.4 496.5 366.9 400.7
Expense assessments 491.8 600.3 803.0 930.9 1050.2 793.1 696.8
Health premiums 790.4 572.6 635.1 698.5 409.8 320.4 304.5
Investment advisory fees 180.8 204.9 227.1 223.8 213.1 159.5 146.3
Other revenue and fees 138.2 157.3 261.0 344.5 445.4 300.9 233.8
Net investment income 2087.9 2250.8 2681.4 2807.5 2747.1 2075.0 2033.0
Earnings in Unconsolidated Affiliates 1.4 2.1 3.3 5.8 (0.4) (1.0) 1.3
------ ------ ------ ------ ------ ------ ------
Operating Revenue 4641.1 4775.9 6068.0 6800.7 6879.8 5106.3 4982.9
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 835.7 1090.2 1237.7 1546.6 1546.4 1116.4 1215.1
Div accum & div to policyholders 33.4 29.7 78.0 88.4 87.6 60.1 57.2
Interest credited to policy bal. 1167.2 1238.7 1446.2 1510.4 1474.2 1102.7 1115.4
Health policy benefits 673.6 833.1 566.9 659.7 449.0 357.2 277.1
Underwriting, acquisition,
insurance and other expenses 1417.0 1557.3 1844.2 2218.5 2168.4 1595.6 1532.2
Goodwill amortization 13.9 15.6 44.5 49.2 45.1 34.2 32.6
Interest 84.7 92.5 117.1 133.7 139.5 106.1 96.1
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 4225.4 4857.2 5334.6 6206.4 5910.3 4372.4 4325.7
------ ------ ------ ------ ------ ------ ------
Income from Operations Before Tax 415.7 (81.3) 733.4 594.4 969.6 734.0 657.2
Federal income taxes 116.9 (30.6) 203.0 118.9 250.5 199.6 167.3
------ ------ ------ ------ ------ ------ ------
Income from Continuing Operations 298.8 (50.6) 530.4 475.5 719.1 534.4 489.9
------ ------ ------ ------ ------ ------ ------
Discontinued Operations 157.2 911.8
Restructuring charges (34.3) (18.9) (80.2) (43.2) (4.5)
Realized gains (losses) on investments 57.6 72.9 13.7 3.8 (17.5) (18.7) (48.6)
Gains(losses) on derivatives (0.2)
------ ------ ------ ------ ------ ------ ------
Income before Accounting Changes 513.6 934.0 509.8 460.4 621.4 472.5 436.6
Cumulative Effect of Accounting Changes (15.6)
------ ------ ------ ------ ------ ------ ------
Net Income 513.6 934.0 509.8 460.4 621.4 472.5 421.0
====== ====== ====== ====== ====== ====== ======
For the Quarter Ended Dec Mar Jun Sep Dec Mar Jun
1998 1999 1999 1999 1999 2000 2000
------ ------ ------ ------ ------ ------ ------
Operating Revenue
Life and annuity premiums 348.0 284.2 274.0 263.8 361.1 331.2 337.1
Surrender charges 26.9 25.5 27.1 28.4 29.2 28.7 29.8
Mortality assessments 130.0 137.3 122.2 118.2 118.7 118.5 122.5
Expense assessments 198.2 215.3 231.5 245.9 238.3 261.1 258.6
Health premiums 164.5 154.9 160.3 149.6 233.6 58.4 144.0
Investment advisory fees 57.5 58.8 56.3 54.6 54.1 54.0 52.2
Other revenue and fees 76.4 86.4 109.0 77.9 71.2 106.1 88.7
Net investment income 714.7 709.5 700.8 697.1 700.1 711.1 673.8
Earnings in Unconsolidated Affiliates 1.3 1.6 1.1 1.2 1.8 1.0 (3.6)
------ ------ ------ ------ ------ ------ ------
Operating Revenue 1717.6 1673.4 1682.4 1636.7 1808.2 1670.2 1703.0
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 440.0 344.6 335.5 294.0 572.5 356.1 370.1
Div accum & div to policyholders 27.9 21.5 22.5 21.2 23.3 21.7 20.2
Interest credited to policy bal. 380.6 375.1 377.1 369.7 388.5 373.9 366.8
Health policy benefits 131.0 145.5 166.6 189.8 157.8 114.3 119.9
Underwriting, acquisition,
insurance and other expenses 491.2 522.4 532.1 533.4 630.5 525.7 537.5
Goodwill amortization 16.0 11.8 9.9 12.9 14.6 10.2 12.0
Interest 33.5 33.1 32.6 33.3 34.7 36.3 35.4
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 1520.3 1454.1 1476.3 1454.1 1821.8 1438.2 1461.9
------ ------ ------ ------ ------ ------ ------
Income from Operations before Tax/Min Int. 197.4 219.3 206.1 182.6 (13.6) 232.0 241.1
Federal income taxes 58.0 63.6 54.2 51.2 (50.2) 61.6 67.9
------ ------ ------ ------ ------ ------ ------
Inc from Operations before Min Int 139.4 155.7 151.8 131.4 36.6 170.4 173.2
------ ------ ------ ------ ------ ------ ------
Minority Interest (0.2) 0.2
------ ------ ------ ------ ------ ------ ------
Income from Operations 139.4 155.7 151.8 131.4 36.6 170.6 173.0
------ ------ ------ ------ ------ ------ ------
Restructuring charges (14.3) (12.1) (3.2) (3.6) (2.7)
Realized gains (losses) on investments 0.5 1.5 (3.5) 4.1 1.6 (0.4) (6.7)
Gains (losses) on derivatives
------ ------ ------ ------ ------ ------ ------
Income before Accounting Changes 125.6 145.1 148.4 132.3 34.6 170.2 163.6
Cumulative Effect of Accounting Changes
------ ------ ------ ------ ------ ------ ------
Net Income 125.6 145.1 148.4 132.3 34.6 170.2 163.6
------ ------ ------ ------ ------ ------ ------
For the Quarter Ended Sep Dec Mar Jun Sep
2000 2000 2001 2001 2001
------ ------ ------ ------ ------
Operating Revenue
Life and annuity premiums 339.0 396.1 402.1 353.9 336.8
Surrender charges 25.9 30.3 27.8 22.8 23.2
Mortality assessments 125.9 129.6 133.7 133.7 133.3
Expense assessments 273.4 257.1 244.9 227.5 224.4
Health premiums 117.9 89.4 104.8 95.7 103.9
Investment advisory fees 53.3 53.6 49.4 49.6 47.2
Other revenue and fees 106.0 144.6 82.0 60.3 91.5
Net investment income 690.0 672.1 673.7 673.1 686.2
Earnings in Unconsolidated Affiliates 1.6 0.6 0.9 0.0 0.4
------ ------ ------ ------ ------
Operating Revenue 1733.1 1773.5 1719.5 1616.5 1646.9
------ ------ ------ ------ ------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 390.2 430.0 418.9 373.6 422.6
Div accum & div to policyholders 18.2 27.4 18.9 20.2 18.0
Interest credited to policy bal. 362.0 371.5 367.1 369.7 378.7
Health policy benefits 123.0 91.8 101.8 91.5 83.8
Underwriting, acquisition,
insurance and other expenses 532.4 572.9 524.8 491.4 516.0
Goodwill amortization 12.0 10.9 10.9 10.9 10.9
Interest 34.4 33.4 34.4 32.0 29.6
------ ------ ------ ------ ------
Operating Benefits and Expenses 1472.2 1537.9 1476.7 1389.3 1459.6
------ ------ ------ ------ ------
Income from Operations before Tax/Min Int. 260.8 235.6 242.7 227.2 187.3
Federal income taxes 70.1 50.9 64.1 59.1 44.1
------ ------ ------ ------ ------
Inc from Operations before Min Int 190.7 184.7 178.6 168.1 143.2
------ ------ ------ ------ ------
Minority Interest (0.0) 0.0 (0.0) (0.0) (0.0)
------ ------ ------ ------ ------
Income from Operations 190.7 184.7 178.6 168.1 143.2
------ ------ ------ ------ ------
Restructuring charges (40.5) (37.0) (0.7) (3.9) 0.0
Realized gains (losses) on investments (11.6) 1.2 (13.4) (11.5) (23.8)
Gains (losses) on derivatives (0.1) 0.2 (0.4)
------ ------ ------ ------ ------
Income before Accounting Changes 138.6 148.9 164.5 153.0 119.1
Cumulative Effect of Accounting Changes (4.3) (11.3)
------ ------ ------ ------ ------
Net Income 138.6 148.9 160.2 141.7 119.1
------ ------ ------ ------ ------
PAGE 9
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Annuities Life Insurance Reinsurance Management
------------------ ------------------ ------------------ ------------------
ASSETS Sep Dec Sep Dec Sep Dec Sep Dec
2001 2000 2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------- ------- ------- -------
Investments
Corporate bonds 10295.7 8892.4 7023.9 6353.6 2752.2 2573.3 428.3 333.6
U.S. government bonds 13.6 25.8 80.6 86.4 290.9 275.5 0.2 0.2
Foreign government bonds 122.1 135.5 101.6 125.8 63.3 71.1
Asset/Mortgage backed securities 2106.0 2299.7 777.9 829.3 255.4 262.3 45.3 49.0
State and municipal bonds 5.9 6.3 8.1 7.9 0.3 0.3
Preferred stocks-redeemable 73.5 120.5 12.8 24.6 4.3 4.3 8.6 9.6
Common stocks 12.9 13.6 2.2
Preferred stocks-equity 38.6 45.8 6.7 9.2 1.1 1.1 2.6 2.4
Mortgage loans 2198.6 2324.0 1618.8 1765.9 345.0 360.9 88.0 95.5
Real estate
Policy loans 503.3 509.9 1431.4 1440.5
Other long-term investments 14.5 5.2 21.1 16.9 19.3 25.0
------- ------- ------- ------- ------- ------- ------- -------
Total Investments 15371.8 14365.2 11095.8 10673.8 3731.8 3576.1 573.0 490.4
------- ------- ------- ------- ------- ------- ------- -------
Intercompany investments 4629.3 4039.2 1310.9 1598.4 506.7 535.8 163.0 249.1
Invest in unconsol affiliates 6.5 6.4
Cash and invested cash (43.4) (108.8) (86.0) (67.2) 50.9 148.3 78.2 68.6
Property and equipment 8.4 7.0 15.2 13.8 31.5 22.6
Premium and fees receivable (0.2) (1.8) 26.1 45.6 204.7 214.2 39.7 34.4
Accrued investment income 235.3 210.8 204.6 169.5 59.0 52.7 10.0 7.8
Assets held in separate accounts 30269.3 39322.1 1159.8 1270.1
Federal income tax recoverable
Amount recoverable from reinsurers 1264.5 1309.5 1073.6 989.1 1636.2 1616.5
Deferred acquisition costs 781.2 812.5 1156.0 1079.3 475.1 459.6
Other intangible assets 155.9 169.2 978.7 1040.5 11.7 12.8 52.3 60.9
Goodwill 44.3 45.2 861.0 878.7 32.4 33.7 304.8 316.9
Other 139.0 104.1 322.9 254.3 327.5 356.7 204.7 188.6
------- ------- ------- ------- ------- ------- ------- -------
Total Assets 52847.0 60267.1 18111.8 17939.1 7057.6 7026.6 1457.3 1439.0
======= ======= ======= ======= ======= ======= ======= =======
Corporate and Consolidating
Lincoln UK Other Operations Adjustments Consolidated
------------------ ------------------ ------------------ ------------------
ASSETS Sep Dec Sep Dec Sep Dec Sep Dec
2001 2000 2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------- ------- ------- -------
Investments
Corporate bonds 476.1 457.6 2448.2 2639.1 23424.3 21249.7
U.S. government bonds 82.4 154.9 467.7 542.9
Foreign government bonds 336.0 444.8 537.4 543.9 1160.3 1321.1
Asset/Mortgage backed securities 581.0 720.1 3765.6 4160.4
State and municipal bonds 14.4 14.6
Preferred stocks-redeemable 2.2 99.3 161.2
Common stocks 198.2 265.2 100.1 155.6 311.2 436.6
Preferred stocks-equity 117.5 54.5 166.5 113.1
Mortgage loans 0.3 0.3 412.3 116.3 4663.1 4663.0
Real estate 0.2 0.3 291.5 283.0 (2.8) (1.3) 288.8 282.0
Policy loans 8.7 10.5 1943.4 1960.9
Other long-term investments 1678.6 1666.2 (1250.0) (1250.0) 483.4 463.3
------- ------- ------- ------- ------- ------- ------- -------
Total Investments 1019.5 1178.8 6248.9 6335.8 (1252.9) (1251.3) 36788.0 35368.6
------- ------- ------- ------- ------- ------- ------- -------
Intercompany investments (1277.3) (1245.8) (5332.5) (5176.7) (0.0) (0.0)
Invest in unconsol affiliates 6.5 6.4
Cash and invested cash 236.5 253.5 1760.3 1830.5 (197.5) 1996.3 1927.4
Property and equipment 39.9 50.8 165.9 134.0 261.0 228.2
Premium and fees receivable 1.6 1.4 (7.5) 3.0 264.5 296.7
Accrued investment income 23.8 22.8 102.0 82.8 (19.5) 615.1 546.4
Assets held in separate accounts 5217.9 6440.9 2832.9 3546.7 39479.8 50579.9
Federal income tax recoverable 35.3 207.5 35.3 207.5
Amount recoverable from reinsurers 36.8 33.0 (192.8) (200.3) 3818.3 3747.7
Deferred acquisition costs 589.7 635.0 2.6 2.9 82.5 81.1 3087.2 3070.5
Other intangible assets 252.8 273.6 1451.5 1557.0
Goodwill 12.4 13.0 (0.0) (1.6) (1.6) 1253.2 1286.0
Other 53.2 (104.9) 665.5 545.1 (563.5) (322.2) 1149.4 1021.6
------- ------- ------- ------- ------- ------- ------- -------
Total Assets 7445.7 8763.7 7706.2 7719.7 (4419.6) (3311.2) 90206.0 99844.1
------- ------- ------- ------- ------- ------- ------- -------
PAGE 10
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Annuities Life Insurance Reinsurance Management
----------------- ----------------- ----------------- -----------------
LIABILITIES and SHAREHOLDERS' EQUITY Sep Dec Sep Dec Sep Dec Sep Dec
2001 2000 2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------- ------- ------- -------
Liabilities
Insurance and Inv Contract Liabilities:
Life and annuity reserves 2658.0 2686.4 13036.3 12783.9 1048.5 944.9
Health reserves 0.3 0.1 2489.9 2442.1
Unpaid claims - life and health 6.7 7.1 92.3 108.1 1062.4 1154.4
Unearned premiums 0.0 0.1 8.3 46.4
Premium deposit funds 17195.3 16331.4 14.7 13.9 676.7 753.2
Participating policyholders' funds 118.3 139.4
Other policyholders' funds 0.4 543.8 515.4 10.1 6.8
Liab related to separate accounts 30269.3 39322.1 1159.8 1270.1
------- ------- ------- ------- ------- ------- ------- -------
Total Insurance and Inv Contract
Liabilities 50129.7 58347.0 14965.5 14830.9 5296.0 5347.8
Federal income taxes 109.7 (108.7) (11.1) (113.7) 66.8 31.7 37.0 28.3
Short-term debt 238.7 224.0 0.0
Long-term debt
Minority Interest in pref. securities of sub.
Other liabilities 441.2 274.4 352.0 567.9 378.5 303.5 870.6 859.1
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities 50680.5 58512.7 15306.4 15285.2 5980.0 5906.9 907.7 887.4
------- ------- ------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on securities 144.6 (44.7) 45.0 (44.9) 29.6 5.3 3.4 (0.5)
Gains (losses) on derivatives 1.7 4.9 0.3
Other shareholders' equity 2017.3 1799.1 2744.7 2698.8 1047.5 1114.3 546.2 552.2
Cumulative effect of accounting change 2.8 10.9 0.1
------- ------- ------- ------- ------- ------- ------- -------
Shareholders' Equity 2166.5 1754.4 2805.4 2653.9 1077.6 1119.7 549.7 551.6
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs' Equity 52847.0 60267.1 18111.8 17939.1 7057.6 7026.6 1457.3 1439.0
======= ======= ======= ======= ======= ======= ======= =======
Corporate and Consolidating
Lincoln UK Other Operatons Adjustmments Consolidated
---------------- ----------------- ----------------- -----------------
LIABILITIES and SHAREHOLDERS' EQUITY Sep Dec Sep Dec Sep Dec Sep Dec
2001 2000 2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------- ------- ------- -------
Liabilities
Insurance and Inv Contract Liabilities:
Life and annuity reserves 1364.2 1529.1 0.0 (116.2) (103.2) 17990.8 17841.2
Health reserves 48.2 50.7 34.8 30.9 2573.2 2523.8
Unpaid claims - life and health 44.6 46.6 0.6 0.5 (0.0) 1206.6 1316.6
Unearned premiums (0.3) (0.0) 8.1 46.5
Premium deposit funds 30.4 32.9 592.6 584.0 18509.7 17715.5
Participating policyholders' funds 118.3 139.4
Other policyholders' funds 554.3 522.2
Liab related to separate accounts 5217.9 6440.9 2832.9 3546.7 39479.8 50579.9
------- ------- ------- ------- ------- ------- ------- -------
Total Insurance and Inv Contract
Liabilities 6705.2 8100.3 35.2 31.4 3309.3 4027.6 80440.8 90685.1
Federal income taxes (2.3) 3.1 (234.1) (47.5) 33.9 206.7
Short-term debt 607.9 525.9 (307.5) (436.9) 539.0 312.9
Long-term debt 1962.4 1962.2 (1250.0) (1250.0) 712.4 712.2
Minority Interest in pref. securities
of sub. 305.0 745.0 305.0 745.0
Other liabilities 148.3 167.4 1506.3 941.2 (856.7) (678.7) 2840.2 2434.7
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities 6851.2 8270.8 4182.6 4158.2 929.1 1868.7 84837.4 94890.0
------- ------- ------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on securities 11.7 52.6 8.2 39.7 5.4 4.5 247.9 12.0
Gains (losses) on derivatives (4.0) 2.8
Other shareholders' equity 582.8 440.2 3515.8 3521.8 (5354.0) (5184.4) 5100.3 4942.0
Cumulative effect of accounting change 3.7 17.6
------- ------- ------- ------- ------- ------- ------- -------
Shareholders' Equity 594.5 492.8 3523.6 3561.5 (5348.6) (5179.9) 5368.6 4954.1
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs' Equity 7445.7 8763.7 7706.2 7719.7 (4419.6) (3311.2) 90206.0 99844.1
------- ------- ------- ------- ------- ------- ------- -------
9/30/01 PAGE 11
Five Year Comparative Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
ASSETS 1996 1997 1998 1999 2000
-------- -------- -------- -------- --------
Investments
Corporate bonds 15451.0 16633.3 22505.2 21119.5 21249.7
U.S. government bonds 1305.1 662.4 1134.6 538.3 542.9
Foreign government bonds 1781.4 1804.4 1321.2 1447.5 1321.1
Mortgage backed securities 5144.5 4529.3 5080.5 4404.0 4160.4
State and municipal bonds 237.2 241.4 16.7 14.7 14.6
Preferred stocks-redeemable 177.4 195.5 174.6 164.7 161.2
Common stocks 486.3 572.3 463.1 514.5 436.6
Preferred stocks-equity 71.2 88.2 79.8 89.5 113.1
Mortgage loans 3240.7 3288.1 4393.1 4735.4 4663.0
Real estate 655.0 576.0 488.7 256.2 282.0
Policy loans 734.8 763.1 1840.0 1892.4 1960.9
Other long-term investments 445.3 464.8 432.0 401.8 463.3
-------- -------- -------- -------- --------
Total Investments 29730.0 29818.8 37929.5 35578.4 35368.6
-------- -------- -------- -------- --------
Invest in unconsol affiliates 21.0 21.0 18.8 25.8 6.4
Cash and invested cash 1144.8 3794.7 2433.4 1895.9 1927.4
Property and equipment 196.0 189.8 174.8 203.8 228.2
Premiums and fees receivable 237.3 197.5 246.2 259.6 296.7
Accrued investment income 417.6 423.0 528.5 533.2 546.4
Assets held in separate accounts 28809.1 37138.8 43408.9 53654.2 50579.9
Federal income taxes recoverable 204.1 345.0 207.5
Amounts recoverable from reinsurers 2328.5 2350.8 3127.1 3954.3 3747.7
Deferred acquisition costs 1689.7 1623.8 1964.4 2800.3 3070.5
Other intangible assets 708.4 613.9 1848.4 1746.5 1557.0
Goodwill 351.7 457.7 1484.3 1423.0 1286.0
Other 596.4 544.8 468.0 675.7 1021.6
Discontinued operations - assets 5482.7
-------- -------- -------- -------- --------
Total Assets 71713.4 77174.7 93836.3 103095.7 99844.1
======== ======== ======== ======== ========
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Insurance and Inv Contract Liabilities:
Life and annuity reserves 7812.4 8228.7 16434.2 17071.4 17841.2
Health reserves 2153.0 2300.4 2600.1 2507.8 2523.8
Unpaid claims-life and health 438.8 682.0 1043.4 1269.8 1316.6
Unearned premiums 53.7 55.3 62.3 75.8 46.5
Premium deposit funds 20894.6 19803.0 20171.9 19624.1 17715.5
Participating policyholders' funds 81.9 79.8 142.7 132.0 139.4
Other policyholders' funds 188.9 180.6 438.4 472.6 522.2
Liab related to separate accounts 28809.1 37138.8 43408.9 53654.2 50579.9
-------- -------- -------- -------- --------
Total Ins and Inv Contr Liabilities 60432.4 68468.5 84301.9 94807.7 90685.1
Federal income taxes 161.5 487.8
Short-term debt 189.0 297.2 314.6 460.2 312.9
Long-term debt 626.3 511.0 712.2 712.0 712.2
Minority Interest - pref sec of a sub 315.0 315.0 745.0 745.0 745.0
Other liabilities 1417.4 2112.2 2374.6 2107.0 2434.7
Discontinued operations - liabilities 4101.9
-------- -------- -------- -------- --------
Total Liabilities 67243.5 72191.8 88448.3 98831.9 94890.0
-------- -------- -------- -------- --------
S/Hs' equity-unrealized gains (losses)-cont op. 276.4 436.0 552.4 (465.7) 12.0
S/Hs' equity-unrealized gains (losses)-disc op. 136.4
S/Hs' equity-foreign currency 66.4 46.2 50.0 30.0 21.9
S/Hs' equity-other 3990.7 4500.7 4785.6 4699.6 4920.2
-------- -------- -------- -------- --------
Total Shareholders' Equity 4470.0 4982.9 5387.9 4263.9 4954.1
-------- -------- -------- -------- --------
Total Liabilities
and Shareholders' Equity 71713.4 77174.7 93836.3 103095.7 99844.1
======== ======== ======== ======== ========
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $19.51 $22.48 $23.86 $24.14 $25.85
Common shares outstanding 207.9 202.3 202.6 196.0 191.2
9/30/2001 PAGE 12
Quarterly Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
-------- -------- ------- ------- -------- --------
ASSETS
Investments
Corporate bonds 22505.2 22450.1 21888.5 21560.5 21119.5 21188.0
U.S. government bonds 1134.6 1489.4 1367.8 991.0 538.3 572.4
Foreign government bonds 1321.2 1373.7 1339.7 1369.6 1447.5 1416.4
Mortgage backed securities 5080.5 5068.6 4788.5 4601.2 4404.0 4393.4
State and municipal bonds 16.7 16.2 19.1 14.8 14.7 14.7
Preferred stocks - redeemable 174.6 179.8 175.8 171.3 164.7 159.7
Common stocks 463.1 399.5 419.0 423.9 514.5 496.4
Preferred stocks-equity 79.8 81.3 86.7 82.7 89.5 91.3
Mortgage loans 4393.1 4344.6 4570.5 4772.7 4735.4 4833.9
Real estate 488.7 471.8 449.8 280.3 256.2 283.4
Policy loans 1840.0 1842.4 1847.4 1863.2 1892.4 1896.3
Other long-term investments 432.0 411.9 409.9 401.2 401.8 428.8
-------- -------- ------- ------- -------- --------
Total Investments 37929.5 38129.4 37362.6 36532.4 35578.4 35774.6
-------- -------- ------- ------- -------- --------
Invest in unconsol affiliates 18.8 20.5 22.3 23.4 25.8
Cash and invested cash 2433.4 2327.0 2151.1 2342.9 1895.9 1510.1
Property and equipment 174.8 178.0 180.7 191.9 203.8 207.7
Premiums and fees receivable 246.2 241.8 269.0 296.0 259.6 190.2
Accrued investment income 528.5 585.6 569.1 602.9 533.2 575.0
Assets held in separate accounts 43408.9 44339.4 47864.3 46228.8 53654.2 56907.6
Federal income taxes recoverable 204.1 286.0 478.4 457.3 345.0 300.4
Amount recoverable from reinsurers 3127.1 3124.5 3121.3 3315.6 3954.3 3851.0
Deferred acquisition costs 1964.4 2112.2 2398.3 2614.5 2800.3 2870.4
Other intangible assets 1848.4 1845.4 1764.9 1760.6 1746.5 1705.5
Goodwill 1484.3 1404.6 1428.3 1435.0 1423.0 1349.6
Other 468.0 755.8 651.1 699.3 675.7 1097.8
-------- -------- ------- ------- -------- --------
Total Assets 93836.3 95350.3 98261.4 96500.7 103095.7 106340.0
======== ======== ======= ======= ======== ========
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Insurance and Inv Contract Liabilities:
Life and annuity reserves 16434.2 16590.3 16536.4 16760.5 17071.4 17172.1
Health reserves 2600.1 2562.3 2528.2 2511.3 2507.8 2547.4
Unpaid claims-life and health 1043.4 1022.9 1064.9 1162.6 1269.8 1177.3
Unearned premiums 62.3 68.8 68.7 62.5 75.8 57.1
Premium deposit funds 20171.9 20027.8 20012.6 19988.9 19624.1 18899.3
Participating policyholders' funds 142.7 132.6 125.7 120.2 132.0 130.7
Other policyholders' funds 438.4 440.4 441.2 445.9 472.6 478.9
Liab related to separate accounts 43408.9 44339.4 47864.3 46228.8 53654.2 56907.6
-------- -------- ------- ------- -------- --------
Total Ins and Inv Contr Liabilities 84301.9 85184.6 88642.1 87280.8 94807.7 97370.5
Federal income taxes
Short-term debt 314.6 281.8 380.2 367.7 460.2 474.2
Long-term debt 712.2 712.1 712.1 712.0 712.0 712.0
Minority Interest - pref sec of a sub 745.0 745.0 745.0 745.0 745.0 745.0
Other liabilities 2374.6 3319.3 2964.7 2733.0 2107.0 2697.9
-------- -------- ------- ------- -------- --------
Total Liabilities 88448.3 90242.9 93444.1 91838.5 98831.9 101999.6
-------- -------- ------- ------- -------- --------
S/Hs' equity-unrealized gns (losses)- inv. 552.4 254.6 (1.1) (103.8) (465.7) (411.2)
S/Hs' equity- gains (losses)-derivatives
S/Hs' equity-foreign currency 50.0 30.1 20.6 40.2 30.0 22.8
S/Hs' equity-other 4785.6 4822.6 4797.9 4725.8 4699.6 4728.8
Cumulative effect of accounting change
-------- -------- ------- ------- -------- --------
Total Shareholders' Equity 5387.9 5107.4 4817.4 4662.2 4263.9 4340.4
-------- -------- ------- ------- -------- --------
Total Liabilities
and Shareholders' Equity 93836.3 95350.3 98261.4 96500.7 103095.7 106340.0
======== ======== ======= ======= ======== ========
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $23.86 $24.04 $24.18 $24.28 $24.14 $24.58
Common shares outstanding 202.6 201.8 199.3 196.3 196.0 193.3
Quarterly Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
-------- -------- ------- ------- -------- --------
ASSETS
Investments
Corporate bonds 20719.1 21064.7 21249.7 21855.2 22116.6 23424.3
U.S. government bonds 566.2 575.5 542.9 536.6 510.0 467.7
Foreign government bonds 1377.4 1277.7 1321.1 1240.8 1236.3 1160.3
Mortgage backed securities 4242.4 4172.5 4160.4 4009.8 3844.6 3765.6
State and municipal bonds 14.1 14.3 14.6 14.7 14.1 14.4
Preferred stocks - redeemable 159.2 159.5 161.2 154.1 152.2 99.3
Common stocks 467.8 479.9 436.6 388.6 373.3 311.2
Preferred stocks-equity 92.2 90.3 113.1 170.9 160.8 166.5
Mortgage loans 4783.8 4767.3 4663.0 4641.2 4652.8 4663.1
Real estate 282.1 297.6 282.0 308.1 306.9 288.8
Policy loans 1914.7 1935.6 1960.9 1947.0 1947.4 1943.4
Other long-term investments 438.2 470.5 463.3 477.4 480.9 483.4
-------- -------- ------- ------- -------- --------
Total Investments 35057.2 35305.4 35368.6 35744.5 35796.0 36788.0
-------- -------- ------- ------- -------- --------
Invest in unconsol affiliates (0.9) 5.8 6.4 7.3 6.1 6.5
Cash and invested cash 1619.3 1435.9 1927.4 2015.2 1501.9 1996.3
Property and equipment 205.5 213.8 228.2 242.1 251.4 261.0
Premiums and fees receivable 247.8 240.8 296.7 282.8 303.7 264.5
Accrued investment income 544.0 569.2 546.4 581.9 573.2 615.1
Assets held in separate accounts 54924.2 54410.9 50579.9 44506.2 47140.2 39479.8
Federal income taxes recoverable 246.1 267.3 207.5 106.6 177.5 35.3
Amount recoverable from reinsurers 3775.3 3774.7 3747.7 3706.4 3662.0 3818.3
Deferred acquisition costs 2968.0 3048.0 3070.5 2963.4 3129.1 3087.2
Other intangible assets 1646.7 1598.4 1557.0 1505.3 1479.0 1451.5
Goodwill 1335.4 1296.6 1286.0 1274.5 1263.6 1253.2
Other 1279.1 1076.4 1021.6 1186.3 1147.7 1149.4
-------- -------- ------- ------- -------- --------
Total Assets 103847.6 103243.1 99844.1 94122.4 96431.2 90206.0
======== ======== ======= ======= ======== ========
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Insurance and Inv Contract Liabilities:
Life and annuity reserves 17247.3 17500.0 17841.2 17733.0 17865.3 17990.8
Health reserves 2494.2 2520.2 2523.8 2534.8 2533.9 2573.2
Unpaid claims-life and health 1204.1 1202.8 1316.6 1255.3 1136.5 1206.6
Unearned premiums 52.8 51.8 46.5 45.9 19.0 8.1
Premium deposit funds 18407.2 18072.1 17715.5 17667.1 17715.9 18509.7
Participating policyholders' funds 130.4 135.4 139.4 145.0 135.2 118.3
Other policyholders' funds 490.6 500.7 522.2 532.1 541.4 554.3
Liab related to separate accounts 54924.2 54410.9 50579.9 44506.2 47140.2 39479.8
-------- -------- ------- ------- -------- --------
Total Ins and Inv Contr Liabilities 94950.8 94394.0 90685.1 84419.3 87087.2 80440.8
Federal income taxes
Short-term debt 355.7 330.3 312.9 415.3 351.3 539.0
Long-term debt 712.1 712.2 712.2 712.3 712.4 712.4
Minority Interest - pref sec of a sub 745.0 745.0 745.0 745.0 745.0 305.0
Other liabilities 2860.3 2522.9 2434.7 2734.2 2479.4 2840.2
-------- -------- ------- ------- -------- --------
Total Liabilities 99623.9 98704.5 94890.0 89026.0 91375.3 84837.4
-------- -------- ------- ------- -------- --------
S/Hs' equity-unrealized gns (losses)- inv. (556.6) (337.7) 12.0 190.4 76.2 247.9
S/Hs' equity- gains (losses)-derivatives 5.7 9.4 2.8
S/Hs' equity-foreign currency 21.8 19.9 21.9 4.1 (15.3) 6.9
S/Hs' equity-other 4758.5 4856.4 4920.1 4878.6 4968.1 5093.4
Cumulative effect of accounting change 17.6 17.6 17.6
-------- -------- ------- ------- -------- --------
Total Shareholders' Equity 4223.7 4538.6 4954.1 5096.4 5055.9 5368.6
-------- -------- ------- ------- -------- --------
Total Liabilities
and Shareholders' Equity 103847.6 103243.1 99844.1 94122.4 96431.2 90206.0
======== ======== ======= ======= ======== ========
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $25.01 $25.43 $25.85 $25.96 $26.32 $26.87
Common shares outstanding 191.1 191.8 191.2 188.1 188.2 189.8
9/30/2001 PAGE 13
Annuities Segment
Income Statements & Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1996 1997 1998 1999 2000 2000 2001
-----------------------------------------------------------------------------------------------------------------------
Operating Revenue
Premiums 69.8 84.2 53.9 65.2 64.3 48.1 64.8
Surrender charges 26.3 29.8 33.5 37.9 41.8 32.7 24.0
Expense assessments 276.7 367.2 459.9 536.2 628.4 474.1 411.5
Other revenue and fees 0.8 1.2 1.7 14.5 11.0 7.5 6.7
Net investment income 1385.9 1477.1 1501.6 1474.2 1393.5 1058.5 1027.3
------ ------ ------ ------ ------ ------ ------
Operating Revenue 1759.5 1959.5 2050.6 2128.0 2138.9 1620.8 1534.4
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 270.1 292.6 271.6 259.1 254.7 195.7 208.6
Interest credited to policy bal. 910.3 974.4 955.2 925.2 866.1 652.9 636.3
Underwriting, acquisition,
insurance and other expenses 348.5 415.0 498.8 560.8 575.5 432.3 393.4
Goodwill amortization 0.0 0.0 2.2 2.0 (0.6) (0.9) 0.9
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 1528.9 1682.0 1727.8 1747.1 1695.7 1280.0 1239.3
------ ------ ------ ------ ------ ------ ------
Income from Operations Before Tax 230.6 277.5 322.8 380.9 443.2 340.9 295.1
Federal income taxes 56.0 54.5 60.4 81.4 81.2 65.3 49.6
------ ------ ------ ------ ------ ------ ------
Income from Operations 174.6 223.0 262.4 299.4 362.0 275.6 245.5
------ ------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 29.6 40.3 11.4 (7.9) (3.4) (6.2) (21.6)
Gains(losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 (0.3)
Restructuring Charge 0.0 0.0 0.0 0.0 0.0 0.0 (1.3)
------ ------ ------ ------ ------ ------ ------
Income before Accounting Changes 204.3 263.3 273.8 291.5 358.6 269.4 222.4
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 (7.3)
------ ------ ------ ------ ------ ------ ------
Net Income 204.3 263.3 273.8 291.5 358.6 269.4 215.1
====== ====== ====== ====== ====== ====== ======
Inc from Oper -before Goodwill Amort. 174.6 223.0 264.6 301.5 361.4 274.6 246.4
Effective tax rate 24.3% 19.6% 18.7% 21.4% 18.3% 19.2% 16.8%
Operating Revenue 1759.5 1959.5 2050.6 2128.0 2138.9 1620.8 1534.4
Realized gains (losses) on investments 45.6 63.5 17.5 (12.1) (5.2) (9.5) (33.2)
Gains(losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 (0.4)
------ ------ ------ ------ ------ ------ ------
Total Revenue 1805.0 2023.0 2068.1 2115.8 2133.7 1611.3 1500.7
====== ====== ====== ====== ====== ====== ======
0.4
Average capital 1334.3 1373.0 1592.6 1562.0 1601.8 1573.8 1829.3
Return on average capital 13.1% 16.2% 16.5% 19.2% 22.6% 23.3% 17.9%
9/30/2001 Page 14
Annuities Segment
Income Statements & Operational Data
Unaudited [Millions of Dollars]
Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep
1998 1999 1999 1999 1999 2000 2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 16.3 14.9 16.2 13.1 21.0 13.3 16.8 18.0 16.2 19.1 32.5 13.2
Surrender charges 7.6 8.6 9.3 10.1 9.8 11.1 11.2 10.4 9.1 9.1 8.5 6.5
Expense assessments 112.6 119.8 133.3 142.6 140.5 155.1 155.7 163.4 154.2 141.6 138.0 132.0
Other revenue and fees 1.2 3.9 3.2 0.9 6.4 2.2 0.6 4.6 3.5 1.7 3.9 1.2
Net investment income 372.5 373.4 370.2 364.5 366.0 362.9 345.8 349.8 335.0 341.3 339.3 346.6
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue 510.2 520.7 532.3 531.2 543.7 544.6 530.1 546.2 518.1 512.8 522.1 499.5
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 68.9 61.9 65.0 55.0 77.2 61.6 65.7 68.4 59.0 69.8 72.6 66.3
Interest credited to
policy balances 233.6 228.2 232.9 230.1 234.1 228.2 219.4 205.4 213.2 209.4 209.7 217.2
Underwriting, acquisition,
insurance and other expenses 128.1 138.5 141.0 146.5 134.7 144.5 139.8 147.9 143.2 134.6 126.0 132.8
Goodwill amortization 1.1 0.5 0.4 0.6 0.5 (1.5) 0.3 0.3 0.3 0.3 0.3 0.3
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating Benefits and
Expenses 431.6 429.1 439.2 432.2 446.5 432.8 425.2 421.9 415.7 414.1 408.6 416.6
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Operations
Before Tax 78.6 91.6 93.0 99.0 97.2 111.8 104.8 124.2 102.3 98.7 113.6 82.9
Federal income taxes 15.4 17.2 17.1 23.6 23.5 23.3 20.7 21.3 15.9 16.3 22.8 10.4
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Operations 63.2 74.4 75.9 75.4 73.7 88.5 84.1 102.9 86.4 82.3 90.8 72.4
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.8 2.4 0.5 (7.0) (3.7) 2.7 0.3 (9.1) 2.8 (1.4) (6.7) (13.5)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.1) 0.1 (0.3)
Restructuring charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.7) (0.6) 0.0
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before Accounting
Changes 64.9 76.8 76.4 68.4 69.9 91.2 84.4 93.8 89.2 80.2 83.6 58.6
Cumulative effect of
accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (3.6) (3.7) 0.0
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Income 64.9 76.8 76.4 68.4 69.9 91.2 84.4 93.8 89.2 76.6 79.9 58.6
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Inc from Oper-before
Goodwill Amortization 64.3 75.0 76.3 76.0 74.2 87.0 84.4 103.2 86.7 82.6 91.1 72.7
Effective tax rate 19.6% 18.8% 18.4% 23.8% 24.2% 20.8% 19.7% 17.1% 15.6% 16.6% 20.1% 12.6%
Operating Revenue 510.2 520.7 532.3 531.2 543.7 544.6 530.1 546.2 518.1 512.8 522.1 499.5
Realized gains (losses) on
investments 2.7 3.7 0.7 (10.7) (5.8) 4.2 0.4 (14.1) 4.2 (2.2) (10.3) (20.8)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.2) 0.2 (0.5)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Revenue 512.9 524.4 533.0 520.5 538.0 548.7 530.5 532.1 522.3 510.4 512.1 478.2
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Average capital 1521.5 1615.3 1602.4 1471.2 1559.0 1438.4 1647.7 1635.2 1686.0 1797.9 1787.1 1902.9
Return on average capital 16.6% 18.4% 19.0% 20.5% 18.9% 24.6% 20.4% 25.2% 20.5% 18.3% 20.3% 15.2%
9/30/01 Page 15
Annuities Segment
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
YTD YTD
Sep Sep
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities- Bal Beg-of-Year 14.645 17.634 17.214 18.111 18.210 18.210 16.615
Gross Deposits 1.852 1.632 1.452 2.563 2.074 1.592 2.124
Withdrawals (incl charges) & deaths (1.916) (2.220) (2.468) (2.521) (3.283) (2.473) (1.886)
-------- -------- -------- -------- -------- -------- --------
Net cash flows (0.063) (0.588) (1.016) 0.042 (1.209) (0.881) 0.238
Transfer from (to) var annuities (0.688) (1.336) (0.356) (0.783) (1.329) (1.113) (0.215)
Interest credited 0.871 0.978 0.994 0.840 0.944 0.714 0.679
Acq of new business/companies 2.869 0.527 1.274
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities-Gross 17.634 17.214 18.111 18.210 16.615 16.930 17.317
Reinsurance Ceded (1.816) (1.757) (1.606) (1.419) (1.173) (1.230) (1.014)
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities-Bal End -of-Year 15.818 15.458 16.505 16.791 15.442 15.700 16.303
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities Incremental Deposits * 1.410 1.412 1.265 2.310 1.918 1.471 2.020
Variable Annuities-Bal Beg-of-Year 15.673 20.383 27.346 33.358 41.493 41.493 39.427
Gross Deposits 2.746 2.695 2.791 2.553 3.165 2.319 2.274
Withdrawals (incl charges) & deaths (1.454) (2.038) (3.019) (3.760) (4.830) (3.631) (3.038)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 1.292 0.657 (0.228) (1.207) (1.665) (1.312) (0.764)
Transfer from (to) fixed annuities 0.689 1.335 0.389 0.787 1.320 1.108 0.215
Invest inc & change in mkt value 2.729 4.971 5.414 8.555 (1.721) 1.454 (8.372)
Acq(sale) of new business/companies 0.437
-------- -------- -------- -------- -------- -------- --------
Var Annuities-Bal End-of-Year 20.383 27.346 33.358 41.493 39.427 42.743 30.506
-------- -------- -------- -------- -------- -------- --------
Variable Annuities Incremental
Deposits * 2.626 2.585 2.641 2.409 2.667 2.017 1.899
Total Annuities - Bal Beg-of-Year 30.318 38.017 44.561 51.469 59.704 59.704 56.043
Gross Deposits 4.598 4.327 4.244 5.116 5.239 3.911 4.398
Withdrawals (incl charges) & deaths (3.369) (4.258) (5.487) (6.281) (8.113) (6.104) (4.924)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 1.229 0.069 (1.244) (1.165) (2.874) (2.193) (0.526)
Transfers 0.001 (0.001) 0.033 0.004 (0.009) (0.005)
Interest credited & change in mkt value 3.600 5.949 6.408 9.395 (0.777) 2.168 (7.693)
Acq of new business/companies 2.869 0.527 1.711
-------- -------- -------- -------- -------- -------- --------
Total Gross Annuities-Bal End-of-Year 38.017 44.561 51.469 59.704 56.043 59.673 47.824
Reinsurance Ceded (1.816) (1.757) (1.606) (1.419) (1.173) (1.230) (1.014)
-------- -------- -------- -------- -------- -------- --------
Total Annuities (Net of Ceded) - Bal
End-of-Year 36.202 42.804 49.863 58.284 54.869 58.443 46.810
======== ======== ======== ======== ======== ======== ========
Total Annuities Incremental Deposits * 4.036 3.997 3.906 4.719 4.585 3.488 3.919
Var Ann Under Agree - Included above 0.649 0.719 0.941 0.962 0.907
* Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Annuity products.
9/30/01 PAGE 16
Annuities Segment
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal Beg-of-Quarter 18.123 18.111 18.225 18.303 18.406 18.210
Gross Deposits 0.335 0.489 0.654 0.678 0.741 0.589
Withdrawals (incl charges) & deaths (0.608) (0.579) (0.593) (0.567) (0.782) (0.875)
------ ------ ------ ------ ------ ------
Net cash flows (0.273) (0.090) 0.061 0.111 (0.040) (0.287)
Transfer from (to) var annuities 0.011 (0.034) (0.211) (0.238) (0.300) (0.550)
Interest credited 0.249 0.238 0.228 0.231 0.144 0.241
Acq of new business/companies 0.001
------ ------ ------ ------ ------ ------
Fixed Annuities-Gross 18.111 18.225 18.303 18.406 18.210 17.615
Reinsurance Ceded (1.606) (1.569) (1.524) (1.473) (1.419) (1.363)
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal End-of-Quarter 16.505 16.656 16.779 16.934 16.791 16.252
------ ------ ------ ------ ------ ------
Fixed Annuities Incremental Deposits * 0.304 0.462 0.622 0.644 0.582 0.560
Variable Annuities-Bal Beg-of-Quarter 29.476 33.358 34.148 37.233 35.613 41.493
Gross Deposits 0.633 0.635 0.651 0.634 0.634 0.797
Withdrawals (incl charges) & deaths (0.801) (0.827) (0.912) (0.938) (1.084) (1.210)
------ ------ ------ ------ ------ ------
Net cash flows (0.168) (0.192) (0.261) (0.304) (0.450) (0.413)
Transfer from (to) fixed annuities 0.028 0.034 0.213 0.237 0.303 0.549
Invest inc & change in mkt value 5.405 0.948 3.133 (1.553) 6.027 3.011
Acq(sale) of new business/companies (1.383)
------ ------ ------ ------ ------ ------
Var Annuities-Bal End-of-Quarter 33.358 34.148 37.233 35.613 41.493 44.640
Variable Annuities Incremental Deposits 0.585 0.606 0.622 0.589 0.592 0.732
Total Annuities -Bal Beg-of-Quarter 47.599 51.469 52.373 55.536 54.020 59.704
Gross Deposits 0.968 1.124 1.305 1.312 1.375 1.386
Withdrawals (incl charges) & deaths (1.409) (1.406) (1.505) (1.505) (1.865) (2.085)
------ ------ ------ ------ ------ ------
Net cash flows (0.441) (0.282) (0.200) (0.193) (0.490) (0.700)
Transfers 0.039 0.002 (0.001) 0.003 (0.001)
Interest credited & change in mkt value 5.654 1.186 3.361 (1.322) 6.171 3.252
Acq of new business/companies (1.382)
------ ------ ------ ------ ------ ------
Total Gross Annuities-Bal End-of-Quarter 51.469 52.373 55.536 54.020 59.704 62.255
Reinsurance Ceded (1.606) (1.569) (1.524) (1.473) (1.419) (1.363)
------ ------ ------ ------ ------ ------
Total Annuities (Net of Ceded) - Bal End-of-Qtr 49.863 50.804 54.012 52.547 58.284 60.892
====== ====== ====== ====== ====== ======
Total Annuities Incremental Deposits * 0.889 1.068 1.244 1.233 1.174 1.292
Var Ann Under Agree - Included above 0.649 0.651 0.685 0.639 0.719 0.866
* Incremental Deposits represent gross deposits
reduced by transfers from other Lincoln
Annuity products.
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.132 0.136 0.151 0.147 0.275 0.134
Withdrawals (0.278) (0.292) (0.318) (0.329) (0.428) (0.612)
Net Flows (0.146) (0.156) (0.167) (0.182) (0.152) (0.479)
Variable Annuities - included fixed
portion of variable contracts
Deposits 0.836 0.988 1.154 1.165 1.100 1.252
Withdrawals (1.131) (1.114) (1.187) (1.176) (1.438) (1.473)
Net Flows (0.295) (0.126) (0.033) (0.011) (0.338) (0.221)
Fixed Portion of Variable Contracts
Deposits 0.203 0.353 0.503 0.531 0.466 0.455
Withdrawals (0.330) (0.287) (0.275) (0.238) (0.354) (0.263)
Net Flows (0.127) 0.066 0.228 0.293 0.112 0.192
Annuities Segment (Continued)
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal Beg-of-Quarter 17.615 17.200 16.930 16.615 16.599 16.697
Gross Deposits 0.490 0.513 0.482 0.560 0.668 0.896
Withdrawals (incl charges) & deaths (0.796) (0.802) (0.810) (0.787) (0.574) (0.525)
------ ------ ------ ------ ------ ------
Net cash flows (0.307) (0.288) (0.328) (0.227) 0.094 0.372
Transfer from (to) var annuities (0.346) (0.217) (0.216) (0.014) (0.222) 0.021
Interest credited 0.238 0.235 0.230 0.225 0.226 0.228
Acq of new business/companies
Fixed Annuities-Gross 17.200 16.930 16.615 16.599 16.697 17.317
Reinsurance Ceded (1.291) (1.230) (1.173) (1.115) (1.069) (1.014)
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal End-of-Quarter 15.909 15.700 15.442 15.484 15.628 16.303
------ ------ ------ ------ ------ ------
Fixed Annuities Incremental Deposits * 0.447 0.464 0.447 0.536 0.611 0.873
Variable Annuities-Bal Beg-of-Quarter 44.640 43.097 42.743 39.427 34.733 36.961
Gross Deposits 0.793 0.729 0.846 0.887 0.703 0.684
Withdrawals (incl charges) & deaths (1.168) (1.253) (1.199) (1.250) (0.993) (0.795)
------ ------ ------ ------ ------ ------
Net cash flows (0.375) (0.524) (0.353) (0.363) (0.290) (0.111)
Transfer from (to) fixed annuities 0.343 0.216 0.212 0.011 0.227 (0.023)
Invest inc & change in mkt value (1.511) (0.046) (3.175) (4.342) 2.291 (6.321)
Acq(sale) of new business/companies
Var Annuities-Bal End-of-Quarter 43.097 42.743 39.427 34.733 36.961 30.506
------ ------ ------ ------ ------ ------
Variable Annuities Incremental Deposits 0.699 0.586 0.650 0.683 0.612 0.604
Total Annuities -Bal Beg-of-Quarter 62.255 60.297 59.673 56.043 51.332 53.658
Gross Deposits 1.283 1.242 1.328 1.447 1.371 1.580
Withdrawals (incl charges) & deaths (1.964) (2.055) (2.009) (2.037) (1.567) (1.320)
------ ------ ------ ------ ------ ------
Net cash flows (0.682) (0.812) (0.681) (0.590) (0.196) 0.261
Transfers (0.003) (0.001) (0.004) (0.003) 0.005 (0.002)
Interest credited & change in mkt value (1.273) 0.189 (2.945) (4.117) 2.517 (6.093)
Acq of new business/companies
Total Gross Annuities-Bal End-of-Quarter 60.297 59.673 56.043 51.332 53.658 47.824
Reinsurance Ceded (1.291) (1.230) (1.173) (1.115) (1.069) (1.014)
------ ------ ------ ------ ------ ------
Total Annuities (Net of Ceded) - Bal End-of-Qtr 59.006 58.443 54.869 50.217 52.589 46.810
====== ====== ====== ====== ====== ======
Total Annuities Incremental Deposits * 1.145 1.050 1.097 1.219 1.223 1.477
Var Ann Under Agree - Included above 0.868 0.962 0.941 0.904 0.975 0.907
* Incremental Deposits represent gross deposits
reduced by transfers from other Lincoln
Annuity products.
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.126 0.114 0.085 0.160 0.329 0.489
Withdrawals (0.557) (0.532) (0.570) (0.556) (0.356) (0.340)
Net Flows (0.431) (0.417) (0.485) (0.396) (0.027) 0.149
Variable Annuities - included fixed
portion of variable contracts
Deposits 1.157 1.128 1.243 1.287 1.042 1.091
Withdrawals (1.408) (1.523) (1.439) (1.481) (1.211) (0.979)
Net Flows (0.251) (0.395) (0.196) (0.194) (0.169) 0.112
Fixed Portion of Variable Contracts
Deposits 0.364 0.399 0.397 0.400 0.339 0.407
Withdrawals (0.240) (0.270) (0.240) (0.231) (0.218) (0.184)
Net Flows 0.124 0.129 0.157 0.169 0.121 0.223
9/30/01 PAGE 17
Life Insurance Segment
Income Statements & Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 62.4 64.8 185.9 235.8 227.3 160.2 148.0
Surrender charges 10.5 9.8 52.1 66.3 66.4 46.5 46.3
Mortality assessments 159.7 161.2 350.1 444.6 465.2 343.0 373.8
Expense assessments 27.8 28.6 146.2 165.8 191.8 136.3 138.6
Other revenue and fees 6.7 9.0 2.6 9.8 14.2 10.6 11.9
Net investment income 260.6 268.2 642.6 840.1 871.5 651.8 683.6
------- ------- ------- ------- ------- ------- -------
Operating Revenue 527.6 541.5 1379.5 1762.6 1836.4 1348.4 1402.2
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 136.5 143.6 371.2 430.5 411.5 290.5 305.7
Div accum & div to policyholders 24.1 20.4 70.7 81.5 80.8 55.5 53.1
Interest credited to policy bal. 151.9 153.0 393.1 493.8 525.4 388.9 423.0
Underwriting, acquisition,
insurance and other expenses 154.1 172.1 293.1 399.1 384.8 295.3 283.3
Goodwill amortization 0.1 0.1 19.7 23.4 23.7 17.8 17.8
Interest expense 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 466.8 489.3 1147.8 1428.2 1426.3 1047.9 1082.9
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 60.8 52.3 231.6 334.3 410.1 300.5 319.3
Federal income taxes 19.6 12.4 82.4 122.3 150.1 111.1 113.5
------- ------- ------- ------- ------- ------- -------
Income from Operations* 41.2 39.9 149.2 212.0 259.9 189.3 205.8
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on investments 10.5 (0.8) (1.7) (0.5) (10.7) (5.4) (17.2)
Gains(losses) on derivatives 0.1
Restructuring charges (20.0) (2.0)
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 51.8 39.1 127.5 211.5 249.3 183.9 186.7
======= ======= ======= ======= ======= ======= =======
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 (5.5)
Net Income* 51.8 39.1 127.5 211.5 249.3 183.9 181.2
Inc from Oper -before Goodwill Amort. 41.4 40.0 168.9 235.4 283.6 207.1 223.6
Effective tax rate 32.2% 23.7% 35.6% 36.6% 36.6% 37.0% 35.6%
Operating Revenue 527.6 541.5 1,379.5 1762.6 1836.4 1348.4 1402.2
Realized gains (losses) on investments 21.6 3.2 (1.0) (2.2) (17.4) (9.3) (26.5)
Gains(losses) on derivatives 0.1
------- ------- ------- ------- ------- ------- -------
Total Revenue 549.2 544.8 1,378.5 1760.4 1819.0 1339.1 1375.9
======= ======= ======= ======= ======= ======= =======
Average capital 388.2 384.9 1948.0 2712.3 2640.2 2640.3 2727.3
Return on average capital 10.6% 10.4% 7.7% 7.8% 9.8% 9.6% 10.1%
First Year Premiums by Product (Billions)
Lincoln Life
Universal Life 0.021 0.013 0.125 0.225 0.190 0.134 0.115
Variable Universal Life 0.054 0.053 0.086 0.129 0.209 0.136 0.151
Whole Life 0.007 0.005 0.020 0.024 0.022 0.014 0.016
Term 0.000 0.000 0.003 0.004 0.003 0.002 0.001
------- ------- ------- ------- ------- ------- -------
Subtotal 0.082 0.071 0.234 0.381 0.423 0.287 0.282
Corporate Owned Life Insurance (COLI) 0.000 0.000 0.004 0.015 0.087 0.038 0.033
------- ------- ------- ------- ------- ------- -------
Total Lincoln Life 0.082 0.071 0.238 0.396 0.510 0.325 0.315
------- ------- ------- ------- ------- ------- -------
First Penn-Pacific
Universal Life 0.111 0.101 0.108 0.114 0.094 0.071 0.075
Term 0.023 0.033 0.046 0.047 0.045 0.036 0.025
------- ------- ------- ------- ------- ------- -------
Total First Penn-Pacific 0.134 0.134 0.154 0.160 0.139 0.107 0.101
------- ------- ------- ------- ------- ------- -------
Total Segment by Product 0.216 0.205 0.391 0.556 0.649 0.431 0.416
======= ======= ======= ======= ======= ======= =======
First Year Premiums by Distribution (Billions)
Lincoln Financial Advisors 0.181 0.195 0.130 0.118
Lincoln Financial Distributors 0.375 0.455 0.302 0.298
------- ------- ------- ------- ------- ------- -------
Total by Distribution 0.216 0.205 0.391 0.556 0.649 0.431 0.416
======= ======= ======= ======= ======= ======= =======
Individual Life Insurance In-Force (Billions)
Universal Life & Other 32.876 32.827 105.837 109.288 115.872 112.884 119.029
Term Insurance 16.284 30.337 67.076 85.701 100.130 98.424 108.723
------- ------- ------- ------- ------- ------- -------
Total Life Segment In-Force 49.160 63.164 172.914 194.988 216.002 211.308 227.751
======= ======= ======= ======= ======= ======= =======
* Year-to-date 2001 income from operations and net income include special charges of $1.9 million after-tax ($2.9
million pre-tax) recorded in the 3rd quarter of 2001 related to the events of September 11, 2001.
9/30/01 PAGE 18
Life Insurance Segment
Income Statements & Operational Data
Unaudited [Millions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 80.2 54.5 57.8 52.4 71.1 53.0
Surrender charges 17.6 14.7 16.5 17.1 18.0 16.2
Mortality assessments 121.8 108.8 111.4 110.5 113.9 112.2
Expense assessments 50.8 39.6 35.4 42.8 48.0 45.3
Other revenue and fees 2.5 1.9 1.6 2.4 3.9 3.2
Net investment income 207.5 207.9 207.8 209.6 214.8 215.6
------- ------- ------- ------- ------- -------
Operating Revenue 480.4 427.4 430.6 434.9 469.6 445.5
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 134.9 103.6 108.7 105.4 112.8 98.4
Div accum & div to policyholders 26.3 20.3 21.0 19.2 21.0 20.4
Interest credited to policy bal. 122.0 125.8 123.0 122.8 122.3 126.3
Underwriting, acquisition,
insurance and other expenses 106.6 95.7 86.5 99.1 117.8 99.4
Goodwill amortization 7.1 5.9 5.0 6.4 6.0 5.9
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 396.9 351.2 344.1 353.0 379.9 350.3
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 83.5 76.1 86.5 82.0 89.8 95.2
Federal income taxes 31.6 28.1 32.0 29.4 32.8 34.8
------- ------- ------- ------- ------- -------
Income from Operations* 51.9 48.1 54.4 52.6 57.0 60.4
------- ------- ------- ------- ------- -------
Realized gains (losses) on investments (6.1) (1.8) (2.9) 1.4 2.8 (2.4)
Gains (losses) on derivatives
Restructuring charges
------- ------- ------- ------- ------- -------
Income before Accounting Changes 45.8 46.3 51.5 54.0 59.7 58.1
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income* 45.8 46.3 51.5 54.0 59.7 58.1
======= ======= ======= ======= ======= =======
Inc from Oper -before
Goodwill Amortization 59.0 54.0 59.5 59.0 63.0 66.3
Effective tax rate 37.9% 36.9% 37.0% 35.9% 36.5% 36.5%
Operating Revenue 480.4 427.4 430.6 434.9 469.6 445.5
Realized gains (losses) on investments (9.7) (3.4) (4.4) 2.1 3.4 (3.8)
Gains (losses) on derivatives
------- ------- ------- ------- ------- -------
Total Revenue 470.7 424.0 426.3 437.1 473.1 441.7
======= ======= ======= ======= ======= =======
Average capital 2527.0 2716.6 2739.4 2707.4 2686.0 2655.3
Return on average capital 8.2% 7.1% 7.9% 7.8% 8.5% 9.1%
First Year Premiums by Product (Billions)
Lincoln Life
Universal Life 0.051 0.044 0.086 0.046
Variable Universal Life 0.024 0.027 0.052 0.042
Whole Life 0.005 0.006 0.008 0.004
Term 0.001 0.001 0.001 0.001
------- ------- ------- ------- ------- -------
Subtotal 0.081 0.078 0.147 0.093
Corporate Owned Life Insurance (COLI) 0.007 0.002 0.004 0.013
------- ------- ------- ------- ------- -------
Total Lincoln Life 0.103 0.077 0.088 0.081 0.151 0.105
------- ------- ------- ------- ------- -------
First Penn-Pacific
Universal Life 0.029 0.030 0.026 0.026
Term 0.012 0.011 0.011 0.013
------- ------- ------- ------- ------- -------
Total First Penn-Pacific 0.043 0.042 0.040 0.041 0.037 0.039
------- ------- ------- ------- ------- -------
Total Segment by Product 0.147 0.119 0.128 0.121 0.188 0.144
======= ======= ======= ======= ======= =======
First Year Premiums by Distribution (Billions)
Lincoln Financial Advisors 0.006 0.039 0.033 0.038 0.071 0.044
Lincoln Financial Distributors 0.141 0.080 0.095 0.084 0.117 0.100
------- ------- ------- ------- ------- -------
Total by Distribution 0.147 0.119 0.128 0.121 0.188 0.144
======= ======= ======= ======= ======= =======
Individual Insurance In-Force (Billions)
Universal Life & Other 105.837 105.090 106.047 106.945 109.288 108.817
Term Insurance 67.076 73.452 78.431 81.963 85.701 92.857
------- ------- ------- ------- ------- -------
Total Segment In-Force 172.914 178.542 184.478 188.908 194.988 201.674
======= ======= ======= ======= ======= =======
Life Insurance Segment (Continued)
Income Statements & Operational Data
Unaudited [Millions of Dollars]
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 56.3 50.9 67.1 50.9 50.7 46.4
Surrender charges 16.5 13.8 19.9 17.2 13.5 15.6
Mortality assessments 114.5 116.3 122.1 124.3 124.8 124.7
Expense assessments 44.1 46.9 55.5 47.4 45.3 46.0
Other revenue and fees 3.6 3.8 3.7 5.1 3.8 3.0
Net investment income 215.5 220.6 219.7 223.0 227.4 233.2
------- ------- ------- ------- ------- -------
Operating Revenue 450.5 452.4 488.0 467.9 465.5 468.9
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 96.3 95.8 121.0 99.9 103.5 102.3
Div accum & div to policyholders 18.7 16.4 25.3 17.5 19.0 16.5
Interest credited to policy bal. 128.7 134.0 136.5 138.3 141.2 143.5
Underwriting, acquisition,
insurance and other expenses 100.9 94.9 89.6 98.8 92.0 92.5
Goodwill amortization 5.9 5.9 5.9 5.9 5.9 5.9
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 350.6 347.0 378.4 360.5 361.7 360.8
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 99.9 105.4 109.6 107.4 103.8 108.1
Federal income taxes 37.4 38.9 39.0 38.8 36.7 38.1
------- ------- ------- ------- ------- -------
Income from Operations* 62.4 66.5 70.6 68.6 67.1 70.1
------- ------- ------- ------- ------- -------
Realized gains (losses) on investments (4.0) 1.0 (5.2) (5.4) (6.4) (5.3)
Gains (losses) on derivatives (0.0) 0.1 (0.0)
Restructuring charges (2.0)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 58.4 67.4 65.4 63.2 58.8 64.7
Cumulative effect of accounting changes 0.0 0.0 0.0 (0.2) (5.3) 0.0
------- ------- ------- ------- ------- -------
Net Income* 58.4 67.4 65.4 62.9 53.5 64.7
======= ======= ======= ======= ======= =======
Inc from Oper -before
Goodwill Amortization 68.4 72.4 76.5 74.5 73.0 76.0
Effective tax rate 37.5% 36.9% 35.6% 36.1% 35.3% 35.2%
Operating Revenue 450.5 452.4 488.0 467.9 465.5 468.9
Realized gains (losses) on investments (6.3) 0.8 (8.1) (8.2) (10.0) (8.2)
Gains (losses) on derivatives (0.0) 0.2 (0.1)
------- ------- ------- ------- ------- -------
Total Revenue 444.2 453.2 479.9 459.6 455.7 460.6
======= ======= ======= ======= ======= =======
Average capital 2615.0 2650.5 2640.0 2729.8 2715.7 2736.3
Return on average capital 9.6% 10.0% 10.7% 10.1% 9.9% 10.2%
First Year Premiums by Product (Billions)
Lincoln Life
Universal Life 0.042 0.047 0.056 0.035 0.045 0.034
Variable Universal Life 0.043 0.052 0.072 0.053 0.050 0.047
Whole Life 0.005 0.006 0.008 0.004 0.005 0.007
Term 0.001 0.000 0.001 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Subtotal 0.089 0.105 0.137 0.093 0.101 0.088
Corporate Owned Life Insurance (COLI) 0.019 0.006 0.049 0.007 0.021 0.005
------- ------- ------- ------- ------- -------
Total Lincoln Life 0.109 0.111 0.186 0.100 0.122 0.093
------- ------- ------- ------- ------- -------
First Penn-Pacific
Universal Life 0.021 0.024 0.023 0.022 0.023 0.030
Term 0.013 0.010 0.009 0.007 0.008 0.010
------- ------- ------- ------- ------- -------
Total First Penn-Pacific 0.034 0.035 0.032 0.029 0.031 0.040
------- ------- ------- ------- ------- -------
Total Segment by Product 0.142 0.145 0.218 0.129 0.154 0.134
======= ======= ======= ======= ======= =======
First Year Premiums by Distribution (Billions)
Lincoln Financial Advisors 0.035 0.050 0.065 0.035 0.046 0.037
Lincoln Financial Distributors 0.107 0.095 0.153 0.093 0.108 0.096
------- ------- ------- ------- ------- -------
Total by Distribution 0.142 0.145 0.218 0.129 0.154 0.134
======= ======= ======= ======= ======= =======
Individual Insurance In-Force (Billions)
Universal Life & Other 110.448 112.884 115.872 116.747 118.007 119.029
Term Insurance 97.039 98.424 100.130 102.467 105.265 108.723
------- ------- ------- ------- ------- -------
Total Segment In-Force 207.487 211.308 216.002 219.214 223.272 227.751
======= ======= ======= ======= ======= =======
* Third quarter 2001 income from operations and net income include special charges of $1.9 million after-
tax ($2.9 million pre-tax) related to the events of September 11, 2001.
9/30/2001 PAGE 19
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
YTD YTD
Sep Sep
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------- -------
Lincoln Life
Universal Life-Bal Beg-of-Year 1.507 1.538 1.479 5.093 5.385 5.385 5.645
Deposits 0.160 0.136 0.527 0.861 0.819 0.588 0.622
Withdrawals & deaths (0.221) (0.284) (0.575) (0.385) (0.347) (0.254) (0.185)
------- ------- ------- ------- ------- ------- -------
Net cash flows (0.061) (0.148) (0.048) 0.475 0.472 0.334 0.437
Policyholder assessments (0.483) (0.518) (0.385) (0.395)
Interest credited 0.092 0.088 0.285 0.300 0.306 0.228 0.241
Acq of new business/companies 0.000 0.000 3.378 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- ------- -------
Universal Life-Bal End of Year (1) 1.538 1.479 5.093 5.385 5.645 5.562 5.928
------- ------- ------- ------- ------- ------- -------
Variable Universal Life-Bal Beg-of-Year 0.239 0.339 0.480 1.200 1.605 1.605 1.808
Deposits 0.095 0.106 0.193 0.326 0.607 0.362 0.397
Withdrawals & deaths (0.030) (0.040) (0.100) (0.099) (0.132) (0.084) (0.163)
------- ------- ------- ------- ------- ------- -------
Net cash flows 0.065 0.065 0.093 0.228 0.475 0.278 0.234
Policyholder assessments (0.084) (0.141) (0.100) (0.125)
Invest inc & chg in mkt value 0.035 0.076 0.105 0.370 (0.130) 0.030 (0.391)
Acq of new business/transfers between segments 0.000 0.000 0.522 (0.110) 0.000 0.000 0.000
------- ------- ------- ------- ------- ------- -------
Variable Universal Life -Bal End-of-Year 0.339 0.480 1.200 1.605 1.808 1.812 1.527
------- ------- ------- ------- ------- ------- -------
Interest Sensitive Whole Life - Bal Beg-of-Year 1.784 1.963 1.963 2.062
Deposits 0.340 0.355 0.322 0.210 0.202
Withdrawals & deaths (0.294) (0.162) (0.168) (0.112) (0.139)
------- ------- ------- ------- ------- ------- -------
Net cash flows 0.046 0.193 0.154 0.097 0.063
Policyholder assessments (0.168) (0.168) (0.118) (0.117)
Interest credited 0.096 0.109 0.113 0.084 0.088
Acq of new business/companies 1.642 0.045
------- ------- ------- ------- ------- ------- -------
Int Sensitive Whole Life-Bal End -of -Year 1.784 1.963 2.062 2.026 2.096
------- ------- ------- ------- ------- ------- -------
Total Lincoln Life -Bal Beg-of-Year 1.746 1.877 1.959 8.077 8.952 8.952 9.516
Deposits 0.255 0.242 1.059 1.542 1.749 1.160 1.221
Withdrawals & deaths (0.251) (0.324) (0.968) (0.646) (0.647) (0.451) (0.487)
------- ------- ------- ------- ------- ------- -------
Net cash flows 0.004 (0.082) 0.091 0.896 1.102 0.709 0.734
Policyholder assessments (0.734) (0.827) (0.604) (0.636)
Invest inc & chg in mkt value 0.127 0.164 0.486 0.778 0.289 0.342 (0.062)
Acq of new business/transfers between segments 5.542 (0.065)
------- ------- ------- ------- ------- ------- -------
Total Lincoln Life - Bal End -of -Year 1.877 1.959 8.077 8.952 9.516 9.400 9.552
------- ------- ------- ------- ------- ------- -------
VUL Under Agree -included above 0.631 0.704 0.609 0.698 0.465
First Penn-Pacific (FPP)
Universal Life-Bal Beg-of-Year 0.883 0.992 1.079 1.166 1.265 1.265 1.331
Deposits 0.150 0.142 0.148 0.156 0.135 0.102 0.107
Withdrawals & deaths (0.098) (0.115) (0.126) (0.067) (0.079) (0.058) (0.062)
------- ------- ------- ------- ------- ------- -------
Net cash flows 0.052 0.027 0.022 0.089 0.056 0.044 0.045
Policyholder assessments (0.060) (0.065) (0.048) (0.049)
Interest credited 0.056 0.061 0.065 0.071 0.076 0.056 0.060
------- ------- ------- ------- ------- ------- -------
FPP Universal Life-Bal End-of-Year 0.992 1.079 1.166 1.265 1.331 1.317 1.387
------- ------- ------- ------- ------- ------- -------
Total Segment- Life Insurance Account Values
Bal Beg-of-Year 2.629 2.869 3.038 9.243 10.217 10.217 10.847
Deposits 0.405 0.384 1.207 1.698 1.884 1.262 1.328
Withdrawals & deaths (0.349) (0.439) (1.095) (0.713) (0.727) (0.509) (0.549)
------- ------- ------- ------- ------- ------- -------
Net cash flows 0.056 (0.056) 0.113 0.985 1.158 0.753 0.780
Policyholder assessments (0.795) (0.893) (0.652) (0.685)
Invest inc & change in market value 0.183 0.225 0.551 0.849 0.364 0.398 (0.002)
Acq(sale) of new business/companies 5.542 (0.065)
------- ------- ------- ------- ------- ------- -------
Total Segment -Bal End-of-Year 2.869 3.038 9.243 10.217 10.847 10.716 10.939
======= ======= ======= ======= ======= ======= =======
9/30/2001 PAGE 20
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
--------------------------------------------------------------------------------------------------------------------
Lincoln Life
Universal Life-Bal Beg-of-Quarter 3.013 5.093 5.183 5.219 5.279 5.385
Deposits 0.223 0.194 0.199 0.198 0.270 0.216
Withdrawals & deaths (0.236) (0.050) (0.135) (0.091) (0.110) (0.097)
------ ------ ------ ------ ------ ------
Net cash flows (0.013) 0.144 0.064 0.107 0.160 0.118
Policyholder assessments 0.000 (0.116) (0.118) (0.121) (0.129) (0.129)
Interest credited 0.152 0.062 0.089 0.073 0.075 0.075
Acq of new business/companies 1.941 0.000 0.000
------ ------ ------ ------ ------ ------
Universal Life-Bal End-of-Quarter (1) 5.093 5.183 5.219 5.279 5.385 5.449
------ ------ ------ ------ ------ ------
Variable Universal Life-Bal Beg of Quarter 0.561 1.200 1.177 1.298 1.285 1.605
Deposits 0.095 0.077 0.068 0.074 0.107 0.112
Withdrawals & deaths (0.063) (0.011) (0.013) (0.049) (0.025) (0.019)
------ ------ ------ ------ ------ ------
Net cash flows 0.032 0.066 0.055 0.025 0.082 0.093
Policyholder assessments 0.000 (0.020) (0.020) (0.020) (0.024) (0.032)
Invest inc & chg in mkt value 0.103 0.040 0.087 (0.018) 0.262 0.105
Acq of new business/transfers between segments 0.504 (0.110) 0.000
------ ------ ------ ------ ------ ------
Variable Universal Life -Bal End-of-Quarter 1.200 1.177 1.298 1.285 1.605 1.771
------ ------ ------ ------ ------ ------
Interest Sensitive Whole Life - Bal Beg-of-Quarter 1.730 1.784 1.865 1.895 1.922 1.963
Deposits 0.116 0.083 0.073 0.086 0.113 0.060
Withdrawals & deaths (0.085) (0.039) (0.030) (0.044) (0.050) (0.042)
------ ------ ------ ------ ------ ------
Net cash flows 0.031 0.044 0.044 0.043 0.062 0.018
Policyholder assessments (0.039) (0.039) (0.042) (0.048) (0.039)
Interest credited 0.024 0.030 0.025 0.027 0.026 0.028
Acq of new business/companies 0.045
------ ------ ------ ------ ------ ------
Int Sensitive Whole Life-Bal End-of-Quarter 1.784 1.865 1.895 1.922 1.963 1.970
------ ------ ------ ------ ------ ------
Total Lincoln Life -Bal Beg-of-Quarter 5.304 8.077 8.225 8.412 8.485 8.952
Deposits 0.433 0.354 0.340 0.358 0.490 0.387
Withdrawals & deaths (0.383) (0.100) (0.178) (0.184) (0.185) (0.158)
------ ------ ------ ------ ------ ------
Net cash flows 0.050 0.254 0.163 0.175 0.305 0.229
Policyholder assessments (0.174) (0.176) (0.183) (0.201) (0.199)
Invest inc & chg in mkt value 0.279 0.132 0.201 0.082 0.363 0.208
Acq of new business/transfers between segments 2.445 (0.065)
------ ------ ------ ------ ------ ------
Total Lincoln Life - Bal End-of-Quarter 8.077 8.225 8.412 8.485 8.952 9.190
------ ------ ------ ------ ------ ------
VUL Under Agree -included above 0.631 0.699 0.770 0.681 0.704 0.743
First Penn-Pacific (FPP)
Universal Life-Bal Beg-of-Quarter 1.140 1.166 1.191 1.215 1.240 1.265
Deposits 0.041 0.040 0.039 0.041 0.036 0.036
Withdrawals & deaths (0.032) (0.017) (0.017) (0.019) (0.014) (0.024)
------ ------ ------ ------ ------ ------
Net cash flows 0.009 0.023 0.022 0.022 0.022 0.013
Policyholder assessments (0.015) (0.015) (0.016)
Interest credited 0.017 0.017 0.017 0.018 0.018 0.019
------ ------ ------ ------ ------ ------
FPP Universal Life-Bal End-of-Quarter 1.166 1.191 1.215 1.240 1.265 1.280
------ ------ ------ ------ ------ ------
Total Segment- Life Insurance Account Values
Bal Beg-of-Quarter 6.444 9.243 9.416 9.628 9.726 10.217
Deposits 0.475 0.394 0.379 0.399 0.526 0.424
Withdrawals & deaths (0.415) (0.117) (0.195) (0.202) (0.199) (0.182)
------ ------ ------ ------ ------ ------
Net cash flows 0.060 0.277 0.185 0.197 0.327 0.242
Policyholder assessments (0.198) (0.216) (0.215)
Invest inc & change in market value 0.295 0.149 0.219 0.100 0.381 0.227
Acq(sale) of new business/companies 2.445 (0.065) 0.000 0.000 0.000 0.000
------ ------ ------ ------ ------ ------
Total Segment -Bal End-of-Quarter 9.243 9.416 9.628 9.726 10.217 10.470
====== ====== ====== ====== ====== ======
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
-------------------------------------------------------------------------------------------------------------------
Lincoln Life
Universal Life-Bal Beg-of-Quarter 5.449 5.486 5.562 5.645 5.718 5.848
Deposits 0.181 0.192 0.231 0.194 0.236 0.191
Withdrawals & deaths (0.093) (0.064) (0.093) (0.069) (0.056) (0.060)
------ ------ ------ ------ ------ ------
Net cash flows 0.088 0.128 0.139 0.125 0.181 0.131
Policyholder assessments (0.127) (0.129) (0.133) (0.131) (0.131) (0.132)
Interest credited 0.076 0.077 0.078 0.078 0.080 0.082
Acq of new business/companies 0.000
------ ------ ------ ------ ------ ------
Universal Life-Bal End-of-Quarter (1) 5.486 5.562 5.645 5.718 5.848 5.928
------ ------ ------ ------ ------ ------
Variable Universal Life-Bal Beg of Quarter 1.771 1.764 1.812 1.808 1.633 1.766
Deposits 0.128 0.123 0.245 0.136 0.138 0.124
Withdrawals & deaths (0.028) (0.037) (0.048) (0.049) (0.060) (0.055)
------ ------ ------ ------ ------ ------
Net cash flows 0.100 0.085 0.197 0.087 0.078 0.069
Policyholder assessments (0.033) (0.036) (0.041) (0.041) (0.041) (0.042)
Invest inc & chg in mkt value (0.074) (0.001) (0.160) (0.221) 0.096 (0.266)
Acq of new business/transfers between segments 0.000 0.000
------ ------ ------ ------ ------ ------
Variable Universal Life -Bal End-of-Quarter 1.764 1.812 1.808 1.633 1.766 1.527
------ ------ ------ ------ ------ ------
Interest Sensitive Whole Life - Bal Beg-of-Quarter 1.970 1.993 2.026 2.062 2.068 2.084
Deposits 0.071 0.079 0.113 0.056 0.069 0.077
Withdrawals & deaths (0.037) (0.033) (0.056) (0.041) (0.043) (0.054)
------ ------ ------ ------ ------ ------
Net cash flows 0.034 0.045 0.057 0.014 0.027 0.022
Policyholder assessments (0.040) (0.040) (0.050) (0.037) (0.040) (0.041)
Interest credited 0.028 0.027 0.029 0.028 0.030 0.030
Acq of new business/companies
------ ------ ------ ------ ------ ------
Int Sensitive Whole Life-Bal End-of-Quarter 1.993 2.026 2.062 2.068 2.084 2.096
------ ------ ------ ------ ------ ------
Total Lincoln Life -Bal Beg-of-Quarter 9.190 9.242 9.400 9.516 9.419 9.698
Deposits 0.380 0.393 0.589 0.386 0.443 0.392
Withdrawals & deaths (0.158) (0.135) (0.196) (0.159) (0.158) (0.170)
------ ------ ------ ------ ------ ------
Net cash flows 0.222 0.258 0.392 0.226 0.285 0.223
Policyholder assessments (0.200) (0.205) (0.224) (0.209) (0.212) (0.215)
Invest inc & chg in mkt value 0.030 0.104 (0.053) (0.114) 0.206 (0.154)
Acq of new business/transfers between segments
------ ------ ------ ------ ------ ------
Total Lincoln Life - Bal End-of-Quarter 9.242 9.400 9.516 9.419 9.698 9.552
------ ------ ------ ------ ------ ------
VUL Under Agree -included above 0.707 0.698 0.609 0.527 0.549 0.465
First Penn-Pacific (FPP)
Universal Life-Bal Beg-of-Quarter 1.280 1.296 1.317 1.331 1.345 1.368
Deposits 0.031 0.035 0.033 0.032 0.034 0.041
Withdrawals & deaths (0.018) (0.016) (0.021) (0.022) (0.015) (0.025)
------ ------ ------ ------ ------ ------
Net cash flows 0.013 0.019 0.012 0.011 0.019 0.016
Policyholder assessments (0.016) (0.017) (0.017) (0.016) (0.016) (0.017)
Interest credited 0.019 0.019 0.019 0.020 0.020 0.020
------ ------ ------ ------ ------ ------
FPP Universal Life-Bal End-of-Quarter 1.296 1.317 1.331 1.345 1.368 1.387
------ ------ ------ ------ ------ ------
Total Segment- Life Insurance Account Values
Bal Beg-of-Quarter 10.470 10.538 10.716 10.847 10.764 11.066
Deposits 0.411 0.428 0.622 0.418 0.477 0.434
Withdrawals & deaths (0.176) (0.151) (0.218) (0.181) (0.173) (0.195)
------ ------ ------ ------ ------ ------
Net cash flows 0.235 0.277 0.404 0.237 0.304 0.239
Policyholder assessments (0.216) (0.221) (0.241) (0.225) (0.228) (0.232)
Invest inc & change in market value 0.048 0.123 (0.033) (0.094) 0.226 (0.134)
Acq(sale) of new business/companies 0.000 0.000 0.000 0.000 0.000 0.000
------ ------ ------ ------ ------ ------
Total Segment -Bal End-of-Quarter 10.538 10.716 10.847 10.764 11.066 10.939
====== ====== ====== ====== ====== ======
(1) Includes fixed investment option of VUL products.
9/30/01 PAGE 21
Reinsurance
Income Statements & Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1996 1997 1998 1999 2000 2000 2001
------ ------ ------ ------ ------ ------ ------
Operating Revenue
Life and annuity premiums 472.2 466.7 592.0 743.1 968.5 695.4 847.8
Health premiums 775.6 566.1 628.6 692.3 404.6 316.0 302.4
Surrender charges 2.7 3.4 3.3 2.8 3.7 2.9 1.8
Mortality assessments 0.0 0.0 0.7 0.7 0.0 0.0 0.1
Expense assessments 0.0 0.0 0.3 0.3 (0.0) (0.0) (0.0)
Other revenue and fees 28.7 35.5 37.9 62.5 71.3 50.6 45.9
Net investment income 264.2 288.6 315.0 316.6 320.3 243.2 234.5
Equity earnings in unconsol affiliates 0.0 2.1 3.3 5.8 2.1 1.5 1.3
------ ------ ------ ------ ------ ------ ------
Operating Revenue 1543.3 1362.3 1581.2 1824.1 1770.6 1309.5 1433.8
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Life and annuity policy benefits 305.7 321.4 452.2 530.6 716.1 516.9 646.6
Div accum & div to policyholders 9.3 9.3 7.3 6.9 6.7 4.6 4.0
Interest credited to policy bal. 40.3 50.3 44.1 47.3 42.2 30.3 26.6
Health policy benefits 658.6 824.4 556.3 646.5 434.8 346.5 268.7
Underwriting, acquisition
insurance and other expenses 413.0 388.0 359.9 531.7 380.5 277.4 331.3
Goodwill amortization 0.0 0.0 0.0 0.4 1.8 1.3 1.4
Interest on notes payable 2.9 0.0 1.0 11.2 8.0 7.1
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 1429.7 1593.6 1419.7 1764.4 1593.2 1185.1 1285.7
------ ------ ------ ------ ------ ------ ------
Income from Operations Before Tax 113.5 (231.3) 161.4 59.7 177.3 124.4 148.1
Federal income taxes 38.7 (81.2) 56.5 19.6 54.8 38.5 50.0
------ ------ ------ ------ ------ ------ ------
Income from Operations (1) 74.8 (150.1) 104.9 40.1 122.5 85.9 98.1
Realized gains (losses) on investments 12.0 16.3 (2.6) 3.7 (0.9) (2.1) (10.7)
Gains(losses) on derivatives (0.0)
Restructuring charges (3.2) 0.7
------ ------ ------ ------ ------ ------ ------
Income before Accounting Changes 86.8 (133.8) 102.3 40.6 122.3 83.8 87.4
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 (2.4)
------ ------ ------ ------ ------ ------ ------
Net Income (1) 86.8 (133.8) 102.3 40.6 122.3 83.8 85.0
====== ====== ====== ====== ====== ====== ======
Inc from Oper -before Goodwill Amort. 74.8 (150.1) 104.9 40.5 124.2 87.2 99.5
Effective tax rate 34.1% 35.1% 35.0% 32.8% 30.9% 31.0% 33.8%
Operating Revenue 1543.3 1362.3 1581.2 1824.1 1770.6 1309.5 1433.8
Realized gains (losses) on investments 18.5 25.3 (3.5) 5.7 (1.3) (3.5) (16.5)
Gains(losses) on derivatives (0.0)
------ ------ ------ ------ ------ ------ ------
Total Revenue 1561.8 1387.5 1577.7 1829.7 1769.3 1306.1 1417.2
====== ====== ====== ====== ====== ====== ======
Revenue by Source
Individual Markets 468.1 503.9 633.6 814.1 1053.4 758.4 916.0
Group Markets 158.7 131.6 130.6 168.0 318.0 240.8 260.7
Financial Reinsurance 531.1 365.2 279.3 344.5 127.3 93.7 82.1
Other 20.0 26.5 8.5 (5.0) 12.7 9.5 12.1
------ ------ ------ ------ ------ ------ ------
Total Revenue, Excl Exited Businesses 1177.9 1027.2 1052.0 1321.6 1511.4 1102.4 1270.9
Exited Businesses Under Management (2) 383.9 360.3 525.7 508.1 257.9 203.7 146.3
------ ------ ------ ------ ------ ------ ------
Total Revenue 1561.8 1387.5 1577.7 1829.7 1769.3 1306.1 1417.2
====== ====== ====== ====== ====== ====== ======
Income from Operations by Source
Individual Markets 49.8 71.9 83.5 91.9 90.6 62.3 61.2
Group Markets 10.2 3.3 1.6 (1.6) 7.5 3.7 7.5
Financial Reinsurance 17.5 15.5 17.1 21.7 20.3 15.7 12.0
Other (2.0) (2.0) (3.4) (4.4) (7.7) (4.4) (3.3)
------ ------ ------ ------ ------ ------ ------
Inc from Oper, Excl Exited Businesses 75.6 88.7 98.8 107.6 110.7 77.3 77.4
Exited Businesses Under Management (2) (0.8) (238.8) 6.1 (67.4) 11.8 8.6 20.7
------ ------ ------ ------ ------ ------ ------
Inc from Operations (1) 74.8 (150.1) 104.9 40.1 122.5 85.9 98.1
====== ====== ====== ====== ====== ====== ======
Risk Premium (3) 362.4 384.1 451.5 543.7 675.5 490.4 618.7
Individual Life Sales
[Billions of Dollars] 26.6 39.5 78.1 116.8 139.5 104.3 87.8
Ind Life In-Force 130.8 153.1 213.6 306.6 407.4 381.4 468.9
Group Life In-Force 30.1 30.4 36.7 34.2 29.3 31.2 28.4
------ ------ ------ ------ ------ ------ ------
Total Life In-Force 160.9 183.5 250.3 340.8 436.7 412.6 497.3
====== ====== ====== ====== ====== ====== ======
[Billions of Dollars]
Ratios [Percentages]
Individual Life Mortality
Actual to Expected Loss Ratio 93.0 84.9 87.8 88.9 97.8 99.3 102.6
Employer Stop Loss-
Loss Ratio 67.6 52.8 77.7 84.3 74.0 74.6 71.7
Combined Ratio 93.3 84.7 108.4 115.0 99.4 100.5 96.0
Average Capital 651.7 791.8 966.6 1069.3 1078.3 1063.0 1071.5
Average Capital, Excl Exited Business 389.6 459.1 486.1 603.1 744.2 728.9 792.1
Return on Average Capital, Excl Exited Business 19.4% 19.3% 20.3% 17.8% 14.9% 14.1% 13.0%
(1) 1999 and 1997 income includes special charges of $65.4 million and $243.7 million, respectively. Year-to-date 2001 income
from operations and net income include special charges of $31.3 million after-tax ($48.2 million pre-tax) related to the
events of September 11, 2001.
(2) Exited Businesses Under Mgmt incl. disability inc., HMO excess-of-loss, carrier medical, personal accident and Seguros
Serfin Lincoln (through March 2000).
(3) Risk premium is an internal measure used to gauge the earnings power of the Individual Markets segment and is equal to
total operating revenue less commissions, investment income on surplus, and that portion of revenue required to fund
policy reserves.
9/30/01 PAGE 22
Reinsurance
Income Statements & Operational Data
Unaudited [Millions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
------ ------ ------ ------ ------ ------
Operating Revenue
Life and annuity premiums 200.1 172.0 173.1 166.2 231.9 227.4
Health premiums 163.5 153.3 158.7 148.3 232.0 57.0
Surrender charges 0.9 1.2 0.4 0.6 0.7 0.6
Mortality assessments 0.7 0.7 0.1 0.0 (0.2) 0.0
Expense assessments 0.3 0.4 (0.0) 0.0 (0.2) (0.0)
Other revenue and fees 12.0 10.6 13.3 6.6 32.0 15.8
Net investment income 80.3 79.6 79.2 80.8 77.0 91.0
Equity earnings in unconsol affiliates 1.3 1.6 1.1 1.2 1.8 1.0
------ ------ ------ ------ ------ ------
Operating Revenue 459.1 419.4 425.8 403.7 575.1 392.7
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Life and annuity policy benefits 192.4 124.3 123.0 108.8 174.5 165.4
Div accum & div to policyholders 1.6 1.3 1.5 1.9 2.2 1.3
Interest credited to policy bal. 12.2 8.9 10.9 6.0 21.5 9.0
Health policy benefits 129.0 143.5 161.7 187.4 153.9 110.0
Underwriting, acquisition,
insurance and other expenses 85.2 89.1 92.9 94.9 254.8 60.1
Goodwill amortization 0.0 (0.0) (0.8) 0.8 0.4 0.4
Interest on notes payable 0.0 0.0 0.0 0.0 1.0 2.3
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 420.5 367.1 389.2 399.7 608.4 348.6
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 38.6 52.4 36.7 3.9 (33.3) 44.2
Federal income taxes 13.3 18.6 13.0 1.7 (13.7) 12.2
------ ------ ------ ------ ------ ------
Income from Operations (1) 25.3 33.8 23.7 2.2 (19.5) 31.9
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments (1.4) 0.7 0.3 0.3 2.4 1.2
Gains (losses) on derivatives
Restructuring charges (3.2)
------ ------ ------ ------ ------ ------
Income before Accounting Changes 23.9 34.5 24.0 (0.7) (17.1) 33.1
------ ------ ------ ------ ------ ------
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0
Net Income (1) 23.9 34.5 24.0 (0.7) (17.1) 33.1
====== ====== ====== ====== ====== ======
Inc from Oper -before
Goodwill Amortization 25.3 33.7 22.8 3.0 (19.1) 32.3
Effective tax rate 34.5% 35.5% 35.5% 43.3% 41.3% 27.7%
Operating Revenue 459.1 419.4 425.8 403.7 575.1 392.7
Realized gains (losses) on investments (1.8) 1.2 0.4 0.4 3.6 1.7
Gains (losses) on derivatives
------ ------ ------ ------ ------ ------
Total Revenue 457.2 420.6 426.2 404.1 578.8 394.4
====== ====== ====== ====== ====== ======
Revenue by Source (Including Investment
Gains/Losses)
Individual Markets 214.3 187.9 191.4 182.0 252.9 246.8
Group Markets 33.0 36.5 37.1 38.4 56.0 87.7
Financial Reinsurance 58.4 80.6 81.9 72.5 109.5 34.6
Other (1.4) (2.7) (1.6) (1.0) 0.3 3.1
------ ------ ------ ------ ------ ------
Total Revenue, Excl Exited Businesses 304.4 302.2 308.8 291.9 418.7 372.2
Exited Businesses Under Management (2) 152.9 118.4 117.4 112.2 160.0 22.3
------ ------ ------ ------ ------ ------
Total Revenue 457.2 420.6 426.2 404.1 578.8 394.4
====== ====== ====== ====== ====== ======
Income from Operations by Source
Individual Markets 26.6 25.4 21.3 24.9 20.2 19.2
Group Markets 0.1 0.9 0.4 (1.3) (1.7) 1.0
Financial Reinsurance 5.5 7.3 4.7 4.2 5.5 7.2
Other (0.5) (1.1) (1.1) (0.7) (1.4) (1.7)
------ ------ ------ ------ ------ ------
Inc from Oper, Excl Exited Businesses 31.6 32.5 25.4 27.1 22.6 25.7
Exited Businesses Under Management (2) (6.3) 1.3 (1.7) (24.8) (42.2) 6.2
------ ------ ------ ------ ------ ------
Income from Operations 25.3 33.8 23.7 2.2 (19.5) 31.9
====== ====== ====== ====== ====== ======
Risk Premium (3) 144.1 130.4 128.4 129.0 155.8 152.9
Individual Life Sales
[Billions of Dollars] 40.2 18.5 20.0 28.8 49.6 30.0
Ind Life In-Force 213.6 225.1 240.0 261.5 306.6 325.9
Group Life In-Force 36.7 38.3 38.5 35.6 34.2 32.5
------ ------ ------ ------ ------ ------
Total Life In-Force 250.3 263.4 278.5 297.1 340.8 358.4
====== ====== ====== ====== ====== ======
[Billions of Dollars]
Ratios [Percentages]
Individual Life Mortality
Actual to Expected Loss Ratio 94.3 85.8 88.9 81.7 97.2 99.5
Employer Stop Loss-
Loss Ratio 114.3 68.5 81.0 100.8 84.5 74.7
Combined Ratio 141.8 100.8 119.1 133.1 111.8 99.8
Average Capital 1019.6 1094.8 1064.9 1056.6 1060.9 1075.0
Average Capital, Excl Exited Business 507.8 571.4 577.8 615.1 648.0 692.7
Return on Average Capital,
Excluding Exited Business 24.9% 22.8% 17.6% 17.6% 14.0% 14.8%
Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
------ ------ ------ ------ ------ ------
Operating Revenue
Life and annuity premiums 229.1 238.9 273.2 320.0 261.9 265.9
Health premiums 142.6 116.5 88.6 104.2 94.9 103.3
Surrender charges 1.4 0.9 0.8 0.9 0.4 0.6
Mortality assessments 0.0 0.0 0.0 0.0 0.0 0.0
Expense assessments (0.0) (0.0) (0.0) (0.0) (0.0) (0.0)
Other revenue and fees 11.9 22.9 20.8 11.3 15.0 19.6
Net investment income 73.7 78.5 77.2 77.9 79.2 77.5
Equity earnings in unconsol affiliates 0.2 0.2 0.6 0.9 0.0 0.4
------ ------ ------ ------ ------ ------
Operating Revenue 458.9 457.9 461.0 515.1 451.4 467.4
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Life and annuity policy benefits 173.5 178.0 199.2 229.4 181.6 235.6
Div accum & div to policyholders 1.5 1.8 2.1 1.4 1.2 1.5
Interest credited to policy bal. 8.6 12.8 11.9 9.1 8.7 8.7
Health policy benefits 116.8 119.7 88.2 97.5 89.6 81.6
Underwriting, acquisition
insurance and other expenses 117.2 100.1 103.1 103.7 115.8 111.7
Goodwill amortization 0.4 0.4 0.4 0.4 0.4 0.5
Interest on notes payable 2.7 3.0 3.2 2.8 2.3 1.9
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 420.6 415.9 408.1 444.5 399.7 441.6
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 38.2 42.0 52.9 70.6 51.7 25.8
Federal income taxes 12.4 13.8 16.3 23.8 17.6 8.6
------ ------ ------ ------ ------ ------
Income from Operations (1) 25.8 28.2 36.6 46.8 34.1 17.2
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments (1.1) (2.2) 1.2 (4.6) (1.7) (4.4)
Gains (losses) on derivatives 0.0 (0.0) (0.1)
Restructuring charges 0.7
------ ------ ------ ------ ------ ------
Income before Accounting Changes 24.7 26.0 38.5 42.2 32.4 12.8
Cumulative effect of accounting changes 0.0 0.0 0.0 (0.1) (2.2) 0.0
Net Income (1) 24.7 26.0 38.5 42.0 30.2 12.8
====== ====== ====== ====== ====== ======
Inc from Oper -before
Goodwill Amortization 26.3 28.6 37.0 47.2 34.6 17.7
Effective tax rate 32.5% 32.9% 30.8% 33.8% 34.0% 33.5%
Operating Revenue 458.9 457.9 461.0 515.1 451.4 467.4
Realized gains (losses) on investments (1.7) (3.5) 2.2 (7.1) (2.7) (6.8)
Gains (losses) on derivatives 0.0 0.0 (0.1)
------ ------ ------ ------ ------ ------
Total Revenue 457.2 454.4 463.2 508.0 448.7 460.5
====== ====== ====== ====== ====== ======
Revenue by Source (Including Investment
Gains/Losses)
Individual Markets 249.2 262.4 295.0 340.7 284.9 290.4
Group Markets 75.6 77.5 77.2 84.9 87.1 88.7
Financial Reinsurance 29.8 29.4 33.6 24.8 28.7 28.7
Other 2.5 3.9 3.2 3.8 2.9 5.5
------ ------ ------ ------ ------ ------
Total Revenue, Excl Exited Businesses 357.1 373.1 409.0 454.2 403.5 413.2
Exited Businesses Under Management (2) 100.1 81.3 54.2 53.8 45.2 47.3
------ ------ ------ ------ ------ ------
Total Revenue 457.2 454.4 463.2 508.0 448.7 460.5
====== ====== ====== ====== ====== ======
Income from Operations by Source
Individual Markets 22.6 20.5 28.3 39.5 24.8 (3.1)
Group Markets 1.2 1.5 3.7 2.5 3.2 1.8
Financial Reinsurance 4.0 4.5 4.6 3.7 6.8 1.5
Other (1.6) (1.1) (3.3) (1.1) (1.3) (0.8)
------ ------ ------ ------ ------ ------
Inc from Oper, Excl Exited Businesses 26.3 25.4 33.4 44.6 33.4 (0.6)
Exited Businesses Under Management (2) (0.4) 2.8 3.2 2.2 0.7 17.8
------ ------ ------ ------ ------ ------
Income from Operations 25.8 28.2 36.6 46.8 34.1 17.2
====== ====== ====== ====== ====== ======
Risk Premium (3) 158.5 179.0 185.1 229.0 194.3 195.4
Individual Life Sales
[Billions of Dollars] 37.2 37.2 35.2 30.9 28.3 28.6
Ind Life In-Force 354.0 381.4 407.4 426.2 447.8 468.9
Group Life In-Force 30.5 31.2 29.3 27.2 27.9 28.4
------ ------ ------ ------ ------ ------
Total Life In-Force 384.4 412.6 436.7 453.4 475.7 497.3
====== ====== ====== ====== ====== ======
[Billions of Dollars]
Ratios [Percentages]
Individual Life Mortality
Actual to Expected Loss Ratio 96.9 101.2 93.9 88.7 97.4 123.4
Employer Stop Loss-
Loss Ratio 72.6 76.5 72.0 71.4 73.8 69.9
Combined Ratio 100.8 100.9 95.9 95.8 96.9 95.2
Average Capital 1039.0 1075.0 1124.3 1100.0 1062.7 1051.8
Average Capital, Excl Exited Business 732.7 761.1 790.1 773.5 791.1 811.6
Return on Average Capital,
Excluding Exited Business 14.3% 13.3% 16.9% 23.0% 16.9% (0.3%)
(1) Third quarter 1999 and fourth quarter 1999 income includes special charges of $25.0 million and $40.4
million, respectively. The first quarter 2001 includes $25.5 million for a change in estimate of premiums
receivable. Third quarter 2001 income from operations and net income include special charges of $31.3
million after-tax ($48.2 million pre-tax) related to the events of September 11, 2001.
(2) Exited Businesses Under Mgmt incl. disability inc., HMO excess-of-loss, carrier medical, personal
accident and Seguros Serfin Lincoln (through March 2000).
(3) Risk premium is an internal measure used to gauge the earnings power of the Individual Markets
segment and is equal to total operating revenue less commissions, investment income on surplus,
and that portion of revenue required to fund policy reserves. The risk premium for the first quarter
2001, includes the effect of the change in estimate for premiums receivable.
9/30/2001 PAGE 23
Investment Management
Income Statements
Unaudited [Millions of Dollars]
For the Year Ended December 31 1996
---------------------------------------------------------------------------------------------
Operating Revenue
Investment advisory fees - External 199.8
Investment advisory fees - Insurance Assets 65.7
Other revenue and fees 59.3
Net investment income 75.8
------
Operating Revenue 400.6
------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses 350.1
Goodwill amortization 13.7
Interest on notes payable 0.0
------
Operating Benefits and Expenses 363.8
------
Income from Operations Before Tax 36.8
Federal income taxes 18.2
------
Income from Operations 18.6
------
Realized gains (losses) on investments 6.4
Gains(losses) on derivatives
Restructuring Charges 0.0
------
Income before Accounting Changes 25.0
Cumulative effect of accounting changes
------
Net Income 25.0
======
Income from Operations- before Goodwill Amortization 32.4
Income from Operations - before Goodwill & Intang. Amort 42.6
Operating Revenue 400.6
Realized gains (losses) on investments 9.9
Gains(losses) on derivatives
------
Total Revenue 410.5
======
Average Capital (Securities at Cost) 646.1
Return on Capital 2.9%
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
---------------------------------------------------------------------------------------------
Operating Revenue
Investment advisory fees - External 62.5 65.1 62.5 60.7 60.3 60.0
Investment advisory fees - Insurance Assets 20.8 21.0 20.7 19.9 22.1 21.0
Other revenue and fees 24.9 25.6 26.3 24.9 29.8 31.9
Net investment income 16.7 14.9 14.1 13.9 13.9 13.0
------ ------ ------ ------ ------ ------
Operating Revenue 124.9 126.6 123.6 119.3 126.1 126.0
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses 98.5 97.8 97.3 92.8 96.3 102.5
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 102.6 101.9 101.4 96.8 100.4 106.6
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 22.3 24.7 22.2 22.5 25.7 19.4
Federal income taxes 7.7 9.4 7.9 7.7 9.1 7.0
------ ------ ------ ------ ------ ------
Income from Operations 14.6 15.4 14.3 14.7 16.5 12.4
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 1.8 0.2 (0.3) (0.3) 0.4 (0.1)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring Charges 0.0 (12.1) 0.0 0.0 2.9 0.0
------ ------ ------ ------ ------ ------
Income before Accounting Changes 16.4 3.4 14.0 14.4 19.8 12.3
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Net Income 16.4 3.4 14.0 14.4 19.8 12.3
====== ====== ====== ====== ====== ======
Inc from Oper -before
Goodwill Amortization 18.7 19.4 18.4 18.8 20.6 16.5
Inc from Oper -before
Goodwill & Intang. Amort 21.9 22.4 21.3 21.7 23.3 19.4
Operating Revenue 124.9 126.6 123.6 119.3 126.1 126.0
Realized gains (losses) on investments 3.0 0.2 (0.4) (0.5) 0.6 (0.2)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Total Revenue 127.9 126.8 123.2 118.8 126.6 125.8
------ ------ ------ ------ ------ ------
Average Capital (Securities at Cost) 635.3 612.6 591.6 587.2 584.2 581.5
Return on Capital 9.2% 10.0% 9.7% 10.0% 11.3% 8.6%
YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2000 2001
---------------------------------------------------------------------------------------------
Operating Revenue
Investment advisory fees - External 229.9 249.0 248.6 231.6 174.8 147.8
Investment advisory fees - Insurance Assets 68.5 82.5 83.6 88.9 65.8 65.4
Other revenue and fees 76.3 92.5 106.6 115.9 89.4 75.9
Net investment income 72.8 67.0 56.9 57.7 43.9 40.8
------ ------ ------ ------ ------ ------
Operating Revenue 447.5 491.0 495.6 494.2 374.0 329.9
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses 396.1 401.5 384.3 408.7 305.7 301.5
Goodwill amortization 15.5 16.3 16.2 16.2 12.2 12.2
Interest on notes payable 0.2 0.3 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 411.8 418.2 400.5 425.0 317.9 313.6
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 35.8 72.8 95.1 69.2 56.1 16.2
Federal income taxes 17.7 28.9 34.1 25.1 20.7 6.7
------ ------ ------ ------ ------ ------
Income from Operations 18.1 43.9 61.0 44.1 35.4 9.6
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 7.0 0.5 (0.1) (2.5) (2.4) (1.7)
Gains(losses) on derivatives
Restructuring Charges 0.0 0.0 (9.2) (4.6) (2.7) 0.0
------ ------ ------ ------ ------ ------
Income before Accounting Changes 25.1 44.4 51.6 37.0 30.4 7.9
Cumulative effect of accounting changes (0.1)
------ ------ ------ ------ ------ ------
Net Income 25.1 44.4 51.6 37.0 30.4 7.8
====== ====== ====== ====== ====== ======
Income from Operations- before
Goodwill Amortization 33.6 60.3 77.2 60.3 47.6 21.7
Income from Operations - before
Goodwill & Intang.Amort 45.2 72.6 88.7 70.9 55.7 27.3
Operating Revenue 447.5 491.0 495.6 494.2 374.0 329.9
Realized gains (losses) on investments 11.6 0.9 (0.1) (3.9) (3.6) (2.6)
Gains(losses) on derivatives
------ ------ ------ ------ ------ ------
Total Revenue 459.1 491.9 495.5 490.3 370.3 327.2
====== ====== ====== ====== ====== ======
Average Capital (Securities at Cost) 653.3 642.3 593.9 575.2 580.7 544.8
Return on Capital 2.8% 6.8% 10.3% 7.7% 8.1% 2.3%
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
---------------------------------------------------------------------------------------------
Operating Revenue
Investment advisory fees - External 57.9 56.9 56.7 50.5 51.1 46.2
Investment advisory fees - Insurance Assets 22.3 22.5 23.1 22.1 21.6 21.8
Other revenue and fees 31.0 26.4 26.6 26.3 25.7 23.9
Net investment income 12.6 18.3 13.8 14.1 13.0 13.6
------ ------ ------ ------ ------ ------
Operating Revenue 123.8 124.1 120.2 113.0 111.4 105.5
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses 99.3 103.9 103.0 104.7 101.6 95.1
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 103.3 107.9 107.1 108.8 105.7 99.2
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 20.5 16.2 13.1 4.2 5.7 6.3
Federal income taxes 7.4 6.3 4.4 1.8 2.0 2.9
------ ------ ------ ------ ------ ------
Income from Operations 13.1 9.9 8.7 2.4 3.7 3.5
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments (2.0) (0.2) (0.2) (0.5) (0.7) (0.5)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring Charges (2.7) 0.0 (1.9) 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Income before Accounting Changes 8.4 9.7 6.6 2.0 3.0 2.9
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 (0.1) 0.0
------ ------ ------ ------ ------ ------
Net Income 8.4 9.7 6.6 2.0 2.9 2.9
====== ====== ====== ====== ====== ======
Inc from Oper -before
Goodwill Amortization 17.1 14.0 12.7 6.5 7.7 7.5
Inc from Oper -before
Goodwill & Intang. Amort 19.7 16.6 15.2 9.1 9.2 9.0
Operating Revenue 123.8 124.1 120.2 113.0 111.4 105.5
Realized gains (losses) on investments (3.1) (0.4) (0.3) (0.7) (1.1) (0.8)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Total Revenue 120.7 123.8 120.0 112.3 110.3 104.7
====== ====== ====== ====== ====== ======
Average Capital (Securities at Cost) 593.0 567.7 558.5 548.3 542.8 543.1
Return on Capital 8.8% 7.0% 6.2% 1.8% 2.7% 2.5%
9/30/01 PAGE 24
Investment Management
Assets Under Management Roll Forward
Unaudited [Billions of Dollars]
YTD YTD
SEP SEP
1996 1997 1998 1999 2000 2000 2001
--------------------------------------------------------------------------------------------------------------------------------
Retail Fixed - Bal Beg-of-Year 6.094 5.853 8.125 8.217 7.424 7.424 6.499
Fund Sales 0.764 0.961 1.165 0.991 0.712 0.511 0.622
Redemptions (0.986) (1.271) (1.235) (1.424) (1.365) (1.093) (0.790)
Net Money Market (0.079) (0.069) (0.140) (0.110) (0.207) (0.156) (0.015)
Transfers (0.114) (0.220) 0.132 0.177 (0.159) (0.173) 0.422
------ ------ ------- ------ ------ ------ ------
Net Cash Flows (0.415) (0.599) (0.078) (0.366) (1.019) (0.910) 0.239
Income Retained 0.237 0.276 0.291 0.276 0.240 0.183 0.153
Market Apprec/Deprec (0.062) 0.049 (0.121) (0.704) (0.146) (0.167) 0.175
Acq of New Company/Business 2.547
------ ------ ------- ------ ------ ------ ------
Balance End-of-Year 5.853 8.125 8.217 7.424 6.499 6.531 7.066
------ ------ ------- ------ ------ ------ ------
Retail Equity - Bal Beg-of-Year 9.974 13.152 17.754 22.080 23.383 23.383 21.174
Fund Sales 2.175 2.953 3.581 3.271 4.048 2.992 2.157
Redemptions (1.037) (1.926) (2.460) (4.971) (4.369) (3.548) (2.182)
Net Money Market 0.000 (0.002) (0.001) 0.001 0.001
Transfers 0.188 0.209 0.730 (0.143) (0.178) (0.111) (0.547)
------ ------ ------- ------ ------ ------ ------
Net Cash Flows 1.327 1.236 1.849 (1.844) (0.498) (0.665) (0.572)
Income Retained 0.039 0.005 0.220 0.120 0.083 0.059 0.050
Market Apprec/Deprec 1.812 3.317 2.256 3.028 (1.793) 0.905 (5.069)
Acq of New Company/Business 0.043
------ ------ ------- ------ ------ ------ ------
Balance at End-of-Year 13.152 17.754 22.080 23.383 21.174 23.680 15.584
------ ------ ------- ------ ------ ------ ------
Total Retail - Bal Beg-of-Year 16.068 19.006 25.879 30.297 30.807 30.807 27.674
Retail Sales-Annuities 1.638 2.163 2.238 1.561 1.726 1.190 1.168
Retail Sales-Mutual Funds 0.849 1.218 1.913 2.153 2.452 1.917 1.058
Retail Sales-Wrap & Other 0.454 0.533 0.596 0.550 0.581 0.397 0.552
------ ------ ------- ------ ------ ------ ------
Total Retail Sales 2.940 3.914 4.745 4.264 4.760 3.505 2.778
Redemptions (2.023) (3.197) (3.694) (6.396) (5.733) (4.642) (2.972)
Net Money Market (0.079) (0.068) (0.141) (0.111) (0.206) (0.155) (0.015)
Transfers 0.074 (0.011) 0.862 0.034 (0.337) (0.282) (0.125)
------ ------ ------- ------ ------ ------ ------
Net Cash Flows 0.912 0.637 1.772 (2.209) (1.517) (1.575) (0.334)
Income Retained 0.276 0.281 0.511 0.396 0.323 0.241 0.205
Market Apprec/Deprec 1.750 3.366 2.136 2.324 (1.939) 0.739 (4.892)
Acq of New Company/Business 2.590
------ ------ ------- ------ ------ ------ ------
Balance at End-of-Year 19.006 25.879 30.297 30.807 27.674 30.211 22.650
------ ------ ------- ------ ------ ------ ------
Institutional Fixed - Bal Beg-of-Year 2.956 3.580 5.708 6.955 6.937 6.937 6.111
Inflows 1.516 2.509 2.169 2.000 0.771 0.636 0.563
Withdrawals/Terminations (1.155) (0.787) (1.242) (1.699) (1.973) (1.405) (1.037)
Transfers 0.015 0.013 (0.074) (0.001) (0.005) (0.006) 0.014
------ ------ ------- ------ ------ ------ ------
Net Cash Flows 0.376 1.735 0.853 0.300 (1.207) (0.775) (0.460)
Income Retained 0.145 0.225 0.333 0.346 0.294 0.245 0.142
Market Apprec/Deprec 0.104 0.118 0.061 (0.665) 0.087 (0.131) (0.154)
Acq of New Company/Business 0.051
------ ------ ------- ------ ------ ------ ------
Balance at End-of-Year 3.580 5.708 6.955 6.937 6.111 6.275 5.639
------ ------ ------- ------ ------ ------ ------
Institutional Equity - Bal Beg-of-Year 21.619 22.886 24.871 24.235 23.630 23.630 19.111
Inflows 1.974 2.465 3.840 5.248 2.730 1.980 2.567
Withdrawals/Terminations (4.772) (6.447) (7.441) (7.801) (7.209) (5.841) (2.255)
Transfers (0.007) (0.068) 0.047 0.011 (0.008) (0.015) 0.020
------ ------ ------- ------ ------ ------ ------
Net Cash Flows (2.805) (4.049) (3.555) (2.542) (4.487) (3.876) 0.332
Income Retained 0.557 0.491 0.473 0.482 0.449 0.349 0.305
Market Apprec/Deprec 3.514 5.544 2.446 1.453 (0.481) (1.061) (3.509)
Acq of New Company/Business
------ ------ ------- ------ ------ ------ ------
Balance at End-of-Year 22.886 24.871 24.235 23.630 19.111 19.041 16.240
------ ------ ------- ------ ------ ------ ------
Total Institutional - Bal Beg-of-Year 24.575 26.465 30.579 31.191 30.567 30.567 25.222
Inflows 3.490 4.975 6.009 7.249 3.501 2.616 3.130
Withdrawals/Terminations (5.928) (7.234) (8.683) (9.500) (9.182) (7.246) (3.291)
Transfers 0.008 (0.055) (0.027) 0.011 (0.014) (0.021) 0.034
------ ------ ------- ------ ------ ------ ------
Net Cash Flows (2.429) (2.314) (2.702) (2.240) (5.694) (4.651) (0.127)
Income Retained 0.702 0.716 0.806 0.829 0.743 0.591 0.447
Market Apprec/Deprec 3.618 5.662 2.508 0.789 (0.394) (1.191) (3.663)
Acq of New Company/Business 0.051
------ ------ ------- ------ ------ ------ ------
Balance at End-of-Year 26.465 30.579 31.191 30.567 25.222 25.316 21.880
------ ------ ------- ------ ------ ------ ------
Total Retail/Institutional - At End-of-Year 45.471 56.458 61.488 61.374 52.895 55.527 44.530
------ ------ ------- ------ ------ ------ ------
Insurance Assets - At End-of-Year 37.453 35.684 39.432 35.934 35.686 34.981 37.337
------ ------ ------- ------ ------ ------ ------
Total Assets Under Management
At End-of-Year 82.924 92.142 100.920 97.308 88.581 90.508 81.867
====== ====== ======= ====== ====== ====== ======
9/30/01 PAGE 25
Investment Management
Assets Under Management Roll Forward
Unaudited [Billions of Dollars]
Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
-----------------------------------------------------------------------------------------------------------------
Retail Fixed - Bal-Beg-of-Qtr 8.287 8.217 8.233 7.945 7.680 7.424
Fund Sales 0.246 0.316 0.263 0.231 0.181 0.146
Redemptions (0.387) (0.313) (0.366) (0.342) (0.403) (0.444)
Net Money Market (0.000) (0.019) (0.033) (0.029) (0.030) (0.067)
Transfers 0.007 0.032 (0.043) 0.034 0.154 (0.095)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.134) 0.016 (0.179) (0.106) (0.098) (0.460)
Income Retained 0.076 0.066 0.074 0.069 0.067 0.061
Market Apprec/Deprec (0.012) (0.067) (0.185) (0.228) (0.225) (0.062)
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 8.217 8.233 7.945 7.680 7.424 6.964
------- ------ ------ ------ ------ ------
Retail Equity - Bal-Beg-of-Qtr 18.785 22.080 21.798 22.340 20.873 23.383
Fund Sales 0.802 0.856 0.790 0.730 0.894 1.220
Redemptions (0.915) (1.030) (1.957) (0.865) (1.120) (1.550)
Net Money Market 0.000 0.000 (0.001) 0.000 0.000 0.000
Transfers (0.011) (0.034) 0.036 (0.060) (0.086) (0.096)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.124) (0.208) (1.132) (0.195) (0.312) (0.426)
Income Retained (0.001) 0.053 0.061 0.007 0.000 0.033
Market Apprec/Deprec 3.420 (0.128) 1.614 (1.279) 2.822 1.112
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 22.080 21.798 22.340 20.873 23.383 24.102
------- ------ ------ ------ ------ ------
Total Retail - Bal-Beg-of-Qtr 27.072 30.297 30.031 30.285 28.553 30.807
Retail Sales-Annuities 0.507 0.428 0.393 0.332 0.409 0.379
Retail Sales-Mutual Funds 0.403 0.565 0.487 0.514 0.587 0.840
Retail Sales-Wrap & Other 0.136 0.182 0.173 0.116 0.079 0.148
------- ------ ------ ------ ------ ------
Total Retail Sales 1.046 1.175 1.053 0.962 1.075 1.367
Redemptions (1.302) (1.343) (2.323) (1.207) (1.523) (1.995)
Net Money Market 0.000 (0.019) (0.033) (0.029) (0.030) (0.067)
Transfers (0.004) (0.001) (0.006) (0.027) 0.068 (0.191)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.260) (0.188) (1.309) (0.301) (0.410) (0.886)
Income Retained 0.075 0.119 0.134 0.076 0.067 0.095
Market Apprec/Deprec 3.409 (0.196) 1.429 (1.507) 2.597 1.051
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 30.297 30.031 30.285 28.553 30.807 31.066
------- ------ ------ ------ ------ ------
Institutional Fixed - Bal-Beg-of-Qtr 6.769 6.955 6.984 7.264 7.218 6.937
Inflows 0.170 0.657 0.478 0.446 0.420 0.180
Withdrawals/Terminations (0.225) (0.415) (0.210) (0.294) (0.781) (0.353)
Transfers 0.008 (0.003) 0.003 (0.002) 0.001 (0.005)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.047) 0.239 0.271 0.150 (0.360) (0.178)
Income Retained 0.060 0.089 0.079 0.110 0.068 0.090
Market Apprec/Deprec 0.173 (0.300) (0.070) (0.306) 0.011 0.024
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 6.955 6.984 7.264 7.218 6.937 6.873
------- ------ ------ ------ ------ ------
Institutional Equity - Bal-Beg-of-Qtr 21.702 24.235 22.927 23.962 23.098 23.630
Inflows 1.165 1.297 1.179 1.839 0.934 0.904
Withdrawals/Terminations (2.072) (2.540) (2.052) (1.165) (2.043) (3.333)
Transfers 0.013 0.011 0.019 (0.008) (0.010) (0.004)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.895) (1.232) (0.854) 0.666 (1.119) (2.433)
Income Retained 0.098 0.104 0.118 0.167 0.093 0.109
Market Apprec/Deprec 3.330 (0.180) 1.771 (1.697) 1.559 (1.003)
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 24.235 22.927 23.962 23.098 23.630 20.303
------- ------ ------ ------ ------ ------
Total Institutional - Bal-Beg-of-Qtr 28.471 31.191 29.910 31.226 30.316 30.567
Inflows 1.335 1.953 1.656 2.284 1.354 1.084
Withdrawals/Terminations (2.297) (2.955) (2.262) (1.458) (2.825) (3.686)
Transfers 0.021 0.008 0.022 (0.010) (0.009) (0.009)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.942) (0.994) (0.584) 0.816 (1.480) (2.611)
Income Retained 0.158 0.193 0.197 0.277 0.161 0.198
Market Apprec/Deprec 3.504 (0.480) 1.702 (2.003) 1.569 (0.979)
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 31.191 29.910 31.226 30.316 30.567 27.175
------- ------ ------ ------ ------ ------
Total Retail/Inst - At End-of-Qtr 61.488 59.941 61.511 58.869 61.374 58.241
Insurance Assets-End-of-Qtr 39.432 38.516 37.391 36.820 35.934 35.541
Total Assets Under Management
------- ------ ------ ------ ------ ------
At End-of-Qtr 100.920 98.457 98.902 95.689 97.308 93.782
======= ====== ====== ====== ====== ======
Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
-----------------------------------------------------------------------------------------------------------------
Retail Fixed - Bal-Beg-of-Qtr 6.964 6.667 6.531 6.499 6.631 6.643
Fund Sales 0.152 0.213 0.200 0.235 0.195 0.192
Redemptions (0.328) (0.321) (0.272) (0.255) (0.280) (0.255)
Net Money Market (0.058) (0.031) (0.051) 0.010 (0.030) 0.005
Transfers (0.045) (0.033) 0.013 0.042 (0.002) 0.382
------- ------ ------ ------ ------ ------
Net Cash Flows (0.279) (0.171) (0.109) 0.032 (0.117) 0.324
Income Retained 0.063 0.059 0.057 0.054 0.050 0.049
Market Apprec/Deprec (0.082) (0.023) 0.021 0.046 0.080 0.051
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 6.667 6.531 6.499 6.631 6.643 7.066
------- ------ ------ ------ ------ ------
Retail Equity - Bal-Beg-of-Qtr 24.102 23.129 23.680 21.174 17.935 19.411
Fund Sales 0.868 0.904 1.055 0.888 0.660 0.609
Redemptions (0.971) (1.027) (0.820) (0.899) (0.657) (0.626)
Net Money Market 0.000 0.001 0.000 0.000 0.000 0.000
Transfers 0.018 (0.033) (0.068) (0.068) (0.046) (0.433)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.085) (0.154) 0.167 (0.079) (0.043) (0.450)
Income Retained 0.021 0.005 0.025 0.007 0.015 0.028
Market Apprec/Deprec (0.908) 0.701 (2.698) (3.168) 1.504 (3.405)
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 23.129 23.680 21.174 17.935 19.411 15.584
------- ------ ------ ------ ------ ------
Total Retail - Bal-Beg-of-Qtr 31.066 29.796 30.211 27.673 24.566 26.054
Retail Sales-Annuities 0.358 0.453 0.536 0.455 0.373 0.340
Retail Sales-Mutual Funds 0.556 0.521 0.535 0.442 0.324 0.292
Retail Sales-Wrap & Other 0.106 0.143 0.184 0.227 0.157 0.168
------- ------ ------ ------ ------ ------
Total Retail Sales 1.020 1.118 1.255 1.124 0.854 0.800
Redemptions (1.299) (1.348) (1.092) (1.154) (0.938) (0.880)
Net Money Market (0.058) (0.030) (0.051) 0.010 (0.030) 0.005
Transfers (0.026) (0.065) (0.054) (0.026) (0.048) (0.051)
------- ------ ------ ------ ------ ------
Net Cash Flows (0.363) (0.326) 0.058 (0.047) (0.160) (0.126)
Income Retained 0.083 0.063 0.082 0.061 0.066 0.078
Market Apprec/Deprec (0.989) 0.677 (2.677) (3.122) 1.584 (3.354)
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 29.796 30.211 27.674 24.566 26.054 22.650
------- ------ ------ ------ ------ ------
Institutional Fixed - Bal-Beg-of-Qtr 6.873 6.484 6.275 6.111 5.890 5.809
Inflows 0.148 0.308 0.135 0.310 0.233 0.020
Withdrawals/Terminations (0.520) (0.532) (0.568) (0.432) (0.112) (0.493)
Transfers (0.001) 0.000 0.001 0.003 0.010 0.001
------- ------ ------ ------ ------ ------
Net Cash Flows (0.373) (0.224) (0.433) (0.119) 0.131 (0.472)
Income Retained 0.066 0.089 0.050 0.066 0.047 0.029
Market Apprec/Deprec (0.081) (0.074) 0.219 (0.168) (0.259) 0.273
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 6.484 6.275 6.111 5.890 5.809 5.639
------- ------ ------ ------ ------ ------
Institutional Equity - Bal-Beg-of-Qtr 20.303 20.239 19.041 19.111 17.311 18.405
Inflows 0.669 0.407 0.750 0.881 0.823 0.863
Withdrawals/Terminations (1.354) (1.154) (1.368) (1.199) (0.501) (0.555)
Transfers 0.002 (0.013) 0.007 0.019 (0.008) 0.009
------- ------ ------ ------ ------ ------
Net Cash Flows (0.683) (0.760) (0.611) (0.299) 0.314 0.317
Income Retained 0.132 0.108 0.102 0.094 0.117 0.094
Market Apprec/Deprec 0.488 (0.545) 0.579 (1.596) 0.663 (2.576)
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 20.239 19.041 19.111 17.311 18.405 16.240
------- ------ ------ ------ ------ ------
Total Institutional - Bal-Beg-of-Qtr 27.175 26.722 25.316 25.222 23.201 24.214
Inflows 0.817 0.715 0.885 1.191 1.056 0.883
Withdrawals/Terminations (1.874) (1.686) (1.936) (1.631) (0.613) (1.047)
Transfers 0.000 (0.012) 0.008 0.022 0.002 0.010
------- ------ ------ ------ ------ ------
Net Cash Flows (1.057) (0.983) (1.043) (0.418) 0.445 (0.155)
Income Retained 0.197 0.196 0.151 0.160 0.164 0.123
Market Apprec/Deprec 0.407 (0.619) 0.798 (1.764) 0.404 (2.303)
------- ------ ------ ------ ------ ------
Balance at End-of-Qtr 26.722 25.316 25.222 23.201 24.214 21.880
------- ------ ------ ------ ------ ------
Total Retail/Inst - At End-of-Qtr 56.518 55.527 52.895 47.766 50.268 44.530
Insurance Assets-End-of-Qtr 34.891 34.981 35.686 36.324 36.018 37.337
Total Assets Under Management
------- ------ ------ ------ ------ ------
At End-of-Qtr 91.409 90.508 88.581 84.090 86.286 81.867
======= ====== ====== ====== ====== ======
9/30/2001 PAGE 26
Lincoln UK
Income Statements & Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Dec Dec Dec Dec Dec Sep Sep
For the Year Ended December 31 1996 1997 1998 1999 2000 2000 2001
---------------------------------------------------------------------------------------------------------------------------------
Operating Revenue
Premiums 131.8 145.4 156.6 145.1 148.4 107.9 34.2
Surrender charges
Mortality assessments 21.1 25.2 29.3 27.1 31.4 23.9 26.8
Expense assessments 153.4 166.1 153.6 182.3 178.1 143.5 110.7
Other revenue and fees 5.1 3.3 11.2 13.8 6.9 5.6 0.7
Net investment income 82.0 85.1 87.9 75.3 70.3 53.6 49.6
------ ------ ------ ------ ------ ------ ------
Operating Revenue 393.3 425.2 438.6 443.6 435.0 334.4 222.0
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 133.9 339.6 151.0 306.2 178.5 124.4 62.6
Underwriting, acquisition,
insurance and other expenses 157.7 184.5 175.6 223.5 180.0 145.1 111.1
Goodwill amortization 0.0 0.0 6.3 7.0 4.0 3.9 0.5
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 291.7 524.1 332.9 536.7 362.6 273.4 174.1
------ ------ ------ ------ ------ ------ ------
Income from Operations Before Tax 101.7 (99.0) 105.8 (93.1) 72.4 61.1 47.8
Federal income taxes 35.7 9.3 34.8 (79.2) 11.3 15.5 7.1
------ ------ ------ ------ ------ ------ ------
Income from Operations 66.0 (108.3) 70.9 (13.9) 61.0 45.5 40.7
------ ------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 0.0 1.5 0.8 2.1 2.3 (0.4) 5.7
Gains(losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring charges (6.5) (76.5) (40.5) 0.0
------ ------ ------ ------ ------ ------ ------
Income before Accounting Changes 66.0 (106.8) 71.7 (18.2) (13.2) 4.7 46.4
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------ ------
Net Income 66.0 (106.8) 71.7 (18.2) (13.2) 4.7 46.4
====== ====== ====== ====== ====== ====== ======
Inc from Oper -before Goodwill Amort. 66.0 (108.3) 77.2 (6.9) 65.1 49.4 41.2
Effective tax rate 35.1% (9.4%) 32.9% 85.1% 15.7% 25.4% 14.8%
Operating revenue 393.3 425.2 438.6 443.6 435.0 334.4 222.0
Realized gains (losses) on investments (0.2) 2.1 1.1 3.0 3.2 (0.5) 8.1
Gains(losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------ ------
Total Revenue 393.2 427.3 439.7 446.6 438.2 333.9 230.1
====== ====== ====== ====== ====== ====== ======
Average capital 601.1 618.1 517.7 551.2 488.2 501.2 559.1
Return on average capital 11.0% (17.5%) 13.7% (2.5%) 12.5% 12.1% 9.7%
Unit Linked Assets - Beg-of-Year 4.307 5.074 5.643 6.265 7.220 7.220 6.441
Deposits 0.446 0.569 0.473 0.537 0.554 0.438 0.370
Withdrawals (incl. chgs) & Deaths (0.420) (0.503) (0.547) (0.566) (0.644) (0.491) (0.413)
------ ------ ------ ------ ------ ------ ------
Net Cash Flows 0.026 0.066 (0.074) (0.029) (0.090) (0.052) (0.044)
Inv Inc & Chg in Mkt Val 0.269 0.682 0.662 1.154 (0.154) (0.054) (1.074)
Acq of new business/companies 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Foreign currency adjustment 0.472 (0.179) 0.035 (0.170) (0.536) (0.614) (0.106)
------ ------ ------ ------ ------ ------ ------
Unit Linked Assets - End-of-Year 5.074 5.643 6.265 7.220 6.441 6.499 5.218
====== ====== ====== ====== ====== ====== ======
Individual Life In-force (Billions) 23.835 25.026 25.002 25.698 24.290 24.535 21.299
Exchange Rate - Dollars to Pounds
For-the-Year 1.567 1.644 1.658 1.617 1.518 1.539 1.439
End-of-Year 1.713 1.651 1.660 1.615 1.493 1.475 1.474
9/30/2001 PAGE 27
Lincoln UK
Income Statements & Operational Data
Unaudited [Millions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
---------------------------------------------------------------------------------------------------
Operating Revenue
Premiums 52.3 43.9 29.0 33.5 38.7 39.0
Surrender charges
Mortality assessments 7.6 6.7 7.7 7.7 5.0 6.3
Expense assessments 23.7 43.9 51.9 49.3 37.2 46.5
Other revenue and fees 1.6 2.9 3.5 3.6 3.8 2.4
Net investment income 23.6 21.7 19.6 16.2 17.7 18.9
------ ------ ------ ------ ------ ------
Operating Revenue 108.7 119.2 111.8 110.3 102.4 113.2
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 45.7 35.7 31.5 27.2 211.8 35.0
Underwriting, acquisition,
insurance and other expenses 33.6 55.3 55.2 61.6 51.4 56.4
Goodwill amortization 3.7 1.2 1.2 1.2 3.3 1.3
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 83.0 92.2 87.9 90.1 266.6 92.8
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 25.7 27.0 23.9 20.2 (164.2) 20.4
Federal income taxes 6.9 8.9 4.9 4.0 (97.1) 4.7
------ ------ ------ ------ ------ ------
Income from Operations 18.8 18.1 19.0 16.2 (67.1) 15.7
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 0.4 (0.0) 1.0 0.2 1.0 (0.2)
Gains (losses) on derivatives
Restructuring charges (6.5)
------ ------ ------ ------ ------ ------
Income before Accounting Changes 19.2 18.0 20.0 16.4 (72.6) 15.5
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Net Income 19.2 18.0 20.0 16.4 (72.6) 15.5
====== ====== ====== ====== ====== ======
Inc from Oper -before
Goodwill Amortization 22.5 19.3 20.2 17.4 (63.8) 17.1
Effective tax rate 27.0% 33.0% 20.4% 20.0% 59.1% 22.9%
Operating revenue 108.7 119.2 111.8 110.3 102.4 113.2
Realized gains (losses) on investments 0.5 (0.1) 1.4 0.3 1.4 (0.4)
Gains (losses) on derivatives
------ ------ ------ ------ ------ ------
Total Revenue 109.2 119.1 113.1 110.5 103.8 112.8
====== ====== ====== ====== ====== ======
Average capital 533.8 519.2 526.9 573.5 585.0 516.4
Return on average capital 14.1% 13.9% 14.4% 11.3% (45.9%) 12.2%
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 5.711 6.265 6.348 6.503 6.568 7.220
Deposits 0.136 0.131 0.119 0.130 0.156 0.159
Withdrawals (incl. chgs) & Deaths (0.139) (0.136) (0.137) (0.136) (0.158) (0.170)
------ ------ ------ ------ ------ ------
Net Cash Flows (0.003) (0.005) (0.017) (0.005) (0.002) (0.011)
Inv Inc & Chg in Mkt Val 0.696 0.271 0.314 (0.214) 0.784 (0.077)
Acq of new business/companies 0.000 0.000 0.000 0.000 0.000 0.000
Foreign currency adjustment (0.139) (0.184) (0.141) 0.284 (0.130) (0.101)
------ ------ ------ ------ ------ ------
Unit Linked Assets - End-of-Quarter 6.265 6.348 6.503 6.568 7.220 7.031
====== ====== ====== ====== ====== ======
Individual Life In-force (Billions) 25.002 25.246 25.107 26.235 25.698 26.514
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.661 1.631 1.602 1.614 1.625 1.599
End-of-Quarter 1.660 1.612 1.577 1.647 1.615 1.591
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
---------------------------------------------------------------------------------------------------
Operating Revenue
Premiums 36.3 32.5 40.5 12.8 9.6 11.8
Surrender charges
Mortality assessments 8.0 9.6 7.5 9.4 8.9 8.5
Expense assessments 44.3 52.6 34.6 43.7 31.4 35.5
Other revenue and fees 1.3 2.0 1.3 0.6 0.1 0.0
Net investment income 18.5 16.1 16.7 17.9 16.9 14.8
------ ------ ------ ------ ------ ------
Operating Revenue 108.4 112.8 100.6 84.4 66.9 70.7
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 37.4 51.9 54.2 24.0 17.9 20.7
Underwriting, acquisition,
insurance and other expenses 43.5 45.2 34.9 41.1 29.7 40.3
Goodwill amortization 1.3 1.2 0.2 0.2 0.2 0.2
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 82.2 98.3 89.3 65.3 47.7 61.1
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 26.2 14.5 11.3 19.1 19.1 9.6
Federal income taxes 6.9 3.9 (4.2) 4.7 2.9 (0.5)
------ ------ ------ ------ ------ ------
Income from Operations 19.3 10.6 15.5 14.4 16.2 10.1
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments (0.1) (0.0) 2.6 0.4 1.4 3.9
Gains (losses) on derivatives
Restructuring charges (40.5) (36.1)
------ ------ ------ ------ ------ ------
Income before Accounting Changes 19.1 (29.9) (17.9) 14.8 17.6 14.0
Cumulative effect of accounting changes 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Net Income 19.1 (29.9) (17.9) 14.8 17.6 14.0
====== ====== ====== ====== ====== ======
Inc from Oper -before
Goodwill Amortization 20.5 11.8 15.7 14.5 16.4 10.3
Effective tax rate 26.4% 27.2% (37.1%) (37.1%) 15.3% (5.7%)
Operating revenue 108.4 112.8 100.6 84.4 66.9 70.7
Realized gains (losses) on investments (0.2) (0.0) 3.8 0.6 2.0 5.5
Gains (losses) on derivatives
------ ------ ------ ------ ------ ------
Total Revenue 108.2 112.8 104.3 84.9 68.9 76.3
====== ====== ====== ====== ====== ======
Average capital 500.8 486.5 448.9 548.7 553.2 575.4
Return on average capital 15.4% 8.7% 13.8% 10.5% 11.7% 7.0%
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 7.031 6.726 6.499 6.441 5.677 5.768
Deposits 0.134 0.145 0.116 0.132 0.111 0.128
Withdrawals (incl. chgs) & Deaths (0.162) (0.159) (0.153) (0.147) (0.131) (0.136)
------ ------ ------ ------ ------ ------
Net Cash Flows (0.028) (0.014) (0.037) (0.015) (0.020) (0.009)
Inv Inc & Chg in Mkt Val 0.047 (0.025) (0.100) (0.421) 0.115 (0.768)
Acq of new business/companies 0.000 0.000 0.000 0.000 0.000 0.000
Foreign currency adjustment (0.324) (0.189) 0.078 (0.328) (0.004) 0.226
------ ------ ------ ------ ------ ------
Unit Linked Assets - End-of-Quarter 6.726 6.499 6.441 5.677 5.768 5.218
====== ====== ====== ====== ====== ======
Individual Life In-force (Billions) 25.225 24.535 24.290 21.894 21.519 21.299
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.536 1.482 1.454 1.455 1.421 1.442
End-of-Quarter 1.517 1.475 1.493 1.416 1.415 1.474
9/30/01 PAGE 28
Other Operations
Unaudited [Millions of Dollars]
For the Year Ended December 31 1996
------
Revenue
Lincoln Financial Advisors 111.0
Lincoln Financial Distributors 25.1
------
Total Distribution 136.1
Other [Including
Consolidating Adjustments] (119.3)
------
Operating Revenue 16.8
------
Realized gains (losses) on investments (3.0)
------
Total Revenue 13.8
======
Income (Loss)
Lincoln Financial Advisors (10.2)
Lincoln Financial Distributors (4.3)
------
Total Distribution (14.5)
LNC Financing (49.4)
LNC Operations * (14.8)
Other Corporate 2.1
------
Inc (Loss) from Operations (76.5)
------
Realized gains (losses) on investments (1.0)
Gains(losses) on derivatives
Restructuring charges
------
Income before Accounting Changes (77.5)
Cumulative effect of accounting changes
------
Total Net Income (Loss) (77.5)
======
Other Operations (Continued)
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2000 2001
------ ------ ------ ------ ------ ------
Revenue
Lincoln Financial Advisors 130.1 292.9 325.2 394.2 276.3 244.0
Lincoln Financial Distributors 20.5 33.5 107.5 119.9 84.9 88.6
------ ------ ------ ------ ------ ------
Total Distribution 150.6 326.4 432.6 514.0 361.1 332.6
Other [Including
Consolidating Adjustments] (110.7) (199.2) (285.7) (309.2) (242.0) (271.9)
------ ------ ------ ------ ------ ------
Operating Revenue 39.9 127.2 147.0 204.8 119.2 60.6
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 16.9 4.0 8.7 (3.7) (1.9) (4.8)
------ ------ ------ ------ ------ ------
Total Revenue 56.8 131.1 155.7 201.1 117.3 55.8
====== ====== ====== ====== ====== ======
Income (Loss)
Lincoln Financial Advisors (5.3) (23.7) (20.8) (11.7) (13.4) (23.3)
Lincoln Financial Distributors (11.2) (8.2) (14.0) (18.5) (13.4) (26.2)
------ ------ ------ ------ ------ ------
Total Distribution (16.5) (31.9) (34.8) (30.2) (26.8) (49.6)
LNC Financing (31.6) (51.5) (83.5) (84.9) (65.1) (63.2)
LNC Operations * (18.4) (18.5)
Other Corporate (6.7) 1.0 (5.0) (15.4) (5.5) 3.0
------ ------ ------ ------ ------ ------
Inc (Loss) from Operations (73.2) (100.9) (123.2) (130.5) (97.4) (109.8)
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 8.6 5.3 6.5 (2.3) (2.3) (3.1)
Gains(losses) on derivatives 0.0
Restructuring charges (14.3) 0.3 (1.2)
------ ------ ------ ------ ------ ------
Income before Accounting Changes (64.6) (109.9) (116.7) (132.5) (99.7) (114.1)
Cumulative effect of accounting changes (0.3)
------ ------ ------ ------ ------ ------
Total Net Income (Loss) (64.6) (109.9) (116.7) (132.5) (99.7) (114.4)
====== ====== ====== ====== ====== ======
Dec Mar Jun Sep Dec Mar
For the Quarter Ended 1998 1999 1999 1999 1999 2000
------ ------ ------ ------ ------ ------
Revenue
Lincoln Financial Advisors 81.7 67.0 73.9 78.0 106.3 89.4
Lincoln Financial Distributors 9.8 20.7 26.2 26.4 34.2 29.3
------ ------ ------ ------ ------ ------
Total Distribution 91.5 87.6 100.1 104.4 140.5 118.8
Other [Including
Consolidating Adjustments] (57.2) (27.5) (41.9) (67.1) (149.2) (70.6)
------ ------ ------ ------ ------ ------
Operating Revenue 34.3 60.1 58.2 37.3 (8.7) 48.2
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 1.6 0.2 (1.7) 13.8 (3.6) (2.5)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Total Revenue 35.9 60.4 56.6 51.1 (12.4) 45.7
====== ====== ====== ====== ====== ======
Income (Loss)
Lincoln Financial Advisors (6.4) (8.4) (9.7) (5.3) 2.7 (7.4)
Lincoln Financial Distributors (1.6) (3.0) (5.3) (2.1) (3.7) (3.3)
------ ------ ------ ------ ------ ------
Total Distribution (8.0) (11.4) (15.0) (7.4) (1.0) (10.7)
LNC Financing (19.3) (20.5) (21.4) (19.9) (21.6) (21.9)
LNC Operations * (4.9) 0.0 0.0 0.0 0.0 0.0
Other Corporate (2.1) (2.1) 0.9 (2.4) (1.4) (5.7)
------ ------ ------ ------ ------ ------
Inc (Loss) from Oper (34.3) (34.0) (35.6) (29.7) (23.9) (38.3)
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 4.1 0.1 (2.0) 9.5 (1.1) (1.6)
Gains (losses) on derivatives
Restructuring charges (14.3)
------ ------ ------ ------ ------ ------
Income before Accounting Changes (44.6) (33.9) (37.6) (20.2) (25.1) (39.9)
Cumulative effect of accounting changes
------ ------ ------ ------ ------ ------
Total Net Income (Loss) (44.6) (33.9) (37.6) (20.2) (25.1) (39.9)
====== ====== ====== ====== ====== ======
Jun Sep Dec Mar Jun Sep
For the Quarter Ended 2000 2000 2000 2001 2001 2001
------ ------ ------ ------ ------ ------
Revenue
Lincoln Financial Advisors 92.9 93.9 117.9 81.2 83.8 78.9
Lincoln Financial Distributors 28.1 27.5 35.0 25.7 32.1 30.8
------ ------ ------ ------ ------ ------
Total Distribution 121.0 121.4 152.9 106.9 115.9 109.8
Other [Including
Consolidating Adjustments] (89.6) (81.8) (67.2) (80.5) (116.6) (74.8)
------ ------ ------ ------ ------ ------
Operating Revenue 31.4 39.6 85.6 26.4 (0.7) 35.0
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 0.4 0.1 (1.8) (2.9) 4.1 (6.0)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 (0.1) 0.1
------ ------ ------ ------ ------ ------
Total Revenue 31.9 39.7 83.8 23.5 3.3 29.0
====== ====== ====== ====== ====== ======
Income (Loss)
Lincoln Financial Advisors (2.9) (3.1) 1.6 (6.8) (12.3) (4.2)
Lincoln Financial Distributors (5.2) (5.0) (5.1) (6.9) (11.5) (7.8)
------ ------ ------ ------ ------ ------
Total Distribution (8.1) (8.0) (3.4) (13.8) (23.8) (12.0)
LNC Financing (22.2) (20.9) (19.8) (21.7) (22.0) (19.5)
LNC Operations * 0.0 0.0 0.0 0.0 0.0 0.0
Other Corporate (1.5) 1.6 (9.8) (0.5) 2.0 1.5
------ ------ ------ ------ ------ ------
Inc (Loss) from Oper (31.7) (27.3) (33.1) (35.9) (43.8) (30.1)
------ ------ ------ ------ ------ ------
Realized gains (losses) on investments 0.3 (1.0) 0.0 (1.9) 2.7 (3.9)
Gains (losses) on derivatives 0.0 (0.1) 0.0
Restructuring charges 0.3 (1.2) 0.0
------ ------ ------ ------ ------ ------
Income before Accounting Changes (31.4) (28.3) (32.8) (37.8) (42.4) (33.9)
Cumulative effect of accounting changes (0.3)
------ ------ ------ ------ ------ ------
Total Net Income (Loss) (31.4) (28.3) (32.8) (38.1) (42.4) (33.9)
====== ====== ====== ====== ====== ======
* Starting with the first quarter of 1999, 100% of "LNC Operations" is allocated to the business
segments. Prior periods have not been restated.
9/30/01 PAGE 29
Consolidated Domestic Retail Deposits/Account Balances
Unaudited [Billions of Dollars]
YTD YTD
Sep Sep
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------- -------
Deposits - For the Year
Annuities Segment - Fixed Annuities 1.852 1.632 1.452 2.563 2.074 1.592 2.124
Annuities Segment - Variable Annuities 2.746 2.695 2.791 2.553 3.165 2.319 2.274
Annuities Segment - Life Insurance 0.000 0.000 0.000 0.017 0.014 0.010 0.010
Life Insurance Segment - Life Insurance 0.405 0.384 1.207 1.698 1.884 1.262 1.328
Inv Mgmt - Annuities 1.638 2.163 2.238 1.561 1.726 1.190 1.168
Inv Mgmt - Mutual Funds 0.849 1.218 1.913 2.153 2.452 1.917 1.058
Inv Mgmt - Wrap Fee & Other 0.454 0.533 0.596 0.550 0.581 0.397 0.552
Consolidating Adjustments (0.684) (0.966) (1.041) (0.499) (0.406) (0.261) (0.497)
------- ------- ------- ------- ------- ------- -------
Gross Deposits 7.259 7.658 9.157 10.597 11.491 8.427 8.017
Account Balances - End of Year
Annuities Segment - Fixed Annuities 15.818 15.458 16.505 16.791 15.442
Annuities Segment - Variable Annuities 20.383 27.346 33.358 41.493 39.427
Annuities Segment - Life Insurance 0.155 0.160
Life Insurance Segment - Life Insurance 2.869 3.038 9.243 10.217 10.847
Inv Mgmt - Annuities 7.915 10.991 14.257 15.526 13.494
Inv Mgmt - Mutual Funds 9.017 12.484 13.528 13.632 12.805
Inv Mgmt - Wrap Fee & Other 2.074 2.403 2.512 1.649 1.375
Consolidating Adjustments (5.098) (6.806) (8.891) (9.175) (7.753)
------- ------- ------- ------- -------
Account Balances 52.978 64.914 80.512 90.288 85.797
Consolidated Domestic Retail Deposits/Account Balances (Continued)
Unaudited [Billions of Dollars]
Dec Mar Jun Sep Dec Mar
1998 1999 1999 1999 1999 2000
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Annuities Segment - Fixed Annuities 0.335 0.489 0.654 0.678 0.741 0.589
Annuities Segment - Variable Annuities 0.633 0.635 0.651 0.634 0.634 0.797
Annuities Segment - Life Insurance 0.003 0.005 0.004 0.005 0.003
Life Insurance Segment - Life Insurance 0.475 0.394 0.379 0.399 0.526 0.424
Inv Mgmt - Annuities 0.507 0.428 0.393 0.332 0.409 0.379
Inv Mgmt - Mutual Funds 0.403 0.565 0.487 0.514 0.587 0.840
Inv Mgmt - Wrap Fee & Other 0.136 0.182 0.173 0.116 0.079 0.148
Consolidating Adjustments (0.254) (0.142) (0.143) (0.096) (0.118) (0.099)
------- ------- ------- ------- ------- -------
Gross Deposits 2.234 2.554 2.599 2.581 2.864 3.081
------- ------- ------- ------- ------- -------
Account Balances - End of Quarter
Annuities Segment - Fixed Annuities 16.505 16.656 16.779 16.934 16.791 16.252
Annuities Segment - Variable Annuities 33.358 34.148 37.233 35.613 41.493 44.640
Annuities Segment - Life Insurance 0.115 0.130 0.128 0.155 0.169
Life Insurance Segment - Life Insurance 9.243 9.416 9.628 9.726 10.217 10.470
Inv Mgmt - Annuities 14.257 14.166 14.981 14.004 15.526 15.531
Inv Mgmt - Mutual Funds 13.528 13.442 13.654 12.938 13.632 14.201
Inv Mgmt - Wrap Fee & Other 2.512 2.424 1.650 1.611 1.649 1.335
Consolidating Adjustments (8.891) (8.798) (9.050) (8.387) (9.175) (8.768)
------- ------- ------- ------- ------- -------
Account Balances 80.512 81.570 85.004 82.567 90.288 93.831
------- ------- ------- ------- ------- -------
Consolidated Domestic Retail Deposits/Account Balances (Continued)
Unaudited [Billions of Dollars]
Jun Sep Dec Mar Jun Sep
2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Annuities Segment - Fixed Annuities 0.490 0.513 0.482 0.560 0.668 0.896
Annuities Segment - Variable Annuities 0.793 0.729 0.846 0.887 0.703 0.684
Annuities Segment - Life Insurance 0.003 0.004 0.004 0.003 0.004 0.003
Life Insurance Segment - Life Insurance 0.411 0.428 0.622 0.418 0.477 0.434
Inv Mgmt - Annuities 0.358 0.453 0.536 0.455 0.373 0.340
Inv Mgmt - Mutual Funds 0.556 0.521 0.535 0.442 0.324 0.292
Inv Mgmt - Wrap Fee & Other 0.106 0.143 0.184 0.227 0.157 0.168
Consolidating Adjustments (0.062) (0.100) (0.145) (0.262) (0.202) (0.032)
------- ------- ------- ------- ------- -------
Gross Deposits 2.655 2.691 3.064 2.729 2.504 2.785
------- ------- ------- ------- ------- -------
Account Balances - End of Quarter
Annuities Segment - Fixed Annuities 15.909 15.700 15.442 15.484 15.628 16.303
Annuities Segment - Variable Annuities 43.097 42.743 39.427 34.733 36.961 30.506
Annuities Segment - Life Insurance 0.165 0.166 0.160 0.147 0.157 0.134
Life Insurance Segment - Life Insurance 10.538 10.716 10.847 10.764 11.066 10.939
Inv Mgmt - Annuities 14.861 14.824 13.494 11.787 12.483 10.665
Inv Mgmt - Mutual Funds 13.604 14.102 12.805 11.091 11.748 10.301
Inv Mgmt - Wrap Fee & Other 1.331 1.285 1.375 1.688 1.823 1.684
Consolidating Adjustments (8.419) (8.644) (7.753) (6.834) (7.007) (6.023)
------- ------- ------- ------- ------- -------
Account Balances 91.086 90.893 85.797 78.860 82.860 74.509
------- ------- ------- ------- ------- -------
Annuities & Investment Management
Net Flows
Unaudited [Billions of Dollars]
Mar Jun Sep Dec Mar Jun Sep
2000 2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- ------- -------
Annuities Segment (0.700) (0.682) (0.812) (0.681) (0.590) (0.196) 0.261
Investment Management Segment (3.497) (1.420) (1.309) (0.985) (0.465) 0.285 (0.281)
Consolidating Adjustments 0.717 0.342 0.194 0.152 0.019 (0.034) 0.181
------- ------- ------- ------- ------- ------- -------
Total Net Flows (3.480) (1.761) (1.927) (1.514) (1.037) 0.055 0.162
======= ======= ======= ======= ======= ======= =======
NOTE: Excludes amounts reported as Assets Under Management - Insurance Assets
9/30/01 PAGE 30
Consolidated Information - Individual Life Insurance In-Force
Unaudited [Billions of Dollars]
December 31 1996 1997 1998 1999 2000
------- ------ ------ ------ ------
Annuities Segment 0.6 0.7
Life Insurance Segment 49.2 63.2 172.9 195.0 216.0
Reinsurance 130.8 153.1 213.6 306.6 407.4
Lincoln UK 23.8 25.0 25.0 25.7 24.3
Consolidating Adjustment (5.6) (9.9) (11.3) (11.4)
------- ------ ------ ------ ------
Total 203.8 235.7 401.6 516.5 637.0
======= ====== ====== ====== ======
Dec Mar Jun Sep Dec Mar
End of Quarter 1998 1999 1999 1999 1999 2000
------- ------ ------ ------ ------ ------
Annuities Segment 0.5 0.6 0.6
Life Insurance Segment 172.9 178.5 184.5 188.9 195.0 201.7
Reinsurance 213.6 225.1 240.0 261.5 306.6 325.9
Lincoln UK 25.0 25.2 25.1 26.2 25.7 26.5
Consolidating Adjustment (9.9) (10.3) (10.6) (10.9) (11.3) (11.4)
------- ------ ------ ------ ------ ------
Total 401.6 418.6 439.0 466.3 516.5 543.3
======= ====== ====== ====== ====== ======
Jun Sep Dec Mar Jun Sep
End of Quarter 2000 2000 2000 2001 2001 2001
------ ------ ------ ------ ------ ------
Annuities Segment 0.6 0.6 0.7 0.7 0.7 0.7
Life Insurance Segment 207.5 211.3 216.0 219.2 223.3 227.8
Reinsurance 354.0 381.4 407.4 426.2 447.8 468.9
Lincoln UK 25.2 24.5 24.3 21.9 21.5 21.3
Consolidating Adjustment (11.5) (11.4) (11.4) (13.1) (12.7) (13.1)
------ ------ ------ ------ ------ ------
Total 575.8 606.5 637.0 654.9 680.5 705.6
====== ====== ====== ====== ====== ======
Consolidated Investment Data - Assets Managed
Unaudited [Billions of Dollars]
Dec Dec Dec Dec Dec
December 31 1996 1997 1998 1999 2000
------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 24.097 24.066 30.233 27.689 27.450
Equity securities 0.558 0.660 0.543 0.604 0.550
Other investments 5.076 5.092 7.154 7.286 7.369
------- ------- ------- ------- -------
Total LNC Investments 29.730 29.819 37.929 35.578 35.369
Separate accounts 28.809 37.139 43.409 53.654 50.580
Cash and Invested Cash 1.145 3.795 2.433 1.896 1.927
Discontinued Operations 4.402
------- ------- ------- ------- -------
Total LNC 64.086 70.752 83.772 91.128 87.876
------- ------- ------- ------- -------
Non-affiliate assets managed 40.968 48.331 50.061 49.314 43.397
------- ------- ------- ------- -------
Total Assets Managed 105.054 119.083 133.833 140.443 131.273
======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment 45.471 56.457 61.488 61.374 52.895
(See page 24 for additional detail)
DLIA-Corp 37.453 35.684 39.432 35.934 35.686
(Assets managed internally-see page 24)
Lincoln (UK) 6.107 6.775 7.573 8.589 7.873
Policy Loans (within business units) 0.758 0.763 1.840 1.892 1.961
Non-LNC Affiliates 15.265 19.404 23.500 32.654 32.858
------- ------- ------- ------- -------
Total Assets Managed 105.054 119.083 133.833 140.443 131.273
======= ======= ======= ======= =======
Consolidated Investment Data - Assets Managed (Continued)
Unaudited [Billions of Dollars]
Dec Mar Jun Sep Dec Mar
End of Quarter 1998 1999 1999 1999 1999 2000
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 30.233 30.578 29.579 28.708 27.689 27.745
Equity securities 0.543 0.481 0.506 0.507 0.604 0.588
Other investments 7.154 7.071 7.278 7.317 7.286 7.442
------- ------- ------- ------- ------- -------
Total LNC Investments 37.929 38.129 37.363 36.532 35.578 35.775
Separate accounts 43.409 44.339 47.864 46.229 53.654 56.908
Cash and invested cash 2.433 2.327 2.151 2.343 1.896 1.510
------- ------- ------- ------- ------- -------
Total LNC 83.772 84.796 87.378 85.104 91.128 94.192
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 50.061 48.690 49.827 48.068 49.314 47.150
------- ------- ------- ------- ------- -------
Total Assets Managed 133.833 133.486 137.205 133.172 140.443 141.342
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment 61.488 59.941 61.511 58.869 61.374 58.241
(See page 25 for additional detail)
DLIA-Corp 39.432 38.516 37.391 36.820 35.934 35.541
(Assets managed internally-see page 25)
Lincoln (UK) 7.573 7.631 7.746 7.849 8.589 8.423
Policy Loans (within business units) 1.840 1.842 1.847 1.863 1.892 1.896
Non-LNC Affiliates 23.499 25.555 28.710 27.771 32.654 37.241
------- ------- ------- ------- ------- -------
Total Assets Managed 133.833 133.486 137.205 133.172 140.443 141.342
======= ======= ======= ======= ======= =======
Consolidated Investment Data - Assets Managed (Continued)
Unaudited [Billions of Dollars]
Jun Sep Dec Mar Jun Sep
End of Quarter 2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 27.078 27.264 27.450 27.811 27.874 28.932
Equity securities 0.560 0.570 0.550 0.560 0.534 0.478
Other investments 7.419 7.471 7.369 7.374 7.388 7.379
------- ------- ------- ------- ------- -------
Total LNC Investments 35.057 35.305 35.369 35.744 35.796 36.788
Separate accounts 54.924 54.411 50.580 44.506 47.140 39.480
Cash and invested cash 1.619 1.436 1.927 2.015 1.502 1.996
------- ------- ------- ------- ------- -------
Total LNC 91.601 91.152 87.876 82.266 84.438 78.264
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 45.945 45.119 43.397 41.904 44.069 39.198
------- ------- ------- ------- ------- -------
Total Assets Managed 137.546 136.271 131.273 124.170 128.507 117.462
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment 56.518 55.527 52.895 47.766 50.268 44.530
(See page 25 for additional detail)
DLIA-Corp 34.891 34.981 35.686 36.324 36.018 37.337
(Assets managed internally-see page 25)
Lincoln (UK) 8.058 7.838 7.873 7.012 7.027 6.474
Policy Loans (within business units) 1.915 1.936 1.961 1.947 1.947 1.943
Non-LNC Affiliates 36.164 35.989 32.858 31.122 33.246 27.177
------- ------- ------- ------- ------- -------
Total Assets Managed 137.546 136.271 131.273 124.170 128.507 117.462
======= ======= ======= ======= ======= =======
9/30/2001 PAGE 31
Consolidated Investment Data
Unaudited [Millions of Dollars except as noted]
YTD YTD
Sep Sep
For the Year Ended December 31 1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 1690.1 1832.1 2065.8 2232.9 2148.7 1611.0 1585.5
Equity Securities 14.4 19.1 22.8 20.1 19.5 13.0 12.5
Mortgage loans on real estate 292.7 279.2 383.6 369.2 373.8 281.5 282.2
Real estate 125.4 99.4 86.8 64.1 51.8 35.5 38.6
Policy loans 40.7 44.5 99.5 116.5 125.0 92.1 93.8
Invested cash 69.2 102.4 156.8 110.3 87.2 68.8 62.5
Other investments 14.7 20.6 88.4 51.8 66.8 63.9 66.0
------- ------- ------- ------- ------- ------- -------
Investment revenue 2247.2 2397.3 2903.7 2964.8 2872.8 2165.8 2141.0
Investment expense 159.2 146.6 222.3 157.3 125.7 90.9 108.0
------- ------- ------- ------- ------- ------- -------
Net Investment Income 2087.9 2250.8 2681.4 2807.5 2747.1 2075.0 2033.0
------- ------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 9.7 12.7 11.6 8.1 7.8 5.2 5.0
------- ------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 2097.7 2263.5 2693.0 2815.6 2754.9 2080.2 2038.0
======= ======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 27906.2 30337.3 36573.8 39027.5 37471.3 37598.1 37339.4
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.52% 7.46% 7.36% 7.21% 7.35% 7.38% 7.28%
Investment Gains
Realized Gains (Losses) on Investments 57.6 72.9 13.7 3.8 (17.5) (18.7) (48.6)
Gains(Losses) on Derivatives 0.0 0.0 0.0 0.0 0.0 0.0 (0.2)
Incr (Decr) in Unreal Gains on Sec
Avail-for-Sale (after DAC/Tax) (208.8) 159.6 116.4 (1018.1) 477.7 128.0 235.9
Incr (Decr) on Derivatives 20.4
Incr (Decr) in Foreign Exchange 53.0 (20.3) 3.8 (19.9) (8.1) (10.2) (15.0)
Securities Available-for-Sale
[Billions of Dollars at End of Year]
Fixed Maturity Sec (Market) 24.097 24.066 30.233 27.689 27.450 27.264 28.932
Fixed Maturity Sec (Adjusted Cost) 23.200 22.624 28.640 28.357 27.373 27.727 28.253
Equity Securities (Market) 0.558 0.660 0.543 0.604 0.550 0.570 0.478
Equity Securities (Adjusted Cost) 0.434 0.518 0.437 0.482 0.458 0.450 0.453
% of Fixed Maturity Securities (Based on Market)
Treasuries and AAA 32.8% 27.6% 25.6% 22.8% 22.1% 22.3% 17.9%
AA or better 41.9% 35.1% 32.6% 29.8% 29.2% 29.4% 24.3%
BB or less 7.0% 7.3% 7.0% 8.0% 6.7% 6.8% 7.2%
Dec Mar Jun Sep Dec
For the Quarter Ended 1998 1999 1999 1999 1999
------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 544.5 557.8 575.8 551.2 5.48
Equity Securities 8.9 4.4 4.9 3.9 6.9
Mortgage loans on real estate 107.4 94.5 85.5 94.7 94.5
Real estate 18.4 19.4 18.4 13.7 12.5
Policy loans 29.8 28.6 28.6 29.4 29.9
Invested cash 44.0 32.4 23.4 32.4 22.0
Other investments 19.3 7.5 13.4 9.9 20.9
------- ------- ------- ------- -------
Investment revenue 772.4 744.6 750.1 735.2 734.9
Investment expense 57.7 35.1 49.3 38.1 34.8
------- ------- ------- ------- -------
Net Investment Income 714.7 709.5 700.8 697.1 700.1
------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 3.0 1.8 2.0 1.7 2.6
------- ------- ------- ------- -------
Adjusted Net Invest Income 717.7 711.3 702.8 698.7 702.7
======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 37619.5 39174.2 39385.3 39111.8 38438.6
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.63% 7.26% 7.14% 7.15% 7.31%
Investment Gains
Realized Gains (Losses) on Investments 0.5 1.5 (3.5) 4.1 1.6
Gains (Losses) on Derivatives 0.0 0.0 0.0 0.0 0.0
Incr (Decr) in Unreal Gains on Sec
Avail-for-Sale (after DAC/Tax) (221.4) (297.7) (255.8) (102.7) (361.9)
Incr (Decr) on Derivatives
Incr (Decr) in Foreign Exchange (9.8) (19.9) (9.5) 19.6 (10.2)
Securities Available-for-Sale
[Billions of Dollars at End of Year]
Fixed Maturity Sec (Market) 30.233 30.578 29.579 28.708 27.689
Fixed Maturity Sec (Adjusted Cost) 28.640 29.681 29.494 28.974 28.357
Equity Securities (Market) 0.543 0.481 0.506 0.507 0.604
Equity Securities (Adjusted Cost) 0.437 0.380 0.385 0.414 0.482
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 25.6% 26.3% 25.5% 24.2% 22.8%
AA or better 32.6% 33.2% 32.5% 31.1% 29.8%
BB or less 7.0% 7.1% 7.0% 7.5% 8.0%
Mar Jun Sep Dec Mar Jun Sep
For the Quarter Ended 2000 2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 541.3 544.4 525.3 537.7 522.7 530.6 532.1
Equity Securities 3.7 5.7 3.6 6.5 1.0 7.8 3.7
Mortgage loans on real estate 92.0 95.1 94.4 92.3 95.7 92.4 94.2
Real estate 11.2 12.5 11.8 16.3 12.8 13.1 12.7
Policy loans 30.7 30.9 30.5 32.9 31.4 31.4 31.0
Invested cash 27.2 15.1 26.5 18.4 26.7 16.2 19.6
Other investments 35.1 2.0 26.9 2.9 19.6 18.2 28.2
------- ------- ------- ------- ------- ------- -------
Investment revenue 741.1 705.7 719.1 706.9 709.9 709.7 721.4
Investment expense 30.0 31.8 29.0 34.8 36.1 36.6 35.2
------- ------- ------- ------- ------- ------- -------
Net Investment Income 711.1 673.8 690.0 672.1 673.7 673.1 686.2
------- ------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 1.5 2.3 1.4 2.6 0.5 3.0 1.5
------- ------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 712.6 676.1 691.5 674.7 674.2 676.1 687.7
======= ======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 38237.4 37306.1 37250.8 37090.8 37238.0 37094.5 37685.8
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.45% 7.25% 7.43% 7.28% 7.24% 7.29% 7.30%
Investment Gains
Realized Gains (Losses) on Investments (0.4) (6.7) (11.6) 1.2 (13.4) (11.5) (23.8)
Gains (Losses) on Derivatives 0.0 0.0 0.0 0.0 (0.1) 0.2 (0.4)
Incr (Decr) in Unreal Gains on Sec
Avail-for-Sale (after DAC/Tax) 54.5 (145.4) 218.8 349.8 178.4 (114.2) 171.7
Incr (Decr) on Derivatives 23.3 3.7 (6.6)
Incr (Decr) in Foreign Exchange (7.3) (0.9) (2.0) 2.0 (17.8) (19.5) 22.2
Securities Available-for-Sale
[Billions of Dollars at End of Year]
Fixed Maturity Sec (Market) 27.745 27.078 27.264 27.450 27.811 27.874 28.932
Fixed Maturity Sec (Adjusted Cost) 28.295 27.788 27.727 27.373 27.367 27.681 28.253
Equity Securities (Market) 0.588 0.560 0.570 0.550 0.560 0.534 0.478
Equity Securities (Adjusted Cost) 0.475 0.446 0.450 0.458 0.507 0.477 0.453
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 22.7% 22.3% 22.3% 22.1% 20.3% 19.3% 17.9%
AA or better 29.5% 29.3% 29.4% 29.2% 27.1% 26.0% 24.3%
BB or less 7.4% 7.4% 6.8% 6.7% 7.2% 7.8% 7.2%
9/30/01 PAGE 32
Common Stock / Debt Information
Unaudited [Dollars per Share, except Percentages]
For the Year Ended December 31 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
Common Stock [1]
Highest Price 15.338 13.813 19.032 24.125 22.188 26.875 28.500 39.063 49.438 57.500 56.375
Lowest Price 7.688 9.500 12.625 17.344 17.313 17.313 20.375 24.500 33.500 36.000 22.625
Closing Price 10.750 13.688 18.500 21.750 17.500 26.875 26.250 39.063 40.907 40.000 47.313
Dividend Payout Ratio [2] 63.4% 63.5% 38.9% 52.6% 51.0% 39.7% 38.2% 22.8% 43.9% 50.5% 38.3%
Yield [3] 6.3% 5.3% 4.1% 3.8% 4.9% 3.4% 3.7% 2.7% 2.7% 2.9% 2.6%
Preferred Stock Dividend (Millions) 9.143 13.033 17.246 17.212 17.119 8.644 0.112 0.106 0.100 0.089 0.078
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a
Fitch AA AA- AA- AA- AA- AA- A+ A+ A+
Moody's A2 A2 A1 A2 A2 A2 A2 A2 A3
Standard and Poors A+ A+ A+ A A A A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A+ A+ A+ A+ A+ A+ A A A
Lincoln Life - Fitch AAA AAA AAA AA+ AA+ AA+ AA+ AA+ AA
Lincoln Life - Moody's A1 A1 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A+ A+ A+ A+ A+ A A A
First Penn - Fitch AA+ AA+ AA+ AA
First Penn - Moody's A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A+ A+ A A A
LLA of New York - Fitch* AA+ AA+ AA+ AA
LLA of New York - Moody's A1 A1 A1 A1 A1
LLA of New York - Standard & Poors* AA- AA- AA- AA- AA-
Ratios
Debt to Total
Capitalization [4] 25.7% 21.1% 19.9% 22.8% 18.8% 17.0% 21.2% 23.2% 20.8%
Debt to Equity [4] 34.7% 26.7% 24.9% 29.5% 23.1% 20.5% 26.9% 30.3% 26.3%
Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep
For the Quarter Ended 1998 1999 1999 1999 1999 2000 2000 2000 2000 2001 2001 2001
---------------------------------------------------------------------------------------------------------------------------------
Common Stock:
Highest Price 43.344 50.250 53.438 57.500 48.313 41.375 40.063 56.375 50.938 48.250 52.300 52.750
Lowest Price 33.500 39.281 45.688 36.000 36.500 22.625 29.000 35.625 40.875 38.000 41.280 41.000
Closing Price 40.906 49.438 52.313 37.563 40.000 33.500 36.125 48.125 47.313 42.470 51.750 46.630
Yield [3] 2.7% 2.2% 2.1% 2.9% 2.9% 3.5% 3.2% 2.4% 2.6% 2.9% 2.4% 2.6%
Preferred Stock Dividend 0.023 0.024 0.024 0.027 0.014 0.022 0.022 0.021 0.013 0.019 0.018 0.017
(Millions)
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a a a a
Fitch A+ A+ A+ A+ A+ A+ A+ A+ A+ A+ A+ A+
Moody's A2 A2 A2 A2 A2 A2 A2 A2 A3 A3 A3 A3
Standard and Poors A- A- A- A- A- A- A- A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A A A A A A A A A A A A
Lincoln Life - Fitch AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA- AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A A A A A A A A A A A
First Penn - Fitch AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA
First Penn - Moody's A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA- AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A A A A A A A A A A A A
LLA of New York - Fitch* AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA AA AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1 A1
LLA of New York - Standard & Poors* AA- AA- AA- AA- AA- AA- AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total
Capitalization [4] 21.2% 20.7% 22.0% 22.0% 23.2% 23.3% 21.8% 21.2% 20.8% 22.2% 21.2% 21.1%
Debt to Equity [4] 26.9% 26.2% 28.2% 28.3% 30.3% 30.4% 28.0% 27.0% 26.3% 28.5% 27.0% 26.7%
* 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 three separate Return on Equity numbers on pages 2 and 3
of this Statistical Report. "Net Income Divided by Average Shareholders' Equity" tends to fluctuate from period to period
due to the realization of gains on the sale of investments or subsidiaries during one period and the planned generation of
losses in another period for purposes of recovering Federal Taxes previously paid. "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. "Adjusted Income from Operations Divided by Adjusted
Shareholders' Equity" amortizes:
1) realized security gains on investments 2) unrealized gains on equity securities over approximately five years and
eliminates amortization of goodwill related to acquisitions.
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.