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: December 31, 2002
LINCOLN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 1-6028 35-1140070
(State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
1500 Market Street, Suite 3900, Centre Square West Tower, Philadelphia, PA 19102
(Address of principal executive offices)
Registrant's telephone number 219-448-1400
Item 9
The following financial information is included in this 8-K filing under
item 9:
1. Statistical Report for the quarter ended December 31, 2002.
2. Detail of gross realized gains and losses on investments for 2002, gross
unrealized gains and losses on securities available-for-sale as of December
31, 2002 and fair value of fixed maturity securities available-for-sale by
quality rating in accordance with NAIC regulations.
PAGE 1
Financial Highlights
Unaudited [Amounts in Millions,
except Per Share]
For the Quarter Ended December 31
2002 2001
Amount Amount Change % Change
------- ------- ------- -------
Income from Operations
Lincoln Retirement* 36.5 74.8 (38.3) (51.2%)
Life Insurance 63.8 73.2 (9.5) (13.0%)
Investment Management 10.3 5.1 5.2 102.5%
Lincoln UK 15.9 19.5 (3.6) (18.5%)
Corporate & Other** (14.3) 26.5 (40.8)
------- ------- ------- -------
Total Income from Operations 112.2 199.1 (86.9) (43.7%)
Realized gains (losses) on
investments (33.3) (20.0) (13.3)
Gains (losses) on derivatives 0.2 (4.6) 4.9
Reserve increase on business sold
through reinsurance (8.2) -- (8.2)
Gain on sale of subsidiaries (9.4) 15.0 (24.4)
Restructuring charges 1.7 (20.2) 21.9
Income before Accounting Changes 63.2 169.2 (106.0)
Cumulative effect of accounting
changes*** -- (0.0) 0.0
------- ------- ------- -------
Net Income 63.2 169.2 (106.0) (62.6%)
======= ======= ======= =======
Earnings per share (diluted)
Income from Operations $0.63 $1.03 ($0.41) (39.7%)
Realized gain (losses) on
investments ($0.18) ($0.11) ($0.07)
Gains (losses) on derivatives $0.00 ($0.02) $0.02
Reserve increase on business sold
through reinsurance ($0.05) $0.00 ($0.05)
Gain on sale of subsidiaries ($0.05) $0.08 ($0.13)
Restructuring charges $0.01 ($0.10) $0.11
------- ------- ------- -------
Income before Accounting Changes $0.35 $0.88 ($0.53)
Cumulative effect of accounting
changes*** $0.00 $0.00 $0.00
------- ------- ------- -------
Net Income $0.35 $0.88 ($0.52) (59.3%)
======= ======= ======= =======
Inc. from Oper.- before Goodwill
Amort.
Lincoln Retirement* 36.5 75.1 (38.6) (51.4%)
Life Insurance 63.8 79.1 (15.4) (19.4%)
Investment Management 10.3 9.1 1.2 12.8%
Lincoln UK 15.9 19.7 (3.7) (19.0%)
Corporate & Other** (14.3) 26.8 (41.1)
------- ------- ------- -------
Total 112.2 209.8 (97.6) (46.5%)
======= ======= ======= =======
Earnings per share (diluted)
Inc. from Oper.- before Goodwill
Amort. $0.63 $1.09 ($0.46) (42.2%)
------- ------- ------- -------
Net Income-- before Goodwill
Amort.
Lincoln Retirement* 6.0 54.5 (48.4) (88.9%)
Life Insurance 60.2 57.8 2.4 4.2%
Investment Management 9.3 8.1 1.3 16.0%
Lincoln UK 18.5 22.7 (4.2) (18.4%)
Corporate & Other** (31.0) 37.0 (67.9)
------- ------- ------- -------
Total 63.2 180.0 (116.8) (64.9%)
======= ======= ======= =======
Earnings per share (diluted)
Net Income-- before Goodwill
Amort. $0.35 $0.93 ($0.58) (62.4%)
------- ------- ------- -------
Operating Revenue
Lincoln Retirement* 497.6 498.7 (1.1) (0.2%)
Life Insurance 485.0 495.2 (10.2) (2.1%)
Investment Management 100.5 107.6 (7.0) (6.5%)
Lincoln UK 50.6 49.1 1.5 3.0%
Corporate & Other** 112.9 339.0 (226.1) (66.7%)
------- ------- ------- -------
Total Operating Revenue 1,246.7 1,489.6 (242.9) (16.3%)
======= ======= ======= =======
Total Revenue
Lincoln Retirement* 451.4 467.5 (16.1) (3.4%)
Life Insurance 479.6 464.7 15.0 3.2%
Investment Management 99.1 106.5 (7.4) (7.0%)
Lincoln UK 51.8 53.4 (1.6) (3.0%)
Corporate & Other** 106.7 371.7 (265.0) (71.3%)
------- ------- ------- -------
Total Revenue 1,188.6 1,463.8 (275.2) (18.8%)
======= ======= ======= =======
Operational Data by Segment:
(Billions except where noted)
-----------------------------------------------------------------------------------------------------------
Lincoln Retirement*
Gross Deposits 1.368 2.011 (0.643) (32.0%)
Net Cash Flows 0.074 0.631 (0.557) 88.3%
Account Values (Gross) 47.525 52.642 (5.118) (9.7%)
Account Values (Net of
Reinsurance) 45.522 51.129 (5.606) (11.0%)
Life Insurance Segment
First Year Premium- Retail (in
millions) 223.164 187.184 35.980 19.2%
First Year Premium- COLI (in
millions) 26.774 14.155 12.620 89.2%
First Year Premium- Total (in
millions) 249.938 201.338 48.600 24.1%
In-force 253.896 234.394 19.502 8.3%
Account Values 12.086 11.377 0.709 6.2%
Investment Management Segment
Retail Deposits 1.673 0.798 0.875 109.6%
Retail Net Cash Flows 0.502 (0.091) 0.593 649.4%
Institutional In-flows 1.323 0.696 0.628 90.3%
Institutional Net Cash Flows 0.572 (0.103) 0.674 (656.9%)
Total Net Cash Flows 1.074 (0.194) 1.267 (653.4%)
Assets Under Management- Retail
and Inst'l 46.495 48.411 (1.916) (4.0%)
Assets Under Management--
Insurance Assets 41.104 38.119 2.985 7.8%
Assets Under Management-- Total
Segment 87.599 86.530 1.068 1.2%
Consolidated
Consolidated Domestic Retail
Deposits 3.396 3.137 0.259 8.3%
Consolidated Domestic Retail
Account Balances 75.057 81.044 (5.987) (7.4%)
Total Retail Net Cash Flows 1.060 0.869 0.191 (22.0%)
Total Net Cash Flows 1.632 0.767 0.865 112.8%
Total Assets Under Management 119.127 126.241 (7.114) (5.6%)
For the Year Ended December 31
2002 2001
Amount Amount Change % Change
------- ------- ------- -------
Income from Operations
Lincoln Retirement* 187.5 320.3 (132.8) (41.5%)
Life Insurance 271.9 279.0 (7.2) (2.6%)
Investment Management 28.9 14.6 14.3 97.7%
Lincoln UK 37.0 60.2 (23.3) (38.7%)
Corporate & Other** (50.8) 14.8 (65.6)
------- ------- ------- -------
Total Income from Operations 474.4 689.0 (214.6) (31.1%)
Realized gains (losses) on
investments (177.2) (68.7) (108.5)
Gains (losses) on derivatives 0.8 (4.9) 5.6
Reserve increase on business sold
through reinsurance (199.1) -- (199.1)
Gain on sale of subsidiaries (9.4) 15.0 (24.4)
Restructuring charges 2.0 (24.7) 26.7
Income before Accounting Changes 91.6 605.8 (514.3)
Cumulative effect of accounting
changes*** -- (15.6) 15.6
------- ------- ------- -------
Net Income 91.6 590.2 (498.6) (84.5%)
======= ======= ======= =======
Earnings per share (diluted)
Income from Operations $2.56 $3.56 ($1.01) (28.3%)
Realized gain (losses) on
investments ($0.95) ($0.35) ($0.60)
Gains (losses) on derivatives $0.00 ($0.03) $0.03
Reserve increase on business sold
through reinsurance ($1.07) $0.00 ($1.07)
Gain on sale of subsidiaries ($0.05) $0.08 ($0.13)
Restructuring charges $0.01 ($0.13) $0.14
------- ------- -------
Income before Accounting Changes $0.49 $3.13 ($2.64)
Cumulative effect of accounting
changes*** $0.00 ($0.08) $0.08
------- ------- ------- -------
Net Income $0.49 $3.05 ($2.56) (83.8%)
======= ======= ======= =======
Inc. from Oper.- before Goodwill
Amort.
Lincoln Retirement* 187.5 321.5 (134.0) (41.7%)
Life Insurance 271.9 302.7 (30.9) (10.2%)
Investment Management 28.9 30.9 (1.9) (6.3%)
Lincoln UK 37.0 60.9 (23.9) (39.2%)
Corporate & Other** (50.8) 16.4 (67.2)
------- ------- ------- -------
Total 474.4 732.4 (258.0) (35.2%)
======= ======= ======= =======
Earnings per share (diluted)
Inc. from Oper.- before Goodwill
Amort. $2.56 $3.79 ($1.23) (32.5%)
------- ------- ------- -------
Net Income-- before Goodwill
Amort.
Lincoln Retirement* 57.8 270.5 (212.6) (78.6%)
Life Insurance 209.0 256.7 (47.8) (18.6%)
Investment Management 25.6 28.0 (2.3) (8.4%)
Lincoln UK 40.0 69.6 (29.6) (42.5%)
Corporate & Other** (240.9) 8.8 (249.8)
------- ------- ------- -------
Total 91.6 633.6 (542.0) (85.5%)
======= ======= ======= =======
Earnings per share (diluted)
Net Income-- before Goodwill
Amort. $0.49 $3.28 ($2.79) (85.1%)
------- ------- ------- -------
Operating Revenue
Lincoln Retirement* 1,985.5 2,033.1 (47.5) (2.3%)
Life Insurance 1,881.7 1,897.5 (15.8) (0.8%)
Investment Management 404.7 437.4 (32.7) (7.5%)
Lincoln UK 275.4 278.2 (2.9) (1.0%)
Corporate & Other** 368.8 1,833.4 (1,464.6) (79.9%)
------- ------- ------- -------
Total Operating Revenue 4,916.1 6,479.6 (1,563.5) (24.1%)
======= ======= ======= =======
Total Revenue
Lincoln Retirement* 1,787.7 1,968.3 (180.6) (9.2%)
Life Insurance 1,785.0 1,840.6 (55.6) (3.0%)
Investment Management 399.3 433.7 (34.5) (7.9%)
Lincoln UK 277.2 290.7 (13.4) (4.6%)
Corporate & Other** 386.3 1,844.7 (1,458.5) (79.1%)
------- ------- ------- -------
Total Revenue 4,635.5 6,378.0 (1,742.5) (27.3%)
======= ======= ======= =======
Operational Data by Segment:
(Billions except where noted)
-----------------------------------------------------------------------------------------------------------
Lincoln Retirement*
Gross Deposits 6.415 6.409 0.006 0.1%
Net Cash Flows 0.453 0.105 0.348 (331.4%)
Account Values (Gross) 47.525 52.642 (5.118) (9.7%)
Account Values (Net of
Reinsurance) 45.522 51.129 (5.606) (11.0%)
Life Insurance Segment
First Year Premium- Retail (in
millions) 692.328 578.387 113.941 19.7%
First Year Premium- COLI (in
millions) 88.109 47.255 40.854 86.5%
First Year Premium- Total (in
millions) 780.437 625.642 154.795 24.7%
In-force 253.896 234.394 19.502 8.3%
Account Values 12.086 11.377 0.709 6.2%
Investment Management Segment
Retail Deposits 5.695 3.693 2.002 54.2%
Retail Net Cash Flows 0.806 (0.375) 1.181 314.7%
Institutional In-flows 5.194 3.826 1.368 35.8%
Institutional Net Cash Flows 2.106 (0.231) 2.337 (1012.6%)
Total Net Cash Flows 2.912 (0.606) 3.518 580.4%
Assets Under Management- Retail
and Inst'l 46.495 48.411 (1.916) (4.0%)
Assets Under Management--
Insurance Assets 41.104 38.119 2.985 7.8%
Assets Under Management-- Total
Segment 87.599 86.530 1.068 1.2%
Consolidated
Consolidated Domestic Retail
Deposits 12.783 11.009 1.775 16.1%
Consolidated Domestic Retail
Account Balances 75.057 81.044 (5.987) (7.4%)
Total Retail Net Cash Flows 2.587 0.742 1.845 (248.6%)
Total Net Cash Flows 4.693 0.514 4.179 (812.7%)
Total Assets Under Management 119.127 126.241 (7.114) (5.6%)
* Effective March 7, 2002, the Annuities segment became known as
Lincoln Retirement.
** Upon the closing of Swiss Re's acquisition of LNC's reinsurance
business on December 7, 2001, all historical financial data for the
former Reinsurance segment was moved into "Other Operations." In
addition, ongoing amortization of the deferred gain on indemnity
reinsurance is shown in "Other Operations."
*** The cumulative effect of accounting changes relates to the
adjustments recorded upon adoption of FAS #133 in the 1st qtr. 2001 and
EITF 99-20 in the 2nd qtr. 2001.
PAGE 2
Financial Highlights
Unaudited [Amounts in Millions,
except Per Share]
For the Quarter Ended December 31
2002 2001
Amount Amount Change % Change
--------- --------- --------- ---------
Consolidated Operational Data:
(Millions)
Balance Sheet Assets - End of
Period 93135.3 98001.3 (4866.0) (5.0%)
Shareholders' Equity
Beg of Period (Securities at
Market) 5389.0 5368.6 20.4
End of Period (Securities at
Market) 5355.0 5263.5 91.5
End of Period (Securities at
Cost) 4514.6 5046.3 (531.6)
Average Equity (Securities at
Cost) 4584.9 5131.4 (546.6)
Return on Equity
Inc from Operations/Average
Equity 9.8% 15.5% (5.7%)
Net Income/Average Equity 5.5% 13.2% (7.7%)
Return on Capital
Inc from Operations/Average
Capital 7.7% 12.9% (5.2%)
Common Stock Outstanding
Average for the Period - Diluted 178.9 192.8 (14.0) (7.3%)
End of Period - Assuming Conv of
Pref. 177.6 187.3 (9.7) (5.2%)
End of Period - Diluted 179.0 191.1 (12.1) (6.3%)
Book Value (Including accumulated
other comprehensive income) 30.15 28.10 2.05 7.2%
Book Value (Excluding accumulated
other comprehensive income) 25.97 27.13 (1.17) (4.3%)
Cash Returned to Shareholders
Share Repurchase - dollar amount 0.0 134.3 (134.3)
Dividends Declared to
Shareholders 58.9 59.9 (1.0)
--------- --------- --------- ---------
Total Cash Returned to
Shareholders 58.9 194.2 (135.3)
========= ========= ========= =========
Share Repurchase - number of
shares 0.000 2.894 (2.900)
Dividend Declared on Common Stock
- per share $0.335 $0.320 $0.015 4.7%
For the Quarter Ended December 31
Comprehensive Income 2002 2001
(millions) Amount Amount
--------- ---------
Net Income 63.2 169.2
Foreign Currency Translation 15.4 (14.9)
Net Unrealized Gains (Losses) on
Securities (5.6) (52.2)
Gains (Losses) on Derivatives 1.0 1.2
Cumulative Effect of Accounting
Change 0.0 (0.0)
Minimum Pension Liability
Adjustment (62.6) (36.0)
--------- ---------
Comprehensive Income 11.5 67.3
========= =========
For the Year Ended December 31
2002 2001
Amount Amount Change % Change
--------- --------- --------- ---------
Consolidated Operational Data:
(Millions)
Balance Sheet Assets - End of
Period 93135.3 98001.3 (4866.0) (5.0%)
Shareholders' Equity
Beg of Period (Securities at
Market) 5263.5 4954.1 309.4
End of Period (Securities at
Market) 5355.0 5263.5 91.5
End of Period (Securities at
Cost) 4514.6 5046.3 (531.6)
Average Equity (Securities at
Cost) 4910.1 5022.6 (112.5)
Return on Equity
Inc from Operations/Average
Equity 9.7% 13.7% (4.1%)
Net Income/Average Equity 1.9% 11.8% (9.9%)
Return on Capital
Inc from Operations/Average
Capital 8.0% 11.5% (3.5%)
Common Stock Outstanding
Average for the Period - Diluted 185.6 193.3 (7.7) (4.0%)
End of Period - Assuming Conv of
Pref. 177.6 187.3 (9.7) (5.2%)
End of Period - Diluted 179.0 191.1 (12.1) (6.3%)
Book Value (Including accumulated
other comprehensive income) 30.15 28.10 2.05 7.2%
Book Value (Excluding accumulated
other comprehensive income) 25.97 27.13 (1.17) (4.3%)
Cash Returned to Shareholders
Share Repurchase - dollar amount 474.5 503.7 (29.2)
Dividends Declared to
Shareholders 234.3 231.8 2.5
--------- --------- --------- ---------
Total Cash Returned to
Shareholders 708.8 735.5 (26.7)
========= ========= ========= =========
Share Repurchase - number of
shares 12.088 11.278 0.810
Dividend Declared on Common Stock
- per share $1.295 $1.235 $0.060 4.9%
For the Year Ended December 31
Comprehensive Income 2002 2001
(millions) Amount Amount
--------- ---------
Net Income 91.6 590.2
Foreign Currency Translation 58.8 (30.0)
Net Unrealized Gains (Losses) on
Securities 616.3 183.6
Gains (Losses) on Derivatives 24.4 3.9
Cumulative Effect of Accounting
Change (17.6) 17.6
Minimum Pension Liability
Adjustment (61.9) (36.0)
--------- ---------
Comprehensive Income 711.7 729.4
========= =========
PAGE 3
Financial Highlights
Unaudited [Amounts in Millions]
For the Quarter Ended December 31
2002 2001
Amount Amount Change % Change
------- ------- ------- -------
Consolidated Condensed Statements
of Income
Revenue:
Insurance Premiums and Fees 451.4 679.5 (228.1) (33.6%)
Investment Advisory Fees 44.7 50.9 (6.2) (12.2%)
Net Investment Income 662.2 646.6 15.6 2.4%
Realized Gains (Losses) on
Investments (50.7) (29.7) (21.0)
Gains (Losses) on Derivatives 0.6 (8.9) 9.5
Gains (Losses) on sale of
subsidiaries (8.3) 12.8 (21.1)
Other 88.7 112.6 (23.9) (21.2%)
------- ------- ------- -------
Total Revenue 1,188.6 1,463.8 (275.2) (18.8%)
Benefits and Expenses:
Benefits 653.0 744.9 (92.0) (12.3%)
Underwriting, Acquisition,
Insurance and Other Expenses 474.8 529.2 (54.4) (10.3%)
------- ------- ------- -------
Total Benefits and Expenses 1,127.8 1,274.1 (146.3) (11.5%)
------- ------- ------- -------
Net Income
before Federal Taxes 60.8 189.7 (128.9)
Federal Income Taxes (2.4) 20.5 (22.8)
------- ------- -------
Income before Accounting Changes 63.2 169.2 (106.0)
Cumulative Effect of Accounting
Changes -- (0.0) 0.0
------- ------- -------
Net Income 63.2 169.2 (106.0) (62.7%)
======= ======= ======= =======
Income before Tax and Cumulative
Effect
of Accounting Changes By Segment
Lincoln Retirement (11.8) 53.3 (65.2)
Life Insurance 87.2 79.9 7.3
Investment Management 12.6 5.5 7.1
Lincoln UK 15.8 5.7 10.1
Corporate and Other (42.9) 45.3 (88.2)
------- ------- -------
Income before Tax and
Cumulative Effect of Accounting
Changes 60.8 189.7 (128.9)
------- ------- -------
Pre-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (46.2) (31.2) (15.1)
Life Insurance (5.4) (30.6) 25.2
Investment Management (1.5) (1.1) (0.4)
Lincoln UK 1.2 4.3 (3.1)
Corporate and Other 1.5 19.8 (18.3)
------- ------- -------
Pre-Tax Realized Gains (Losses)
on Investments and Derivatives (50.3) (38.6) (11.7)
After-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (30.4) (20.6) (9.8)
Life Insurance (3.5) (19.9) 16.3
Investment Management (0.9) (0.7) (0.3)
Lincoln UK 0.8 3.0 (2.2)
Corporate and Other 1.0 13.5 (12.5)
------- ------- -------
After-Tax Realized Gains (Losses)
on Investments and Derivatives (33.1) (24.7) (8.4)
For the Year Ended December 31
2002 2001
Amount Amount Change % Change
------- ------- ------- -------
Consolidated Condensed Statements
of Income
Revenue:
Insurance Premiums and Fees 1,750.4 3,248.0 (1,497.7) (46.1%)
Investment Advisory Fees 183.3 197.2 (13.8) (7.0%)
Net Investment Income 2,608.3 2,679.6 (71.3) (2.7%)
Realized Gains (Losses) on
Investments (272.7) (105.2) (167.5)
Gains (Losses) on Derivatives 3.8 (9.3) 13.1
Gains (Losses) on sale of
subsidiaries (8.3) 12.8 (21.1)
Other 370.6 354.8 15.8 4.4%
------- ------- ------- -------
Total Revenue 4,635.5 6,378.0 (1,742.5) (27.3%)
Benefits and Expenses:
Benefits 2,554.1 3,409.7 (855.6) (25.1%)
Underwriting, Acquisition,
Insurance and Other Expenses 2,079.7 2,204.2 (124.5) (5.6%)
------- ------- ------- -------
Total Benefits and Expenses 4,633.8 5,613.9 (980.1) (17.5%)
------- ------- ------- -------
Net Income
before Federal Taxes 1.6 764.1 (762.5)
Federal Income Taxes (90.0) 158.4 (248.3)
------- ------- -------
Income before Accounting Changes 91.6 605.7 (514.1)
Cumulative Effect of Accounting
Changes -- (15.6) 15.6
------- ------- -------
Net Income 91.6 590.2 (498.6) (84.5%)
======= ======= ======= =======
Income before Tax and Cumulative
Effect
of Accounting Changes By Segment
Lincoln Retirement 0.8 312.8 (312.1)
Life Insurance 298.7 369.8 (71.1)
Investment Management 31.4 19.1 12.3
Lincoln UK 36.9 61.6 (24.8)
Corporate and Other (366.1) 0.8 (366.8)
------- ------- -------
Income before Tax and
Cumulative Effect of Accounting
Changes 1.6 764.1 (762.5)
------- ------- -------
Pre-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (197.8) (64.8) (133.0)
Life Insurance (96.7) (56.9) (39.8)
Investment Management (5.4) (3.7) (1.7)
Lincoln UK 1.9 12.4 (10.6)
Corporate and Other 26.6 (1.5) 28.1
------- ------- -------
Pre-Tax Realized Gains (Losses)
on Investments and Derivatives (271.5) (114.5) (157.1)
After-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (128.6) (42.5) (86.1)
Life Insurance (62.9) (36.9) (25.9)
Investment Management (3.5) (2.4) (1.1)
Lincoln UK 1.3 8.7 (7.4)
Corporate and Other 17.3 (0.4) 17.7
------- ------- -------
After-Tax Realized Gains (Losses)
on Investments and Derivatives (176.4) (73.5) (102.9)
* Includes both realized gains (losses) on investments and gains (losses) on derivatives.
PAGE 4
Financial Highlights
Unaudited [Amounts in Millions, except Retail Account Balances and Assets Managed]
As of
---------------------------------------------------------------
December December
2002 2001
Amount Amount Change % Change
--------- --------- --------- ---------
Consolidated Condensed Balance
Sheets
Assets:
Investments:
Securities Available for Sale:
Fixed Maturities 32,767.5 28,345.7 4,421.8 15.6%
Equities 337.2 470.5 (133.2) (28.3%)
Mortgage Loans on Real Estate 4,205.5 4,535.5 (330.1) (7.3%)
Real Estate 279.7 267.9 11.8 4.4%
Policy Loans 1,945.6 1,939.7 5.9 0.3%
Other Long-Term Investments 466.2 553.8 (87.6) (15.8%)
--------- --------- --------- ---------
Total Investments 40,001.7 36,113.1 3,888.6 10.8%
Other Assets:
Assets Held in Separate Accounts 36,178.3 44,833.4 (8,655.1) (19.3%)
Other Assets 16,955.2 17,054.8 (99.6) (0.6%)
--------- --------- --------- ---------
Total Assets 93,135.3 98,001.3 (4,866.0) (5.0%)
========= ========= ========= =========
Liabilities and Shareholders'
Equity
Liabilities:
Insurance and Investment Contract
Liabilities 44,768.9 40,857.2 3,911.7 9.6%
Liabilities Related to Separate
Accounts 36,178.3 44,833.4 (8,655.1) (19.3%)
Other Liabilities 6,815.4 7,047.2 (231.8) (3.2%)
--------- --------- --------- ---------
Total Liabilities 87,780.3 92,737.8 (4,957.5) (5.4%)
Shareholders' Equity:
Net Unrealized Gains(Losses) on
Securities
and Derivatives 840.3 217.2 623.1 286.9%
Other Shareholders' Equity 4,514.6 5,046.3 (531.6) (10.5%)
--------- --------- --------- ---------
Total Shareholders' Equity 5,355.0 5,263.5 91.5 1.7%
--------- --------- --------- ---------
Total Liabilities and
Shareholders' Equity 93,135.3 98,001.3 (4,866.0) (5.0%)
========= ========= ========= =========
-----------------------------------------------------------------------------------------------------------
As of
---------------------------------------------------------------
December December
2002 2001
Amount Amount Change % Change
--------- --------- --------- ---------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 2,885.3 3,070.5 (185.2) (6.0%)
Deferral 627.3 714.1 (86.8) (12.2%)
Amortization (346.7) (367.7) 21.0 (5.7%)
--------- --------- --------- ---------
Operating 280.5 346.4 (65.8) (19.0%)
Adjustment related to realized
(gains) losses
on securities available-for-sale 115.0 112.9 2.2 1.9%
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (338.5) (187.2) (151.3) 80.8%
Foreign currency translation
adjustment 56.9 (16.0) 73.0 (454.8%)
Disposition of business - (425.9) 425.9 (100.0%)
Other (28.3) (15.3) (13.0) 85.1%
--------- --------- --------- ---------
Balance at end-of-year 2,971.0 2,885.3 85.7 3.0%
========= ========= ========= =========
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 1,362.5 1,483.3 (120.9) (8.1%)
Amortization (136.4) (113.1) (23.3) 20.6%
Foreign currency translation
adjustment 24.1 (7.0) 31.1 (441.8%)
Other (0.0) (0.7) 0.7 (97.9%)
--------- --------- --------- ---------
Balance at end-of-year 1,250.1 1,362.5 (112.4) (8.2%)
========= ========= ========= =========
PAGE 5
Eleven-Year Summary
Unaudited [Millions of Dollars except Per Share Data]
For the Year Ended December 31 2002 2001 2000 1999 1998 1997
------- ------- ------- ------- ------- -------
Revenue
Lincoln Retirement 1787.7 1968.3 2133.7 2115.8 2068.1 2023.0
Life Insurance 1785.0 1840.6 1819.0 1760.4 1378.5 544.8
Investment Management 399.3 433.7 490.3 495.5 491.9 459.1
Lincoln UK 277.2 290.7 433.8 446.6 439.7 427.3
Corporate & Other 386.3 1844.7 1970.4 1985.4 1708.9 1444.3
------- ------- ------- ------- ------- -------
Total Revenue 4635.5 6378.0 6847.1 6803.7 6087.1 4898.5
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 187.5 320.3 362.0 299.4 262.4 223.0
Life Insurance 271.9 279.0 259.9 212.0 149.2 39.9
Investment Management 28.9 14.6 44.1 61.0 43.9 18.1
Lincoln UK 37.0 60.2 61.0 (13.9) 70.9 (108.3)
Corporate & Other (50.8) 14.8 (8.0) (83.1) 4.0 (223.3)
------- ------- ------- ------- ------- -------
Total Income from Cont Oper 474.4 689.0 719.1 475.5 530.4 (50.6)
Discontinued Operations 110.1
------- ------- ------- ------- ------- -------
Income from Operations 474.4 689.0 719.1 475.5 530.4 59.4
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 57.8 269.2 358.6 291.5 273.8 263.3
Life Insurance 209.0 233.1 249.3 211.5 127.5 39.1
Investment Management 25.6 11.8 37.0 51.6 44.4 25.1
Lincoln UK 40.0 68.9 (13.2) (18.2) 71.7 (106.8)
Corporate & Other (240.9) 7.2 (10.2) (76.1) (7.6) (198.4)
------- ------- ------- ------- ------- -------
Total Net Inc from Cont Oper 91.6 590.2 621.4 460.4 509.8 22.2
Discontinued Operations 911.8
------- ------- ------- ------- ------- -------
Total Net Income 91.6 590.2 621.4 460.4 509.8 934.0
------- ------- ------- ------- ------- -------
OTHER DATA
Assets 93135.3 98001.3 99844.1 103095.7 93836.3 77174.7
Shareholders' Equity:
Securities and Derivatives at
Market 5355.0 5263.5 4954.1 4263.9 5387.9 4982.9
Securities and Derivatives at
Cost 4514.6 5046.3 4942.0 4729.6 4835.6 4546.9
Average Equity (Sec & Deriv at
Cost) 4910.1 5022.6 4831.9 4818.7 4685.6 4214.1
Common Shares Outstanding:
(millions)
End of Period - Diluted 179.0 191.1 195.2 197.0 203.4 204.7
Average for the Period - Diluted 185.6 193.3 194.9 200.4 203.3 208.0
Per Share Data (Diluted)
Income (Loss) from Continuing
Operations $2.56 $3.56 $3.69 $2.37 $2.61 ($0.24)
Income from Operations * $2.56 $3.56 $3.69 $2.37 $2.61 $0.29
Net Income from Continuing
Operations $0.49 $3.05 $3.19 $2.30 $2.51 $0.11
Net Income $0.49 $3.05 $3.19 $2.30 $2.51 $4.49
Shareholders' Equity:
Shareholders' Equity (Includes
accum OCI) $30.15 $28.10 $25.92 $21.76 $26.59 $24.63
Shareholders' Equity (Excludes
accum OCI) $25.97 $27.13 $25.85 $24.14 $23.86 $22.48
Dividends Declared (Common Stock) $1.30 $1.24 $1.18 $1.12 $1.06 $1.00
Return on Equity (see page 30)
Net Income/Average Equity 1.9% 11.8% 12.9% 9.6% 10.9% 22.2%
Inc from Operations/Average
Equity 9.7% 13.7% 14.9% 9.9% 11.3% 1.4%
Market Value of Common Stock
High for the Year $53.650 $52.750 $56.375 $57.500 $49.438 $39.063
Low for the Year $25.150 $38.000 $22.625 $36.000 $33.500 $24.500
Close for the Year $31.580 $48.570 $47.313 $40.000 $40.907 $39.063
Ten-year
compound
For the Year Ended December 31 1996 1995 1994 1993 1992 annual growth
------- ------- ------- ------- ------- -------------
Revenue
Lincoln Retirement 1805.0 1877.1 1506.2 1603.8 1336.2 3.0%
Life Insurance 549.2 514.9 466.2 477.5 444.4 14.9%
Investment Management 410.5 290.5
Lincoln UK 393.2 351.5 216.0 174.9 180.6 4.4%
Corporate & Other 1575.6 1552.5 1744.1 2680.9 2780.9
------- ------- ------- ------- ------- -------
Total Revenue 4733.6 4586.5 3932.5 4937.1 4742.1 - 0.2%
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 174.6 175.2 142.4 127.1 89.4 7.7%
Life Insurance 41.2 35.4 34.2 37.8 46.8 19.2%
Investment Management 18.6 20.6
Lincoln UK 66.0 45.9 17.2 11.9 9.2 14.9%
Corporate & Other (1.7) (136.2) 24.8 20.8 6.5
------- ------- ------- ------- ------- -------
Total Income from Cont Oper 298.8 140.8 218.6 197.6 151.9 12.1%
Discontinued Operations 135.3 165.6 171.1 145.9 88.7
------- ------- ------- ------- ------- -------
Income from Operations 434.1 306.5 389.7 343.5 240.6 7.0%
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 204.3 248.8 142.4 127.1 89.4 - 4.3%
Life Insurance 51.8 40.6 34.2 37.8 46.8 16.1%
Investment Management 25.0 27.4
Lincoln UK 66.0 45.7 18.5 12.6 9.2
Corporate & Other 9.3 (61.0) (29.6) (101.1) 125.1
------- ------- ------- ------- ------- -------
Total Net Inc from Cont Oper 356.4 301.4 165.5 76.4 270.5 - 10.3%
Discontinued Operations 157.2 180.8 184.4 242.5 88.7
------- ------- ------- ------- ------- -------
Total Net Income 513.6 482.2 349.9 318.9 359.2 - 12.8%
------- ------- ------- ------- ------- -------
OTHER DATA
Assets 71713.4 63257.7 48864.8 47825.1 39042.2 9.1%
Shareholders' Equity:
Securities and Derivatives at
Market 4470.0 4378.1 3042.1 4072.3 2826.8 6.6%
Securities and Derivatives at
Cost 4057.1 3679.9 3353.1 3157.6 2664.1 5.4%
Average Equity (Sec & Deriv at
Cost) 3866.0 3568.4 3288.6 3009.0 2575.0 6.7%
Common Shares Outstanding:
(millions)
End of Period - Diluted 209.5 210.3 208.3 208.3 187.7
Average for the Period - Diluted 210.7 209.5 208.7 206.1 186.8
Per Share Data (Diluted)
Income (Loss) from Continuing
Operations $1.42 $0.67 $1.05 $0.96 $0.81 12.1%
Income from Operations * $2.06 $1.46 $1.87 $1.67 $1.29 7.1%
Net Income from Continuing
Operations $1.69 $1.44 $0.79 $0.37 $1.45 - 10.2%
Net Income $2.44 $2.30 $1.68 $1.55 $1.92 - 12.7%
Shareholders' Equity:
Shareholders' Equity (Includes
accum OCI) $21.50 $20.95 $14.67 $19.69 $15.13 7.1%
Shareholders' Equity (Excludes
accum OCI) $19.51 $17.61 $16.17 $15.27 $14.26 6.2%
Dividends Declared (Common Stock) $0.94 $0.88 $0.830 $0.775 $0.738 5.8%
Return on Equity (see page 30)
Net Income/Average Equity 13.3% 14.7% 10.6% 10.6% 13.9%
Inc from Operations/Average
Equity 11.2% 9.4% 11.8% 11.4% 9.3%
Market Value of Common Stock
High for the Year $28.500 $26.875 $22.188 $24.125 $19.032
Low for the Year $20.375 $17.313 $17.313 $17.344 $12.625
Close for the Year $26.250 $26.875 $17.500 $21.750 $18.500 5.5%
* "Income from Operations" is defined as "Net income less realized gain (loss) on investments, derivative instruments and
associated items, gain (loss) on sale of subsidiaries, restructuring charges, and cumulative effect of accounting changes, all
net of taxes." Income from operations also excludes the recognition of losses and related changes to the deferred gain
amortization under indemnity reinsurance resulting from future developments in the business reinsured.
PAGE 6
Quarterly Summary
Unaudited [Millions of Dollars except Per Share Data]
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2000 2000 2000 2000 2001 2001
------ ------ ------ ------ ------ -----
Revenue
Lincoln Retirement 548.7 530.5 532.1 522.3 510.4 512.1
Life Insurance 441.7 444.2 453.2 479.9 459.6 455.7
Investment Management 125.8 120.7 123.8 120.0 112.3 110.3
Lincoln UK 116.8 103.5 110.7 102.8 88.8 63.4
Corporate & Other 440.2 489.0 494.1 547.0 531.6 452.0
------- ------- ------- ------- ------- -------
Total Revenue 1673.2 1688.0 1714.0 1772.0 1702.7 1593.5
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 88.5 84.1 102.9 86.4 82.3 90.8
Life Insurance 60.4 62.4 66.5 70.6 68.6 67.1
Investment Management 12.4 13.1 9.9 8.7 2.4 3.7
Lincoln UK 15.7 19.3 10.6 15.5 14.4 16.2
Corporate & Other (6.5) (5.9) 0.9 3.5 10.9 (9.7)
------- ------- ------- ------- ------- -------
Income from Operations 170.6 173.0 190.7 184.7 178.6 168.1
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 91.2 84.4 93.8 89.2 76.6 79.9
Life Insurance 58.1 58.4 67.4 65.4 62.9 53.5
Investment Management 12.3 8.4 9.7 6.6 2.0 2.9
Lincoln UK 15.5 19.1 (29.9) (17.9) 14.8 17.6
Corporate & Other (6.8) (6.8) (2.3) 5.7 4.0 (12.2)
------- ------- ------- ------- ------- -------
Total Net Income 170.2 163.6 138.6 148.9 160.2 141.7
OTHER DATA
Assets 106340.0 103847.6 103243.1 99844.1 94122.4 96431.2
Shareholders' Equity
Beg of Period (Sec & Deriv at
Market) 4263.9 4340.4 4223.7 4538.6 4954.1 5096.4
End of Period (Sec & Deriv at
Market) 4340.4 4223.7 4538.6 4954.1 5096.4 5055.9
End of Period (Sec & Deriv at
Cost) 4751.6 4780.3 4876.3 4942.0 4882.7 4952.8
Average Equity (Sec & Deriv at
Cost) 4791.5 4753.0 4867.2 4915.7 4953.7 4920.2
Common Shares Outstanding
Average for the Period - Diluted 195.8 194.0 195.6 195.6 193.7 192.0
End of Period - Diluted 195.1 193.7 196.2 195.2 191.3 192.9
Per Share Data (Diluted)
Income from Operations * $0.87 $0.89 $0.98 $0.94 $0.92 $0.88
Net Income $0.87 $0.84 $0.71 $0.76 $0.83 $0.74
Shareholders' Equity
Shareholders' Equity (Includes
accum OCI) 22.45 22.10 23.67 25.92 27.09 26.87
Shareholders' Equity (Excludes
accum OCI) 24.58 25.01 25.43 25.85 25.96 26.32
Dividends Declared (Com Stk) 0.290 0.290 0.290 0.305 0.305 0.305
Return on Equity (see page 30)
Net Income/Average Equity 14.2% 13.8% 11.4% 12.1% 12.9% 11.5%
Inc from Operations/Average
Equity 14.2% 14.6% 15.7% 15.0% 14.4% 13.7%
Market Value of Common Stock
Highest Price $41.375 $40.063 $56.375 $50.938 $48.250 $52.300
Lowest Price $22.625 $29.000 $35.625 $40.875 $38.000 $41.280
Closing Price $33.500 $36.125 $48.125 $47.313 $42.470 $51.750
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 2001 2001 2002 2002 2002 2002
------ ------ ------ ------ ------ -----
Revenue
Lincoln Retirement 478.2 467.5 453.0 442.6 440.7 451.4
Life Insurance 460.6 464.7 423.9 439.8 441.6 479.6
Investment Management 104.7 106.5 103.5 102.4 94.3 99.1
Lincoln UK 85.0 53.4 53.2 80.5 91.8 51.8
Corporate & Other 489.5 371.7 92.3 92.2 95.1 106.7
------- ------- ------- ------- ------- -------
Total Revenue 1618.0 1463.8 1126.0 1157.5 1163.4 1188.6
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 72.4 74.8 80.4 47.8 22.8 36.5
Life Insurance 70.1 73.2 71.1 73.5 63.4 63.8
Investment Management 3.5 5.1 8.0 6.6 4.0 10.3
Lincoln UK 10.1 19.5 14.4 6.7 (0.0) 15.9
Corporate & Other (12.9) 26.5 (12.0) (7.3) (17.2) (14.3)
------- ------- ------- ------- ------- -------
Income from Operations 143.2 199.1 162.0 127.2 73.0 112.2
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 58.6 54.2 47.6 10.2 (6.0) 6.0
Life Insurance 64.7 51.9 44.2 57.4 47.1 60.2
Investment Management 2.9 4.0 7.0 6.2 3.1 9.3
Lincoln UK 14.0 22.5 10.8 9.8 0.8 18.5
Corporate & Other (21.2) 36.7 (15.2) (24.2) (170.6) (31.0)
------- ------- ------- ------- ------- -------
Total Net Income 119.1 169.2 94.5 59.4 (125.5) 63.2
======= ======= ======= ======= ======= =======
OTHER DATA
Assets 90206.0 98001.3 97846.4 95069.2 90436.2 93135.3
Shareholders' Equity
Beg of Period (Sec & Deriv at
Market) 5055.9 5368.6 5263.5 5131.1 5307.9 5389.0
End of Period (Sec & Deriv at
Market) 5368.6 5263.5 5131.1 5307.9 5389.0 5355.0
End of Period (Sec & Deriv at
Cost) 5100.4 5046.3 5076.6 4959.5 4544.2 4514.6
Average Equity (Sec & Deriv at
Cost) 5085.0 5131.4 5083.3 5080.7 4891.6 4584.9
Common Shares Outstanding
Average for the Period - Diluted 194.8 192.8 191.7 189.7 183.9 178.9
End of Period - Diluted 193.3 191.1 191.7 186.9 178.8 179.0
Per Share Data (Diluted)
Income from Operations * $0.74 $1.03 $0.84 $0.67 $0.40 $0.63
Net Income $0.61 $0.88 $0.49 $0.31 ($0.68) $0.35
Shareholders' Equity
Shareholders' Equity (Includes
accum OCI) 28.29 28.10 27.30 28.77 30.37 30.15
Shareholders' Equity (Excludes
accum OCI) 26.87 27.13 27.20 27.09 25.81 25.97
Dividends Declared (Com Stk) 0.305 0.320 0.320 0.320 0.320 0.335
Return on Equity (see page 30)
Net Income/Average Equity 9.4% 13.2% 7.4% 4.7% (10.3%) 5.5%
Inc from Operations/Average
Equity 11.3% 15.5% 12.7% 10.0% 6.0% 9.8%
Market Value of Common Stock
Highest Price $52.750 $49.450 $53.650 $52.540 $42.080 $35.950
Lowest Price $41.000 $40.000 $47.200 $40.750 $29.120 $25.150
Closing Price $46.630 $48.570 $50.730 $42.000 $30.550 $31.580
* "Income from Operations" is defined as "Net income less realized gain (loss) on investments, derivative instruments and
associated items, gain (loss) on sale of subsidiaries, restructuring charges, and cumulative effect of accounting
changes, all net of taxes." Income from operations also excludes the recognition of losses and related changes to
the deferred gain amortization under indemnity reinsurance resulting from future developments in the business reinsured.
PAGE 7
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Quarter Ended December 30 Lincoln Retirement Life Insurance Management Lincoln UK
---------------------- --------------------- ------------------ ------------------
Dec Dec Dec Dec Dec Dec Dec Dec
2002 2001 2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue
Life and annuity premiums 8.7 12.7 56.4 64.3 13.5 11.4
Surrender charges 7.4 7.2 15.5 19.9 (0.0)
Mortality assessments 127.3 125.5 8.9 7.1
Expense assessments 105.7 126.2 56.3 52.8 (0.0) 22.8 24.1
Health premiums 0.0 0.1 0.6 0.5
Investment advisory fees (0.0) 65.8 71.4
Other revenue and fees 2.7 10.0 6.2 6.0 22.1 23.4 (11.9) (9.2)
Net investment income 373.1 342.6 223.3 226.6 12.7 12.8 16.6 15.2
Earnings in Unconsolidated
Affiliates
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue 497.6 498.7 485.0 495.2 100.5 107.6 50.6 49.1
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 78.4 55.3 114.6 112.9 21.2 16.7
Div accum & div to policyholders 22.8 25.4
Interest credited to policy bal. 231.7 227.5 150.7 146.9 0.0
Health policy benefits 0.0 0.0 1.8 4.1
-------- -------- -------- -------- -------- -------- -------- --------
Total insurance benefits 310.1 282.8 288.0 285.2 0.0 23.1 20.8
Underwriting, acquisition,
insurance and other expenses*:
Commissions 72.8 96.7 38.6 45.1 0.0 1.3 1.9
Other volume related expenses 18.1 13.1 58.3 56.9 (0.0)
Operating and administrative
expenses 68.3 66.4 43.6 38.3 81.2 88.4 20.0 24.1
Taxes, licenses and fees (0.5) 4.5 11.5 12.5 3.3 5.7
Par policyholder interests
Foreign exchange -------- -------- -------- -------- -------- -------- -------- --------
Subtotal 158.8 180.7 152.1 152.8 84.4 94.1 21.3 25.9
Deferral of acquisition costs (55.3) (71.9) (101.4) (106.3) (0.6) (0.9)
DAC amortization 29.6 20.8 36.3 30.2 (11.5) (3.9)
-------- -------- -------- -------- -------- -------- -------- --------
DAC deferral net of amortization (25.7) (51.0) (65.1) (76.1) (12.1) (4.8)
PVIF amortization 20.0 1.4 17.4 14.7 5.5 5.6
Other intangibles amortization 2.0 2.3
-------- -------- -------- -------- -------- -------- -------- --------
Total underwriting, acquisition,
insurance and other expenses 153.2 131.1 104.4 91.4 86.4 96.4 14.7 26.8
Goodwill amortization 0.3 5.9 4.1 0.2
Interest 0.0 0.0
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses 463.3 414.2 392.5 382.5 86.4 100.4 37.8 47.8
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations Before Tax 34.4 84.5 92.5 112.7 14.1 7.1 12.8 1.4
Federal income taxes (2.1) 9.7 28.8 39.5 3.8 2.1 (3.1) (18.1)
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations 36.5 74.8 63.8 73.2 10.3 5.1 15.9 19.5
-------- -------- -------- -------- -------- -------- -------- --------
Restructuring charges (1.5) 0.0 (0.4) 1.7
Realized gains (losses) on
investments (30.4) (20.7) (3.6) (21.3) (0.9) (0.7) 0.8 3.0
Gains (losses) on derivatives (0.0) 0.1 0.1 1.5
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries
-------- -------- -------- -------- -------- -------- -------- --------
Income before Accounting Changes 6.0 54.2 60.2 51.9 9.3 4.0 18.5 22.5
Cumulative effect of accounting
changes 0.0 (0.0)
-------- -------- -------- -------- -------- -------- -------- --------
Net Income 6.0 54.2 60.2 51.9 9.3 4.0 18.5 22.5
======== ======== ======== ======== ======== ======== ======== ========
Inc. from Oper.-before Goodwill
Amort. 36.5 75.1 63.8 79.1 10.3 9.1 15.9 19.7
-------- -------- -------- -------- -------- -------- -------- --------
Net Income-before Goodwill 6.0 54.5 60.2 57.8 9.3 8.1 18.5 22.7
Amort. -------- -------- -------- -------- -------- -------- -------- --------
* Does not include restructuring charges which is consistent with the definition of "Income from Operations" (see page 5).
PAGE 8
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Corporate and Consolidating
Other Operations Adjustments Consolidated
----------------- ------------------ ------------------
For the Quarter Dec Dec Dec Dec Dec Dec
Ended December 31 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 2.2 182.3 80.7 270.7
Surrender charges 0.1 0.6 0.5 23.5 27.7
Mortality assessments (0.9) 0.0 135.3 132.6
Expense assessments 0.9 (0.0) 7.0 9.3 192.8 212.4
Health premiums 18.4 35.5 19.1 36.1
Investment advisory fees (21.1) (20.5) 44.7 50.9
Other revenue and fees 110.4 115.3 (40.9) (37.3) 88.4 108.2
Net investment income 37.7 51.1 (1.3) (1.7) 662.2 646.6
Earnings in Unconsolidated
Affiliates 4.3 4.3
------- ------- ------- ------- ------- -------
Operating Revenue 168.7 388.6 (55.8) (49.6) 1246.7 1489.6
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits (0.2) 117.9 214.0 302.8
Div accum & div to policyholders (0.0) 1.2 22.8 26.6
Interest credited to policy bal. 21.4 7.0 7.2 9.2 411.1 390.6
Health policy benefits 3.3 20.9 5.1 25.0
------- ------- ------- ------- ------- -------
Total insurance benefits 24.5 146.9 7.2 9.2 653.0 744.9
Underwriting, acquisition,
insurance and other expenses*:
Commissions 42.2 69.0 7.1 5.1 162.0 217.9
Other volume related expenses 20.7 (21.1) (24.5) (19.7) 72.6 29.1
Operating and administrative
expenses 71.4 122.0 (42.1) (41.8) 242.5 297.3
Taxes, licenses and fees 9.1 7.8 23.5 30.4
Par policyholder interests
Foreign exchange (0.6) 1.1 (0.6) 1.1
------- ------- ------- ------- ------- -------
Subtotal 142.7 178.8 (59.4) (56.4) 499.9 575.9
Deferral of acquisition costs (6.6) (10.5) (8.7) (167.8) (194.5)
DAC amortization 0.1 1.5 8.2 8.0 62.7 56.8
------- ------- ------- ------- ------- -------
DAC deferral net of amortization 0.1 (5.1) (2.2) (0.7) (105.0) (137.7)
PVIF amortization 43.0 21.8
Other intangibles amortization 0.2 2.0 2.5
Total underwriting, acquisition,
insurance and other expenses 142.8 173.9 (61.7) (57.1) 439.9 462.5
Goodwill amortization 0.3 (0.0) 10.7
Interest 24.8 26.7 (1.3) (1.7) 23.5 25.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 192.1 347.9 (55.8) (49.6) 1116.3 1243.1
------- ------- ------- ------- ------- -------
Income from Operations Before Tax (23.5) 40.7 (0.0) 0.0 130.3 246.5
Federal income taxes (9.2) 14.2 18.2 47.4
------- ------- ------- ------- ------- -------
Income from Operations (14.3) 26.5 (0.0) 0.0 112.2 199.1
------- ------- ------- ------- ------- -------
Restructuring charges 0.0 (18.3) 1.7 (20.2)
Realized gains (losses) on
investments 0.8 19.5 0.3 (33.3) (20.0)
Gains (losses) on derivatives 0.2 (6.3) 0.2 (4.6)
Reserve increase on business sold
through reinsurance (8.2) (8.2)
Gain on sale of subsidiaries (11.5) 15.0 2.1 (9.4) 15.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes (33.0) 36.4 2.1 0.3 63.2 169.2
Cumulative effect of accounting
changes (0.0) (0.0)
------- ------- ------- ------- ------- -------
Net Income (33.0) 36.4 2.1 0.3 63.2 169.2
======== ======== ======== ======== ======== ========
Inc. from Oper.-before Goodwill
Amort. (14.3) 26.8 (0.0) 112.2 209.8
------- ------- ------- ------- ------- -------
Net Income-before Goodwill Amort. (33.0) 36.7 2.1 0.3 63.2 180.0
------- ------- ------- ------- ------- -------
* Does not include restructuring charges which is consistent with the definition of "Income from
Operations" (see page 5).
PAGE 9
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Year Ended December 31 Lincoln Retirement Life Insurance Management Lincoln UK
---------------------- --------------------- ------------------ ------------------
Dec Dec Dec Dec Dec Dec Dec Dec
2002 2001 2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue
Life and annuity premiums 47.4 77.5 203.6 212.3 48.0 43.6
Surrender charges 31.2 31.2 54.1 66.1
Mortality assessments 501.5 499.4 32.4 33.9
Expense assessments 469.8 537.7 199.5 191.4 105.3 134.8
Health premiums 0.2 0.1 2.6 2.5
Investment advisory fees 267.2 284.6
Other revenue and fees 3.3 16.7 23.7 17.9 87.0 99.2 24.9 (1.4)
Net investment income 1433.9 1370.0 899.1 910.2 50.5 53.6 62.1 64.8
Earnings in Unconsolidated
Affiliates
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue 1985.5 2033.1 1881.7 1897.5 404.7 437.4 275.4 278.2
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 314.1 263.9 427.4 418.6 70.8 70.8
Div accum & div to policyholders 76.0 78.5
Interest credited to policy bal. 903.8 863.8 598.6 569.9
Health policy benefits 0.0 0.0 13.4 12.5
-------- -------- -------- -------- -------- -------- -------- --------
Total insurance benefits 1217.9 1127.7 1102.0 1067.0 84.2 83.4
Underwriting, acquisition,
insurance and other expenses*:
Commissions 320.8 336.3 139.8 142.1 6.1 10.8
Other volume related expenses 64.6 49.7 190.4 176.4
Operating and administrative
expenses 225.0 225.5 157.8 161.0 342.3 364.8 74.5 80.0
Taxes, licenses and fees 11.5 13.7 53.2 49.2 17.7 22.2
Par policyholder interests
Foreign exchange
-------- -------- -------- -------- -------- -------- -------- --------
Subtotal 621.8 625.3 541.2 528.7 360.0 387.0 80.6 90.8
Deferral of acquisition costs (243.9) (240.9) (336.6) (324.8) (3.4) (4.2)
DAC amortization 157.6 125.5 105.8 95.0 50.0 35.8
-------- -------- -------- -------- -------- -------- -------- --------
DAC deferral net of amortization (86.2) (115.4) (230.7) (229.8) 46.5 31.7
PVIF amortization 31.8 14.7 73.9 75.9 30.8 22.5
Other intangibles amortization 8.2 10.8
-------- -------- -------- -------- -------- -------- -------- --------
Total underwriting, acquisition,
insurance and other expenses 567.4 524.5 384.4 374.7 368.3 397.8 157.9 145.0
Goodwill amortization 1.2 23.7 16.2 0.6
Interest 0.0 0.0
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses 1785.3 1653.5 1486.3 1465.4 368.3 414.1 242.1 229.0
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations Before Tax 200.2 379.6 395.4 432.1 36.4 23.4 33.3 49.2
Federal income taxes 12.7 59.3 123.5 153.0 7.5 8.7 (3.7) (11.1)
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations 187.5 320.3 271.9 279.0 28.9 14.6 37.0 60.2
-------- -------- -------- -------- -------- -------- -------- --------
Restructuring charges (1.0) (1.3) (3.5) 0.3 (0.4) 1.7
Realized gains (losses) on
investments (127.8) (42.3) (63.8) (38.5) (3.5) (2.4) 1.3 8.7
Gains (losses) on derivatives (0.8) (0.2) 1.0 1.6
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries
-------- -------- -------- -------- -------- -------- -------- --------
Income before Accounting Changes 57.8 276.5 209.0 238.6 25.6 11.9 40.0 68.9
Cumulative effect of accounting
changes (7.3) (5.5) (0.1)
-------- -------- -------- -------- -------- -------- -------- --------
Net Income 57.8 269.2 209.0 233.1 25.6 11.8 40.0 68.9
======== ======== ======== ======== ======== ======== ======== ========
Inc. from Oper.-before Goodwill
Amort. 187.5 321.5 271.9 302.7 28.9 30.9 37.0 60.9
-------- -------- -------- -------- -------- -------- -------- --------
Net Income-before Goodwill Amort. 57.8 270.5 209.0 256.7 25.6 28.0 40.0 69.6
-------- -------- -------- -------- -------- -------- -------- --------
* Does not include restructuring charges which is consistent with the definition of "Income from Operations" (see page 5).
PAGE 10
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Corporate and Consolidating
Other Operations Adjustments Consolidated
----------------- ------------------ ------------------
For the Year Dec Dec Dec Dec Dec Dec
Ended December 31 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums (3.3) 1030.1 295.6 1363.4
Surrender charges 1.9 2.4 2.2 87.8 101.5
Mortality assessments (3.6) 0.1 530.3 533.3
Expense assessments 3.6 (0.0) 38.1 45.3 816.3 909.2
Health premiums 17.5 337.9 20.3 340.6
Investment advisory fees (83.8) (87.5) 183.3 197.2
Other revenue and fees 392.4 366.2 (156.5) (149.6) 374.7 349.1
Net investment income 168.6 292.2 (6.0) (11.1) 2608.3 2679.6
Earnings in Unconsolidated
Affiliates (0.6) 5.7 (0.6) 5.7
------- ------- ------- ------- ------- -------
Operating Revenue 574.6 2034.0 (205.7) (200.5) 4916.1 6479.6
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits (1.1) 764.6 811.3 1517.9
Div accum & div to policyholders 5.2 76.0 83.7
Interest credited to policy bal. 83.5 33.6 31.3 38.7 1617.1 1506.0
Health policy benefits 36.3 289.6 49.7 302.1
------- ------- ------- ------- ------- -------
Total insurance benefits 118.8 1092.9 31.3 38.7 2554.1 3409.7
Underwriting, acquisition,
insurance and other expenses*:
Commissions 86.1 349.1 26.5 22.1 579.4 860.3
Other volume related expenses 79.6 26.4 (77.8) (67.7) 256.8 184.8
Operating and administrative
expenses 238.9 397.3 (170.6) (177.9) 867.8 1050.9
Taxes, licenses and fees 29.1 43.2 111.5 128.3
Par policyholder interests
Foreign exchange 0.3 (1.4) 0.3 (1.4)
------- ------- ------- ------- ------- -------
Subtotal 434.0 814.7 (221.9) (223.5) 1815.8 2223.0
Deferral of acquisition costs (1.4) (108.5) (42.0) (35.6) (627.3) (714.1)
DAC amortization 0.4 80.5 32.8 30.9 346.7 367.7
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (1.0) (28.0) (9.2) (4.7) (280.6) (346.3)
PVIF amortization 136.5 113.1
Other intangibles amortization 1.3 8.2 12.1
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 433.0 788.0 (231.0) (228.2) 1679.9 2001.8
Goodwill amortization 1.7 (0.0) 43.4
Interest 102.6 132.1 (6.0) (11.1) 96.6 121.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 654.3 2014.6 (205.7) (200.6) 4330.6 5576.0
------- ------- ------- ------- ------- -------
Income from Operations Before Tax (79.8) 19.4 0.0 0.0 585.4 903.6
Federal income taxes (29.0) 4.7 111.0 214.7
------- ------- ------- ------- ------- -------
Income from Operations (50.8) 14.8 0.0 0.0 474.4 689.0
------- ------- ------- ------- ------- -------
Restructuring charges 1.1 (19.5) 2.0 (24.7)
Realized gains (losses) on
investments 16.7 4.8 1.0 (177.2) (68.7)
Gains (losses) on derivatives 0.6 (6.3) 0.8 (4.9)
Reserve increase on business sold
through reinsurance (199.1) (199.1)
Gain on sale of subsidiaries (11.5) 15.0 2.1 (9.4) 15.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes (243.0) 8.8 2.1 1.1 91.6 605.8
Cumulative effect of accounting
changes (2.7) (15.6)
------- ------- ------- ------- ------- -------
Net Income (243.0) 6.1 2.1 1.1 91.6 590.2
======= ======= ======= ======= ======= =======
Inc. from Oper.-before Goodwill
Amort. (50.8) 16.4 0.0 474.4 732.4
------- ------- ------- ------- ------- -------
Net Income-before Goodwill Amort. (243.0) 7.8 2.1 1.0 91.6 633.6
------- ------- ------- ------- ------- -------
* Does not include restructuring charges which is consistent with the definition of "Income from
Operations" (see page 5).
PAGE 11
Statement of Consolidated Income
Unaudited [Millions of Dollars]
For the Year Ended December 31 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 985.6 1183.0 1403.3 1363.4 295.6
Surrender charges 91.5 110.2 114.7 101.5 87.8
Mortality assessments 380.1 496.4 496.5 533.3 530.3
Expense assessments 803.0 930.9 1050.2 909.2 816.3
Health premiums 635.1 698.5 409.8 340.6 20.3
Investment advisory fees 227.1 223.8 213.1 197.2 183.3
Other revenue and fees 261.0 344.5 441.1 349.1 374.7
Net investment income 2681.4 2807.5 2747.1 2679.6 2608.3
Earnings in Unconsolidated
Affiliates 3.3 5.8 (0.4) 5.7 (0.6)
------- ------- ------- ------- -------
Operating Revenue 6068.0 6800.7 6875.4 6479.6 4916.1
------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 1237.7 1546.6 1546.4 1517.9 811.3
Div accum & div to policyholders 78.0 88.4 87.6 83.7 76.0
Interest credited to policy bal. 1446.2 1510.4 1474.2 1506.0 1617.1
Health policy benefits 566.9 659.7 449.0 302.1 49.7
------- ------- ------- ------- -------
Total insurance benefits 3328.9 3805.0 3557.2 3409.7 2554.1
Underwriting, acquisition,
insurance and other expenses*:
Commissions 740.1 961.0 919.1 860.3 579.4
Other volume related expenses 150.7 197.1 253.8 184.8 256.8
Operating and administrative
expenses 995.7 1165.3 1157.0 1050.9 867.8
Taxes, licenses and fees 75.9 84.0 113.0 128.3 111.5
Par policyholder interests (4.3) 3.3 1.1
Foreign exchange (1.5) 1.9 (2.9) (1.4) 0.3
------- ------- ------- ------- -------
Subtotal 1956.5 2412.6 2441.2 2223.0 1815.8
Deferral of acquisition costs (714.1) (627.3)
DAC amortization 367.7 346.7
------- ------- ------- ------- -------
DAC deferral net of amortization (208.2) (314.6) (427.5) (346.3) (280.6)
PVIF amortization 77.1 102.5 132.6 113.1 136.5
Other intangibles amortization 18.8 18.0 17.7 12.1 8.2
------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 1844.2 2218.5 2164.1 2001.8 1679.9
Goodwill amortization 44.5 49.2 45.1 43.4
Interest 117.1 133.7 139.5 121.0 96.6
------- ------- ------- ------- -------
Operating Benefits and Expenses 5334.6 6206.4 5905.9 5576.0 4330.6
------- ------- ------- ------- -------
Income from Operations Before Tax 733.4 594.4 969.6 903.6 585.4
Federal income taxes 203.0 118.9 250.5 214.7 111.0
------- ------- ------- ------- -------
Income from Continuing Operations 530.4 475.5 719.1 689.0 474.4
------- ------- ------- ------- -------
Discontinued Operations
Restructuring charges (34.3) (18.9) (80.2) (24.7) 2.0
Realized gains (losses) on
investments 13.7 3.8 (17.5) (68.7) (177.2)
Gains (losses) on derivatives (4.9) 0.8
Reserve increase on business sold
through reinsurance (199.1)
Gain on sale of subsidiaries 15.0 (9.4)
------- ------- ------- ------- -------
Income before Accounting Changes 509.8 460.4 621.4 605.8 91.6
Cumulative Effect of Accounting
Changes (15.6)
------- ------- ------- ------- -------
Net Income 509.8 460.4 621.4 590.2 91.6
======= ======= ======= ======= =======
------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 3,070.5 2,885.3
Deferral 714.1 627.3
Amortization (367.7) (346.7)
------- ------- ------- ------- -------
Operating 346.4 280.5
Adjustment related to realized
(gains) losses
on securities available-for-sale 112.9 115.0
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (187.2) (338.5)
Foreign currency translation
adjustment (16.0) 56.9
Disposition of business (425.9) 0.0
Other (15.3) (28.3)
------- ------- ------- ------- -------
Balance at end-of-year 2,885.3 2,970.9
======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 1,483.3 1,362.5
Amortization (113.1) (136.4)
Foreign currency translation
adjustment (7.0) 24.1
Other (0.7) (0.0)
------- ------- ------- ------- -------
Balance at end-of-year 1,362.5 1,250.1
======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of
"Income from Operations" (see page 5).
PAGE 12
Statement of Consolidated Income
Unaudited [Millions of Dollars]
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2000 2000 2000 2000 2001 2001
------ ------ ------ ------ ------ -----
Operating Revenue
Life and annuity premiums 331.2 337.1 339.0 396.1 402.1 353.9
Surrender charges 28.7 29.8 25.9 30.3 27.8 22.8
Mortality assessments 118.5 122.5 125.9 129.6 133.7 133.7
Expense assessments 261.1 258.6 273.4 257.1 244.9 227.5
Health premiums 58.4 144.0 117.9 89.4 104.8 95.7
Investment advisory fees 54.0 52.2 53.3 53.6 49.4 49.6
Other revenue and fees 110.1 84.0 104.0 143.0 85.9 54.9
Net investment income 711.1 673.8 690.0 672.1 673.7 673.1
Earnings in Unconsolidated
Affiliates 1.0 (3.6) 1.6 0.6 0.9 0.0
------- ------- ------- ------- ------- -------
Operating Revenue 1674.1 1698.4 1731.0 1772.0 1723.3 1611.1
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 356.1 370.1 390.2 430.0 418.9 373.6
Div accum & div to policyholders 21.7 20.2 18.2 27.4 18.9 20.2
Interest credited to policy bal. 373.9 366.8 362.0 371.5 367.1 369.7
Health policy benefits 114.3 119.9 123.0 91.8 101.8 91.5
------- ------- ------- ------- ------- -------
Total insurance benefits 866.0 877.0 893.5 920.7 906.7 855.0
Underwriting, acquisition,
insurance and other expenses*:
Commissions 194.2 251.9 238.5 234.6 216.9 217.6
Other volume related expenses 50.5 54.2 62.9 86.2 43.7 58.9
Operating and administrative
expenses 299.6 268.8 270.3 318.4 246.9 242.6
Taxes, licenses and fees 32.8 21.6 26.3 32.4 36.5 30.8
Par policyholder interests (1.5) 1.6 1.4 (0.5) (0.0) 0.0
Foreign exchange (0.2) (1.0) (0.5) (1.1) (2.0) 2.0
------- ------- ------- ------- ------- -------
Subtotal 575.3 597.1 598.8 670.0 542.1 551.9
Deferral of acquisition costs (161.1) (175.1)
DAC amortization 110.0 82.9
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (82.3) (99.7) (109.1) (136.4) (51.0) (92.2)
PVIF amortization 31.9 31.0 36.2 33.5 33.3 23.6
Other intangibles amortization 4.7 4.3 4.3 4.3 4.3 2.6
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 529.6 532.8 530.3 571.4 528.6 486.0
Goodwill amortization 10.2 12.0 12.0 10.9 10.9 10.9
Interest 36.3 35.4 34.4 33.4 34.4 32.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1442.2 1457.2 1470.1 1536.4 1480.6 1383.9
------- ------- ------- ------- ------- -------
Income from Operations before
Tax/Min Int. 232.0 241.1 260.8 235.6 242.7 227.2
Federal income taxes 61.6 67.9 70.1 50.9 64.1 59.1
Inc from Operations before Min ------- ------- ------- ------- ------- -------
Int 170.4 173.2 190.7 184.7 178.6 168.1
------- ------- ------- ------- ------- -------
Minority Interest (0.2) 0.2 (0.0) 0.0 (0.0) (0.0)
------- ------- ------- ------- ------- -------
Income from Operations 170.6 173.0 190.7 184.7 178.6 168.1
------- ------- ------- ------- ------- -------
Restructuring charges (2.7) (40.5) (37.0) (0.7) (3.9)
Realized gains (losses) on
investments (0.4) (6.7) (11.6) 1.2 (13.4) (11.5)
Gains (losses) on derivatives (0.1) 0.2
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries
------- ------- ------- ------- ------- -------
Income before Accounting Changes 170.2 163.6 138.6 148.9 164.5 153.0
Cumulative Effect of Accounting
Changes (4.3) (11.3)
------- ------- ------- ------- ------- -------
Net Income 170.2 163.6 138.6 148.9 160.2 141.7
======= ======= ======= ======= ======= =======
-----------------------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-period 3,070.5 2,963.4
Deferral 161.1 175.1
Amortization (110.0) (82.9)
Operating 51.1 92.2
Adjustment related to realized
(gains) losses
on securities available-for-sale 21.7 17.8
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (154.1) 55.8
Foreign currency translation
adjustment (32.4) (0.2)
Disposition of business
Other 6.7 0.1
------- -------
Balance at end-of-year 2,963.4 3,129.1
======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-period 1,483.3 1,436.0
Amortization (33.3) (23.6)
Foreign currency translation
adjustment (14.0) (0.1)
Other
------- -------
Balance at end-of-year 1,436.0 1,412.3
======= =======
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 2001 2001 2002 2002 2002 2002
------ ------ ------ ------ ------ -----
Operating Revenue
Life and annuity premiums 336.8 270.7 74.7 68.7 71.6 80.7
Surrender charges 23.2 27.7 20.2 21.3 22.8 23.5
Mortality assessments 133.3 132.6 130.4 130.5 134.1 135.3
Expense assessments 224.4 212.4 210.5 214.4 198.6 192.8
Health premiums 103.9 36.1 2.4 8.3 (9.6) 19.1
Investment advisory fees 47.2 50.9 48.0 47.8 42.9 44.7
Other revenue and fees 100.2 108.2 95.0 97.2 94.2 88.4
Net investment income 686.2 646.6 648.1 651.0 647.0 662.2
Earnings in Unconsolidated
Affiliates 0.4 4.3 (0.6)
------- ------- ------- ------- ------- -------
Operating Revenue 1655.6 1489.6 1229.3 1238.5 1201.6 1246.7
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 422.6 302.8 176.1 191.5 229.7 214.0
Div accum & div to policyholders 18.0 26.6 17.8 18.2 17.2 22.8
Interest credited to policy bal. 378.7 390.6 406.2 382.5 417.4 411.1
Health policy benefits 83.8 25.0 3.3 33.9 7.3 5.1
------- ------- ------- ------- ------- -------
Total insurance benefits 903.1 744.9 603.4 626.1 671.6 653.0
Underwriting, acquisition,
insurance and other expenses*:
Commissions 207.9 217.9 144.2 148.6 124.6 162.0
Other volume related expenses 53.1 29.1 54.7 65.5 63.9 72.6
Operating and administrative
expenses 264.0 297.3 208.5 204.1 212.8 242.5
Taxes, licenses and fees 30.6 30.4 38.3 24.6 25.1 23.5
Par policyholder interests
Foreign exchange (2.5) 1.1 0.0 0.6 0.4 (0.6)
------- ------- ------- ------- ------- -------
Subtotal 553.1 575.9 445.7 443.4 426.8 499.9
Deferral of acquisition costs (183.4) (194.5) (147.9) (156.1) (155.5) (167.8)
DAC amortization 118.0 56.8 70.4 100.7 113.0 62.7
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (65.4) (137.7) (77.5) (55.5) (42.5) (105.0)
PVIF amortization 34.4 21.8 21.3 31.9 40.2 43.0
Other intangibles amortization 2.6 2.5 2.2 2.0 2.0 2.0
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 524.7 462.5 391.7 421.8 426.5 439.9
Goodwill amortization 10.9 10.7
Interest 29.6 25.0 24.8 24.6 23.7 23.5
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1468.4 1243.1 1019.9 1072.6 1121.8 1116.3
------- ------- ------- ------- ------- -------
Income from Operations before
Tax/Min Int. 187.3 246.5 209.4 166.0 79.7 130.3
Federal income taxes 44.1 47.4 47.4 38.7 6.7 18.2
Inc from Operations before Min ------- ------- ------- ------- ------- -------
Int 143.2 199.1 162.0 127.2 73.0 112.2
------- ------- ------- ------- ------- -------
Minority Interest (0.0) (0.0)
------- ------- ------- ------- ------- -------
Income from Operations 143.2 199.1 162.0 127.2 73.0 112.2
------- ------- ------- ------- ------- -------
Restructuring charges 0.0 (20.2) (1.0) 1.3 1.7
Realized gains (losses) on
investments (23.8) (20.0) (67.6) (52.7) (23.6) (33.3)
Gains (losses) on derivatives (0.4) (4.6) 0.1 0.3 0.1 0.2
Reserve increase on business sold
through reinsurance (14.4) (176.4) (8.2)
Gain on sale of subsidiaries (9.4)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 119.1 169.2 94.5 59.4 (125.5) 63.2
Cumulative Effect of Accounting
Changes (0.0)
------- ------- ------- ------- ------- -------
Net Income 119.1 169.2 94.5 59.4 (125.5) 63.2
======= ======= ======= ======= ======= =======
-----------------------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-period 3,129.1 3,087.2 2,885.3 3,114.9 3,056.6 2,868.7
Deferral 183.4 194.5 147.9 156.1 155.5 167.8
Amortization (118.0) (56.8) (70.4) (100.7) (113.0) (62.7)
Operating 65.4 137.8 77.5 55.4 42.5 105.1
Adjustment related to realized
(gains) losses
on securities available-for-sale 23.9 49.5 41.9 32.5 22.9 17.8
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (157.0) 68.1 114.9 (152.1) (267.1) (34.2)
Foreign currency translation
adjustment 23.8 (7.2) (12.2) 41.7 13.8 13.7
Disposition of business (425.9)
Other 2.1 (24.2) 7.5 (35.7) (0.0)
Inc from Operations before Min ------- ------- ------- ------- ------- -------
Balance at end-of-year 3,087.2 2,885.3 3,114.9 3,056.6 2,868.7 2,970.9
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-period 1,412.3 1,387.4 1,362.5 1,336.1 1,321.4 1,286.9
Amortization (34.4) (21.8) (21.3) (31.9) (40.2) (42.9)
Foreign currency translation
adjustment 10.3 (3.2) (5.1) 17.4 5.7 6.1
Other (0.7) (0.1) 0.1
Inc from Operations before Min ------- ------- ------- ------- ------- -------
Balance at end-of-year 1,387.4 1,362.5 1,336.1 1,321.4 1,286.9 1,250.1
======= ======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of "Income from Operations" (see page 5).
PAGE 13
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Lincoln Retirement Life Insurance Management Lincoln UK
--------------------- --------------------- ----------------- -----------------
ASSETS Dec Dec Dec Dec Dec Dec Dec Dec
2002 2001 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- ------- ------- -------
Investments
Corporate bonds 12928.9 10956.5 7879.1 7088.2 494.5 424.2 621.0 512.3
U.S. government bonds 41.1 13.2 87.0 78.2 0.1 0.2
Foreign government bonds 259.2 145.8 136.5 114.6 1.5 1.9 307.5 326.2
Asset/Mortgage backed securities 3243.5 1945.8 937.0 779.1 47.2 42.5
State and municipal bonds 67.8 24.3 30.4 17.4
Preferred stocks-redeemable 55.6 62.7 12.5 13.0 8.9 8.8
Common stocks 0.1 1.5 7.6 128.9 211.3
Preferred stocks-equity 33.6 38.5 5.6 2.7 2.6
Mortgage loans 2210.3 2378.1 1572.6 1701.6 81.2 92.4 0.3 0.3
Real estate 0.2 0.2
Policy loans 469.5 491.4 1468.2 1439.7 7.9 8.6
Other long-term investments 29.3 11.7 23.7 20.9
------- ------- ------- ------- ------- ------- ------- -------
Total Investments 19338.9 16068.0 12148.5 11265.9 636.1 572.6 1066.0 1058.8
------- ------- ------- ------- ------- ------- ------- -------
Allocated investments 3757.4 3481.0 1250.7 1154.7 100.0 102.4
Notes receivable from LNC 358.8 333.3 207.7 27.6 51.7 82.9
Invest in unconsol affiliates
Cash and invested cash (76.7) (24.7) (22.7) (36.4) 52.9 55.4 206.7 181.2
Property and equipment 1.5 7.7 8.5 44.7 36.5 19.0 39.3
Premium and fees receivable 0.7 0.0 32.0 8.2 37.0 38.5
Accrued investment income 256.7 245.0 171.7 187.6 9.0 8.9 22.2 20.9
Assets held in separate accounts 26934.1 34324.6 1310.4 1491.0 5077.9 5607.2
Federal income tax recoverable
Amount recoverable from
reinsurers 1169.7 1211.6 920.5 859.5
Deferred acquisition costs 855.8 912.8 1424.5 1265.6 597.6 587.3
Other intangible assets 41.8 50.1
Present value of in-force 122.7 154.5 890.1 964.0 237.4 244.0
Goodwill 64.1 43.9 855.1 855.1 300.7 300.7 13.3 12.1
Other 114.1 138.1 395.6 358.4 187.4 212.5 87.0 37.9
------- ------- ------- ------- ------- ------- ------- -------
Total Assets 52897.8 56888.2 19591.6 18409.7 1461.4 1460.5 7327.1 7788.8
======= ======= ======= ======= ======= ======= ======= =======
--------------------------------------------------------------------------------------------------------------------------------
Corporate and Consolidating
Other Operations Adjustments Consolidated
--------------------- -------------------- -----------------
ASSETS Dec Dec Dec Dec Dec Dec
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Investments
Corporate bonds 4011.1 4123.9 25934.7 23105.1
U.S. government bonds 385.4 318.9 513.6 410.5
Foreign government bonds 405.6 586.2 1110.2 1174.7
Asset/Mortgage backed securities 787.8 757.3 5015.5 3524.7
State and municipal bonds 16.2 3.0 114.4 44.7
Preferred stocks-redeemable 2.1 1.4 79.0 85.9
Common stocks 97.4 100.5 228.0 319.3
Preferred stocks-equity 72.9 104.5 109.2 151.2
Mortgage loans 341.0 363.0 4205.5 4535.5
Real estate 279.5 267.7 279.7 267.9
Policy loans 1945.6 1939.7
Other long-term investments 413.2 521.3 (0.0) (0.0) 466.2 553.8
------- ------- ------- ------- ------- -------
Total Investments 6812.3 7147.8 (0.0) (0.0) 40001.7 36113.1
------- ------- ------- ------- ------- -------
Allocated investments (468.2) 50.0 (4639.9) (4788.2) (0.0)
Notes receivable from LNC (617.6) (443.7) (0.5) (0.1) 0.0
Invest in unconsol affiliates 8.1 8.1
Cash and invested cash 1530.4 3130.5 (210.5) 1690.5 3095.5
Property and equipment 169.3 173.2 242.1 257.5
Premium and fees receivable 143.2 365.6 (12.2) 212.9 400.1
Accrued investment income 77.0 101.0 536.7 563.5
Assets held in separate accounts 2856.0 3410.5 36178.3 44833.4
Federal income tax recoverable 266.5 15.1 266.5 15.1
Amount recoverable from
reinsurers 5450.1 4150.6 (260.3) (191.4) 7280.0 6030.4
Deferred acquisition costs 2.2 33.9 90.8 85.6 2970.9 2885.3
Other intangible assets 41.8 50.1
Present value of in-force 1250.1 1362.5
Goodwill (0.0) (0.0) 1233.2 1211.8
Other 853.2 865.5 (407.0) (437.4) 1230.3 1174.9
------- ------- ------- ------- ------- -------
Total Assets 13951.9 15582.5 (2094.6) (2128.6) 93135.3 98001.3
======= ======= ======= ======= ======= =======
PAGE 14
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Lincoln Retirement Life Insurance Management Lincoln UK
------------------ ------------------ ------------------- ------------------
LIABILITIES and SHAREHOLDERS' EQUITY
Dec Dec Dec Dec Dec Dec Dec Dec
2002 2001 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- ------- ------- -------
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 2696.8 2622.7 13780.9 12955.8 1336.2 1338.1
Health reserves 0.3 0.3 48.5 46.0
Unpaid claims - life and health 48.3 31.3 108.3 92.9 44.7 42.4
Unearned premiums 0.0 0.0
Premium deposit funds 19921.6 17838.9 18.3 13.9 30.8 29.2
Participating policyholders'
funds 119.7 100.2
Other policyholders' funds 603.5 555.2
Liab related to separate accounts 26934.1 34324.6 1310.4 1491.0 5077.9 5607.2
------- ------- ------- ------- ------- ------- ------- -------
Total Insurance and Inv Contract
Liabilities 49600.7 54817.5 15941.4 15209.5 6538.1 7063.0
Federal income taxes 225.1 (5.7) 101.0 (13.5) 50.7 43.3 (6.7) (12.2)
Short-term debt 10.0
Long-term debt
Minority Interest in pref.
securities of sub.
Notes payable to LNC 0.2 9.3
Other liabilities 95.9 168.4 443.9 436.3 839.8 866.2 201.3 192.0
Deferred gain on indemnity
reinsurance
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities 49921.9 54980.3 16486.3 15642.2 890.5 918.8 6732.7 7242.8
------- ------- ------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on
securities 331.5 79.9 215.0 13.6 6.4 1.5 25.8 15.3
Gains (losses) on derivatives* 10.6 0.3 16.7 4.5
Other shareholders' equity 2633.8 1824.9 2874.3 2738.5 567.1 540.3 601.7 566.7
S/Hs' equity-minimum pension
liability adjustment (0.7) (2.6) (33.0) (36.0)
Cumulative effect of accounting
change 2.8 10.9
------- ------- ------- ------- ------- ------- ------- -------
Shareholders' Equity 2975.9 1907.9 3105.2 2767.5 570.9 541.7 594.5 546.0
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs'
Equity 52897.8 56888.2 19591.6 18409.7 1461.4 1460.5 7327.1 7788.8
======= ======= ======= ======= ======= ======= ======= =======
------------------------------------------------------------------------------------------------------------------------------
Corporate and Consolidating
Other Operations Adjustments Consolidated
------------------ ------------------ ------------------
LIABILITIES and SHAREHOLDERS'
EQUITY
Dec Dec Dec Dec Dec Dec
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 2209.4 1122.8 (94.7) (122.4) 19928.5 17917.0
Health reserves 2640.2 2491.5 2689.0 2537.9
Unpaid claims - life and health 577.1 920.9 778.4 1087.5
Unearned premiums 141.2 66.9 141.2 66.9
Premium deposit funds 40.1 105.5 508.1 597.5 20518.8 18585.0
Participating policyholders'
funds 119.7 100.2
Other policyholders' funds 7.4 7.4 610.9 562.7
Liab related to separate accounts 2856.0 3410.5 36178.3 44833.4
------- ------- ------- ------- ------- -------
Total Insurance and Inv Contract
Liabilities 5615.4 4715.0 3269.4 3885.6 80964.9 85690.6
Federal income taxes (638.9) (26.7) 267.3 14.8
Short-term debt 153.0 550.7 (210.5) 153.0 350.2
Long-term debt 1119.2 861.8 1119.2 861.8
Minority Interest in pref.
securities of sub. 392.7 474.7 392.7 474.7
Notes payable to LNC 308.7 335.0 (308.9) (344.3) (0.0)
Other liabilities 3278.1 3239.4 (681.5) (686.3) 4173.3 4216.1
Deferred gain on indemnity
reinsurance 977.1 1144.5 977.1 1144.5
------- ------- ------- ------- ------- -------
Total Liabilities 11205.4 11294.3 2546.2 2659.3 87780.3 92737.8
------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on
securities 228.2 77.2 5.2 8.2 812.0 195.7
Gains (losses) on derivatives* 1.0 (0.8) 28.3 3.9
Other shareholders' equity 2578.9 4207.9 (4645.9) (4796.0) 4612.5 5082.2
S/Hs' equity-minimum pension
liability adjustment (61.6) (97.8) (36.0)
Cumulative effect of accounting
change 3.9 17.6
------- ------- ------- ------- ------- -------
Shareholders' Equity 2746.5 4288.2 (4640.7) (4787.9) 5355.0 5263.5
------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs'
Equity 13951.9 15582.5 (2094.6) (2128.6) 93135.3 98001.3
======= ======= ======= ======= ======= =======
* Cumulative effect of accounting change recorded upon the adoption of FAS 133 in the 1st quarter of 2001 is a component of
gains (losses) on derivatives in the 1st quarter of 2002.
PAGE 15
Five Year Comparative Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
ASSETS
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Investments
Corporate bonds 22505.2 21119.5 21249.7 23105.1 25934.7
U.S. government bonds 1134.6 538.3 542.9 410.5 513.6
Foreign government bonds 1321.2 1447.5 1321.1 1174.7 1110.2
Mortgage backed securities 5080.5 4404.0 4160.4 3524.7 5015.5
State and municipal bonds 16.7 14.7 14.6 44.7 114.4
Preferred stocks-redeemable 174.6 164.7 161.2 85.9 79.0
Common stocks 463.1 514.5 436.6 319.3 228.0
Preferred stocks-equity 79.8 89.5 113.1 151.2 109.2
Mortgage loans 4393.1 4735.4 4663.0 4535.5 4205.5
Real estate 488.7 256.2 282.0 267.9 279.7
Policy loans 1840.0 1892.4 1960.9 1939.7 1945.6
Other long-term investments 432.0 401.8 463.3 553.8 466.2
------- ------- ------- ------- -------
Total Investments 37929.5 35578.4 35368.6 36113.1 40001.7
------- ------- ------- ------- -------
Invest in unconsol affiliates 18.8 25.8 6.4 8.1
Cash and invested cash 2433.4 1895.9 1927.4 3095.5 1690.5
Property and equipment 174.8 203.8 228.2 257.5 242.1
Premiums and fees receivable 246.2 259.6 296.7 400.1 212.9
Accrued investment income 528.5 533.2 546.4 563.5 536.7
Assets held in separate accounts 43408.9 53654.2 50579.9 44833.4 36178.3
Federal income taxes recoverable 204.1 345.0 207.5 15.1 266.5
Amounts recoverable from
reinsurers 3127.1 3954.3 3747.7 6030.4 7280.0
Deferred acquisition costs 1964.4 2800.3 3070.5 2885.3 2970.9
Other intangible assets 95.1 92.3 73.7 50.1 41.8
Present value of in-force 1753.3 1654.2 1483.3 1362.5 1250.1
Goodwill 1484.3 1423.0 1286.0 1211.8 1233.2
Other 468.0 675.7 1021.6 1174.9 1230.3
------- ------- ------- ------- -------
Total Assets 93836.3 103095.7 99844.1 98001.3 93135.3
======= ======= ======== ======= =======
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 16434.2 17071.4 17841.2 17917.0 19928.5
Health reserves 2600.1 2507.8 2523.8 2537.9 2689.0
Unpaid claims-life and health 1043.4 1269.8 1316.6 1087.5 778.4
Unearned premiums 62.3 75.8 46.5 66.9 141.2
Premium deposit funds 20171.9 19624.1 17715.5 18585.0 20518.8
Participating policyholders'
funds 142.7 132.0 139.4 100.2 119.7
Other policyholders' funds 438.4 472.6 522.2 562.7 610.9
Liab related to separate accounts 43408.9 53654.2 50579.9 44833.4 36178.3
------- ------- -------- ------- -------
Total Ins and Inv Contr
Liabilities 84301.9 94807.7 90685.1 85690.6 80964.9
Federal income taxes
Short-term debt 314.6 460.2 312.9 350.2 153.0
Long-term debt 712.2 712.0 712.2 861.8 1119.2
Minority Interest - pref sec of a
sub 745.0 745.0 745.0 474.7 392.7
Other liabilities 2374.6 2107.0 2434.7 4216.1 4173.3
Deferred gain on indemnity
reinsurance 1144.5 977.1
------- ------- -------- ------- -------
Total Liabilities 88448.3 98831.9 94890.0 92737.8 87780.3
S/Hs' equity-unrealized gains
(losses)-cont op. 552.4 (465.7) 12.0 199.6 840.3
S/Hs' equity-foreign currency 50.0 30.0 21.9 (8.1) 50.8
S/Hs' equity-minimum pension
liability adjustment (36.0) (97.8)
S/Hs' equity-other 4785.6 4699.5 4920.1 5090.3 4561.7
Cumulative effect of accounting
change 17.6
------- ------- -------- ------- -------
Total Shareholders' Equity 5387.9 4263.9 4954.1 5263.5 5355.0
------- ------- -------- ------- -------
Total Liabilities ------- ------- -------- ------- -------
and Shareholders' Equity 93836.3 103095.7 99844.1 98001.3 93135.3
======= ======= ======== ======= =======
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $23.86 $24.14 $25.85 $26.94 $25.42
Common shares outstanding 202.6 196.0 191.2 187.3 177.6
PAGE 16
Quarterly Balance Sheet
Unaudited [Millions of Dollars
except Common Share Data]
Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
ASSETS
Investments
Corporate bonds 21188.0 20719.1 21064.7 21249.7 21855.2 22116.6
U.S. government bonds 572.4 566.2 575.5 542.9 536.6 510.0
Foreign government bonds 1416.4 1377.4 1277.7 1321.1 1240.8 1236.3
Mortgage backed securities 4393.4 4242.4 4172.5 4160.4 4009.8 3844.6
State and municipal bonds 14.7 14.1 14.3 14.6 14.7 14.1
Preferred stocks - redeemable 159.7 159.2 159.5 161.2 154.1 152.2
Common stocks 496.4 467.8 479.9 436.6 388.6 373.3
Preferred stocks-equity 91.3 92.2 90.3 113.1 170.9 160.8
Mortgage loans 4833.9 4783.8 4767.3 4663.0 4641.2 4652.8
Real estate 283.4 282.1 297.6 282.0 308.1 306.9
Policy loans 1896.3 1914.7 1935.6 1960.9 1947.0 1947.4
Other long-term investments 428.8 438.2 470.5 463.3 477.4 480.9
------- ------- ------- ------- ------- -------
Total Investments 35774.6 35057.2 35305.4 35368.6 35744.5 35796.0
------- ------- ------- ------- ------- -------
Invest in unconsol affiliates (0.9) 5.8 6.4 7.3 6.1
Cash and invested cash 1510.1 1619.3 1435.9 1927.4 2015.2 1501.9
Property and equipment 207.7 205.5 213.8 228.2 242.1 251.4
Premiums and fees receivable 190.2 247.8 240.8 296.7 282.8 303.7
Accrued investment income 575.0 544.0 569.2 546.4 581.9 573.2
Assets held in separate accounts 56907.6 54924.2 54410.9 50579.9 44506.2 47140.2
Federal income taxes recoverable 300.4 246.1 267.3 207.5 106.6 177.5
Amount recoverable from
reinsurers 3851.0 3775.3 3774.7 3747.7 3706.4 3662.0
Deferred acquisition costs 2870.4 2968.0 3048.0 3070.5 2963.4 3129.1
Other intangible assets 86.7 82.3 78.1 73.7 69.3 66.7
Present value of in-force 1618.8 1564.3 1520.3 1483.3 1436.0 1412.3
Goodwill 1349.6 1335.4 1296.6 1286.0 1274.5 1263.6
Other 1097.8 1279.1 1076.4 1021.6 1186.3 1147.7
------- ------- ------- ------- ------- -------
Total Assets 106340.0 103847.6 103243.1 99844.1 94122.4 96431.2
======= ======= ======= ======= ======= =======
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 17172.1 17247.3 17500.0 17841.2 17733.0 17865.3
Health reserves 2547.4 2494.2 2520.2 2523.8 2534.8 2533.9
Unpaid claims-life and health 1177.3 1204.1 1202.8 1316.6 1255.3 1136.5
Unearned premiums 57.1 52.8 51.8 46.5 45.9 19.0
Premium deposit funds 18899.3 18407.2 18072.1 17715.5 17667.1 17715.9
Participating policyholders'
funds 130.7 130.4 135.4 139.4 145.0 135.2
Other policyholders' funds 478.9 490.6 500.7 522.2 532.1 541.4
Liab related to separate accounts 56907.6 54924.2 54410.9 50579.9 44506.2 47140.2
------- ------- ------- ------- ------- -------
Total Ins and Inv Contr
Liabilities 97370.5 94950.8 94394.0 90685.1 84419.3 87087.2
Federal income taxes
Short-term debt 474.2 355.7 330.3 312.9 415.3 351.3
Long-term debt 712.0 712.1 712.2 712.2 712.3 712.4
Minority Interest - pref sec of a
sub 745.0 745.0 745.0 745.0 745.0 745.0
Notes payable to LNC
Other liabilities 2697.9 2860.3 2522.9 2434.7 2734.2 2479.4
Deferred gain on indemnity
reinsurance
------- ------- ------- ------- ------- -------
Total Liabilities 101999.6 99623.9 98704.5 94890.0 89026.0 91375.3
------- ------- ------- ------- ------- -------
S/Hs' equity-unrealized gns
(losses)- inv. (411.2) (556.6) (337.7) 12.0 190.4 76.2
S/Hs' equity- gains
(losses)-derivatives* 5.7 9.4
S/Hs' equity-foreign currency 22.8 21.9 19.9 21.9 4.2 (15.3)
S/Hs' equity-minimum pension
liability adj
S/Hs' equity-other 4728.8 4758.4 4856.4 4920.1 4878.5 4968.1
Cumulative effect of accounting
change 17.6 17.6
------- ------- ------- ------- ------- -------
Total Shareholders' Equity 4340.4 4223.7 4538.6 4954.1 5096.4 5055.9
------- ------- ------- ------- ------- -------
Total Liabilities
and Shareholders' Equity 106340.0 103847.6 103243.1 99844.1 94122.4 96431.2
======= ======= ======= ======= ======= =======
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $24.58 $25.01 $25.43 $25.85 $25.96 $26.32
Common shares outstanding 193.3 191.1 191.8 191.2 188.1 188.2
Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
ASSETS
Investments
Corporate bonds 23424.3 23105.1 23470.4 23993.6 25484.6 25934.7
U.S. government bonds 467.7 410.5 429.1 441.6 495.3 513.6
Foreign government bonds 1160.3 1174.7 1180.1 1120.1 1038.6 1110.2
Mortgage backed securities 3765.6 3524.7 3613.9 4031.0 4843.7 5015.5
State and municipal bonds 14.4 44.7 62.6 58.8 97.8 114.4
Preferred stocks - redeemable 99.3 85.9 84.6 79.6 76.8 79.0
Common stocks 311.2 319.3 284.4 267.7 237.2 228.0
Preferred stocks-equity 166.5 151.2 154.2 151.8 160.3 109.2
Mortgage loans 4663.1 4535.5 4448.2 4395.4 4285.2 4205.5
Real estate 288.8 267.9 258.2 258.7 286.4 279.7
Policy loans 1943.4 1939.7 1918.0 1906.1 1899.0 1945.6
Other long-term investments 483.4 553.8 459.6 456.0 457.7 466.2
------- ------- ------- ------- ------- -------
Total Investments 36788.0 36113.1 36363.1 37160.1 39362.6 40001.7
------- ------- ------- ------- ------- -------
Invest in unconsol affiliates 6.5 8.1 8.1 7.5
Cash and invested cash 1996.3 3095.5 1699.5 2265.4 1599.9 1690.5
Property and equipment 261.0 257.5 266.4 253.5 252.7 242.1
Premiums and fees receivable 264.5 400.1 376.3 461.4 577.2 212.9
Accrued investment income 615.1 563.5 577.1 556.3 568.2 536.7
Assets held in separate accounts 39479.8 44833.4 44916.7 40579.6 34069.0 36178.3
Federal income taxes recoverable 35.3 15.1 551.3 438.4 292.9 266.5
Amount recoverable from
reinsurers 3818.3 6030.4 6096.3 6509.9 7094.5 7280.0
Deferred acquisition costs 3087.2 2885.3 3114.9 3056.6 2868.7 2970.9
Other intangible assets 64.1 50.1 47.9 45.8 43.8 41.8
Present value of in-force 1387.4 1362.5 1336.1 1321.4 1286.9 1250.1
Goodwill 1253.2 1211.8 1211.5 1212.4 1232.7 1233.2
Other 1149.4 1174.9 1280.9 1200.6 1187.1 1230.3
------- ------- ------- ------- ------- -------
Total Assets 90206.0 98001.3 97846.4 95069.2 90436.2 93135.3
======= ======= ======= ======= ======= =======
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 17990.8 17917.0 18014.6 18611.2 19142.5 19928.5
Health reserves 2573.2 2537.9 2492.4 2176.1 2448.3 2689.0
Unpaid claims-life and health 1206.6 1087.5 1153.6 1086.1 1100.9 778.4
Unearned premiums 8.1 66.9 66.5 154.3 185.8 141.2
Premium deposit funds 18509.7 18585.0 18669.6 19157.8 20054.4 20518.8
Participating policyholders'
funds 118.3 100.2 98.6 91.9 90.5 119.7
Other policyholders' funds 554.3 562.7 571.9 584.7 595.7 610.9
Liab related to separate accounts 39479.8 44833.4 44916.7 40579.6 34069.0 36178.3
------- ------- ------- ------- ------- -------
Total Ins and Inv Contr
Liabilities 80440.8 85690.6 85983.9 82441.8 77687.1 80964.9
Federal income taxes
Short-term debt 539.0 350.2 510.2 211.0 120.0 153.0
Long-term debt 712.4 861.8 861.8 1112.3 1118.1 1119.2
Minority Interest - pref sec of a
sub 305.0 474.7 376.2 380.0 390.6 392.7
Notes payable to LNC (0.0) 0.0 (0.0) (0.0)
Other liabilities 2840.2 4216.1 3864.6 4501.1 4661.9 4173.3
Deferred gain on indemnity
reinsurance 1144.5 1118.6 1115.2 1069.5 977.1
------- ------- ------- ------- ------- -------
Total Liabilities 84837.4 92737.8 92715.3 89761.4 85047.1 87780.3
------- ------- ------- ------- ------- -------
S/Hs' equity-unrealized gns
(losses)- inv. 247.9 195.7 31.8 325.7 817.5 812.0
S/Hs' equity- gains
(losses)-derivatives* 2.7 3.9 22.6 22.7 27.3 28.3
S/Hs' equity-foreign currency 6.9 (8.1) (20.8) 22.0 35.4 50.8
S/Hs' equity-minimum pension
liability adj (36.0) (35.2) (37.8) (35.2) (97.8)
S/Hs' equity-other 5093.5 5090.3 5132.7 4975.4 4544.1 4561.7
Cumulative effect of accounting
change 17.6 17.6
------- ------- ------- ------- ------- -------
Total Shareholders' Equity 5368.6 5263.5 5131.1 5307.9 5389.0 5355.0
------- ------- ------- ------- ------- -------
Total Liabilities
and Shareholders' Equity 90206.0 98001.3 97846.4 95069.2 90436.2 93135.3
======= ======= ======= ======= ======= =======
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $26.87 $26.94 $27.02 $26.88 $25.61 $25.42
Common shares outstanding 189.8 187.3 187.9 184.5 177.5 177.6
* Cumulative effect of accounting change recorded upon the adoption of
FAS 133 in the 1st quarter of 2001 is a component of gains (losses) on
derivatives in the 1st quarter of 2002.
PAGE 17
Lincoln Retirement
Income Statements & Operational
Data
Unaudited [Millions of Dollars]
For the Year Ended December 31 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Operating Revenue
Premiums 53.9 65.2 64.3 77.5 47.4
Surrender charges 33.5 37.9 41.8 31.2 31.2
Expense assessments 459.9 536.2 628.4 537.7 469.8
Other revenue and fees 1.7 14.5 11.0 16.7 3.3
Net investment income 1501.6 1474.2 1393.5 1370.0 1433.9
------- ------- ------- ------- -------
Operating Revenue 2050.6 2128.0 2138.9 2033.1 1985.5
------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 271.6 259.1 254.7 263.9 314.1
Interest credited to policy bal. 955.2 925.2 866.1 863.8 903.8
------- ------- ------- ------- -------
Total insurance benefits 1226.8 1184.3 1120.8 1127.7 1217.9
Underwriting, acquisition,
insurance and other expenses*:
Commissions 236.7 341.4 326.8 336.3 320.8
Other volume related expenses 33.1 42.8 52.0 49.7 64.6
Operating and administrative
expenses 194.0 208.6 200.6 225.5 225.0
Taxes, licenses and fees 13.8 0.3 9.3 13.7 11.5
Par policyholder interests 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Subtotal 477.6 593.2 588.8 625.3 621.8
Deferral of acquisition costs (240.9) (243.9)
DAC amortization 125.5 157.6
------- ------- ------- ------- -------
DAC deferral net of amortization 9.7 (47.7) (37.5) (115.4) (86.2)
PVIF amortization 11.4 15.3 24.2 14.7 31.8
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 498.8 560.8 575.5 524.5 567.4
Goodwill amortization 2.2 2.0 (0.6) 1.2 0.0
------- ------- ------- ------- -------
Operating Benefits and Expenses 1727.8 1747.1 1695.7 1653.5 1785.3
------- ------- ------- ------- -------
Income from Operations Before Tax 322.8 380.9 443.2 379.6 200.2
Federal income taxes 60.4 81.4 81.2 59.3 12.7
------- ------- ------- ------- -------
Income from Operations 262.4 299.4 362.0 320.3 187.5
------- ------- ------- ------- -------
Realized gains (losses) on
investments 11.4 (7.9) (3.4) (42.3) (127.8)
Gains (losses) on derivatives 0.0 0.0 0.0 (0.2) (0.8)
Restructuring charges 0.0 0.0 0.0 (1.3) (1.0)
------- ------- ------- ------- -------
Income before Accounting Changes 273.8 291.5 358.6 276.5 57.8
Cumulative effect of accounting
changes 0.0 0.0 0.0 (7.3) 0.0
------- ------- ------- ------- -------
Net Income 273.8 291.5 358.6 269.2 57.8
======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 264.6 301.5 361.4 321.5 187.5
Net Income -before Goodwill
Amort. 276.0 293.6 358.0 270.5 57.8
Effective tax rate 18.7% 21.4% 18.3% 15.6% 6.4%
Operating Revenue 2050.6 2128.0 2138.9 2033.1 1985.5
Realized gains (losses) on
investments 17.5 (12.1) (5.2) (64.5) (196.6)
Gains (losses) on derivatives 0.0 0.0 0.0 (0.3) (1.2)
------- ------- ------- ------- -------
Total Revenue 2068.1 2115.8 2133.7 1968.3 1787.7
======= ======= ======= ======= =======
Average capital 1592.6 1562.0 1601.8 1828.2 2334.2
Return on average capital 16.5% 19.2% 22.6% 17.5% 8.0%
------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-period 812.5 912.8
Deferral 240.9 243.9
Amortization (125.5) (157.6)
------- -------
Operating 115.4 86.2
Adjustment related to realized
(gains) losses
on securities available-for-sale 68.2 73.0
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (90.0) (201.4)
Other** 6.7 (14.8)
------- -------
Balance at end-of-period 912.8 855.8
======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-period 169.2 154.5
Amortization (14.7) (31.8)
Other
------- -------
Balance at end-of-period 154.5 122.7
======= =======
* Does not include restructuring charges which is consistent with the
definition of "Income from Operations" (see page 5).
** Includes the transfer of the Legacy Life block of business to the Life
Insurance segment in the first quarter of 2002.
Page 18
Lincoln Retirement
Income Statements & Operational
Data
Unaudited [Millions of Dollars]
Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 13.3 16.8 18.0 16.2 19.1 32.5
Surrender charges 11.1 11.2 10.4 9.1 9.1 8.5
Expense assessments 155.1 155.7 163.4 154.2 141.6 138.0
Other revenue and fees 2.2 0.6 4.6 3.5 1.7 3.9
Net investment income 362.9 345.8 349.8 335.0 341.3 339.3
------- ------- ------- ------- ------- -------
Operating Revenue 544.6 530.1 546.2 518.1 512.8 522.1
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 61.6 65.7 68.4 59.0 69.8 72.6
Interest credited to policy
balances 228.2 219.4 205.4 213.2 209.4 209.7
------- ------- ------- ------- ------- -------
Total insurance benefits 289.8 285.1 273.7 272.2 279.2 282.3
Underwriting, acquisition,
insurance and other expenses*:
Commissions 83.1 75.4 83.8 84.5 72.6 85.8
Other volume related expenses 14.5 14.1 11.3 12.2 11.2 12.8
Operating and administrative
expenses 44.4 46.0 55.5 54.8 51.4 52.4
Taxes, licenses and fees 2.8 1.5 4.6 0.5 4.3 2.7
Par policyholder interests 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Subtotal 144.8 136.9 155.2 152.0 139.6 153.7
Deferral of acquisition costs (50.2) (60.2)
DAC amortization 40.7 28.3
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (6.2) (1.6) (11.3) (18.4) (9.5) (31.9)
PVIF amortization 6.0 4.5 4.1 9.6 4.6 4.1
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 144.5 139.8 147.9 143.2 134.6 126.0
Goodwill amortization (1.5) 0.3 0.3 0.3 0.3 0.3
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 432.8 425.2 421.9 415.7 414.1 408.6
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 111.8 104.8 124.2 102.3 98.7 113.6
Federal income taxes 23.3 20.7 21.3 15.9 16.3 22.8
------- ------- ------- ------- ------- -------
Income from Operations 88.5 84.1 102.9 86.4 82.3 90.8
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 2.7 0.3 (9.1) 2.8 (1.4) (6.7)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 (0.1) 0.1
Restructuring charges 0.0 0.0 0.0 0.0 (0.7) (0.6)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 91.2 84.4 93.8 89.2 80.2 83.6
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 (3.6) (3.7)
------- ------- ------- ------- ------- -------
Net Income 91.2 84.4 93.8 89.2 76.6 79.9
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 87.0 84.4 103.2 86.7 82.6 91.1
Net Income -before Goodwill
Amort. 89.7 84.7 94.1 89.5 76.9 80.2
Effective tax rate 20.8% 19.7% 17.1% 15.6% 16.6% 20.1%
Operating Revenue 544.6 530.1 546.2 518.1 512.8 522.1
Realized gains (losses) on
investments 4.2 0.4 (14.1) 4.2 (2.2) (10.3)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 (0.2) 0.2
------- ------- ------- ------- ------- -------
Total Revenue 548.7 530.5 532.1 522.3 510.4 512.1
======= ======= ======= ======= ======= =======
Average capital 1,438.4 1,647.7 1,635.2 1,686.0 1,797.9 1,787.1
Return on average capital 24.6% 20.4% 25.2% 20.5% 18.3% 20.3%
-----------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 812.5 762.6
Deferral 50.2 60.2
Amortization (40.7) (28.3)
------- -------
Operating 9.5 31.9
Adjustment related to realized
(gains) losses
on securities available-for-sale 12.8 4.9
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (78.6) 31.9
Other** 6.5 (0.0)
------- -------
Balance at end-of-quarter 762.6 831.3
======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 169.2 164.6
Amortization (4.6) (4.2)
Other
------- -------
Balance at end-of-quarter 164.6 160.4
======= =======
Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 13.2 12.7 12.2 13.1 13.4 8.7
Surrender charges 6.5 7.2 7.9 7.2 8.7 7.4
Expense assessments 132.0 126.2 127.7 127.1 109.3 105.7
Other revenue and fees 1.2 10.0 5.8 (1.3) (4.0) 2.7
Net investment income 346.6 342.6 349.9 352.7 358.1 373.1
------- ------- ------- ------- ------- -------
Operating Revenue 499.5 498.7 503.5 498.8 485.6 497.6
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 66.3 55.3 55.4 72.5 107.8 78.4
Interest credited to policy
balances 217.2 227.5 226.1 221.8 224.2 231.7
------- ------- ------- ------- ------- -------
Total insurance benefits 283.5 282.8 281.5 294.3 332.0 310.1
Underwriting, acquisition,
insurance and other expenses*:
Commissions 81.1 96.7 82.4 82.5 83.0 72.8
Other volume related expenses 12.7 13.1 10.0 16.9 19.6 18.1
Operating and administrative
expenses 55.3 66.4 53.0 52.2 51.4 68.3
Taxes, licenses and fees 2.2 4.5 4.7 4.2 3.0 (0.5)
Par policyholder interests 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Subtotal 151.3 180.7 150.2 155.8 157.0 158.8
Deferral of acquisition costs (58.7) (71.9) (61.7) (60.8) (66.1) (55.3)
DAC amortization 35.6 20.8 32.7 48.2 47.2 29.6
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (23.0) (51.0) (29.1) (12.6) (18.9) (25.7)
PVIF amortization 4.5 1.4 3.8 3.9 4.1 20.0
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 132.8 131.1 124.9 147.2 142.2 153.2
Goodwill amortization 0.3 0.3 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 416.6 414.2 406.4 441.5 474.2 463.3
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 82.9 84.5 97.1 57.3 11.4 34.4
Federal income taxes 10.4 9.7 16.7 9.5 (11.4) (2.1)
------- ------- ------- ------- ------- -------
Income from Operations 72.4 74.8 80.4 47.8 22.8 36.5
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (13.5) (20.7) (32.8) (36.6) (28.0) (30.4)
Gains (losses) on derivatives (0.3) 0.1 0.0 0.1 (0.8) (0.0)
Restructuring charges 0.0 0.0 0.0 (1.0) 0.0 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes 58.6 54.2 47.6 10.2 (6.0) 6.0
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income 58.6 54.2 47.6 10.2 (6.0) 6.0
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 72.7 75.1 80.4 47.8 22.8 36.5
Net Income -before Goodwill
Amort. 58.9 54.5 47.6 10.2 (6.0) 6.0
Effective tax rate 12.6% 11.5% 17.2% 16.5% (100.0%) (6.1%)
Operating Revenue 499.5 498.7 503.5 498.8 485.6 497.6
Realized gains (losses) on
investments (20.8) (31.3) (50.5) (56.2) (43.8) (46.1)
Gains (losses) on derivatives (0.5) 0.2 0.0 (0.1) (1.1) (0.1)
------- ------- ------- ------- ------- -------
Total Revenue 478.2 467.5 453.0 442.6 440.7 451.4
======= ======= ======= ======= ======= =======
Average capital 1,902.9 1,824.9 2,041.6 2,391.2 2,405.5 2,498.7
Return on average capital 15.2% 16.4% 15.8% 8.0% 3.8% 5.8%
-----------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 831.3 781.2 912.8 1,031.0 967.8 843.9
Deferral 58.7 71.9 61.7 60.8 66.1 55.3
Amortization (35.6) (20.8) (32.7) (48.2) (47.2) (29.6)
------- ------- ------- ------- ------- -------
Operating 23.0 51.0 29.1 12.6 18.9 25.7
Adjustment related to realized
(gains) losses
on securities available-for-sale 16.4 34.1 25.7 20.9 10.3 16.1
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (89.7) 46.5 78.2 (96.6) (153.1) (29.9)
Other** 0.3 (0.0) (14.8)
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 781.2 912.8 1,031.0 967.8 843.9 855.8
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 160.4 155.9 154.5 150.7 146.8 142.7
Amortization (4.5) (1.4) (3.8) (3.9) (4.1) (20.0)
Other
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 155.9 154.5 150.7 146.8 142.7 122.7
======= ======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the
definition of "Income from Operations" (see page 5).
** Includes the transfer of the Legacy Life block of business to the Life
Insurance segment in the first quarter of 2002.
Page 19
Lincoln Retirement
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Fixed Annuities- Bal Beg-of-Year 17.214 18.111 18.210 16.615 18.004
Gross Deposits 1.452 2.563 2.074 3.342 3.672
Withdrawals (incl charges) &
deaths (2.468) (2.521) (3.283) (2.448) (2.637)
------- ------- ------- ------- -------
Net cash flows (1.016) 0.042 (1.209) 0.894 1.035
Transfer from (to) var annuities (0.356) (0.783) (1.329) (0.428) 0.108
Interest credited 0.994 0.840 0.944 0.923 0.940
Acq of new business/companies 1.274
------- ------- ------- ------- -------
Fixed Annuities-Gross 18.111 18.210 16.615 18.004 20.087
Reinsurance Ceded (1.606) (1.419) (1.221) (1.514) (2.003)
------- ------- ------- ------- -------
Fixed Annuities-Bal End -of-Year 16.505 16.791 15.394 16.491 18.085
------- ------- ------- ------- -------
Fixed Annuities Incremental
Deposits * 1.265 2.310 1.918 3.213 3.600
Variable Annuities-Bal
Beg-of-Year 27.346 33.358 41.493 39.427 34.638
Gross Deposits 2.791 2.553 3.165 3.067 2.743
Withdrawals (incl charges) &
deaths (3.019) (3.760) (4.830) (3.856) (3.325)
------- ------- ------- ------- -------
Net cash flows (0.228) (1.207) (1.665) (0.789) (0.582)
Transfer from (to) fixed
annuities 0.389 0.787 1.320 0.428 (0.122)
Invest inc & change in mkt value 5.414 8.555 (1.721) (4.428) (6.497)
Acq(sale) of new
business/companies 0.437
------- ------- ------- ------- -------
Var Annuities-Bal End-of-Year 33.358 41.493 39.427 34.638 27.438
------- ------- ------- ------- -------
Variable Annuities Incremental
Deposits * 2.641 2.409 2.667 2.624 2.569
Total Annuities - Bal Beg-of-Year 44.560 51.469 59.703 56.042 52.642
Gross Deposits 4.244 5.116 5.239 6.409 6.415
Withdrawals (incl charges) &
deaths (5.487) (6.281) (8.113) (6.304) (5.962)
------- ------- ------- ------- -------
Net cash flows (1.244) (1.165) (2.874) 0.105 0.453
Transfers 0.033 0.004 (0.009) (0.013)
Interest credited & change in mkt
value 6.408 9.395 (0.777) (3.505) (5.558)
Acq of new business/companies 1.711
Total Gross Annuities-Bal
------- ------- ------- ------- -------
End-of-Year 51.469 59.703 56.042 52.642 47.525
Reinsurance Ceded (1.606) (1.419) (1.221) (1.514) (2.003)
------- ------- ------- ------- -------
Total Annuities (Net of Ceded) -
Bal End-of-Year 49.862 58.284 54.821 51.129 45.522
======= ======= ======= ======= =======
Total Annuities Incremental
Deposits * 3.906 4.719 4.585 5.837 6.169
Var Ann Under Agree - Included
above 0.649 0.719 0.941 1.077 1.186
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.709 0.459 1.712 1.844
Withdrawals (1.367) (2.271) (1.604) (1.473)
Net Flows (0.658) (1.812) 0.108 0.371
Gross Fixed Account Values 10.475
Reinsurance Ceded (2.003)
Net Fixed Account Values 8.473
Variable Annuities - including
fixed portion of variable
contracts
Deposits 4.407 4.780 4.697 4.571
Withdrawals (4.915) (5.842) (4.700) (4.489)
Net Flows (0.508) (1.062) (0.003) 0.082
Variable Account Values 37.050
Fixed Portion of Variable
Contracts
Deposits 1.853 1.615 1.630 1.828
Withdrawals (1.154) (1.012) (0.844) (1.164)
Net Flows 0.699 0.603 0.786 0.664
Fixed Portion of Variable Account
Values 11.614
Average Daily Variable Account
Values 35.932 41.776 35.573 30.826
-----------------------------------------------------------------------------------------------------------------------------
Annuity Product Spread
Information**
Net Investment Income 7.22% 7.38% 7.38% 6.98%
Interest Credited 5.13% 5.24% 5.33% 4.87%
------- ------- ------- -------
Spread 2.09% 2.14% 2.05% 2.11%
* Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Retirement products.
** For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product
investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited
on annuity products less bonus credits and excess DCA interest, divided by average fixed account values net of co-insured
account values. Fixed account values reinsured under modified co-insurance agreements are included in account values for
this calculation since assets (and therefore margin) are retained under these agreements.
PAGE 20
Lincoln Retirement
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Fixed Annuities-Bal
Beg-of-Quarter 18.210 17.614 17.199 16.930 16.615 16.598
Gross Deposits 0.589 0.490 0.513 0.482 0.560 0.668
Withdrawals (incl charges) &
deaths (0.875) (0.796) (0.802) (0.810) (0.787) (0.574)
------- ------- ------- ------- ------- -------
Net cash flows (0.287) (0.307) (0.288) (0.328) (0.227) 0.094
Transfer from (to) var annuities (0.550) (0.346) (0.217) (0.216) (0.014) (0.222)
Interest credited 0.241 0.238 0.235 0.230 0.225 0.226
Acq of new business/companies
------- ------- ------- ------- ------- -------
Fixed Annuities-Gross 17.614 17.199 16.930 16.615 16.598 16.696
Reinsurance Ceded (1.371) (1.316) (1.270) (1.221) (1.169) (1.146)
------- ------- ------- ------- ------- -------
Fixed Annuities-Bal
End-of-Quarter 16.244 15.884 15.660 15.394 15.430 15.551
------- ------- ------- ------- ------- -------
Fixed Annuities Incremental
Deposits* 0.560 0.447 0.464 0.447 0.536 0.611
Variable Annuities-Bal
Beg-of-Quarter 41.493 44.640 43.097 42.743 39.427 34.733
Gross Deposits 0.797 0.793 0.729 0.846 0.887 0.703
Withdrawals (incl charges) &
deaths (1.210) (1.168) (1.253) (1.199) (1.250) (0.993)
------- ------- ------- ------- ------- -------
Net cash flows (0.413) (0.375) (0.524) (0.353) (0.363) (0.290)
Transfer from (to) fixed
annuities 0.549 0.343 0.216 0.212 0.011 0.227
Invest inc & change in mkt value 3.011 (1.511) (0.046) (3.175) (4.342) 2.291
Acq(sale) of new
business/companies
------- ------- ------- ------- ------- -------
Var Annuities-Bal End-of-Quarter 44.640 43.097 42.743 39.427 34.733 36.961
------- ------- ------- ------- ------- -------
Variable Annuities Incremental
Deposits 0.732 0.699 0.586 0.650 0.683 0.612
Total Annuities -Bal
Beg-of-Quarter 59.703 62.255 60.297 59.673 56.042 51.332
Gross Deposits 1.386 1.283 1.242 1.328 1.447 1.371
Withdrawals (incl charges) &
deaths (2.085) (1.964) (2.055) (2.009) (2.037) (1.567)
------- ------- ------- ------- ------- -------
Net cash flows (0.700) (0.682) (0.812) (0.681) (0.590) (0.196)
Transfers (0.001) (0.003) (0.001) (0.004) (0.003) 0.005
Interest credited & change in mkt
value 3.252 (1.273) 0.189 (2.945) (4.117) 2.517
Acq of new business/companies
Total Gross Annuities-Bal
------- ------- ------- ------- ------- -------
End-of-Quarter 62.255 60.297 59.673 56.042 51.332 53.658
Reinsurance Ceded (1.371) (1.316) (1.270) (1.221) (1.169) (1.146)
------- ------- ------- ------- ------- -------
Total Annuities (Net of Ceded) -
Bal End-of-Qtr 60.884 58.981 58.403 54.821 50.163 52.512
======= ======= ======= ======= ======= =======
Total Annuities Incremental
Deposits * 1.292 1.145 1.050 1.097 1.219 1.223
Var Ann Under Agree - Included
above 0.866 0.868 0.962 0.941 0.904 0.975
--------------------------------------------------------------------------------------------------------------------------------
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.134 0.126 0.114 0.085 0.160 0.329
Withdrawals (0.612) (0.557) (0.532) (0.570) (0.556) (0.356)
Net Flows (0.479) (0.431) (0.417) (0.485) (0.396) (0.027)
Gross Fixed Account Values
Reinsurance Ceded
Net Fixed Account Values
Variable Annuities - including
fixed portion of variable
contracts
Deposits 1.252 1.157 1.128 1.243 1.287 1.042
Withdrawals (1.473) (1.408) (1.523) (1.439) (1.481) (1.211)
Net Flows (0.221) (0.251) (0.395) (0.196) (0.194) (0.169)
Variable Account Values
Fixed Portion of Variable
Contracts
Deposits 0.455 0.364 0.399 0.397 0.400 0.339
Withdrawals (0.263) (0.240) (0.270) (0.240) (0.231) (0.218)
Net Flows 0.192 0.124 0.129 0.157 0.169 0.121
Fixed Portion of Variable Account
Values
Average Daily Variable Account
Values 42.185 42.182 43.055 39.682 38.180 36.499
--------------------------------------------------------------------------------------------------------------------------------
Annuity Product Spread
Information**
Net Investment Income 7.35% 7.41% 7.40% 7.37% 7.50% 7.45%
Interest Credited 5.33% 5.37% 5.12% 5.14% 5.40% 5.29%
------- ------- ------- ------- ------- -------
Spread 2.02% 2.04% 2.28% 2.23% 2.10% 2.16%
Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Fixed Annuities-Bal
Beg-of-Quarter 16.696 17.317 18.004 18.178 18.679 19.561
Gross Deposits 0.896 1.218 0.906 0.853 1.090 0.822
Withdrawals (incl charges) &
deaths (0.525) (0.562) (0.730) (0.551) (0.827) (0.531)
------ ------- ------- ------- ------- -------
Net cash flows 0.372 0.656 0.176 0.302 0.264 0.291
Transfer from (to) var annuities 0.021 (0.213) (0.232) (0.032) 0.379 (0.007)
Interest credited 0.228 0.244 0.230 0.231 0.239 0.240
Acq of new business/companies
------ ------- ------- ------- ------- -------
Fixed Annuities-Gross 17.317 18.004 18.178 18.679 19.561 20.087
Reinsurance Ceded (1.266) (1.514) (1.645) (1.770) (1.913) (2.003)
------ ------- ------- ------- ------- -------
Fixed Annuities-Bal
End-of-Quarter 16.051 16.491 16.533 16.909 17.650 18.085
------ ------- ------- ------- ------- -------
Fixed Annuities Incremental
Deposits* 0.873 1.193 0.881 0.839 1.072 0.808
Variable Annuities-Bal
Beg-of-Quarter 36.961 30.506 34.638 35.150 31.206 25.942
Gross Deposits 0.684 0.793 0.808 0.787 0.603 0.545
Withdrawals (incl charges) &
deaths (0.795) (0.818) (0.896) (0.866) (0.799) (0.763)
------ ------- ------- ------- ------- -------
Net cash flows (0.111) (0.025) (0.088) (0.079) (0.196) (0.217)
Transfer from (to) fixed
annuities (0.023) 0.213 0.234 0.032 (0.388) 0.000
Invest inc & change in mkt value (6.321) 3.944 0.366 (3.897) (4.680) 1.713
Acq(sale) of new
business/companies
------ ------- ------- ------- ------- -------
Var Annuities-Bal End-of-Quarter 30.506 34.638 35.150 31.206 25.942 27.438
------ ------- ------- ------- ------- -------
Variable Annuities Incremental
Deposits 0.604 0.725 0.725 0.744 0.573 0.528
Total Annuities -Bal
Beg-of-Quarter 53.658 47.823 52.642 53.329 49.886 45.503
Gross Deposits 1.580 2.011 1.714 1.640 1.694 1.368
Withdrawals (incl charges) &
deaths (1.320) (1.380) (1.626) (1.417) (1.626) (1.294)
------ ------- ------- ------- ------- -------
Net cash flows 0.261 0.631 0.088 0.223 0.068 0.074
Transfers (0.002) 0.002 (0.009) (0.006)
Interest credited & change in mkt
value (6.093) 4.188 0.596 (3.666) (4.440) 1.953
Acq of new business/companies
Total Gross Annuities-Bal
------ ------- ------- ------- ------- -------
End-of-Quarter 47.823 52.642 53.329 49.886 45.503 47.525
Reinsurance Ceded (1.266) (1.514) (1.645) (1.770) (1.913) (2.003)
------ ------- ------- ------- ------- -------
Total Annuities (Net of Ceded) -
Bal End-of-Qtr 46.558 51.129 51.684 48.116 43.590 45.522
====== ======= ======= ======= ======= =======
Total Annuities Incremental
Deposits * 1.477 1.918 1.606 1.583 1.645 1.336
Var Ann Under Agree - Included
above 0.907 1.077 1.207 1.175 1.083 1.186
--------------------------------------------------------------------------------------------------------------------------------
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.489 0.734 0.505 0.430 0.558 0.351
Withdrawals (0.340) (0.352) (0.463) (0.267) (0.518) (0.228)
Net Flows 0.149 0.382 0.042 0.163 0.041 0.122
Gross Fixed Account Values 9.761 10.048 10.219 10.475
Reinsurance Ceded (1.645) (1.770) (1.913) (2.003)
Net Fixed Account Values 8.116 8.278 8.306 8.473
Variable Annuities - including
fixed portion of variable
contracts
Deposits 1.091 1.277 1.209 1.210 1.135 1.017
Withdrawals (0.979) (1.028) (1.163) (1.150) (1.108) (1.066)
Net Flows 0.112 0.249 0.046 0.060 0.027 (0.048)
Variable Account Values 43.568 39.838 35.286 37.050
Fixed Portion of Variable
Contracts
Deposits 0.407 0.484 0.401 0.423 0.532 0.472
Withdrawals (0.184) (0.210) (0.267) (0.284) (0.309) (0.303)
Net Flows 0.223 0.274 0.134 0.139 0.223 0.169
Fixed Portion of Variable Account
Values 8.417 8.631 9.344 9.612
Average Daily Variable Account
Values 34.399 33.216 34.341 33.502 28.023 27.431
--------------------------------------------------------------------------------------------------------------------------------
Annuity Product Spread
Information**
Net Investment Income 7.33% 7.26% 7.15% 7.11% 6.87% 6.89%
Interest Credited 5.34% 5.28% 5.14% 4.92% 4.76% 4.72%
------ ------- ------- ------- ------- -------
Spread 1.99% 1.98% 2.01% 2.18% 2.11% 2.17%
* Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Retirement products.
** For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product
investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited
on annuity products less bonus credits and excess DCA interest, divided by average fixed account values net of co-insured
account values. Fixed account values reinsured under modified co-insurance agreements are included in account values for
this calculation since assets (and therefore margin) are retained under these agreements.
PAGE 21
Life Insurance Segment
Income Statements
Unaudited [Millions of Dollars]
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Operating Revenue
Premiums 185.9 235.8 227.3 212.4 203.8
Surrender charges 52.1 66.3 66.4 66.1 54.1
Mortality assessments 350.1 444.6 465.2 499.4 501.5
Expense assessments 146.2 165.8 191.8 191.4 199.5
Other revenue and fees 2.6 9.8 14.2 17.9 23.7
Net investment income 642.6 840.1 871.5 910.2 899.1
------- ------- ------- ------- -------
Operating Revenue 1379.5 1762.6 1836.4 1897.5 1881.7
------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 371.3 430.4 411.5 418.6 427.4
Div accum & div to policyholders 70.7 81.5 80.8 78.5 76.0
Interest credited to policy bal. 393.1 493.8 525.4 569.9 598.6
------- ------- ------- ------- -------
Total insurance benefits 835.1 1005.8 1017.8 1067.0 1101.9
Underwriting, acquisition,
insurance and other expenses*:
Commissions 107.5 163.4 152.8 142.1 139.8
Other volume related expenses 122.7 185.6 200.9 176.4 190.4
Operating and administrative
expenses 144.9 171.2 164.4 161.0 157.8
Taxes, licenses and fees 29.7 51.8 48.5 49.2 53.2
Par policyholder interests (4.3) 3.3 1.1 0.0 0.0
Foreign exchange 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Subtotal 400.6 575.2 567.6 528.7 541.2
Deferral of acquisition costs (324.8) (336.6)
DAC amortization 95.0 105.8
------- ------- ------- ------- -------
DAC deferral net of amortization (159.3) (235.0) (286.5) (229.8) (230.7)
PVIF amortization 51.9 58.8 103.7 75.9 73.9
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 293.1 399.1 384.8 374.7 384.4
Goodwill amortization 19.7 23.4 23.7 23.7 0.0
------- ------- ------- ------- -------
Operating Benefits and Expenses 1147.8 1428.2 1426.3 1465.4 1486.3
------- ------- ------- ------- -------
Income from Operations Before Tax 231.6 334.3 410.1 432.1 395.4
Federal income taxes 82.4 122.3 150.1 153.0 123.5
------- ------- ------- ------- -------
Income from Operations 149.2 212.0 259.9 279.0 271.9
------- ------- ------- ------- -------
Realized gains (losses) on
investments (1.7) (0.5) (10.7) (38.5) (63.8)
Gains (losses) on derivatives 0.0 0.0 0.0 1.6 1.0
Restructuring charges (20.0) 0.0 0.0 (3.5) 0.0
------- ------- ------- ------- -------
Income before Accounting Changes 127.5 211.5 249.3 238.6 209.0
Cumulative effect of accounting
changes 0.0 0.0 0.0 (5.5) 0.0
------- ------- ------- ------- -------
Net Income 127.5 211.5 249.3 233.1 209.0
======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 168.9 235.4 283.6 302.7 271.9
Net Income -before Goodwill
Amort. 147.1 234.9 273.0 256.7 209.0
Effective tax rate 35.6% 36.6% 36.6% 35.4% 31.2%
Operating Revenue 1379.5 1762.6 1836.4 1897.5 1881.7
Realized gains (losses) on
investments (1.0) (2.2) (17.4) (57.6) (98.2)
Gains (losses) on derivatives 0.0 0.0 0.0 0.7 1.5
Total Revenue 1378.5 1760.4 1819.0 1840.6 1785.0
======= ======= ======= ======= =======
Average capital 1948.0 2712.3 2640.2 2731.5 2841.7
Return on average capital 7.7% 7.8% 9.8% 10.2% 9.6%
PAGE 22
Life Insurance Segment
Income Statements
Unaudited [Millions of Dollars]
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 52.9 56.3 50.9 67.1 50.9 50.7
Surrender charges 16.2 16.5 13.8 19.9 17.2 13.5
Mortality assessments 112.2 114.5 116.3 122.1 124.3 124.8
Expense assessments 45.3 44.1 46.9 55.5 47.4 45.3
Other revenue and fees 3.2 3.6 3.8 3.7 5.1 3.8
Net investment income 215.6 215.5 220.6 219.7 223.0 227.4
------- ------- ------- ------- ------- -------
Operating Revenue 445.5 450.5 452.4 488.0 467.9 465.5
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 98.3 96.3 95.8 121.0 99.9 103.5
Div accum & div to policyholders 20.4 18.7 16.4 25.3 17.5 19.0
Interest credited to policy bal. 126.3 128.7 134.0 136.5 138.3 141.2
------- ------- ------- ------- ------- -------
Total insurance benefits 245.0 243.7 246.2 282.9 255.7 263.8
Underwriting, acquisition,
insurance and other expenses*:
Commissions 32.2 34.2 39.8 46.6 33.4 31.1
Other volume related expenses 43.5 44.8 48.6 64.0 34.8 43.3
Operating and administrative
expenses 40.4 40.8 39.4 43.8 40.4 40.7
Taxes, licenses and fees 13.4 9.8 11.4 13.9 12.5 12.3
Par policyholder interests (1.5) 1.6 1.4 (0.5) (0.0) 0.0
Foreign exchange 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Subtotal 128.0 131.1 140.7 167.9 121.1 127.3
Deferral of acquisition costs (68.8)
DAC amortization 15.8
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (53.2) (53.6) (76.8) (103.0) (45.2) (53.0)
PVIF amortization 24.6 23.4 31.0 24.7 22.9 17.7
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 99.4 100.9 94.9 89.6 98.8 92.0
Goodwill amortization 5.9 5.9 5.9 5.9 5.9 5.9
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 350.3 350.6 347.0 378.4 360.5 361.7
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 95.2 99.9 105.4 109.6 107.4 103.8
Federal income taxes 34.8 37.4 38.9 39.0 38.8 36.7
------- ------- ------- ------- ------- -------
Income from Operations 60.4 62.4 66.5 70.6 68.6 67.1
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (2.4) (4.0) 1.0 (5.2) (5.4) (6.4)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 (0.0) 0.1
Restructuring charges 0.0 0.0 0.0 0.0 0.0 (2.0)
Income before Accounting Changes 58.1 58.4 67.4 65.4 63.2 58.8
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 (0.2) (5.3)
------- ------- ------- ------- ------- -------
Net Income 58.1 58.4 67.4 65.4 62.9 53.5
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 66.3 68.4 72.4 76.5 74.5 73.0
Net Income -before Goodwill
Amort. 64.0 64.4 73.4 71.3 68.9 59.5
Effective tax rate 36.5% 37.5% 36.9% 35.6% 36.1% 35.3%
Operating Revenue 445.5 450.5 452.4 488.0 467.9 465.5
Realized gains (losses) on
investments (3.8) (6.3) 0.8 (8.1) (8.2) (10.0)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 (0.0) 0.2
------- ------- ------- ------- ------- -------
Total Revenue 441.7 444.2 453.2 479.9 459.6 455.7
======= ======= ======= ======= ======= =======
Average capital 2,655.3 2,615.0 2,650.5 2,640.0 2,729.8 2,715.7
Return on average capital 9.1% 9.6% 10.0% 10.7% 10.1% 9.9%
--------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 1,079.3 1,064.1
Deferral 64.5 68.8
Amortization (19.3) (15.8)
------- ------- ------- ------- ------- -------
Operating 45.2 53.0
Adjustment related to realized
(gains) losses
on securities available-for-sale 7.8 13.3
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (68.5) 20.7
Other** 0.2 0.1
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 1,064.1 1,151.1
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 1,040.5 1,017.6
Amortization (22.9) (17.7)
Other
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 1,017.6 999.9
======= ======= ======= ======= ======= =======
For the Quarter Ended Sep Dec Mar Jun Sep Dec
2001 2002 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
C>
Operating Revenue
Premiums 46.4 64.3 51.1 47.5 48.6 56.4
Surrender charges 15.6 19.9 11.7 13.5 13.4 15.5
Mortality assessments 124.7 125.5 123.9 123.9 126.3 127.3
Expense assessments 46.0 52.8 46.9 47.2 49.2 56.3
Other revenue and fees 3.0 6.0 5.7 6.7 5.1 6.2
Net investment income 233.2 226.6 226.0 225.7 224.1 223.3
------- ------- ------- ------- ------- -------
Operating Revenue 468.9 495.2 465.3 464.6 466.8 485.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 102.3 112.9 104.1 103.6 105.2 114.6
Div accum & div to policyholders 16.5 25.4 17.8 18.2 17.2 22.8
Interest credited to policy bal. 143.5 146.9 146.3 148.9 152.6 150.7
------- ------- ------- ------- ------- -------
Total insurance benefits 262.3 285.2 268.1 270.8 275.1 288.0
Underwriting, acquisition,
insurance and other expenses*:
Commissions 32.5 45.1 34.6 34.8 31.8 38.6
Other volume related expenses 41.4 56.9 42.7 43.6 45.8 58.3
Operating and administrative
expenses 41.6 38.3 37.1 37.1 40.0 43.6
Taxes, licenses and fees 12.0 12.5 13.2 15.3 13.2 11.5
Par policyholder interests 0.0 0.0 0.0 0.0 0.0 0.0
Foreign exchange 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Subtotal 127.5 152.8 127.5 130.8 130.7 152.1
Deferral of acquisition costs (85.3) (106.3) (74.3) (82.2) (78.7) (101.4)
DAC amortization 29.7 30.2) 22.1 23.6 23.9 36.3
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (55.5) (76.1) (52.3) (58.6) (54.8) (65.1)
PVIF amortization 20.5 14.7 16.9 16.3 23.3 17.4
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 92.5 91.4 92.1 88.5 99.3 104.4
Goodwill amortization 5.9 5.9 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 360.8 382.5 360.2 359.3 374.4 392.5
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 108.1 112.7 105.1 105.3 92.4 92.5
Federal income taxes 38.1 39.5 34.0 31.8 29.0 28.8
------- ------- ------- ------- ------- -------
Income from Operations 70.1 73.2 71.1 73.5 63.4 63.8
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (5.3) (21.3) (26.9) (16.4) (16.9) (3.6)
Gains (losses) on derivatives (0.0) 1.5 0.0 0.3 0.6 0.1
Restructuring charges 0.0 (1.5 0.0 0.0 0.0 0.0
Income before Accounting Changes 64.7 51.9 44.2 57.4 47.1 60.2
Cumulative effect of accounting
changes 0.0 (0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income 64.7 51.9 44.2 57.4 47.1 60.2
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 76.0 79.1 71.1 73.5 63.4 63.8
Net Income -before Goodwill
Amort. 70.6 57.8 44.2 57.4 47.1 60.2
Effective tax rate 35.2% 35.0 32.3% 30.2% 31.3% 31.1%
Operating Revenue 468.9 495.2 465.3 464.6 466.8 485.0
Realized gains (losses) on
investments (8.2) (31.1) (41.4) (25.4) (25.9) (5.5)
Gains (losses) on derivatives (0.1) 0.6 0.0 0.6 0.7 0.1
------- ------- ------- ------- ------- -------
Total Revenue 460.6 464.7 423.9 439.8 441.6 479.6
======= ======= ======= ======= ======= =======
Average capital 2,736.3 2,744.4 2,801.9 2,865.8 2,852.9 2,846.2
Return on average capital 10.2% 10.7% 10.2% 10.3% 8.9% 9.0%
--------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 1,151.1 1,156.0 1,265.6 1,385.3 1,404.9 1,362.1
Deferral 85.3 106.3 74.3 82.2 78.7 101.4
Amortization (29.7) (30.2) (22.1) (23.6) (23.9) (36.3)
------- ------- ------- ------- ------- -------
Operating 55.5 76.1 52.3 58.6 54.8 65.1
Adjustment related to realized
(gains) losses
on securities available-for-sale 7.2 14.7 15.8 11.2 11.7 1.0
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (59.6) 18.5 34.0 (51.9) (109.3) (3.7)
Other** 1.8 0.3 17.6 1.7
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 1,156.0 1,265.6 1,385.3 1,404.9 1,362.1 1,424.5
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 999.9 978.7 964.0 947.1 930.7 907.4
Amortization (20.5) (14.7) (16.9) (16.3) (23.3) (17.4)
Other (0.7) (0.1) 0.1
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 978.7 964.0 947.1 930.7 907.4 890.1
======= ======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of "Income
from Operations" (see page 5).
** Includes the transfer of the Legacy Life block of business from the Lincoln Retirement segment
in the first quarter of 2002.
PAGE 23
Life Insurance Segment
Operational Data
Unaudited [Millions of Dollars]
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
First Year Premiums by Product
(Millions)
Universal Life 233.0 342.9 289.3 292.7 495.3
Variable Universal Life 101.3 142.2 218.7 228.6 134.5
Whole Life 20.0 23.9 22.4 26.3 30.3
Term 48.0 45.9 41.9 30.8 32.3
------- ------- ------- ------- -------
Total Retail 402.3 555.0 572.3 578.4 692.3
Corporate Owned Life Insurance
(COLI) 4.0 14.7 87.0 47.3 88.1
------- ------- ------- ------- -------
Total 406.3 569.7 659.3 625.6 780.4
------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 35.0 188.3 200.6 196.1 201.7
Lincoln Financial Distributors 356.3 367.9 444.7 413.0 556.3
Other* 15.0 13.5 14.0 16.6 22.4
------- ------- ------- ------- -------
Total by Distribution 406.3 569.7 659.3 625.6 780.4
======= ======= ======= ======= =======
Life Insurance In-Force
(Billions)
Universal Life & Other 105.837 109.288 115.872 121.168 126.016
Term Insurance 67.076 85.701 100.130 113.226 127.880
------- ------- ------- ------- -------
Total Life Segment In-Force 172.914 194.988 216.002 234.394 253.896
======= ======= ======= ======= =======
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
First Year Premiums by Product
(Millions)
Universal Life 72.3 63.7 72.4 80.9 57.7 70.0
Variable Universal Life 44.0 44.5 55.1 75.1 56.0 52.2
Whole Life 3.9 4.5 6.0 8.0 4.1 5.1
Term 13.1 12.1 9.1 7.6 6.5 7.2
------- ------- ------- ------- ------- -------
Total Retail 133.3 124.8 142.6 171.6 124.2 134.6
Corporate Owned Life Insurance
(COLI) 12.7 19.5 5.8 49.0 7.1 21.0
------- ------- ------- ------- ------- -------
Total 146.0 144.3 148.4 220.7 131.3 155.6
------- ------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 46.1 37.0 51.3 66.2 38.1 48.2
Lincoln Financial Distributors 96.8 104.4 92.9 150.6 89.1 104.0
Other* 3.0 2.9 4.2 3.9 4.2 3.4
------- ------- ------- ------- ------- -------
Total by Distribution 146.0 144.3 148.4 220.7 131.3 155.6
======= ======= ======= ======= ======= =======
Insurance In-Force (Billions)
Universal Life & Other 108.817 110.448 112.884 115.872 116.747 118.007
Term Insurance 92.857 97.039 98.424 100.130 102.467 105.265
------- ------- ------- ------- ------- -------
Total Segment In-Force 201.674 207.487 211.308 216.002 219.214 223.272
======= ======= ======= ======= ======= =======
For the Quarter Ended Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
First Year Premiums by Product
(Millions)
Universal Life 67.4 97.5 86.4 98.9 132.9 177.1
Variable Universal Life 50.1 70.2 39.0 42.4 26.1 27.0
Whole Life 6.7 10.4 5.2 6.4 7.7 11.0
Term 8.1 9.1 8.7 8.1 7.3 8.1
------- ------- ------- ------- ------- -------
Total Retail 132.4 187.2 139.4 155.8 174.0 223.2
Corporate Owned Life Insurance
(COLI) 5.1 14.2 6.9 46.6 7.8 26.8
------- ------- ------- ------- ------- -------
Total 137.4 201.3 146.3 202.4 181.8 249.9
------- ------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 41.8 68.0 41.5 48.3 46.9 64.9
Lincoln Financial Distributors 90.4 129.5 100.9 151.6 132.7 171.1
Other* 5.2 3.8 3.8 2.6 2.2 13.9
------- ------- ------- ------- ------- -------
Total by Distribution 137.4 201.3 146.3 202.4 181.8 249.9
======= ======= ======= ======= ======= =======
Insurance In-Force (Billions)
Universal Life & Other 119.029 121.168 122.316 123.674 124.085 126.016
Term Insurance 108.723 113.226 117.752 121.076 123.945 127.880
------- ------- ------- ------- ------- -------
Total Segment In-Force 227.751 234.394 240.068 244.750 248.030 253.896
======= ======= ======= ======= ======= =======
* Other consists of distribution arrangements with third-party intermediaries.
PAGE 24
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
Universal Life-Bal Beg-of-Year 2.558 6.259 6.650 6.976 7.508
Deposits 0.675 1.017 0.955 1.043 1.332
Withdrawals & deaths (0.701) (0.452) (0.426) (0.319) (0.426)
-------- -------- -------- -------- --------
Net cash flows (0.026) 0.564 0.528 0.724 0.906
Policyholder assessments 0.000 (0.544) (0.584) (0.598) (0.648)
Interest credited 0.350 0.370 0.382 0.405 0.428
Acq of new business/transfers
between segments 3.378 0.000 0.000 0.000 0.018
-------- -------- -------- -------- --------
Universal Life-Bal End of Year(1) 6.259 6.650 6.976 7.508 8.211
-------- -------- -------- -------- --------
Variable Universal Life-Bal
Beg-of-Year 0.480 1.200 1.605 1.808 1.746
Deposits 0.193 0.326 0.607 0.584 0.504
Withdrawals & deaths (0.100) (0.099) (0.132) (0.251) (0.193)
-------- -------- -------- -------- --------
Net cash flows 0.093 0.228 0.475 0.332 0.311
Policyholder assessments 0.000 (0.084) (0.141) (0.170) (0.186)
Invest inc & chg in mkt value 0.105 0.370 (0.130) (0.225) (0.313)
Acq of new business/transfers
between segments 0.522 (0.110) 0.000 0.000 0.132
-------- -------- -------- -------- --------
Variable Universal Life -Bal
End-of-Year 1.200 1.605 1.808 1.746 1.690
-------- -------- -------- -------- --------
Interest Sensitive Whole Life -
Bal Beg-of-Year 0.000 1.784 1.963 2.062 2.123
Deposits 0.340 0.355 0.322 0.307 0.301
Withdrawals & deaths (0.294) (0.162) (0.168) (0.200) (0.199)
-------- -------- -------- -------- --------
Net cash flows 0.046 0.193 0.154 0.107 0.103
Policyholder assessments 0.000 (0.168) (0.168) (0.164) (0.167)
Interest credited 0.096 0.109 0.113 0.118 0.127
Acq of new business/transfers
between segments 1.642 0.045 0.000 0.000 0.000
-------- -------- -------- -------- --------
Int Sensitive Whole Life-Bal End
-of -Year 1.784 1.963 2.062 2.123 2.186
-------- -------- -------- -------- --------
---------------------------------------------------------------------------------------------
Total Segment- Life Insurance
Account Values
Bal Beg-of-Year 3.038 9.243 10.217 10.847 11.377
Deposits 1.207 1.698 1.884 1.934 2.138
Withdrawals & deaths (1.095) (0.713) (0.727) (0.771) (0.818)
-------- -------- -------- -------- --------
Net cash flows 0.113 0.985 1.158 1.163 1.320
Policyholder assessments (0.795) (0.893) (0.931) (1.002)
Invest inc & change in market
value 0.551 0.849 0.364 0.299 0.241
Acq of new business/transfers
between segments 5.542 (0.065) 0.150
-------- -------- -------- -------- --------
Total Segment -Bal End-of-Year 9.243 10.217 10.847 11.377 12.086
======== ======== ======== ======== ========
(1) Includes fixed investment option of VUL products.
PAGE 25
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2000 2000 2000 2000 2001 2001
------ ------ ------ ------ ------ -----
Universal Life-Bal Beg-of-Quarter 6.650 6.729 6.782 6.878 6.976 7.063
Deposits 0.252 0.212 0.227 0.265 0.227 0.270
Withdrawals & deaths (0.121) (0.111) (0.080) (0.114) (0.091) (0.071)
------- ------- ------- ------- ------- -------
Net cash flows 0.131 0.101 0.146 0.151 0.136 0.199
Policyholder assessments (0.145) (0.143) (0.146) (0.150) (0.147) (0.147)
Interest credited 0.093 0.095 0.096 0.097 0.098 0.100
Acq of new business/transfers
between segments 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Universal Life-Bal End-of-Quarter
(1) 6.729 6.782 6.878 6.976 7.063 7.216
------- ------- ------- ------- ------- -------
Variable Universal Life-Bal Beg
of Quarter 1.605 1.771 1.764 1.812 1.808 1.633
Deposits 0.112 0.128 0.123 0.245 0.136 0.138
Withdrawals & deaths (0.019) (0.028) (0.037) (0.048) (0.049) (0.060)
------- ------- ------- ------- ------- -------
Net cash flows 0.093 0.100 0.085 0.197 0.087 0.078
Policyholder assessments (0.032) (0.033) (0.036) (0.041) (0.041) (0.041)
Invest inc & chg in mkt value 0.105 (0.074) (0.001) (0.160) (0.221) 0.096
Acq of new business/transfers
between segments 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Variable Universal Life -Bal
End-of-Quarter 1.771 1.764 1.812 1.808 1.633 1.766
------- ------- ------- ------- ------- -------
Interest Sensitive Whole Life -
Bal Beg-of-Quarter 1.963 1.970 1.993 2.026 2.062 2.068
Deposits 0.060 0.071 0.079 0.113 0.056 0.069
Withdrawals & deaths (0.042) (0.037) (0.033) (0.056) (0.041) (0.043)
------- ------- ------- ------- ------- -------
Net cash flows 0.018 0.034 0.045 0.057 0.014 0.027
Policyholder assessments (0.039) (0.040) (0.040) (0.050) (0.037) (0.040)
Interest credited 0.028 0.028 0.027 0.029 0.028 0.030
Acq of new business/transfers
between segments 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Int Sensitive Whole Life-Bal
End-of-Quarter 1.970 1.993 2.026 2.062 2.068 2.084
------- ------- ------- ------- ------- -------
-----------------------------------------------------------------------------------------------------------------------------
Total Segment- Life Insurance
Account Values
Bal Beg-of-Quarter 10.218 10.470 10.538 10.716 10.847 10.764
Deposits 0.424 0.411 0.428 0.622 0.418 0.477
Withdrawals & deaths (0.182) (0.176) (0.151) (0.218) (0.181) (0.173)
------- ------- ------- ------- ------- -------
Net cash flows 0.242 0.235 0.277 0.404 0.237 0.304
Policyholder assessments (0.215) (0.216) (0.221) (0.241) (0.225) (0.228)
Invest inc & change in market
value 0.227 0.048 0.123 (0.033) (0.094) 0.226
Acq of new business/transfers
between segments 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Total Segment -Bal End-of-Quarter 10.470 10.538 10.716 10.847 10.764 11.066
======= ======= ======= ======= ======= =======
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 2001 2001 2002 2002 2002 2002
------ ------ ------ ------ ------ -----
Universal Life-Bal Beg-of-Quarter 7.216 7.315 7.508 7.622 7.838 7.987
Deposits 0.233 0.314 0.248 0.364 0.310 0.410
Withdrawals & deaths (0.085) (0.073) (0.097) (0.096) (0.108) (0.125)
------- ------- ------- ------- ------- -------
Net cash flows 0.147 0.241 0.150 0.268 0.201 0.286
Policyholder assessments (0.150) (0.153) (0.158) (0.158) (0.162) (0.170)
Interest credited 0.102 0.105 0.104 0.106 0.110 0.108
Acq of new business/transfers
between segments 0.000 0.000 0.018 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Universal Life-Bal End-of-Quarter
(1) 7.315 7.508 7.622 7.838 7.987 8.211
------- ------- ------- ------- ------- -------
Variable Universal Life-Bal Beg
of Quarter 1.766 1.527 1.746 1.919 1.776 1.575
Deposits 0.124 0.186 0.129 0.147 0.102 0.126
Withdrawals & deaths (0.055) (0.088) (0.055) (0.057) (0.034) (0.047)
------- ------- ------- ------- ------- -------
Net cash flows 0.069 0.098 0.074 0.090 0.068 0.079
Policyholder assessments (0.042) (0.045) (0.047) (0.046) (0.046) (0.047)
Invest inc & chg in mkt value (0.266) 0.166 0.013 (0.186) (0.224) 0.083
Acq of new business/transfers
between segments 0.000 0.000 0.132 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Variable Universal Life -Bal
End-of-Quarter 1.527 1.746 1.919 1.776 1.575 1.690
------- ------- ------- ------- ------- -------
Interest Sensitive Whole Life -
Bal Beg-of-Quarter 2.084 2.096 2.123 2.126 2.145 2.164
Deposits 0.077 0.105 0.063 0.066 0.073 0.100
Withdrawals & deaths (0.054) (0.061) (0.051) (0.039) (0.045) (0.063)
------- ------- ------- ------- ------- -------
Net cash flows 0.022 0.044 0.012 0.026 0.027 0.037
Policyholder assessments (0.041) (0.047) (0.042) (0.039) (0.040) (0.046)
Interest credited 0.030 0.030 0.033 0.032 0.031 0.031
Acq of new business/transfers
between segments 0.000 0.000 0.000 0.000 0.000 0.000
Int Sensitive Whole Life-Bal
------- ------- ------- ------- ------- -------
End-of-Quarter 2.096 2.123 2.126 2.145 2.164 2.186
------- ------- ------- ------- ------- -------
-----------------------------------------------------------------------------------------------------------------------------
Total Segment- Life Insurance
Account Values
Bal Beg-of-Quarter 11.066 10.939 11.377 11.667 11.759 11.726
Deposits 0.434 0.605 0.440 0.577 0.484 0.636
Withdrawals & deaths (0.195) (0.222) (0.204) (0.192) (0.187) (0.234)
------- ------- ------- ------- ------- -------
Net cash flows 0.239 0.383 0.236 0.385 0.297 0.402
Policyholder assessments (0.232) (0.246) (0.246) (0.244) (0.248) (0.263)
Invest inc & change in market
value (0.134) 0.301 0.151 (0.049) (0.082) 0.222
Acq of new business/transfers
between segments 0.000 0.000 0.150 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Total Segment -Bal End-of-Quarter 10.939 11.377 11.667 11.759 11.726 12.086
======= ======= ======= ======= ======= =======
(1) Includes fixed investment option of VUL products.
PAGE 26
Investment Management
Income Statements
Unaudited [Millions of Dollars]
For the Year Ended December 31 1998 1999 2000 2001 2002
------ ------ ------ ------ ------
Operating Revenue
Investment advisory fees -
External 249.0 248.6 231.6 197.2 183.3
Investment advisory fees -
Insurance Assets 82.5 83.6 88.9 87.5 83.8
Other revenue and fees 92.5 106.6 115.9 99.2 87.0
Net investment income 67.0 56.9 57.7 53.6 50.5
------- ------- ------- ------- -------
Operating Revenue 491.0 495.6 494.2 437.4 404.7
------- ------- ------- ------- -------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses*:
Operating and administrative
expenses 366.8 350.2 375.4 364.8 342.3
Taxes, licenses and fees 15.9 16.4 17.1 22.2 17.7
------- ------- ------- ------- -------
Subtotal 382.7 366.6 392.5 387.0 360.0
Other intangibles amortization 18.8 17.7 16.3 10.8 8.2
------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 401.5 384.3 408.7 397.8 368.3
Goodwill amortization 16.3 16.2 16.2 16.2 0.0
Interest on notes payable 0.4 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Operating Benefits and Expenses 418.2 400.5 425.0 414.1 368.3
------- ------- ------- ------- -------
Income from Operations Before Tax 72.8 95.1 69.2 23.4 36.4
Federal income taxes 28.9 34.1 25.1 8.7 7.5
------- ------- ------- ------- -------
Income from Operations 43.9 61.0 44.1 14.6 28.9
------- ------- ------- ------- -------
Realized gains (losses) on
investments 0.5 (0.1) (2.5) (2.4) (3.5)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0
Restructuring charges 0.0 (9.2) (4.6) (0.4) 0.3
------- ------- ------- ------- -------
Income before Accounting Changes 44.4 51.6 37.0 11.9 25.6
Cumulative effect of accounting
changes 0.0 0.0 0.0 (0.1) 0.0
------- ------- ------- ------- -------
Net Income 44.4 51.6 37.0 11.8 25.6
======= ======= ======= ======= =======
Income from Operations- before
Goodwill Amortization 60.3 77.2 60.3 30.9 28.9
Income from Operations
- before Goodwill & Intang. Amort 72.6 88.7 70.9 37.9 34.3
Net Income
- before Goodwill Amortization 60.8 67.9 53.2 28.0 25.6
Net Income
-before Goodwill & Intang. Amort. 73.1 79.4 63.8 35.0 31.0
Operating Revenue 491.0 495.6 494.2 437.4 404.7
Realized gains (losses) on
investments 0.9 (0.1) (3.9) (3.7) (5.4)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Total Revenue 491.9 495.5 490.3 433.7 399.3
======= ======= ======= ======= =======
Average Capital (Securities at
Cost) 642.3 593.9 575.2 543.7 562.1
Return on Capital 6.8% 10.3% 7.7% 2.7% 5.1%
PAGE 27
Investment Management
Income Statements
Unaudited [Millions of Dollars]
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
-------- -------- -------- -------- -------- --------
Operating Revenue
Investment advisory fees -
External 60.0 57.9 56.9 56.7 50.5 51.1
Investment advisory fees -
Insurance Assets 21.0 22.3 22.5 23.1 22.1 21.6
Other revenue and fees 31.9 31.0 26.4 26.6 26.3 25.7
Net investment income 13.0 12.6 18.3 13.8 14.1 13.0
-------- -------- -------- -------- -------- --------
Operating Revenue 126.0 123.8 124.1 120.2 113.0 111.4
-------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses*:
Operating and administrative
expenses 92.7 90.5 96.3 95.9 94.3 94.1
Taxes, licenses and fees 5.5 4.8 3.6 3.2 6.4 5.3
-------- -------- -------- -------- -------- --------
Subtotal 98.2 95.3 99.9 99.1 100.8 99.4
Other intangibles amortization 4.4 4.0 4.0 4.0 4.0 2.3
-------- -------- -------- -------- -------- --------
Total underwriting, acquisition,
insurance and other expenses 102.5 99.3 103.9 103.0 104.7 101.6
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 106.6 103.3 107.9 107.1 108.8 105.7
-------- -------- -------- -------- -------- --------
Income from Operations Before Tax 19.4 20.5 16.2 13.1 4.2 5.7
Federal income taxes 7.0 7.4 6.3 4.4 1.8 2.0
-------- -------- -------- -------- -------- --------
Income from Operations 12.4 13.1 9.9 8.7 2.4 3.7
-------- -------- -------- -------- -------- --------
Realized gains (losses) on
investments (0.1) (2.0) (0.2) (0.2) (0.5) (0.7)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring charges 0.0 (2.7) 0.0 (1.9) 0.0 0.0
-------- -------- -------- -------- -------- --------
Income before Accounting Changes 12.3 8.4 9.7 6.6 2.0 3.0
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 0.0 (0.1)
-------- -------- -------- -------- -------- --------
Net Income 12.3 8.4 9.7 6.6 2.0 2.9
-------- -------- -------- -------- -------- --------
Inc from Oper -before
Goodwill Amortization 16.5 17.1 14.0 12.7 6.5 7.7
Inc from Oper -before
Goodwill & Intang. Amort 19.4 19.7 16.6 15.2 9.1 9.2
Net Income -before
Goodwill Amortization 16.4 12.4 13.7 10.6 6.0 6.9
Net Income -before
Goodwill & Intang. Amort 19.2 15.0 16.3 13.1 8.6 8.4
Operating Revenue 126.0 123.8 124.1 120.2 113.0 111.4
Realized gains (losses) on
investments (0.2) (3.1) (0.4) (0.3) (0.7) (1.1)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
-------- -------- -------- -------- -------- --------
Total Revenue 125.8 120.7 123.8 120.0 112.3 110.3
======== ======== ======== ======== ======== ========
Average Capital (Securities at
Cost) 581.5 593.0 567.7 558.5 548.3 542.8
Return on Capital 8.6% 8.8% 7.0% 6.2% 1.8% 2.7%
For the Quarter Ended Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
-------- -------- -------- -------- -------- --------
Operating Revenue
Investment advisory fees -
External 46.2 49.3 48.0 47.8 42.9 44.7
Investment advisory fees -
Insurance Assets 21.8 22.0 21.2 20.7 20.8 21.1
Other revenue and fees 23.9 23.4 23.0 22.0 19.9 22.1
Net investment income 13.6 12.8 12.8 12.7 12.4 12.7
-------- -------- -------- -------- -------- --------
Operating Revenue 105.5 107.6 105.1 103.1 96.0 100.5
-------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses*:
Operating and administrative
expenses 88.0 88.4 86.9 87.6 86.6 81.2
Taxes, licenses and fees 4.8 5.7 6.3 5.3 2.9 3.3
-------- -------- -------- -------- -------- --------
Subtotal 92.8 94.1 93.2 92.9 89.5 84.4
Other intangibles amortization 2.3 2.3 2.2 2.0 2.0 2.0
-------- -------- -------- -------- -------- --------
Total underwriting, acquisition,
insurance and other expenses 95.1 96.4 95.4 95.0 91.5 86.4
Goodwill amortization 4.1 4.1 0.0 0.0 0.0 0.0
Interest on notes payable 0.0 0.0 0.0 0.0 0.0 0.0
-------- -------- -------- -------- -------- --------
Operating Benefits & Expenses 99.2 100.4 95.4 95.0 91.5 86.4
-------- -------- -------- -------- -------- --------
Income from Operations Before Tax 6.3 7.1 9.7 8.1 4.6 14.1
Federal income taxes 2.9 2.1 1.7 1.5 0.6 3.8
-------- -------- -------- -------- -------- --------
Income from Operations 3.5 5.1 8.0 6.6 4.0 10.3
-------- -------- -------- -------- -------- --------
Realized gains (losses) on
investments (0.5) (0.7) (1.0) (0.4) (1.2) (0.9)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring charges 0.0 (0.4) 0.0 0.0 0.3 0.0
-------- -------- -------- -------- -------- --------
Income before Accounting Changes 2.9 4.0 7.0 6.2 3.1 9.3
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 0.0 0.0
-------- -------- -------- -------- -------- --------
Net Income 2.9 4.0 7.0 6.2 3.1 9.3
-------- -------- -------- -------- -------- --------
Inc from Oper -before
Goodwill Amortization 7.5 9.1 8.0 6.6 4.0 10.3
Inc from Oper -before
Goodwill & Intang. Amort 9.0 10.6 9.4 7.9 5.3 11.6
Net Income -before
Goodwill Amortization 7.0 8.1 7.0 6.2 3.1 9.3
Net Income -before
Goodwill & Intang. Amort 8.5 9.5 8.4 7.5 4.4 10.6
Operating Revenue 105.5 107.6 105.1 103.1 96.0 100.5
Realized gains (losses) on
investments (0.8) (1.1) (1.5) (0.7) (1.8) (1.5)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
-------- -------- -------- -------- -------- --------
Total Revenue 104.7 106.5 103.5 102.4 94.3 99.1
======== ======== ======== ======== ======== ========
Average Capital (Securities at
Cost) 543.1 540.6 546.1 568.6 567.1 566.7
Return on Capital 2.5% 3.8% 5.8% 4.6% 2.8% 7.3%
PAGE 28
Investment Management
Assets Under Management Roll
Forward
Unaudited [Billions of Dollars]
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Retail Fixed - Bal Beg-of-Year 8.125 8.219 7.423 6.608 7.120
Fund Sales 1.166 0.991 0.769 0.876 1.218
Redemptions (1.234) (1.424) (1.401) (1.051) (1.182)
Net Money Market (0.141) (0.111) (0.207) (0.046) (0.050)
Transfers 0.132 0.177 (0.168) 0.405 0.206
------- ------- ------- ------- -------
Net Cash Flows(1) (0.077) (0.367) (1.007) 0.184 0.192
Market 0.170 (0.429) 0.099 0.328 0.320
Acquisitions/addition of Assets
under Administration(1) 0.094
------- ------- ------- ------- -------
Balance End-of-Year 8.219 7.423 6.608 7.120 7.631
------- ------- ------- ------- -------
Retail Equity - Bal Beg-of-Year 17.754 22.081 23.384 21.523 17.987
Fund Sales 3.581 3.270 4.116 2.817 4.477
Redemptions (2.459) (4.972) (4.431) (2.838) (3.690)
Net Money Market (0.001) (0.001) 0.001
Transfers 0.730 (0.144) (0.178) (0.538) (0.173)
------- ------- ------- ------- -------
Net Cash Flows(1) 1.851 (1.847) (0.492) (0.560) 0.614
Market 2.476 3.150 (1.711) (2.976) (3.685)
Acquisitions/addition of Assets
under Administration(1) 0.342
------- ------- ------- ------- -------
Balance at End-of-Year 22.081 23.384 21.523 17.987 14.917
------- ------- ------- ------- -------
Total Retail - Bal Beg-of-Year 25.879 30.300 30.807 28.131 25.107
Retail Sales-Annuities 2.240 1.561 1.782 1.701 2.751
Retail Sales-Mutual Funds 1.912 2.151 2.577 1.523 1.829
Retail Sales-Managed Acct. &
Other 0.595 0.549 0.525 0.469 1.115
------- ------- ------- ------- -------
Total Retail Sales 4.747 4.261 4.885 3.693 5.695
Redemptions (3.693) (6.396) (5.832) (3.889) (4.873)
Net Money Market (0.142) (0.112) (0.206) (0.046) (0.050)
Transfers 0.862 0.033 (0.346) (0.133) 0.033
------- ------- ------- ------- -------
Net Cash Flows(1) 1.774 (2.214) (1.500) (0.375) 0.806
Market 2.647 2.721 (1.612) (2.649) (3.364)
Acquisitions/addition of Assets
under Administration(1) 0.435
------- ------- ------- ------- -------
Balance at End-of-Year 30.300 30.807 28.130 25.107 22.547
------- ------- ------- ------- -------
------------------------------------------------------------------------------------------
Institutional Fixed - Bal
Beg-of-Year 5.708 6.955 6.936 6.111 5.490
Inflows 2.169 2.001 0.771 0.643 2.281
Withdrawals/Terminations (1.242) (1.700) (1.973) (1.229) (1.146)
Transfers (0.074) (0.001) (0.005) 0.017 0.004
------- ------- ------- ------- -------
Net Cash Flows 0.853 0.300 (1.207) (0.569) 1.139
Market 0.394 (0.319) 0.382 (0.052) 0.607
Acquisitions
------- ------- ------- ------- -------
Balance at End-of-Year 6.955 6.936 6.111 5.490 7.237
------- ------- ------- ------- -------
Institutional Equity - Bal
Beg-of-Year 24.871 24.235 23.631 19.112 17.814
Inflows 3.840 5.249 2.730 3.183 2.913
Withdrawals/Terminations (7.441) (7.800) (7.209) (2.879) (1.991)
Transfers 0.047 0.012 (0.008) 0.035 0.045
------- ------- ------- ------- -------
Net Cash Flows (3.555) (2.539) (4.486) 0.338 0.967
Market 2.919 1.935 (0.033) (1.636) (2.070)
Acquisitions
------- ------- ------- ------- -------
Balance at End-of-Year 24.235 23.631 19.112 17.814 16.711
------- ------- ------- ------- -------
Total Institutional - Bal
Beg-of-Year 30.579 31.191 30.568 25.223 23.304
Inflows 6.009 7.250 3.501 3.826 5.194
Withdrawals/Terminations (8.683) (9.500) (9.182) (4.109) (3.137)
Transfers (0.027) 0.011 (0.013) 0.052 0.050
------- ------- ------- ------- -------
Net Cash Flows (2.702) (2.239) (5.693) (0.231) 2.106
Market 3.313 1.616 0.349 (1.688) (1.463)
Acquisitions
------- ------- ------- ------- -------
Balance at End-of-Year 31.191 30.568 25.223 23.304 23.948
------- ------- ------- ------- -------
Total Retail/Institutional - At
End-of-Year 61.490 61.375 53.354 48.411 46.495
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Insurance Assets - At End-of-Year 39.432 35.934 35.686 38.119 41.104
------- ------- ------- ------- -------
Total Assets Under Management
At End-of-Year 100.922 97.309 89.040 86.530 87.599
======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets
under administration beginning in January of 2000. Net Cash Flows from
Assets Under Administration are: 0.018 0.081 0.263
PAGE 29
Investment Management
Assets Under Management Roll
Forward
Unaudited [Billions of Dollars]
Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Retail Fixed - Bal-Beg-of-Qtr 7.424 7.057 6.764 6.631 6.608 6.751
Fund Sales 0.168 0.166 0.223 0.212 0.248 0.203
Redemptions (0.456) (0.339) (0.328) (0.277) (0.261) (0.285)
Net Money Market (0.067) (0.058) (0.031) (0.051) 0.010 (0.030)
Transfers (0.102) (0.046) (0.031) 0.010 0.047 (0.002)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.457) (0.277) (0.167) (0.106) 0.043 (0.114)
Market (0.003) (0.017) 0.035 0.083 0.100 0.131
Acquisitions/addition of Assets
under Admin.(1) 0.094 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 7.057 6.764 6.631 6.608 6.751 6.769
------- ------- ------- ------- ------- -------
Retail Equity - Bal-Beg-of-Qtr 23.383 24.478 23.496 24.047 21.523 18.254
Fund Sales 1.234 0.884 0.927 1.071 0.917 0.681
Redemptions (1.565) (0.989) (1.040) (0.837) (0.911) (0.666)
Net Money Market 0.000 0.000 0.001 0.000 0.000 0.000
Transfers (0.091) 0.018 (0.036) (0.069) (0.070) (0.047)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.423) (0.087) (0.148) 0.165 (0.064) (0.032)
Market 1.176 (0.895) 0.699 (2.689) (3.205) 1.532
Acquisitions/addition of Assets
under Admin.(1) 0.342 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 24.478 23.496 24.047 21.523 18.254 19.755
------- ------- ------- ------- ------- -------
Total Retail - Bal-Beg-of-Qtr 30.807 31.535 30.260 30.679 28.132 25.005
Retail Sales-Annuities 0.379 0.358 0.456 0.589 0.540 0.403
Retail Sales-Mutual Funds 0.875 0.586 0.554 0.563 0.483 0.355
Retail Sales-Managed Acct. &
Other 0.148 0.106 0.140 0.131 0.142 0.127
------- ------- ------- ------- ------- -------
Total Retail Sales 1.402 1.050 1.150 1.283 1.165 0.885
Redemptions (2.021) (1.329) (1.368) (1.114) (1.173) (0.951)
Net Money Market (0.067) (0.058) (0.030) (0.051) 0.010 (0.030)
Transfers (0.193) (0.027) (0.067) (0.059) (0.023) (0.049)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.880) (0.364) (0.315) 0.059 (0.021) (0.146)
Market 1.173 (0.911) 0.734 (2.606) (3.105) 1.663
Acquisitions/addition of Assets
under Admin.(1) 0.435 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 31.535 30.260 30.679 28.130 25.005 26.523
------- ------- ------- ------- ------- -------
-----------------------------------------------------------------------------------------------------
Institutional Fixed -
Bal-Beg-of-Qtr 6.937 6.873 6.485 6.276 6.111 5.890
Inflows 0.180 0.148 0.308 0.135 0.310 0.233
Withdrawals/Terminations (0.353) (0.520) (0.532) (0.568) (0.432) (0.112)
Transfers (0.005) (0.001) 0.000 0.001 0.003 0.010
------- ------- ------- ------- ------- -------
Net Cash Flows (0.178) (0.373) (0.224) (0.433) (0.119) 0.131
Market 0.114 (0.015) 0.015 0.268 (0.102) (0.212)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 6.873 6.485 6.276 6.111 5.890 5.809
------- ------- ------- ------- ------- -------
Institutional Equity -
Bal-Beg-of-Qtr 23.631 20.304 20.241 19.044 19.112 17.311
Inflows 0.904 0.669 0.407 0.750 0.881 0.823
Withdrawals/Terminations (3.333) (1.354) (1.154) (1.368) (1.199) (0.501)
Transfers (0.004) 0.002 (0.013) 0.007 0.018 (0.008)
------- ------- ------- ------- ------- -------
Net Cash Flows (2.433) (0.683) (0.760) (0.611) (0.299) 0.313
Market (0.894) 0.620 (0.438) 0.679 (1.502) 0.780
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 20.304 20.241 19.044 19.112 17.311 18.405
------- ------- ------- ------- ------- -------
Total Institutional -
Bal-Beg-of-Qtr 30.568 27.177 26.726 25.320 25.223 23.201
Inflows 1.084 0.817 0.715 0.885 1.192 1.056
Withdrawals/Terminations (3.686) (1.874) (1.686) (1.936) (1.631) (0.613)
Transfers (0.009) 0.001 (0.012) 0.008 0.022 0.002
------- ------- ------- ------- ------- -------
Net Cash Flows (2.611) (1.056) (0.983) (1.043) (0.417) 0.445
Market (0.780) 0.605 (0.423) 0.947 (1.605) 0.568
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 27.177 26.726 25.320 25.223 23.201 24.214
------- ------- ------- ------- ------- -------
Total Retail/Inst - At End-of-Qtr 58.712 56.986 55.998 53.354 48.207 50.738
------- ------- ------- ------- ------- -------
Insurance Assets-End-of-Qtr 35.541 34.891 34.981 35.686 36.324 36.018
------- ------- ------- ------- ------- -------
Total Assets Under Management ------- ------- ------- ------- ------- -------
At End-of-Qtr 94.253 91.877 90.979 89.040 84.531 86.756
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets
under administration beginning in January of 2000. Net Cash Flows from
Assets Under Administration are: 0.006 0.000 0.011 0.001 0.027 0.013
Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Retail Fixed - Bal-Beg-of-Qtr 6.769 7.208 7.120 7.088 7.169 7.516
Fund Sales 0.207 0.218 0.292 0.272 0.325 0.328
Redemptions (0.262) (0.242) (0.289) (0.306) (0.277) (0.311)
Net Money Market 0.005 (0.031) (0.003) (0.002) (0.009) (0.035)
Transfers 0.388 (0.027) (0.041) 0.021 0.134 0.092
------- ------- ------- ------- ------- -------
Net Cash Flows(1) 0.338 (0.083) (0.041) (0.015) 0.174 0.074
Market 0.101 (0.004) 0.009 0.096 0.174 0.041
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 7.208 7.120 7.088 7.169 7.516 7.631
------- ------- ------- ------- ------- -------
Retail Equity - Bal-Beg-of-Qtr 19.755 15.872 17.987 18.252 16.610 13.703
Fund Sales 0.638 0.580 0.908 1.084 1.140 1.345
Redemptions (0.653) (0.607) (0.791) (0.881) (1.137) (0.881)
Net Money Market 0.000 0.000 0.000 0.000 0.000 0.000
Transfers (0.441) 0.019 0.014 (0.022) (0.128) (0.036)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.456) (0.008) 0.130 0.182 (0.126) 0.428
Market (3.427) 2.124 0.134 (1.824) (2.782) 0.787
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 15.872 17.987 18.252 16.610 13.703 14.917
------- ------- ------- ------- ------- -------
Total Retail - Bal-Beg-of-Qtr 26.523 23.079 25.108 25.340 23.779 21.219
Retail Sales-Annuities 0.434 0.323 0.589 0.601 0.756 0.806
Retail Sales-Mutual Funds 0.336 0.348 0.452 0.562 0.416 0.399
Retail Sales-Managed Acct. &
Other 0.074 0.127 0.159 0.194 0.293 0.469
------- ------- ------- ------- ------- -------
Total Retail Sales 0.845 0.798 1.200 1.356 1.465 1.673
Redemptions (0.915) (0.850) (1.081) (1.186) (1.414) (1.192)
Net Money Market 0.005 (0.031) (0.003) (0.002) (0.009) (0.035)
Transfers (0.053) (0.009) (0.027) (0.001) 0.006 0.056
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.118) (0.091) 0.089 0.167 0.048 0.502
Market (3.326) 2.120 0.143 (1.728) (2.608) 0.827
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 23.079 25.107 25.340 23.779 21.219 22.547
------- ------- ------- ------- ------- -------
-----------------------------------------------------------------------------------------------------
Institutional Fixed -
Bal-Beg-of-Qtr 5.809 5.639 5.490 6.019 6.844 7.208
Inflows 0.020 0.080 0.804 0.663 0.530 0.283
Withdrawals/Terminations (0.493) (0.192) (0.239) (0.161) (0.308) (0.438)
Transfers 0.001 0.002 (0.001) 0.000 0.007 (0.002)
------- ------- ------- ------- ------- -------
Net Cash Flows (0.472) (0.109) 0.565 0.503 0.229 (0.157)
Market 0.302 (0.040) (0.036) 0.323 0.134 0.186
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 5.639 5.490 6.019 6.844 7.208 7.237
------- ------- ------- ------- ------- -------
Institutional Equity -
Bal-Beg-of-Qtr 18.405 16.240 17.814 18.642 18.118 14.935
Inflows 0.863 0.615 0.672 0.569 0.631 1.040
Withdrawals/Terminations (0.555) (0.624) (0.512) (0.635) (0.523) (0.322)
Transfers 0.009 0.016 0.006 0.018 0.011 0.010
------- ------- ------- ------- ------- -------
Net Cash Flows 0.317 0.007 0.167 (0.047) 0.119 0.728
Market (2.482) 1.567 0.661 (0.476) (3.302) 1.048
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 16.240 17.814 18.642 18.118 14.935 16.711
------- ------- ------- ------- ------- -------
Total Institutional -
Bal-Beg-of-Qtr 24.214 21.879 23.304 24.660 24.962 22.142
Inflows 0.883 0.696 1.476 1.232 1.162 1.323
Withdrawals/Terminations (1.048) (0.816) (0.751) (0.796) (0.831) (0.760)
Transfers 0.010 0.018 0.006 0.019 0.017 0.008
------- ------- ------- ------- ------- -------
Net Cash Flows (0.155) (0.103) 0.731 0.455 0.348 0.572
Market (2.180) 1.527 0.625 (0.153) (3.168) 1.234
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 21.879 23.304 24.660 24.962 22.142 23.948
------- ------- ------- ------- ------- -------
Total Retail/Inst - At End-of-Qtr 44.959 48.411 50.001 48.741 43.361 46.495
------- ------- ------- ------- ------- -------
Insurance Assets-End-of-Qtr 37.337 38.119 37.171 38.476 40.416 41.104
------- ------- ------- ------- ------- -------
Total Assets Under Management ------- ------- ------- ------- ------- -------
At End-of-Qtr 82.296 86.530 87.171 87.217 83.777 87.599
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets
under administration beginning in January of 2000. Net Cash Flows from
Assets Under Administration are: 0.007 0.034 0.090 0.061 0.045 0.067
PAGE 30
Lincoln UK
Income Statements
Unaudited [Millions of Dollars]
For the Year Ended December 31 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Operating Revenue
Premiums 156.6 145.1 148.4 46.1 50.6
Mortality assessments 29.3 27.1 31.4 33.9 32.4
Expense assessments 153.6 182.3 178.1 134.8 105.3
Other revenue and fees 11.2 13.8 2.6 (1.4) 24.9
Net investment income 87.9 75.3 70.3 64.8 62.1
------- ------- ------- ------- -------
Operating Revenue 438.6 443.6 430.6 278.2 275.4
------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 151.0 306.2 178.5 83.4 84.2
Underwriting, acquisition,
insurance and other expenses*:
Commissions 52.6 54.5 37.7 10.8 6.1
Operating and administrative
expenses 125.8 153.0 140.5 80.0 74.5
------- ------- ------- ------- -------
Subtotal 178.5 207.4 178.2 90.8 80.6
Deferral of acquisition costs (4.2) (3.4)
DAC amortization 35.8 50.0
------- ------- ------- ------- -------
DAC deferral net of amortization (16.0) (12.4) (7.2) 31.7 46.5
PVIF amortization 13.2 28.4 4.7 22.5 30.8
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 175.6 223.5 175.7 145.0 157.9
Goodwill amortization 6.3 7.0 4.0 0.6 0.0
------- ------- ------- ------- -------
Operating Benefits and Expenses 332.9 536.7 358.2 229.0 242.1
------- ------- ------- ------- -------
Income from Operations Before Tax 105.8 (93.1) 72.4 49.2 33.3
Federal income taxes 34.8 (79.2) 11.3 (11.1) (3.7)
------- ------- ------- ------- -------
Income from Operations 70.9 (13.9) 61.0 60.2 37.0
------- ------- ------- ------- -------
Realized gains (losses) on
investments 0.8 2.1 2.3 8.7 1.3
Restructuring charges 0.0 (6.5) (76.5) 0.0 1.7
------- ------- ------- ------- -------
Income before Accounting Changes 71.7 (18.2) (13.2) 68.9 40.0
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Net Income 71.7 (18.2) (13.2) 68.9 40.0
======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 77.2 (6.9) 65.1 60.9 37.0
Net Income -before Goodwill
Amort. 78.0 (11.3) (9.2) 69.6 40.0
Effective tax rate 32.9% 85.1% 15.7% (22.5%) (11.2%)
Operating revenue 438.6 443.6 430.6 278.2 275.4
Realized gains (losses) on
investments 1.1 3.0 3.2 12.4 1.9
Gains(losses) on derivatives
------- ------- ------- ------- -------
Total Revenue 439.7 446.6 433.8 290.7 277.2
======= ======= ======= ======= =======
Average capital 517.7 551.2 488.2 559.7 503.1
Return on average capital 13.7% (2.5%) 12.5% 10.8% 7.4%
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 635.0 587.3
Deferral 4.2 3.4
Amortization (35.8) (50.0)
------- -------
Operating (31.6) (46.6)
Foreign currency translation
adjustment (16.0) 56.9
Other 0.0 0.0
------- -------
Balance at end-of-year 587.3 597.6
======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 273.6 244.0
Amortization (22.5) (30.7)
Foreign currency translation
adjustment (7.0) 24.1
Other
------- -------
Balance at end-of-year 244.0 237.4
======= =======
* Does not include restructuring charges which is consistent with the
definition of "Income from Operations" (see page 5).
PAGE 31
Lincoln UK
Income Statements
Unaudited [Millions of Dollars]
For the Quarter Ended Mar Jun Sep Dec Mar Jun Sep
2000 2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 39.0 36.3 32.5 40.5 12.8 9.6 11.8
Mortality assessments 6.3 8.0 9.6 7.5 9.4 8.9 8.5
Expense assessments 46.5 44.3 52.6 34.6 43.7 31.4 35.5
Other revenue and fees 6.3 (3.4) (0.1) (0.3) 4.5 (5.4) 8.8
Net investment income 18.9 18.5 16.1 16.7 17.9 16.9 14.8
------- ------- ------- ------- ------- ------- -------
Operating Revenue 117.1 103.7 110.8 99.0 88.3 61.4 79.5
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 35.0 37.4 51.9 54.2 24.0 17.9 20.7
Underwriting, acquisition,
insurance and other expenses*:
Commissions 13.8 11.1 9.3 3.5 3.0 3.3 2.6
Operating and administrative
expenses 44.9 36.9 39.4 19.3 18.7 17.6 19.7
------- ------- ------- ------- ------- ------- -------
Subtotal 58.8 48.0 48.7 22.7 21.7 20.9 22.3
Deferral of acquisition costs (0.9) (1.1) (1.3)
DAC amortization 18.4 2.6 18.7
------- ------- ------- ------- ------- ------- -------
DAC deferral net of amortization 0.3 (12.3) (6.7) 11.6 17.6 1.5 17.4
PVIF amortization 1.3 3.1 1.2 (0.9) 5.8 1.8 9.4
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 60.4 38.8 43.1 33.4 45.0 24.2 49.0
Goodwill amortization 1.3 1.3 1.2 0.2 0.2 0.2 0.2
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 96.7 77.5 96.3 87.7 69.2 42.3 69.9
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 20.4 26.2 14.5 11.3 19.1 19.1 9.6
Federal income taxes 4.7 6.9 3.9 (4.2) 4.7 2.9 (0.5)
------- ------- ------- ------- ------- ------- -------
Income from Operations 15.7 19.3 10.6 15.5 14.4 16.2 10.1
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (0.2) (0.1) (0.0) 2.6 0.4 1.4 3.9
Restructuring charges 0.0 0.0 (40.5) (36.1) 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 15.5 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 0.0
------- ------- ------- ------- ------- ------- -------
Net Income 15.5 19.1 (29.9) (17.9) 14.8 17.6 14.0
======= ======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 17.1 20.5 11.8 15.7 14.5 16.4 10.3
Net Income -before Goodwill
Amort. 16.8 20.4 (28.7) (17.8) 14.9 17.8 14.2
Effective tax rate 22.9% 26.4% 27.2% (37.1%) 24.6% 15.3% (5.7%)
Operating revenue 117.1 103.7 110.8 99.0 88.3 61.4 79.5
Realized gains (losses) on
investments (0.4) (0.2) (0.0) 3.8 0.6 2.0 5.5
------- ------- ------- ------- ------- ------- -------
Total Revenue 116.8 103.5 110.7 102.8 88.8 63.4 85.0
======= ======= ======= ======= ======= ======= =======
Average capital 516.4 500.8 486.5 448.9 548.7 553.2 575.4
Return on average capital 12.2% 15.4% 8.7% 13.8% 10.5% 11.7% 7.0%
----------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 635.0 585.1 583.4
Deferral 0.9 1.1 1.3
Amortization (18.4) (2.6) (18.7)
------- ------- -------
Operating (17.5) (1.5) (17.5)
Foreign currency translation
adjustment (32.4) (0.2) 23.8
Other
------- ------- -------
Balance at end-of-year 585.1 583.4 589.7
======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 273.6 253.8 251.9
Amortization (5.8) (1.8) (9.4)
Foreign currency translation
adjustment (14.0) (0.1) 10.3
Other
------- ------- -------
Balance at end-of-year 253.8 251.9 252.8
======= ======= =======
For the Quarter Ended Dec Mar Jun Sep Dec
2001 2002 2002 2002 2002
------- ------- ------- ------- -------
Operating Revenue
Premiums 11.9 12.1 12.1 12.4 14.2
Mortality assessments 7.1 6.5 8.3 8.7 8.9
Expense assessments 24.1 25.3 27.8 29.4 22.8
Other revenue and fees (9.2) (0.2) 12.5 24.5 (11.9)
Net investment income 15.2 14.7 15.2 15.6 16.6
------- ------- ------- ------- -------
Operating Revenue 49.1 58.3 75.9 90.6 50.6
------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 20.8 18.3 19.0 23.8 23.1
Underwriting, acquisition,
insurance and other expenses*:
Commissions 1.9 1.3 1.9 1.6 1.3
Operating and administrative
expenses 24.1 16.6 18.3 19.6 20.0
------- ------- ------- ------- -------
Subtotal 25.9 17.9 20.2 21.1 21.3
Deferral of acquisition costs (0.9) (0.9) (1.0) (0.9) (0.6)
DAC amortization (3.9) 6.7 21.0 33.8 (11.5)
------- ------- ------- ------- -------
DAC deferral net of amortization (4.8) 5.8 19.9 33.0 (12.1)
PVIF amortization 5.6 0.7 11.7 12.8 5.5
Other intangibles amortization 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 26.8 24.4 51.8 66.9 14.7
Goodwill amortization 0.2 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Operating Benefits and Expenses 47.8 42.7 70.9 90.7 37.8
------- ------- ------- ------- -------
Income from Operations Before Tax 1.4 15.6 5.1 (0.2) 12.8
Federal income taxes (18.1) 1.1 (1.6) (0.2) (3.1)
------- ------- ------- ------- -------
Income from Operations 19.5 14.4 6.7 (0.0) 15.9
------- ------- ------- ------- -------
Realized gains (losses) on
investments 3.0 (3.6) 3.2 0.9 0.8
Restructuring charges 0.0 0.0 0.0 0.0 1.7
------- ------- ------- ------- -------
Income before Accounting Changes 22.5 10.8 9.8 0.8 18.5
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- -------
Net Income 22.5 10.8 9.8 0.8 18.5
======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 19.7 14.4 6.7 (0.0) 15.9
Net Income -before Goodwill
Amort. 22.7 10.8 9.8 0.8 18.5
Effective tax rate (1337.4%) 7.3% (31.3%) 88.2% (24.3%)
Operating revenue 49.1 58.3 75.9 90.6 50.6
Realized gains (losses) on
investments 4.3 (5.1) 4.5 1.2 1.2
------- ------- ------- ------- -------
Total Revenue 53.4 53.2 80.5 91.8 51.8
======= ======= ======= ======= =======
Average capital 561.3 510.0 485.3 500.3 516.9
Return on average capital 13.9% 11.3% 5.5% (0.0%) 12.3%
-----------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 589.7 587.3 569.4 591.0 571.8
Deferral 0.9 0.9 1.0 0.9 0.6
Amortization 3.9 (6.7) (21.0) (33.8) 11.5
------- ------- ------- ------- -------
Operating 4.9 (5.7) (20.1) (33.0) 12.1
Foreign currency translation
adjustment (7.2) (12.2) 41.7 13.8 13.7
Other
------- ------- ------- ------- -------
Balance at end-of-year 587.3 569.4 591.0 571.8 597.6
======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 252.8 244.0 238.3 243.9 236.8
Amortization (5.6) (0.7) (11.7) (12.8) (5.5)
Foreign currency translation
adjustment (3.2) (5.1) 17.4 5.7 6.1
Other
------- ------- ------- ------- -------
Balance at end-of-year 244.0 238.3 243.9 236.8 237.4
======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of
"Income from Operations" (see page 5).
PAGE 32
Lincoln UK
Operational Data
Unaudited [Millions of Dollars]
For the Year Ended December 31 1998 1999 2000 2001 2002
------ ------ ------ ------ ------
Unit Linked Assets - Beg-of-Year
(Billions) 5.643 6.265 7.220 6.441 5.607
Deposits 0.473 0.537 0.554 0.481 0.453
Withdrawals (incl. chgs) & Deaths (0.547) (0.566) (0.644) (0.529) (0.519)
------ ------ ------ ------ ------
Net Cash Flows (0.074) (0.029) (0.090) (0.048) (0.066)
Inv Inc & Chg in Mkt Val 0.662 1.154 (0.154) (0.617) (1.004)
Acq of new business/companies
Foreign currency adjustment 0.035 (0.170) (0.536) (0.169) 0.542
------ ------ ------ ------ ------
Unit Linked Assets - End-of-Year 6.265 7.220 6.441 5.607 5.079
======= ======= ======= ======= =======
Individual Life In-force
(Billions) 25.002 25.698 24.290 20.878 18.900
Exchange Rate - Dollars to Pounds
For-the-Period 1.658 1.617 1.518 1.441 1.503
End-of-Period 1.660 1.615 1.493 1.456 1.610
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
------ ------ ------ ------ ------ -----
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 7.220 7.031 6.726 6.499 6.441 5.677
Deposits 0.159 0.134 0.145 0.116 0.132 0.111
Withdrawals (incl. chgs) & Deaths (0.170) (0.162) (0.159) (0.153) (0.147) (0.131)
------ ------ ------ ------ ------ -----
Net Cash Flows (0.011) (0.028) (0.014) (0.037) (0.015) (0.020)
Inv Inc & Chg in Mkt Val (0.077) 0.047 (0.025) (0.100) (0.421) 0.115
Acq of new business/companies
Foreign currency adjustment (0.101) (0.324) (0.189) 0.078 (0.328) (0.004)
------ ------ ------ ------ ------ -----
Unit Linked Assets -
End-of-Quarter 7.031 6.726 6.499 6.441 5.677 5.768
======= ======= ======= ======= ======= =======
Individual Life In-force
(Billions) 26.514 25.225 24.535 24.290 21.894 21.519
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.599 1.536 1.482 1.454 1.455 1.421
End-of-Quarter 1.591 1.517 1.475 1.493 1.416 1.415
For the Quarter Ended Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
------ ------ ------ ------ ------ -----
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 5.768 5.218 5.607 5.618 5.520 4.825
Deposits 0.128 0.111 0.114 0.115 0.119 0.104
Withdrawals (incl. chgs) & Deaths (0.136) (0.115) (0.127) (0.137) (0.126) (0.129)
------ ------ ------ ------ ------ -----
Net Cash Flows (0.009) (0.004) (0.013) (0.022) (0.006) (0.025)
Inv Inc & Chg in Mkt Val (0.768) 0.457 0.141 (0.479) (0.812) 0.146
Acq of new business/companies
Foreign currency adjustment 0.226 (0.063) (0.117) 0.403 0.123 0.133
------ ------ ------ ------ ------ -----
Unit Linked Assets -
End-of-Quarter 5.218 5.607 5.618 5.520 4.825 5.079
======= ======= ======= ======= ======= =======
Individual Life In-force
(Billions) 21.299 20.878 20.010 20.401 19.815 18.900
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.442 1.448 1.423 1.464 1.555 1.570
End-of-Quarter 1.474 1.456 1.426 1.532 1.569 1.610
PAGE 33
Other Operations
Unaudited [Millions of Dollars]
For the Year Ended December 31 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 286.4 317.0 377.5 360.7 318.0
Lincoln Financial Distributors 33.5 107.5 119.9 113.4 127.3
------- ------- ------- ------- -------
Total Distribution 319.9 424.4 497.4 474.0 445.4
Reinsurance 1581.2 1824.1 1770.6 1699.4 0.0
Amortization of deferred gain on
indemnity reinsurance* 0.0 0.0 0.0 20.4 75.2
Other [Including
Consolidating Adjustments] (192.7) (277.5) (292.6) (360.4) (151.8)
------- ------- ------- ------- -------
Operating Revenue 1708.3 1971.0 1975.4 1833.4 368.8
------- ------- ------- ------- -------
Realized gains (losses) on
investments 0.5 14.4 (5.0) 8.2 24.8
Gains (losses) on derivatives 0.0 0.0 0.0 (9.7) 0.9
Gain on sale of reinsurance
subsidiaries 0.0 0.0 0.0 12.8 (8.3)
------- ------- ------- ------- -------
Total Revenue 1708.9 1985.4 1970.4 1844.7 386.3
======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (23.7) (20.8) (11.7) (15.9) (27.6)
Lincoln Financial Distributors (8.2) (14.0) (18.5) (30.7) (33.9)
------- ------- ------- ------- -------
Total Distribution (31.9) (34.8) (30.2) (46.6) (61.5)
Reinsurance 104.9 40.1 122.5 128.8 0.0
Amortization of deferred gain on
indemnity reinsurance* 0.0 0.0 0.0 12.9 48.9
LNC Financing (51.5) (83.5) (84.9) (77.9) (43.0)
Other Corporate (17.5) (5.0) (15.4) (2.4) 4.7
------- ------- ------- ------- -------
Inc (Loss) from Operations 4.0 (83.1) (8.0) 14.8 (50.8)
------- ------- ------- ------- -------
Realized gains (losses) on
investments 2.7 10.2 (3.2) 5.9 16.7
Gains (losses) on derivatives 0.0 0.0 0.0 (6.3) 0.6
Gain on sale of reinsurance
subsidiaries 0.0 0.0 0.0 15.0 (9.4)
Reserve increase on business sold
through reinsurance 0.0 0.0 0.0 0.0 (199.1)
Restructuring charges (14.3) (3.2) 1.0 (19.5) 1.1
------- ------- ------- ------- -------
Income before Accounting Changes (7.6) (76.1) (10.2) 9.9 (240.9)
Cumulative effect of accounting
changes 0.0 0.0 0.0 (2.7) 0.0
------- ------- ------- ------- -------
Total Net Income (Loss) (7.6) (76.1) (10.2) 7.2 (240.9)
======= ======= ======= ======= =======
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 86.4 90.0 91.3 109.8 81.2 83.8
Lincoln Financial Distributors 29.3 28.1 27.5 35.0 25.7 20.7
------- ------- ------- ------- ------- -------
Total Distribution 115.8 118.1 118.8 144.8 106.9 104.5
Reinsurance 392.7 458.9 457.9 461.0 515.1 451.4
Amortization of deferred gain on
indemnity reinsurance* 0.0 0.0 0.0 0.0 0.0 0.0
Other [Including
Consolidating Adjustments] (67.6) (86.7) (79.2) (59.2) (80.5) (105.2)
------- ------- ------- ------- ------- -------
Operating Revenue 440.9 490.3 497.5 546.6 541.5 450.7
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (0.8) (1.3) (3.4) 0.4 (10.0) 1.4
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.1 (0.1)
Gain on sale of reinsurance
subsidiaries 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total Revenue 440.2 489.0 494.1 547.0 531.6 452.0
======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (7.4) (2.9) (3.1) 1.6 (6.8) (12.3)
Lincoln Financial Distributors (3.3) (5.2) (5.0) (5.1) (6.9) (11.5)
------- ------- ------- ------- ------- -------
Total Distribution (10.7) (8.1) (8.0) (3.4) (13.8) (23.8)
Reinsurance 31.9 25.8 28.2 36.6 46.8 34.1
Amortization of deferred gain on
indemnity reinsurance* 0.0 0.0 0.0 0.0 0.0 0.0
LNC Financing (21.9) (22.2) (20.9) (19.8) (21.7) (22.0)
Other Corporate (5.7) (1.5) 1.6 (9.8) (0.5) 2.0
------- ------- ------- ------- ------- -------
Inc (Loss) from Oper (6.5) (5.9) 0.9 3.5 10.9 (9.7)
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (0.4) (0.8) (3.2) 1.2 (6.5) 1.0
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.1 (0.1)
Gain on sale of reinsurance
subsidiaries 0.0 0.0 0.0 0.0 0.0 0.0
Reserve increase on business
sold through reinsurance 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring charges 0.0 0.0 0.0 1.0 0.0 (1.2)
------- ------- ------- ------- ------- -------
Income before Accounting Changes (6.8) (6.8) (2.3) 5.7 4.4 (10.0)
Cumulative effect of accounting
changes 0.0 0.0 0.0 0.0 (0.4) (2.2)
------- ------- ------- ------- ------- -------
Total Net Income (Loss) (6.8) (6.8) (2.3) 5.7 4.0 (12.2)
======= ======= ======= ======= ======= =======
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 78.9 116.7 75.9 78.1 74.4 89.6
Lincoln Financial Distributors 32.0 35.0 29.4 29.3 31.8 36.9
------- ------- ------- ------- ------- -------
Total Distribution 111.0 151.7 105.3 107.4 106.2 126.5
Reinsurance 467.4 265.6 0.0 0.0 0.0 0.0
Amortization of deferred gain on
indemnity reinsurance* 0.0 20.4 24.1 22.1 22.1 6.9
Other [Including
Consolidating Adjustments] (76.0) (98.7) (32.2) (33.4) (65.6) (20.5)
------- ------- ------- ------- ------- -------
Operating Revenue 502.3 339.0 97.1 96.1 62.7 112.9
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (12.8) 29.5 (4.9) (3.8) 31.8 1.7
Gains (losses) on derivatives (0.0) (9.7) 0.1 (0.1) 0.6 0.3
Gain on sale of reinsurance
subsidiaries 0.0 12.8 0.0 0.0 0.0 (8.3)
------- ------- ------- ------- ------- -------
Total Revenue 489.5 371.7 92.3 92.2 95.1 106.7
======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (4.2) 7.4 (9.1) (7.7) (8.0) (2.7)
Lincoln Financial Distributors (7.8) (4.5) (6.2) (7.3) (12.7) (7.7)
------- ------- ------- ------- ------- -------
Total Distribution (12.0) 3.0 (15.4) (15.0) (20.7) (10.4)
Reinsurance 17.2 30.7 0.0 0.0 0.0 0.0
Amortization of deferred gain on
indemnity reinsurance* 0.0 12.9 15.7 14.4 14.4 4.5
LNC Financing (19.5) (14.7) (8.2) (9.6) (11.6) (13.5)
Other Corporate 1.5 (5.3) (4.1) 2.9 0.7 5.2
------- ------- ------- ------- ------- -------
Inc (Loss) from Oper (12.9) 26.5 (12.0) (7.3) (17.2) (14.3)
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (8.3) 19.7 (3.3) (2.4) 21.6 0.8
Gains (losses) on derivatives (0.0) (6.3) 0.1 (0.1) 0.4 0.2
Gain on sale of reinsurance
subsidiaries 0.0 15.0 0.0 0.0 0.0 (9.4)
Reserve increase on business
sold through reinsurance 0.0 0.0 0.0 (14.4) (176.4) (8.2)
Restructuring charges 0.0 (18.3) 0.0 0.0 1.1 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes (21.2) 36.7 (15.2) (24.2) (170.6) (31.0)
Cumulative effect of accounting
changes 0.0 (0.0) 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total Net Income (Loss) (21.2) 36.7 (15.2) (24.2) (170.6) (31.0)
======= ======= ======= ======= ======= =======
* The amortization of deferred gain on sale of reinsurance business represents the amortization of deferred gain recognized
on the business sold through indemnity reinsurance to Swiss Re.
PAGE 34
Consolidated Domestic Retail Deposits/Account Balances
Unaudited [Billions of Dollars]
1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Deposits - For the Year
Lincoln Retirement - Fixed
Annuities 1.452 2.563 2.074 3.342 3.672
Lincoln Retirement - Variable
Annuities 2.791 2.553 3.165 3.067 2.743
Lincoln Retirement - Life
Insurance 0.000 0.017 0.014 0.012
Life Insurance Segment - Life
Insurance 1.207 1.698 1.884 1.934 2.138
Inv Mgmt - Annuities 2.240 1.561 1.782 1.701 2.751
Inv Mgmt - Mutual Funds(1) 1.912 2.151 2.577 1.523 1.829
Inv Mgmt - Wrap Fee & Other 0.595 0.549 0.525 0.469 1.115
Consolidating Adjustments (1.041) (0.499) (0.406) (1.039) (1.464)
------- ------- ------- ------- -------
Gross Deposits 9.157 10.593 11.616 11.009 12.783
Account Balances - End of Year
Lincoln Retirement - Fixed
Annuities 16.505 16.791 15.394 16.491 18.085
Lincoln Retirement - Variable
Annuities 33.358 41.493 39.427 34.638 27.438
Lincoln Retirement - Life
Insurance 0.155 0.160 0.149
Life Insurance Segment - Life
Insurance 9.243 10.217 10.847 11.377 12.086
Inv Mgmt - Annuities 14.257 15.557 13.527 11.835 9.981
Inv Mgmt - Mutual Funds(1) 13.528 13.632 13.261 11.552 10.297
Inv Mgmt - Wrap Fee & Other 2.512 1.618 1.342 1.719 2.270
Consolidating Adjustments (8.891) (9.175) (7.753) (6.717) (5.100)
------- ------- ------- ------- -------
Account Balances 80.512 90.288 86.205 81.044 75.057
Mar Jun Sep Dec Mar Jun
2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Lincoln Retirement - Fixed
Annuities 0.589 0.490 0.513 0.482 0.560 0.668
Lincoln Retirement - Variable
Annuities 0.797 0.793 0.729 0.846 0.887 0.703
Lincoln Retirement - Life
Insurance 0.003 0.003 0.004 0.004 0.003 0.004
Life Insurance Segment - Life
Insurance 0.424 0.411 0.428 0.622 0.418 0.477
Inv Mgmt - Annuities 0.379 0.358 0.456 0.589 0.540 0.403
Inv Mgmt - Mutual Funds(1) 0.875 0.586 0.554 0.563 0.483 0.355
Inv Mgmt - Managed Acct. & Other 0.148 0.106 0.140 0.131 0.142 0.127
Consolidating Adjustments (0.099) (0.062) (0.100) (0.145) (0.262) (0.202)
------- ------- ------- ------- ------- -------
Gross Deposits 3.115 2.685 2.724 3.092 2.770 2.535
------- ------- ------- ------- ------- -------
Account Balances - End of Quarter
Lincoln Retirement - Fixed
Annuities 16.244 15.884 15.660 15.394 15.430 15.551
Lincoln Retirement - Variable
Annuities 44.640 43.097 42.743 39.427 34.733 36.961
Lincoln Retirement - Life
Insurance 0.169 0.165 0.166 0.160 0.147 0.157
Life Insurance Segment - Life
Insurance 10.470 10.538 10.716 10.847 10.764 11.066
Inv Mgmt - Annuities 15.557 14.888 14.853 13.527 11.822 12.532
Inv Mgmt - Mutual Funds(1) 14.671 14.069 14.571 13.261 11.530 12.215
Inv Mgmt - Managed Acct. & Other 1.309 1.304 1.256 1.342 1.653 1.774
Consolidating Adjustments (8.768) (8.419) (8.644) (7.753) (6.834) (7.007)
------- ------- ------- ------- ------- -------
Account Balances 94.292 91.526 91.322 86.205 79.245 83.250
------- ------- ------- ------- ------- -------
Sep Dec Mar Jun Sep Dec
2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Lincoln Retirement - Fixed
Annuities 0.896 1.218 0.906 0.853 1.090 0.822
Lincoln Retirement - Variable
Annuities 0.684 0.793 0.808 0.787 0.603 0.545
Lincoln Retirement - Life
Insurance 0.003 0.002
Life Insurance Segment - Life
Insurance 0.434 0.605 0.440 0.577 0.484 0.636
Inv Mgmt - Annuities 0.434 0.323 0.589 0.601 0.756 0.806
Inv Mgmt - Mutual Funds(1) 0.336 0.348 0.452 0.562 0.416 0.399
Inv Mgmt - Managed Acct. & Other 0.074 0.127 0.159 0.194 0.293 0.469
Consolidating Adjustments (0.295) (0.279) (0.309) (0.371) (0.504) (0.281)
------- ------- ------- ------- ------- -------
Gross Deposits 2.567 3.137 3.045 3.203 3.139 3.396
------- ------- ------- ------- ------- -------
Account Balances - End of Quarter
Lincoln Retirement - Fixed
Annuities 16.051 16.491 16.533 16.909 17.650 18.085
Lincoln Retirement - Variable
Annuities 30.506 34.638 35.150 31.206 25.942 27.438
Lincoln Retirement - Life
Insurance 0.134 0.149
Life Insurance Segment - Life
Insurance 10.939 11.377 11.667 11.759 11.726 12.086
Inv Mgmt - Annuities 10.714 11.835 11.920 10.896 9.327 9.981
Inv Mgmt - Mutual Funds(1) 10.726 11.552 11.597 11.033 10.069 10.297
Inv Mgmt - Managed Acct. & Other 1.635 1.719 1.821 1.847 1.820 2.270
Consolidating Adjustments (6.023) (6.717) (6.684) (6.007) (4.875) (5.100)
------- ------- ------- ------- ------- -------
Account Balances 74.682 81.044 82.005 77.644 71.658 75.057
------- ------- ------- ------- ------- -------
Total Domestic Net Flows
Unaudited [Billions of Dollars]
For the Year 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Lincoln Retirement (1.244) (1.244) (1.165) 0.105 0.453
Life Insurance Segment 0.113 0.113 0.985 1.163 1.320
Investment Management Segment-
Retail(1) 1.772 1.772 (2.209) (0.375) 0.806
Consolidating Adjustments (0.158) 1.276 1.406 (0.150) 0.008
------- ------- ------- ------- -------
Total Retail Net Flows 0.483 0.483 (1.114) 0.742 2.587
Investment Management Segment-
Institutional (2.702) (2.240) (5.694) (0.228) 2.106
------- ------- ------- ------- -------
Total Net Flows (2.219) (2.219) (3.354) 0.514 4.693
------- ------- ------- ------- -------
Mar Jun Sep Dec Mar Jun
For the Quarter 2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Lincoln Retirement (0.700) (0.682) (0.812) (0.681) (0.590) (0.196)
Life Insurance Segment 0.242 0.235 0.277 0.404 0.237 0.304
Investment Management Segment-
Retail(1) (0.880) (0.364) (0.315) 0.059 (0.021) (0.146)
Consolidating Adjustments 0.717 0.343 0.193 0.151 0.019 (0.034)
------- ------- ------- ------- ------- -------
Total Retail Net Flows (0.620) (0.468) (0.657) (0.066) (0.355) (0.072)
Investmenagement Segment-
Instit. (2.611) (1.056) (0.983) (1.043) (0.417) 0.445
------- ------- ------- ------- ------- -------
Total Net Flows (3.231) (1.524) (1.640) (1.110) (0.773) 0.372
------- ------- ------- ------- ------- -------
Sep Dec Mar Jun Sep Dec
For the Quarter 2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Lincoln Retirement 0.261 0.631 0.088 0.223 0.068 0.074
Life Insurance Segment 0.239 0.383 0.236 0.385 0.297 0.402
Investment Management Segment-
Retail(1) (0.118) (0.091) 0.089 0.167 0.048 0.502
Consolidating Adjustments (0.081) (0.053) (0.037) (0.086) 0.049 0.082
------- ------- ------- ------- ------- -------
Total Retail Net Flows 0.300 0.869 0.377 0.688 0.462 1.060
Investmenagement Segment-
Instit. (0.155) (0.103) 0.731 0.455 0.348 0.572
------- ------- ------- ------- ------- -------
Total Net Flows 0.145 0.767 1.108 1.143 0.810 1.632
------- ------- ------- ------- ------- -------
NOTE: Excludes amounts reported as Assets Under Management - Insurance Assets
(1) Retail assets under management have been restated to include assets under administration beginning in January of 2000.
See details on pages 28 and 29.
PAGE 35
Consolidated Investment Data -
Assets Managed
Unaudited [Billions of Dollars]
December 31 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 30.233 27.689 27.450 28.346 32.767
Equity securities 0.543 0.604 0.550 0.470 0.337
Other investments 7.154 7.286 7.369 7.297 6.897
------- ------- ------- ------- -------
Total LNC Investments(1) 37.929 35.578 35.369 36.113 40.002
Separate accounts 43.409 53.654 50.580 44.833 36.178
Cash and Invested Cash 2.433 1.896 1.927 3.095 1.691
Discontinued Operations ------- ------- ------- ------- -------
Total LNC 83.772 91.128 87.876 84.042 77.871
------- ------- ------- ------- -------
Non-affiliate assets managed 50.061 49.314 43.397 42.199 41.256
------- ------- ------- ------- -------
Total Assets Managed 133.833 140.443 131.273 126.241 119.127
======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 61.488 61.374 53.354 48.411 46.495
(See page 22 for additional
detail)
DLIA-Corp 39.432 35.934 35.686 38.119 41.104
(Assets managed internally-see
page 22)
Lincoln (UK) 7.573 8.589 7.873 6.847 6.351
Policy Loans (within business
units) 1.840 1.892 1.961 1.940 1.946
Non-LNC Affiliates 23.500 32.654 32.399 30.924 23.232
------- ------- ------- ------- -------
Total Assets Managed 133.833 140.443 131.273 126.241 119.127
======= ======= ======= ======= =======
Mar Jun Sep Dec Mar Jun
End of Quarter 2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 27.745 27.078 27.264 27.450 27.811 27.874
Equity securities 0.588 0.560 0.570 0.550 0.560 0.534
Other investments 7.442 7.419 7.471 7.369 7.374 7.388
------- ------- ------- ------- ------- -------
Total LNC Investments(1) 35.775 35.057 35.305 35.369 35.744 35.796
Separate accounts 56.908 54.924 54.411 50.580 44.506 47.140
Cash and invested cash 1.510 1.619 1.436 1.927 2.015 1.502
------- ------- ------- ------- ------- -------
Total LNC 94.192 91.601 91.152 87.876 82.266 84.438
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 47.150 45.945 45.119 43.397 41.904 44.069
------- ------- ------- ------- ------- -------
Total Assets Managed 141.342 137.546 136.271 131.273 124.170 128.507
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 58.712 56.986 55.998 53.355 48.208 50.736
(See page 23 for additional
detail)
DLIA-Corp 35.541 34.891 34.981 35.686 36.324 36.018
(Assets managed internally-see
page 23)
Lincoln (UK) 8.423 8.058 7.838 7.873 7.012 7.027
Policy Loans (within business
units) 1.896 1.915 1.936 1.961 1.947 1.947
Non-LNC Affiliates 36.770 35.696 35.518 32.397 30.680 32.778
------- ------- ------- ------- ------- -------
Total Assets Managed 141.342 137.546 136.271 131.273 124.170 128.507
======= ======= ======= ======= ======= =======
Sep Dec Mar Jun Sep Dec
End of Quarter 2001 2001 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 28.932 28.346 28.841 29.725 32.037 32.767
Equity securities 0.478 0.470 0.439 0.419 0.397 0.337
Other investments 7.379 7.297 7.084 7.016 6.928 6.897
------- ------- ------- ------- ------- -------
Total LNC Investments(1) 36.788 36.113 36.363 37.160 39.363 40.002
Separate accounts 39.480 44.833 44.917 40.580 34.069 36.178
Cash and invested cash 1.996 3.095 1.700 2.265 1.600 1.691
------- ------- ------- ------- ------- -------
Total LNC 78.264 84.042 82.979 80.005 75.031 77.871
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 39.198 42.199 43.708 43.031 38.506 41.256
------- ------- ------- ------- ------- -------
Total Assets Managed 117.462 126.241 126.687 123.036 113.538 119.127
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 44.957 48.412 50.001 48.738 43.357 46.495
(See page 23 for additional
detail)
DLIA-Corp 37.337 38.119 37.171 38.476 40.416 46.495
(Assets managed internally-see
page 23)
Lincoln (UK) 6.474 6.847 6.772 6.753 6.068 41.104
Policy Loans (within business
units) 1.943 1.940 1.918 1.906 1.899 1.946
Non-LNC Affiliates 26.751 30.923 30.825 27.163 21.798 23.232
------- ------- ------- ------- ------- -------
Total Assets Managed 117.462 126.241 126.687 123.036 113.538 119.127
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets under administration beginning
in January of 2000. See details on pages 28 and 29.
PAGE 36
Consolidated Investment Data
Unaudited [Millions of Dollars except as noted]
For the Year Ended December 31 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 2065.8 2232.9 2148.7 2121.0 2118.2
Equity Securities 22.8 20.1 19.5 17.6 15.4
Mortgage loans on real estate 383.6 369.2 373.8 374.5 356.8
Real estate 86.8 64.1 51.8 49.5 47.4
Policy loans 99.5 116.5 125.0 125.3 134.5
Invested cash 156.8 110.3 87.2 68.4 36.4
Other investments 88.4 51.8 66.8 69.5 16.3
------- ------- ------- ------- -------
Investment revenue 2903.7 2964.8 2872.8 2825.8 2725.0
Investment expense (222.3) (157.3) (125.7) (146.2) (116.7)
------- ------- ------- ------- -------
Net Investment Income 2681.4 2807.5 2747.1 2679.6 2608.3
------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 11.6 8.1 7.8 7.2 7.5
------- ------- ------- ------- -------
Adjusted Net Invest Income 2693.0 2815.6 2754.9 2686.8 2615.8
======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 36573.8 39027.5 37471.3 37616.9 38828.5
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.36% 7.21% 7.35% 7.14% 6.74%
Investment Gains
Realized Gains (Losses) on
Investments 13.7 3.8 (17.5) (68.7) (177.2)
Gains(Losses) on Derivatives 0.0 0.0 0.0 (4.9) 0.8
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) 116.4 (1018.1) 477.7 183.7 616.3
Incr (Decr) on Derivatives* 21.4 24.4
Incr (Decr) in Foreign Exchange 3.8 (19.9) (8.1) (30.0) (58.8)
Incr (Decr) in minimum pension
liability (36.0) 61.9
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 30.233 27.689 27.450 28.346 32.767
Fixed Maturity Sec (Adjusted
Cost) 28.640 28.357 27.373 27.956 32.379
Equity Securities (Market) 0.543 0.604 0.550 0.470 0.337
Equity Securities (Adjusted Cost) 0.437 0.482 0.458 0.444 0.326
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 25.6% 22.8% 22.1% 17.2% 20.1%
AA or better 32.6% 29.8% 29.2% 23.6% 25.8%
BB or less 7.0% 8.0% 6.7% 8.3% 6.6%
---------------------------------------------------------------------------------------------------
For the Quarter Ended Mar Jun Sep Dec Mar Jun
2000 2000 2000 2001 2001 2001
------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 541.3 544.4 525.3 537.7 526.9 527.0
Equity Securities 3.7 5.7 3.6 6.5 1.0 7.8
Mortgage loans on real estate 92.0 95.1 94.4 92.3 95.7 92.4
Real estate 11.2 12.5 11.8 16.3 12.8 13.1
Policy loans 30.7 30.9 30.5 32.9 31.4 31.4
Invested cash 27.2 15.1 26.5 18.4 22.5 19.8
Other investments 35.1 2.0 26.9 2.9 19.6 18.2
------- ------- ------- ------- ------- -------
Investment revenue 741.1 705.7 719.1 706.9 709.9 709.7
Investment expense (30.0) (31.8) (29.0) (34.8) (36.1) (36.6)
------- ------- ------- ------- ------- -------
Net Investment Income 711.1 673.8 690.0 672.1 673.7 673.1
------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 1.5 2.3 1.4 2.6 0.5 3.0
------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 712.6 676.1 691.5 674.7 674.2 676.1
======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 38237.4 37306.1 37250.8 37090.8 37238.0 37094.5
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.45% 7.25% 7.43% 7.28% 7.24% 7.29%
Investment Gains
Realized Gains (Losses) on
Investments (0.4) (6.7) (11.6) 1.2 (13.4) (11.5)
Gains (Losses) on Derivatives 0.0 0.0 0.0 0.0 (0.1) 0.2
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)
Incr (Decr) on Derivatives* 23.3 3.7
Incr (Decr) in Foreign Exchange (7.3) (0.9) (2.0) 2.0 (17.8) (19.5)
Incr (Decr) in minimum pension
liability
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
Fixed Maturity Sec (Adjusted
Cost) 28.295 27.788 27.727 27.373 27.367 27.681
Equity Securities (Market) 0.588 0.560 0.570 0.550 0.560 0.534
Equity Securities (Adjusted Cost) 0.475 0.446 0.450 0.458 0.507 0.477
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 22.7% 22.3% 22.3% 22.1% 20.3% 19.3%
AA or better 29.5% 29.3% 29.4% 29.2% 27.1% 26.0%
BB or less 7.4% 7.4% 6.8% 6.7% 7.2% 7.8%
For the Quarter Ended Sep Dec Mar Jun Sep Dec
2001 2002 2002 2002 2002 2002
------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 536.9 530.1 522.5 523.8 533.7 538.1
Equity Securities 3.7 5.1 3.4 4.3 2.7 5.1
Mortgage loans on real estate 94.2 92.4 89.5 90.2 90.8 86.4
Real estate 12.7 10.9 12.3 11.9 10.0 13.2
Policy loans 31.0 31.6 30.2 31.1 31.1 42.0
Invested cash 14.8 11.3 12.4 9.1 7.9 7.0
Other investments 28.2 3.5 7.8 9.8 (1.2) (0.1)
------- ------- ------- ------- ------- -------
Investment revenue 721.4 684.8 678.1 680.2 675.0 691.7
Investment expense (35.2) (38.2) (29.9) (29.2) (28.0) (29.6)
------- ------- ------- ------- ------- -------
Net Investment Income 686.2 646.6 648.1 651.0 647.0 662.2
------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 1.5 2.1 1.5 2.0 1.5 2.6
------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 687.7 648.7 649.6 653.0 648.5 664.7
======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 37685.8 38449.3 38169.9 38235.5 39175.8 39733.1
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.30% 6.75% 6.81% 6.83% 6.62% 6.69%
Investment Gains
Realized Gains (Losses) on
Investments (23.8) (20.0) (67.6) (52.7) (23.6) (33.3)
Gains (Losses) on Derivatives (0.4) (4.6) 0.1 0.3 0.2 0.2
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) 171.8 (52.2) (163.9) 293.8 491.9 (5.6)
Incr (Decr) on Derivatives* (6.7) 1.2 1.2 0.0 4.6 1.0
Incr (Decr) in Foreign Exchange 22.2 (14.9) (12.8) 42.8 13.4 15.4
Incr (Decr) in minimum pension
liability (36.0) 0.7 (2.6) 2.6 (62.6)
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 28.932 28.346 28.841 29.725 32.037 32.767
Fixed Maturity Sec (Adjusted
Cost) 28.253 27.956 30.117 30.420 31.706 32.379
Equity Securities (Market) 0.478 0.470 0.439 0.419 0.397 0.337
Equity Securities (Adjusted Cost) 0.453 0.444 0.398 0.374 0.374 0.326
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 17.9% 17.2% 17.8% 18.2% 20.0% 20.1%
AA or better 24.3% 23.6% 24.7% 25.0% 26.7% 25.8%
BB or less 7.2% 8.3% 7.5% 6.4% 6.6% 6.6%
* 2001 includes the cumulative effect of accounting change related to the adjustment recorded
upon adoption of FAS #133.
PAGE 37
Common Stock / Debt Information
Unaudited [Dollars per Share,
except Percentages]
For the Year Ended December 31 1992 1993 1994 1995 1996
------- ------- ------- ------- -------
Common Stock [1]
Highest Price 19.032 24.125 22.188 26.875 28.500
Lowest Price 12.625 17.344 17.313 17.313 20.375
------- ------- ------- ------- -------
Closing Price 18.500 21.750 17.500 26.875 26.250
------- ------- ------- ------- -------
Dividend Payout Ratio [2] 38.9% 52.6% 51.0% 39.7% 38.2%
Yield [3] 4.1% 3.8% 4.9% 3.4% 3.7%
Preferred Stock Dividend
(Millions) 17.246 17.212 17.119 8.644 0.112
Debt: (End of Period)
Senior Debt Ratings
A.M. Best
Fitch AA AA- AA- AA- AA-
Moody's A2 A2 A1 A2 A2
Standard and Poors A+ A+ A+ A A
Claims Paying Ratings:
Lincoln Life - A.M. Best A+ A+ A+ A+ A+
Lincoln Life - Fitch AAA AAA AAA AA+ AA+
Lincoln Life - Moody's A1 A1 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A+ A+ A+ A+
First Penn - Fitch
First Penn - Moody's
First Penn - Standard & Poors* AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A+
LLA of New York - Fitch*
LLA of New York - Moody's A1
LLA of New York - Standard &
Poors* AA-
Ratios
Debt to Total Capitalization [4] 25.7% 21.1% 19.9% 22.8% 18.8%
Debt to Equity [4] 34.7% 26.7% 24.9% 29.5% 23.1%
For the Year Ended December 31 1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
Common Stock [1]
Highest Price 39.063 49.438 57.500 56.375 52.750 53.650
Lowest Price 24.500 33.500 36.000 22.625 38.000 25.150
------- ------- ------- ------- ------- -------
Closing Price 39.063 40.907 40.000 47.313 48.570 31.580
------- ------- ------- ------- ------- -------
Dividend Payout Ratio [2] 22.8% 43.9% 50.5% 38.3% 41.9% 273.5%
Yield [3] 2.7% 2.7% 2.9% 2.6% 2.6% 4.2%
Preferred Stock Dividend
(Millions) 0.106 0.100 0.089 0.078 0.071 0.061
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a a
Fitch AA- A+ A+ A+ A+ A
Moody's A2 A2 A2 A3 A3 A3
Standard and Poors A A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A+ A A A A A+
Lincoln Life - Fitch AA+ AA+ AA+ AA AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A+ A A A A A+
First Penn - Fitch AA+ AA+ AA+ AA AA AA
First Penn - Moody's A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A+ A A A A A+
LLA of New York - Fitch* AA+ AA+ AA+ AA AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 17.0% 21.2% 23.2% 20.8% 21.4% 23.2%
Debt to Equity [4] 20.5% 26.9% 30.3% 26.3% 27.2% 30.6%
Mar Jun Sep Dec Mar Jun
For the Quarter Ended 2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- -------
Common Stock:
Highest Price 41.375 40.063 56.375 50.938 48.250 52.300
Lowest Price 22.625 29.000 35.625 40.875 38.000 41.280
------- ------- ------- ------- ------- -------
Closing Price 33.500 36.125 48.125 47.313 42.470 51.750
------- ------- ------- ------- ------- -------
Yield [3] 3.5% 3.2% 2.4% 2.6% 2.9% 2.4%
Preferred Stock Dividend 0.022 0.022 0.021 0.013 0.019 0.018
(Millions)
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a a a
Fitch A+ A+ A+ A+ A+ A+
Moody's A2 A2 A2 A3 A3 A3
Standard and Poors A- A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A A A A A A
Lincoln Life - Fitch AA+ AA+ AA+ AA AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A A A A A
First Penn - Fitch AA+ AA+ AA+ AA AA AA
First Penn - Moody's A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A A A A A A
LLA of New York - Fitch* AA+ AA+ AA+ AA AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 23.3% 21.8% 21.2% 20.8% 22.2% 21.2%
Debt to Equity [4] 30.4% 28.0% 27.0% 26.3% 28.5% 27.0%
Sep Dec Mar Jun Sep Dec
For the Quarter Ended 2001 2001 2002 2002 2002 2002
------ ------- ------- ------- ------- -------
Common Stock:
Highest Price 52.750 49.450 53.650 52.540 42.080 35.950
Lowest Price 41.000 40.000 47.200 40.750 29.120 25.150
------ ------- ------- ------- ------- -------
Closing Price 46.630 48.570 50.730 42.000 30.550 31.580
------ ------- ------- ------- ------- -------
Yield [3] 2.6% 2.6% 2.5% 3.0% 4.2% 4.2%
Preferred Stock Dividend 0.017 0.017 0.016 0.015 0.015 0.015
(Millions)
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a a a a a
Fitch A+ A+ A+ A+ A A
Moody's A3 A3 A3 A3 A3 A3
Standard and Poors A- A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A A A A+ A+ A+
Lincoln Life - Fitch AA AA AA AA AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A A A+ A+ A+
First Penn - Fitch AA AA AA AA AA AA
First Penn - Moody's A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A A A A+ A+ A+
LLA of New York - Fitch* AA AA AA AA AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 21.1% 21.4% 22.7% 22.6% 23.1% 23.2%
Debt to Equity [4] 26.7% 27.2% 29.4% 29.2% 30.0% 30.6%
* Rating based on affiliation with Lincoln Life
[1] Stock prices shown above include 2-for-1 splits in June 1993, and June 1999
[2] Indicated dividend divided by net income
[3] Indicated dividend divided by the closing price
[4] Equity used in calculation assumes securities at cost. Minority interest-preferred securities
of subsidiary companies (hybrid securities) are considered 50% debt and 50% equity.
Return on Equity/Return on Capital: In order to accommodate the various perspectives, LNC
presents two separate Return on Equity numbers on pages 2, 5 and 6 of this Statistical Report.
"Net Income Divided by Average Shareholders' Equity" tends to fluctuate from period to period
due to the realization of gains and losses on investments or sale of subsidiaries. "Income from
Operations Divided by Average Shareholders' Equity" is less volatile but leaves out an important
element of earnings for a company that has a long-term goal of enhancing shareholder value by
realizing investment gains.
Return on capital measures the effectiveness of LNC's use of its total capital, which is made up
of equity, debt and hybrid securities. Return on capital is calculated by dividing income from
operations (after adding back after-tax interest expense) by average capital. The difference
between return on capital and return on equity presents the effect of leveraging on LNC's
consolidated results.
Lincoln National Corporation
Realized Gains (Losses) on Investments
For the Year Ended December 31, 2002
(in millions of dollars)
Pre-DAC, Net Capital
Pre-Tax Loss Add: DAC Less: tax Loss
-------- -------- -------- --------
Capital Losses on Sold Securities
1Q02 (95.00) 23.20 24.10 (47.70)
2Q02 (91.10) 25.00 21.60 (44.50)
3Q02 (77.00) 20.90 18.40 (37.70)
4Q02 (58.30) 13.20 14.50 (30.60)
-------- -------- -------- --------
2002 Capital Losses on Sold Securities (Excl. Lincoln UK)* (321.40) 82.30 78.60 (160.50)
2002 Capital Losses on Sold Securities for Lincoln UK (15.20) 0.00 4.56 (10.64)
-------- -------- -------- --------
Total Capital Losses on Sold Securities (336.60) 82.30 83.16 (171.14)
Write Downs
1Q02 (109.10) 34.30 27.00 (47.80)
2Q02 (76.20) 19.50 19.90 (36.80)
3Q02 (52.50) 14.90 13.10 (24.50)
4Q02 (88.60) 25.60 22.30 (40.70)
-------- -------- -------- --------
2002 Total Write Downs (326.40) 94.30 82.30 (149.80)
2002 Total Capital Losses (663.00) 176.60 165.46 (320.94)
Realized Gains
1Q02 64.04 (15.60) (16.93) 31.51
2Q02 49.10 (12.30) (11.40) 25.40
3Q02 65.90 (10.50) (17.70) 37.70
4Q02 76.84 (20.80) (18.84) 37.20
-------- -------- -------- --------
2002 Realized Gains on Sold Securities (Excl. Lincoln UK) 255.88 (59.20) (64.87) 131.81
2002 Realized Gains on Sold Securities for Lincoln UK 17.06 0.00 (5.12) 11.94
-------- -------- -------- --------
Total Realized Gains on Sold Securities 272.94 (59.20) (69.99) 143.75
Net Realized Capital Gains/(Losses) on Investments
1Q02 (140.06) 41.90 34.17 (63.99)
2Q02 (118.20) 32.20 30.10 (55.90)
3Q02 (63.60) 25.30 13.80 (24.50)
4Q02 (70.06) 18.00 17.96 (34.10)
-------- -------- -------- --------
2002 Realized Capital Gains/(Losses) (Excl. Lincoln UK) (391.92) 117.40 96.03 (178.49)
2002 Realized Capital Gains/(Losses) for Lincoln UK 1.86 0.00 (0.56) 1.30
-------- -------- -------- --------
Net 2002 Realized Capital Gains/(Losses) on Investments (390.06) 117.40 95.47 (177.19)
Sale of Affiliate
1Q02 0.00 0.00 0.00 0.00
2Q02 0.00 0.00 0.00 0.00
3Q02 0.00 0.00 0.00 0.00
4Q02 (8.30) 0.00 (1.10) (9.40)
-------- -------- -------- --------
2002 Sale of Affiliate (8.30) 0.00 (1.10) (9.40)
======== ======== ======== ========
* Includes investment expenses of $12.4 million.
Lincoln National Corporation
Detail of Unrealized Gains and Losses
As of December 31, 2002
(in millions of dollars)
Gross Unrealized Gains - Fixed Maturities 2,281.5
Gross Unrealized Gains - Equities 24.5
--------
Total Gross Unrealized Gains 2,306.0
Gross Unrealized Losses - Fixed Maturities (687.8)
Gross Unrealized Losses - Equities (8.5)
--------
Total Gross Unrealized Losses (696.3)
Net Unrealized Gains on Securities (Excl. Lincoln UK) 1,609.6
Net Unrealized Gains for Lincoln UK 57.4
--------
Net Unrealized Gains on Securities 1,667.0
Adjustment for DAC, Policyholder Commitments, Foreign
Exchange, and Taxes (855.0)
--------
Total Unrealized Gains 812.0
========
Lincoln National Corporation
Fixed Maturity Securities Available-for-Sale
Statutory Quality Distribution
At 12/31/2002
(in millions of dollars)
Statutory
NAIC Rating Description Market Value
----------------------------------------------------------------------
1 Highest Quality 19,080.0
2 High Quality 9,252.8
3 Medium Quality 1,096.1
4 Low Quality 400.7
5 Lower Quality 225.4
6 In or Near Default 170.4
---------
Subtotal Statutory Investments 30,225.4
Other Non-Statutory Investments 2,542.1
---------
Total Fixed Maturity Securities Available-for-Sale 32,767.5
=========