-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fi6MHdrO3jZDovorYfUp30rmvwGZVK7bXB5/6Rgxz9kNjy6gfovGRBknbnMn2jlM CbMj7SS2GDy6as6jAOJ5NA== 0000928816-02-000122.txt : 20020414 0000928816-02-000122.hdr.sgml : 20020414 ACCESSION NUMBER: 0000928816-02-000122 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 ITEM INFORMATION: Other events FILED AS OF DATE: 20020211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN NATIONAL CORP CENTRAL INDEX KEY: 0000059558 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 351140070 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06028 FILM NUMBER: 02533892 BUSINESS ADDRESS: STREET 1: 1500 MARKET STREET STE 3900 STREET 2: CENTRE SQUARE WEST TOWER CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2194552000 MAIL ADDRESS: STREET 1: 1500 MARKET STREET STE 3900 STREET 2: CENTRE SQUARE TOWER CITY: PHILADELPHIA STATE: PA ZIP: 19102*2706 8-K 1 lnc.txt LINCOLN NATIONAL CORPORATION
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, 2001 LINCOLN NATIONAL CORPORATION (Exact name of registrant as specified in its charter) Indiana 1-6028 35-1140070 (State of Incorporation) (Commission File Number (I.R.S. Employer Identification No.) 1500 Market Street, Suite 3900, Centre Square West Tower, Philadelphia, PA 19102 (Address of principal executive offices) Registrant's telephone number 219-448-1400
Item 5 Financial Report for the quarter ended December 31, 2001.
12/31/01 PAGE 1 Financial Highlights Unaudited [Amounts in Millions, except Per Share] For the Quarter Ended December 31 2001 2000 Amount Amount Change % Change -------- -------- -------- -------- Income from Operations Annuities 74.8 86.4 (11.6) (13.4%) Life Insurance 73.2 70.6 2.6 3.7% Investment Management 5.1 8.7 (3.6) (41.4%) Lincoln UK 19.5 15.5 4.0 25.8% Corporate & Other* 26.5 3.5 23.0 -------- -------- -------- -------- Total Income from Operations** 199.1 184.7 14.4 7.8% Realized gains (losses) on investments (20.1) 1.2 (21.3) Gains (losses) on derivatives (4.6) 0.0 (4.6) Gain on sale of subsidiaries 15.0 0.0 Restructuring charges (20.2) (37.0) 16.8 -------- -------- -------- -------- Income before Accounting Changes 169.2 148.9 5.3 Cumulative effect of accounting changes*** 0.0 0.0 0.0 -------- -------- -------- -------- Net Income* 169.2 148.9 20.3 13.6% ======== ======== ======== ======== Earnings per share (diluted) Income from Operations** $1.03 $0.94 $0.09 9.6% Realized gain (losses) on investments ($0.11) $0.01 ($0.12) Gains (losses) on derivatives ($0.02) $0.00 ($0.02) Gain on sale of subsidiaries $0.08 $0.00 $0.08 Restructuring charges ($0.10) ($0.19) $0.09 -------- -------- -------- -------- Income before Accounting Changes $0.88 $0.76 $0.12 Cumulative effect of accounting changes*** $0.00 $0.00 -- -------- -------- -------- -------- Net Income* $0.88 $0.76 $0.12 15.8% ======== ======== ======== ======== Inc. from Oper.- before Goodwill Amort. Annuities 75.1 86.7 (11.7) (13.4%) Life Insurance 79.1 76.5 2.6 3.4% Investment Management 9.1 12.7 (3.6) (28.3%) Lincoln UK 19.7 15.7 4.0 25.5% Corporate & Other* 26.8 3.9 22.9 -------- -------- -------- -------- Total 209.8 195.6 14.2 7.3% ======== ======== ======== ======== Earnings per share (diluted) Inc. from Oper.- before Goodwill Amort. $1.09 $1.00 $0.09 9.0% Operating Revenue Annuities 498.7 518.1 (19.4) (3.7%) Life Insurance 495.2 488.0 7.2 1.5% Investment Management 107.6 120.2 (12.7) (10.5%) Lincoln UK 58.9 100.6 (41.7) (41.4%) Corporate & Other* 369.8 546.6 (176.9) (32.4%) -------- -------- -------- -------- Total Operating Revenue 1530.1 1773.5 (243.4) (13.7%) ======== ======== ======== ======== Total Revenue Annuities 467.5 522.3 (54.8) (10.5%) Life Insurance 464.7 479.9 (15.2) (3.2%) Investment Management 106.5 120.0 (13.5) (11.2%) Lincoln UK 63.2 104.3 (41.1) (39.4%) Corporate & Other* 402.5 547.0 (144.6) (26.4%) -------- -------- -------- -------- Total Revenue 1504.4 1773.5 (269.1) (15.2%) ======== ======== ======== ======== Operational Data by Segment: (Billions) Annuities Segment Gross Deposits 2.011 1.328 0.683 51.4% Net Cash Flows 0.631 (0.681) 1.312 Account Values (Gross) 52.643 56.043 (3.400) (6.1%) Account Values (Net of Reinsurance) 51.129 54.821 (3.692) (6.7%) Life Insurance Segment First Year Premium- Retail 0.186 0.169 0.017 10.1% First Year Premium- COLI 0.014 0.049 (0.035) (71.4%) First Year Premium- Total 0.200 0.218 (0.018) (8.3%) In-force 234.394 216.002 18.392 8.5% Account Values 11.377 10.847 0.530 4.9% Investment Management Segment Retail Deposits 0.749 1.255 (0.506) (40.3%) Retail Net Cash Flows (0.125) 0.058 (0.183) Institutional In-flows 0.696 0.885 (0.189) (21.4%) Institutional Net Cash Flows (0.102) (1.043) 0.941 Total Net Cash Flows (0.227) (0.985) 0.758 Assets Under Management- Retail and Inst'l 47.922 52.895 (4.972) (9.4%) Assets Under Management - Insurance Assets 38.119 35.686 2.433 6.8% Assets Under Management - Total Segment 86.041 88.581 (2.539) (2.9%) Consolidated Consolidated Domestic Retail Deposits 3.088 3.064 0.024 0.8% Consolidated Domestic Retail Account Balances 80.557 85.749 (5.191) (6.1%) Total Retail Net Cash Flows 0.836 (0.066) 0.902 (1360.6%) Total Net Cash Flows 0.734 (1.110) 1.843 (166.1%) Total Assets Under Management 126.250 131.273 (5.023) (3.8%) For the Year Ended December 31 2001 2000 Amount Amount Change % Change -------- -------- -------- -------- Income from Operations Annuities 320.3 362.0 (41.7) (11.5%) Life Insurance 279.0 259.9 19.1 7.3% Investment Management 14.6 44.1 (29.5) (66.9%) Lincoln UK 60.2 61.0 (0.8) (1.3%) Corporate & Other* 14.8 (8.0) 22.8 -------- -------- -------- -------- Total Income from Operations** 689.0 719.1 (30.1) (4.2%) Realized gains (losses) on investments (68.7) (17.5) (51.2) Gains (losses) on derivatives (4.9) 0.0 (4.9) Gain on sale of subsidiaries 15.0 0.0 Restructuring charges (24.6) (80.2) 55.6 -------- -------- -------- -------- Income before Accounting Changes 605.8 621.4 (30.6) Cumulative effect of accounting changes*** (15.6) 0.0 (15.6) -------- -------- -------- -------- Net Income* 590.2 621.4 (31.2) (5.0%) ======== ======== ======== ======== Earnings per share (diluted) Income from Operations** $3.56 $3.69 ($0.13) (3.5%) Realized gain (losses) on investments ($0.36) ($0.09) ($0.27) Gains (losses) on derivatives ($0.03) $0.00 ($0.03) Gain on sale of subsidiaries $0.08 $0.00 $0.08 Restructuring charges ($0.13) ($0.41) $0.28 -------- -------- -------- -------- Income before Accounting Changes $3.12 $3.19 ($0.07) Cumulative effect of accounting changes*** ($0.08) $0.00 ($0.08) -------- -------- -------- -------- Net Income* $3.05 $3.19 ($0.14) (4.4%) ======== ======== ======== ======== Inc. from Oper.- before Goodwill Amort. Annuities 321.5 361.4 (39.9) (11.0%) Life Insurance 302.7 283.6 19.1 6.7% Investment Management 30.9 60.3 (29.5) (48.9%) Lincoln UK 60.9 65.1 (4.2) (6.4%) Corporate & Other* 16.4 (6.2) 22.7 -------- -------- -------- -------- Total 732.4 764.2 (31.8) (4.2%) ======== ======== ======== ======== Earnings per share (diluted) Inc. from Oper.- before Goodwill Amort. $3.79 $3.92 ($0.13) (3.3%) Operating Revenue Annuities 2033.1 2138.9 (105.8) (4.9%) Life Insurance 1897.5 1836.4 61.1 3.3% Investment Management 437.4 494.2 (56.8) (11.5%) Lincoln UK 280.9 435.0 (154.1) (35.4%) Corporate & Other* 1864.2 1975.4 (111.2) (5.6%) -------- -------- -------- -------- Total Operating Revenue 6513.0 6879.8 (366.8) (5.3%) ======== ======== ======== ======== Total Revenue Annuities 1968.3 2133.7 (165.4) (7.8%) Life Insurance 1840.6 1819.0 21.6 1.2% Investment Management 433.7 490.3 (56.5) (11.5%) Lincoln UK 293.3 438.2 (144.9) (33.1%) Corporate & Other* 1875.5 1970.4 (94.8) (4.8%) -------- -------- -------- -------- Total Revenue 6411.4 6851.5 (440.1) (6.4%) ======== ======== ======== ======== Operational Data by Segment: (Billions) Annuities Segment Gross Deposits 6.409 5.239 1.170 22.3% Net Cash Flows 0.105 (2.874) 2.979 Account Values (Gross) 52.643 56.043 (3.400) (6.1%) Account Values (Net of Reinsurance) 51.129 54.821 (3.692) (6.7%) Life Insurance Segment First Year Premium- Retail 0.569 0.562 0.007 1.2% First Year Premium- COLI 0.047 0.087 (0.040) (46.0%) First Year Premium- Total 0.617 0.649 (0.032) (4.9%) In-force 234.394 216.002 18.393 8.5% Account Values 11.377 10.847 0.530 4.9% Investment Management Segment Retail Deposits 3.527 4.760 (1.233) (25.9%) Retail Net Cash Flows (0.461) (1.517) 1.056 Institutional In-flows 3.825 3.501 0.324 9.3% Institutional Net Cash Flows (0.228) (5.694) 5.466 Total Net Cash Flows (0.689) (7.211) 6.522 Assets Under Management- Retail and Inst'l 47.922 52.895 (4.972) (9.4%) Assets Under Management - Insurance Assets 38.119 35.686 2.433 6.8% Assets Under Management - Total Segment 86.041 88.581 (2.539) (2.9%) Consolidated Consolidated Domestic Retail Deposits 10.843 11.491 (0.648) (5.6%) Consolidated Domestic Retail Account Balances 80.557 85.749 (5.191) (6.1%) Total Retail Net Cash Flows 0.657 (1.828) 2.484 (135.9%) Total Net Cash Flows 0.429 (7.522) 7.951 (105.7%) Total Assets Under Management 126.250 131.273 (5.023) (3.8%) * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations." ** Income from operations and net income for 2001 include special charges of $24.5 million after-tax ($37.7 million pre-tax) or $0.13 per share related to the events of September 11, 2001 (composed of a charge of $33.2 million after-tax ($51.1 million pre-tax) recorded in the 3rd quarter 2001 partially offset by a reversal of $8.7 million after-tax ($13.4 million pre-tax) recorded in the 4th quarter as a result of updated information on previously recorded incurred but unreported claims). *** The cumulative effect of accounting changes relates to the adjustment recorded upon adoption of FAS #133 in the 1st qtr. 2001 and the adjustment recorded upon the adoption of EITF 99-20 in the 2nd qtr. 2001.
12/31/01 PAGE 2 Financial Highlights Unaudited [Amounts in Millions, except Per Share] For the Quarter Ended December 31 2001 2000 Amount Amount Change % Change -------- -------- -------- -------- Consolidated Operational Data: (Millions) Balance Sheet Assets - End of Period 98001.5 99844.1 (1842.6) (1.8%) Shareholders' Equity Beg of Period (Securities at Market) 5368.6 4538.6 830.0 End of Period (Securities at Market) 5263.7 4954.1 309.6 End of Period (Securities at Cost) 5046.5 4942.0 104.5 Average Equity (Securities at Cost) 5131.5 4915.7 215.8 Return on Equity Inc from Operations/Average Equity 15.5% 15.0% 0.5% Net Income/Average Equity 13.2% 12.1% 1.1% Return on Capital Inc from Operations/Average Capital 12.9% 12.4% 0.5% Common Stock Outstanding Average for the Period - Diluted 192.8 195.6 (2.8) (1.4%) End of Period - Assuming Conv of Pref. 187.3 191.2 (3.9) (2.0%) End of Period - Diluted 191.2 195.2 (4.0) (2.0%) Book Value (Securities at Market) $28.10 $25.92 2.18 8.4% Book Value (Securities at Cost) $26.94 $25.85 1.09 4.2% Cash Returned to Shareholders Share Repurchase - dollar amount 134.3 51.7 82.6 Dividends Declared to Shareholders 59.9 58.5 1.4 -------- -------- -------- -------- Total Cash Returned to Shareholders 194.2 110.2 84.0 ======== ======== ======== ======== Share Repurchase - number of shares 2.894 1.114 1.780 Dividend Declared on Common Stock - per share $0.320 $0.305 $0.015 4.9% For the Year Ended December 31 2001 2000 Amount Amount Change % Change -------- -------- -------- -------- Consolidated Operational Data: (Millions) Balance Sheet Assets - End of Period 98001.5 99844.1 (1842.6) (1.8%) Shareholders' Equity Beg of Period (Securities at Market) 4954.1 4263.9 690.2 End of Period (Securities at Market) 5263.7 4954.1 309.6 End of Period (Securities at Cost) 5046.5 4942.0 104.5 Average Equity (Securities at Cost) 5022.6 4831.9 190.7 Return on Equity Inc from Operations/Average Equity 13.7% 14.9% (1.2%) Net Income/Average Equity 11.8% 12.9% (1.1%) Return on Capital Inc from Operations/Average Capital 11.5% 12.1% -0.6% Common Stock Outstanding Average for the Period - Diluted 193.3 194.9 (1.6) (0.8%) End of Period - Assuming Conv of Pref. 187.3 191.2 (3.9) (2.0%) End of Period - Diluted 191.2 195.2 (4.0) (2.0%) Book Value (Securities at Market) $28.10 $25.92 2.18 8.4% Book Value (Securities at Cost) $26.94 $25.85 1.09 4.2% Cash Returned to Shareholders Share Repurchase - dollar amount 503.7 210.0 293.7 Dividends Declared to Shareholders 231.8 224.4 7.4 -------- -------- -------- -------- Total Cash Returned to Shareholders 735.5 434.4 301.1 ======== ======== ======== ======== Share Repurchase - number of shares 11.278 6.223 5.055 Dividend Declared on Common Stock - per share $1.235 $1.175 $0.060 5.1% For the Quarter Ended December 31 For the Year Ended December 31 Comprehensive Income 2001 2000 2001 2000 (millions) Amount Amount Amount Amount -------- -------- -------- -------- Net Income 169.2 148.9 590.2 621.4 Foreign Currency Translation (14.9) 2.1 (30.0) (8.1) Net Unrealized Gains (Losses) on Securities (52.2) 349.7 183.7 477.7 Gains (Losses) on Derivatives 1.2 0.0 3.9 0.0 Cumulative Effect of Accounting Change 0.0 0.0 17.6 0.0 Minimum Pension Liability Adjustment (36.0) 0.0 (36.0) 0.0 -------- -------- -------- -------- Comprehensive Income 67.3 500.7 729.4 1,091.0 ======== ======== ======== ========
12/31/01 PAGE 3 Financial Highlights Unaudited [Amounts in Millions] For the Quarter Ended December 31 2001 2000 Amount Amount Change % Change -------- -------- -------- -------- Consolidated Condensed Statements of Income Revenue: Insurance Premiums and Fees 679.5 902.6 (223.1) (24.7%) Investment Advisory Fees 50.9 53.6 (2.7) (5.1%) Net Investment Income 646.6 672.1 (25.5) (3.8%) Realized Gains (Losses) on Investments (29.7) 0.0 (29.7) Gains (Losses) on Derivatives (8.9) - (8.9) Gains (Losses) on Sale of Subsidiaries 12.8 - 12.8 Other 153.1 145.1 8.0 5.5% -------- -------- -------- -------- Total Revenue 1,504.4 1,773.5 (269.2) (15.2%) Benefits and Expenses: Benefits 744.9 920.7 (175.8) (19.1%) Underwriting, Acquisition, Insurance and Other Expenses 569.7 664.5 (94.7) (14.3%) -------- -------- -------- -------- Total Benefits and Expenses 1,314.7 1,585.2 (270.5) (17.1%) -------- -------- -------- -------- Net Income before Federal Taxes 189.7 188.3 1.4 Federal Income Taxes 20.5 39.4 (18.9) -------- -------- -------- -------- Income before Accounting Changes 169.2 148.9 20.4 Cumulative Effect of Accounting Changes - - - -------- -------- -------- -------- Net Income 169.2 148.9 20.3 13.6% ======== ======== ======== ======== Income before Tax and Cumulative Effect of Accounting Changes By Segment Annuities 53.3 106.6 (53.3) Life Insurance 79.9 101.5 (21.6) Investment Management 5.5 9.9 (4.4) Lincoln UK 5.7 (30.8) 36.5 Corporate and Other* 45.3 1.1 44.2 -------- -------- -------- Income before Tax and Cumulative Effect of Accounting Changes 189.7 188.3 1.4 Pre-Tax Realized Gains (Losses) by Segment** Annuities (31.2) 4.2 (35.4) Life Insurance (30.5) (8.1) (22.4) Investment Management (1.1) (0.3) (0.8) Lincoln UK 4.3 3.8 0.5 Corporate and Other* 20.0 0.4 19.6 -------- -------- -------- Pre-Tax Realized Gains (Losses) on Investments and Derivatives (38.5) - (38.5) After-Tax Realized Gains (Losses) by Segment* Annuities (20.6) 2.8 (23.4) Life Insurance (19.8) (5.2) (14.6) Investment Management (0.7) (0.2) (0.5) -------- -------- -------- Lincoln UK 3.0 2.6 0.4 Corporate and Other* 13.5 1.2 12.3 -------- -------- -------- After-Tax Realized Gains (Losses) on Investments and Derivatives (24.6) 1.2 (25.8) For the Year Ended December 31 2001 2000 Amount Amount Change % Change -------- -------- -------- -------- Consolidated Condensed Statements of Income Revenue: Insurance Premiums and Fees 3,248.0 3,474.6 (226.5) (6.5%) Investment Advisory Fees 197.2 213.1 (15.9) (7.5%) Net Investment Income 2,679.6 2,747.1 (67.5) (2.5%) Realized Gains (Losses) on Investments (105.2) (28.3) (76.9) Gains (Losses) on Derivatives (9.3) - (9.3) Gains (Losses) on Sale of Subsidiaries 12.8 - 12.8 Other 388.2 445.1 (56.9) (12.8%) -------- -------- -------- -------- Total Revenue 6,411.4 6,851.5 (440.1) (6.4%) Benefits and Expenses: Benefits 3,409.7 3,557.2 (147.4) (4.1%) Underwriting, Acquisition, Insurance and Other Expenses 2,237.6 2,458.1 (220.5) (9.0%) -------- -------- -------- -------- Total Benefits and Expenses 5,647.3 6,015.2 (367.9) (6.1%) -------- -------- -------- -------- Net Income before Federal Taxes 764.1 836.3 (72.2) (8.6%) Federal Income Taxes 158.3 214.9 (56.6) (26.4%) -------- -------- -------- -------- Income before Accounting Changes 605.8 621.4 (15.6) Cumulative Effect of Accounting Changes (15.6) - (15.6) -------- -------- -------- -------- Net Income 590.2 621.4 (31.2) (5.0%) ======== ======== ======== ======== Income before Tax and Cumulative Effect of Accounting Changes By Segment Annuities 312.8 438.0 (125.2) Life Insurance 369.8 392.7 (22.9) Investment Management 19.1 58.2 (39.1) Lincoln UK 61.6 (23.8) 85.4 Corporate and Other* 0.8 (28.8) 29.6 -------- -------- -------- Income before Tax and Cumulative Effect of Accounting Changes 764.1 836.3 (72.2) Pre-Tax Realized Gains (Losses) by Segment** Annuities (64.8) (5.2) (59.6) Life Insurance (56.9) (17.4) (39.5) Investment Management (3.7) (3.9) 0.2 Lincoln UK 12.4 3.2 9.2 Corporate and Other* (1.5) (5.0) 3.5 -------- -------- -------- Pre-Tax Realized Gains (Losses) on Investments and Derivatives (114.5) (28.3) (86.2) After-Tax Realized Gains (Losses) by Segment* Annuities (42.5) (3.4) (39.1) Life Insurance (37.0) (10.7) (26.3) Investment Management (2.4) (2.5) 0.1 Lincoln UK 8.7 2.3 6.4 Corporate and Other* (0.4) (3.2) 2.8 -------- -------- -------- After-Tax Realized Gains (Losses) on Investments and Derivatives (73.6) (17.5) (56.1) * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations." ** Includes both realized gains (losses) on investments and gains (losses) on derivatives.
12/31/01 PAGE 4 Financial Highlights Unaudited [Amounts in Millions, except Retail Account Balances and Assets Managed] As of December December 2001 2000 Amount Amount Change % Change --------- ---------- ---------- ---------- Consolidated Condensed Balance Sheets Assets: Investments: Securities Available for Sale: Fixed Maturities 28,345.7 27,449.8 895.9 3.3% Equities 470.5 549.7 (79.3) (14.4%) Mortgage Loans on Real Estate 4,535.5 4,663.0 (127.4) (2.7%) Real Estate 267.9 282.0 (14.1) (5.0%) Policy Loans 1,939.7 1,960.9 (21.2) (1.1%) Other Long-Term Investments 553.8 463.3 90.6 19.5% --------- ---------- ---------- ---------- Total Investments 36,113.1 35,368.6 744.4 2.1% Other Assets: Assets Held in Separate Accounts 44,833.4 50,579.9 (5,746.5) (11.4%) Other Assets 17,055.0 13,895.5 3,159.5 22.7% --------- ---------- ---------- ---------- Total Assets 98,001.5 99,844.1 (1,842.5) (1.8%) ========= ========== ========== ========== Liabilities and Shareholders' Equity Liabilities: Insurance and Investment Contract Liabilities 40,857.2 40,105.2 752.0 1.9% Liabilities Related to Separate Accounts 44,833.4 50,579.9 (5,746.5) (11.4%) Other Liabilities 7,047.2 4,204.9 2,842.3 67.6% --------- ---------- ---------- ---------- Total Liabilities 92,737.8 94,890.0 (2,152.2) (2.3%) Shareholders' Equity: Net Unrealized Gains(Losses) on Securities and Derivatives 217.2 12.0 205.2 1702.8% Other Shareholders' Equity 5,046.5 4,942.0 104.5 2.1% --------- ---------- ---------- ---------- Total Shareholders' Equity 5,263.7 4,954.1 309.6 6.2% --------- ---------- ---------- ---------- Total Liabilities and Shareholders' Equity 98,042.4 99,844.1 (1,801.6) (1.8%) ========= ========== ========== ========== As of December 31 ($ billions) 2001 2000 Amount Amount Change % Change --------- ---------- ---------- ---------- Domestic Retail Account Balances: Annuities Segment - Fixed Annuities 16.491 15.394 1.097 7.1% Annuities Segment - Variable Annuities 34.638 39.427 (4.789) (12.1%) Annuities Segment - Life Insurance 0.149 0.160 (0.011) (6.9%) Life Insurance Segment - Life Insurance 11.377 10.847 0.530 4.9% Investment Management - Annuities 11.772 13.494 (1.722) (12.8%) Investment Management - Mutual Funds 11.065 12.805 (1.740) (13.6%) Investment Management - Wrap Fee & Other 1.782 1.375 0.407 29.6% Consolidating Adjustments (6.717) (7.753) --------- ---------- ---------- ---------- Total Domestic Account Balance 80.557 85.749 (5.191) (6.1%) ========= ========== ========== ========== Assets Managed by Advisor: Investment Management Segment 86.041 88.581 (2.540) (2.9%) Lincoln UK 6.847 7.873 (1.026) (13.0%) Policy Loans (within business units) 1.940 1.961 (0.021) (1.1%) Non-LNC Affiliates 31.422 32.858 (1.436) (4.4%) --------- ---------- ---------- ---------- Total Assets Managed 126.250 131.273 (5.023) (3.8%) ========= ========== ========== ==========
12/31/01 PAGE 5 Eleven-Year Summary Unaudited [Millions of Dollars except Per Share Data] For the Year Ended December 31 2001 2000 1999 1998 1997 1996 ------ ------ ------ ------ ------ ------ Revenue Annuities 1968.3 2133.7 2115.8 2068.1 2023.0 1805.0 Life Insurance 1840.6 1819.0 1760.4 1378.5 544.8 549.2 Investment Management 433.7 490.3 495.5 491.9 459.1 410.5 Lincoln UK 293.3 438.2 446.6 439.7 427.3 393.2 Employee Life - Health Benefits Corporate & Other* 1875.5 1970.4 1985.4 1708.9 1444.3 1575.6 ------ ------ ------ ------ ------ ------ Total Revenue 6411.4 6851.5 6803.7 6087.1 4898.5 4733.6 ====== ====== ====== ====== ====== ====== Income from Operations** Annuities 320.3 362.0 299.4 262.4 223.0 174.6 Life Insurance 279.0 259.9 212.0 149.2 39.9 41.2 Investment Management 14.6 44.1 61.0 43.9 18.1 18.6 Lincoln UK 60.2 61.0 (13.9) 70.9 (108.3) 66.0 Employee Life - Health Benefits Corporate & Other* 14.8 (8.0) (83.1) 4.0 (223.3) (1.7) ------ ------ ------ ------ ------ ------ Total Income from Cont Oper 689.0 719.1 475.5 530.4 (50.6) 298.8 Discontinued Operations 110.1 135.3 ------ ------ ------ ------ ------ ------ Income from Operations 689.0 719.1 475.5 530.4 59.4 434.1 ====== ====== ====== ====== ====== ====== Net Income Annuities 269.2 358.6 291.5 273.8 263.3 204.3 Life Insurance 233.1 249.3 211.5 127.5 39.1 51.8 Investment Management 11.8 37.0 51.6 44.4 25.1 25.0 Lincoln UK 68.9 (13.2) (18.2) 71.7 (106.8) 66.0 Employee Life - Health Benefits Corporate & Other* 7.2 (10.2) (76.1) (7.6) (198.4) 9.3 ------ ------ ------ ------ ------ ------ Total Net Inc from Cont Oper 590.2 621.4 460.4 509.8 22.2 356.4 Discontinued Operations 911.8 157.2 ------ ------ ------ ------ ------ ------ Total Net Income 590.2 621.4 460.4 509.8 934.0 513.6 ====== ====== ====== ====== ====== ====== OTHER DATA Assets 98001.5 99844.1 103095.7 93836.3 77174.7 71713.4 Shareholders' Equity: Securities and Derivatives at Market 5263.7 4954.1 4263.9 5387.9 4982.9 4470.0 Securities and Derivatives at Cost 5046.5 4942.0 4729.6 4835.6 4546.9 4057.1 Average Equity (Sec & Deriv at Cost) 5022.6 4831.9 4818.7 4685.6 4214.1 3866.0 Common Shares Outstanding: (millions) End of Period - Diluted 191.2 195.2 197.0 203.4 204.7 209.5 Average for the Period - Diluted 193.3 194.9 200.4 203.3 208.0 210.7 Per Share Data (Diluted) Income (Loss) from Continuing Operations $3.56 $3.69 $2.37 $2.61 ($0.24) $1.42 Income from Operations ** $3.56 $3.69 $2.37 $2.61 $0.29 $2.06 Net Income from Continuing Operations $3.05 $3.19 $2.30 $2.51 $0.11 $1.69 Net Income $3.05 $3.19 $2.30 $2.51 $4.49 $2.44 Shareholders' Equity: Shareholders' Equity (Sec & Deriv at Market) $28.10 $25.92 $21.76 $26.59 $24.63 $21.50 Shareholders' Equity (Sec & Deriv at Cost) $26.94 $25.85 $24.14 $23.86 $22.48 $19.51 Dividends Declared (Common Stock) $1.235 $1.175 $1.115 $1.055 $0.995 $0.935 Return on Equity (see page 30) Net Income/Average Equity 11.8% 12.9% 9.6% 10.9% 22.2% 13.3% Inc from Operations/Average Equity 13.7% 14.9% 9.9% 11.3% 1.4% 11.2% Market Value of Common Stock High for the Year $52.750 $56.375 $57.500 $49.438 $39.063 $28.500 Low for the Year $38.000 $22.625 $36.000 $33.500 $24.500 $20.375 Close for the Year $48.570 $47.313 $40.000 $40.907 $39.063 $26.250 Eleven-Year Summary Unaudited [Millions of Dollars except Per Share Data] Ten-year compound For the Year Ended December 31 1995 1994 1993 1992 1991 annual growth ------ ------ ------ ------ ------ ------------- Revenue Annuities 1877.1 1506.2 1603.8 1336.2 1216.7 4.9% Life Insurance 514.9 466.2 477.5 444.4 417.3 16.0% Investment Management 290.5 Lincoln UK 351.5 216.0 174.9 180.6 169.6 5.6% Employee Life - Health Benefits 314.9 1297.3 1241.6 2646.3 Corporate & Other* 1552.5 1429.2 1383.6 1539.3 1074.7 ------ ------ ------ ------ ------ ------ Total Revenue 4586.5 3932.5 4937.1 4742.1 5524.6 1.5% ====== ====== ====== ====== ====== ====== Income from Operations** Annuities 175.2 142.4 127.1 89.4 58.3 18.6% Life Insurance 35.4 34.2 37.8 46.8 31.5 24.4% Investment Management 20.6 Lincoln UK 45.9 17.2 11.9 9.2 14.3 26.0% Employee Life - Health Benefits 0.0 14.1 54.3 40.8 43.5 Corporate & Other* (136.2) 10.7 (33.5) (34.3) (39.3) ------ ------ ------ ------ ------ ------ Total Income from Cont Oper 140.8 218.6 197.6 151.9 108.3 21.7% Discontinued Operations 165.6 171.1 145.9 88.7 69.4 ------ ------ ------ ------ ------ ------ Income from Operations 306.5 389.7 343.5 240.6 177.7 14.5% ====== ====== ====== ====== ====== ====== Net Income Annuities 248.8 142.4 127.1 89.4 58.3 16.5% Life Insurance 40.6 34.2 37.8 46.8 31.5 22.2% Investment Management 27.4 Lincoln UK 45.7 18.5 12.6 9.2 14.3 Employee Life - Health Benefits 0.0 14.4 55.3 40.8 43.5 Corporate & Other* (61.1) (44.0) (156.4) 84.3 (15.1) ------ ------ ------ ------ ------ ------ Total Net Inc from Cont Oper 301.4 165.5 76.4 270.5 132.5 16.1% Discontinued Operations 180.8 184.4 242.5 88.7 69.4 ------ ------ ------ ------ ------ ------ Total Net Income 482.2 349.9 318.9 359.2 201.9 11.3% ====== ====== ====== ====== ====== ====== OTHER DATA Assets 63257.7 48864.8 47825.1 39042.2 33660.3 11.3% Shareholders' Equity: Securities and Derivatives at Market 4378.1 3042.1 4072.3 2826.8 2655.8 7.1% Securities and Derivatives at Cost 3679.9 3353.1 3157.6 2664.1 2445.8 7.5% Average Equity (Sec & Deriv at Cost) 3550.5 3288.6 3009.0 2575.0 2335.3 8.0% Common Shares Outstanding: (millions) End of Period - Diluted 210.3 208.3 208.3 187.7 185.4 Average for the Period - Diluted 209.5 208.7 206.1 186.8 189.2 Per Share Data (Diluted) Income (Loss) from Continuing Operations $0.67 $1.05 $0.96 $0.81 $0.57 20.1% Income from Operations ** $1.46 $1.87 $1.67 $1.29 $0.94 14.3% Net Income from Continuing Operations $1.44 $0.79 $0.37 $1.45 $0.70 15.9% Net Income $2.30 $1.68 $1.55 $1.92 $1.07 11.1% Shareholders' Equity: Shareholders' Equity (Sec & Deriv at Market) $20.95 $14.67 $19.69 $15.13 $14.35 7.0% Shareholders' Equity (Sec & Deriv at Cost) $17.61 $16.17 $15.27 $14.26 $13.21 7.4% Dividends Declared (Common Stock) $0.875 $0.830 $0.775 $0.738 $0.693 5.9% Return on Equity (see page 30) Net Income/Average Equity 13.6% 10.6% 10.6% 13.9% 8.6% Inc from Operations/Average Equity 8.6% 11.8% 11.4% 9.3% 7.6% Market Value of Common Stock High for the Year $26.875 $22.188 $24.125 $19.032 $13.813 Low for the Year $17.313 $17.313 $17.344 $12.625 $9.500 Close for the Year $26.875 $17.500 $21.750 $18.500 $13.688 13.5% * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations." ** "Income from Operations" is defined as "Net income less realized gain (loss) on investments and associated items, gain (loss) on sale of subsidiaries, restructuring charges, and cumulative effect of accounting changes, all net of taxes."
12/31/01 PAGE 6 Quarterly Summary Unaudited [Millions of Dollars except Per Share Data] Mar Jun Sep Dec Mar Jun For the Quarter Ended 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Revenue Annuities 524.4 533.0 520.5 538.0 548.7 530.5 Life Insurance 424.0 426.3 437.1 473.1 441.7 444.2 Investment Management 126.8 123.2 118.8 126.6 125.8 120.7 Lincoln UK 119.1 113.1 110.5 103.8 112.8 108.2 Corporate & Other* 481.0 482.8 455.2 566.4 440.2 489.0 ------ ------ ------ ------ ------ ------ Total Revenue 1675.4 1678.3 1642.1 1807.9 1669.2 1692.7 ====== ====== ====== ====== ====== ====== Income from Operations** Annuities 74.4 75.9 75.4 73.7 88.5 84.1 Life Insurance 48.1 54.4 52.6 57.0 60.4 62.4 Investment Management 15.4 14.3 14.7 16.5 12.4 13.1 Lincoln UK 18.1 19.0 16.2 (67.1) 15.7 19.3 Corporate & Other* (0.3) (11.9) (27.5) (43.5) (6.5) (5.9) ------ ------ ------ ------ ------ ------ Income from Operations 155.7 151.8 131.4 36.6 170.6 173.0 ====== ====== ====== ====== ====== ====== Net Income Annuities 76.8 76.4 68.4 69.9 91.2 84.4 Life Insurance 46.3 51.5 54.0 59.7 58.1 58.4 Investment Management 3.4 14.0 14.4 19.8 12.3 8.4 Lincoln UK 18.0 20.0 16.4 (72.6) 15.5 19.1 Corporate & Other* 0.6 (13.6) (20.9) (42.2) (6.8) (6.8) ------ ------ ------ ------ ------ ------ Total Net Income 145.1 148.4 132.3 34.6 170.2 163.6 ====== ====== ====== ====== ====== ====== OTHER DATA Assets 95350.3 98261.4 96500.7 103095.7 106340.0 103847.6 Shareholders' Equity Beg of Period (Sec & Deriv at Market) 5387.9 5107.4 4817.4 4662.2 4263.9 4340.4 End of Period (Sec & Deriv at Market) 5107.4 4817.4 4662.2 4263.9 4340.4 4223.7 End of Period (Sec & Deriv at Cost) 4852.8 4818.5 4766.0 4729.6 4751.6 4780.3 Average Equity (Sec & Deriv at Cost 4872.5 4834.2 4793.9 4774.2 4791.5 4753.0 Common Shares Outstanding Average for the Period - Diluted 203.6 201.9 199.0 197.1 195.8 194.0 End of Period - Diluted 203.2 200.9 196.9 197.0 195.1 193.7 Per Share Data (Diluted) Income from Operations ** $0.76 $0.75 $0.66 $0.19 $0.87 $0.89 Net Income $0.71 $0.73 $0.66 $0.18 $0.87 $0.84 Shareholders' Equity Shareholders' Equity (Sec & Deriv at Market) $25.30 $24.18 $23.76 $21.76 $22.45 $22.10 Shareholders' Equity (Sec & Deriv at Cost) $24.04 $24.18 $24.28 $24.14 $24.58 $25.01 Dividends Declared (Com Stk) $0.275 $0.275 $0.275 $0.290 $0.290 $0.290 Return on Equity (see page 30) Net Income/Average Equity 11.9% 12.3% 11.0% 2.9% 14.2% 13.8% Inc from Operations/Average Equity 12.8% 12.6% 11.0% 3.1% 14.2% 14.6% Market Value of Common Stock Highest Price $50.250 $53.438 $57.500 $48.313 $41.375 $40.063 Lowest Price $39.281 $45.688 $36.000 $36.500 $22.625 $29.000 Closing Price $49.438 $52.313 $37.563 $40.000 $33.500 $36.125 Quarterly Summary (continued) Unaudited [Millions of Dollars except Per Share Data] Sep Dec Mar Jun Sep Dec For the Quarter Ended 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Revenue Annuities 532.1 522.3 510.4 512.1 478.2 467.5 Life Insurance 453.2 479.9 459.6 455.7 460.6 464.7 Investment Management 123.8 120.0 112.3 110.3 104.7 106.5 Lincoln UK 112.8 104.3 84.9 68.9 76.3 63.2 Corporate & Other* 494.1 547.0 531.6 452.0 489.5 402.5 ------ ------ ------ ------ ------ ------ Total Revenue 1716.1 1773.5 1698.8 1599.0 1609.3 1504.4 ====== ====== ====== ====== ====== ====== Income from Operations** Annuities 102.9 86.4 82.3 90.8 72.4 74.8 Life Insurance 66.5 70.6 68.6 67.1 70.1 73.2 Investment Management 9.9 8.7 2.4 3.7 3.5 5.1 Lincoln UK 10.6 15.5 14.4 16.2 10.1 19.5 Corporate & Other* 0.9 3.5 10.9 (9.7) (12.9) 26.5 ------ ------ ------ ------ ------ ------ Income from Operations 190.7 184.7 178.6 168.1 143.2 199.1 ====== ====== ====== ====== ====== ====== Net Income Annuities 93.8 89.2 76.6 79.9 58.6 54.2 Life Insurance 67.4 65.4 62.9 53.5 64.7 51.9 Investment Management 9.7 6.6 2.0 2.9 2.9 4.0 Lincoln UK (29.9) (17.9) 14.8 17.6 14.0 22.5 Corporate & Other* (2.3) 5.7 4.0 (12.2) (21.2) 36.7 ------ ------ ------ ------ ------ ------ Total Net Income 138.6 148.9 160.2 141.7 119.1 169.2 ====== ====== ====== ====== ====== ====== OTHER DATA Assets 103243.1 99844.1 94122.4 96431.2 90206.0 98001.5 Shareholders' Equity Beg of Period (Sec & Deriv at Market) 4223.7 4538.6 4954.1 5096.4 5055.9 5368.6 End of Period (Sec & Deriv at Market) 4538.6 4954.1 5096.4 5055.9 5368.6 5263.7 End of Period (Sec & Deriv at Cost) 4876.3 4942.0 4882.7 4952.8 5100.4 5046.5 Average Equity (Sec & Deriv at Cost 4867.2 4915.7 4953.7 4920.2 5085.0 5131.5 Common Shares Outstanding Average for the Period - Diluted 195.6 195.6 193.7 192.0 194.8 192.8 End of Period - Diluted 196.2 195.2 191.3 192.9 193.3 191.2 Per Share Data (Diluted) Income from Operations ** $0.98 $0.94 $0.92 $0.88 $0.74 $1.03 Net Income $0.71 $0.76 $0.83 $0.74 $0.61 $0.88 Shareholders' Equity Shareholders' Equity (Sec & Deriv at Market) $23.67 $25.92 $27.09 $26.87 $28.29 $28.10 Shareholders' Equity (Sec & Deriv at Cost) $25.43 $25.85 $25.96 $26.32 $26.87 $26.94 Dividends Declared (Com Stk) $0.290 $0.305 $0.305 $0.305 $0.305 $0.320 Return on Equity (see page 30) Net Income/Average Equity 11.4% 12.1% 12.9% 11.5% 9.4% 13.2% Inc from Operations/Average Equity 15.7% 15.0% 14.4% 13.7% 11.3% 15.5% Market Value of Common Stock Highest Price $56.375 $50.938 $48.250 $52.300 $52.750 $49.450 Lowest Price $35.625 $40.875 $38.000 $41.280 $41.000 $40.000 Closing Price $48.125 $47.313 $42.470 $51.750 $46.630 $48.570 * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations." ** "Income from Operations" is defined as "net income less realized gain (loss) on investments and associated items, gain (loss) on sale of subsidiaries, restructuring charges, and cumulative effect of accounting changes, all net of taxes."
12/31/01 PAGE 7 Reconciliation of Business Segments to Consolidated Income Statement Unaudited [Millions of Dollars] For the Quarter Ended December 31 Annuities Life Insurance Dec Dec Dec Dec 2001 2000 2001 2000 -------- -------- -------- -------- Operating Revenue Life and annuity premiums 12.7 16.2 64.3 67.1 Surrender charges 7.2 9.1 19.9 19.9 Mortality assessments 125.5 122.1 Expense assessments 126.2 154.2 52.8 55.5 Health premiums 0.1 0.0 Investment advisory fees Other revenue and fees 10.0 3.5 6.0 3.7 Net investment income 342.6 335.0 226.6 219.7 Earnings in Unconsolidated Affiliates -------- -------- -------- -------- Operating Revenue 498.7 518.1 495.2 488.0 -------- -------- -------- -------- Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 55.3 59.0 112.9 121.0 Div accum & div to policyholders 25.4 25.3 Interest credited to policy bal. 227.5 213.2 146.9 136.5 Health policy benefits (0.0) 0.0 Underwriting, acquisition, insurance and other expenses 131.1 143.2 91.4 89.6 Goodwill amortization 0.3 0.3 5.9 5.9 Interest 0.0 -------- -------- -------- -------- Operating Benefits and Expenses 414.2 415.7 382.5 378.4 -------- -------- -------- -------- Income from Operations Before Tax 84.5 102.3 112.7 109.6 Federal income taxes 9.7 15.9 39.5 39.0 -------- -------- -------- -------- Income from Operations 74.8 86.4 73.2 70.6 -------- -------- -------- -------- Restructuring charges (1.5) Realized gains (losses) on investments (20.7) 2.8 (21.3) (5.2) Gains (losses) on derivatives 0.1 1.5 Gain on sale of subsidiaries -------- -------- -------- -------- Income before Accounting Changes 54.2 89.2 51.9 65.4 Cumulative effect of accounting changes 0.0 (0.0) Net Income 54.2 89.2 51.9 65.4 ======== ======== ======== ======== Inc. from Oper.-before Goodwill Amort. 75.1 86.7 79.1 76.5 -------- -------- -------- -------- Investment For the Quarter Ended December 31 Management Lincoln UK Dec Dec Dec Dec 2001 2000 2001 2000 -------- -------- -------- -------- Operating Revenue Life and annuity premiums 11.4 39.7 Surrender charges Mortality assessments 7.1 7.5 Expense assessments 24.1 34.6 Health premiums 0.5 0.8 Investment advisory fees 71.4 79.9 Other revenue and fees 23.4 26.6 0.6 1.3 Net investment income 12.8 13.8 15.2 16.7 Earnings in Unconsolidated Affiliates -------- -------- -------- -------- Operating Revenue 107.6 120.2 58.9 100.6 -------- -------- -------- -------- Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 16.7 50.7 Div accum & div to policyholders Interest credited to policy bal. Health policy benefits 4.1 3.5 Underwriting, acquisition, insurance and other expenses 96.4 103.0 36.5 34.9 Goodwill amortization 4.1 4.1 0.2 0.2 Interest (0.0) -------- -------- -------- -------- Operating Benefits and Expenses 100.4 107.1 57.5 89.3 -------- -------- -------- -------- Income from Operations Before Tax 7.1 13.1 1.4 11.3 Federal income taxes 2.1 4.4 (18.1) (4.2) -------- -------- -------- -------- Income from Operations 5.1 8.7 19.5 15.5 -------- -------- -------- -------- Restructuring charges (0.4) (1.9) (36.1) Realized gains (losses) on investments (0.7) (0.2) 3.0 2.6 Gains (losses) on derivatives Gain on sale of subsidiaries -------- -------- -------- -------- Income before Accounting Changes 4.0 6.6 22.5 (17.9) Cumulative effect of accounting changes Net Income 4.0 6.6 22.5 (17.9) ======== ======== ======== ======== Inc. from Oper.-before Goodwill Amort. 9.1 12.7 19.7 15.7 -------- -------- -------- -------- Corporate and Consolidating Other Operations* Adjustments Dec Dec Dec Dec 2001 2000 2001 2000 -------- -------- -------- -------- Operating Revenue Life and annuity premiums 182.3 273.2 Surrender charges 0.1 0.8 0.5 0.5 Mortality assessments 0.0 0.0 Expense assessments (0.0) 0.0 9.3 12.8 Health premiums 35.5 88.6 Investment advisory fees (20.5) (26.3) Other revenue and fees 117.7 161.5 (8.9) (51.9) Net investment income 71.2 99.3 (21.9) (12.3) Earnings in Unconsolidated Affiliates 4.3 0.6 -------- -------- -------- -------- Operating Revenue 411.1 623.9 (41.4) (77.2) -------- -------- -------- -------- Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 117.9 199.2 Div accum & div to policyholders 1.2 2.1 Interest credited to policy bal. 7.0 11.9 9.2 9.9 Health policy benefits 20.9 88.3 Underwriting, acquisition, insurance and other expenses 181.9 271.2 (34.3) (69.1) Goodwill amortization 0.3 0.4 (0.0) Interest 46.8 56.7 (21.9) (23.3) -------- -------- -------- -------- Operating Benefits and Expenses 376.0 629.9 (46.9) (82.5) -------- -------- -------- -------- Income from Operations Before Tax 35.2 (6.0) 5.6 5.2 Federal income taxes 12.9 (8.0) 1.4 3.7 -------- -------- -------- -------- Income from Operations 22.3 2.0 4.2 1.5 Restructuring charges (18.3) 1.0 Realized gains (losses) on investments 25.1 0.6 (5.4) 0.6 Gains (losses) on derivatives (6.3) Gain on sale of subsidiaries 15.0 -------- -------- -------- -------- Income before Accounting Changes 37.8 3.6 (1.2) 2.1 Cumulative effect of accounting changes (0.0) -------- -------- -------- -------- Net Income 37.8 3.6 (1.2) 2.1 ======== ======== ======== ======== Inc. from Oper.-before Goodwill Amort. 22.6 2.4 4.2 1.5 -------- -------- -------- -------- Consolidated Dec Dec 2001 2000 -------- -------- Operating Revenue Life and annuity premiums 270.7 396.1 Surrender charges 27.7 30.3 Mortality assessments 132.6 129.6 Expense assessments 212.4 257.1 Health premiums 36.1 89.4 Investment advisory fees 50.9 53.6 Other revenue and fees 148.8 144.6 Net investment income 646.6 672.1 Earnings in Unconsolidated Affiliates 4.3 0.6 -------- -------- Operating Revenue 1530.1 1773.5 -------- -------- Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 302.8 430.0 Div accum & div to policyholders 26.6 27.4 Interest credited to policy bal. 390.6 371.5 Health policy benefits 25.0 91.8 Underwriting, acquisition, insurance and other expenses 503.0 572.9 Goodwill amortization 10.7 10.9 Interest 25.0 33.4 -------- -------- Operating Benefits and Expenses 1283.7 1537.9 -------- -------- Income from Operations Before Tax 246.5 235.6 Federal income taxes 47.4 50.9 -------- -------- Income from Operations 199.1 184.7 Restructuring charges (20.2) (37.0) Realized gains (losses) on investments (20.0) 1.2 Gains (losses) on derivatives (4.6) Gain on sale of subsidiaries 15.0 -------- -------- Income before Accounting Changes 169.2 148.9 Cumulative effect of accounting changes (0.0) -------- -------- Net Income 169.2 148.9 ======== ======== Inc. from Oper.-before Goodwill Amort. 209.8 195.6 * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations."
12/31/01 PAGE 7A Reconciliation of Business Segments to Consolidated Income Statement Unaudited [Millions of Dollars] Investment For the Year Ended December 31 Annuities Life Insurance Management Lincoln UK ----------------- ----------------- --------------- ---------------- Dec Dec Dec Dec Dec Dec Dec Dec 2001 2000 2001 2000 2001 2000 2001 2000 ------- ------- ------- ------- ------- ------- ------- ------- Operating Revenue Life and annuity premiums 77.5 64.3 212.3 227.2 43.6 143.3 Surrender charges 31.2 41.8 66.1 66.4 Mortality assessments 499.4 465.2 33.9 31.4 Expense assessments 537.7 628.4 191.4 191.8 134.8 178.1 Health premiums 0.1 0.1 2.5 5.1 Investment advisory fees 284.6 320.5 Other revenue and fees 16.7 11.0 17.9 14.2 99.2 115.9 1.3 6.9 Net investment income 1370.0 1393.5 910.2 871.5 53.6 57.7 64.8 70.3 Earnings in Unconsolidated Affiliates ------- ------- ------- ------- ------- ------- ------- ------- Operating Revenue 2033.1 2138.9 1897.5 1836.4 437.4 494.2 280.9 435.0 ------- ------- ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 263.9 254.7 418.6 411.5 70.8 164.1 Div accum & div to policyholders 78.5 80.8 Interest credited to policy bal. 863.8 866.1 569.9 525.4 Health policy benefits (0.0) 0.1 12.5 14.4 Underwriting, acquisition, insurance and other expenses 524.5 575.5 374.7 384.8 397.8 408.7 147.6 180.0 Goodwill amortization 1.2 (0.6) 23.7 23.7 16.2 16.2 0.6 4.0 Interest 0.0 0.0 ------- ------- ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses 1653.5 1695.7 1465.4 1426.3 414.1 425.0 231.7 362.6 ------- ------- ------- ------- ------- ------- ------- ------- Income from Operations Before Tax 379.6 443.2 432.1 410.1 23.4 69.2 49.2 72.4 Federal income taxes 59.3 81.2 153.0 150.1 8.7 25.1 (11.1) 11.3 ------- ------- ------- ------- ------- ------- ------- ------- Income from Operations 320.3 362.0 279.0 259.9 14.6 44.1 60.2 61.0 ------- ------- ------- ------- ------- ------- ------- ------- Restructuring charges (1.3) (3.5) (0.4) (4.6) (76.5) Realized gains (losses) on investments (42.3) (3.4) (38.5) (10.7) (2.4) (2.5) 8.7 2.3 Gains (losses) on derivatives (0.2) 1.6 Gain on sale of subsidiaries ------- ------- ------- ------- ------- ------- ------- ------- Income before Accounting Changes 276.5 358.6 238.6 249.3 11.9 37.0 68.9 (13.2) Cumulative effect of accounting changes (7.3) (5.5) (0.1) ------- ------- ------- ------- ------- ------- ------- ------- Net Income 269.2 358.6 233.1 249.3 11.8 37.0 68.9 (13.2) ======= ======= ======= ======= ======= ======= ======= ======= Inc. from Oper.-before Goodwill Amort. 321.5 361.4 302.7 283.6 30.9 60.3 60.9 65.1 ------- ------- ------- ------- ------- ------- ------- ------- Corporate Consolidating Other Operations* Adjustments Consolidated ----------------- ----------------- ---------------- Dec Dec Dec Dec Dec Dec 2001 2000 2001 2000 2001 2000 ------- ------- ------- ------- ------- ------- Operating Revenue Life and annuity premiums 1030.1 968.5 1363.4 1403.3 Surrender charges 1.9 3.7 2.2 2.8 101.5 114.7 Mortality assessments 0.1 0.0 533.3 496.5 Expense assessments (0.0) 0.0 45.3 52.0 909.2 1050.2 Health premiums 337.9 404.6 340.6 409.8 Investment advisory fees (87.5) (107.4) 197.2 213.1 Other revenue and fees 378.8 475.0 (131.4) (177.6) 382.5 445.4 Net investment income 375.9 411.0 (94.8) (56.8) 2679.6 2747.1 Earnings in Unconsolidated Affiliates 5.7 (0.4) 5.7 (0.4) ------- ------- ------- ------- ------- ------- Operating Revenue 2130.3 2262.5 (266.1) (287.1) 6513.0 6879.8 ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 764.6 716.1 1517.9 1546.4 Div accum & div to policyholders 5.2 6.7 83.7 87.6 Interest credited to policy bal. 33.6 42.2 38.7 40.5 1506.0 1474.2 Health policy benefits 289.6 434.5 302.1 449.0 Underwriting, acquisition, insurance and other expenses 810.5 864.2 (220.0) (244.9) 2035.2 2168.4 Goodwill amortization 1.7 1.8 (0.0) 43.4 45.1 Interest 215.8 230.5 (94.8) (91.0) 121.0 139.5 ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses 2120.8 2296.0 (276.1) (295.4) 5609.4 5910.3 ------- ------- ------- ------- ------- ------- Income from Operations Before Tax 9.5 (33.6) 9.9 8.3 903.6 969.6 Federal income taxes 2.0 (21.0) 2.7 3.7 214.7 250.5 ------- ------- ------- ------- ------- ------- Income from Operations 7.6 (12.5) 7.2 4.5 689.0 719.1 Restructuring charges (19.5) 1.0 (24.7) (80.2) Realized gains (losses) on investments 11.5 7.7 (5.6) (10.9) (68.7) (17.5) Gains (losses) on derivatives (6.3) (4.9) Gain on sale of subsidiaries 15.0 15.0 ------- ------- ------- ------- ------- ------- Income before Accounting Changes 8.2 (3.9) 1.6 (6.3) 605.8 621.4 Cumulative effect of accounting changes (2.7) (15.6) ------- ------- ------- ------- ------- ------- Net Income 5.6 (3.9) 1.6 (6.3) 590.2 621.4 ======= ======= ======= ======= ======= ======= Inc. from Oper.-before Goodwill Amort. 9.2 (10.8) 7.2 4.5 732.4 764.2 ------- ------- ------- ------- ------- ------- * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations."
12/31/2001 PAGE 8 Statement of Consolidated Income Unaudited [Millions of Dollars] For the Year Ended December 31 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ Operating Revenue Life and annuity premiums 756.2 985.6 1183.0 1403.3 1363.4 Surrender charges 45.4 91.5 110.2 114.7 101.5 Mortality assessments 186.4 380.1 496.4 496.5 533.3 Expense assessments 600.3 803.0 930.9 1050.2 909.2 Health premiums 572.6 635.1 698.5 409.8 340.6 Investment advisory fees 204.9 227.1 223.8 213.1 197.2 Other revenue and fees 157.3 261.0 344.5 445.4 382.5 Net investment income 2250.8 2681.4 2807.5 2747.1 2679.6 Earnings in Unconsolidated Affiliates 2.1 3.3 5.8 (0.4) 5.7 ------ ------ ------ ------ ------ Operating Revenue 4775.9 6068.0 6800.7 6879.8 6513.0 ------ ------ ------ ------ ------ Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 1090.2 1237.7 1546.6 1546.4 1517.9 Div accum & div to policyholders 29.7 78.0 88.4 87.6 83.7 Interest credited to policy bal. 1238.7 1446.2 1510.4 1474.2 1506.0 Health policy benefits 833.1 566.9 659.7 449.0 302.1 Underwriting, acquisition, insurance and other expenses 1557.3 1844.2 2218.5 2168.4 2035.2 Goodwill amortization 15.6 44.5 49.2 45.1 43.4 Interest 92.5 117.1 133.7 139.5 121.0 ------ ------ ------ ------ ------ Operating Benefits and Expenses 4857.2 5334.6 6206.4 5910.3 5609.4 ------ ------ ------ ------ ------ Income from Operations Before Tax (81.3) 733.4 594.4 969.6 903.6 Federal income taxes (30.6) 203.0 118.9 250.5 214.7 ------ ------ ------ ------ ------ Income from Continuing Operations (50.6) 530.4 475.5 719.1 689.0 ------ ------ ------ ------ ------ Discontinued Operations 911.8 Restructuring charges (34.3) (18.9) (80.2) (24.7) Realized gains (losses) on investments 72.9 13.7 3.8 (17.5) (68.7) Gains (losses) on derivatives (4.9) Gain on sale of subsidiaries 15.0 ------ ------ ------ ------ ------ Income before Accounting Changes 934.0 509.8 460.4 621.4 605.8 Cumulative Effect of Accounting Changes (15.6) ------ ------ ------ ------ ------ Net Income 934.0 509.8 460.4 621.4 590.2 ====== ====== ====== ====== ====== - ------------------------------------------------------------------------------------------------------------------ For the Quarter Ended Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Operating Revenue Life and annuity premiums 284.2 274.0 263.8 361.1 331.2 337.1 Surrender charges 25.5 27.1 28.4 29.2 28.7 29.8 Mortality assessments 137.3 122.2 118.2 118.7 118.5 122.5 Expense assessments 215.3 231.5 245.9 238.3 261.1 258.6 Health premiums 154.9 160.3 149.6 233.6 58.4 144.0 Investment advisory fees 58.8 56.3 54.6 54.1 54.0 52.2 Other revenue and fees 86.4 109.0 77.9 71.2 106.1 88.7 Net investment income 709.5 700.8 697.1 700.1 711.1 673.8 Earnings in Unconsolidated Affiliates 1.6 1.1 1.2 1.8 1.0 (3.6) ------ ------ ------ ------ ------ ------ Operating Revenue 1673.4 1682.4 1636.7 1808.2 1670.2 1703.0 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 344.6 335.5 294.0 572.5 356.1 370.1 Div accum & div to policyholders 21.5 22.5 21.2 23.3 21.7 20.2 Interest credited to policy bal. 375.1 377.1 369.7 388.5 373.9 366.8 Health policy benefits 145.5 166.6 189.8 157.8 114.3 119.9 Underwriting, acquisition, insurance and other expenses 522.4 532.1 533.4 630.5 525.7 537.5 Goodwill amortization 11.8 9.9 12.9 14.6 10.2 12.0 Interest 33.1 32.6 33.3 34.7 36.3 35.4 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses 1454.1 1476.3 1454.1 1821.8 1438.2 1461.9 ------ ------ ------ ------ ------ ------ Income from Operations before Tax/Min Int. 219.3 206.1 182.6 (13.6) 232.0 241.1 Federal income taxes 63.6 54.2 51.2 (50.2) 61.6 67.9 ------ ------ ------ ------ ------ ------ Inc from Operations before Min Int 155.7 151.8 131.4 36.6 170.4 173.2 ------ ------ ------ ------ ------ ------ Minority Interest (0.2) 0.2 ------ ------ Income from Operations 155.7 151.8 131.4 36.6 170.6 173.0 ------ ------ ------ ------ ------ ------ Restructuring charges (12.1) (3.2) (3.6) (2.7) Realized gains (losses) on investments 1.5 (3.5) 4.1 1.6 (0.4) (6.7) Gains (losses) on derivatives Gain on sale of subsidiaries ------ ------ ------ ------ ------ ------ Income before Accounting Changes 145.1 148.4 132.3 34.6 170.2 163.6 Cumulative Effect of Accounting Changes ------ ------ ------ ------ ------ ------ Net Income 145.1 148.4 132.3 34.6 170.2 163.6 ====== ====== ====== ====== ====== ====== - ------------------------------------------------------------------------------------------------------------------ For the Quarter Ended Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Operating Revenue Life and annuity premiums 339.0 396.1 402.1 353.9 336.8 270.7 Surrender charges 25.9 30.3 27.8 22.8 23.2 27.7 Mortality assessments 125.9 129.6 133.7 133.7 133.3 132.6 Expense assessments 273.4 257.1 244.9 227.5 224.4 212.4 Health premiums 117.9 89.4 104.8 95.7 103.9 36.1 Investment advisory fees 53.3 53.6 49.4 49.6 47.2 50.9 Other revenue and fees 106.0 144.6 82.0 60.3 91.5 148.8 Net investment income 690.0 672.1 673.7 673.1 686.2 646.6 Earnings in Unconsolidated Affiliates 1.6 0.6 0.9 0.0 0.4 4.3 ------ ------ ------ ------ ------ ------ Operating Revenue 1733.1 1773.5 1719.5 1616.5 1646.9 1530.1 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses Ins. benefits paid or provided: Life and annuity policy benefits 390.2 430.0 418.9 373.6 422.6 302.8 Div accum & div to policyholders 18.2 27.4 18.9 20.2 18.0 26.6 Interest credited to policy bal. 362.0 371.5 367.1 369.7 378.7 390.6 Health policy benefits 123.0 91.8 101.8 91.5 83.8 25.0 Underwriting, acquisition, insurance and other expenses 532.4 572.9 524.8 491.4 516.0 503.0 Goodwill amortization 12.0 10.9 10.9 10.9 10.9 10.7 Interest 34.4 33.4 34.4 32.0 29.6 25.0 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses 1472.2 1537.9 1476.7 1389.3 1459.6 1283.7 ------ ------ ------ ------ ------ ------ Income from Operations before Tax/Min Int. 260.8 235.6 242.7 227.2 187.3 246.5 Federal income taxes 70.1 50.9 64.1 59.1 44.1 47.4 ------ ------ ------ ------ ------ ------ Inc from Operations before Min Int 190.7 184.7 178.6 168.1 143.2 199.1 ------ ------ ------ ------ ------ ------ Minority Interest (0.0) 0.0 (0.0) (0.0) (0.0) (0.0) ------ ------ ------ ------ ------ ------ Income from Operations 190.7 184.7 178.6 168.1 143.2 199.1 ------ ------ ------ ------ ------ ------ Restructuring charges (40.5) (37.0) (0.7) (3.9) 0.0 (20.2) Realized gains (losses) on investments (11.6) 1.2 (13.4) (11.5) (23.8) (20.0) Gains (losses) on derivatives (0.1) 0.2 (0.4) (4.6) Gain on sale of subsidiaries 15.0 ------ ------ ------ ------ ------ ------ Income before Accounting Changes 138.6 148.9 164.5 153.0 119.1 169.2 Cumulative Effect of Accounting Changes (4.3) (11.3) (0.0) ------ ------ ------ ------ ------ ------ Net Income 138.6 148.9 160.2 141.7 119.1 169.2 ====== ====== ====== ====== ====== ======
12/31/01 PAGE 9 Reconciliation of Business Segments to Consolidated Balance Sheets Unaudited [Millions of Dollars] Investment Annuities Life Insurance Management Lincoln UK ------------------ ------------------ ------------------ ------------------ ASSETS Dec Dec Dec Dec Dec Dec Dec Dec 2001 2000 2001 2000 2001 2000 2001 2000 ------- ------- ------- ------- ------- ------- ------- ------- Investments Corporate bonds 10956.5 8892.4 7088.2 6353.6 424.2 333.6 512.3 457.6 U.S. government bonds 13.2 25.8 78.2 86.4 0.2 0.2 Foreign government bonds 145.8 135.5 114.6 125.8 1.9 326.2 444.8 Asset/Mortgage backed securities 1945.8 2299.7 779.1 829.3 42.5 49.0 State and municipal bonds 24.3 6.3 17.4 7.9 Preferred stocks-redeemable 62.7 120.5 13.0 24.6 8.8 9.6 Common stocks 7.6 13.6 211.3 265.2 Preferred stocks-equity 38.5 45.8 5.6 9.2 2.6 2.4 Mortgage loans 2378.1 2324.0 1701.6 1765.9 92.4 95.5 0.3 0.3 Real estate 0.2 0.3 Policy loans 491.4 509.9 1439.7 1440.5 8.6 10.5 Other long-term investments 11.7 5.2 20.9 16.9 ------- ------- ------- ------- ------- ------- ------- ------- Total Investments 16068.0 14365.2 11265.9 10673.8 572.6 490.4 1058.8 1178.8 ------- ------- ------- ------- ------- ------- ------- ------- Allocated investments 3481.0 3598.0 1154.7 1131.7 102.4 122.8 Notes receivable from LNC 333.3 441.2 27.6 466.7 82.9 126.3 Invest in unconsol affiliates Cash and invested cash (24.7) (108.8) (36.4) (67.2) 55.4 68.6 181.2 253.5 Property and equipment 8.5 7.0 36.5 22.6 39.3 50.8 Premium and fees receivable 0.0 (1.8) 8.2 45.6 38.5 34.4 Accrued investment income 245.0 210.8 187.6 169.5 8.9 7.8 20.9 22.8 Assets held in separate accounts 34324.6 39322.1 1491.0 1270.1 5607.2 6440.9 Federal income tax recoverable Amount recoverable from reinsurers 1211.6 1309.5 859.5 989.1 Deferred acquisition costs 912.8 812.5 1265.6 1079.3 587.3 635.0 Other intangible assets 154.5 169.2 964.0 1040.5 50.1 60.9 244.0 273.6 Goodwill 43.9 45.2 855.1 878.7 300.7 316.9 12.1 13.0 Other 138.1 104.1 358.4 254.3 212.5 188.6 37.9 (104.9) ------- ------- ------- ------- ------- ------- ------- ------- Total Assets 56888.2 60267.1 18409.7 17939.1 1460.5 1439.0 7788.8 8763.7 ======= ======= ======= ======= ======= ======= ======= ======= Corporate and Consolidating Other Operations* Adjustments Consolidated ------------------ ------------------ ------------------ ASSETS Dec Dec Dec Dec Dec Dec 2001 2000 2001 2000 2001 2000 ------- ------- ------- ------- ------- ------- Investments Corporate bonds 4123.9 5212.4 23105.1 21249.7 U.S. government bonds 318.9 430.4 410.5 542.9 Foreign government bonds 586.2 615.0 1174.7 1321.1 Asset/Mortgage backed securities 757.3 982.4 3524.7 4160.4 State and municipal bonds 3.0 0.3 44.7 14.6 Preferred stocks-redeemable 1.4 6.5 85.9 161.2 Common stocks 100.5 157.8 319.3 436.6 Preferred stocks-equity 104.5 55.6 151.2 113.1 Mortgage loans 363.0 477.2 4535.5 4663.0 Real estate 269.0 283.0 (1.3) (1.3) 267.9 282.0 Policy loans 1939.7 1960.9 Other long-term investments 1771.3 1691.2 (1250.0) (1250.0) 553.8 463.3 ------- ------- ------- ------- ------- ------- Total Investments 8399.1 9911.9 (1251.3) (1251.3) 36113.1 35368.6 ------- ------- ------- ------- ------- ------- Allocated investments 50.0 323.7 (4788.2) (5176.1) (0.0) (0.0) Notes receivable from LNC (443.7) (1033.7) (0.1) (0.5) 0.0 (0.0) Invest in unconsol affiliates 8.1 6.4 8.1 6.4 Cash and invested cash 3139.5 1978.8 (210.5) (197.5) 3104.4 1927.4 Property and equipment 173.2 147.8 257.5 228.2 Premium and fees receivable 365.6 215.6 (12.2) 3.0 400.1 296.7 Accrued investment income 101.0 135.5 563.5 546.4 Assets held in separate accounts 3410.5 3546.7 44833.4 50579.9 Federal income tax recoverable 6.3 207.5 6.3 207.5 Amount recoverable from reinsurers 4150.6 1649.5 (191.4) (200.3) 6030.4 3747.7 Deferred acquisition costs 33.9 462.6 85.6 81.1 2885.3 3070.5 Other intangible assets 12.8 1412.6 1557.0 Goodwill (0.0) 33.7 (1.6) 1211.8 1286.0 Other 1032.9 901.8 (604.7) (322.2) 1175.1 1021.6 ------- ------- ------- ------- ------- ------- Total Assets 17753.8 14746.4 (4258.7) (3311.2) 98042.4 99844.1 ======= ======= ======= ======= ======= ======= * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations."
12/31/01 PAGE 10 Reconciliation of Business Segments to Consolidated Balance Sheets Unaudited [Millions of Dollars] Annuities Life Insurance LIABILITIES and SHAREHOLDERS' EQUITY Dec Dec Dec Dec 2001 2000 2001 2000 --------- --------- --------- --------- Liabilities Insurance and Inv Contract Liabilities: Life and annuity reserves 2622.7 2686.4 12955.8 12783.9 Health reserves 0.3 0.1 Unpaid claims - life and health 31.3 7.1 92.9 108.1 Unearned premiums 0.0 0.1 Premium deposit funds 17838.9 16331.4 13.9 13.9 Participating policyholders' funds 100.2 139.4 Other policyholders' funds 555.2 515.4 Liab related to separate accounts 34324.6 39322.1 1491.0 1270.1 --------- --------- --------- --------- Total Insurance and Inv Contract Liabilities 54817.5 58347.0 15209.5 14830.9 Federal income taxes (5.7) (108.7) (13.5) (113.7) Short-term debt 10.0 Long-term debt Minority Interest in pref. securities of sub. Notes payable to LNC Other liabilities 168.4 274.4 436.3 567.9 Deferred gain on indemnity reinsurance --------- --------- --------- --------- Total Liabilities 54980.3 58512.7 15642.2 15285.2 --------- --------- --------- --------- Net unrealized gains (losses) on securities 79.9 (44.7) 13.6 (44.9) Gains (losses) on derivatives 0.3 4.5 Other shareholders' equity 1824.9 1799.1 2738.4 2698.8 S/Hs' equity-minimum pension liability adjustment Cumulative effect of accounting change 2.8 11.1 --------- --------- --------- --------- Shareholders' Equity 1907.9 1754.4 2767.5 2653.9 --------- --------- --------- --------- Total Liabilities and S/Hs' Equity 56888.2 60267.1 18409.7 17939.1 ========= ========= ========= ========= Investment Management Lincoln UK LIABILITIES and SHAREHOLDERS' EQUITY Dec Dec Dec Dec 2001 2000 2001 2000 --------- -------- -------- -------- Liabilities Insurance and Inv Contract Liabilities: Life and annuity reserves 1338.1 1529.1 Health reserves 46.0 50.7 Unpaid claims - life and health 42.4 46.6 Unearned premiums Premium deposit funds 29.2 32.9 Participating policyholders' funds Other policyholders' funds Liab related to separate accounts 5607.2 6440.9 --------- -------- -------- -------- Total Insurance and Inv Contract Liabilities 7063.0 8100.3 Federal income taxes 43.3 28.3 (12.2) 3.1 Short-term debt 9.3 Long-term debt Minority Interest in pref. securities of sub. Notes payable to LNC Other liabilities 866.2 859.1 192.0 167.4 Deferred gain on indemnity reinsurance --------- -------- -------- -------- Total Liabilities 918.8 887.4 7242.8 8270.8 --------- -------- -------- -------- Net unrealized gains (losses) on securities 1.5 (0.5) 15.3 52.6 Gains (losses) on derivatives Other shareholders' equity 540.3 552.2 566.7 440.2 S/Hs' equity-minimum pension liability adjustment (36.0) Cumulative effect of accounting change --------- -------- -------- -------- Shareholders' Equity 541.7 551.6 546.0 492.8 --------- -------- -------- -------- Total Liabilities and S/Hs' Equity 1460.5 1439.0 7788.8 8763.7 ========= ========= ========= ========= Corporate and Consolidating Other Operations* Adjustments LIABILITIES and SHAREHOLDERS' EQUITY Dec Dec Dec Dec 2001 2000 2001 2000 --------- --------- --------- --------- Liabilities Insurance and Inv Contract Liabilities: Life and annuity reserves 1122.8 945.0 (122.4) (103.2) Health reserves 2491.5 2473.0 Unpaid claims - life and health 920.9 1154.8 Unearned premiums 66.9 46.4 Premium deposit funds 105.5 753.2 597.5 584.0 Participating policyholders' funds Other policyholders' funds 7.4 6.8 Liab related to separate accounts 3410.5 3546.7 --------- --------- --------- --------- Total Insurance and Inv Contract Liabilities 4715.0 5379.2 3885.6 4027.6 Federal income taxes (17.5) (15.8) 46.4 206.7 Short-term debt 726.2 749.8 (554.8) (436.9) Long-term debt 2211.7 1962.2 (1250.0) (1250.0) Minority Interest in pref. securities of sub. 474.7 745.0 Notes payable to LNC Other liabilities 3452.1 1244.7 (839.5) (678.7) Deferred gain on indemnity reinsurance 1144.5 --------- --------- --------- --------- Total Liabilities 12706.7 10065.2 1287.8 1868.7 --------- --------- --------- --------- Net unrealized gains (losses) on securities 77.2 45.0 8.2 4.5 Gains (losses) on derivatives (0.8) Other shareholders' equity 4223.1 4636.1 (4811.0) (5184.4) S/Hs' equity-minimum pension liability adjustment Cumulative effect of accounting change 3.9 --------- --------- --------- --------- Shareholders' Equity 4303.4 4681.2 (4802.8) (5179.9) --------- --------- --------- --------- Total Liabilities and S/Hs' Equity 17010.1 14746.4 (3515.0) (3311.2) ========= ========= ========= ========= Consolidated LIABILITIES and SHAREHOLDERS' EQUITY Dec Dec 2001 2000 -------- -------- Liabilities Insurance and Inv Contract Liabilities: Life and annuity reserves 17917.0 17841.2 Health reserves 2537.9 2523.8 Unpaid claims - life and health 1087.5 1316.6 Unearned premiums 66.9 46.5 Premium deposit funds 18585.0 17715.5 Participating policyholders' funds 100.2 139.4 Other policyholders' funds 562.7 522.2 Liab related to separate accounts 44833.4 50579.9 -------- -------- Total Insurance and Inv Contract Liabilities 85690.6 90685.1 Federal income taxes Short-term debt 190.7 312.9 Long-term debt 961.7 712.2 Minority Interest in pref. securities of sub. 474.7 745.0 Notes payable to LNC Other liabilities 4275.6 2434.7 Deferred gain on indemnity reinsurance 1144.5 -------- -------- Total Liabilities 92737.8 94890.0 -------- -------- Net unrealized gains (losses) on securities 195.7 12.0 Gains (losses) on derivatives 3.9 Other shareholders' equity 5082.5 4942.0 S/Hs' equity-minimum pension liability adjustment (36.0) Cumulative effect of accounting change 17.6 -------- -------- Shareholders' Equity 5263.7 4954.1 -------- -------- Total Liabilities and S/Hs' Equity 98001.5 99844.1 ========= ========= * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations."
12/31/01 PAGE 11 Five Year Comparative Balance Sheet Unaudited [Millions of Dollars except Common Share Data] ASSETS 1997 1998 1999 2000 2001 -------- ------- ------- -------- ------- Investments Corporate bonds 16633.3 22505.2 21119.5 21249.7 23105.1 U.S. government bonds 662.4 1134.6 538.3 542.9 410.5 Foreign government bonds 1804.4 1321.2 1447.5 1321.1 1174.7 Mortgage backed securities 4529.3 5080.5 4404.0 4160.4 3524.7 State and municipal bonds 241.4 16.7 14.7 14.6 44.7 Preferred stocks-redeemable 195.5 174.6 164.7 161.2 85.9 Common stocks 572.3 463.1 514.5 436.6 319.3 Preferred stocks-equity 88.2 79.8 89.5 113.1 151.2 Mortgage loans 3288.1 4393.1 4735.4 4663.0 4535.5 Real estate 576.0 488.7 256.2 282.0 267.9 Policy loans 763.1 1840.0 1892.4 1960.9 1939.7 Other long-term investments 464.8 432.0 401.8 463.3 553.8 -------- ------- ------- -------- ------- Total Investments 29818.8 37929.5 35578.4 35368.6 36113.1 -------- ------- ------- -------- ------- Invest in unconsol affiliates 21.0 18.8 25.8 6.4 8.1 Cash and invested cash 3794.7 2433.4 1895.9 1927.4 3104.4 Property and equipment 189.8 174.8 203.8 228.2 257.5 Premiums and fees receivable 197.5 246.2 259.6 296.7 400.1 Accrued investment income 423.0 528.5 533.2 546.4 563.5 Assets held in separate accounts 37138.8 43408.9 53654.2 50579.9 44833.4 Federal income taxes recoverable 204.1 345.0 207.5 6.3 Amounts recoverable from reinsurers 2350.8 3127.1 3954.3 3747.7 6030.4 Deferred acquisition costs 1623.8 1964.4 2800.3 3070.5 2885.3 Other intangible assets 613.9 1848.4 1746.5 1557.0 1412.6 Goodwill 457.7 1484.3 1423.0 1286.0 1211.8 Other 544.8 468.0 675.7 1021.6 1175.0 -------- ------- ------- -------- ------- Total Assets 77174.7 93836.3 03095.7 99844.1 98001.5 ======== ======= ======= ======== ======= LIABILITIES and SHAREHOLDERS' EQUITY Liabilities Insurance and Inv Contract Liabilities: Life and annuity reserves 8228.7 16434.2 17071.4 17841.2 17917.0 Health reserves 2300.4 2600.1 2507.8 2523.8 2537.9 Unpaid claims-life and health 682.0 1043.4 1269.8 1316.6 1087.5 Unearned premiums 55.3 62.3 75.8 46.5 66.9 Premium deposit funds 19803.0 20171.9 19624.1 17715.5 18585.0 Participating policyholders' funds 79.8 142.7 132.0 139.4 100.2 Other policyholders' funds 180.6 438.4 472.6 522.2 562.7 Liab related to separate accounts 37138.8 43408.9 53654.2 50579.9 44833.4 -------- ------- ------- -------- ------- Total Ins and Inv Contr Liabilities 68468.5 84301.9 94807.7 90685.1 85690.6 -------- ------- ------- -------- ------- Federal income taxes 487.8 Short-term debt 297.2 314.6 460.2 312.9 190.7 Long-term debt 511.0 712.2 712.0 712.2 961.7 Minority Interest - pref sec of a sub 315.0 745.0 745.0 745.0 474.7 Other liabilities 2112.2 2374.6 2107.0 2434.7 4275.6 Deferred gain on indemnity reinsurance 1144.5 -------- ------- ------- -------- ------- Total Liabilities 72191.8 88448.3 98831.9 94890.0 92737.8 -------- ------- ------- -------- ------- S/Hs' equity-unrealized gains (losses)-cont op. 436.0 552.4 (465.7) 12.0 199.6 S/Hs' equity-foreign currency 46.2 50.0 30.0 21.9 (8.1) S/Hs' equity-minimum pension liability adjustment (36.0) S/Hs' equity-other 4500.7 4785.5 4699.6 4920.2 5090.6 Cumulative effect of accounting change 17.6 -------- ------- ------- -------- ------- Total Shareholders' Equity 4982.9 5387.9 4263.9 4954.1 5263.7 -------- ------- ------- -------- ------- Total Liabilities and Shareholders' Equity 77174.7 93836.3 103095.7 99844.1 98001.5 ======== ======= ======== ======== ======= Shareholders' Equity Per Share [Book Value, Securities at Cost] $22.48 $23.86 $24.14 $25.85 $26.94 Common shares outstanding 202.3 202.6 196.0 191.2 187.3
12/31/01 PAGE 12 Quarterly Balance Sheet Unaudited [Millions of Dollars except Common Share Data] Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------- ------- ------- -------- -------- -------- ASSETS Investments Corporate bonds 22450.1 21888.5 21560.5 21119.5 21188.0 20719.1 U.S. government bonds 1489.4 1367.8 991.0 538.3 572.4 566.2 Foreign government bonds 1373.7 1339.7 1369.6 1447.5 1416.4 1377.4 Mortgage backed securities 5068.6 4788.5 4601.2 4404.0 4393.4 4242.4 State and municipal bonds 16.2 19.1 14.8 14.7 14.7 14.1 Preferred stocks - redeemable 179.8 175.8 171.3 164.7 159.7 159.2 Common stocks 399.5 419.0 423.9 514.5 496.4 467.8 Preferred stocks-equity 81.3 86.7 82.7 89.5 91.3 92.2 Mortgage loans 4344.6 4570.5 4772.7 4735.4 4833.9 4783.8 Real estate 471.8 449.8 280.3 256.2 283.4 282.1 Policy loans 1842.4 1847.4 1863.2 1892.4 1896.3 1914.7 Other long-term investments 411.9 409.9 401.2 401.8 428.8 438.2 ------- ------- ------- -------- -------- -------- Total Investments 38129.4 37362.6 36532.4 35578.4 35774.6 35057.2 ------- ------- ------- -------- -------- -------- Invest in unconsol affiliates 20.5 22.3 23.4 25.8 (0.9) Cash and invested cash 2327.0 2151.1 2342.9 1895.9 1510.1 1619.3 Property and equipment 178.0 180.7 191.9 203.8 207.7 205.5 Premiums and fees receivable 241.8 269.0 296.0 259.6 190.2 247.8 Accrued investment income 585.6 569.1 602.9 533.2 575.0 544.0 Assets held in separate accounts 44339.4 47864.3 46228.8 53654.2 56907.6 54924.2 Federal income taxes recoverable 286.0 478.4 457.3 345.0 300.4 246.1 Amount recoverable from reinsurers 3124.5 3121.3 3315.6 3954.3 3851.0 3775.3 Deferred acquisition costs 2112.2 2398.3 2614.5 2800.3 2870.4 2968.0 Other intangible assets 1845.4 1764.9 1760.6 1746.5 1705.5 1646.7 Goodwill 1404.6 1428.3 1435.0 1423.0 1349.6 1335.4 Other 755.8 651.1 699.3 675.7 1097.8 1279.1 ------- ------- ------- -------- -------- -------- Total Assets 95350.3 98261.4 96500.7 103095.7 106340.0 103847.6 ======= ======= ======= ======== ======== ======== LIABILITIES and SHAREHOLDERS' EQUITY Liabilities Insurance and Inv Contract Liabilities: Life and annuity reserves 16590.3 16536.4 16760.5 17071.4 17172.1 17247.3 Health reserves 2562.3 2528.2 2511.3 2507.8 2547.4 2494.2 Unpaid claims-life and health 1022.9 1064.9 1162.6 1269.8 1177.3 1204.1 Unearned premiums 68.8 68.7 62.5 75.8 57.1 52.8 Premium deposit funds 20027.8 20012.6 19988.9 19624.1 18899.3 18407.2 Participating policyholders' funds 132.6 125.7 120.2 132.0 130.7 130.4 Other policyholders' funds 440.4 441.2 445.9 472.6 478.9 490.6 Liab related to separate accounts 44339.4 47864.3 46228.8 53654.2 56907.6 54924.2 ------- ------- ------- -------- -------- -------- Total Ins and Inv Contr Liabilities 85184.6 88642.1 87280.8 94807.7 97370.5 94950.8 Federal income taxes Short-term debt 281.8 380.2 367.7 460.2 474.2 355.7 Long-term debt 712.1 712.1 712.0 712.0 712.0 712.1 Minority Interest - pref sec of a sub 745.0 745.0 745.0 745.0 745.0 745.0 Other liabilities 3319.3 2964.7 2733.0 2107.0 2697.9 2860.3 Deferred gain on indemnity reinsurance ------- ------- ------- -------- -------- -------- Total Liabilities 90242.9 93444.1 91838.5 98831.9 101999.6 99623.9 ------- ------- ------- -------- -------- -------- S/Hs' equity-unrealized gns (losses)- inv. 254.6 (1.1) (103.8) (465.7) (411.2) (556.6) S/Hs' equity- gains (losses)-derivatives S/Hs' equity-foreign currency 30.1 20.6 40.2 30.0 22.8 21.8 S/Hs' equity-minimum pension liability adj S/Hs' equity-other 4822.7 4797.9 4725.8 4699.6 4728.9 4758.5 Cumulative effect of accounting change ------- ------- ------- -------- -------- -------- Total Shareholders' Equity 5107.4 4817.4 4662.2 4263.9 4340.4 4223.7 ------- ------- ------- -------- -------- -------- Total Liabilities and Shareholders' Equity 95350.3 98261.4 96500.7 103095.7 106340.0 103847.6 ======= ======= ======= ======== ======== ======== Shareholders' Equity Per Share [Book Value, Securities at Cost] $24.04 $24.18 $24.28 $24.14 $24.58 $25.01 Common shares outstanding 201.8 199.3 196.3 196.0 193.3 191.1 - -------------------------------------------------------------------------------------------------------------- Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 -------- ------- ------- ------- ------- ------- ASSETS Investments Corporate bonds 21064.7 21249.7 21855.2 22116.6 23424.3 23105.1 U.S. government bonds 575.5 542.9 536.6 510.0 467.7 410.5 Foreign government bonds 1277.7 1321.1 1240.8 1236.3 1160.3 1174.7 Mortgage backed securities 4172.5 4160.4 4009.8 3844.6 3765.6 3524.7 State and municipal bonds 14.3 14.6 14.7 14.1 14.4 44.7 Preferred stocks - redeemable 159.5 161.2 154.1 152.2 99.3 85.9 Common stocks 479.9 436.6 388.6 373.3 311.2 319.3 Preferred stocks-equity 90.3 113.1 170.9 160.8 166.5 151.2 Mortgage loans 4767.3 4663.0 4641.2 4652.8 4663.1 4535.5 Real estate 297.6 282.0 308.1 306.9 288.8 267.9 Policy loans 1935.6 1960.9 1947.0 1947.4 1943.4 1939.7 Other long-term investments 470.5 463.3 477.4 480.9 483.4 553.8 -------- ------- ------- ------- ------- ------- Total Investments 35305.4 35368.6 35744.5 35796.0 36788.0 36113.1 -------- ------- ------- ------- ------- ------- Invest in unconsol affiliates 5.8 6.4 7.3 6.1 6.5 8.1 Cash and invested cash 1435.9 1927.4 2015.2 1501.9 1996.3 3104.4 Property and equipment 213.8 228.2 242.1 251.4 261.0 257.5 Premiums and fees receivable 240.8 296.7 282.8 303.7 264.5 400.1 Accrued investment income 569.2 546.4 581.9 573.2 615.1 563.5 Assets held in separate accounts 54410.9 50579.9 44506.2 47140.2 39479.8 44833.4 Federal income taxes recoverable 267.3 207.5 106.6 177.5 35.3 6.3 Amount recoverable from reinsurers 3774.7 3747.7 3706.4 3662.0 3818.3 6030.4 Deferred acquisition costs 3048.0 3070.5 2963.4 3129.1 3087.2 2885.3 Other intangible assets 1598.4 1557.0 1505.3 1479.0 1451.5 1412.6 Goodwill 1296.6 1286.0 1274.5 1263.6 1253.2 1211.8 Other 1076.4 1021.6 1186.3 1147.7 1149.4 1175.0 -------- ------- ------- ------- ------- ------- Total Assets 103243.1 99844.1 94122.4 96431.2 90206.0 98001.5 ======== ======= ======= ======= ======= ======= LIABILITIES and SHAREHOLDERS' EQUITY Liabilities Insurance and Inv Contract Liabilities: Life and annuity reserves 17500.0 17841.2 17733.0 17865.3 17990.8 17917.0 Health reserves 2520.2 2523.8 2534.8 2533.9 2573.2 2537.9 Unpaid claims-life and health 1202.8 1316.6 1255.3 1136.5 1206.6 1087.5 Unearned premiums 51.8 46.5 45.9 19.0 8.1 66.9 Premium deposit funds 18072.1 17715.5 17667.1 17715.9 18509.7 18585.0 Participating policyholders' funds 135.4 139.4 145.0 135.2 118.3 100.2 Other policyholders' funds 500.7 522.2 532.1 541.4 554.3 562.7 Liab related to separate accounts 54410.9 50579.9 44506.2 47140.2 39479.8 44833.4 -------- ------- ------- ------- ------- ------- Total Ins and Inv Contr Liabilities 94394.0 90685.1 84419.3 87087.2 80440.8 85690.6 Federal income taxes Short-term debt 330.3 312.9 415.3 351.3 539.0 190.7 Long-term debt 712.2 712.2 712.3 712.4 712.4 961.7 Minority Interest - pref sec of a sub 745.0 745.0 745.0 745.0 305.0 474.7 Other liabilities 2522.9 2434.7 2734.2 2479.4 2840.2 4275.6 Deferred gain on indemnity reinsurance 1144.5 -------- ------- ------- ------- ------- ------- Total Liabilities 98704.5 94890.0 89026.0 91375.3 84837.4 92737.8 -------- ------- ------- ------- ------- ------- S/Hs' equity-unrealized gns (losses)- inv. (337.7) 12.0 190.4 76.2 247.9 195.7 S/Hs' equity- gains (losses)-derivatives 5.7 9.4 2.8 3.9 S/Hs' equity-foreign currency 19.9 21.9 4.1 (15.3) 6.9 (8.1) S/Hs' equity-minimum pension liability adj (36.0) S/Hs' equity-other 4856.4 4920.1 4878.5 4968.2 5093.4 5090.6 Cumulative effect of accounting change 17.6 17.6 17.6 17.6 -------- ------- ------- ------- ------- ------- Total Shareholders' Equity 4538.6 4954.1 5096.4 5055.9 5368.6 5263.7 -------- ------- ------- ------- ------- ------- Total Liabilities and Shareholders' Equity 103243.1 99844.1 94122.4 96431.2 90206.0 98001.5 ======== ======= ======= ======= ======= ======= Shareholders' Equity Per Share [Book Value, Securities at Cost] $25.43 $25.85 $25.96 $26.32 $26.87 $26.94 Common shares outstanding 191.8 191.2 188.1 188.2 189.8 187.3
12/31/01 PAGE 13 Annuities Segment Income Statements & Operational Data Unaudited [Millions of Dollars] For the Year Ended December 31 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ Operating Revenue Premiums 84.2 53.9 65.2 64.3 77.5 Surrender charges 29.8 33.5 37.9 41.8 31.2 Expense assessments 367.2 459.9 536.2 628.4 537.7 Other revenue and fees 1.2 1.7 14.5 11.0 16.7 Net investment income 1477.1 1501.6 1474.2 1393.5 1370.0 ------ ------ ------ ------ ------ Operating Revenue 1959.5 2050.6 2128.0 2138.9 2033.1 ------ ------ ------ ------ ------ Operating Benefits and Expenses Benefits paid or provided: Benefits 292.6 271.6 259.1 254.7 263.9 Interest credited to policy bal. 974.4 955.2 925.2 866.1 863.8 Underwriting, acquisition, insurance and other expenses 415.0 498.8 560.8 575.5 524.5 Goodwill amortization 0.0 2.2 2.0 (0.6) 1.2 ------ ------ ------ ------ ------ Operating Benefits and Expenses 1682.0 1727.8 1747.1 1695.7 1653.5 ------ ------ ------ ------ ------ Income from Operations Before Tax 277.5 322.8 380.9 443.2 379.6 Federal income taxes 54.5 60.4 81.4 81.2 59.3 ------ ------ ------ ------ ------ Income from Operations 223.0 262.4 299.4 362.0 320.3 ------ ------ ------ ------ ------ Realized gains (losses) on investments 40.3 11.4 (7.9) (3.4) (42.3) Gains (losses) on derivatives (0.2) Restructuring charges (1.3) ------ ------ ------ ------ ------ Income before Accounting Changes 263.3 273.8 291.5 358.6 276.5 Cumulative effect of accounting changes (7.3) ------ ------ ------ ------ ------ Net Income 263.3 273.8 291.5 358.6 269.2 ====== ====== ====== ====== ====== Inc from Oper -before Goodwill Amort. 223.0 264.6 301.5 361.4 321.5 Effective tax rate 19.6% 18.7% 21.4% 18.3% 15.6% Operating Revenue 1959.5 2050.6 2128.0 2138.9 2033.1 Realized gains (losses) on investments 63.5 17.5 (12.1) (5.2) (64.5) Gains (losses) on derivatives (0.3) ------ ------ ------ ------ ------ Total Revenue 2023.0 2068.1 2115.8 2133.7 1968.3 ====== ====== ====== ====== ====== Average capital 1373.0 1592.6 1562.0 1601.8 1828.2 Return on average capital 16.2% 16.5% 19.2% 22.6% 17.5%
12/31/01 Page 14 Annuities Segment Income Statements & Operational Data Unaudited [Millions of Dollars] Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ----- ----- ----- ----- ----- ----- Operating Revenue Premiums 14.9 16.2 13.1 21.0 13.3 16.8 Surrender charges 8.6 9.3 10.1 9.8 11.1 11.2 Expense assessments 119.8 133.3 142.6 140.5 155.1 155.7 Other revenue and fees 3.9 3.2 0.9 6.4 2.2 0.6 Net investment income 373.4 370.2 364.5 366.0 362.9 345.8 ----- ----- ----- ----- ----- ----- Operating Revenue 520.7 532.3 531.2 543.7 544.6 530.1 ----- ----- ----- ----- ----- ----- Operating Benefits and Expenses Benefits paid or provided: Benefits 61.9 65.0 55.0 77.2 61.6 65.7 Interest credited to policy balances 228.2 232.9 230.1 234.1 228.2 219.4 Underwriting, acquisition, insurance and other expenses 138.5 141.0 146.5 134.7 144.5 139.8 Goodwill amortization 0.5 0.4 0.6 0.5 (1.5) 0.3 ----- ----- ----- ----- ----- ----- Operating Benefits and Expenses 429.1 439.2 432.2 446.5 432.8 425.2 ----- ----- ----- ----- ----- ----- Income from Operations Before Tax 91.6 93.0 99.0 97.2 111.8 104.8 Federal income taxes 17.2 17.1 23.6 23.5 23.3 20.7 ----- ----- ----- ----- ----- ----- Income from Operations 74.4 75.9 75.4 73.7 88.5 84.1 ----- ----- ----- ----- ----- ----- Realized gains (losses) on investments 2.4 0.5 (7.0) (3.7) 2.7 0.3 Gains (losses) on derivatives Restructuring charges ----- ----- ----- ----- ----- ----- Income before Accounting Changes 76.8 76.4 68.4 69.9 91.2 84.4 Cumulative effect of accounting changes ----- ----- ----- ----- ----- ----- Net Income 76.8 76.4 68.4 69.9 91.2 84.4 ===== ===== ===== ===== ===== ===== Inc from Oper -before Goodwill Amortization 75.0 76.3 76.0 74.2 87.0 84.4 Effective tax rate 18.8% 18.4% 23.8% 24.2% 20.8% 19.7% Operating Revenue 520.7 532.3 531.2 543.7 544.6 530.1 Realized gains (losses) on investments 3.7 0.7 (10.7) (5.8) 4.2 0.4 Gains (losses) on derivatives ----- ----- ----- ----- ----- ----- Total Revenue 524.4 533.0 520.5 538.0 548.7 530.5 ===== ===== ===== ===== ===== ===== Average capital 1615.3 1602.4 1471.2 1559.0 1438.4 1647.7 Return on average capital 18.4% 19.0% 20.5% 18.9% 24.6% 20.4% - --------------------------------------------------------------------------------------------------------- Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ----- ----- ----- ----- ----- ----- Operating Revenue Premiums 18.0 16.2 19.1 32.5 13.2 12.7 Surrender charges 10.4 9.1 9.1 8.5 6.5 7.2 Expense assessments 163.4 154.2 141.6 138.0 132.0 126.2 Other revenue and fees 4.6 3.5 1.7 3.9 1.2 10.0 Net investment income 349.8 335.0 341.3 339.3 346.6 342.6 ----- ----- ----- ----- ----- ----- Operating Revenue 546.2 518.1 512.8 522.1 499.5 498.7 ----- ----- ----- ----- ----- ----- Operating Benefits and Expenses Benefits paid or provided: Benefits 68.4 59.0 69.8 72.6 66.3 55.3 Interest credited to policy balances 205.4 213.2 209.4 209.7 217.2 227.5 Underwriting, acquisition, insurance and other expenses 147.9 143.2 134.6 126.0 132.8 131.1 Goodwill amortization 0.3 0.3 0.3 0.3 0.3 0.3 ----- ----- ----- ----- ----- ----- Operating Benefits and Expenses 421.9 415.7 414.1 408.6 416.6 414.2 ----- ----- ----- ----- ----- ----- Income from Operations Before Tax 124.2 102.3 98.7 113.6 82.9 84.5 Federal income taxes 21.3 15.9 16.3 22.8 10.4 9.7 ----- ----- ----- ----- ----- ----- Income from Operations 102.9 86.4 82.3 90.8 72.4 74.8 ----- ----- ----- ----- ----- ----- Realized gains (losses) on investments (9.1) 2.8 (1.4) (6.7) (13.5) (20.7) Gains (losses) on derivatives (0.1) 0.1 (0.3) 0.1 Restructuring charges (0.7) (0.6) 0.0 0.0 ----- ----- ----- ----- ----- ----- Income before Accounting Changes 93.8 89.2 80.2 83.6 58.6 54.2 Cumulative effect of accounting changes (3.6) (3.7) 0.0 0.0 ----- ----- ----- ----- ----- ----- Net Income 93.8 89.2 76.6 79.9 58.6 54.2 ===== ===== ===== ===== ===== ===== Inc from Oper -before Goodwill Amortization 103.2 86.7 82.6 91.1 72.7 75.1 Effective tax rate 17.1% 15.6% 16.6% 20.1% 12.6% 11.5% Operating Revenue 546.2 518.1 512.8 522.1 499.5 498.7 Realized gains (losses) on investments (14.1) 4.2 (2.2) (10.3) (20.8) (31.3) Gains (losses) on derivatives (0.2) 0.2 (0.5) 0.2 ----- ----- ----- ----- ----- ----- Total Revenue 532.1 522.3 510.4 512.1 478.2 467.5 ===== ===== ===== ===== ===== ===== Average capital 1635.2 1686.0 1797.9 1787.1 1902.9 1824.9 Return on average capital 25.2% 20.5% 18.3% 20.3% 15.2% 16.4%
12/31/01 Page 15 Annuities Segment Annuity Account Value Roll Forward Unaudited [Billions of Dollars] 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ Fixed Annuities- Bal Beg-of-Year 17.634 17.214 18.111 18.210 16.615 Gross Deposits 1.632 1.452 2.563 2.074 3.342 Withdrawals (incl charges) & deaths (2.220) (2.468) (2.521) (3.283) (2.448) ------ ------ ------ ------ ------ Net cash flows (0.588) (1.016) 0.042 (1.209) 0.894 Transfer from (to) var annuities (1.336) (0.356) (0.783) (1.329) (0.428) Interest credited 0.978 0.994 0.840 0.944 0.923 Acq of new business/companies 0.527 1.274 ------ ------ ------ ------ ------ Fixed Annuities-Gross 17.214 18.111 18.210 16.615 18.004 Reinsurance Ceded (1.757) (1.606) (1.419) (1.221) (1.514) ------ ------ ------ ------ ------ Fixed Annuities-Bal End -of-Year 15.458 16.505 16.791 15.394 16.491 ------ ------ ------ ------ ------ Fixed Annuities Incremental Deposits * 1.412 1.265 2.310 1.918 3.213 Variable Annuities-Bal Beg-of-Year 20.383 27.346 33.358 41.493 39.427 Gross Deposits 2.695 2.791 2.553 3.165 3.067 Withdrawals (incl charges) & deaths (2.038) (3.019) (3.760) (4.830) (3.856) ------ ------ ------ ------ ------ Net cash flows 0.657 (0.228) (1.207) (1.665) (0.789) Transfer from (to) fixed annuities 1.335 0.389 0.787 1.320 0.428 Invest inc & change in mkt value 4.971 5.414 8.555 (1.721) (4.428) Acq(sale) of new business/companies 0.437 ------ ------ ------ ------ ------ Var Annuities-Bal End-of-Year 27.346 33.358 41.493 39.427 34.638 ------ ------ ------ ------ ------ Variable Annuities Incremental Deposits * 2.585 2.641 2.409 2.667 2.624 Total Annuities - Bal Beg-of-Year 38.017 44.561 51.469 59.704 56.043 Gross Deposits 4.327 4.244 5.116 5.239 6.409 Withdrawals (incl charges) & deaths (4.258) (5.487) (6.281) (8.113) (6.304) ------ ------ ------ ------ ------ Net cash flows 0.069 (1.244) (1.165) (2.874) 0.105 Transfers (0.001) 0.033 0.004 (0.009) 0.000 Interest credited & change in mkt value 5.949 6.408 9.395 (0.777) (3.505) Acq of new business/companies 0.527 1.711 ------ ------ ------ ------ ------ Total Gross Annuities-Bal End-of-Year 44.561 51.469 59.704 56.043 52.643 Reinsurance Ceded (1.757) (1.606) (1.419) (1.221) (1.514) ------ ------ ------ ------ ------ Total Annuities (Net of Ceded) - Bal End-of-Year 42.804 49.863 58.284 54.821 51.129 ====== ====== ====== ====== ====== Total Annuities Incremental Deposits * 3.997 3.906 4.719 4.585 5.837 Var Ann Under Agree - Included above 0.649 0.719 0.941 1.077 * Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Annuity products.
12/31/01 PAGE 16 Annuities Segment Annuity Account Value Roll Forward Unaudited [Billions of Dollars] Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Fixed Annuities-Bal Beg-of-Quarter 18.111 18.225 18.303 18.406 18.210 17.615 Gross Deposits 0.489 0.654 0.678 0.741 0.589 0.490 Withdrawals (incl charges) & deaths (0.579) (0.593) (0.567) (0.782) (0.875) (0.796) ------ ------ ------ ------ ------ ------ Net cash flows (0.090) 0.061 0.111 (0.040) (0.287) (0.307) Transfer from (to) var annuities (0.034) (0.211) (0.238) (0.300) (0.550) (0.346) Interest credited 0.238 0.228 0.231 0.144 0.241 0.238 Acq of new business/companies ------ ------ ------ ------ ------ ------ Fixed Annuities-Gross 18.225 18.303 18.406 18.210 17.615 17.200 Reinsurance Ceded (1.569) (1.524) (1.473) (1.419) (1.371) (1.316) ------ ------ ------ ------ ------ ------ Fixed Annuities-Bal End-of-Quarter 16.656 16.779 16.934 16.791 16.244 15.884 ------ ------ ------ ------ ------ ------ Fixed Annuities Incremental Deposits * 0.462 0.622 0.644 0.582 0.560 0.447 Variable Annuities-Bal Beg-of-Quarter 33.358 34.148 37.233 35.613 41.493 44.640 Gross Deposits 0.635 0.651 0.634 0.634 0.797 0.793 Withdrawals (incl charges) & deaths (0.827) (0.912) (0.938) (1.084) (1.210) (1.168) ------ ------ ------ ------ ------ ------ Net cash flows (0.192) (0.261) (0.304) (0.450) (0.413) (0.375) Transfer from (to) fixed annuities 0.034 0.213 0.237 0.303 0.549 0.343 Invest inc & change in mkt value 0.948 3.133 (1.553) 6.027 3.011 (1.511) Acq(sale) of new business/companies ------ ------ ------ ------ ------ ------ Var Annuities-Bal End-of-Quarter 34.148 37.233 35.613 41.493 44.640 43.097 ------ ------ ------ ------ ------ ------ Variable Annuities Incremental Deposits 0.606 0.622 0.589 0.592 0.732 0.699 Total Annuities -Bal Beg-of-Quarter 51.469 52.373 55.536 54.020 59.704 62.255 Gross Deposits 1.124 1.305 1.312 1.375 1.386 1.283 Withdrawals (incl charges) & deaths (1.406) (1.505) (1.505) (1.865) (2.085) (1.964) ------ ------ ------ ------ ------ ------ Net cash flows (0.282) (0.200) (0.193) (0.490) (0.700) (0.682) Transfers 0.002 (0.001) 0.003 (0.001) (0.003) Interest credited & change in mkt value 1.186 3.361 (1.322) 6.171 3.252 (1.273) Acq of new business/companies ------ ------ ------ ------ ------ ------ Total Gross Annuities-Bal End-of-Quarter 52.373 55.536 54.020 59.704 62.255 60.297 Reinsurance Ceded (1.569) (1.524) (1.473) (1.419) (1.371) (1.316) ------ ------ ------ ------ ------ ------ Total Annuities (Net of Ceded) - Bal End-of-Qtr 50.804 54.012 52.547 58.284 60.884 58.981 ====== ====== ====== ====== ====== ====== Total Annuities Incremental Deposits * 1.068 1.244 1.233 1.174 1.292 1.145 Var Ann Under Agree - Included above 0.651 0.685 0.639 0.719 0.866 0.868 * Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Annuity products. Fixed Annuities - excluding fixed portion of variable contracts Deposits 0.136 0.151 0.147 0.275 0.134 0.126 Withdrawals (0.292) (0.318) (0.329) (0.428) (0.612) (0.557) Net Flows (0.156) (0.167) (0.182) (0.152) (0.479) (0.431) Variable Annuities - including fixed portion of variable contracts Deposits 0.988 1.154 1.165 1.100 1.252 1.157 Withdrawals (1.114) (1.187) (1.176) (1.438) (1.473) (1.408) Net Flows (0.126) (0.033) (0.011) (0.338) (0.221) (0.251) Fixed Portion of Variable Contracts Deposits 0.353 0.503 0.531 0.466 0.455 0.364 Withdrawals (0.287) (0.275) (0.238) (0.354) (0.263) (0.240) Net Flows 0.066 0.228 0.293 0.112 0.192 0.124 Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Fixed Annuities-Bal Beg-of-Quarter 17.200 16.930 16.615 16.599 16.697 17.317 Gross Deposits 0.513 0.482 0.560 0.668 0.896 1.218 Withdrawals (incl charges) & deaths (0.802) (0.810) (0.787) (0.574) (0.525) (0.562) ------ ------ ------ ------ ------ ------ Net cash flows (0.288) (0.328) (0.227) 0.094 0.372 0.656 Transfer from (to) var annuities (0.217) (0.216) (0.014) (0.222) 0.021 (0.213) Interest credited 0.235 0.230 0.225 0.226 0.228 0.244 Acq of new business/companies ------ ------ ------ ------ ------ ------ Fixed Annuities-Gross 16.930 16.615 16.599 16.697 17.317 18.004 Reinsurance Ceded (1.270) (1.221) (1.169) (1.146) (1.266) (1.514) ------ ------ ------ ------ ------ ------ Fixed Annuities-Bal End-of-Quarter 15.660 15.394 15.430 15.551 16.051 16.491 ------ ------ ------ ------ ------ ------ Fixed Annuities Incremental Deposits * 0.464 0.447 0.536 0.611 0.873 1.193 Variable Annuities-Bal Beg-of-Quarter 43.097 42.743 39.427 34.733 36.961 30.506 Gross Deposits 0.729 0.846 0.887 0.703 0.684 0.793 Withdrawals (incl charges) & deaths (1.253) (1.199) (1.250) (0.993) (0.795) (0.818) ------ ------ ------ ------ ------ ------ Net cash flows (0.524) (0.353) (0.363) (0.290) (0.111) (0.025) Transfer from (to) fixed annuities 0.216 0.212 0.011 0.227 (0.023) 0.213 Invest inc & change in mkt value (0.046) (3.175) (4.342) 2.291 (6.321) 3.944 Acq(sale) of new business/companies ------ ------ ------ ------ ------ ------ Var Annuities-Bal End-of-Quarter 42.743 39.427 34.733 36.961 30.506 34.638 ------ ------ ------ ------ ------ ------ Variable Annuities Incremental Deposits 0.586 0.650 0.683 0.612 0.604 0.725 Total Annuities -Bal Beg-of-Quarter 60.297 59.673 56.043 51.332 53.658 47.824 Gross Deposits 1.242 1.328 1.447 1.371 1.580 2.011 Withdrawals (incl charges) & deaths (2.055) (2.009) (2.037) (1.567) (1.320) (1.380) ------ ------ ------ ------ ------ ------ Net cash flows (0.812) (0.681) (0.590) (0.196) 0.261 0.631 Transfers (0.001) (0.004) (0.003) 0.005 (0.002) 0.000 Interest credited & change in mkt value 0.189 (2.945) (4.117) 2.517 (6.093) 4.188 Acq of new business/companies ------ ------ ------ ------ ------ ------ Total Gross Annuities-Bal End-of-Quarter 59.673 56.043 51.332 53.658 47.824 52.643 Reinsurance Ceded (1.270) (1.221) (1.169) (1.146) (1.266) (1.514) ------ ------ ------ ------ ------ ------ Total Annuities (Net of Ceded) - Bal End-of-Qtr 58.403 54.821 50.163 52.512 46.558 51.129 ====== ====== ====== ====== ====== ====== Total Annuities Incremental Deposits * 1.050 1.097 1.219 1.223 1.477 1.918 Var Ann Under Agree - Included above 0.962 0.941 0.904 0.975 0.907 1.077 * Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Annuity products. Fixed Annuities - excluding fixed portion of variable contracts Deposits 0.114 0.085 0.160 0.329 0.489 0.734 Withdrawals (0.532) (0.570) (0.556) (0.356) (0.340) (0.352) Net Flows (0.417) (0.485) (0.396) (0.027) 0.149 0.382 Variable Annuities - including fixed portion of variable contracts Deposits 1.128 1.243 1.287 1.042 1.091 1.277 Withdrawals (1.523) (1.439) (1.481) (1.211) (0.979) (1.028) Net Flows (0.395) (0.196) (0.194) (0.169) 0.112 0.249 Fixed Portion of Variable Contracts Deposits 0.399 0.397 0.400 0.339 0.407 0.484 Withdrawals (0.270) (0.240) (0.231) (0.218) (0.184) (0.210) Net Flows 0.129 0.157 0.169 0.121 0.223 0.274
12/31/01 PAGE 17 Life Insurance Segment Income Statements & Operational Data Unaudited [Millions of Dollars] 1997 1998 1999 2000 2001 ------- ------- ------- ------- ------- Operating Revenue Premiums 64.8 185.9 235.8 227.3 212.4 Surrender charges 9.8 52.1 66.3 66.4 66.1 Mortality assessments 161.2 350.1 444.6 465.2 499.4 Expense assessments 28.6 146.2 165.8 191.8 191.4 Other revenue and fees 9.0 2.6 9.8 14.2 17.9 Net investment income 268.2 642.6 840.1 871.5 910.2 ------- ------- ------- ------- ------- Operating Revenue 541.5 1379.5 1762.6 1836.4 1897.5 ------- ------- ------- ------- ------- Operating Benefits and Expenses Benefits paid or provided: Benefits 143.6 371.2 430.5 411.5 418.5 Div accum & div to policyholders 20.4 70.7 81.5 80.8 78.5 Interest credited to policy bal. 153.0 393.1 493.8 525.4 569.9 Underwriting, acquisition, insurance and other expenses 172.1 293.1 399.1 384.8 374.7 Goodwill amortization 0.1 19.7 23.4 23.7 23.7 ------- ------- ------- ------- ------- Operating Benefits and Expenses 489.3 1147.8 1428.2 1426.3 1465.4 ------- ------- ------- ------- ------- Income from Operations Before Tax 52.3 231.6 334.3 410.1 432.1 Federal income taxes 12.4 82.4 122.3 150.1 153.0 ------- ------- ------- ------- ------- Income from Operations* 39.9 149.2 212.0 259.9 279.0 ------- ------- ------- ------- ------- Realized gains (losses) on investments (0.8) (1.7) (0.5) (10.7) (38.5) Gains(losses) on derivatives 1.6 Restructuring charges 0.0 (20.0) 0.0 0.0 (3.5) ------- ------- ------- ------- ------- Income before Accounting Changes 39.1 127.5 211.5 249.3 238.6 Cumulative effect of accounting changes (5.5) ------- ------- ------- ------- ------- Net Income* 39.1 127.5 211.5 249.3 233.1 ======= ======= ======= ======= ======= Inc from Oper -before Goodwill Amort. 40.0 168.9 235.4 283.6 302.7 Effective tax rate 23.7% 35.6% 36.6% 36.6% 35.4% Operating Revenue 541.5 1,379.5 1,762.6 1836.4 1897.5 Realized gains (losses) on investments 3.2 (1.0) (2.2) (17.4) (57.6) Gains(losses) on derivatives 0.7 ------- ------- ------- ------- ------- Total Revenue 544.8 1,378.5 1,760.4 1819.0 1840.6 ======= ======= ======= ======= ======= Average capital 384.9 1948.0 2712.3 2640.2 2731.5 Return on average capital 10.4% 7.7% 7.8% 9.8% 10.2% - -------------------------------------------------------------------------------------------------------------- First Year Premiums by Product (Billions) Universal Life 0.114 0.233 0.343 0.289 0.293 Variable Universal Life 0.053 0.086 0.129 0.209 0.219 Whole Life 0.005 0.020 0.024 0.022 0.026 Term 0.033 0.048 0.046 0.042 0.031 ------- ------- ------- ------- ------- Total Retail 0.205 0.387 0.541 0.562 0.569 Corporate Owned Life Insurance (COLI) 0.000 0.004 0.015 0.087 0.047 ------- ------- ------- ------- ------- Total 0.205 0.391 0.556 0.649 0.617 ------- ------- ------- ------- ------- First Year Premiums by Distribution (Billions) Lincoln Financial Advisors 0.071 0.035 0.188 0.201 0.185 Lincoln Financial Distributors 0.134 0.356 0.368 0.449 0.431 ------- ------- ------- ------- ------- Total by Distribution 0.205 0.391 0.556 0.649 0.617 ======= ======= ======= ======= ======= Life Insurance In-Force (Billions) Universal Life & Other 32.827 105.837 109.288 115.872 121.168 Term Insurance 30.337 67.076 85.701 100.130 113.226 ------- ------- ------- ------- ------- Total Life Segment In-Force 63.164 172.914 194.988 216.002 234.394 ======= ======= ======= ======= ======= * 2001 income from operations and net income include special charges of $1.1 million after-tax ($1.7 million pre-tax) related to the events of September 11, 2001 (composed of $1.9 million after-tax ($2.9 million pre-tax) recorded in the 3rd quarter partially offset by a reversal of $0.8 million after-tax ($1.2 million pre-tax) recorded in the 4th quarter as a result of updated information on the previously recorded incurred but unreported claims.
12/31/01 PAGE 18 Life Insurance Segment Income Statements & Operational Data Unaudited [Millions of Dollars] For the Quarter Ended Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------- ------- ------- ------- ------- ------- Operating Revenue Premiums 54.5 57.8 52.4 71.1 53.0 56.3 Surrender charges 14.7 16.5 17.1 18.0 16.2 16.5 Mortality assessments 108.8 111.4 110.5 113.9 112.2 114.5 Expense assessments 39.6 35.4 42.8 48.0 45.3 44.1 Other revenue and fees 1.9 1.6 2.4 3.9 3.2 3.6 Net investment income 207.9 207.8 209.6 214.8 215.6 215.5 ------- ------- ------- ------- ------- ------- Operating Revenue 427.4 430.6 434.9 469.6 445.5 450.5 ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses Benefits paid or provided: Benefits 103.6 108.7 105.4 112.8 98.4 96.3 Div accum & div to policyholders 20.3 21.0 19.2 21.0 20.4 18.7 Interest credited to policy bal. 125.8 123.0 122.8 122.3 126.3 128.7 Underwriting, acquisition, insurance and other expenses 95.7 86.5 99.1 117.8 99.4 100.9 Goodwill amortization 5.9 5.0 6.4 6.0 5.9 5.9 ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses 351.2 344.1 353.0 379.9 350.3 350.6 ------- ------- ------- ------- ------- ------- Income from Operations Before Tax 76.1 86.5 82.0 89.8 95.2 99.9 Federal income taxes 28.1 32.0 29.4 32.8 34.8 37.4 ------- ------- ------- ------- ------- ------- Income from Operations* 48.1 54.4 52.6 57.0 60.4 62.4 ------- ------- ------- ------- ------- ------- Realized gains (losses) on investments (1.8) (2.9) 1.4 2.8 (2.4) (4.0) Gains (losses) on derivatives Restructuring charges ------- ------- ------- ------- ------- ------- Income before Accounting Changes 46.3 51.5 54.0 59.7 58.1 58.4 Cumulative effect of accounting changes ------- ------- ------- ------- ------- ------- Net Income* 46.3 51.5 54.0 59.7 58.1 58.4 ======= ======= ======= ======= ======= ======= Inc from Oper -before Goodwill Amortization 54.0 59.5 59.0 63.0 66.3 68.4 Effective tax rate 36.9% 37.0% 35.9% 36.5% 36.5% 37.5% Operating Revenue 427.4 430.6 434.9 469.6 445.5 450.5 Realized gains (losses) on investments (3.4) (4.4) 2.1 3.4 (3.8) (6.3) Gains (losses) on derivatives ------- ------- ------- ------- ------- ------- Total Revenue 424.0 426.3 437.1 473.1 441.7 444.2 ======= ======= ======= ======= ======= ======= Average capital 2716.6 2739.4 2707.4 2686.0 2655.3 2615.0 Return on average capital 7.1% 7.9% 7.8% 8.5% 9.1% 9.6% - ----------------------------------------------------------------------------------------------- First Year Premiums by Product (Billions) Universal Life 0.081 0.076 0.113 0.072 0.064 Variable Universal Life 0.024 0.027 0.052 0.042 0.043 Whole Life 0.005 0.006 0.008 0.004 0.005 Term 0.012 0.010 0.011 0.013 0.012 ------- ------- ------- ------- ------- Total Retail 0.122 0.119 0.184 0.131 0.123 Corporate Owned Life Insurance (COLI) 0.007 0.002 0.004 0.013 0.019 ------- ------- ------- ------- ------- Total 0.119 0.128 0.121 0.188 0.144 0.142 ------- ------- ------- ------- ------- ------- First Year Premiums by Distribution (Billions) Lincoln Financial Advisors 0.041 0.035 0.039 0.073 0.046 0.037 Lincoln Financial Distributors 0.078 0.093 0.082 0.115 0.098 0.105 ------- ------- ------- ------- ------- ------- Total by Distribution 0.119 0.128 0.121 0.188 0.144 0.142 ------- ------- ------- ------- ------- ------- Insurance In-Force (Billions) Universal Life & Other 105.090 106.047 106.945 109.288 108.817 110.448 Term Insurance 73.452 78.431 81.963 85.701 92.857 97.039 ------- ------- ------- ------- ------- ------- Total Segment In-Force 178.542 184.478 188.908 194.988 201.674 207.487 ======= ======= ======= ======= ======= ======= Life Insurance Segment (Continued) Income Statements & Operational Data Unaudited [Millions of Dollars] For the Quarter Ended Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------- ------- ------- ------- ------- ------- Operating Revenue Premiums 50.9 67.1 50.9 50.7 46.4 64.4 Surrender charges 13.8 19.9 17.2 13.5 15.6 19.9 Mortality assessments 116.3 122.1 124.3 124.8 124.7 125.5 Expense assessments 46.9 55.5 47.4 45.3 46.0 52.8 Other revenue and fees 3.8 3.7 5.1 3.8 3.0 6.0 Net investment income 220.6 219.7 223.0 227.4 233.2 226.6 ------- ------- ------- ------- ------- ------- Operating Revenue 452.4 488.0 467.9 465.5 468.9 495.2 ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses Benefits paid or provided: Benefits 95.8 121.0 99.9 103.5 102.3 112.9 Div accum & div to policyholders 16.4 25.3 17.5 19.0 16.5 25.4 Interest credited to policy bal. 134.0 136.5 138.3 141.2 143.5 146.9 Underwriting, acquisition, insurance and other expenses 94.9 89.6 98.8 92.0 92.5 91.4 Goodwill amortization 5.9 5.9 5.9 5.9 5.9 5.9 ------- ------- ------- ------- ------- ------- Operating Benefits and Expenses 347.0 378.4 360.5 361.7 360.8 382.5 ------- ------- ------- ------- ------- ------- Income from Operations Before Tax 105.4 109.6 107.4 103.8 108.1 112.7 Federal income taxes 38.9 39.0 38.8 36.7 38.1 39.5 ------- ------- ------- ------- ------- ------- Income from Operations* 66.5 70.6 68.6 67.1 70.1 73.2 ------- ------- ------- ------- ------- ------- Realized gains (losses) on investments 1.0 (5.2) (5.4) (6.4) (5.3) (21.3) Gains (losses) on derivatives (0.0) 0.1 (0.0) 1.5 Restructuring charges (2.0) (1.5) ------- ------- ------- ------- ------- ------- Income before Accounting Changes 67.4 65.4 63.2 58.8 64.7 51.9 Cumulative effect of accounting changes (0.2) (5.3) 0.0 (0.0) ------- ------- ------- ------- ------- ------- Net Income* 67.4 65.4 62.9 53.5 64.7 51.9 ======= ======= ======= ======= ======= ======= Inc from Oper -before Goodwill Amortization 72.4 76.5 74.5 73.0 76.0 79.1 Effective tax rate 36.9% 35.6% 36.1% 35.3% 35.2% 35.0% Operating Revenue 452.4 488.0 467.9 465.5 468.9 495.2 Realized gains (losses) on investments 0.8 (8.1) (8.2) (10.0) (8.2) (31.1) Gains (losses) on derivatives (0.0) 0.2 (0.1) 0.6 ------- ------- ------- ------- ------- ------- Total Revenue 453.2 479.9 459.6 455.7 460.6 464.7 ======= ======= ======= ======= ======= ======= Average capital 2650.5 2640.0 2729.8 2715.7 2736.3 2744.4 Return on average capital 10.0% 10.7% 10.1% 9.9% 10.2% 10.7% - ----------------------------------------------------------------------------------------------- First Year Premiums by Product (Billions) Universal Life 0.072 0.081 0.058 0.070 0.067 0.098 Variable Universal Life 0.052 0.072 0.053 0.050 0.047 0.069 Whole Life 0.006 0.008 0.004 0.005 0.007 0.010 Term 0.009 0.008 0.006 0.007 0.008 0.009 ------- ------- ------- ------- ------- ------- Total Retail 0.139 0.169 0.122 0.133 0.129 0.186 Corporate Owned Life Insurance (COLI) 0.006 0.049 0.007 0.021 0.005 0.014 ------- ------- ------- ------- ------- ------- Total 0.145 0.218 0.129 0.154 0.134 0.200 ------- ------- ------- ------- ------- ------- First Year Premiums by Distribution (Billions) Lincoln Financial Advisors 0.051 0.066 0.036 0.046 0.038 0.064 Lincoln Financial Distributors 0.094 0.152 0.092 0.107 0.096 0.136 ------- ------- ------- ------- ------- ------- Total by Distribution 0.145 0.218 0.129 0.154 0.134 0.200 ------- ------- ------- ------- ------- ------- Insurance In-Force (Billions) Universal Life & Other 112.884 115.872 116.747 118.007 119.029 121.168 Term Insurance 98.424 100.130 102.467 105.265 108.723 113.226 ------- ------- ------- ------- ------- ------- Total Segment In-Force 211.308 216.002 219.214 223.272 227.751 234.394 ======= ======= ======= ======= ======= ======= * Third quarter 2001 income from operations and net income include special charges of $1.9 million after-tax ($2.9 million pre-tax) related to the events of September 11, 2001 and 4th quarter results include a reversal of $0.8 million after-tax ($1.2 million pre-tax) which resulted from updated information on previously recorded incurred but unreported claims for September 11.
12/31/01 PAGE 19 Life Insurance Segment Life Insurance Account Value Roll Forward Unaudited [Billions of Dollars] 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ Universal Life-Bal Beg-of-Year 2.530 2.558 6.259 6.650 6.976 Deposits 0.278 0.675 1.017 0.955 1.043 Withdrawals & deaths (0.399) (0.701) (0.452) (0.426) (0.319) ------ ------ ------ ------ ------ Net cash flows (0.121) (0.026) 0.564 0.528 0.724 Policyholder assessments (0.544) (0.584) (0.598) Interest credited 0.149 0.350 0.370 0.382 0.405 Acq of new business/companies 0.000 3.378 0.000 0.000 0.000 ------ ------ ------ ------ ------ Universal Life-Bal End of Year (1) 2.558 6.259 6.650 6.976 7.508 ------ ------ ------ ------ ------ Variable Universal Life-Bal Beg-of-Year 0.339 0.480 1.200 1.605 1.808 Deposits 0.106 0.193 0.326 0.607 0.584 Withdrawals & deaths (0.040) (0.100) (0.099) (0.132) (0.251) ------ ------ ------ ------ ------ Net cash flows 0.065 0.093 0.228 0.475 0.332 Policyholder assessments 0.000 (0.084) (0.141) (0.170) Invest inc & chg in mkt value 0.076 0.105 0.370 (0.130) (0.225) Acq of new business/transfers between segments 0.000 0.522 (0.110) 0.000 0.000 ------ ------ ------ ------ ------ Variable Universal Life -Bal End-of-Year 0.480 1.200 1.605 1.808 1.746 ------ ------ ------ ------ ------ Interest Sensitive Whole Life - Bal Beg-of-Year 1.784 1.963 2.062 Deposits 0.340 0.355 0.322 0.307 Withdrawals & deaths (0.294) (0.162) (0.168) (0.200) ------ ------ ------ ------ Net cash flows 0.046 0.193 0.154 0.107 Policyholder assessments (0.168) (0.168) (0.164) Interest credited 0.096 0.109 0.113 0.118 Acq of new business/companies 1.642 0.045 ------ ------ ------ ------ Int Sensitive Whole Life-Bal End -of -Year 1.784 1.963 2.062 2.123 - --------------------------------------------------------------------------------------------------------------------- Total Segment- Life Insurance Account Values Bal Beg-of-Year 2.869 3.038 9.243 10.217 10.847 Deposits 0.384 1.207 1.698 1.884 1.934 Withdrawals & deaths (0.439) (1.095) (0.713) (0.727) (0.771) ------ ------ ------ ------ ------ Net cash flows (0.056) 0.113 0.985 1.158 1.163 Policyholder assessments (0.795) (0.893) (0.931) Invest inc & change in market value 0.225 0.551 0.849 0.364 0.299 Acq(sale) of new business/companies 5.542 (0.065) ------ ------ ------ ------ ------ Total Segment -Bal End-of-Year 3.038 9.243 10.217 10.847 11.377 ====== ====== ====== ====== ====== (1) Includes fixed investment option of VUL products.
12/31/01 PAGE 20 Life Insurance Segment Life Insurance Account Value Roll Forward Unaudited [Billions of Dollars] For the Quarter Ended Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Universal Life-Bal Beg-of-Quarter 6.259 6.374 6.434 6.519 6.650 6.729 Deposits 0.234 0.238 0.239 0.306 0.252 0.212 Withdrawals & deaths (0.067) (0.152) (0.109) (0.124) (0.121) (0.111) ------ ------ ------ ------ ------ ------ Net cash flows 0.167 0.086 0.129 0.182 0.131 0.101 Policyholder assessments (0.130) (0.133) (0.136) (0.145) (0.145) (0.143) Interest credited 0.079 0.107 0.091 0.093 0.093 0.095 Acq of new business/companies 0.000 0.000 ------ ------ ------ ------ ------ ------ Universal Life-Bal End-of-Quarter (1) 6.374 6.434 6.519 6.650 6.729 6.782 ------ ------ ------ ------ ------ ------ Variable Universal Life-Bal Beg of Quarter 1.200 1.177 1.298 1.285 1.605 1.771 Deposits 0.077 0.068 0.074 0.107 0.112 0.128 Withdrawals & deaths (0.011) (0.013) (0.049) (0.025) (0.019) (0.028) ------ ------ ------ ------ ------ ------ Net cash flows 0.066 0.055 0.025 0.082 0.093 0.100 Policyholder assessments (0.020) (0.020) (0.020) (0.024) (0.032) (0.033) Invest inc & chg in mkt value 0.040 0.087 (0.018) 0.262 0.105 (0.074) Acq of new business/transfers between segments (0.110) 0.000 ------ ------ ------ ------ ------ ------ Variable Universal Life -Bal End-of-Quarter 1.177 1.298 1.285 1.605 1.771 1.764 ------ ------ ------ ------ ------ ------ Interest Sensitive Whole Life - Bal Beg-of-Quarter 1.784 1.865 1.895 1.922 1.963 1.970 Deposits 0.083 0.073 0.086 0.113 0.060 0.071 Withdrawals & deaths (0.039) (0.030) (0.044) (0.050) (0.042) (0.037) ------ ------ ------ ------ ------ ------ Net cash flows 0.044 0.044 0.043 0.062 0.018 0.034 Policyholder assessments (0.039) (0.039) (0.042) (0.048) (0.039) (0.040) Interest credited 0.030 0.025 0.027 0.026 0.028 0.028 Acq of new business/companies 0.045 ------ ------ ------ ------ ------ ------ Int Sensitive Whole Life-Bal End-of-Quarter 1.865 1.895 1.922 1.963 1.970 1.993 ------ ------ ------ ------ ------ ------ - -------------------------------------------------------------------------------------------------------------------- Total Segment- Life Insurance Account Values Bal Beg-of-Quarter 9.243 9.416 9.628 9.726 10.217 10.470 Deposits 0.394 0.379 0.399 0.526 0.424 0.411 Withdrawals & deaths (0.117) (0.195) (0.202) (0.199) (0.182) (0.176) ------ ------ ------ ------ ------ ------ Net cash flows 0.277 0.185 0.197 0.327 0.242 0.235 Policyholder assessments (0.189) (0.192) (0.198) (0.216) (0.215) (0.216) Invest inc & change in market value 0.149 0.219 0.100 0.381 0.227 0.048 Acq(sale) of new business/companies (0.065) 0.000 0.000 0.000 0.000 0.000 ------ ------ ------ ------ ------ ------ Total Segment -Bal End-of-Quarter 9.416 9.628 9.726 10.217 10.470 10.538 ====== ====== ====== ====== ====== ====== Life Insurance Segment (Continued) Life Insurance Account Value Roll Forward Unaudited [Billions of Dollars] For the Quarter Ended Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Universal Life-Bal Beg-of-Quarter 6.782 6.878 6.976 7.063 7.216 7.315 Deposits 0.227 0.265 0.227 0.270 0.233 0.314 Withdrawals & deaths (0.080) (0.114) (0.091) (0.071) (0.085) (0.073) ------ ------ ------ ------ ------ ------ Net cash flows 0.146 0.151 0.136 0.199 0.147 0.241 Policyholder assessments (0.146) (0.150) (0.147) (0.147) (0.150) (0.153) Interest credited 0.096 0.097 0.098 0.100 0.102 0.105 Acq of new business/companies 0.000 ------ ------ ------ ------ ------ ------ Universal Life-Bal End-of-Quarter (1) 6.878 6.976 7.063 7.216 7.315 7.508 ------ ------ ------ ------ ------ ------ Variable Universal Life-Bal Beg of Quarter 1.764 1.812 1.808 1.633 1.766 1.527 Deposits 0.123 0.245 0.136 0.138 0.124 0.186 Withdrawals & deaths (0.037) (0.048) (0.049) (0.060) (0.055) (0.088) ------ ------ ------ ------ ------ ------ Net cash flows 0.085 0.197 0.087 0.078 0.069 0.098 Policyholder assessments (0.036) (0.041) (0.041) (0.041) (0.042) (0.045) Invest inc & chg in mkt value (0.001) (0.160) (0.221) 0.096 (0.266) 0.166 Acq of new business/transfers between segments 0.000 0.000 ------ ------ ------ ------ ------ ------ Variable Universal Life -Bal End-of-Quarter 1.812 1.808 1.633 1.766 1.527 1.746 ------ ------ ------ ------ ------ ------ Interest Sensitive Whole Life - Bal Beg-of-Quarter 1.993 2.026 2.062 2.068 2.084 2.096 Deposits 0.079 0.113 0.056 0.069 0.077 0.105 Withdrawals & deaths (0.033) (0.056) (0.041) (0.043) (0.054) (0.061) ------ ------ ------ ------ ------ ------ Net cash flows 0.045 0.057 0.014 0.027 0.022 0.044 Policyholder assessments (0.040) (0.050) (0.037) (0.040) (0.041) (0.047) Interest credited 0.027 0.029 0.028 0.030 0.030 0.030 Acq of new business/companies ------ ------ ------ ------ ------ ------ Int Sensitive Whole Life-Bal End-of-Quarter 2.026 2.062 2.068 2.084 2.096 2.123 ------ ------ ------ ------ ------ ------ - -------------------------------------------------------------------------------------------------------------------- Total Segment- Life Insurance Account Values Bal Beg-of-Quarter 10.538 10.716 10.847 10.764 11.066 10.939 Deposits 0.428 0.622 0.418 0.477 0.434 0.605 Withdrawals & deaths (0.151) (0.218) (0.181) (0.173) (0.195) (0.222) ------ ------ ------ ------ ------ ------ Net cash flows 0.277 0.404 0.237 0.304 0.239 0.383 Policyholder assessments (0.221) (0.241) (0.225) (0.228) (0.232) (0.246) Invest inc & change in market value 0.123 (0.033) (0.094) 0.226 (0.134) 0.301 Acq(sale) of new business/companies 0.000 0.000 0.000 0.000 0.000 0.000 ------ ------ ------ ------ ------ ------ Total Segment -Bal End-of-Quarter 10.716 10.847 10.764 11.066 10.939 11.377 ====== ====== ====== ====== ====== ====== (1) Includes fixed investment option of VUL products.
12/31/2001 PAGE 21 Investment Management Income Statements Unaudited [Millions of Dollars] For the Year Ended December 31 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ Operating Revenue Investment advisory fees - External 229.9 249.0 248.6 231.6 197.2 Investment advisory fees - Insurance Assets 68.5 82.5 83.6 88.9 87.5 Other revenue and fees 76.3 92.5 106.6 115.9 99.2 Net investment income 72.8 67.0 56.9 57.7 53.6 ------ ------ ------ ------ ------ Operating Revenue 447.5 491.0 495.6 494.2 437.4 ------ ------ ------ ------ ------ Operating Benefits and Expenses Underwriting, acquisition, insurance and other expenses 396.1 401.5 384.3 408.7 397.8 Goodwill amortization 15.5 16.3 16.2 16.2 16.2 Interest on notes payable 0.1 0.4 0.0 0.0 0.0 ------ ------ ------ ------ ------ Operating Benefits and Expenses 411.8 418.2 400.5 425.0 414.1 ------ ------ ------ ------ ------ Income from Operations Before Tax 35.8 72.8 95.1 69.2 23.4 Federal income taxes 17.7 28.9 34.1 25.1 8.7 ------ ------ ------ ------ ------ Income from Operations 18.1 43.9 61.0 44.1 14.6 ------ ------ ------ ------ ------ Realized gains (losses) on investments 7.0 0.5 (0.1) (2.5) (2.4) Gains (losses) on derivatives 0.0 Restructuring charges 0.0 0.0 (9.2) (4.6) (0.4) ------ ------ ------ ------ ------ Income before Accounting Changes 25.1 44.4 51.6 37.0 11.9 ------ ------ ------ ------ ------ Cumulative effect of accounting changes (0.1) Net Income 25.1 44.4 51.6 37.0 11.8 ====== ====== ====== ====== ====== Income from Operations- before Goodwill Amortization 33.6 60.3 77.2 60.3 30.9 Income from Operations - before Goodwill & Intang. Amort 45.2 72.6 88.7 70.9 37.9 Operating Revenue 447.5 491.0 495.6 494.2 437.4 Realized gains (losses) on investments 11.6 0.9 (0.1) (3.9) (3.7) Gains (losses) on derivatives ------ ------ ------ ------ ------ Total Revenue 459.1 491.9 495.5 490.3 433.7 ====== ====== ====== ====== ====== Average Capital (Securities at Cost) 653.3 642.3 593.9 575.2 543.7 Return on Capital 2.8% 6.8% 10.3% 7.7% 2.7% - ------------------------------------------------------------------------------------------------------------------------ For the Quarter Ended Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Operating Revenue Investment advisory fees - External 65.1 62.5 60.7 60.3 60.0 57.9 Investment advisory fees - Insurance Assets 21.0 20.7 19.9 22.1 21.0 22.3 Other revenue and fees 25.6 26.3 24.9 29.8 31.9 31.0 Net investment income 14.9 14.1 13.9 13.9 13.0 12.6 ------ ------ ------ ------ ------ ------ Operating Revenue 126.6 123.6 119.3 126.1 126.0 123.8 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses Underwriting, acquisition, insurance and other expenses 97.8 97.3 92.8 96.3 102.5 99.3 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 101.9 101.4 96.8 100.4 106.6 103.3 ------ ------ ------ ------ ------ ------ Income from Operations Before Tax 24.7 22.2 22.5 25.7 19.4 20.5 Federal income taxes 9.4 7.9 7.7 9.1 7.0 7.4 ------ ------ ------ ------ ------ ------ Income from Operations 15.4 14.3 14.7 16.5 12.4 13.1 ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments 0.2 (0.3) (0.3) 0.4 (0.1) (2.0) Gains (losses) on derivatives Restructuring charges (12.1) 0.0 0.0 2.9 0.0 (2.7) ------ ------ ------ ------ ------ ------ Income before Accounting Changes 3.4 14.0 14.4 19.8 12.3 8.4 Cumulative effect of accounting changes ------ ------ ------ ------ ------ ------ Net Income 3.4 14.0 14.4 19.8 12.3 8.4 ====== ====== ====== ====== ====== ====== Inc from Oper -before 19.4 18.4 18.8 20.6 16.5 17.1 Goodwill Amortization Inc from Oper -before Goodwill & Intang. Amort 22.4 21.3 21.7 23.3 19.4 19.7 Operating Revenue 126.6 123.6 119.3 126.1 126.0 123.8 Realized gains (losses) on investments 0.2 (0.4) (0.5) 0.6 (0.2) (3.1) Gains (losses) on derivatives ------ ------ ------ ------ ------ ------ Total Revenue 126.8 123.2 118.8 126.6 125.8 120.7 ====== ====== ====== ====== ====== ====== Average Capital (Securities at Cost) 612.6 591.6 587.2 584.2 581.5 593.0 Return on Capital 10.0% 9.7% 10.0% 11.3% 8.6% 8.8% ------ ------ ------ ------ ------ ------ For the Quarter Ended Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Operating Revenue Investment advisory fees - External 56.9 56.7 50.5 51.1 46.2 49.3 Investment advisory fees - Insurance Assets 22.5 23.1 22.1 21.6 21.8 22.0 Other revenue and fees 26.4 26.6 26.3 25.7 23.9 23.4 Net investment income 18.3 13.8 14.1 13.0 13.6 12.8 ------ ------ ------ ------ ------ ------ Operating Revenue 124.1 120.2 113.0 111.4 105.5 107.6 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses Underwriting, acquisition, insurance and other expenses 103.9 103.0 104.7 101.6 95.1 96.4 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 107.9 107.1 108.8 105.7 99.2 100.4 ------ ------ ------ ------ ------ ------ Income from Operations Before Tax 16.2 13.1 4.2 5.7 6.3 7.1 Federal income taxes 6.3 4.4 1.8 2.0 2.9 2.1 ------ ------ ------ ------ ------ ------ Income from Operations 9.9 8.7 2.4 3.7 3.5 5.1 ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments (0.2) (0.2) (0.5) (0.7) (0.5) (0.7) Gains (losses) on derivatives 0.0 0.0 0.0 0.0 Restructuring charges 0.0 (1.9) 0.0 0.0 0.0 (0.4) ------ ------ ------ ------ ------ ------ Income before Accounting Changes 9.7 6.6 2.0 3.0 2.9 4.0 Cumulative effect of accounting changes 0.0 (0.1) 0.0 0.0 ------ ------ ------ ------ ------ ------ Net Income 9.7 6.6 2.0 2.9 2.9 4.0 ====== ====== ====== ====== ====== ====== Inc from Oper -before 14.0 12.7 6.5 7.7 7.5 9.1 Goodwill Amortization Inc from Oper -before Goodwill & Intang. Amort 16.6 15.2 9.1 9.2 9.0 10.6 Operating Revenue 124.1 120.2 113.0 111.4 105.5 107.6 Realized gains (losses) on investments (0.4) (0.3) (0.7) (1.1) (0.8) (1.1) Gains (losses) on derivatives 0.0 ------ ------ ------ ------ ------ ------ Total Revenue 123.8 120.0 112.3 110.3 104.7 106.5 ====== ====== ====== ====== ====== ====== Average Capital (Securities at Cost) 567.7 558.5 548.3 542.8 543.1 540.6 Return on Capital 7.0% 6.2% 1.8% 2.7% 2.5% 3.8% ------ ------ ------ ------ ------ ------
12/31/01 PAGE 22 Investment Management Assets Under Management Roll Forward Unaudited [Billions of Dollars] 1997 1998 1999 2000 2001 ------ ------- ------ ------ ------ Retail Fixed - Bal Beg-of-Year 5.853 8.125 8.217 7.424 6.499 Fund Sales 0.961 1.165 0.991 0.712 0.825 Redemptions (1.271) (1.235) (1.424) (1.365) (1.024) Net Money Market (0.069) (0.140) (0.110) (0.207) (0.047) Transfers (0.220) 0.132 0.177 (0.159) 0.394 ------ ------- ------ ------ ------ Net Cash Flows (0.599) (0.078) (0.366) (1.019) 0.148 Income Retained 0.276 0.291 0.276 0.240 0.223 Market Apprec/Deprec 0.049 (0.121) (0.704) (0.146) 0.103 Acq of New Company/Business 2.547 ------ ------- ------ ------ ------ Balance End-of-Year 8.125 8.217 7.424 6.499 6.973 ------ ------- ------ ------ ------ Retail Equity - Bal Beg-of-Year 13.152 17.754 22.080 23.383 21.174 Fund Sales 2.953 3.581 3.271 4.048 2.702 Redemptions (1.926) (2.460) (4.971) (4.369) (2.780) Net Money Market 0.000 (0.002) (0.001) 0.001 0.000 Transfers 0.209 0.730 (0.143) (0.178) (0.530) ------ ------- ------ ------ ------ Net Cash Flows 1.236 1.849 (1.844) (0.498) (0.608) Income Retained 0.005 0.220 0.120 0.083 0.093 Market Apprec/Deprec 3.317 2.256 3.028 (1.793) (3.013) Acq of New Company/Business 0.043 ------ ------- ------ ------ ------ Balance at End-of-Year 17.754 22.080 23.383 21.174 17.646 ------ ------- ------ ------ ------ Total Retail - Bal Beg-of-Year 19.006 25.879 30.297 30.807 27.674 Retail Sales-Annuities 2.163 2.238 1.561 1.726 1.449 Retail Sales-Mutual Funds 1.218 1.913 2.153 2.452 1.357 Retail Sales-Wrap & Other 0.533 0.596 0.550 0.581 0.721 ------ ------- ------ ------ ------ Total Retail Sales 3.914 4.745 4.264 4.760 3.527 Redemptions (3.197) (3.694) (6.396) (5.733) (3.805) Net Money Market (0.068) (0.141) (0.111) (0.206) (0.047) Transfers (0.011) 0.862 0.034 (0.337) (0.136) ------ ------- ------ ------ ------ Net Cash Flows 0.637 1.772 (2.209) (1.517) (0.461) Income Retained 0.281 0.511 0.396 0.323 0.316 Market Apprec/Deprec 3.366 2.136 2.324 (1.939) (2.910) Acq of New Company/Business 2.590 ------ ------- ------ ------ ------ Balance at End-of-Year 25.879 30.297 30.807 27.674 24.619 ------ ------- ------ ------ ------ - -------------------------------------------------------------------------------------------------------------------------------- Institutional Fixed - Bal Beg-of-Year 3.580 5.708 6.955 6.937 6.111 Inflows 2.509 2.169 2.000 0.771 0.643 Withdrawals/Terminations (0.787) (1.242) (1.699) (1.973) (1.228) Transfers 0.013 (0.074) (0.001) (0.005) 0.017 ------ ------- ------ ------ ------ Net Cash Flows 1.735 0.853 0.300 (1.207) (0.568) Income Retained 0.225 0.333 0.346 0.294 0.185 Market Apprec/Deprec 0.118 0.061 (0.665) 0.087 (0.238) Acq of New Company/Business 0.051 ------ ------- ------ ------ ------ Balance at End-of-Year 5.708 6.955 6.937 6.111 5.490 ------ ------- ------ ------ ------ Institutional Equity - Bal Beg-of-Year 22.886 24.871 24.235 23.630 19.111 Inflows 2.465 3.840 5.248 2.730 3.182 Withdrawals/Terminations (6.447) (7.441) (7.801) (7.209) (2.878) Transfers (0.068) 0.047 0.011 (0.008) 0.036 ------ ------- ------ ------ ------ Net Cash Flows (4.049) (3.555) (2.542) (4.487) 0.340 Income Retained 0.491 0.473 0.482 0.449 0.376 Market Apprec/Deprec 5.544 2.446 1.453 (0.481) (2.014) Acq of New Company/Business ------ ------- ------ ------ ------ Balance at End-of-Year 24.871 24.235 23.630 19.111 17.813 ------ ------- ------ ------ ------ Total Institutional - Bal Beg-of-Year 26.465 30.579 31.191 30.567 25.222 Inflows 4.975 6.009 7.249 3.501 3.825 Withdrawals/Terminations (7.234) (8.683) (9.500) (9.182) (4.106) Transfers (0.055) (0.027) 0.011 (0.014) 0.053 ------ ------- ------ ------ ------ Net Cash Flows (2.314) (2.702) (2.240) (5.694) (0.228) Income Retained 0.716 0.806 0.829 0.743 0.561 Market Apprec/Deprec 5.662 2.508 0.789 (0.394) (2.252) Acq of New Company/Business 0.051 ------ ------- ------ ------ ------ Balance at End-of-Year 30.579 31.191 30.567 25.222 23.303 ------ ------- ------ ------ ------ Total Retail/Institutional - At End-of-Year 56.458 61.488 61.374 52.895 47.922 ------ ------- ------ ------ ------ Insurance Assets - At End-of-Year 35.684 39.432 35.934 35.686 38.119 ------ ------- ------ ------ ------ Total Assets Under Management At End-of-Year 92.142 100.920 97.308 88.581 86.041 ====== ======= ====== ====== ======
12/31/01 PAGE 23 Investment Management Assets Under Management Roll Forward Unaudited [Billions of Dollars] Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Retail Fixed - Bal-Beg-of-Qtr 8.217 8.233 7.945 7.680 7.424 6.964 Fund Sales 0.316 0.263 0.231 0.181 0.146 0.152 Redemptions (0.313) (0.366) (0.342) (0.403) (0.444) (0.328) Net Money Market (0.019) (0.033) (0.029) (0.030) (0.067) (0.058) Transfers 0.032 (0.043) 0.034 0.154 (0.095) (0.045) ------ ------ ------ ------ ------ ------ Net Cash Flows 0.016 (0.179) (0.106) (0.098) (0.460) (0.279) Income Retained 0.066 0.074 0.069 0.067 0.061 0.063 Market Apprec/Deprec (0.067) (0.185) (0.228) (0.225) (0.062) (0.082) ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 8.233 7.945 7.680 7.424 6.964 6.667 ------ ------ ------ ------ ------ ------ Retail Equity - Bal-Beg-of-Qtr 22.080 21.798 22.340 20.873 23.383 24.102 Fund Sales 0.856 0.790 0.730 0.894 1.220 0.868 Redemptions (1.030) (1.957) (0.865) (1.120) (1.550) (0.971) Net Money Market 0.000 (0.001) 0.000 0.000 0.000 0.000 Transfers (0.034) 0.036 (0.060) (0.086) (0.096) 0.018 ------ ------ ------ ------ ------ ------ Net Cash Flows (0.208) (1.132) (0.195) (0.312) (0.426) (0.085) Income Retained 0.053 0.061 0.007 0.000 0.033 0.021 Market Apprec/Deprec (0.128) 1.614 (1.279) 2.822 1.112 (0.908) ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 21.798 22.340 20.873 23.383 24.102 23.129 ------ ------ ------ ------ ------ ------ Total Retail - Bal-Beg-of-Qtr 30.297 30.031 30.285 28.553 30.807 31.066 Retail Sales-Annuities 0.428 0.393 0.332 0.409 0.379 0.358 Retail Sales-Mutual Funds 0.565 0.487 0.514 0.587 0.840 0.556 Retail Sales-Wrap & Other 0.182 0.173 0.116 0.079 0.148 0.106 ------ ------ ------ ------ ------ ------ Total Retail Sales 1.175 1.053 0.962 1.075 1.367 1.020 Redemptions (1.343) (2.323) (1.207) (1.523) (1.995) (1.299) Net Money Market (0.019) (0.033) (0.029) (0.030) (0.067) (0.058) Transfers (0.001) (0.006) (0.027) 0.068 (0.191) (0.026) ------ ------ ------ ------ ------ ------ Net Cash Flows (0.188) (1.309) (0.301) (0.410) (0.886) (0.363) Income Retained 0.119 0.134 0.076 0.067 0.095 0.083 Market Apprec/Deprec (0.196) 1.429 (1.507) 2.597 1.051 (0.989) ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 30.031 30.285 28.553 30.807 31.066 29.796 ------ ------ ------ ------ ------ ------ - --------------------------------------------------------------------------------------- Institutional Fixed - Bal-Beg-of-Qtr 6.955 6.984 7.264 7.218 6.937 6.873 Inflows 0.657 0.478 0.446 0.420 0.180 0.148 Withdrawals/Terminations (0.415) (0.210) (0.294) (0.781) (0.353) (0.520) Transfers (0.003) 0.003 (0.002) 0.001 (0.005) (0.001) ------ ------ ------ ------ ------ ------ Net Cash Flows 0.239 0.271 0.150 (0.360) (0.178) (0.373) Income Retained 0.089 0.079 0.110 0.068 0.090 0.066 Market Apprec/Deprec (0.300) (0.070) (0.306) 0.011 0.024 (0.081) ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 6.984 7.264 7.218 6.937 6.873 6.484 ------ ------ ------ ------ ------ ------ Institutional Equity - Bal-Beg-of-Qtr 24.235 22.927 23.962 23.098 23.630 20.303 Inflows 1.297 1.179 1.839 0.934 0.904 0.669 Withdrawals/Terminations (2.540) (2.052) (1.165) (2.043) (3.333) (1.354) Transfers 0.011 0.019 (0.008) (0.010) (0.004) 0.002 ------ ------ ------ ------ ------ ------ Net Cash Flows (1.232) (0.854) 0.666 (1.119) (2.433) (0.683) Income Retained 0.104 0.118 0.167 0.093 0.109 0.132 Market Apprec/Deprec (0.180) 1.771 (1.697) 1.559 (1.003) 0.488 ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 22.927 23.962 23.098 23.630 20.303 20.239 ------ ------ ------ ------ ------ ------ Total Institutional - Bal-Beg-of-Qtr 31.191 29.910 31.226 30.316 30.567 27.175 Inflows 1.953 1.656 2.284 1.354 1.084 0.817 Withdrawals/Terminations (2.955) (2.262) (1.458) (2.825) (3.686) (1.874) Transfers 0.008 0.022 (0.010) (0.009) (0.009) 0.000 ------ ------ ------ ------ ------ ------ Net Cash Flows (0.994) (0.584) 0.816 (1.480) (2.611) (1.057) Income Retained 0.193 0.197 0.277 0.161 0.198 0.197 Market Apprec/Deprec (0.480) 1.702 (2.003) 1.569 (0.979) 0.407 ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 29.910 31.226 30.316 30.567 27.175 26.722 ------ ------ ------ ------ ------ ------ Total Retail/Inst - At End-of-Qtr 59.941 61.511 58.869 61.374 58.241 56.518 Insurance Assets-End-of-Qtr 38.516 37.391 36.820 35.934 35.541 34.891 ------ ------ ------ ------ ------ ------ Total Assets Under Management At End-of-Qtr 98.457 98.902 95.689 97.308 93.782 91.409 ------ ------ ------ ------ ------ ------ Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Retail Fixed - Bal-Beg-of-Qtr 6.667 6.531 6.499 6.631 6.643 7.066 Fund Sales 0.213 0.200 0.235 0.195 0.192 0.203 Redemptions (0.321) (0.272) (0.255) (0.280) (0.255) (0.235) Net Money Market (0.031) (0.051) 0.010 (0.030) 0.005 (0.031) Transfers (0.033) 0.013 0.042 (0.002) 0.382 (0.027) ------ ------ ------ ------ ------ ------ Net Cash Flows (0.171) (0.109) 0.032 (0.117) 0.324 (0.090) Income Retained 0.059 0.057 0.054 0.050 0.049 0.070 Market Apprec/Deprec (0.023) 0.021 0.046 0.080 0.051 (0.073) ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 6.531 6.499 6.631 6.643 7.066 6.973 ------ ------ ------ ------ ------ ------ Retail Equity - Bal-Beg-of-Qtr 23.129 23.680 21.174 17.935 19.411 15.584 Fund Sales 0.904 1.055 0.888 0.660 0.609 0.546 Redemptions (1.027) (0.820) (0.899) (0.657) (0.626) (0.598) Net Money Market 0.001 0.000 0.000 0.000 0.000 0.000 Transfers (0.033) (0.068) (0.068) (0.046) (0.433) 0.017 ------ ------ ------ ------ ------ ------ Net Cash Flows (0.154) 0.167 (0.079) (0.043) (0.450) (0.035) Income Retained 0.005 0.025 0.007 0.015 0.028 0.043 Market Apprec/Deprec 0.701 (2.698) (3.168) 1.504 (3.405) 2.055 ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 23.680 21.174 17.935 19.411 15.584 17.646 ------ ------ ------ ------ ------ ------ Total Retail - Bal-Beg-of-Qtr 29.796 30.211 27.674 24.566 26.054 22.650 Retail Sales-Annuities 0.453 0.536 0.455 0.373 0.340 0.281 Retail Sales-Mutual Funds 0.521 0.535 0.442 0.324 0.292 0.299 Retail Sales-Wrap & Other 0.143 0.184 0.227 0.157 0.168 0.169 ------ ------ ------ ------ ------ ------ Total Retail Sales 1.118 1.255 1.124 0.854 0.800 0.749 Redemptions (1.348) (1.092) (1.154) (0.938) (0.880) (0.833) Net Money Market (0.030) (0.051) 0.010 (0.030) 0.005 (0.031) Transfers (0.065) (0.054) (0.026) (0.048) (0.051) (0.010) ------ ------ ------ ------ ------ ------ Net Cash Flows (0.326) 0.058 (0.047) (0.160) (0.126) (0.125) Income Retained 0.063 0.082 0.061 0.066 0.078 0.112 Market Apprec/Deprec 0.677 (2.677) (3.122) 1.584 (3.354) 1.982 ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 30.211 27.674 24.566 26.054 22.650 24.619 ------ ------ ------ ------ ------ ------ - --------------------------------------------------------------------------------------- Institutional Fixed - Bal-Beg-of-Qtr 6.484 6.275 6.111 5.890 5.809 5.639 Inflows 0.308 0.135 0.310 0.233 0.020 0.080 Withdrawals/Terminations (0.532) (0.568) (0.432) (0.112) (0.493) (0.191) Transfers 0.000 0.001 0.003 0.010 0.001 0.002 ------ ------ ------ ------ ------ ------ Net Cash Flows (0.224) (0.433) (0.119) 0.131 (0.472) (0.109) Income Retained 0.089 0.050 0.066 0.047 0.029 0.043 Market Apprec/Deprec (0.074) 0.219 (0.168) (0.259) 0.273 (0.084) ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 6.275 6.111 5.890 5.809 5.639 5.490 ------ ------ ------ ------ ------ ------ Institutional Equity - Bal-Beg-of-Qtr 20.239 19.041 19.111 17.311 18.405 16.240 Inflows 0.407 0.750 0.881 0.823 0.863 0.615 Withdrawals/Terminations (1.154) (1.368) (1.199) (0.501) (0.555) (0.624) Transfers (0.013) 0.007 0.019 (0.008) 0.009 0.016 ------ ------ ------ ------ ------ ------ Net Cash Flows (0.760) (0.611) (0.299) 0.314 0.317 0.007 Income Retained 0.108 0.102 0.094 0.117 0.094 0.071 Market Apprec/Deprec (0.545) 0.579 (1.596) 0.663 (2.576) 1.495 ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 19.041 19.111 17.311 18.405 16.240 17.813 ------ ------ ------ ------ ------ ------ Total Institutional - Bal-Beg-of-Qtr 26.722 25.316 25.222 23.201 24.214 21.880 Inflows 0.715 0.885 1.191 1.056 0.883 0.696 Withdrawals/Terminations (1.686) (1.936) (1.631) (0.613) (1.047) (0.814) Transfers (0.012) 0.008 0.022 0.002 0.010 0.018 ------ ------ ------ ------ ------ ------ Net Cash Flows (0.983) (1.043) (0.418) 0.445 (0.155) (0.102) Income Retained 0.196 0.151 0.160 0.164 0.123 0.114 Market Apprec/Deprec (0.619) 0.798 (1.764) 0.404 (2.303) 1.411 ------ ------ ------ ------ ------ ------ Balance at End-of-Qtr 25.316 25.222 23.201 24.214 21.880 23.303 ------ ------ ------ ------ ------ ------ Total Retail/Inst - At End-of-Qtr 55.527 52.895 47.766 50.268 44.530 47.922 Insurance Assets-End-of-Qtr 34.981 35.686 36.324 36.018 37.337 38.119 Total Assets Under Management ------ ------ ------ ------ ------ ------ At End-of-Qtr 90.508 88.581 84.090 86.286 81.867 86.041 ------ ------ ------ ------ ------ ------
12/31/2001 PAGE 24 Lincoln UK Income Statements & Operational Data Unaudited [Millions of Dollars] For the Year Ended December 31 1997 1998 1999 2000 2001 ------ ------ ------ ------ ------ Operating Revenue Premiums 145.4 156.6 145.1 148.4 46.1 Surrender charges Mortality assessments 25.2 29.3 27.1 31.4 33.9 Expense assessments 166.1 153.6 182.3 178.1 134.8 Other revenue and fees 3.3 11.2 13.8 6.9 1.3 Net investment income 85.1 87.9 75.3 70.3 64.8 ------ ------ ------ ------ ------ Operating Revenue 425.2 438.6 443.6 435.0 280.9 ------ ------ ------ ------ ------ Operating Benefits and Expenses Benefits paid or provided: Benefits 339.6 151.0 306.2 178.5 83.4 Underwriting, acquisition, insurance and other expenses 184.5 175.6 223.5 180.0 147.6 Goodwill amortization 0.0 6.3 7.0 4.0 0.6 ------ ------ ------ ------ ------ Operating Benefits and Expenses 524.1 332.9 536.7 362.6 231.7 ------ ------ ------ ------ ------ Income from Operations Before Tax (99.0) 105.8 (93.1) 72.4 49.2 Federal income taxes 9.3 34.8 (79.2) 11.3 (11.1) ------ ------ ------ ------ ------ Income from Operations (108.3) 70.9 (13.9) 61.0 60.2 ------ ------ ------ ------ ------ Realized gains (losses) on investments 1.5 0.8 2.1 2.3 8.7 Gains (losses) on derivatives 0.0 Restructuring charges 0.0 0.0 (6.5) (76.5) 0.0 ------ ------ ------ ------ ------ Income before Accounting Changes (106.8) 71.7 (18.2) (13.2) 68.9 ------ ------ ------ ------ ------ Cumulative effect of accounting changes 0.0 Net Income (106.8) 71.7 (18.2) (13.2) 68.9 ====== ====== ====== ====== ====== Inc from Oper -before Goodwill Amort. (108.3) 77.2 (6.9) 65.1 60.9 Effective tax rate (9.4%) 32.9% 85.1% 15.7% (22.5%) Operating revenue 425.2 438.6 443.6 435.0 280.9 Realized gains (losses) on investments 2.1 1.1 3.0 3.2 12.4 Gains(losses) on derivatives 0.0 0.0 0.0 0.0 0.0 ------ ------ ------ ------ ------ Total Revenue 427.3 439.7 446.6 438.2 293.3 ====== ====== ====== ====== ====== Average capital 618.1 517.7 551.2 488.2 559.7 Return on average capital (17.5%) 13.7% (2.5%) 12.5% 10.8% Unit Linked Assets - Beg-of-Year 5.074 5.643 6.265 7.220 6.441 Deposits 0.569 0.473 0.537 0.554 0.481 Withdrawals (incl. chgs) & Deaths (0.503) (0.547) (0.566) (0.644) (0.529) ------ ------ ------ ------ ------ Net Cash Flows 0.066 (0.074) (0.029) (0.090) (0.048) Inv Inc & Chg in Mkt Val 0.682 0.662 1.154 (0.154) (0.617) Acq of new business/companies 0.000 0.000 0.000 0.000 0.000 Foreign currency adjustment (0.179) 0.035 (0.170) (0.536) (0.169) ------ ------ ------ ------ ------ Unit Linked Assets - End-of-Year 5.643 6.265 7.220 6.441 5.607 ====== ====== ====== ====== ====== Individual Life In-force (Billions) 25.026 25.002 25.698 24.290 20.878 Exchange Rate - Dollars to Pounds For-the-Year 1.644 1.658 1.617 1.518 1.441 End-of-Year 1.651 1.660 1.615 1.493 1.456
12/31/2001 PAGE 25 Lincoln UK Income Statements & Operational Data Unaudited [Millions of Dollars] For the Quarter Ended Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Operating Revenue Premiums 43.9 29.0 33.5 38.7 39.0 36.3 Surrender charges Mortality assessments 6.7 7.7 7.7 5.0 6.3 8.0 Expense assessments 43.9 51.9 49.3 37.2 46.5 44.3 Other revenue and fees 2.9 3.5 3.6 3.8 2.4 1.3 Net investment income 21.7 19.6 16.2 17.7 18.9 18.5 ------ ------ ------ ------ ------ ------ Operating Revenue 119.2 111.8 110.3 102.4 113.2 108.4 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses Benefits paid or provided: Benefits 35.7 31.5 27.2 211.8 35.0 37.4 Underwriting, acquisition, insurance and other expenses 55.3 55.2 61.6 51.4 56.4 43.5 Goodwill amortization 1.2 1.2 1.2 3.3 1.3 1.3 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses 92.2 87.9 90.1 266.6 92.8 82.2 ------ ------ ------ ------ ------ ------ Income from Operations Before Tax 27.0 23.9 20.2 (164.2) 20.4 26.2 Federal income taxes 8.9 4.9 4.0 (97.1) 4.7 6.9 ------ ------ ------ ------ ------ ------ Income from Operations 18.1 19.0 16.2 (67.1) 15.7 19.3 ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments (0.0) 1.0 0.2 1.0 (0.2) (0.1) Gains (losses) on derivatives Restructuring charges 0.0 0.0 0.0 (6.5) 0.0 0.0 ------ ------ ------ ------ ------ ------ Income before Accounting Changes 18.0 20.0 16.4 (72.6) 15.5 19.1 Cumulative effect of accounting changes ------ ------ ------ ------ ------ ------ Net Income 18.0 20.0 16.4 (72.6) 15.5 19.1 ====== ====== ====== ====== ====== ====== Inc from Oper -before Goodwill Amortization 19.3 20.2 17.4 (63.8) 17.1 20.5 Effective tax rate 33.0% 20.4% 20.0% 59.1% 22.9% 26.4% Operating revenue 119.2 111.8 110.3 102.4 113.2 108.4 Realized gains (losses) on investments (0.1) 1.4 0.3 1.4 (0.4) (0.2) Gains (losses) on derivatives ------ ------ ------ ------ ------ ------ Total Revenue 119.1 113.1 110.5 103.8 112.8 108.2 ====== ====== ====== ====== ====== ====== Average capital 519.2 526.9 573.5 585.0 516.4 500.8 Return on average capital 13.9% 14.4% 11.3% (45.9%) 12.2% 15.4% - -------------------------------------------------------------------------------------------------------------------- Unit Linked Assets Balance-Beg-of-Quarter (Billions) 6.265 6.348 6.503 6.568 7.220 7.031 Deposits 0.131 0.119 0.130 0.156 0.159 0.134 Withdrawals (incl. chgs) & Deaths (0.136) (0.137) (0.136) (0.158) (0.170) (0.162) ------ ------ ------ ------ ------ ------ Net Cash Flows (0.005) (0.017) (0.005) (0.002) (0.011) (0.028) Inv Inc & Chg in Mkt Val 0.271 0.314 (0.214) 0.784 (0.077) 0.047 Acq of new business/companies Foreign currency adjustment (0.184) (0.141) 0.284 (0.130) (0.101) (0.324) ------ ------ ------ ------ ------ ------ Unit Linked Assets - End-of-Quarter 6.348 6.503 6.568 7.220 7.031 6.726 ====== ====== ====== ====== ====== ====== Individual Life In-force (Billions) 25.246 25.107 26.235 25.698 26.514 25.225 Exchange Rate - Dollars to Pounds For-the-Quarter 1.631 1.602 1.614 1.625 1.599 1.536 End-of-Quarter 1.612 1.577 1.647 1.615 1.591 1.517 ------ ------ ------ ------ ------ ------ For the Quarter Ended Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Operating Revenue Premiums 32.5 40.5 12.8 9.6 11.8 11.9 Surrender charges Mortality assessments 9.6 7.5 9.4 8.9 8.5 7.1 Expense assessments 52.6 34.6 43.7 31.4 35.5 24.1 Other revenue and fees 2.0 1.3 0.6 0.1 0.0 0.6 Net investment income 16.1 16.7 17.9 16.9 14.8 15.2 ------ ------ ------ ------ ------ ------ Operating Revenue 112.8 100.6 84.4 66.9 70.7 58.9 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses Benefits paid or provided: Benefits 51.9 54.2 24.0 17.9 20.7 20.8 Underwriting, acquisition, insurance and other expenses 45.2 34.9 41.1 29.7 40.3 36.5 Goodwill amortization 1.2 0.2 0.2 0.2 0.2 0.2 ------ ------ ------ ------ ------ ------ Operating Benefits and Expenses 98.3 89.3 65.3 47.7 61.1 57.5 ------ ------ ------ ------ ------ ------ Income from Operations Before Tax 14.5 11.3 19.1 19.1 9.6 1.4 Federal income taxes 3.9 (4.2) 4.7 2.9 (0.5) (18.1) ------ ------ ------ ------ ------ ------ Income from Operations 10.6 15.5 14.4 16.2 10.1 19.5 ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments (0.0) 2.6 0.4 1.4 3.9 3.0 Gains (losses) on derivatives 0.0 Restructuring charges (40.5) (36.1) 0.0 0.0 0.0 0.0 ------ ------ ------ ------ ------ ------ Income before Accounting Changes (29.9) (17.9) 14.8 17.6 14.0 22.5 Cumulative effect of accounting changes 0.0 ------ ------ ------ ------ ------ ------ Net Income (29.9) (17.9) 14.8 17.6 14.0 22.5 ====== ====== ====== ====== ====== ====== Inc from Oper -before Goodwill Amortization 11.8 15.7 14.5 16.4 10.3 19.7 Effective tax rate 27.2% (37.1%) 24.6% 15.3% (5.7%) (1337.4%) Operating revenue 112.8 100.6 84.4 66.9 70.7 58.9 Realized gains (losses) on investments (0.0) 3.8 0.6 2.0 5.5 4.3 Gains (losses) on derivatives ------ ------ ------ ------ ------ ------ Total Revenue 112.8 104.3 84.9 68.9 76.3 63.2 ====== ====== ====== ====== ====== ====== Average capital 486.5 448.9 548.7 553.2 575.4 561.3 Return on average capital 8.7% 13.8% 10.5% 11.7% 7.0% 13.9% - -------------------------------------------------------------------------------------------------------------------- Unit Linked Assets Balance-Beg-of-Quarter (Billions) 6.726 6.499 6.441 5.677 5.768 5.218 Deposits 0.145 0.116 0.132 0.111 0.128 0.111 Withdrawals (incl. chgs) & Deaths (0.159) (0.153) (0.147) (0.131) (0.136) (0.115) ------ ------ ------ ------ ------ ------ Net Cash Flows (0.014) (0.037) (0.015) (0.020) (0.009) (0.004) Inv Inc & Chg in Mkt Val (0.025) (0.100) (0.421) 0.115 (0.768) 0.457 Acq of new business/companies Foreign currency adjustment (0.189) 0.078 (0.328) (0.004) 0.226 (0.063) ------ ------ ------ ------ ------ ------ Unit Linked Assets - End-of-Quarter 6.499 6.441 5.677 5.768 5.218 5.607 ====== ====== ====== ====== ====== ====== Individual Life In-force (Billions) 24.535 24.290 21.894 21.519 21.299 20.878 Exchange Rate - Dollars to Pounds For-the-Quarter 1.482 1.454 1.455 1.421 1.442 1.448 End-of-Quarter 1.475 1.493 1.416 1.415 1.474 1.456 ------ ------ ------ ------ ------ ------
12/31/01 PAGE 26 Other Operations Unaudited [Millions of Dollars] For the Year Ended December 31 1997 1998 1999 2000 2001 ------- ------- ------- ------- ------- Revenue Lincoln Financial Advisors 125.3 286.4 317.0 377.5 360.7 Lincoln Financial Distributors 20.5 33.5 107.5 119.9 126.0 ------- ------- ------- ------- ------- Total Distribution 145.8 319.9 424.4 497.4 486.6 Reinsurance* 1362.3 1581.2 1824.1 1770.6 1699.4 Amortization of deferred gain on indemnity reinsurance** 20.4 Other [Including Consolidating Adjustments] (105.9) (192.7) (277.5) (292.6) (342.3) ------- ------- ------- ------- ------- Operating Revenue 1,402.2 1,708.3 1,971.0 1,975.4 1864.2 ------- ------- ------- ------- ------- Realized gains (losses) on investments 42.1 0.5 14.4 (5.0) 8.2 Gains (losses) on derivatives (9.7) Gain on sale of reinsurance subsidiaries 12.8 ------- ------- ------- ------- ------- Total Revenue 1,444.3 1,708.9 1,985.4 1,970.4 1875.5 ======= ======= ======= ======= ======= Income (Loss) Lincoln Financial Advisors (5.3) (23.7) (20.8) (11.7) (15.9) Lincoln Financial Distributors (11.2) (8.2) (14.0) (18.5) (30.7) ------- ------- ------- ------- ------- Total Distribution (16.5) (31.9) (34.8) (30.2) (46.6) Reinsurance* (150.1) 104.9 40.1 122.5 128.8 Amortization of deferred gain on indemnity reinsurance** 12.9 LNC Financing (31.6) (51.5) (83.5) (84.9) (77.9) LNC Operations *** (18.4) (18.5) 0.0 0.0 0.0 Other Corporate (6.7) 1.0 (5.0) (15.4) (2.4) ------- ------- ------- ------- ------- Inc (Loss) from Operations (223.3) 4.0 (83.1) (8.0) 14.8 ------- ------- ------- ------- ------- Realized gains (losses) on investments 24.9 2.7 10.2 (3.2) 5.9 Gains (losses) on derivatives (6.3) Gain on sale of reinsurance subsidiaries 15.0 Restructuring charges 0.0 (14.3) (3.2) 1.0 (19.5) ------- ------- ------- ------- ------- Income before Accounting Changes (198.4) (7.6) (76.1) (10.2) 9.9 Cumulative effect of accounting changes (2.7) ------- ------- ------- ------- ------- Total Net Income (Loss) (198.4) (7.6) (76.1) (10.2) 7.2 ======= ======= ======= ======= ======= Mar Jun Sep Dec Mar Jun For the Quarter Ended 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Revenue Lincoln Financial Advisors 65.4 71.8 75.7 104.0 86.4 90.0 Lincoln Financial Distributors 20.7 26.2 26.4 34.2 29.3 28.1 ------ ------ ------ ------ ------ ------ Total Distribution 86.1 98.0 102.1 138.2 115.8 118.1 Reinsurance* 419.4 425.8 403.7 575.1 392.7 458.9 Amortization of deferred gain on indemnity reinsurance** Other [Including Consolidating Adjustments] (25.9) (39.8) (64.8) (147.0) (67.6) (86.7) ------ ------ ------ ------ ------ ------ Operating Revenue 479.6 484.1 441.0 566.4 440.9 490.3 ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments 1.4 (1.3) 14.2 0.0 (0.8) (1.3) Gains (losses) on derivatives Gain on sale of reinsurance subsidiaries ------ ------ ------ ------ ------ ------ Total Revenue 481.0 482.8 455.2 566.4 440.2 489.0 ====== ====== ====== ====== ====== ====== Income (Loss) Lincoln Financial Advisors (8.4) (9.7) (5.3) 2.7 (7.4) (2.9) Lincoln Financial Distributors (3.0) (5.3) (2.1) (3.7) (3.3) (5.2) ------ ------ ------ ------ ------ ------ Total Distribution (11.4) (15.0) (7.4) (1.0) (10.7) (8.1) Reinsurance* 33.8 23.7 2.2 (19.5) 31.9 25.8 Amortization of deferred gain on indemnity reinsurance** LNC Financing (20.5) (21.4) (19.9) (21.6) (21.9) (22.2) LNC Operations *** Other Corporate (2.1) 0.9 (2.4) (1.4) (5.7) (1.5) ------ ------ ------ ------ ------ ------ Inc (Loss) from Oper (0.3) (11.9) (27.5) (43.5) (6.5) (5.9) ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments 0.8 (1.7) 9.8 1.3 (0.4) (0.8) Gains (losses) on derivatives Gain on sale of reinsurance subsidiaries Restructuring charges 0.0 0.0 (3.2) 0.0 0.0 0.0 ------ ------ ------ ------ ------ ------ Income before Accounting Changes 0.6 (13.6) (20.9) (42.2) (6.8) (6.8) Cumulative effect of accounting changes ------ ------ ------ ------ ------ ------ Total Net Income (Loss) 0.6 (13.6) (20.9) (42.2) (6.8) (6.8) ====== ====== ====== ====== ====== ====== Sep Dec Mar Jun Sep Dec For the Quarter Ended 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Revenue Lincoln Financial Advisors 91.3 109.8 81.2 83.8 78.9 116.7 Lincoln Financial Distributors 27.5 35.0 25.7 32.1 30.8 37.4 ------ ------ ------ ------ ------ ------ Total Distribution 118.8 144.8 106.9 115.9 109.8 154.1 Reinsurance* 457.9 461.0 515.1 451.4 467.4 265.6 Amortization of deferred gain on indemnity reinsurance** 20.4 Other [Including Consolidating Adjustments] (79.2) (59.2) (80.5) (116.6) (74.8) (70.3) ------ ------ ------ ------ ------ ------ Operating Revenue 497.5 546.6 541.5 450.7 502.3 369.8 ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments (3.4) 0.4 (10.0) 1.4 (12.8) 29.5 Gains (losses) on derivatives 0.1 (0.1) (0.0) (9.7) Gain on sale of reinsurance subsidiaries 12.8 ------ ------ ------ ------ ------ ------ Total Revenue 494.1 547.0 531.6 452.0 489.5 402.5 ====== ====== ====== ====== ====== ====== Income (Loss) Lincoln Financial Advisors (3.1) 1.6 (6.8) (12.3) (4.2) 7.4 Lincoln Financial Distributors (5.0) (5.1) (6.9) (11.5) (7.8) (4.5) ------ ------ ------ ------ ------ ------ Total Distribution (8.0) (3.4) (13.8) (23.8) (12.0) 3.0 Reinsurance* 28.2 36.6 46.8 34.1 17.2 30.7 Amortization of deferred gain on indemnity reinsurance** 12.9 LNC Financing (20.9) (19.8) (21.7) (22.0) (19.5) (14.7) LNC Operations *** 0.0 Other Corporate 1.6 (9.8) (0.5) 2.0 1.5 (5.3) ------ ------ ------ ------ ------ ------ Inc (Loss) from Oper 0.9 3.5 10.9 (9.7) (12.9) 26.5 ------ ------ ------ ------ ------ ------ Realized gains (losses) on investments (3.2) 1.2 (6.5) 1.0 (8.3) 19.7 Gains (losses) on derivatives 0.1 (0.1) (0.0) (6.3) Gain on sale of reinsurance subsidiaries 0.0 0.0 0.0 15.0 Restructuring charges 0.0 1.0 0.0 (1.2) 0.0 (18.3) ------ ------ ------ ------ ------ ------ Income before Accounting Changes (2.3) 5.7 4.4 (10.0) (21.2) 36.7 Cumulative effect of accounting changes (0.4) (2.2) 0.0 (0.0) ------ ------ ------ ------ ------ ------ Total Net Income (Loss) (2.3) 5.7 4.0 (12.2) (21.2) 36.7 ====== ====== ====== ====== ====== ====== * Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all current year and historical financial data for the former Reinsurance segment was moved into "Other Operations." The Reinsurance line for 2001 represents the results for the former Reinsurance segment for the eleven months ended November 30, 2001. ** The amortization of deferred gain on sale of reinsurance business represents the amortization of deferred gain recognized on the indemnity reinsurance portion of the transaction with Swiss Re ($5.0 million after-tax) along with the recognition of amortization of gain on reinsurance business to Swiss Re that was novated after December 7, 2001 ($7.9 million after-tax). *** Starting with the first quarter of 1999, 100% of "LNC Operations" is allocated to the business segments. Prior periods have not been restated.
12/31/01 PAGE 27 Consolidated Domestic Retail Deposits/Account Balances Unaudited [Billions of Dollars] 1997 1998 1999 2000 2001 -------- -------- -------- -------- -------- Deposits - For the Year Annuities Segment - Fixed Annuities 1.632 1.452 2.563 2.074 3.342 Annuities Segment - Variable Annuities 2.695 2.791 2.553 3.165 3.067 Annuities Segment - Life Insurance 0.000 0.000 0.017 0.014 0.012 Life Insurance Segment - Life Insurance 0.384 1.207 1.698 1.884 1.934 Inv Mgmt - Annuities 2.163 2.238 1.561 1.726 1.449 Inv Mgmt - Mutual Funds 1.218 1.913 2.153 2.452 1.357 Inv Mgmt - Wrap Fee & Other 0.533 0.596 0.550 0.581 0.721 Consolidating Adjustments (0.966) (1.041) (0.499) (0.406) (1.039) -------- -------- -------- -------- -------- Gross Deposits 7.658 9.157 10.597 11.491 10.843 Account Balances - End of Year Annuities Segment - Fixed Annuities 15.458 16.505 16.791 15.394 16.491 Annuities Segment - Variable Annuities 27.346 33.358 41.493 39.427 34.638 Annuities Segment - Life Insurance 0.155 0.160 0.149 Life Insurance Segment - Life Insurance 3.038 9.243 10.217 10.847 11.377 Inv Mgmt - Annuities 10.991 14.257 15.526 13.494 11.772 Inv Mgmt - Mutual Funds 12.484 13.528 13.632 12.805 11.065 Inv Mgmt - Wrap Fee & Other 2.403 2.512 1.649 1.375 1.782 Consolidating Adjustments (6.806) (8.891) (9.175) (7.753) (6.717) -------- -------- -------- -------- -------- Account Balances 64.914 80.512 90.288 85.749 80.557 Mar Jun Sep Dec Mar Jun 1999 1999 1999 1999 2000 2000 -------- -------- -------- -------- -------- ------- Deposits - For the Quarter Annuities Segment - Fixed Annuities 0.489 0.654 0.678 0.741 0.589 0.490 Annuities Segment - Variable Annuities 0.635 0.651 0.634 0.634 0.797 0.793 Annuities Segment - Life Insurance 0.003 0.005 0.004 0.005 0.003 0.003 Life Insurance Segment - Life Insurance 0.394 0.379 0.399 0.526 0.424 0.411 Inv Mgmt - Annuities 0.428 0.393 0.332 0.409 0.379 0.358 Inv Mgmt - Mutual Funds 0.565 0.487 0.514 0.587 0.840 0.556 Inv Mgmt - Wrap Fee & Other 0.182 0.173 0.116 0.079 0.148 0.106 Consolidating Adjustments (0.142) (0.143) (0.096) (0.118) (0.099) (0.062) -------- -------- -------- -------- -------- ------- Gross Deposits 2.554 2.599 2.581 2.864 3.081 2.655 -------- -------- -------- -------- -------- ------- Account Balances - End of Quarter Annuities Segment - Fixed Annuities 16.656 16.779 16.934 16.791 16.244 15.884 Annuities Segment - Variable Annuities 34.148 37.233 35.613 41.493 44.640 43.097 Annuities Segment - Life Insurance 0.115 0.130 0.128 0.155 0.169 0.165 Life Insurance Segment - Life Insurance 9.416 9.628 9.726 10.217 10.470 10.538 Inv Mgmt - Annuities 14.166 14.981 14.004 15.526 15.531 14.861 Inv Mgmt - Mutual Funds 13.442 13.654 12.938 13.632 14.201 13.604 Inv Mgmt - Wrap Fee & Other 2.424 1.650 1.611 1.649 1.335 1.331 Consolidating Adjustments (8.798) (9.050) (8.387) (9.175) (8.768) (8.419) -------- -------- -------- -------- -------- ------- Account Balances 81.570 85.004 82.567 90.288 93.822 91.061 -------- -------- -------- -------- -------- ------- Sep Dec Mar Jun Sep Dec 2000 2000 2001 2001 2001 2001 ------- -------- -------- -------- -------- -------- Deposits - For the Quarter Annuities Segment - Fixed Annuities 0.513 0.482 0.560 0.668 0.896 1.218 Annuities Segment - Variable Annuities 0.729 0.846 0.887 0.703 0.684 0.793 Annuities Segment - Life Insurance 0.004 0.004 0.003 0.004 0.003 0.002 Life Insurance Segment - Life Insurance 0.428 0.622 0.418 0.477 0.434 0.605 Inv Mgmt - Annuities 0.453 0.536 0.455 0.373 0.340 0.281 Inv Mgmt - Mutual Funds 0.521 0.535 0.442 0.324 0.292 0.299 Inv Mgmt - Wrap Fee & Other 0.143 0.184 0.227 0.157 0.168 0.169 Consolidating Adjustments (0.100) (0.145) (0.262) (0.202) (0.295) (0.279) ------- -------- -------- -------- -------- -------- Gross Deposits 2.691 3.064 2.729 2.504 2.522 3.088 ------- -------- -------- -------- -------- -------- Account Balances - End of Quarter Annuities Segment - Fixed Annuities 15.660 15.394 15.430 15.551 16.051 16.491 Annuities Segment - Variable Annuities 42.743 39.427 34.733 36.961 30.506 34.638 Annuities Segment - Life Insurance 0.166 0.160 0.147 0.157 0.134 0.149 Life Insurance Segment - Life Insurance 10.716 10.847 10.764 11.066 10.939 11.377 Inv Mgmt - Annuities 14.824 13.494 11.787 12.483 10.665 11.772 Inv Mgmt - Mutual Funds 14.102 12.805 11.091 11.748 10.301 11.065 Inv Mgmt - Wrap Fee & Other 1.285 1.375 1.688 1.823 1.684 1.782 Consolidating Adjustments (8.644) (7.753) (6.834) (7.007) (6.023) (6.717) ------- -------- -------- -------- -------- -------- Account Balances 90.853 85.749 78.806 82.783 74.257 80.557 ------- -------- -------- -------- -------- -------- Total Domestic Net Flows Unaudited [Billions of Dollars] For the Year 2000 2001 ------- -------- Annuities Segment (2.874) 0.105 Life Insurance Segment 1.158 1.163 Investment Management Segment- Retail (1.517) (0.461) Consolidating Adjustments 1.406 (0.150) ------- -------- Total Retail Net Flows (1.828) 0.657 ------- -------- Investment Management Segment- Institutional (5.694) (0.228) ------- -------- Total Net Flows (7.522) 0.429 ------- -------- Mar Jun Sep Dec For the Quarter 2000 2000 2000 2000 ------- ------- ------- ------- Annuities Segment (0.700) (0.682) (0.812) (0.681) Life Insurance Segment 0.242 0.235 0.277 0.404 Investment Management Segment- Retail (0.886) (0.363) (0.326) 0.058 Consolidating Adjustments 0.717 0.342 0.194 0.152 ------- ------- ------- ------- Total Retail Net Flows (0.627) (0.469) (0.667) (0.066) Investment Management Segment- Institutional (2.611) (1.057) (0.983) (1.043) ------- ------- ------- ------- Total Net Flows (3.238) (1.526) (1.650) (1.110) ------- ------- ------- ------- Mar Jun Sep Dec For the Quarter 2001 2001 2001 2001 -------- ------- ------- ------- Annuities Segment (0.590) (0.196) 0.261 0.631 Life Insurance Segment 0.237 0.304 0.239 0.383 Investment Management Segment- Retail (0.047) (0.160) (0.126) (0.125) Consolidating Adjustments 0.019 (0.034) (0.081) (0.053) -------- ------- ------- ------- Total Retail Net Flows (0.382) (0.086) 0.293 0.836 Investment Management Segment- Institutional (0.418) 0.445 (0.155) (0.102) -------- ------- ------- ------- Total Net Flows (0.800) 0.359 0.138 0.734 -------- ------- ------- ------- NOTE: Excludes amounts reported as Assets Under Management - Insurance Assets
PAGE 28 Consolidated Investment Data - Assets Managed Unaudited [Billions of Dollars] December 31 1997 1998 1999 2000 2001 ------- ------- ------- ------- ------- Assets Managed by Source LNC's Investments and Cash: Fixed maturity securities 24.066 30.233 27.689 27.450 28.346 Equity securities 0.660 0.543 0.604 0.550 0.470 Other investments 5.092 7.154 7.286 7.369 7.297 ------- ------- ------- ------- ------- Total LNC Investments 29.819 37.929 35.578 35.369 36.113 Separate accounts 37.139 43.409 53.654 50.580 44.833 Cash and Invested Cash 3.795 2.433 1.896 1.927 3.104 Discontinued Operations ------- ------- ------- ------- ------- Total LNC 70.752 83.772 91.128 87.876 84.051 ------- ------- ------- ------- ------- Non-affiliate assets managed 48.331 50.061 49.314 43.397 42.199 ------- ------- ------- ------- ------- Total Assets Managed 119.083 133.833 140.443 131.273 126.250 ======= ======= ======= ======= ======= Assets Managed by Advisor Investment Management segment 56.457 61.488 61.374 52.895 47.922 (See page 22 for additional detail) DLIA-Corp 35.684 39.432 35.934 35.686 38.119 (Assets managed internally-see page 22) Lincoln (UK) 6.775 7.573 8.589 7.873 6.847 Policy Loans (within business units) 0.763 1.840 1.892 1.961 1.940 Non-LNC Affiliates 19.404 23.500 32.654 32.858 31.422 ------- ------- ------- ------- ------- Total Assets Managed 119.083 133.833 140.443 131.273 126.250 ======= ======= ======= ======= =======
Mar Jun Sep Dec Mar Jun End of Quarter 1999 1999 1999 1999 2000 2000 ------- ------- ------- ------- ------- ------- Assets Managed by Source LNC's Investments and Cash: Fixed maturity securities 30.578 29.579 28.708 27.689 27.745 27.078 Equity securities 0.481 0.506 0.507 0.604 0.588 0.560 Other investments 7.071 7.278 7.317 7.286 7.442 7.419 ------- ------- ------- ------- ------- ------- Total LNC Investments 38.129 37.363 36.532 35.578 35.775 35.057 Separate accounts 44.339 47.864 46.229 53.654 56.908 54.924 Cash and invested cash 2.327 2.151 2.343 1.896 1.510 1.619 ------- ------- ------- ------- ------- ------- Total LNC 84.796 87.378 85.104 91.128 94.192 91.601 ------- ------- ------- ------- ------- ------- Non-affiliate assets managed 48.690 49.827 48.068 49.314 47.150 45.945 ------- ------- ------- ------- ------- ------- Total Assets Managed 133.486 137.205 133.172 140.443 141.342 137.546 ======= ======= ======= ======= ======= ======= Assets Managed by Advisor Investment Management segment 59.941 61.511 58.869 61.374 58.241 56.518 (See page 23 for additional detail) DLIA-Corp 38.516 37.391 36.820 35.934 35.541 34.891 (Assets managed internally-see page 23) Lincoln (UK) 7.631 7.746 7.849 8.589 8.423 8.058 Policy Loans (within business units) 1.842 1.847 1.863 1.892 1.896 1.915 Non-LNC Affiliates 25.555 28.710 27.771 32.654 37.241 36.164 ------- ------- ------- ------- ------- ------- Total Assets Managed 133.486 137.205 133.172 140.443 141.342 137.546 ======= ======= ======= ======= ======= ======= Sep Dec Mar Jun Sep Dec End of Quarter 2000 2000 2001 2001 2001 2001 ------- ------- ------- ------- ------- ------- Assets Managed by Source LNC's Investments and Cash: Fixed maturity securities 27.264 27.450 27.811 27.874 28.932 28.346 Equity securities 0.570 0.550 0.560 0.534 0.478 0.470 Other investments 7.471 7.369 7.374 7.388 7.379 7.297 ------- ------- ------- ------- ------- ------- Total LNC Investments 35.305 35.369 35.744 35.796 36.788 36.113 Separate accounts 54.411 50.580 44.506 47.140 39.480 44.833 Cash and invested cash 1.436 1.927 2.015 1.502 1.996 3.104 ------- ------- ------- ------- ------- ------- Total LNC 91.152 87.876 82.266 84.438 78.264 84.051 ------- ------- ------- ------- ------- ------- Non-affiliate assets managed 45.119 43.397 41.904 44.069 39.198 42.199 ------- ------- ------- ------- ------- ------- Total Assets Managed 136.271 131.273 124.170 128.507 117.462 126.250 ======= ======= ======= ======= ======= ======= Assets Managed by Advisor Investment Management segment 55.527 52.895 47.766 50.268 44.530 47.922 (See page 23 for additional detail) DLIA-Corp 34.981 35.686 36.324 36.018 37.337 38.119 (Assets managed internally-see page 23) Lincoln (UK) 7.838 7.873 7.012 7.027 6.474 6.847 Policy Loans (within business units) 1.936 1.961 1.947 1.947 1.943 1.940 Non-LNC Affiliates 35.989 32.858 31.122 33.246 27.177 31.422 ------- ------- ------- ------- ------- ------- Total Assets Managed 136.271 131.273 124.170 128.507 117.462 126.250 ======= ======= ======= ======= ======= =======
12/31/2001 PAGE 29 Consolidated Investment Data Unaudited [Millions of Dollars except as noted] For the Year Ended December 31 1997 1998 1999 2000 2001 ------- ------- ------- ------- ------- Net Investment Income Fixed Maturity Securities 1832.1 2065.8 2232.9 2148.7 2121.0 Equity Securities 19.1 22.8 20.1 19.5 17.6 Mortgage loans on real estate 279.2 383.6 369.2 373.8 374.5 Real estate 99.4 86.8 64.1 51.8 49.5 Policy loans 44.5 99.5 116.5 125.0 125.3 Invested cash 102.4 156.8 110.3 87.2 68.4 Other investments 20.6 88.4 51.8 66.8 69.3 ------- ------- ------- ------- ------- Investment revenue 2397.3 2903.7 2964.8 2872.8 2825.8 Investment expense 146.6 222.3 157.3 125.7 146.2 ------- ------- ------- ------- ------- Net Investment Income 2250.8 2681.4 2807.5 2747.1 2679.6 ------- ------- ------- ------- ------- Gross-up of Tax Exempt Income 12.7 11.6 8.1 7.8 7.2 ------- ------- ------- ------- ------- Adjusted Net Invest Income 2263.5 2693.0 2815.6 2754.9 2686.8 ======= ======= ======= ======= ======= Mean Invested Assets (Cost Basis) 30337.3 36573.8 39027.5 37471.3 37616.8 Ratio of Adjusted Net Invest Inc Over Mean Invested Assets 7.46% 7.36% 7.21% 7.35% 7.14% Investment Gains Realized Gains (Losses) on Investments 72.9 13.7 3.8 (17.5) (68.7) Gains(Losses) on Derivatives 0.0 0.0 0.0 0.0 (4.9) Incr (Decr) in Unreal Gains on Sec Avail-for-Sale (after DAC/Tax) 159.6 116.4 (1018.1) 477.7 183.7 Incr (Decr) on Derivatives 3.9 Incr (Decr) in Foreign Exchange (20.3) 3.8 (19.9) (8.1) (30.0) Incr (Decr) in minimum pension liability (36.0) Securities Available-for-Sale [Billions of Dollars at End of Year] Fixed Maturity Sec (Market) 24.066 30.233 27.689 27.450 28.346 Fixed Maturity Sec (Adjusted Cost) 22.624 28.640 28.357 27.373 27.934 Equity Securities (Market) 0.660 0.543 0.604 0.550 0.470 Equity Securities (Adjusted Cost) 0.518 0.437 0.482 0.458 0.438 % of Fixed Maturity Securities (Based on Market) Treasuries and AAA 27.6% 25.6% 22.8% 22.1% 17.2% AA or better 35.1% 32.6% 29.8% 29.2% 23.6% BB or less 7.3% 7.0% 8.0% 6.7% 8.3% Mar Jun Sep Dec Mar Jun For the Quarter Ended 1999 1999 1999 1999 2000 2000 ------- ------- ------- ------- ------- ------- Net Investment Income Fixed Maturity Securities 557.8 575.8 551.2 548.0 541.3 544.4 Equity Securities 4.4 4.9 3.9 6.9 3.7 5.7 Mortgage loans on real estate 94.5 85.5 94.7 94.5 92.0 95.1 Real estate 19.4 18.4 13.7 12.5 11.2 12.5 Policy loans 28.6 28.6 29.4 29.9 30.7 30.9 Invested cash 32.4 23.4 32.4 22.0 27.2 15.1 Other investments 7.5 13.4 9.9 20.9 35.1 2.0 ------- ------- ------- ------- ------- ------- Investment revenue 744.6 750.1 735.2 734.9 741.1 705.7 Investment expense 35.1 49.3 38.1 34.8 30.0 31.8 ------- ------- ------- ------- ------- ------- Net Investment Income 709.5 700.8 697.1 700.1 711.1 673.8 ------- ------- ------- ------- ------- ------- Gross-up of Tax Exempt Income 1.8 2.0 1.7 2.6 1.5 2.3 ------- ------- ------- ------- ------- ------- Adjusted Net Invest Income 711.3 702.8 698.7 702.7 712.6 676.1 ======= ======= ======= ======= ======= ======= Mean Invested Assets (Cost Basis) 39174.2 39385.3 39111.8 38438.6 38237.4 37306.1 Ratio of Adjusted Net Invest Inc Over Mean Invested Assets 7.26% 7.14% 7.15% 7.31% 7.45% 7.25% Investment Gains Realized Gains (Losses) on Investments 1.5 (3.5) 4.1 1.6 (0.4) (6.7) Gains (Losses) on Derivatives 0.0 0.0 0.0 0.0 0.0 0.0 Incr (Decr) in Unreal Gains on Sec Avail-for-Sale (after DAC/Tax) (297.7) (255.8) (102.7) (361.9) 54.5 (145.4) Incr (Decr) on Derivatives Incr (Decr) in Foreign Exchange (19.9) (9.5) 19.6 (10.2) (7.3) (0.9) Incr (Decr) in minimum pension liability Securities Available-for-Sale [Billions of Dollars at End of Year] Fixed Maturity Sec (Market) 30.578 29.579 28.708 27.689 27.745 27.078 Fixed Maturity Sec (Adjusted Cost) 29.681 29.494 28.974 28.357 28.295 27.788 Equity Securities (Market) 0.481 0.506 0.507 0.604 0.588 0.560 Equity Securities (Adjusted Cost) 0.380 0.385 0.414 0.482 0.475 0.446 % of Fixed Maturity Securities (Based on Market) Treasuries and AAA 26.3% 25.5% 24.2% 22.8% 22.7% 22.3% AA or better 33.2% 32.5% 31.1% 29.8% 29.5% 29.3% BB or less 7.1% 7.0% 7.5% 8.0% 7.4% 7.4% Sep Dec Mar Jun Sep Dec For the Quarter Ended 2000 2000 2001 2001 2001 2001 ------- ------- ------- ------- ------- ------- Net Investment Income Fixed Maturity Securities 525.3 537.7 526.9 527.0 536.9 530.1 Equity Securities 3.6 6.5 1.0 7.8 3.7 5.1 Mortgage loans on real estate 94.4 92.3 95.7 92.4 94.2 92.4 Real estate 11.8 16.3 12.8 13.1 12.7 10.9 Policy loans 30.5 32.9 31.4 31.4 31.0 31.6 Invested cash 26.5 18.4 22.5 19.8 14.8 11.3 Other investments 26.9 2.9 19.6 18.2 28.2 3.5 ------- ------- ------- ------- ------- ------- Investment revenue 719.1 706.9 709.9 709.7 721.4 684.8 Investment expense 29.0 34.8 36.1 36.6 35.2 38.2 ------- ------- ------- ------- ------- ------- Net Investment Income 690.0 672.1 673.7 673.1 686.2 646.6 ------- ------- ------- ------- ------- ------- Gross-up of Tax Exempt Income 1.4 2.6 0.5 3.0 1.5 2.1 ------- ------- ------- ------- ------- ------- Adjusted Net Invest Income 691.5 674.7 674.2 676.1 687.7 648.7 ======= ======= ======= ======= ======= ======= Mean Invested Assets (Cost Basis) 37250.8 37090.8 37238.0 37094.5 37685.8 38448.9 Ratio of Adjusted Net Invest Inc Over Mean Invested Assets 7.43% 7.28% 7.24% 7.29% 7.30% 6.75% Investment Gains Realized Gains (Losses) on Investments (11.6) 1.2 (13.4) (11.5) (23.8) (20.0) Gains (Losses) on Derivatives 0.0 0.0 (0.1) 0.2 (0.4) (4.6) Incr (Decr) in Unreal Gains on Sec Avail-for-Sale (after DAC/Tax) 218.8 349.8 178.4 (114.2) 171.8 (52.2) Incr (Decr) on Derivatives 23.3 3.7 (6.7) 1.2 Incr (Decr) in Foreign Exchange (2.0) 2.0 (17.8) (19.5) 22.2 (14.9) Incr (Decr) in minimum pension liability (36.0) Securities Available-for-Sale [Billions of Dollars at End of Year] Fixed Maturity Sec (Market) 27.264 27.450 27.811 27.874 28.932 28.346 Fixed Maturity Sec (Adjusted Cost) 27.727 27.373 27.367 27.681 28.253 27.934 Equity Securities (Market) 0.570 0.550 0.560 0.534 0.478 0.470 Equity Securities (Adjusted Cost) 0.450 0.458 0.507 0.477 0.453 0.438 % of Fixed Maturity Securities (Based on Market) Treasuries and AAA 22.3% 22.1% 20.3% 19.3% 17.9% 17.2% AA or better 29.4% 29.2% 27.1% 26.0% 24.3% 23.6% BB or less 6.8% 6.7% 7.2% 7.8% 7.2% 8.3%
12/31/01 PAGE 30 Common Stock / Debt Information Unaudited [Dollars per Share, except Percentages] For the Year Ended December 31 1991 1992 1993 1994 1995 1996 ------ ------ ------ ------ ------ ------ Common Stock [1] Highest Price 13.813 19.032 24.125 22.188 26.875 28.500 Lowest Price 9.500 12.625 17.344 17.313 17.313 20.375 Closing Price 13.688 18.500 21.750 17.500 26.875 26.250 Dividend Payout Ratio [2] 63.5% 38.9% 52.6% 51.0% 39.7% 38.2% Yield [3] 5.3% 4.1% 3.8% 4.9% 3.4% 3.7% Preferred Stock Dividend (Millions) 13.033 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 ------ ------ ------ ------ ------ Common Stock [1] Highest Price 39.063 49.438 57.500 56.375 52.750 Lowest Price 24.500 33.500 36.000 22.625 38.000 Closing Price 39.063 40.907 40.000 47.313 48.570 Dividend Payout Ratio [2] 22.8% 43.9% 50.5% 38.3% 41.9% Yield [3] 2.7% 2.7% 2.9% 2.6% 2.6% Preferred Stock Dividend (Millions) 0.106 0.100 0.089 0.078 0.071 Debt: (End of Period) Senior Debt Ratings A.M. Best a a Fitch AA- A+ A+ A+ A+ Moody's A2 A2 A2 A3 A3 Standard and Poors A A- A- A- A- Claims Paying Ratings: Lincoln Life - A.M. Best A+ A A A A Lincoln Life - Fitch AA+ AA+ AA+ AA AA Lincoln Life - Moody's Aa3 Aa3 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 AA+ AA+ AA+ AA AA First Penn - Moody's A1 A1 A1 A1 A1 First Penn - Standard & Poors* AA- AA- AA- AA- AA- LLA of New York - A.M. Best* A+ A A A A LLA of New York - Fitch* AA+ AA+ AA+ AA AA LLA of New York - Moody's A1 A1 A1 A1 A1 LLA of New York - Standard & Poors* AA- AA- AA- AA- AA- Ratios Debt to Total Capitalization [4] 17.0% 21.2% 23.2% 20.8% 20.7% Debt to Equity [4] 20.5% 26.9% 30.3% 26.3% 26.1% - ----------------------------------------------------------------------------------------------------------------- Mar Jun Sep Dec Mar Jun For the Quarter Ended 1999 1999 1999 1999 2000 2000 ------ ------ ------ ------ ------ ------ Common Stock: Highest Price 50.250 53.438 57.500 48.313 41.375 40.063 Lowest Price 39.281 45.688 36.000 36.500 22.625 29.000 Closing Price 49.438 52.313 37.563 40.000 33.500 36.125 Yield [3] 2.2% 2.1% 2.9% 2.9% 3.5% 3.2% Preferred Stock Dividend 0.024 0.024 0.027 0.014 0.022 0.022 (Millions) Debt: (End of Period) Senior Debt Ratings A.M. Best Fitch A+ A+ A+ A+ A+ A+ Moody's A2 A2 A2 A2 A2 A2 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] 20.7% 22.0% 22.0% 23.2% 23.3% 21.8% Debt to Equity [4] 26.2% 28.2% 28.3% 30.3% 30.4% 28.0% Sep Dec Mar Jun Sep Dec For the Quarter Ended 2000 2000 2001 2001 2001 2001 ------ ------ ------ ------ ------ ------ Common Stock: Highest Price 56.375 50.938 48.250 52.300 52.750 49.450 Lowest Price 35.625 40.875 38.000 41.280 41.000 40.000 Closing Price 48.125 47.313 42.470 51.750 46.630 48.570 Yield [3] 2.4% 2.6% 2.9% 2.4% 2.6% 2.6% Preferred Stock Dividend 0.021 0.013 0.019 0.018 0.017 0.017 (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 A2 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] 21.2% 20.8% 22.2% 21.2% 21.1% 20.7% Debt to Equity [4] 27.0% 26.3% 28.5% 27.0% 26.7% 26.1% * Rating based on affiliation with Lincoln Life [1] Stock prices shown above include 2-for-1 splits in June 1993, and June 1999 [2] Indicated dividend divided by net income [3] Indicated dividend divided by the closing price [4] Equity used in calculation assumes securities at cost. Minority interest-preferred securities of subsidiary companies (hybrid securities) are considered 50% debt and 50% equity. Return on Equity/Return on Capital: In order to accommodate the various perspectives, LNC presents three separate Return on Equity numbers on pages 2 and 3 of this Statistical Report. "Net Income Divided by Average Shareholders' Equity" tends to fluctuate from period to period due to the realization of gains on the sale of investments or subsidiaries during one period and the planned generation of losses in another period for purposes of recovering Federal Taxes previously paid. "Income from Operations Divided by Average Shareholders' Equity" is less volatile but leaves out an important element of earnings for a company that has a long-term goal of enhancing shareholder value by realizing investment gains. "Adjusted Income from Operations Divided by Adjusted Shareholders' Equity" amortizes: 1) realized security gains on investments 2) unrealized gains on equity securities over approximately five years and eliminates amortization of goodwill related to acquisitions. Return on capital measures the effectiveness of LNC's use of its total capital, which is made up of equity, debt and hybrid securities. Return on capital is calculated by dividing income from operations (after adding back after-tax interest expense) by average capital. The difference between return on capital and return on equity presents the effect of leveraging on LNC's consolidated results.
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