-----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, OL8z9WRJ7pBLDce4bbkpSic+fOGQBsXGl/EFZxXyNo3Zya7m7MIfFoeXnEGfOXp+ EwRKxBExYPK6gr1Qa1LLsg== 0000950137-00-001469.txt : 20000331 0000950137-00-001469.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950137-00-001469 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 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: 11-K SEC ACT: SEC FILE NUMBER: 001-06028 FILM NUMBER: 588033 BUSINESS ADDRESS: STREET 1: 200 E BERRY ST STREET 2: PO BOX 1110 CITY: FORT WAYNE STATE: IN ZIP: 46802 BUSINESS PHONE: 2194552000 MAIL ADDRESS: STREET 1: 200 EAST BERRY STREET CITY: FORT WAYNE STATE: IN ZIP: 46802-2706 11-K 1 FORM 11-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1999 LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN (Full title of the Plan) [Current Registration Number 33-04711] Lincoln National Corporation Centre Square West 1500 Market Street, Suite 3900 Philadelphia, PA 19102 (Name of Issuer and principal executive office) 2 Form 11-K The Lincoln National Life Insurance Company Agents' Savings and Profit-Sharing Plan TABLE OF CONTENTS Facing Sheet Financial Statements Signature 3 Financial Statements THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Years ended December 31, 1999, 1998 and 1997 with Report of Independent Auditors 4 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN FINANCIAL STATEMENTS Years ended December 31, 1999, 1998 and 1997 CONTENTS Report of Independent Auditors.................................................1 Audited Financial Statements Statements of Net Assets Available for Plan Benefits...........................2 Statements of Changes in Net Assets Available for Plan Benefits................3 Notes to Financial Statements..................................................4 5 REPORT OF INDEPENDENT AUDITORS Lincoln National Corporation Benefits Investment Committee Lincoln National Corporation We have audited the accompanying statements of net assets available for plan benefits of The Lincoln National Life Insurance Company Agents' Savings and Profit-Sharing Plan as of December 31, 1999 and 1998, and the related statements of changes in net assets available for plan benefits for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan at December 31, 1999 and 1998, and the changes in its net assets available for plan benefits for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. March 17, 2000 Ernst & Young 1 6 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Statements of Net Assets Available for Plan Benefits DECEMBER 31 1999 1998 ---- ---- ASSETS Investments: Common stock--Lincoln National Corporation (cost: 1999-$41,814,475; 1998-$33,969,141) $ 64,456,840 $ 65,019,912 Wells Fargo Bank Short-Term Investment Fund 1,924,477 1,905,255 Pooled separate accounts--The Lincoln National Life Insurance Company Separate Accounts (cost: 1999-$50,297,271; 1998-$40,946,428) 88,733,386 67,032,542 Investment contracts -- The Lincoln National Life Insurance Company 12,740,236 12,081,039 Participant loans 5,906,107 5,207,903 ------------- ------------- 173,761,046 151,246,651 Accrued interest receivable 10,965 8,454 Cash and invested cash (deficit) (340,844) 92,786 Contributions receivable from Employer companies 4,476,358 4,103,596 ------------- ------------- Net assets available for plan benefits $ 177,907,525 $ 155,451,487 ============= ============= See accompanying notes. 2 7 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Statements of Changes in Net Assets Available for Plan Benefits
YEAR ENDED DECEMBER 31 1999 1998 1997 ---- ---- ---- Investment income: Cash dividends--Lincoln National Corporation $ 1,687,397 $ 1,639,615 $ 1,604,366 Interest: The Lincoln National Life Insurance Company 824,582 653,432 690,992 Other 495,956 342,801 320,146 ------------- ------------- ------------- 1,320,538 996,233 1,011,138 ------------- ------------- ------------- 3,007,935 2,635,848 2,615,504 Net realized gain on sale, distribution and forfeitures of investments: Common stock--Lincoln National Corporation 6,821,567 2,636,667 4,343,393 Pooled separate accounts--The Lincoln National Life Insurance Company Separate Accounts 5,564,689 2,122,479 2,482,267 ------------- ------------- ------------- 12,386,256 4,759,146 6,825,660 Net unrealized appreciation of investments 3,941,598 8,990,405 22,635,104 Contributions: Participants 12,044,177 11,249,342 4,839,046 Employer companies (net of forfeitures; 1999--$13,076 1998--$18,660; 1997--$12,050) 5,829,738 4,436,110 5,430,354 ------------- ------------- ------------- 17,873,915 15,685,452 10,269,400 Distributions to participants (14,645,718) (11,405,338) (6,096,184) Administrative expenses (107,948) (100,648) (108,251) ------------- ------------- ------------- Net increase in net assets available for plan benefits 22,456,038 20,564,865 36,141,233 Net assets available for plan benefits at beginning of the year 155,451,487 134,886,622 98,745,389 ------------- ------------- ------------- Net assets available for plan benefits at end of the year $ 177,907,525 $ 155,451,487 $ 134,886,622 ============= ============= =============
See accompanying notes. 3 8 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements 1. SIGNIFICANT ACCOUNTING POLICIES INVESTMENTS The investment in Lincoln National Corporation ("LNC") common stock is valued at the last reported sales price per the national securities exchange on the last business day of the year. The Wells Fargo Bank Short-Term Investment Fund is valued at cost which approximates fair value. The fair value of participation units in pooled separate accounts is based on quoted redemption value on the last business day of the year. The investment contracts are valued at contract value as estimated by The Lincoln National Life Insurance Company ("Lincoln Life"). Contract value represents net contributions plus interest at the contract rate. The contracts are fully benefit responsive. Participant loans are valued at their outstanding balances which approximate fair value. The cost of investments sold, distributed or forfeited is determined using the specific identification method. USE OF ESTIMATES Preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. DESCRIPTION OF THE PLAN The Lincoln National Life Insurance Company Agents' Savings and Profit-Sharing Plan ("Plan") is a contributory, defined contribution plan which covers eligible agents of Lincoln Life and agents and employees of Sagemark Consulting, Inc. ("Sagemark"). Any person who is a full-time agent of Lincoln Life or is an agent or employee of Sagemark is eligible to enroll in the Plan. Lincoln Life and Sagemark are the employer companies ("Employer") contributing to the Plan. A participant may make pre-tax contributions at a rate of at least 1%, but not more than 15% of eligible earnings, up to a maximum annual amount as determined and adjusted annually by the Internal Revenue Service ("IRS"). Participants direct the Plan to invest their contributions in any combination of the investment options as described in Note 4. Participants can direct the investment of Employer contributions, but only after the contributions have been in the Plan for two years following the date the last contribution for the plan year was contributed. 4 9 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) Employer contributions to the Plan are based on an amount equal to a participant's contributions, not to exceed 6% of eligible earnings, multiplied by a percentage, ranging from 25% to 150%, which varies according to LNC's return on equity in relation to similar companies in the insurance industry. In early 1998, the Board of Directors of Lincoln Life adopted an amendment approving certain changes to the contribution formula that became effective April 1, 1998. Under the new formula, Employer contributions to the Plan are based on LNC's increase in operating income. The Employer match on eligible participants' contributions during their first year of employment is limited to a maximum of 25%. The maximum match for Sagemark agents is 50%. Employer contributions are invested in the LNC Common Stock Fund. Participants' contributions are fully vested. Employer contributions vest based upon years of service as defined in the Plan agreement as follows: Years of Service Percent Vested ---------------- -------------- 1 0% 2 50% 3 or more 100% The Employer has the right to discontinue contributions at any time and terminate the Plan. In the event of termination of the Plan, all amounts allocated to participants' accounts shall become vested. The Plan allows loans to participants in amounts up to 50% of the vested account value to a maximum of $50,000 but not more than the total value of the participant's accounts excluding Employer contributions that haven't been in the Plan for two full years, less the highest outstanding loan balance in the previous twelve month period. Upon termination of service due to disability or retirement, a participant or beneficiary, in case of the participant's death, may elect to receive either a lump-sum amount equal to the value of the participant's vested interest in his or her account, or annual installments over a five-year period. For termination of service due to other reasons, a participant may receive the value of the vested interest in his or her account as a lump-sum distribution. Each participant's account is credited with the participant's contributions, matching contributions from the Employer and allocations of Plan earnings, and is charged with an allocation of administrative expenses. Allocations are based on participant account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Forfeited non-vested amounts are used to reduce future Employer contributions. 5 10 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 3. INVESTMENTS The following is a summary of assets held for investment:
DECEMBER 31, 1999 December 31, 1998 NUMBER OF Number of SHARES, UNITS MARKET Shares, Units Market OR PAR VALUE VALUE or Par Value Value ------------- ----- ------------- ----- QUOTED MARKET VALUES: Common stock--LNC 1,611,421 $ 64,456,840* 794,743 $ 65,019,912* Pooled separate account investment contracts underwritten by Lincoln Life: Government Bond Fund 308,756.794 539,932 484,630.307 847,854 Core Equity Fund 1,326,200.262 20,773,412* 1,403,540.627 18,309,961* Medium Capitalization Equity Fund 898,103.437 16,082,430* 930,687.431 11,504,791* Short-Term Fund 2,402,789.272 7,731,626 1,190,036.159 3,645,178 Government/Corporate Bond Fund 190,823.533 1,089,109 205,814.429 1,211,364 Large Capitalization Equity Fund 1,374,932.455 17,868,439* 1,309,420.549 13,204,880* Balanced Fund 273,746.508 1,883,688 191,351.379 1,162,706 High Yield Bond Fund 478,729.171 1,206,774 515,601.420 1,280,241 Small Capitalization Equity Fund 1,289,866.133 10,577,034* 1,085,472.627 5,124,246 Value Equity Fund 2,046,160.900 4,880,194 2,231,259.184 5,484,306 International Equity Fund 989,828.346 6,100,748 974,670.259 5,257,015 ------------ ------------ 88,733,386 67,032,542 CONTRACT VALUE: Investment contracts underwritten by Lincoln Life 12,740,236 12,740,236* 12,081,039 12,081,039* ESTIMATED VALUES: Wells Fargo Bank short-term investment fund 1,924,477 1,924,477 1,905,255 1,905,255 Participant loans 5,906,107 5,906,107 5,207,903 5,207,903 ------------ ------------ Total investments $173,761,046 $151,246,651 ============ ============
* Investments that represent 5% or more of the fair value of net assets available for benefits as of the indicated date. 6 11 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) Net realized gain on sale, distribution and forfeitures of investments is summarized as follows:
YEAR ENDED DECEMBER 31 1999 1998 1997 ---- ---- ---- COMMON STOCK: Proceeds from disposition of stock $11,207,528 $ 4,297,217 $11,100,882 Cost of stock disposed 4,385,961 1,660,550 6,757,489 ----------- ----------- ----------- Net realized gain on sale, distribution and forfeitures of common stock $ 6,821,567 $ 2,636,667 $ 4,343,393 =========== =========== =========== POOLED SEPARATE ACCOUNTS: Proceeds from disposition of units $42,965,562 $28,814,807 $12,728,284 Cost of units disposed 37,400,873 26,692,328 10,246,017 ----------- ----------- ----------- Net realized gain on sale, distribution and forfeitures of pooled separate accounts $ 5,564,689 $ 2,122,479 $ 2,482,267 =========== =========== ===========
The net change in unrealized appreciation (depreciation) of investments in total and by investment classification as determined by quoted market price is summarized as follows:
YEAR ENDED DECEMBER 31 1999 1998 1997 ---- ---- ---- Market value in excess of cost: At beginning of the year $57,136,885 $48,146,480 $25,511,376 At end of the year 61,078,483 57,136,885 48,146,480 ----------- ----------- ----------- Change in net unrealized appreciation of investments $ 3,941,598 $ 8,990,405 $22,635,104 =========== =========== =========== Common stock $(8,408,405) $ 471,672 $16,957,113 Pooled separate accounts 12,350,003 8,518,733 5,677,991 ----------- ----------- ----------- Change in net unrealized appreciation of investments $ 3,941,598 $ 8,990,405 $22,635,104 =========== =========== ===========
The investment contracts (Guaranteed Fund) earned an average interest rate of approximately 6.22%, 6.45% and 6.60% in 1999, 1998 and 1997, respectively. The credited interest rates for new contributions, which approximate the current market rate, were 6.50% and 5.50% at December 31, 1999 and 1998, respectively. The rate on new contributions is guaranteed through the three succeeding calendar year quarters. The credited interest rates for the remaining contract value balance were 6.25% and 6.40% at December 31, 1999 and 1998, respectively, and are determined based upon the performance of the Lincoln Life's general account. The credited interest rates change at least quarterly. The minimum guaranteed rate is 4.50% for the first 5 contract years, 4.00% for years 6-10 and 3.50% following year 10. The guarantee is based on Lincoln Life's ability to meet its financial obligations from the general assets of Lincoln Life. The fair value of the investment contracts approximates contract value. 7 12 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 4. INVESTMENT OPTIONS The detail of the net assets available for plan benefits by investment option is as follows:
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1999 Total 1 2 3 4 5 6 ASSETS Investments: Common stock $ 64,456,840 $64,456,840 Short-term investment fund 1,924,477 1,924,477 Pooled separate accounts 88,733,386 $539,932 $20,773,412 $16,082,430 $7,731,626 Investment contracts 12,740,236 $12,740,236 Participant loans 5,906,107 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total investments 173,761,046 66,381,317 539,932 12,740,236 20,773,412 16,082,430 7,731,626 Accrued interest receivable 10,965 10,965 Cash and invested cash (deficit) (340,844) (1,473) (4,673) (65,621) (283,068) 195,707 Other receivables Contributions receivable from Employer companies 4,476,358 4,476,358 ------------ ----------- -------- ----------- ----------- ----------- ---------- Net assets available for plan benefits Total assets $177,907,525 $70,868,640 $538,459 $12,735,563 $20,707,791 $15,799,362 $7,927,333 ============ =========== ======== =========== =========== =========== ==========
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1999 7 8 9 10 11 12 13 LOANS ASSETS Investments: Common stock Pooled separate accounts $1,089,109 $17,868,439 $1,883,688 $1,206,774 $10,577,034 $4,880,194 $6,100,748 Investment contracts Participant loans $5,906,107 ---------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- Total investments 1,089,109 17,868,439 1,883,688 1,206,774 10,577,034 4,880,194 6,100,748 5,906,107 Accrued interest receivable Cash and invested cash (deficit) (5,064) (87,197) (2,873) (11,792) (102,849) (26,574) 53,895 738 Other receivables Contributions receivable from Employer companies ---------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- Net assets available for plan benefits $1,084,045 $17,781,242 $1,880,815 $1,194,982 $10,474,185 $4,853,620 $6,154,643 $5,906,845 ========== =========== ========== ========== =========== ========== ========== ==========
8 13 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 4. INVESTMENT OPTIONS (CONTINUED) The detail of the net assets available for plan benefits by investment option is as follows:
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1998 Total 1 2 3 4 5 6 ASSETS Investments: Common stock $ 65,019,912 $65,019,912 Short-term investment fund 1,905,255 1,905,255 Pooled separate accounts 67,032,542 $847,854 $18,309,961 $11,504,791 $3,645,178 Investment contracts 12,081,039 $12,081,039 Participant loans 5,207,903 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total investments 151,246,651 66,925,167 847,854 12,081,039 18,309,961 11,504,791 3,645,178 Accrued interest receivable 8,454 8,454 Cash and invested cash (deficit) 92,786 93,986 (21,131) (298) (149) Other receivables Contributions receivable from Employer companies 4,103,596 4,103,596 ------------ ----------- -------- ----------- ----------- ----------- ---------- Net assets available for plan benefits Total assets $155,451,487 $71,131,203 $826,723 $12,081,039 $18,309,663 $11,504,642 $3,645,178 ============ =========== ======== =========== =========== =========== ==========
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1998 7 8 9 10 11 12 13 LOANS ASSETS Investments: Common stock Pooled separate accounts $1,211,364 $13,204,880 $1,162,706 $1,280,241 $5,124,246 $5,484,306 $5,257,015 Investment contracts Participant loans $5,207,903 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- Total investments 1,211,364 13,204,880 1,162,706 1,280,241 5,124,246 5,484,306 5,257,015 5,207,903 Accrued interest receivable Cash and invested cash (deficit) 21,131 (407) 236,830 (14) (236,829) 4 (337) Other receivables Contributions receivable from Employer companies ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- Net assets available for plan benefits $1,232,495 $13,204,473 $1,399,536 $1,280,241 $5,124,232 $5,247,477 $5,257,019 $5,207,566 ========== =========== ========== ========== ========== ========== ========== ==========
9 14 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 4. INVESTMENT OPTIONS (CONTINUED) The detail of the changes in net assets available for plan benefits by investment option is as follows:
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1999 TOTAL 1 2 3 4 5 6 INVESTMENT INCOME: Cash dividends $ 1,687,397 $ 1,687,397 Interest 1,320,538 122,244 $ 702,338 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total investment income 3,007,935 1,809,641 702,338 Net realized gain on sale, distribution and forfeitures of investments: Common stock 6,821,567 6,821,567 Pooled separate accounts 5,564,689 $ 20,165 $ 1,497,091 $ 818,413 $ 163,220 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total realized gains 12,386,256 6,821,567 20,165 1,497,091 818,413 163,220 Net unrealized appreciation (depreciation) of investments 3,941,598 (8,408,405) (28,592) 2,176,065 4,156,004 127,526 Contributions: Participant 12,044,177 2,084,402 132,500 1,157,823 1,619,112 1,201,052 498,500 Employer companies 5,829,738 5,829,738 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total contributions 17,873,915 7,914,140 132,500 1,157,823 1,619,112 1,201,052 498,500 Distributions to participants (14,645,718) (5,762,669) (4,136) (1,726,040) (1,715,157) (766,649) (1,592,075) Administrative expenses (107,948) (56,208) (900) (7,433) (11,663) (5,686) (3,844) Net transfers (2,580,629) (407,301) 527,836 (1,167,320) (1,108,414) 5,088,828 ------------ ----------- -------- ----------- ----------- ----------- ---------- Net increase (decrease) in net assets available for plan benefits 22,456,038 (262,563) (288,264) 654,524 2,398,128 4,294,720 4,282,155 Net assets available for plan benefits at beginning of the year 155,451,487 71,131,203 826,723 12,081,039 18,309,663 11,504,642 3,645,178 ------------ ----------- -------- ----------- ----------- ----------- ---------- Net assets available for plan benefits at end of the year $177,907,525 $70,868,640 $538,459 $12,735,563 $20,707,791 $15,799,362 $7,927,333 ============ =========== ======== =========== =========== =========== ==========
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1999 7 8 9 10 11 12 13 LOANS INVESTMENT INCOME: Cash dividends Interest $ 495,956 ---------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- Total investment income 495,956 Net realized gain on sale, distribution and forfeitures of investments: Common stock Pooled separate accounts $ 33,722 $ 1,280,657 $ 112,210 $ 37,978 $ 1,137,622 $ 408,417 $ 55,194 ---------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- Total realized gains 33,722 1,280,657 112,210 37,978 1,137,622 408,417 55,194 Net unrealized appreciation (depreciation) of investments (79,529) 2,774,181 138,663 (16,792) 3,006,593 (613,836) 709,720 Contributions: Participant 139,297 1,660,156 341,374 329,419 987,954 998,707 893,881 Employer companies ---------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- Total contributions 139,297 1,660,156 341,374 329,419 987,954 998,707 893,881 Distributions to participants (118,134) (1,368,682) (243,086) (140,694) (424,605) (683,191) (303,898) 203,298 Administrative expenses (1,507) (7,608) (1,833) (2,055) (3,047) (3,299) (2,865) Net transfers (122,299) 238,065 133,951 (293,115) 645,436 (500,655) (454,408) 25 ---------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets available for plan benefits (148,450) 4,576,769 481,279 (85,259) 5,349,953 (393,857) 897,624 699,279 Net assets available for plan benefits at beginning of the year 1,232,495 13,204,473 1,399,536 1,280,241 5,124,232 5,247,477 5,257,019 5,207,566 ---------- ----------- ---------- ---------- ----------- ---------- ---------- ---------- Net assets available for plan benefits at end of the year $1,084,045 $17,781,242 $1,880,815 $1,194,982 $10,474,185 $4,853,620 $6,154,643 $5,906,845 ========== =========== ========== ========== =========== ========== ========== ==========
10 15 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 4. INVESTMENT OPTIONS (CONTINUED) The detail of the changes in net assets available for plan benefits by investment option is as follows:
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1998 TOTAL 1 2 3 4 5 6 INVESTMENT INCOME: Cash dividends $ 1,639,615 $ 1,639,615 Interest 996,233 126,274 $ 653,432 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total investment income 2,635,848 1,765,889 653,432 Net realized gain on sale, distribution and forfeitures of investments: Common stock 2,636,667 2,636,667 Pooled separate accounts 2,122,479 $ 49,765 $ 699,872 $ 367,765 $ 131,980 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total realized gains 4,759,146 2,636,667 49,765 699,872 367,765 131,980 Net unrealized appreciation 8,990,405 471,672 14,412 2,231,163 1,741,637 (3,455) of investments Contributions: Participant 11,249,342 1,774,165 52,317 351,590 1,648,079 1,268,764 372,083 Employer companies 4,436,110 4,436,110 ------------ ----------- -------- ----------- ----------- ----------- ---------- Total contributions 15,685,452 6,210,275 52,317 351,590 1,648,079 1,268,764 372,083 Distributions to participants (11,405,338) (4,446,390) (9,056) (1,787,303) (1,490,497) (524,278) (448,308) Administrative expenses (100,648) (55,518) (848) (7,090) (11,076) (5,520) (2,072) Net transfers (3,258,640) 296,458 1,877,179 (489,760) (1,172,134) 965,658 ------------ ----------- -------- ----------- ----------- ----------- ---------- Net increase in net assets available for plan benefits 20,564,865 3,323,955 403,048 1,087,808 2,587,781 1,676,234 1,015,886 Net assets available for plan benefits at beginning of the year 134,886,622 67,807,248 423,675 10,993,231 15,721,882 9,828,408 2,629,292 ------------ ----------- -------- ----------- ----------- ----------- ---------- Net assets available for plan benefits at end of the year $155,451,487 $71,131,203 $826,723 $12,081,039 $18,309,663 $11,504,642 $3,645,178 ============ =========== ======== =========== =========== =========== ==========
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1998 7 8 9 10 11 12 13 LOANS INVESTMENT INCOME: Cash dividends Interest $ 216,527 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- Total investment income 216,527 Net realized gain on sale, distribution and forfeitures of investments: Common stock Pooled separate accounts $ 46,160 $ 584,743 $ 28,588 $ 39,390 $ 127,318 $ 152,507 $ (105,609) ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- Total realized gains 46,160 584,743 28,588 39,390 127,318 152,507 (105,609) Net unrealized appreciation of investments 51,305 2,647,588 113,691 34,018 605,242 469,198 613,934 Contributions: Participant 196,693 1,540,806 313,928 410,896 1,072,488 1,089,923 1,157,610 Employer companies --------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- Total contributions 196,693 1,540,806 313,928 410,896 1,072,488 1,089,923 1,157,610 Distributions to participants (214,675) (912,062) (101,930) (49,831) (147,455) (256,067) (255,782) (761,704) Administrative expenses (1,053) (6,500) (1,116) (2,029) (2,283) (2,870) (2,673) Net transfers 277,994 181,922 350,389 (278,899) 198,264 438,882 (153,674) 766,361 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- Net increase in net assets available for plan benefits 356,424 4,036,497 703,550 153,545 1,853,574 1,891,573 1,253,806 221,184 Net assets available for plan benefits at beginning of the year 876,071 9,167,976 695,986 1,126,696 3,270,658 3,355,904 4,003,213 4,986,382 ---------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- Net assets available for plan benefits at end of the year $1,232,495 $13,204,473 $1,399,536 $1,280,241 $5,124,232 $5,247,477 $5,257,019 $5,207,566 ========== =========== ========== ========== ========== ========== ========== ==========
11 16 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 4. INVESTMENT OPTIONS (CONTINUED) The detail of the changes in net assets available for plan benefits by investment option is as follows:
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1997 TOTAL 1 2 3 4 5 6 INVESTMENT INCOME: Cash dividends $ 1,604,366 $1,604,366 Interest 1,011,138 $ 690,992 ------------ ----------- -------- ----------- ----------- ---------- ---------- Total investment income 2,615,504 1,604,366 690,992 Net realized gain on sale, distribution and forfeitures of investments: Common stock 4,343,393 4,343,393 Pooled separate accounts 2,482,267 $38,502 $ 792,850 $ 704,233 $ 33,725 ------------ ----------- ------- ----------- ----------- ---------- ---------- Total realized gains 6,825,660 4,343,393 38,502 792,850 704,233 33,725 Net unrealized appreciation (depreciation) of investments 22,635,104 16,957,113 (6,849) 2,912,192 303,028 63,418 Contributions: Participant 4,839,046 804,479 13,642 225,243 796,555 745,763 143,661 The Lincoln National Life Insurance Company 5,430,354 5,430,354 ------------ ----------- -------- ----------- ----------- ---------- ---------- Total contributions 10,269,400 6,234,833 13,642 225,243 796,555 745,763 143,661 Distributions to participants (6,096,184) (2,966,329) (24,350) (1,036,813) (355,330) (313,285) (443,836) Administrative expenses (108,251) (73,949) (476) (5,364) (6,762) (4,220) (1,155) Net transfers (6,578,182) (78,205) 696,009 855,723 (595,223) 1,441,543 ------------ ----------- -------- ----------- ----------- ---------- ---------- Net increase (decrease) in net assets available for plan benefits 36,141,233 19,521,245 (57,736) 570,067 4,995,228 840,296 1,237,356 Net assets available for plan benefits at beginning of the year 98,745,389 48,286,003 481,411 10,423,164 10,726,654 8,988,112 1,391,936 ------------ ----------- -------- ----------- ----------- ---------- ---------- Net assets available for plan benefits at end of the year $134,886,622 $67,807,248 $423,675 $10,993,231 $15,721,882 $9,828,408 $2,629,292 ============ =========== ======== =========== =========== ========== ==========
INVESTMENT OPTIONS ------------------ DECEMBER 31, 1997 7 8 9 10 11 12 13 LOANS INVESTMENT INCOME: Cash dividends Interest $ 320,146 -------- ---------- -------- ---------- ---------- ----------- ---------- ---------- Total investment income 320,146 Net realized gain on sale, distribution and forfeitures of investments: Common stock Pooled separate accounts $ 92,386 $ 545,130 $ 18,465 $ 19,644 $ 69,093 $ 63,683 $ 104,556 -------- ---------- -------- ---------- ---------- ----------- ---------- ---------- Total realized gains 92,386 545,130 18,465 19,644 69,093 63,683 104,556 Net unrealized appreciation (depreciation) of investments (12,556) 1,574,956 77,891 56,692 446,475 557,280 (294,536) Contributions: Participant 54,900 686,925 77,923 61,750 396,285 272,302 559,618 The Lincoln National Life Insurance Company -------- ---------- -------- ---------- ---------- ----------- ---------- ---------- Total contributions 54,900 686,925 77,923 61,750 396,285 272,302 559,618 Distributions to participants (57,010) (429,179) (5,494) (35,262) (64,180) (26,482) (160,100) (178,534) Administrative expenses (726) (3,794) (715) (815) (1,238) (1,455) (2,182) (5,400) Net transfers (167,062) 279,442 126,647 576,787 794,545 1,367,226 165,006 1,115,744 -------- ---------- -------- ---------- ---------- ----------- ---------- ---------- Net increase (decrease) in net assets available for plan benefits (90,068) 2,653,480 294,717 678,796 1,640,980 2,232,554 372,362 1,251,956 Net assets available for plan benefits at beginning of the year 966,139 6,514,496 401,269 447,900 1,629,678 1,123,350 3,630,851 3,734,426 -------- ---------- -------- ---------- ---------- ----------- ---------- ---------- Net assets available for plan benefits at end of the year $876,071 $9,167,976 $695,986 $1,126,696 $3,270,658 $ 3,355,904 $4,003,213 $4,986,382 ======== ========== ======== ========== ========== =========== ========== ==========
12 17 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 4. INVESTMENT OPTIONS (CONTINUED) Information with respect to investment options is as follows: Option Description of Investment Option - ------ -------------------------------- 1 LNC Common Stock Fund, which invests exclusively in the stock of LNC. However, some funds may be invested in the Wells Fargo Bank Short-Term Investment Fund until the LNC stock can be purchased. 2 Government Bond Fund, which invests primarily in fixed income securities backed by the United States government that will mature in 3 to 5 years. 3 Guaranteed Fund, which invests primarily in high-quality bonds and mortgages. The account's balances are backed by the general assets of Lincoln Life. 4 Core Equity Fund, which invests primarily in large capitalization stocks of well-established companies. 5 Medium Capitalization Equity Fund, which invests primarily in medium-sized companies. 6 Short-Term Fund, which invests in high quality money market securities that include commercial paper, bankers acceptances, certificates of deposit, loan participation and short-term U.S. government debt. 7 Government/Corporate Bond Fund, which invests primarily in U.S. government and high-quality corporate bonds and securities. 8 Large Capitalization Equity Fund, which invests primarily in high-risk common stocks which have the potential for a significant appreciation in value within 18 months from the date of purchase. 9 Balanced Fund, which invests in three different asset classes: stocks, bonds and money market instruments, which provides growth through the stock portion and reduced risk through the bond and money market portion. 10 High Yield Bond Fund, which invests primarily in below-investment-grade bonds, providing higher rates of return to compensate higher risk. 11 Small Capitalization Equity Fund, which invests primarily in the stock of new, rapid growth companies. 12 Value Equity Fund, which invests primarily in large capitalization stocks of undervalued companies that are industry leaders. 13 International Equity Fund, which invests primarily in stocks of non-United States companies. At December 31, 1999, the fair value of LNC common stock in the LNC Common Stock Fund not subject to participant direction was $5,949,502. The information as to the number of participants selecting each investment option is not readily available. Beginning January 1, 1994, the Plan began offering investment options 9 through 13 noted above to participants. Investment options 2 and 4 through 13 are invested in pooled separate accounts of Lincoln Life through a group annuity contract issued by Lincoln Life. Interest charged on new loans to participants is established monthly based upon the prime rate plus 1%. Loans may be repaid over any period selected by the participant up to a maximum repayment period of 5 years except that the maximum repayment period may be 20 years for the purchase of a principal residence. 13 18 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 5. INCOME TAX STATUS The Internal Revenue Service ruled on February 9, 1995 that the Plan qualifies under Section 401(a) of the Internal Revenue Code ("IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan's administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan is qualified and the related trust is tax exempt. 6. TAX IMPLICATIONS TO PARTICIPANTS There are no income tax consequences to participants arising from their pre-tax contributions, the Employer's contributions and income earned in the Plan until actual distribution or withdrawal from the Plan. The tax basis of securities distributed to the participant is provided by the Lincoln National Corporation Benefits Investment Committee. 7. TRANSACTIONS WITH PARTIES-IN-INTEREST The Plan has investments in common stock of LNC, and in pooled separate accounts and investment contracts with Lincoln Life. Lincoln Life charges the Plan for certain administrative expenses including trustee and audit fees. Total administrative expenses charged were $107,948, $100,648, and $108,251 in 1999, 1998, and 1997, respectively. 8. CONCENTRATIONS OF CREDIT RISKS The Plan has investments in common stock of LNC, and in pooled separate accounts and unallocated investment contracts with Lincoln Life of $64,456,840, $88,733,386 and $12,740,236 respectively, at December 31, 1999 (36.2%, 49.9% and 7.2% of net assets, respectively). LNC and Lincoln Life operate predominately in the insurance and investment management industries. 9. CENTURY COMPLIANCE (UNAUDITED) The Year 2000 issue was complex and affected many aspects of Lincoln Life's businesses. Lincoln Life was particularly concerned with Year 2000 issues that related to Lincoln Life's computer systems and interfaces with the computer systems of vendors, suppliers, customers and business partners. From 1996 through 1999 Lincoln Life and its operating subsidiaries redirected a large portion of internal Information Technology ("IT") efforts and contracted with outside consultants to update systems to address Year 2000 issues. Experts were engaged to assist in developing work plans and cost estimates and to complete remediation activities. For the year ended December 31, 1999, Lincoln Life identified expenditures of $37.3 million ($24.3 million after-tax) to address this issue. This brings the expenditures for 1996 through 1999 to $64.9 million ($42.2 million after-tax). Because updating systems and procedures is an integral part of Lincoln Life's on-going operations, most of the expenditures shown above for 1999 are expected to continue after all Year 2000 issues have been resolved. All Year 2000 expenditures have been funded from operating cash flows. The scope of the overall Year 2000 program included the following four major project areas: 1) addressing the readiness of business applications, operating systems and hardware on mainframe, personal computer and local area network platforms (IT); 2) addressing the readiness of non-IT embedded software and equipment (non-IT); 3) addressing the readiness of key business partners and 4) establishing Year 2000 contingency plans. Lincoln Life companies completed these projects prior to year-end. Lincoln Life businesses have not identified any major problems in their business processing. Minor problems have been resolved quickly. Lincoln Life businesses have not experienced any significant interruption in service to clients or business partners or in reporting to regulators. 14 19 THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS' SAVINGS AND PROFIT-SHARING PLAN Notes to Financial Statements (continued) 9. CENTURY COMPLIANCE (UNAUDITED) (CONTINUED) The record keeping for the Plan is currently handled by Wells Fargo. Record keeping consists of the day to day maintenance of the individual accounts within the Plan. As a result of Wells Fargo's Year 2000 program and efforts, there were no significant disruptions in service to the Plan. 15 20 SIGNATURE THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrator of the Plan has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. By /s/ George E. Davis --------------------------------- George E. Davis, Administrator Date: March 27, 2000 16 -----END PRIVACY-ENHANCED MESSAGE-----