8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

                May 9, 2006                

Date of Report (Date of earliest event reported)

                  Lincoln National Corporation              

(Exact name of registrant as specified in its charter)

Indiana	1-6028	35-1140070
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

1500 Market Street, West Tower, Suite 3900, Philadelphia, Pennsylvania 19102-2112

(Address of principal executive offices) (Zip Code)

(215) 448-1400

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

As previously reported in our current report on Form 8-K filed on April 3, 2006, we consummated the merger of Jefferson-Pilot Corporation, a North Carolina corporation (“Jefferson-Pilot”), with and into Lincoln JP Holdings, L.P., an Indiana limited partnership and our wholly owned subsidiary, as contemplated by the Agreement and Plan of Merger, dated as of October 9, 2005, as amended as of January 26, 2006, by and among Lincoln National Corporation, Jefferson-Pilot, Lincoln JP Holdings, L.P and Quartz Corporation, a North Carolina corporation and wholly owned subsidiary of LNC, on April 3, 2006. We are filing this Form 8-K to provide the additional financial information described in Item 9.01 below.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of the Business Acquired.

The following financial statements of Jefferson-Pilot Corporation are being filed herewith and are incorporated herein by reference:

Jefferson-Pilot Corporation and Subsidiaries unaudited consolidated financial statements at March 31, 2006 and December 31, 2005 and for the quarter ended March 31, 2006 and 2005.

(b) Pro Forma Financial Information.

The unaudited pro forma financial statements with respect to the combined company (unaudited pro forma condensed combined balance sheet as of March 31, 2006, unaudited pro forma condensed combined statement of income for the quarter ended March 31, 2006 and notes to the aforementioned unaudited pro forma condensed combined financial statements).

(c) Exhibits.

The Exhibit Index beginning on page E-1 is incorporated herein by reference.

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 9, 2006	Lincoln National Corporation
	By:	/s/ Frederick J. Crawford
	Name:	Frederick J. Crawford
	Title:	Senior Vice President and
		Chief Financial Officer

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INDEX OF EXHIBITS

Exhibit Number	Description
99.1	Jefferson-Pilot Corporation and Subsidiaries unaudited consolidated financial statements at March 31, 2006 and December 31, 2005 and for the quarter ended March 31, 2006 and 2005.
99.2	Unaudited pro forma condensed combined financial statements as of and for the quarterly period ended March 31, 2006.

E-1

EX-99.1

Exhibit 99.1

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
	(Unaudited)		(Audited)
	March 31,		December 31,
	2006		2005
ASSETS
Investments:
Debt securities available-for-sale, at fair value (amortized cost $19,998 and $19,828)	$	19,897	$	20,206
Debt securities held-to-maturity, at amortized cost (fair value $1,879 and $2,065)		1,828		1,974
Equity securities available-for-sale, at fair value (cost $193 and $192)		624		620
Mortgage loans on real estate		3,920		3,982
Policy loans		837		833
Real estate		122		124
Other investments		291		252
Total investments		27,519		27,991
Cash and cash equivalents		39		150
Accrued investment income		355		345
Due from reinsurers		1,296		1,318
Deferred policy acquisition costs and value of business acquired		2,987		2,822
Goodwill		312		312
Other assets		671		673
Assets held in separate accounts		2,574		2,467
		35,753		36,078
LIABILITIES AND STOCKHOLDERS’ EQUITY
Policy liabilities:
Future policy benefits	$	3,156	$	3,148
Policyholder contract deposits		22,138		22,156
Policy and contract claims		224		223
Funding agreements		300		300
Other		1,302		1,265
Total policy liabilities		27,120		27,092
Commercial paper and revolving credit borrowings		-		260
Securities sold under repurchase agreements		432		452
Notes payable		600		600
Junior subordinated debentures		309		309
Income tax liabilities		457		538
Accounts payable, accruals and other liabilities		394		443
Liabilities related to separate accounts		2,574		2,467
Total liabilities		31,886		32,161
Commitments and contingent liabilities
Stockholders’ equity:
Common stock and paid in capital		232		186
Retained earnings		3,431		3,293
Accumulated other comprehensive income		204		438
Total stockholders’ equity		3,867		3,917
		35,753		36,078
See Notes to Consolidated Unaudited Condensed Financial Statements.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF INCOME
(In Millions)
	Three Months Ended
	March 31,
	2006			2005
Revenue
Premiums and other considerations	$	364		$	331
Universal life and investment product charges		197			200
Net investment income		438			408
Realized investment gains (losses)		(7	)		5
Communications sales		61			61
Broker-dealer concessions and other		36			32
Total revenue		1,089			1,037
Benefits and Expenses
Insurance and annuity benefits		613			537
Insurance commissions, net of deferrals		70			65
General and administrative expenses, net of deferrals		54			39
Insurance taxes, licenses and fees		23			23
Amortization of policy acquisition costs and value of
business acquired		79			78
Interest expense		16			14
Communications operations		39			38
Total benefits and expenses		894			794
Income before income taxes		195			243
Income taxes		57			82
Net income	$	138		$	161
See Notes to Consolidated Unaudited Condensed Financial Statements.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(In Millions)
	Three Months Ended
	March 31,
	2006			2005
Cash Flows from Operating Activities	$	198		$	124
Cash Flows from Investing Activities
Securities and loans purchased, net		16			(378	)
Other investing activities		(27	)		(8	)
Net cash used in investing activities		(11	)		(386	)
Cash Flows from Financing Activities
Policyholder contract deposits		689			693
Policyholder contract withdrawals		(687	)		(489	)
Net borrowings (repayments)		(280	)		36
Net issuance (repurchase) of common shares		31			(40	)
Cash dividends paid		(56	)		(52	)
Other financing activities		5			1
Net cash provided by (used in) financing activities		(298	)		149
Decrease in cash and cash equivalents		(111	)		(113	)
Cash and cash equivalents at beginning of period		150			87
Cash and cash equivalents at end of period	$	39		$	(26	)
Supplemental Cash Flow Information
Income taxes paid	$	-		$	18
Interest paid	$	28		$	25
See Notes to Consolidated Unaudited Condensed Financial Statements.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED CONDENSED

FINANCIAL STATEMENTS

(Dollar Amounts In Millions, Except Per Share Amounts)

March 31, 2006

Note 1. Basis of Presentation

The accompanying consolidated unaudited condensed financial statements of Jefferson-Pilot Corporation (with its subsidiaries, referred to as the Company) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Therefore, the information contained in the notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, should be referred to in connection with the reading of these interim consolidated unaudited condensed financial statements.

In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Operating results for the three-month period ended March 31, 2006, are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

Share Information

On April 3, 2006, all of Jefferson-Pilot Corporation’s shares converted into shares of Lincoln National Corporation (LNC) or cash in accordance with the terms of the merger agreement (see Note 9). Accordingly, share information is not presented herein.

First Quarter 2005 Earnings

In the first quarter of 2005, the Company’s net income was impacted by management actions and claims experience, which when taken together increased pretax earnings and net income by $49 and $32 and affects the comparability of earnings results. Management reduced the rates for non-guaranteed cost of insurance bonuses (partial refunds) on certain older UL-type life insurance products. These bonuses are paid to certain policyholders at specified policy anniversaries for continuing coverage. Consequently, we recognized an accrual release, which increased cost of insurance charge revenue by $13 pretax, and a related unlocking of expected gross profits, which reduced amortization of value of business acquired by $16 pretax. Additionally, the Company experienced strong earnings emergence from favorable claims and reserve development in its group insurance business, primarily in the Canada Life block, reducing insurance and annuity benefits by $25 pretax, partially offset by $5 pretax of additional amortization of deferred policy acquisition costs.

Note 2. Significant Accounting Policies

Stock-Based Compensation

Prior to January 1, 2006, the Company accounted for stock incentive awards in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), and accordingly, recognized no compensation expense for stock option awards to employees or directors when the option price was not less than the market value of the stock at the date of award. The Company recognized expense utilizing the fair value method in accordance with Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), for stock options granted to non-employees, specifically agents. Accordingly, no compensation was recognized for our employee and director stock options prior to January 1, 2006. In the first quarter of 2006 and 2005, the Company recorded stock-based compensation expense for agents’ options in the amount of $1, all of which was capitalized as deferred acquisition costs (DAC).

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On January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004), “Share Based Payment” (SFAS 123-R) under the modified prospective method. Accordingly, prior period amounts have not been restated. Under this method, the fair value of all employee and director stock options vesting on or after the adoption date is generally included in the determination of net income as the options vest. The fair value of stock options granted has been estimated using an appropriate fair value option-pricing model considering assumptions for dividend yield, expected volatility, risk-free interest rate and expected life of the option. The fair value of the option grants is amortized on a straight-line basis over the implicit service period of the employee, considering retirement eligibility for options granted after January 1, 2006.  For options granted after January 1, 2006, the expense is recognized evenly up through the retirement eligibility date or immediately upon grant for participants already eligible for retirement. Total stock-based compensation expense recognized in the first quarter of 2006 for agents, employees and directors, related to the Company’s Long Term Stock Incentive Plans and Non-Employee Directors’ Stock Option Plans (together, “stock incentive plans,” discussed below) was $10, of which $2 was capitalized as DAC. The compensation cost is included in the general and administrative expenses, net of deferrals, line item on the Company's consolidated statements of income.  The total income tax benefit recognized in the income statement for share-based compensation arrangements was $3.

The following table details the effect on net income as if the Company had adopted the fair value expensing provisions of SFAS 123 for its employee and director stock option awards. The reported and pro forma net income for the first quarter of 2006 are the same, as stock-based compensation expense is calculated under the provisions of SFAS 123-R. The amounts for the first quarter of 2006 have been presented for comparative purposes to the first quarter of 2005. Prior to January 1, 2006, for purposes of the pro forma disclosures, the Company amortized the fair value of its grants over the explicit vesting period for participants, with acceleration at retirement.  For grants made starting in 2006, the Company amortizes the fair value of its grants over the shorter of the explicit vesting period or the period from grant date up to the retirement eligibility date.

	Three Months Ended March 31,
	2006		2005
Net income, as reported	$	138	$	161
Add: Total stock-based employee compensation included in reported net income, net of related tax and DAC effects		5		-
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax and DAC effects		5		1
Pro forma net income	$	138	$	160

In the first quarter of 2006, the adoption of SFAS 123-R resulted in incremental stock-based compensation expense (representing the cost of stock options issued to employees and directors) of $9, including $7 due to consideration of retirement eligibility when determining the vesting period for 2006 grants. Of this amount, $1 was capitalized as DAC. The incremental stock-based compensation expense due to the adoption of SFAS 123-R caused income before income taxes to decrease by $8 and net income to decrease by $5. In addition, in connection with the adoption of SFAS 123-R, net cash provided by operating activities decreased and net cash provided by financing activities increased in the first quarter of 2006 by $5 related to excess tax benefits from stock-based payment arrangements. The amount of cash received from the exercise of stock options was approximately $31 in the first quarter of 2006.

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Long Term Stock Incentive Plan

Under the Long Term Stock Incentive Plan, a Committee of independent directors may award nonqualified or incentive stock options and stock appreciation rights, and make grants of the Company’s stock, to employees of the Company and to life insurance agents. Stock grants may be either restricted stock or unrestricted stock distributed upon the achievement of performance goals established by the Committee.

A total of 9,474,929 shares are available for issuance pursuant to outstanding or future awards as of March 31, 2006. The option price is never less than the market value of the Company’s common stock on the award date. Options are exercisable for periods determined by the Committee, not to exceed ten years from the award date, and vest immediately or over periods as determined by the Committee. Restricted and unrestricted stock grants are limited to 10% of the total shares reserved for the Plan.

Non-Employee Directors’ Plan

Under the Non-Employee Directors’ Stock Option Plans, 806,373 shares of the Company’s common stock are reserved for issuance pursuant to outstanding or future awards as of March 31, 2006. Nonqualified stock options are automatically awarded, at market prices on specified award dates. The options vest over a period of one to three years, and terminate ten years from the date of award, but are subject to earlier vesting or termination under certain circumstances.

Vesting of Stock Options

Grants of stock options in February 2006 will continue to vest on a straight-line basis, over the implicit service period of the employees, considering retirement eligibility. All employee and director stock options outstanding as of December 31, 2005, vested upon closing of the merger with LNC on April 3, 2006. All outstanding options were converted to options on LNC stock in accordance with the terms of the merger agreement.

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Summary Stock Option Activity

Changes in the Company’s stock options for the first quarter of 2006 were as follows:

	Options			Weighted- Average Exercise Price Per Share
Outstanding beginning of year		9,423,976		$	43.78
Granted		1,304,750			58.46
Exercised		(757,091	)		40.81
Forfeited and expired		(39,913	)		44.63
Outstanding end of quarter		9,931,722		$	45.93
Exercisable at end of quarter		7,663,137		$	43.28

The weighted-average fair value of options granted during the quarter ended March 31, 2006, and March 31, 2005, was $12.19 and $9.40, respectively. The total intrinsic value for stock options outstanding and exercisable was $97 as of March 31, 2006. The total intrinsic value of stock options exercised during the first quarter of 2006 and 2005 was $14 and $2, respectively. The total fair value of shares vesting during the first quarter 2006 and 2005 was $9 and $8, respectively.

Changes in the Company’s nonvested shares for the first quarter of 2006 were as follows:

Nonvested Shares	Options			Weighted- Average Grant- Date Fair Value
Nonvested beginning of year		1,954,039		$	49.61
Granted		1,304,750			58.46
Vested		(964,712	)		49.14
Forfeited		(25,492	)		48.86
Nonvested end of quarter		2,268,585		$	54.91

As of March 31, 2006, there was $16 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the stock incentive plans. Of this amount, $9 vested upon consummation of the merger on April 3, 2006, and $7 will continue to vest over a three-year period subsequent to the merger, subject to retirement eligibility.

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The following table summarizes certain stock option information at March 31, 2006:

	Options Outstanding			Options Exercisable
		Weighted- Average Remaining	Weighted-		Weighted- Average Remaining	Weighted-
Range of Exercise Prices	Number of Shares	Contractual Life	Average Exercise Price	Number of Shares	Contractual Life	Average Exercise Price
$25.56 - $35.96	1,576,452	2.1	$32.25	1,576,452	2.1	$32.25
$36.00 - $46.17	2,033,564	4.2	40.22	2,033,564	4.2	40.22
$46.55 - $58.46	6,321,706	6.9	51.18	4,053,121	5.9	49.10
	9,931,722		$45.93	7,663,137		$43.28

These tables include 525,531 outstanding and 338,484 exercisable stock options held by life insurance agents. These are five-year options with vesting based on future performance. Forfeitures on agent options have been much higher than on other options.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.

Fair values were estimated at grant date using a Black-Scholes option pricing model with the following weighted-average assumptions for the first quarters of 2006 and 2005: risk-free interest rates of 4.6% and 3.9%; volatility factors of the expected market price of the Company’s common stock of 0.20 and 0.21; and a weighted-average expected life of the options of 6.8 years and 7.8 years. An expected dividend yield of 2.86% and 3.28% was assumed for grants made in the first quarter of 2006 and 2005. In the first quarter of 2006, the volatility assumptions were determined using historical closing prices. In the first quarter of 2005, the volatility assumptions were determined using a 50/50 mix of historical and implied volatility.

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Note 3. Income Taxes

The effective tax rate on net income is lower than the prevailing corporate Federal income tax rate principally from tax-preferred investment income and other investment credits. The Company earns tax-preferred investment income that does not change proportionately with the overall change in earnings or losses before Federal income taxes. In addition, the Internal Revenue Service recently completed its examination of tax years 2000-2003, and adjustments related to the completion of this audit also impacted the effective tax rate for the three months ended March 31, 2006.

Note 4. Comprehensive Loss

The components of comprehensive loss, net of related effects of DAC/VOBA and income taxes, are as follows:

	Three Months Ended March 31,
	2006			2005
Net income, as reported	$	138		$	161
Change in unrealized gains/losses on securities		(234	)		(169	)
Change in minimum pension liability		-			(1	)
Change in the fair value of derivative financial instruments		-			(3	)
Comprehensive loss	$	(96	)	$	(12	)

Note 5. Policy Liabilities 

In June 2005, a life insurance subsidiary of the Company established a program for an unconsolidated special purpose entity, Jefferson-Pilot Life Funding Trust I (the Trust), to sell medium-term notes through investment banks to commercial investors. The notes are backed by funding agreements issued by this subsidiary. The funding agreements are investment contracts that do not subject the subsidiary to mortality or morbidity risk. The medium-term notes issued by the Trust are exposed to all the risks and rewards of owning the funding agreements that collateralize them. The funding agreements issued to the Trust are classified as a component of policy liabilities within the consolidated balance sheets. As spread products, funding agreements generate profit to the extent that the rate of return on the investments earned exceeds the interest credited and other expenses.

The subsidiary issued $300 of funding agreements in June 2005. The initial funding agreements were issued at a variable rate and provide for quarterly interest payments, indexed to the 3-month LIBOR plus 7 basis points, with principal due at maturity on June 2, 2008. Concurrent with this issuance, the subsidiary executed an interest rate swap for a notional amount equal to the proceeds of the funding agreements. The swap qualifies for cash flow hedge accounting treatment and converts the variable rate of the funding agreements to a fixed rate of 4.28%.

Note 6. Contingent liabilities

A life insurance subsidiary is a defendant in a proposed class action suit. The suit alleges that a predecessor company, decades ago, unfairly discriminated in the sale of certain small face amount life insurance policies, and unreasonably priced these policies. Management believes that the life company’s practices have complied with state insurance laws and intends to vigorously defend the claims asserted.

In the normal course of business, the Company and its subsidiaries are parties to various lawsuits. Because of the considerable uncertainties that exist, the Company cannot predict the outcome of pending or future litigation. However, management believes that the resolution of pending legal proceedings will not have a material adverse effect on the Company’s financial position or liquidity, although it could have a material adverse effect on the results of operations for a specific period.

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Note 7. Retirement Benefit Plans

The following table illustrates the components of net periodic benefit cost for our pension plans:

	Three Months Ended March 31,
	2006			2005
Service cost	$	4		$	4
Interest cost		6			6
Expected return on plan assets		(8	)		(8	)
Amortization of net transition asset		-			-
Amortization of prior service cost		-			-
Amortization of net loss		1			-
Net periodic benefit cost	$	3		$	2

The Company expects to make contributions of $3 to $7 during 2006 related to our nonqualified plans. Contributions of $0 were made during the three months ended March 31, 2006.

Note 8. Segment Information

The Company has five reportable segments, which are defined based on the nature of the products and services offered: Individual Products, Annuity and Investment Products (AIP), Benefit Partners, Communications, and Corporate and Other. The segments remain as we described in our Form 10-K for 2005. The following tables summarize financial information of the reportable segments:

	March 31,		December 31,
	2006		2005
Assets
Individual Products	$	19,958	$	19,672
AIP		10,668		10,794
Benefit Partners		1,953		1,937
Communications		221		224
Corporate and Other		2,953		3,451
Total assets	$	35,753	$	36,078

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	Three Months Ended March 31,
	2006			2005
Revenues
Individual Products	$	460		$	456
AIP		203			169
Benefit Partners		345			313
Communications		62			60
Corporate & Other		26			34
Realized investment gains (losses), before taxes		(7	)		5
Total revenues	$	1,089		$	1,037
Total reportable segments results and reconciliation to net income
Individual Products	$	74		$	84
AIP		25			22
Benefit Partners		30			34
Communications		11			11
Corporate & Other		3			7
Total reportable segment results		143			158
Realized investment gains (losses), net of taxes		(5	)		3
Net income	$	138		$	161

Default charges paid to the Corporate and Other segment for Individual, AIP and Benefit Partners were $6, $3, $1 for the three months ended March 31, 2006 and 2005.

Note 9. Subsequent Event

On October 10, 2005, LNC and the Company announced that they had entered into a definitive merger agreement. The transaction was approved by the shareholders of both companies and regulators and was completed on April 3, 2006. At closing, the Company’s shareholders received 1.0906 shares of LNC common stock or $55.96 in cash for each share of the Company’s common stock, at their election, but subject to proration. The aggregate amount of cash paid to the Company’s shareholders equaled $1.8 billion.

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EX-99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On April 3, 2006, LNC and Jefferson-Pilot consummated the merger. The Jefferson-Pilot historical consolidated financial statements for the year ended December 31, 2005 are included in Jefferson-Pilot’s Annual Report on Form 10-K for the year ended December 31, 2005.

The following unaudited pro forma condensed combined financial statements of LNC give effect to the merger as if it had been completed as of January 1, 2006 with respect to the pro forma results of operations data, and as of March 31, 2006 with respect to the pro forma balance sheet data. The unaudited proforma condensed combined financial information also gives effect to the initial funding of the cash portion of the merger consideration through a bridge financing facility and the issuance of the portion of the capital securities and senior notes that we have issued or that we expect to issue to repay all of the outstanding debt under the bridge financing facility as if they occurred on January 1, 2006. We have adjusted the historical consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable, and (3) with respect to the statements of income, expected to have a continuing impact on the combined results.

The unaudited pro forma condensed combined financial information below should be read in conjunction with the notes thereto and our unaudited consolidated financial statements for the quarterly period ended March 31, 2006 in our quarterly report on Form 10-Q, and our audited historical consolidated financial statements for the year ended December 31, 2005 included in our Annual Report on Form 10-K.

The merger will be accounted for under the purchase method of accounting, with LNC treated as the accounting acquirer. Under this method of accounting, the purchase price will be allocated to Jefferson-Pilot’s net assets based upon the estimated fair values of Jefferson-Pilot’s assets and liabilities at the date of completion of the merger. The actual purchase price to be so allocated will depend upon, among other things, the number of shares of Jefferson-Pilot common stock issued and outstanding or subject to outstanding options immediately prior to the merger. The unaudited pro forma condensed combined financial statements include adjustments, which are based upon preliminary estimates, to reflect the allocation of the purchase price to Jefferson-Pilot’s net assets as of March 31, 2006. The purchase price allocation reflected herein is preliminary and final allocation of the purchase price will be based upon the actual purchase price and the actual assets and liabilities of Jefferson-Pilot as of the date of the completion of the merger. Accordingly, the actual purchase accounting adjustments may differ materially from the pro forma adjustments reflected herein.

The following unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of what our actual financial position or results of operations would have been had the merger been completed on the date indicated above. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the resulting company. These statements do not give effect to (1) the impact of possible revenue enhancements, expense efficiencies or synergies expected to result from the merger or contemplated share repurchases of our common stock, (2) the merger related costs of approximately $180 million to integrate our and Jefferson-Pilot’s operations or (3) the effects of transactions or developments that may occur subsequent to the merger. The foregoing matters could cause both LNC’s pro forma historical financial position and results of operations, and LNC’s actual future financial position and results of operations, to differ materially from those presented in the following unaudited pro forma condensed combined financial statements.

Unaudited Pro Forma Condensed Combined Balance Sheet

(in millions)

March 31, 2006

	Lincoln National		Jefferson-Pilot		Pro Forma
	Corporation		Corporation		Adjustments			Note			Pro Forma
ASSETS
Investments:
Securities available-for-sale, at fair value:
Fixed maturity	$	32,893	$	19,897	$	1,827			3(a) 3(b	)	$	54,617
Equity		176		624		(3	)		3(c	)		797
Fixed maturity held-to-maturity		-		1,828		(1,828	)		3(a	)		-
Trading securities		3,190		-		-						3,190
Mortgage loans on real estate		3,586		3,920		114			3(d	)		7,620
Policy loans		1,860		837		-						2,697
Other investments		868		413		144			3(e	)		1,425
Total Investments		42,573		27,519		254						70,346
Cash and invested cash		1,974		39		(90	)		3(f	)		1,923
Deferred acquisition costs and value
of business acquired		5,367		2,987		(496	)		3(g	)		7,858
Amounts recoverable from reinsurers		6,900		1,296		(143	)		3(h	)		8,053
Goodwill		1,194		312		3,108			3(i	)		4,614
Other intangible assets		-		198		583			3(j	)		781
Other assets		2,402		828		137			3(k	)		3,367
Assets held in separate accounts		67,984		2,574		-						70,558
Total Assets	$	128,394	$	35,753	$	3,353					$	167,500
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Insurance and Investment Contract Liabilities:
Insurance policy and claim reserves	$	24,716	$	4,682	$	107			3(l	)	$	29,505
Contractholder funds		22,285		22,438		(604	)		3(m	)		44,119
Total Insurance and Investment Contract Liabilities		47,001		27,120		(497	)					73,624
Short-term debt		11		-		-						11
Long-term debt		999		600		1,778			3(n	)		3,377
Junior subordinated debentures issued to affiliated trusts		332		309		(12	)		3(o	)		629
Funds withheld reinsurance liabilities		2,058		-		-						2,058
Deferred gain on indemnity reinsurance		817		-		-						817
Other liabilities		2,854		1,283		322			3(p	)		4,459
Liabilities related to separate accounts		67,984		2,574		-						70,558
Total Liabilities		122,056		31,886		1,591						155,533
Shareholders' Equity:
Series A preferred stock		1		-		-						1
Common stock and additional paid-in
capital		1,818		232		5,397			3(q	)		7,447
Retained earnings		4,236		3,431		(3,431	)		3(r	)		4,236
Accumulated other comprehensive income		283		204		(204	)		3(s	)		283
Total Shareholders' Equity		6,338		3,867		1,762						11,967
Total Liabilities and Shareholders' Equity	$	128,394	$	35,753	$	3,353					$	167,500

See Notes to the Unaudited Pro Forma Condensed Combined Financial Information

Unaudited Pro Forma Condensed Combined Statement of Income

(in millions, except share amounts)

Three Months Ended March 31, 2006

	Lincoln National		Jefferson-Pilot		Pro Forma
	Corporation		Corporation		Adjustments			Note			Pro Forma
Revenue:
Insurance premiums and fees	$	554	$	561	$	(12	)		3(t	)		1,103
Net investment income		678		438		(1	)		3(u	)		1,115
Other revenue and fees		185		90								275
Total Revenue		1,417		1,089		(13	)					2,493
Benefits and Expenses:
Benefits		584		613		(10	)		3(v	)		1,187
Underwriting, acquisition, insurance and
other expenses		496		265		(13	)		3(w	)		748
Interest and debt expense		22		16		25			3(x	)		63
Total Benefits and Expenses		1,102		894		2						1,998
Income before Federal income
taxes		315		195		(15	)					495
Federal income taxes (benefit)		94		57		(5	)		3(y	)		146
Net Income	$	221	$	138	$	(10	)				$	349
Common shares - basic		174,577,421										286,882,378
Common shares - diluted		177,929,653										291,852,167
Net Income per Common Share
Basic	$	1.27									$	1.22
Diluted	$	1.24									$	1.20

See Notes to the Unaudited Pro Forma Condensed Combined Financial Information

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL

INFORMATION

Note 1 — Reporting Reclassifications

Certain amounts in the historical consolidated financial statements of Jefferson-Pilot have been reclassified to conform to LNC’s historical financial statement presentation. While LNC and Jefferson-Pilot have completed a preliminary review of their respective accounting and financial reporting policies as compared to those used by the other company, this review is ongoing and will continue throughout the merger process. As such, additional reclassifications or pro forma adjustments may be identified.

Note 2 — Purchase Price and Financing Considerations

LNC funded the $1.8 billion cash portion of the merger consideration through the issuance of debt under a bridge financing facility. LNC expects to repay all, or substantially all of the outstanding debt under the bridge financing facility through the issuance of long-term debt, including senior notes and capital securities described below. The unaudited pro forma condensed combined financial information reflects the issuance of 112,304,957 shares of LNC common stock with an aggregate value of $5.5 billion (see note 1 to the table below), the conversion of all outstanding Jefferson-Pilot stock options at the date of the merger with an estimated value of approximately $131 million at March 31, 2006, and the cash payment of $1.8 billion and estimated transaction costs of $63 million.

Goodwill of $3.4 billion is a result of the excess of purchase price over the estimated fair value of Jefferson-Pilot’s net assets at March 31, 2006. The purchase price is assumed to be $7.5 billion, including certain estimated purchase price adjustments related to the merger as shown in the table below. The estimated fair value of Jefferson-Pilot’s net assets is assumed to be $4.1 billion based on the carrying value of net assets at March 31, 2006 plus estimated fair value pro forma adjustments as shown in the table below. Preliminary values and lives have been assigned to the acquired assets and liabilities assumed for the purposes of these unaudited pro forma combined financial statements. The unaudited pro forma combined financial statements reflect LNC’s estimates of the fair value of the net assets of Jefferson-Pilot as of March 31, 2006, and the allocation of the purchase price to the fair value of Jefferson-Pilot’s net assets, including identified intangible assets. The estimated fair values and lives will be refined during the completion of the merger process and may vary materially from the amounts included herein.

The allocation of the purchase price follows:

		March 31, 2006
		(in millions except share data)
Jefferson-Pilot common shares outstanding		135,140,837
Common shares converted into
cash ($1.8 billion divided by cash consideration of $55.96)		(32,165,450	)
Jefferson-Pilot common shares
converted into LNC common shares		102,975,387
Exchange ratio		1.0906
Estimated LNC common shares to be issued		112,304,957
Purchase price per LNC common share1	$	48.98
Fair value of the shares to be issued				$	5,501
Cash to be paid to Jefferson-Pilot shareholders					1,800
Fair value of Jefferson-Pilot stock options					131
Estimated transaction costs					63
Total estimated purchase price					7,495
Net assets acquired at December 31, 2005
Carrying value of net assets prior to merger	$	3,867
Estimated fair value adjustments		208
Estimated fair value of net assets acquired					4,075
Total Goodwill				$	3,420

1. Fair value was based on the average closing price of LNC common stock for the five trading days ranging from two days before to two days after October 10, 2005, the date the merger was announced, which was $48.98 per share.

The pro forma financial information presented herein assumes that LNC initially funded the cash portion of the merger consideration of $1.8 billion through the issuance of debt under a bridge financing facility and then repaid such amount through the issuance of $500 million of floating rate senior notes due 2009, $500 million 6.15% senior notes due 2036, and $275 million of 6.75% capital securities due 2066, and anticipated issuance of $525 million of 7.00% capital securities due 2066, callable in 10 years. The unaudited pro forma condensed combined financial information reflects the impact of these financing arrangements using the applicable actual or anticipated borrowing rates for such types of securities. As discussed below in Note 6, management entered into a repurchase arrangement for $500 million in LNC stock, financed initially through issuance of debt under a bridge facility. No pro forma adjustments have been made to reflect the financing of the repurchase of LNC shares.

The interest rates used to calculate the impact of the financing on the pro forma financial information were based on the securities issued or were estimated based on LNC's borrowing rates at April 29, 2006. LNC’s borrowing rates are sensitive to changes in risk-free rates and credit spreads. The actual interest rates may differ materially from those estimated by LNC.

Options outstanding to acquire Jefferson-Pilot common stock immediately prior to the effective time of the merger remain subject to the same terms and conditions as were in effect with respect to the options immediately prior to the effective time of the merger, except that each of these stock options is now exercisable for LNC common stock equal to the number of shares of Jefferson-Pilot common stock subject to such option multiplied by 1.0906 (rounded down to the nearest whole share), with the exercise price determined by dividing the exercise price of the Jefferson-Pilot options by 1.0906 (rounded up to the sixth decimal place). Each unvested Jefferson-Pilot stock option held by an employee, officer or director and granted prior to October 9, 2005 (which was the date we signed the merger agreement) and outstanding

under any Jefferson-Pilot stock option plan became fully vested and exercisable in connection with the merger. Jefferson-Pilot stock options held by its agents did not become fully vested and exercisable in connection with the merger, but will vest in accordance with the applicable option agreement.

The fair value of Jefferson-Pilot options was estimated using a Black-Scholes option pricing model at March 31, 2006. The actual variables used to calculate the fair value of the Jefferson-Pilot options at the date of the merger may differ from those estimated within the accompanying unaudited pro forma condensed combined financial statements.

Note 3 — Pro Forma Adjustments

These pro forma adjustments are based on certain estimates and assumptions as of the date of the unaudited pro forma condensed combined financial information. The actual adjustments upon the consummation of the merger will depend on a number of factors, including changes in the estimated fair value of net assets and the effective date of the acquisition. Therefore, the actual adjustments may be different from the adjustments made to prepare the unaudited pro forma condensed combined financial information and such differences may be material.

a. Adjustment of $1.827 billion includes the redesignation of Jefferson-Pilot’s historical $1.828 billion of held-to-maturity debt securities to available-for-sale based on LNC’s investment policies, $29 million for the difference between the estimated fair value and carrying value of Jefferson-Pilot’s investment in held-to-maturity debt securities, and the elimination of $(30) million of intercompany debt (see adjustment 3(b)). The related amortization of the adjustment to fair value is included in adjustment 3(u).

b. Adjustment eliminates the fair value of $30 million in available-for-sale fixed maturity securities and related carrying value of the junior subordinated debentures issued to affiliated trusts, of which $24 million is held by LNC and issued by Jefferson-Pilot, and $6 million is held by Jefferson-Pilot and issued by LNC. The related eliminations of the interest income and interest expense to both LNC and Jefferson-Pilot are not material.

c. Adjustment of $(3) million to eliminate the fair value of LNC common stock held in Jefferson-Pilot’s available-for-sale equity securities.

d. Adjustment of $114 million for the difference between the estimated fair value and carrying value of Jefferson-Pilot’s investment in mortgage loans. The related amortization for this adjustment is included in adjustment 3(u).

e. Adjustment of $144 million consists of $59 million for the difference between the estimated fair value and carrying value of Jefferson-Pilot’s investment in real estate, including foreclosed properties, and $85 million fair value adjustment for equity method investments. The related depreciation and amortization adjustments were not material.

f. Adjustment of $(90) million represents the cash position of $1.8 billion resulting from the assumed issuance of senior debt and capital securities as described in Note 2, reduced by estimated discounts and issuance costs of $(27) million. The net cash generated from financing has been reduced by the payment of $(1.8) billion of cash to Jefferson-Pilot shareholders and estimated transaction costs of $(63) million. Actual transaction and issuance costs may vary from these estimates.

g. Adjustment of $(496) million for the purchase accounting adjustment related to the elimination of the historical DAC and the historical VOBA of $(2.987) billion and the establishment of VOBA of $2.491 billion. The VOBA reflects the estimated fair value of in force contracts and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the life

insurance and annuity contracts in force at the acquisition date. VOBA is based on actuarially determined projections, by each line of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience of the purchased business may vary from these projections. Also included in the determination of VOBA is the elimination of Jefferson-Pilot’s historical deferred revenue liability of $505 million (see adjustment 3(m)). VOBA is amortized in relation to estimated gross profits or premiums, depending on product type. For interest-sensitive products, if estimated gross profits differ from expectations, the amortization of VOBA will be adjusted to reflect actual experience. The net adjustment to amortization as a result of eliminating the historical DAC and VOBA is included in adjustment 3(w).

h. Adjustment of $(143) million eliminates the amounts recoverable from reinsurers with corresponding eliminations to policy liabilities of $(44) million and contractholder funds of $(99) million resulting from reinsurance arrangements between Jefferson-Pilot and LNC. The reinsurance arrangement between Jefferson-Pilot and LNC was included in LNC’s indemnity reinsurance arrangement with Swiss Re as part of LNC’s 2001 sale of its reinsurance business.

i. Adjustment of $3.108 billion represents the elimination of Jefferson-Pilot’s historical goodwill of $(312) million and the recording of $3.420 billion of goodwill arising from the transaction. See computation of estimated goodwill in Note 2.

j. Adjustment of $583 million consists of the establishment of $782 million for identifiable other intangible assets, including $682 million for identifiable other intangible assets related to Jefferson-Pilot’s communications business and $100 million for the estimated value of the sales force acquired, offset by the elimination of $(199) million related to Jefferson-Pilot’s historical other intangible assets, including $85 million for deferred sales inducements, which are referred to as DSI. The identifiable assets will be amortized in relation to the expected economic benefits of the agreement. The related amortization for the adjustment to identified intangibles is included in adjustment 3(w). The reversal of historical amortization expense related to the DSI is included in adjustment 3(v).

k. Adjustment of $137 million consists of  $27 million of financing costs (see adjustment 3(f)) and the fair value adjustment of $113 million for the difference between the estimated fair value and carrying value of Jefferson-Pilot’s other assets consisting of a $138 million increase in the value of owner occupied real estate offset by a $(25) million fair value adjustment to the pension asset. The adjustment includes $(3) million to expense prepaid merger costs. The adjustments to amortize financing costs and for depreciation expense on owner occupied real estate were not material.

l. Adjustment of $107 million includes a $151 million increase to the carrying value of Jefferson-Pilot's liability for future policy benefits based on current assumptions and the elimination of $(44) million related to policy and claim liabilities reinsured by LNC. See adjustment 3(h) for additional information on the reinsurance between Jefferson-Pilot and LNC.

m. Adjustment of $(604) million includes the elimination of $(505) million for Jefferson-Pilot’s historical deferred revenue liability and the elimination of $(99) million related to liabilities reinsured by LNC. See adjustment 3(h) for additional information on the reinsurance arrangements between Jefferson-Pilot and LNC.

n. Adjustment of $1.778 billion includes $1.8 billion for the issuance of $1.0 billion of senior debt and $800 million of capital securities as described in Note 2, offset by an adjustment of $(16) million to record the difference between the historical amount and estimated fair value (present value of amounts to be paid determined at appropriate current interest rates) of Jefferson-Pilot's notes payable and the elimination of $(6) million of LNC senior notes held by Jefferson-Pilot. Related interest expense is also described in Note 2. Related debt issuance costs are described in adjustment 3(k).

o. Adjustment of $(12) million includes $(24) million for the elimination of debt securities as described in adjustment 3(b), offset by an adjustment of $12 million to record the difference between the

historical amount and estimated fair value (present value of amounts to be paid determined at appropriate current interest rates) of Jefferson-Pilot's junior subordinated debentures payable to affiliated trusts. Related interest expense is also described in adjustment 3(x).

p. Adjustment of $322 million consists of a $312 million adjustment to Jefferson-Pilot’s federal and state income tax liabilities and a $10 million liability for Jefferson-Pilot employment contractual buyouts and severance.

q. Adjustment of $5.397 billion includes $5.501 billion for the issuance of LNC common stock to Jefferson-Pilot shareholders, $131 million for the fair value of outstanding stock options granted to Jefferson-Pilot employees and directors (see Note 2), $(232) million to eliminate Jefferson-Pilot’s historical common stock and paid-in-capital, and $(3) million to eliminate the fair value of LNC common stock held in Jefferson-Pilot’s available-for-sale equity securities (see adjustment 3(c)).

r. Adjustment of $(3.431) billion to eliminate Jefferson-Pilot’s historical retained earnings.

s. Adjustment of $(204) million to eliminate Jefferson-Pilot’s historical accumulated other comprehensive income.

t. Adjustment of $(12) million to eliminate the amortization of deferred policy fees resulting from the elimination of such deferred revenue in purchase accounting, included in adjustment 3(m).

u. Adjustment of $(1) million includes amortization of discounts of $3 million on fixed maturity securities of Jefferson-Pilot resulting from the fair value adjustment of these assets as of March 31, 2006 (see adjustment 3(a)). Realized gains and losses have not been adjusted, and therefore, are based on their historical cost basis. Also included in the adjustment is $(4) million in amortization of the adjustment in fair value of mortgage loans and other investments (see adjustment 3(d)).

v. Adjustment of $(10) million includes $(7) million for the amortization of the adjustment to the liability for future policy benefits and for interest credited to policyholders related to the increase in the carrying value of Jefferson-Pilot’s contractholder funds (see adjustment 3(l)) , and $(3) million for the reversal of Jefferson-Pilot’s historical amortization of DSI (see adjustment 3(j)).

w. Adjustment of $(13) million includes $(15) million for the reduction in amortization expense related to the fair value adjustment of DAC and VOBA (see adjustment 3(g)), $3 million for the amortization of other identified intangibles (see adjustment 3(j)), and a $(1) million decrease to pension expense (see adjustment 3(k)).

x. Adjustment of $25 million includes $27 million for interest expense related to financing of the merger, and $(2) million related to the amortization of the fair value of Jefferson-Pilot’s debt securities (see adjustment 3(o)). The elimination of interest expense for intercompany debt (see adjustments 3(b) and 3(o)) was not material.

y. Adjustment represents the income tax effect of all pro forma consolidated statement of income adjustments using the U.S. federal tax rate of 35%.

Note 4—Merger Related Charges

In connection with the merger, LNC’s preliminary integration plan includes merger related costs of approximately $180 million to integrate LNC’s and Jefferson-Pilot’s operations. Depending on the nature of such costs, they will either be included in the purchase price allocation, or be treated as period costs and charged to the Statement of Income as incurred. The specific details of these plans will continue to be refined.

Note 5—Earnings per Share

The pro forma earnings per share reflect the weighted average number of LNC shares that would have been outstanding had the transaction occurred as at January 1, 2006. Jefferson-Pilot options, which factor into the dilution calculation, were converted at an assumed 1.0906 exchange ratio, as provided in the merger agreement, see Note 2.

The effect of certain potentially dilutive securities was excluded from the computation of diluted earnings per share as their effect is anti-dilutive.

Note 6 - Accelerated Stock Repurchase Program

On April 3, 2006, LNC entered into an agreement with a third party broker-dealer to purchase shares of our common stock, under an accelerated stock repurchase program, for an aggregate purchase price of $500 million. The number of shares to be repurchased under this arrangement will be at least approximately 8 million but not more than approximately 9 million shares, based on the volume weighted average share price of our common stock over the program’s duration. On April 10, 2006, we funded the arrangement by borrowing $500 million under the bridge facility and received approximately 8 million shares of our common stock, which were retired. We expect the program to be completed in the third quarter of 2006. As discussed in Note 2, the pro forma financial statements do not include any effects from this transaction.