UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: September 30, 2002
LINCOLN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 1-6028 35-1140070
(State of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.)
1500 Market Street, Suite 3900, Centre Square West Tower, Philadelphia, PA 19102
(Address of principal executive offices)
Registrant's telephone number 219-448-1400
Item 5
Statistical Report for the quarter ended September 30, 2002
PAGE 1
Financial Highlights
Unaudited [Amounts in Millions,
except Per Share]
For the Quarter Ended September 30 For the Nine Months Ended September 30
2002 2001 2002 2001
Amount Amount Change % Change Amount Amount Change % Change
------- ------- ------- ------- ------- ------- ------- -------
Income from Operations
Lincoln Retirement* 22.8 72.4 (49.6) (68.5%) 151.0 245.5 (94.5) (38.5%)
Life Insurance 63.4 70.1 (6.7) (9.6%) 208.1 205.8 2.3 1.1%
Investment Management 4.0 3.5 0.5 14.3% 18.6 9.6 9.0 93.8%
Lincoln UK 0.0 10.1 (10.1) (100.0%) 21.1 40.7 (19.6) (48.2%)
Corporate & Other** (17.2) (12.9) (4.3) (36.5) (11.7) (24.8)
------- ------- ------- ------- ------- ------- ------- -------
Total Income from Operations 73.0 143.2 (70.2) (49.0%) 362.3 489.9 (127.6) (26.0%)
Realized gains (losses) on
investments (23.6) (23.7) 0.1 (143.9) (48.6) (95.3)
Gains (losses) on derivatives 0.2 (0.4) 0.6 0.5 (0.2) 0.7
Reserve increase on business sold
through reinsurance (176.4) 0.0 (176.4) (190.8) 0.0 (190.8)
Restructuring charges 1.3 0.0 1.3 0.3 (4.5) 4.8
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes (125.5) 119.1 (244.6) 28.4 436.6 (408.2)
Cumulative effect of accounting
changes*** 0.0 0.0 0.0 0.0 (15.6) 15.6
------- ------- ------- ------- ------- ------- ------- -------
Net Income (125.5) 119.1 (244.6) (205.4%) 28.4 421.0 (392.6) (93.3%)
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share (diluted)
Income from Operations $0.40 $0.74 ($0.34) (45.9%) $1.93 $2.53 ($0.60) (23.7%)
Realized gain (losses) on
investments ($0.13) ($0.13) $0.00 ($0.77) ($0.25) ($0.52)
Gains (losses) on derivatives $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Reserve increase on business sold
through reinsurance ($0.96) $0.00 ($0.96) ($1.01) $0.00 ($1.01)
Restructuring charges $0.01 $0.00 $0.01 $0.00 ($0.02) $0.02
------- ------- ------- ------- ------- -------
Income before Accounting Changes ($0.68) $0.61 ($1.29) $0.15 $2.26 ($2.11)
Cumulative effect of accounting
changes*** $0.00 $0.00 $0.00 $0.00 ($0.08) $0.08
------- ------- ------- ------- ------- ------- ------- -------
Net Income ($0.68) $0.61 ($1.29) (211.5%) $0.15 $2.18 ($2.03) (93.1%)
======= ======= ======= ======= ======= ======= ======= =======
Inc. from Oper.- before Goodwill
Amort.
Lincoln Retirement* 22.8 72.7 (49.9) (68.7%) 151.0 246.4 (95.4) (38.7%)
Life Insurance 63.4 76.0 (12.5) (16.5%) 208.1 223.6 (15.5) (6.9%)
Investment Management 4.0 7.5 (3.5) (46.4%) 18.6 21.7 (3.1) (14.3%)
Lincoln UK (0.0) 10.3 (10.3) (100.2%) 21.1 41.2 (20.2) (48.9%)
Corporate & Other** (17.2) (12.4) (4.8) (36.5) (10.4) (26.1)
------- ------- ------- ------- ------- ------- ------- -------
Total 73.0 154.1 (81.1) (52.6%) 362.3 522.6 (160.3) (30.7%)
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share (diluted)
Inc. from Oper.- before Goodwill
Amort. $0.40 $0.79 ($0.39) (49.4%) $1.92 $2.70 ($0.78) (28.9%)
------- ------- ------- ------- ------- ------- ------- -------
Net Income - before Goodwill
Amort.
Lincoln Retirement* (6.0) 58.9 (64.9) (110.2%) 51.8 216.0 (164.2) (76.0%)
Life Insurance 47.1 70.6 (23.5) (33.3%) 148.7 198.9 (50.2) (25.2%)
Investment Management 3.1 7.0 (3.8) (55.0%) 16.3 19.9 (3.6) (18.2%)
Lincoln UK 0.8 14.2 (13.3) (94.1%) 21.5 46.9 (25.4) (54.1%)
Corporate & Other** (170.5) (20.7) (149.7) (209.9) (28.1) (181.7)
------- ------- ------- ------- ------- ------- ------- -------
Total (125.5) 130.0 (255.4) (196.5%) 28.4 453.6 (425.2) (93.7%)
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share (diluted)
Net Income - before Goodwill
Amort. ($0.68) $0.67 ($1.35) (201.5%) $0.15 $2.34 ($2.19) (93.6%)
------- ------- ------- ------- ------- ------- ------- -------
Operating Revenue
Lincoln Retirement* 485.6 499.5 (13.9) (2.8%) 1487.9 1534.4 (46.5) (3.0%)
Life Insurance 466.8 468.9 (2.1) (0.5%) 1396.7 1402.2 (5.6) (0.4%)
Investment Management 96.0 105.5 (9.4) (9.0%) 304.2 329.9 (25.7) (7.8%)
Lincoln UK 68.1 70.7 (2.7) (3.8%) 190.3 222.0 (31.7) (14.3%)
Corporate & Other** 62.7 502.3 (439.7) (87.5%) 255.9 1494.4 (1,238.5) (82.9%)
------- ------- ------- ------- ------- ------- ------- -------
Total Operating Revenue 1179.1 1646.9 (467.8) (28.4%) 3634.9 4982.9 (1,348.0) (27.1%)
======= ======= ======= ======= ======= ======= ======= =======
Total Revenue
Lincoln Retirement* 440.7 478.2 (37.6) (7.9%) 1336.3 1500.7 (164.5) (11.0%)
Life Insurance 441.6 460.6 (19.0) (4.1%) 1305.4 1375.9 (70.6) (5.1%)
Investment Management 94.3 104.7 (10.4) (9.9%) 300.2 327.2 (27.0) (8.3%)
Lincoln UK 69.3 76.3 (6.9) (9.1%) 190.9 230.1 (39.2) (17.0%)
Corporate & Other** 95.1 489.5 (394.4) (80.6%) 279.6 1473.0 (1,193.4) (81.0%)
------- ------- ------- ------- ------- ------- ------- -------
Total Revenue 1141.0 1609.3 (468.3) (29.1%) 3412.4 4907.0 (1,494.6) (30.5%)
======= ======= ======= ======= ======= ======= ======= =======
------------------------------------------------------------------------------------------------------------------------------
Operational Data by Segment:
(Billions except where noted)
Lincoln Retirement*
Gross Deposits 1.694 1.580 0.114 7.2% 5.048 4.398 0.650 14.8%
Net Cash Flows 0.069 0.261 (0.192) 73.6% 0.380 (0.526) 0.906 172.2%
Account Values (Gross) 45.505 47.824 (2.319) (4.8%) 45.505 47.824 (2.319) (4.8%)
Account Values (Net of
Reinsurance) 43.592 46.558 (2.966) (6.4%) 43.592 46.558 (2.966) (6.4%)
Life Insurance Segment
First Year Premium- Retail (in
millions) 173.986 132.368 41.618 31.4% 469.164 391.204 77.961 19.9%
First Year Premium- COLI (in
millions) 7.831 5.069 2.761 54.5% 61.335 33.101 28.234 85.3%
First Year Premium- Total (in
millions) 181.816 137.437 44.379 32.3% 530.499 424.304 106.195 25.0%
In-force 248.030 227.751 20.278 8.9% 248.030 227.751 20.278 8.9%
Account Values 11.726 10.939 0.787 7.2% 11.726 10.939 0.787 7.2%
Investment Management Segment
Retail Deposits 1.465 0.843 0.622 73.8% 4.023 2.894 1.130 39.1%
Retail Net Cash Flows 0.048 (0.120) 0.168 140.0% 0.305 (0.287) 0.592 206.1%
Institutional In-flows 1.162 0.883 0.279 31.6% 3.870 3.130 0.740 23.6%
Institutional Net Cash Flows 0.349 (0.155) 0.504 (325.2%) 1.534 (0.128) 1.662 (1298.4%)
Total Net Cash Flows 0.397 (0.275) 0.672 (244.4%) 1.839 (0.415) 2.254 542.9%
Assets Under Management- Retail
and Inst'l 43.357 44.957 (1.600) (3.6%) 43.357 44.957 (1.600) (3.6%)
Assets Under Management -
Insurance Assets 40.416 37.337 3.079 8.2% 40.416 37.337 3.079 8.2%
Assets Under Management - Total
Segment 83.773 82.294 1.479 1.8% 83.773 82.294 1.479 1.8%
Consolidated
Consolidated Domestic Retail
Deposits 3.139 2.566 0.574 22.4% 9.389 7.871 1.519 19.3%
Consolidated Domestic Retail
Account Balances 71.658 74.682 (3.024) (4.0%) 71.658 74.682 (3.024) (4.0%)
Total Retail Net Cash Flows 0.290 0.299 (0.009) 3.0% 1.357 (0.129) 1.486 1148.8%
Total Net Cash Flows 0.639 0.144 0.495 343.9% 2.891 (0.257) 3.148 1223.3%
Total Assets Under Management 113.538 117.462 (3.924) (3.3%) 113.538 117.462 (3.924) (3.3%)
* Effective March 7, 2002, the Annuities segment became known as Lincoln Retirement.
** Upon the closing of Swiss Re's acquisition of LNC's reinsurance business on December 7, 2001, all historical financial data
for the former Reinsurance segment was moved into "Other Operations." In addition, ongoing amortization of the deferred
gain on indemnity reinsurance is shown in "Other Operations."
*** The cumulative effect of accounting changes relates to the adjustments recorded upon adoption of FAS #133 in the 1st qtr.
2001 and EITF 99-20 in the 2nd qtr. 2001.
PAGE 2
Financial Highlights
Unaudited [Amounts in Millions,
except Per Share]
For the Quarter Ended September 30 For the Nine Months Ended September 30
2002 2001 2002 2001
Amount Amount Change % Change Amount Amount Change % Change
------- ------- ------- ------- ------- ------- ------- -------
Consolidated Operational Data:
(Millions)
Balance Sheet Assets - End of
Period 90436.2 90206.0 230.2 0.3% 90436.2 90206.0 230.2 0.3%
Shareholders' Equity
Beg of Period (Securities at
Market) 5307.9 5055.9 252.0 5263.5 4954.1 309.4
End of Period (Securities at
Market) 5389.0 5368.6 20.4 5389.0 5368.6 20.4
End of Period (Securities at
Cost) 4544.2 5100.4 (556.2) 4544.2 5100.4 (556.2)
Average Equity (Securities at
Cost) 4891.6 5085.0 (193.4) 5018.5 4986.3 32.2
Return on Equity
Inc from Operations/Average
Equity 6.0% 11.3% (5.3%) 9.6% 13.1% (3.5%)
Net Income/Average Equity (10.3%) 9.4% (19.6%) 0.8% 11.3% (10.5%)
Return on Capital
Inc from Operations/Average
Capital 5.5% 9.7% (4.2%) 8.2% 11.0% (2.9%)
Common Stock Outstanding
Average for the Period - Diluted 183.9 194.8 (10.9) (5.6%) 188.2 193.5 (5.3) (2.7%)
End of Period - Assuming Conv of
Pref. 177.5 189.8 (12.3) (6.5%) 177.5 189.8 (12.3) (6.5%)
End of Period - Diluted 178.8 193.3 (14.5) (7.5%) 178.8 193.3 (14.5) (7.5%)
Book Value (Securities at Market) $30.37 $28.29 2.08 7.4% $30.37 $28.29 2.08 7.4%
Book Value (Securities at Cost) $25.61 $26.87 (1.26) (4.7%) $25.61 $26.87 (1.26) (4.7%)
Cash Returned to Shareholders
Share Repurchase - dollar amount 247.8 182.7 65.1 474.5 369.5 105.0
Dividends Declared to
Shareholders 58.8 57.7 1.1 178.4 171.9 6.5
Total Cash Returned to ------- ------- ------- ------- ------- ------- -------
Shareholders 306.6 240.4 66.2 652.9 541.4 111.5
======= ======= ======= ======= ======= ======= =======
Share Repurchase - number of
shares 7.203 4.084 3.119 12.088 8.384 3.704
Dividend Declared on Common Stock
- per share $0.320 $0.305 $0.015 4.9% $0.960 $0.915 $0.045 4.9%
For the Quarter Ended September 30 For the Nine Months Ended September 30
Comprehensive Income 2002 2001 2002 2001
(millions) Amount Amount Amount Amount
------- ------- ------- -------
Net Income (125.5) 119.1 28.4 421.0
Foreign Currency Translation 13.4 22.2 43.4 (15.0)
Net Unrealized Gains (Losses) on
Securities 491.9 (114.2) 621.8 235.9
Gains (Losses) on Derivatives 4.6 (6.5) 5.8 2.9
Cumulative Effect of Accounting
Change 0.0 0.0 0.0 17.6
Minimum Pension Liability
Adjustment 2.6 0.0 0.7 0.0
------- ------- ------- -------
Comprehensive Income 387.0 20.6 700.1 662.4
======= ======= ======= =======
PAGE 3
Financial Highlights
Unaudited [Amounts in Millions]
For the Quarter Ended September 30 For the Nine Months Ended September 30
2002 2001 2002 2001
Amount Amount Change % Change Amount Amount Change % Change
------- ------- ------- ------- ------- ------- ------- -------
Consolidated Condensed Statements
of Income
Revenue:
Insurance Premiums and Fees 417.5 821.6 (404.1) (49.2%) 1,298.9 2,568.5 (1,269.6) (49.4%)
Investment Advisory Fees 42.9 47.2 (4.4) (9.2%) 138.7 146.3 (7.6) (5.2%)
Net Investment Income 647.0 686.2 (39.2) (5.7%) 1,946.2 2,033.0 (86.8) (4.3%)
Realized Gains (Losses) on
Investments (37.1) (37.1) 0.1 (222.0) (75.5) (146.5)
Gains (Losses) on Derivatives 0.3 (0.6) 0.9 0.8 (0.4) 1.2
Other 70.3 91.9 (21.5) (23.4%) 249.8 235.1 14.7 6.3%
------- ------- ------- ------- ------- ------- ------- -------
Total Revenue 1,141.0 1,609.3 (468.3) (29.1%) 3,412.4 4,907.0 (1,494.7) (30.5%)
Benefits and Expenses:
Benefits 671.6 903.1 (231.5) (25.6%) 1,901.1 2,664.8 (763.7) (28.7%)
Underwriting, Acquisition,
Insurance and Other Expenses 695.7 556.5 139.2 25.0% 1,570.4 1,667.8 (97.4) (5.8%)
------- ------- ------- ------- ------- ------- ------- -------
Total Benefits and Expenses 1,367.3 1,459.6 (92.3) (6.3%) 3,471.6 4,332.7 (861.1) (19.9%)
------- ------- ------- ------- ------- ------- ------- -------
Net Income
before Federal Taxes (226.3) 149.6 (376.0) (59.2) 574.4 (633.6)
Federal Income Taxes (100.9) 30.6 (131.5) (87.6) 137.9 (225.5)
------- ------- ------- ------- ------- -------
Income before Accounting Changes (125.5) 119.1 (244.6) 28.4 436.5 (408.1)
Cumulative Effect of Accounting
Changes - - - - (15.6) 15.6
------- ------- ------- ------- ------- ------- -------
Net Income (125.5) 119.1 (244.5) (205.4%) 28.4 421.0 (392.6) (93.3%)
======= ======= ======= ======= ======= ======= ======= =======
Income before Tax and Cumulative
Effect
of Accounting Changes By Segment
Lincoln Retirement (33.5) 61.6 (95.1) 12.6 259.5 (246.9)
Life Insurance 67.2 99.9 (32.7) 211.5 289.9 (78.4)
Investment Management 3.2 5.5 (2.3) 18.8 13.6 5.2
Lincoln UK 1.0 15.1 (14.1) 21.1 55.9 (34.8)
Corporate and Other (264.3) (32.6) (231.8) (323.2) (44.5) (278.7)
------- ------- ------- ------- ------- -------
Income before Tax and
Cumulative Effect of Accounting
Changes (226.3) 149.6 (375.9) (59.2) 574.4 (633.6)
------- ------- ------- ------- ------- -------
Pre-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (44.9) (21.3) (23.6) (151.6) (33.6) (118.0)
Life Insurance (25.2) (8.2) (17.0) (91.4) (26.3) (65.1)
Investment Management (1.8) (0.8) (1.0) (4.0) (2.6) (1.4)
Lincoln UK 1.2 5.5 (4.3) 0.7 8.1 (7.4)
Corporate and Other 33.8 (12.8) 46.7 25.1 (21.4) 46.5
------- ------- ------- ------- ------- -------
Pre-Tax Realized Gains (Losses)
on Investments and Derivatives (36.8) (37.6) 0.8 (221.2) (75.8) (145.4)
After-Tax Realized Gains (Losses)
by Segment*
Lincoln Retirement (28.8) (13.8) (15.0) (98.1) (21.9) (76.2)
Life Insurance (16.4) (5.3) (11.1) (59.4) (17.1) (42.3)
Investment Management (1.2) (0.5) (0.7) (2.6) (1.7) (0.9)
Lincoln UK 0.9 3.9 (3.0) 0.5 5.7 (5.2)
Corporate and Other 22.1 (8.4) 30.5 16.2 (13.8) 30.0
------- ------- ------- ------- ------- -------
After-Tax Realized Gains (Losses)
on Investments and Derivatives (23.4) (24.1) 0.7 (143.4) (48.8) (94.6)
* Includes both realized gains (losses) on investments and gains (losses) on derivatives.
PAGE 4
Financial Highlights
Unaudited [Amounts in Millions]
As of
---------------------------------------------------------------
September December
2002 2001
Amount Amount Change % Change
--------- --------- --------- ---------
Consolidated Condensed Balance
Sheets
Assets:
Investments:
Securities Available for Sale:
Fixed Maturities 32,036.8 28,345.7 3,691.2 13.0%
Equities 397.4 470.5 (73.0) (15.5%)
Mortgage Loans on Real Estate 4,285.2 4,535.5 (250.3) (5.5%)
Real Estate 286.4 267.9 18.6 6.9%
Policy Loans 1,899.0 1,939.7 (40.7) (2.1%)
Other Long-Term Investments 457.7 553.8 (96.2) (17.4%)
--------- --------- --------- ---------
Total Investments 39,362.6 36,113.1 3,249.5 9.0%
Other Assets:
Assets Held in Separate Accounts 34,069.0 44,833.4 (10,764.4) (24.0%)
Other Assets 17,004.6 17,054.8 (50.2) (0.3%)
--------- --------- --------- ---------
Total Assets 90,436.2 98,001.3 (7,565.1) (7.7%)
========= ========= ========= =========
Liabilities and Shareholders'
Equity
Liabilities:
Insurance and Investment Contract
Liabilities 43,618.1 40,857.2 2,760.9 6.8%
Liabilities Related to Separate
Accounts 34,069.0 44,833.4 (10,764.4) (24.0%)
Other Liabilities 7,360.1 7,047.2 312.8 4.4%
--------- --------- --------- ---------
Total Liabilities 85,047.1 92,737.8 (7,690.7) (8.3%)
Shareholders' Equity:
Net Unrealized Gains(Losses) on
Securities
and Derivatives 844.9 217.2 627.7 289.0%
Other Shareholders' Equity 4,544.2 5,046.3 (502.1) (10.0%)
--------- --------- --------- ---------
Total Shareholders' Equity 5,389.0 5,263.5 125.5 2.4%
--------- --------- --------- ---------
Total Liabilities and
Shareholders' Equity 90,436.2 98,001.3 (7,565.1) (7.7%)
========= ========= ========= =========
-----------------------------------------------------------------------------------------------------------
As of
---------------------------------------------------------------
September December
2002 2001
Amount Amount Change % Change
--------- --------- --------- ---------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 2,885.3 3,070.5 (185.2) (6.0%)
Deferral 459.5 714.1 (254.6) (35.7%)
Amortization (249.4) (370.4) 121.0 (32.7%)
--------- --------- --------- ---------
Operating 210.0 343.7 (133.6) (38.9%)
Adjustment related to realized
(gains) losses
on securities available-for-sale 97.3 112.9 (15.6) (13.8%)
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (304.3) (187.2) (117.1) 62.5%
Foreign currency translation
adjustment 43.2 (16.0) 59.3 (369.4%)
Disposition of business (425.9) 425.9 (100.0%)
Other (62.9) (12.6) (50.3) 400.0%
--------- --------- --------- ---------
Balance at end-of-year 2,868.7 2,885.3 (16.7) (0.6%)
========= ========= ========= =========
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 1,362.5 1,483.3 (120.8) (8.1%)
Amortization (93.5) (113.1) 19.6 (17.4%)
Foreign currency translation
adjustment 18.0 (7.0) 25.0 (355.2%)
Other (0.1) (0.7) 0.6 (83.6%)
--------- --------- --------- ---------
Balance at end-of-year 1,286.9 1,362.5 (75.6) (5.5%)
========= ========= ========= =========
PAGE 5
Eleven-Year Summary
Unaudited [Millions of Dollars
except Per Share Data]
For the Year Ended December 31 2001 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- -------
Revenue
Lincoln Retirement 1968.3 2133.7 2115.8 2068.1 2023.0 1805.0
Life Insurance 1840.6 1819.0 1760.4 1378.5 544.8 549.2
Investment Management 433.7 490.3 495.5 491.9 459.1 410.5
Lincoln UK 293.3 438.2 446.6 439.7 427.3 393.2
Corporate & Other 1844.7 1970.4 1985.4 1708.9 1444.3 1575.6
------- ------- ------- ------- ------- -------
Total Revenue 6380.6 6851.5 6803.7 6087.1 4898.5 4733.6
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 320.3 362.0 299.4 262.4 223.0 174.6
Life Insurance 279.0 259.9 212.0 149.2 39.9 41.2
Investment Management 14.6 44.1 61.0 43.9 18.1 18.6
Lincoln UK 60.2 61.0 (13.9) 70.9 (108.3) 66.0
Corporate & Other 14.8 (8.0) (83.1) 4.0 (223.3) (1.7)
------- ------- ------- ------- ------- -------
Total Income from Cont Oper 689.0 719.1 475.5 530.4 (50.6) 298.8
Discontinued Operations 110.1 135.3
------- ------- ------- ------- ------- -------
Income from Operations 689.0 719.1 475.5 530.4 59.4 434.1
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 269.2 358.6 291.5 273.8 263.3 204.3
Life Insurance 233.1 249.3 211.5 127.5 39.1 51.8
Investment Management 11.8 37.0 51.6 44.4 25.1 25.0
Lincoln UK 68.9 (13.2) (18.2) 71.7 (106.8) 66.0
Corporate & Other 7.2 (10.2) (76.1) (7.6) (198.4) 9.3
------- ------- ------- ------- ------- -------
Total Net Inc from Cont Oper 590.2 621.4 460.4 509.8 22.2 356.4
Discontinued Operations 911.8 157.2
------- ------- ------- ------- ------- -------
Total Net Income 590.2 621.4 460.4 509.8 934.0 513.6
------- ------- ------- ------- ------- -------
OTHER DATA
Assets 98001.3 99844.1 103095.7 93836.3 77174.7 71713.4
Shareholders' Equity:
Securities and Derivatives at
Market 5263.5 4954.1 4263.9 5387.9 4982.9 4470.0
Securities and Derivatives at
Cost 5046.3 4942.0 4729.6 4835.6 4546.9 4057.1
Average Equity (Sec & Deriv at
Cost) 5022.6 4831.9 4818.7 4685.6 4214.1 3866.0
Common Shares Outstanding:
(millions)
End of Period - Diluted 191.1 195.2 197.0 203.4 204.7 209.5
Average for the Period - Diluted 193.3 194.9 200.4 203.3 208.0 210.7
Per Share Data (Diluted)
Income (Loss) from Continuing
Operations $3.56 $3.69 $2.37 $2.61 ($0.24) $1.42
Income from Operations* $3.56 $3.69 $2.37 $2.61 $0.29 $2.06
Net Income from Continuing
Operations $3.05 $3.19 $2.30 $2.51 $0.11 $1.69
Net Income $3.05 $3.19 $2.30 $2.51 $4.49 $2.44
Shareholders' Equity:
Shareholders' Equity (Sec & Deriv
at Market) $28.10 $25.92 $21.76 $26.59 $24.63 $21.50
Shareholders' Equity (Sec & Deriv
at Cost) $26.94 $25.85 $24.14 $23.86 $22.48 $19.51
Dividends Declared (Common Stock) $1.235 $1.175 $1.115 $1.055 $0.995 $0.935
Return on Equity (see page 30)
Net Income/Average Equity 11.8% 12.9% 9.6% 10.9% 22.2% 13.3%
Inc from Operations/Average
Equity 13.7% 14.9% 9.9% 11.3% 1.4% 11.2%
Market Value of Common Stock
High for the Year $52.750 $56.375 $57.500 $49.438 $39.063 $28.500
Low for the Year $38.000 $22.625 $36.000 $33.500 $24.500 $20.375
Close for the Year $48.570 $47.313 $40.000 $40.907 $39.063 $26.250
Ten-year
Compound
annual
For the Year Ended December 31 1995 1994 1993 1992 1991 growth
------- ------- ------- ------- ------- -------
Revenue
Lincoln Retirement 1877.1 1506.2 1603.8 1336.2 1216.7 4.9%
Life Insurance 514.9 466.2 477.5 444.4 417.3 16.0%
Investment Management 290.5
Lincoln UK 351.5 216.0 174.9 180.6 169.6 5.6%
Corporate & Other 1552.5 1744.1 2680.9 2780.9 3721.0
------- ------- ------- ------- ------- -------
Total Revenue 4586.5 3932.5 4937.1 4742.1 5524.6 1.5%
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 175.2 142.4 127.1 89.4 58.3 18.6%
Life Insurance 35.4 34.2 37.8 46.8 31.5 24.4%
Investment Management 20.6
Lincoln UK 45.9 17.2 11.9 9.2 14.3 15.5%
Corporate & Other (136.2) 24.8 20.8 6.5 4.2
------- ------- ------- ------- ------- -------
Total Income from Cont Oper 140.8 218.6 197.6 151.9 108.3 20.3%
Discontinued Operations 165.6 171.1 145.9 88.7 69.4
------- ------- ------- ------- ------- -------
Income from Operations 306.5 389.7 343.5 240.6 177.7 14.5%
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 248.8 142.4 127.1 89.4 58.3 16.5%
Life Insurance 40.6 34.2 37.8 46.8 31.5 22.2%
Investment Management 27.4
Lincoln UK 45.7 18.5 12.6 9.2 14.3
Corporate & Other (61.1) (29.6) (101.1) 125.1 28.4
------- ------- ------- ------- ------- -------
Total Net Inc from Cont Oper 301.4 165.5 76.4 270.5 132.5 16.1%
Discontinued Operations 180.8 184.4 242.5 88.7 69.4
------- ------- ------- ------- ------- -------
Total Net Income 482.2 349.9 318.9 359.2 201.9 11.3%
------- ------- ------- ------- ------- -------
OTHER DATA
Assets 63257.7 48864.8 47825.1 39042.2 33660.3 11.3%
Shareholders' Equity:
Securities and Derivatives at
Market 4378.1 3042.1 4072.3 2826.8 2655.8 7.1%
Securities and Derivatives at
Cost 3679.9 3353.1 3157.6 2664.1 2445.8 7.5%
Average Equity (Sec & Deriv at
Cost) 3550.5 3288.6 3009.0 2575.0 2335.3 8.0%
Common Shares Outstanding:
(millions)
End of Period - Diluted 210.3 208.3 208.3 187.7 185.4
Average for the Period - Diluted 209.5 208.7 206.1 186.8 189.2
Per Share Data (Diluted)
Income (Loss) from Continuing
Operations $0.67 $1.05 $0.96 $0.81 $0.57 20.1%
Income from Operations* $1.46 $1.87 $1.67 $1.29 $0.94 14.3%
Net Income from Continuing
Operations $1.44 $0.79 $0.37 $1.45 $0.70 15.9%
Net Income $2.30 $1.68 $1.55 $1.92 $1.07 11.1%
Shareholders' Equity:
Shareholders' Equity (Sec & Deriv
at Market) $20.95 $14.67 $19.69 $15.13 $14.35 7.0%
Shareholders' Equity (Sec & Deriv
at Cost) $17.61 $16.17 $15.27 $14.26 $13.21 7.4%
Dividends Declared (Common Stock) $0.875 $0.830 $0.775 $0.738 $0.693 5.9%
Return on Equity (see page 30)
Net Income/Average Equity 13.6% 10.6% 10.6% 13.9% 8.6%
Inc from Operations/Average
Equity 8.6% 11.8% 11.4% 9.3% 7.6%
Market Value of Common Stock
High for the Year $26.875 $22.188 $24.125 $19.032 $13.813
Low for the Year $17.313 $17.313 $17.344 $12.625 $9.500
Close for the Year $26.875 $17.500 $21.750 $18.500 $13.688 13.5%
* "Income from Operations" is defined as "Net income less realized gain (loss) on investments, derivative
instruments and associated items, gain (loss) on sale of subsidiaries, restructuring charges, and cumulative
effect of accounting changes, all net of taxes." Income from operations also excludes the recognition of
gains and losses related to changes in certain reserves and the related changes to the deferred gain
amortization under indemnity reinsurance resulting from developments after the sale in the reinsurance
business sold through indemnity reinsurance.
PAGE 6
Quarterly Summary
Unaudited [Millions of Dollars
except Per Share Data]
Dec Mar Jun Sep Dec Mar
For the Quarter Ended 1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Revenue
Lincoln Retirement 538.0 548.7 530.5 532.1 522.3 510.4
Life Insurance 473.1 441.7 444.2 453.2 479.9 459.6
Investment Management 126.6 125.8 120.7 123.8 120.0 112.3
Lincoln UK 103.8 112.8 108.2 112.8 104.3 84.9
Corporate & Other 566.4 440.2 489.0 494.1 547.0 531.6
------- ------- ------- ------- ------- -------
Total Revenue 1807.9 1669.2 1692.7 1716.1 1773.5 1698.8
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 73.7 88.5 84.1 102.9 86.4 82.3
Life Insurance 57.0 60.4 62.4 66.5 70.6 68.6
Investment Management 16.5 12.4 13.1 9.9 8.7 2.4
Lincoln UK (67.1) 15.7 19.3 10.6 15.5 14.4
Corporate & Other (43.5) (6.5) (5.9) 0.9 3.5 10.9
------- ------- ------- ------- ------- -------
Income from Operations 36.6 170.6 173.0 190.7 184.7 178.6
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 69.9 91.2 84.4 93.8 89.2 76.6
Life Insurance 59.7 58.1 58.4 67.4 65.4 62.9
Investment Management 19.8 12.3 8.4 9.7 6.6 2.0
Lincoln UK (72.6) 15.5 19.1 (29.9) (17.9) 14.8
Corporate & Other (42.2) (6.8) (6.8) (2.3) 5.7 4.0
------- ------- ------- ------- ------- -------
Total Net Income 34.6 170.2 163.6 138.6 148.9 160.2
======= ======= ======= ======= ======= =======
OTHER DATA
Assets 103095.7 106340.0 103847.6 103243.1 99844.1 94122.4
Shareholders' Equity
Beg of Period (Sec & Deriv at
Market) 4817.4 4263.9 4340.4 4223.7 4538.6 4954.1
End of Period (Sec & Deriv at
Market) 4263.9 4340.4 4223.7 4538.6 4954.1 5096.4
End of Period (Sec & Deriv at
Cost) 4729.6 4751.6 4780.3 4876.3 4942.0 4882.7
Average Equity (Sec & Deriv at
Cost) 4774.2 4791.5 4753.0 4867.2 4915.7 4953.7
Common Shares Outstanding
Average for the Period - Diluted 197.1 195.8 194.0 195.6 195.6 193.7
End of Period - Diluted 197.0 195.1 193.7 196.2 195.2 191.3
Per Share Data (Diluted)
Income from Operations* $0.19 $0.87 $0.89 $0.98 $0.94 $0.92
Net Income $0.18 $0.87 $0.84 $0.71 $0.76 $0.83
Shareholders' Equity
Shareholders' Equity (Sec & Deriv
at Market) $21.76 $22.45 $22.10 $23.67 $25.92 $27.09
Shareholders' Equity (Sec & Deriv
at Cost) $24.14 $24.58 $25.01 $25.43 $25.85 $25.96
Dividends Declared (Com Stk) $0.290 $0.290 $0.290 $0.290 $0.305 $0.305
Return on Equity (see page 30)
Net Income/Average Equity 2.9% 14.2% 13.8% 11.4% 12.1% 12.9%
Inc from Operations/Average
Equity 3.1% 14.2% 14.6% 15.7% 15.0% 14.4%
Market Value of Common Stock
Highest Price $48.313 $41.375 $40.063 $56.375 $50.938 $48.250
Lowest Price $36.500 $22.625 $29.000 $35.625 $40.875 $38.000
Closing Price $40.000 $33.500 $36.125 $48.125 $47.313 $42.470
Jun Sep Dec Mar Jun Sep
For the Quarter Ended 2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Revenue
Lincoln Retirement 512.1 478.2 467.5 453.0 442.6 440.7
Life Insurance 455.7 460.6 464.7 423.9 439.8 441.6
Investment Management 110.3 104.7 106.5 103.5 102.4 94.3
Lincoln UK 68.9 76.3 63.2 53.6 68.0 69.3
Corporate & Other 452.0 489.5 371.7 92.3 92.2 95.1
------- ------- ------- ------- ------- -------
Total Revenue 1599.0 1609.3 1473.6 1126.4 1145.0 1141.0
======= ======= ======= ======= ======= =======
Income from Operations*
Lincoln Retirement 90.8 72.4 74.8 80.4 47.8 22.8
Life Insurance 67.1 70.1 73.2 71.1 73.5 63.4
Investment Management 3.7 3.5 5.1 8.0 6.6 4.0
Lincoln UK 16.2 10.1 19.5 14.4 6.7 (0.0)
Corporate & Other (9.7) (12.9) 26.5 (12.0) (7.3) (17.2)
------- ------- ------- ------- ------- -------
Income from Operations 168.1 143.2 199.1 162.0 127.2 73.0
======= ======= ======= ======= ======= =======
Net Income
Lincoln Retirement 79.9 58.6 54.2 47.6 10.2 (6.0)
Life Insurance 53.5 64.7 51.9 44.2 57.4 47.1
Investment Management 2.9 2.9 4.0 7.0 6.2 3.1
Lincoln UK 17.6 14.0 22.5 10.8 9.8 0.8
Corporate & Other (12.2) (21.2) 36.7 (15.2) (24.2) (170.6)
------- ------- ------- ------- ------- -------
Total Net Income 141.7 119.1 169.2 94.5 59.4 (125.5)
======= ======= ======= ======= ======= =======
OTHER DATA
Assets 96431.2 90206.0 98001.3 97846.4 95069.2 90436.2
Shareholders' Equity
Beg of Period (Sec & Deriv at
Market) 5096.4 5055.9 5368.6 5263.5 5131.1 5307.9
End of Period (Sec & Deriv at
Market) 5055.9 5368.6 5263.5 5131.1 5307.9 5389.0
End of Period (Sec & Deriv at
Cost) 4952.8 5100.4 5046.3 5076.6 4959.5 4544.2
Average Equity (Sec & Deriv at
Cost) 4920.2 5085.0 5131.4 5083.3 5080.7 4891.6
Common Shares Outstanding
Average for the Period - Diluted 192.0 194.8 192.8 191.7 189.7 183.9
End of Period - Diluted 192.9 193.3 191.1 191.7 186.9 178.8
Per Share Data (Diluted)
Income from Operations* $0.88 $0.74 $1.03 $0.84 $0.67 $0.40
Net Income $0.74 $0.61 $0.88 $0.49 $0.31 ($0.68)
Shareholders' Equity
Shareholders' Equity (Sec & Deriv
at Market) $26.87 $28.29 $28.10 $27.30 $28.77 $30.37
Shareholders' Equity (Sec & Deriv
at Cost) $26.32 $26.87 $26.94 $27.02 $26.88 $25.61
Dividends Declared (Com Stk) $0.305 $0.305 $0.320 $0.320 $0.320 $0.320
Return on Equity (see page 30)
Net Income/Average Equity 11.5% 9.4% 13.2% 7.4% 4.7% (10.3%)
Inc from Operations/Average
Equity 13.7% 11.3% 15.5% 12.7% 10.0% 6.0%
Market Value of Common Stock
Highest Price $52.300 $52.750 $49.450 $53.650 $52.540 $42.080
Lowest Price $41.280 $41.000 $40.000 $47.200 $40.750 $29.120
Closing Price $51.750 $46.630 $48.570 $50.730 $42.000 $30.550
* "Income from Operations" is defined as "Net income less realized gain (loss) on investments,
derivative instruments and associated items, gain (loss) on sale of subsidiaries, restructuring
charges, and cumulative effect of accounting changes, all net of taxes." Income from operations
also excludes the recognition of gains and losses related to changes in certain reserves and the
related changes to the deferred gain amortization under indemnity reinsurance resulting from
developments after the sale in the reinsurance business sold through indemnity reinsurance.
PAGE 7
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Quarter Ended September 30 Lincoln Retirement Life Insurance Management Lincoln UK
---------------------- --------------------- ------------------ ------------------
Sep Sep Sep Sep Sep Sep Sep Sep
2002 2001 2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue
Life and annuity premiums 13.4 13.2 48.6 46.4 11.7 11.2
Surrender charges 8.7 6.5 13.4 15.6
Mortality assessments 126.3 124.7 8.7 8.5
Expense assessments 109.3 132.0 49.2 46.0 29.4 35.5
Health premiums 0.0 0.0 0.6 0.6
Investment advisory fees 63.7 68.0
Other revenue and fees (4.0) 1.2 5.1 3.0 19.9 23.9 2.0 0.0
Net investment income 358.1 346.6 224.1 233.2 12.4 13.6 15.6 14.8
Earnings in Unconsolidated
Affiliates
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue 485.6 499.5 466.8 468.9 96.0 105.5 68.1 70.7
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 107.8 66.3 105.2 102.3 19.0 18.5
Div accum & div to policyholders 17.2 16.5
Interest credited to policy bal. 224.2 217.2 152.6 143.5
Health policy benefits 0.0 0.0 4.8 2.2
-------- -------- -------- -------- -------- -------- -------- --------
Total insurance benefits 332.0 283.5 275.1 262.3 23.8 20.7
Underwriting, acquisition,
insurance and other expenses*:
Commissions 83.0 81.1 31.8 32.5 1.6 2.6
Other volume related expenses 19.6 12.7 45.8 41.4
Operating and administrative
expenses 51.4 55.3 40.0 41.6 86.6 88.0 19.6 19.7
Taxes, licenses and fees 3.0 2.2 13.2 12.0 2.9 4.8
Par policyholder interests
Foreign exchange
-------- -------- -------- -------- -------- -------- -------- --------
Subtotal 157.0 151.3 130.7 127.5 89.5 92.8 21.1 22.3
Deferral of acquisition costs (66.1) (58.7) (78.7) (85.3) (0.9) (1.3)
DAC amortization 47.2 35.6 23.9 29.7 11.3 9.9
-------- -------- -------- -------- -------- -------- -------- --------
DAC deferral net of amortization (18.9) (23.0) (54.8) (55.5) 10.5 8.7
PVIF amortization 4.1 4.5 23.3 20.5 12.8 9.4
Other intangibles amortization 2.0 2.3
Total underwriting, acquisition,
insurance and other expenses 142.2 132.8 99.3 92.5 91.5 95.1 44.5 40.3
Goodwill amortization 0.3 5.9 4.1 0.2
Interest
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses 474.2 416.6 374.4 360.8 91.5 99.2 68.3 61.1
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations Before Tax 11.4 82.9 92.4 108.1 4.6 6.3 (0.2) 9.6
Federal income taxes (11.4) 10.4 29.0 38.1 0.6 2.9 (0.2) (0.5)
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations 22.8 72.4 63.4 70.1 4.0 3.5 (0.0) 10.1
-------- -------- -------- -------- -------- -------- -------- --------
Restructuring charges 0.3
Realized gains (losses) on
investments (28.0) (13.5) (16.9) (5.3) (1.2) (0.5) 0.9 3.9
Gains (losses) on derivatives (0.8) (0.3) 0.6 (0.0)
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries
-------- -------- -------- -------- -------- -------- -------- --------
Income before Accounting Changes (6.0) 58.6 47.1 64.7 3.1 2.9 0.8 14.0
Cumulative effect of accounting
changes
-------- -------- -------- -------- -------- -------- -------- --------
Net Income (6.0) 58.6 47.1 64.7 3.1 2.9 0.8 14.0
======== ======== ======== ======== ======== ======== ======== ========
Inc. from Oper.-before Goodwill
Amort. -------- -------- -------- -------- -------- -------- -------- --------
22.8 72.7 63.4 76.0 4.0 7.5 (0.0) 10.3
-------- -------- -------- -------- -------- -------- -------- --------
Net Income-before Goodwill Amort. (6.0) 58.9 47.1 70.6 3.1 7.0 0.8 14.2
-------- -------- -------- -------- -------- -------- -------- --------
* Does not include restructuring charges which is consistent with the definition of "Income from Operations" (see page 5).
PAGE 8
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Corporate and Consolidating
Other Operations Adjustments Consolidated
----------------- ------------------ -------------------
For the Quarter Ended September 30 Sep Sep Sep Sep Sep Jun
2002 2001 2002 2001 2002 2001
------ ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums (2.1) 265.9 71.6 336.8
Surrender charges 0.6 0.7 0.5 22.8 23.2
Mortality assessments (0.9) 0.0 134.1 133.3
Expense assessments 0.9 (0.0) 9.8 10.9 198.6 224.4
Health premiums (10.2) 103.3 (9.6) 103.9
Investment advisory fees (20.8) (20.8) 42.9 47.2
Other revenue and fees 89.7 92.9 (41.1) (29.5) 71.7 91.5
Net investment income 38.4 80.8 (1.6) (2.7) 647.0 686.2
Earnings in Unconsolidated
Affiliates 0.4 0.4
------ ------- ------- ------- ------- -------
Operating Revenue 115.7 543.9 (53.1) (41.6) 1179.1 1646.9
------ ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits (2.4) 235.6 229.7 422.6
Div accum & div to policyholders 0.0 1.5 17.2 18.0
Interest credited to policy bal. 32.6 8.7 7.9 9.3 417.4 378.7
Health policy benefits 2.6 81.6 7.3 83.8
------ ------- ------- ------- ------- -------
Total insurance benefits 32.8 327.4 7.9 9.3 671.6 903.1
Underwriting, acquisition,
insurance and other expenses*:
Commissions 2.4 86.8 5.8 5.0 124.6 207.9
Other volume related expenses 18.0 16.1 (19.4) (17.1) 63.9 53.1
Operating and administrative
expenses 59.2 94.7 (43.9) (35.3) 212.8 264.0
Taxes, licenses and fees 6.0 11.5 25.1 30.6
Par policyholder interests
Foreign exchange 0.4 (2.5) 0.4 (2.5)
------ ------- ------- ------- ------- -------
Subtotal 86.0 206.6 (57.5) (47.5) 426.8 553.1
Deferral of acquisition costs (30.2) (9.9) (8.0) (155.5) (183.4)
DAC amortization 26.6 8.0 7.4 90.5 109.2
------ ------- ------- ------- ------- -------
DAC deferral net of amortization 0.1 (3.7) (1.9) (0.6) (64.9) (74.1)
PVIF amortization 40.2 34.4
Other intangibles amortization 0.4 2.0 2.6
------ ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 86.1 203.3 (59.4) (48.1) 404.1 516.0
Goodwill amortization 0.5 (0.0) 10.9
Interest 25.3 32.3 (1.6) (2.7) 23.7 29.6
------ ------- ------- ------- ------- -------
Operating Benefits and Expenses 144.2 563.5 (53.1) (41.6) 1099.4 1459.6
------ ------- ------- ------- ------- -------
Income from Operations Before Tax (28.5) (19.7) 0.0 79.7 187.3
Federal income taxes (11.2) (6.8) 6.7 44.1
------ ------- ------- ------- ------- -------
Income from Operations (17.2) (12.9) 0.0 73.0 143.2
------ ------- ------- ------- ------- -------
Restructuring charges 1.1 0.0 1.3 0.0
Realized gains (losses) on
investments 21.6 (8.3) 0.0 (23.6) (23.8)
Gains (losses) on derivatives 0.4 (0.0) 0.2 (0.4)
Reserve increase on business sold
through reinsurance (176.4) (176.4)
Gain on sale of subsidiaries
------ ------- ------- ------- ------- -------
Income before Accounting Changes (170.6) (21.2) 0.0 (125.5) 119.1
Cumulative effect of accounting
changes
------ ------- ------- ------- ------- -------
Net Income (170.6) (21.2) 0.0 (125.5) 119.1
====== ======= ======= ======= ======= =======
Inc. from Oper.-before Goodwill
Amort. ------ ------- ------- ------- ------- -------
(17.2) (12.4) (0.0) 73.0 154.1
------ ------- ------- ------- ------- -------
Net Income-before Goodwill Amort. (170.6) (20.7) 0.0 (125.5) 130.0
------ ------- ------- ------- ------- -------
* Does not include restructuring charges which is consistent with the definition of "Income from
Operations" (see page 5).
PAGE 9
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Investment
For the Nine Months Ended September 30 Lincoln Retirement Life Insurance Management Lincoln UK
------------------- ------------------- ------------------ -------------------
ASSETS Sep Sep Sep Sep Sep Sep Sep Sep
2002 2001 2002 2001 2002 2001 2002 2001
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue
Life and annuity premiums 38.7 64.8 147.2 147.9 34.5 32.2
Surrender charges 23.8 24.0 38.6 46.3
Mortality assessments 374.2 373.8 23.5 26.8
Expense assessments 364.1 411.5 143.2 138.6 82.4 110.7
Health premiums 0.1 0.1 2.0 2.0
Investment advisory fees 201.4 213.3
Other revenue and fees 0.6 6.7 17.5 11.9 64.9 75.9 2.4 0.7
Net investment income 1060.7 1027.3 675.8 683.6 37.9 40.8 45.5 49.6
Earnings in Unconsolidated
Affiliates
-------- -------- -------- -------- -------- -------- -------- --------
Operating Revenue 1487.9 1534.4 1396.7 1402.2 304.2 329.9 190.3 222.0
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 235.8 208.6 312.9 305.7 49.6 54.1
Div accum & div to policyholders 53.2 53.1
Interest credited to policy bal. 672.1 636.3 447.8 423.0
Health policy benefits 0.0 0.0 11.6 8.4
-------- -------- -------- -------- -------- -------- -------- --------
Total insurance benefits 907.8 845.0 813.9 781.8 61.1 62.6
Underwriting, acquisition,
insurance and other expenses*:
Commissions 248.0 239.6 101.2 96.9 4.8 8.9
Other volume related expenses 46.5 36.7 132.0 119.5
Operating and administrative
expenses 156.6 159.2 114.1 122.7 261.1 276.5 54.5 56.0
Taxes, licenses and fees 11.9 9.2 41.7 36.8 14.5 16.5
Par policyholder interests
Foreign exchange
-------- -------- -------- -------- -------- -------- -------- --------
Subtotal 463.0 444.6 389.1 375.9 275.6 293.0 59.3 64.8
Deferral of acquisition costs (188.6) (169.0) (235.2) (218.6) (2.8) (3.3)
DAC amortization 128.0 104.6 69.6 64.8 26.9 32.6
-------- -------- -------- -------- -------- -------- -------- --------
DAC deferral net of amortization (60.6) (64.4) (165.6) (153.7) 24.2 29.3
PVIF amortization 11.8 13.2 56.5 61.1 25.2 16.9
Other intangibles amortization 6.2 8.5
Total underwriting, acquisition,
insurance and other expenses 414.2 393.4 279.9 283.3 281.8 301.5 108.7 111.1
Goodwill amortization 0.9 17.8 12.2 0.5
Interest 0.0
-------- -------- -------- -------- -------- -------- -------- --------
Operating Benefits and Expenses 1322.1 1239.3 1093.9 1082.9 281.8 313.6 169.8 174.1
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations Before Tax 165.8 295.1 302.8 319.3 22.3 16.2 20.5 47.8
Federal income taxes 14.8 49.6 94.7 113.5 3.7 6.7 (0.6) 7.1
-------- -------- -------- -------- -------- -------- -------- --------
Income from Operations 151.0 245.5 208.1 205.8 18.6 9.6 21.1 40.7
-------- -------- -------- -------- -------- -------- -------- --------
Restructuring charges (1.0) (1.3) (2.0) 0.3
Realized gains (losses) on
investments (97.4) (21.6) (60.2) (17.2) (2.6) (1.7) 0.5 5.7
Gains (losses) on derivatives (0.8) (0.3) 0.9 0.1
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries
-------- -------- -------- -------- -------- -------- -------- --------
Income before Accounting Changes 51.8 222.4 148.7 186.7 16.3 7.9 21.5 46.4
Cumulative effect of accounting
changes (7.3) (5.5) (0.1)
-------- -------- -------- -------- -------- -------- -------- --------
Net Income 51.8 215.1 148.7 181.2 16.3 7.8 21.5 46.4
======== ======== ======== ======== ======== ======== ======== ========
Inc. from Oper.-before Goodwill
Amort. -------- -------- -------- -------- -------- -------- -------- --------
151.0 246.4 208.1 223.6 18.6 21.7 21.1 41.2
-------- -------- -------- -------- -------- -------- -------- --------
Net Income-before Goodwill Amort. 51.8 216.0 148.7 198.9 16.3 19.9 21.5 46.9
-------- -------- -------- -------- -------- -------- -------- --------
* Does not include restructuring charges which is consistent with the definition of "Income from Operations" (see page 5).
PAGE 10
Reconciliation of Business Segments to Consolidated Income Statement
Unaudited [Millions of Dollars]
Corporate and Consolidating
Other Operations Adjustments Consolidated
----------------- ------------------ ------------------
For the Nine Months Sep Sep Sep Sep Sep Jun
Ended September 30 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums (5.5) 847.8 214.9 1092.8
Surrender charges 1.8 1.8 1.7 64.3 73.8
Mortality assessments (2.7) 0.1 395.0 400.7
Expense assessments 2.7 (0.0) 31.1 36.0 623.5 696.8
Health premiums (0.9) 302.4 1.2 304.5
Investment advisory fees (62.7) (67.0) 138.7 146.3
Other revenue and fees 282.0 250.9 (115.5) (112.3) 251.8 233.8
Net investment income 130.9 241.1 (4.7) (9.3) 1946.2 2033.0
Earnings in Unconsolidated
Affiliates (0.6) 1.3 (0.6) 1.3
------- ------- ------- ------- ------- -------
Operating Revenue 405.9 1645.4 (150.0) (150.9) 3634.9 4982.9
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits (0.9) 646.6 597.3 1215.1
Div accum & div to policyholders 0.0 4.0 53.2 57.2
Interest credited to policy bal. 62.1 26.6 24.0 29.5 1206.0 1115.4
Health policy benefits 33.0 268.7 44.6 277.1
------- ------- ------- ------- ------- -------
Total insurance benefits 94.2 946.0 24.0 29.5 1901.1 2664.8
Underwriting, acquisition,
insurance and other expenses*:
Commissions 44.0 280.1 19.4 17.0 417.4 642.4
Other volume related expenses 58.9 47.5 (53.3) (48.0) 184.1 155.7
Operating and administrative
expenses 167.5 275.3 (128.5) (136.1) 625.4 753.5
Taxes, licenses and fees 20.0 35.4 88.0 97.9
Par policyholder interests
Foreign exchange 1.0 (2.5) 1.0 (2.5)
------- ------- ------- ------- ------- -------
Subtotal 291.3 635.9 (162.4) (167.1) 1315.9 1647.1
Deferral of acquisition costs (1.4) (101.8) (31.5) (26.9) (459.5) (519.6)
DAC amortization 0.2 78.9 24.6 22.8 249.4 303.8
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (1.1) (22.9) (6.9) (4.0) (210.0) (215.8)
PVIF amortization 93.5 91.3
Other intangibles amortization 1.1 6.2 9.6
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 290.2 614.0 (169.3) (171.1) 1205.6 1532.2
Goodwill amortization 1.4 (0.0) 32.6
Interest 77.8 105.4 (4.7) (9.3) 73.1 96.1
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 462.2 1666.7 (150.0) (151.0) 3179.8 4325.7
------- ------- ------- ------- ------- -------
Income from Operations Before Tax (56.3) (21.3) 0.0 455.1 657.2
Federal income taxes (19.8) (9.6) 92.8 167.3
------- ------- ------- ------- ------- -------
Income from Operations (36.5) (11.7) 0.0 362.3 489.9
------- ------- ------- ------- ------- -------
Restructuring charges 1.1 (1.2) 0.3 (4.5)
Realized gains (losses) on
investments 15.9 (14.6) 0.8 (143.9) (48.6)
Gains (losses) on derivatives 0.4 (0.0) 0.5 (0.2)
Reserve increase on business sold
through reinsurance (190.8) (190.8)
Gain on sale of subsidiaries
------- ------- ------- ------- ------- -------
Income before Accounting Changes (210.0) (27.6) 0.8 28.4 436.6
Cumulative effect of accounting
changes (2.7) (15.6)
------- ------- ------- ------- ------- -------
Net Income (210.0) (30.3) 0.8 28.4 421.0
======= ======= ======= ======= ======= =======
Inc. from Oper.-before Goodwill
------- ------- ------- ------- ------- -------
(36.5) (10.4) (0.0) 362.3 522.6
------- ------- ------- ------- ------- -------
Net Income-before Goodwill Amort. (210.0) (28.9) 0.8 28.4 453.6
------- ------- ------- ------- ------- -------
* Does not include restructuring charges which is consistent with the definition of
"Income from Operations" (see page 5).
PAGE 11
Statement of Consolidated Income
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 756.2 985.6 1183.0 1403.3 1363.4 1092.8 214.9
Surrender charges 45.4 91.5 110.2 114.7 101.5 73.8 64.3
Mortality assessments 186.4 380.1 496.4 496.5 533.3 400.7 395.0
Expense assessments 600.3 803.0 930.9 1050.2 909.2 696.8 623.5
Health premiums 572.6 635.1 698.5 409.8 340.6 304.5 1.2
Investment advisory fees 204.9 227.1 223.8 213.1 197.2 146.3 138.7
Other revenue and fees 157.3 261.0 344.5 445.4 351.8 233.8 251.8
Net investment income 2250.8 2681.4 2807.5 2747.1 2679.6 2033.0 1946.2
Earnings in Unconsolidated
Affiliates 2.1 3.3 5.8 (0.4) 5.7 1.3 (0.6)
------- ------- ------- ------- ------- ------- -------
Operating Revenue 4775.9 6068.0 6800.7 6879.8 6482.2 4982.9 3634.9
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 1090.2 1237.7 1546.6 1546.4 1517.9 1215.1 597.3
Div accum & div to policyholders 29.7 78.0 88.4 87.6 83.7 57.2 53.2
Interest credited to policy bal. 1238.7 1446.2 1510.4 1474.2 1506.0 1115.4 1206.0
Health policy benefits 833.1 566.9 659.7 449.0 302.1 277.1 44.6
------- ------- ------- ------- ------- ------- -------
Total insurance benefits 3191.7 3328.9 3805.0 3557.2 3409.7 2664.8 1901.1
Underwriting, acquisition,
insurance and other expenses*:
Commissions 575.3 740.1 961.0 919.1 860.3 642.4 417.4
Other volume related expenses 72.8 150.7 197.1 253.8 184.8 155.7 184.1
Operating and administrative
expenses 830.8 995.7 1165.3 1157.0 1050.9 753.5 625.4
Taxes, licenses and fees 70.1 75.9 84.0 113.0 128.3 97.9 88.0
Par policyholder interests (7.5) (4.3) 3.3 1.1
Foreign exchange (3.5) (1.5) 1.9 (2.9) (1.4) (2.5) 1.0
------- ------- ------- ------- ------- ------- -------
Subtotal 1538.0 1956.6 2412.6 2441.2 2223.0 1647.1 1315.9
Deferral of acquisition costs (714.1) (519.6) (459.5)
DAC amortization 370.4 303.8 249.4
------- ------- ------- ------- ------- ------- -------
DAC deferral net of amortization 1.8 (208.2) (314.6) (423.1) (343.7) (215.8) (210.0)
PVIF amortization 77.1 102.5 132.6 113.1 91.3 93.5
Other intangibles amortization 17.6 18.8 18.0 17.7 12.1 9.6 6.2
------- ------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 1557.3 1844.3 2218.5 2168.4 2004.5 1532.2 1205.6
Goodwill amortization 15.6 44.5 49.2 45.1 43.4 32.6
Interest 92.5 117.1 133.7 139.5 121.0 96.1 73.1
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 4857.2 5334.6 6206.4 5910.3 5578.6 4325.7 3179.8
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax (81.3) 733.4 594.4 969.6 903.6 657.2 455.1
Federal income taxes (30.6) 203.0 118.9 250.5 214.7 167.3 92.8
------- ------- ------- ------- ------- ------- -------
Income from Continuing Operations (50.6) 530.4 475.5 719.1 689.0 489.9 362.3
------- ------- ------- ------- ------- ------- -------
Discontinued Operations 911.8
Restructuring charges (34.3) (18.9) (80.2) (24.7) (4.5) 0.3
Realized gains (losses) on
investments 72.9 13.7 3.8 (17.5) (68.7) (48.6) (143.9)
Gains (losses) on derivatives (4.9) (0.2) 0.5
Reserve increase on business sold
through reinsurance (190.8)
Gain on sale of subsidiaries 15.0
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 934.0 509.8 460.4 621.4 605.8 436.6 28.4
Cumulative Effect of Accounting
Changes (15.6) (15.6)
------- ------- ------- ------- ------- ------- -------
Net Income 934.0 509.8 460.4 621.4 590.2 421.0 28.4
----------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 3070.5 3070.5 2885.3
Deferral 714.1 519.6 459.5
Amortization (370.4) (303.8) (249.4)
------- ------- ------- ------- ------- ------- -------
Operating 343.7 215.8 210.0
Adjustment related to realized
(gains) losses
on securities available-for-sale 112.9 63.3 97.3
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (187.2) (255.3) (304.3)
Foreign currency translation
adjustment (16.0) (8.8) 43.2
Disposition of business (425.9)
Other (12.6) 1.7 (62.9)
------- ------- ------- ------- ------- ------- -------
Balance at end-of-year 2885.3 3087.2 2868.7
======= ======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 1,483.3 1,483.3 1,362.5
Amortization (113.1) (91.4) (93.5)
Foreign currency translation
adjustment (7.0) (3.9) 18.0
Other (0.7) (0.7) (0.1)
------- ------- ------- ------- ------- ------- -------
Balance at end-of-year 1362.5 1387.4 1286.9
======= ======= ======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of "Income from Operations"
(see page 5).
PAGE 12
Statement of Consolidated Income
Unaudited [Millions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 361.1 331.2 337.1 339.0 396.1 402.1
Surrender charges 29.2 28.7 29.8 25.9 30.3 27.8
Mortality assessments 118.7 118.5 122.5 125.9 129.6 133.7
Expense assessments 238.3 261.1 258.6 273.4 257.1 244.9
Health premiums 233.6 58.4 144.0 117.9 89.4 104.8
Investment advisory fees 54.1 54.0 52.2 53.3 53.6 49.4
Other revenue and fees 71.2 106.1 88.7 106.0 144.6 82.0
Net investment income 700.1 711.1 673.8 690.0 672.1 673.7
Earnings in Unconsolidated Affiliates 1.8 1.0 (3.6) 1.6 0.6 0.9
------- ------- ------- ------- ------- -------
Operating Revenue 1808.2 1670.2 1703.0 1733.1 1773.5 1719.5
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 572.5 356.1 370.1 390.2 430.0 418.9
Div accum & div to policyholders 23.3 21.7 20.2 18.2 27.4 18.9
Interest credited to policy bal. 388.5 373.9 366.8 362.0 371.5 367.1
Health policy benefits 157.8 114.3 119.9 123.0 91.8 101.8
------- ------- ------- ------- ------- -------
Total insurance benefits 1142.0 866.0 877.0 893.5 920.7 906.7
Underwriting, acquisition,
insurance and other expenses*:
Commissions 289.3 194.2 251.9 238.5 234.6 216.9
Other volume related expenses 17.2 50.5 54.2 62.9 86.2 43.7
Operating and administrative
expenses 351.4 299.6 268.8 270.3 318.4 246.9
Taxes, licenses and fees 10.6 32.8 21.6 26.3 32.4 36.5
Par policyholder interests 4.2 (1.5) 1.6 1.4 (0.5) (0.0)
Foreign exchange 1.8 (0.2) (1.0) (0.5) (1.1) (2.0)
------- ------- ------- ------- ------- -------
Subtotal 674.5 575.3 597.1 598.8 670.0 542.1
Deferral of acquisition costs (161.1)
DAC amortization 106.2
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (87.0) (86.2) (95.0) (107.0) (134.8) (54.9)
PVIF amortization 38.4 31.9 31.0 36.2 33.5 33.3
Other intangibles amortization 4.7 4.7 4.3 4.3 4.3 4.3
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 630.5 525.7 537.5 532.4 572.9 524.8
Goodwill amortization 14.6 10.2 12.0 12.0 10.9 10.9
Interest 34.7 36.3 35.4 34.4 33.4 34.4
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1821.8 1438.2 1461.9 1472.2 1537.9 1476.7
------- ------- ------- ------- ------- -------
Income from Operations before
Tax/Min Int. (13.6) 232.0 241.1 260.8 235.6 242.7
Federal income taxes (50.2) 61.6 67.9 70.1 50.9 64.1
------- ------- ------- ------- ------- -------
Inc from Operations before Min Int 36.6 170.6 173.0 190.7 184.7 178.6
------- ------- ------- ------- ------- -------
Minority Interest (0.2) 0.2 (0.0) 0.0 (0.0)
------- ------- ------- ------- ------- -------
Income from Operations 36.6 170.6 173.0 190.7 184.7 178.6
------- ------- ------- ------- ------- -------
Restructuring charges (3.6) (2.7) (40.5) (37.0) (0.7)
Realized gains (losses) on
investments 1.6 (0.4) (6.7) (11.6) 1.2 (13.4)
Gains (losses) on derivatives (0.1)
Reserve increase on business sold
through reinsurance
Gain on sale of subsidiaries
------- ------- ------- ------- ------- -------
Income before Accounting Changes 34.6 170.2 163.6 138.6 148.9 164.5
Cumulative Effect of Accounting
Changes (4.3)
------- ------- ------- ------- ------- -------
Net Income 34.6 170.2 163.6 138.6 148.9 160.2
======= ======== ======== ======== ======== ========
------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-period 3070.5
Deferral 161.1
Amortization (106.2)
-------
Operating 54.9
Adjustment related to realized
(gains) losses
on securities available-for-sale 21.7
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (154.1)
Foreign currency translation
adjustment (32.4)
Disposition of business
Other 2.9
-------
Balance at end-of-year 2963.4
=======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-period 1483.3
Amortization (33.3)
Foreign currency translation
adjustment (14.0)
Other
-------
Balance at end-of-year 1436.0
=======
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Life and annuity premiums 353.9 336.8 270.7 74.7 68.7 71.6
Surrender charges 22.8 23.2 27.7 20.2 21.3 22.8
Mortality assessments 133.7 133.3 132.6 130.4 130.5 134.1
Expense assessments 227.5 224.4 212.4 210.5 214.4 198.6
Health premiums 95.7 103.9 36.1 2.4 8.3 (9.6)
Investment advisory fees 49.6 47.2 50.9 48.0 47.8 42.9
Other revenue and fees 60.3 91.5 118.0 95.5 84.7 71.7
Net investment income 673.1 686.2 646.6 648.1 651.0 647.0
Earnings in Unconsolidated Affiliates 0.0 0.4 4.3 (0.6) 0.0
------- ------- ------- ------- ------- -------
Operating Revenue 1616.5 1646.9 1499.3 1229.8 1226.0 1179.1
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Ins. benefits paid or provided:
Life and annuity policy benefits 373.6 422.6 302.8 176.1 191.5 229.7
Div accum & div to policyholders 20.2 18.0 26.6 17.8 18.2 17.2
Interest credited to policy bal. 369.7 378.7 390.6 406.2 382.5 417.4
Health policy benefits 91.5 83.8 25.0 3.3 33.9 7.3
------- ------- ------- ------- ------- -------
Total insurance benefits 855.0 903.1 744.9 603.4 626.1 671.6
Underwriting, acquisition,
insurance and other expenses*:
Commissions 217.6 207.9 217.9 144.2 148.6 124.6
Other volume related expenses 58.9 53.1 29.1 54.7 65.5 63.9
Operating and administrative
expenses 242.6 264.0 297.3 208.5 204.1 212.8
Taxes, licenses and fees 30.8 30.6 30.4 38.3 24.6 25.1
Par policyholder interests 0.0
Foreign exchange 2.0 (2.5) 1.1 0.0 0.6 0.4
------- ------- ------- ------- ------- -------
Subtotal 551.9 553.1 575.9 445.7 443.4 426.8
Deferral of acquisition costs (175.1) (183.4) (194.5) (147.9) (156.1) (155.5)
DAC amortization 88.3 109.2 66.7 70.9 88.1 90.5
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (86.7) (74.1) (127.9) (77.0) (68.0) (64.9)
PVIF amortization 23.6 34.4 21.8 21.3 31.9 40.2
Other intangibles amortization 2.6 2.6 2.5 2.2 2.0 2.0
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 491.4 516.0 472.3 392.2 409.3 404.1
Goodwill amortization 10.9 10.9 10.7
Interest 32.0 29.6 25.0 24.8 24.6 23.7
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 1389.3 1459.6 1252.9 1020.4 1060.1 1099.4
------- ------- ------- ------- ------- -------
Income from Operations before
Tax/Min Int. 227.2 187.3 246.5 209.4 166.0 79.7
Federal income taxes 59.1 44.1 47.4 47.4 38.7 6.7
------- ------- ------- ------- ------- -------
Inc from Operations before Min Int 168.1 143.2 199.1 162.0 127.2 73.0
------- ------- ------- ------- ------- -------
Minority Interest (0.0) (0.0) (0.0)
------- ------- ------- ------- ------- -------
Income from Operations 168.1 143.2 199.1 162.0 127.2 73.0
------- ------- ------- ------- ------- -------
Restructuring charges (3.9) 0.0 (20.2) (1.0) 1.3
Realized gains (losses) on
investments (11.5) (23.8) (20.0) (67.6) (52.7) (23.6)
Gains (losses) on derivatives 0.2 (0.4) (4.6) 0.1 0.3 0.1
Reserve increase on business sold
through reinsurance (14.4) (176.4)
Gain on sale of subsidiaries 15.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes 153.0 119.1 169.2 94.5 59.4 (125.5)
Cumulative Effect of Accounting
Changes (11.3) (0.0)
------- ------- ------- ------- ------- -------
Net Income 141.7 119.1 169.2 94.5 59.4 (125.5)
======= ======= ======= ======= ======= =======
------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-period 2963.4 3129.1 3087.2 2885.3 3114.9 3056.6
Deferral 175.1 183.4 194.5 147.9 156.1 155.5
Amortization (88.3) (109.2) (66.7) (70.9) (88.1) (90.5)
------- ------- ------- ------- ------- -------
Operating 86.8 74.2 127.9 77.0 68.0 65.0
Adjustment related to realized
(gains) losses
on securities available-for-sale 17.8 23.9 49.5 41.9 32.5 22.9
Adjustment related to unrealized
(gains) losses
on securities available-for-sale 55.8 (157.0) 68.1 114.9 (152.1) (267.1)
Foreign currency translation
adjustment (0.2) 23.8 (7.2) (12.2) 41.7 13.8
Disposition of business (425.9)
Other 5.5 (6.7) (14.3) 8.0 (48.3) (22.5)
------- ------- ------- ------- ------- -------
Balance at end-of-year 3129.1 3087.2 2885.3 3114.9 3056.6 2868.7
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-period 1436.0 1412.3 1387.4 1362.5 1,336.1 1321.4
Amortization (23.6) (34.4) (21.8) (21.3) (31.9) (40.2)
Foreign currency translation
adjustment (0.1) 10.3 (3.2) (5.1) 17.4 5.7
Other (0.7) (0.1)
------- ------- ------- ------- ------- -------
Balance at end-of-year 1412.3 1387.4 1362.5 1336.1 1321.4 1286.9
======= ======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of "Income from
Operations" (see page 5).
PAGE 13
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Lincoln Retirement Life Insurance Management Lincoln UK
------------------ ------------------ ------------------ ------------------
ASSETS
Sep Dec Sep Dec Sep Dec Sep Dec
2002 2001 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- ------- ------- -------
Investments
Corporate bonds 12619.1 10956.5 7683.1 7088.2 473.9 424.2 594.6 512.3
U.S. government bonds 13.6 13.2 82.5 78.2 0.1 0.2
Foreign government bonds 215.0 145.8 121.0 114.6 1.0 1.9 284.3 326.2
Asset/Mortgage backed securities 2964.8 1945.8 883.7 779.1 47.3 42.5
State and municipal bonds 51.8 24.3 29.9 17.4
Preferred stocks-redeemable 53.7 62.7 12.1 13.0 8.9 8.8
Common stocks 18.1 7.2 7.6 123.3 211.3
Preferred stocks-equity 34.0 38.5 5.6 2.7 2.6
Mortgage loans 2224.1 2378.1 1622.7 1701.6 86.3 92.4 0.4 0.3
Real estate (0.0) 0.2 0.2
Policy loans 467.3 491.4 1423.6 1439.7 8.0 8.6
Other long-term investments 23.3 11.7 21.8 20.9
------- ------- ------- ------- ------- ------- ------- -------
Total Investments 18684.8 16068.0 11887.7 11265.9 620.1 572.6 1010.8 1058.8
------- ------- ------- ------- ------- ------- ------- -------
Allocated investments 3664.1 3481.0 1273.3 1154.7 96.9 102.4
Notes receivable from LNC 431.3 333.3 181.2 27.6 43.1 82.9
Invest in unconsol affiliates
Cash and invested cash (65.7) (24.7) (14.3) (36.4) 64.1 55.4 232.2 181.2
Property and equipment 1.1 7.8 8.5 46.0 36.5 18.9 39.3
Premium and fees receivable 1.7 0.0 27.1 8.2 32.4 38.5
Accrued investment income 251.8 245.0 191.4 187.6 9.3 8.9 24.7 20.9
Assets held in separate accounts 25354.3 34324.6 1195.9 1491.0 4824.7 5607.2
Federal income tax recoverable
Amount recoverable from
reinsurers 1131.6 1211.6 882.8 859.5
Deferred acquisition costs 843.9 912.8 1362.2 1265.6 571.8 587.3
Other intangible assets 43.8 50.1
Present value of in-force 142.7 154.5 907.4 964.0 236.8 244.0
Goodwill 63.9 43.9 855.1 855.1 300.7 300.7 13.0 12.1
Other 174.4 138.1 374.2 358.4 191.7 212.5 55.4 37.9
------- ------- ------- ------- ------- ------- ------- -------
Total Assets 50680.0 56888.2 19131.7 18409.7 1448.3 1460.5 6988.2 7788.8
======= ======= ======= ======= ======= ======= ======= =======
------------------------------------------------------------------------------------------------------------------------------
Corporate and Consolidating
Other Operations Adjustments Consolidated
------------------ ------------------ ------------------
ASSETS
Sep Dec Sep Dec Sep Dec
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Investments
Corporate bonds 4114.0 4123.9 25484.6 23105.1
U.S. government bonds 399.1 318.9 495.3 410.5
Foreign government bonds 417.3 586.2 1038.6 1174.7
Asset/Mortgage backed securities 947.9 757.3 4843.7 3524.7
State and municipal bonds 16.1 3.0 97.8 44.7
Preferred stocks-redeemable 2.2 1.4 76.8 85.9
Common stocks 88.5 100.5 237.2 319.3
Preferred stocks-equity 123.6 104.5 160.3 151.2
Mortgage loans 351.9 363.0 4285.2 4535.5
Real estate 286.2 267.7 286.4 267.9
Policy loans 1899.0 1939.7
Other long-term investments 412.6 521.3 (0.0) (0.0) 457.7 553.8
------- ------- ------- ------- ------- -------
Total Investments 7159.3 7147.8 (0.0) (0.0) 39362.6 36113.1
------- ------- ------- ------- ------- -------
Allocated investments (509.6) 50.0 (4524.6) (4788.2) (0.0)
Notes receivable from LNC (655.1) (443.7) (0.6) (0.1) 0.0 0.0
Invest in unconsol affiliates 8.1 8.1
Cash and invested cash 1383.6 3130.5 (210.5) 1599.9 3095.5
Property and equipment 178.9 173.2 252.7 257.5
Premium and fees receivable 516.1 365.6 (12.2) 577.2 400.1
Accrued investment income 90.9 101.0 568.2 563.5
Assets held in separate accounts 2694.0 3410.5 34069.0 44833.4
Federal income tax recoverable 292.9 15.1 292.9 15.1
Amount recoverable from
reinsurers 5247.8 4150.6 (167.8) (191.4) 7094.5 6030.4
Deferred acquisition costs 2.2 33.9 88.5 85.6 2868.7 2885.3
Other intangible assets 43.8 50.1
Present value of in-force 1286.9 1362.5
Goodwill (0.0) (0.0) 1232.7 1211.8
Other 850.6 865.5 (459.2) (437.4) 1187.1 1174.9
------- ------- ------- ------- ------- -------
Total Assets 14264.7 15582.5 (2076.8) (2128.6) 90436.2 98001.3
======= ======= ======= ======= ======= =======
PAGE 14
Reconciliation of Business Segments to Consolidated Balance Sheets
Unaudited [Millions of Dollars]
Investment
Lincoln Retirement Life Insurance Management Lincoln UK
------------------ ------------------ ------------------- ------------------
LIABILITIES and SHAREHOLDERS' EQUITY
Sep Dec Sep Dec Sep Dec Sep Dec
2002 2001 2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- ------- ------- -------
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 2696.0 2622.7 13507.5 12955.8 1302.1 1338.1
Health reserves 0.4 0.3 47.9 46.0
Unpaid claims - life and health 41.5 31.3 95.0 92.9 36.9 42.4
Unearned premiums 0.0 0.0
Premium deposit funds 19388.7 17838.9 18.1 13.9 30.4 29.2
Participating policyholders'
funds 90.5 100.2
Other policyholders' funds 588.3 555.2
Liab related to separate accounts 25354.3 34324.6 1195.9 1491.0 4824.7 5607.2
------- ------- ------- ------- ------- ------- ------- -------
Total Insurance and Inv Contract
Liabilities 47480.5 54817.5 15495.7 15209.5 6242.0 7063.0
Federal income taxes 196.1 (5.7) 123.5 (13.5) 42.9 43.3 (3.6) (12.2)
Short-term debt 10.0
Long-term debt
Minority Interest in pref.
securities of sub.
Notes payable to LNC 9.3
Other liabilities 233.2 168.4 440.2 436.3 837.3 866.2 207.2 192.0
Deferred gain on indemnity
reinsurance
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities 47909.8 54980.3 16059.3 15642.2 880.1 918.8 6445.6 7242.8
------- ------- ------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on
securities 356.6 79.9 202.8 13.6 7.8 1.5 39.9 15.3
Gains (losses) on derivatives 11.1 0.3 17.0 4.5
Other shareholders' equity 2402.5 1824.9 2852.6 2738.5 560.3 540.3 537.9 566.7
S/Hs' equity-minimum pension
liability adjustment (35.2) (36.0)
Cumulative effect of accounting
change 2.8 10.9
------- ------- ------- ------- ------- ------- ------- -------
Shareholders' Equity 2770.2 1907.9 3072.4 2767.5 568.1 541.7 542.6 546.0
------- ------- ------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs'
Equity 50680.0 56888.2 19131.7 18409.7 1448.3 1460.5 6988.2 7788.8
======= ======= ======= ======= ======= ======= ======= =======
------------------------------------------------------------------------------------------------------------------------------
Corporate and Consolidating
Other Operations Adjustments Consolidated
------------------ ------------------ ------------------
LIABILITIES and SHAREHOLDERS'
EQUITY
Sep Dec Sep Dec Sep Dec
2002 2001 2002 2001 2002 2001
------- ------- ------- ------- ------- -------
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 1731.8 1122.8 (94.8) (122.4) 19142.5 17917.0
Health reserves 2399.9 2491.5 2448.3 2537.9
Unpaid claims - life and health 927.6 920.9 1100.9 1087.5
Unearned premiums 185.7 66.9 185.8 66.9
Premium deposit funds 30.3 105.5 586.9 597.5 20054.4 18585.0
Participating policyholders'
funds 90.5 100.2
Other policyholders' funds 7.4 7.4 595.7 562.7
Liab related to separate accounts 2694.0 3410.5 34069.0 44833.4
------- ------- ------- ------- ------- -------
Total Insurance and Inv Contract
Liabilities 5282.7 4715.0 3186.1 3885.6 77687.1 85690.6
Federal income taxes (651.4) (26.7) 292.6 14.8
Short-term debt 120.0 550.7 (210.5) 120.0 350.2
Long-term debt 1118.1 861.8 1118.1 861.8
Minority Interest in pref.
securities of sub. 390.6 474.7 390.6 474.7
Notes payable to LNC 363.4 335.0 (363.4) (344.3) (0.0) 0.0
Other liabilities 3611.8 3239.4 (667.8) (686.3) 4661.9 4216.1
Deferred gain on indemnity
reinsurance 1069.5 1144.5 1069.5 1144.5
------- ------- ------- ------- ------- -------
Total Liabilities 11304.8 11294.3 2447.5 2659.3 85047.1 92737.8
------- ------- ------- ------- ------- -------
Net unrealized gains (losses) on
securities 204.0 77.2 6.4 8.2 817.5 195.7
Gains (losses) on derivatives (0.8) (0.8) 27.3 3.9
Other shareholders' equity 2756.7 4207.9 (4530.7) (4796.0) 4579.4 5082.2
S/Hs' equity-minimum pension
liability adjustment (35.2) (36.0)
Cumulative effect of accounting
change 3.9 17.6
------- ------- ------- ------- ------- -------
Shareholders' Equity 2959.9 4288.2 (4524.3) (4787.9) 5389.0 5263.5
------- ------- ------- ------- ------- -------
Total Liabilities and S/Hs'
Equity 14264.7 15582.5 (2076.8) (2128.6) 90436.2 98001.3
======= ======= ======= ======= ======= =======
PAGE 15
Five Year Comparative Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
ASSETS
1997 1998 1999 2000 2001
------- ------- ------- ------- -------
Investments
Corporate bonds 16633.3 22505.2 21119.5 21249.7 23105.1
U.S. government bonds 662.4 1134.6 538.3 542.9 410.5
Foreign government bonds 1804.4 1321.2 1447.5 1321.1 1174.7
Mortgage backed securities 4529.3 5080.5 4404.0 4160.4 3524.7
State and municipal bonds 241.4 16.7 14.7 14.6 44.7
Preferred stocks-redeemable 195.5 174.6 164.7 161.2 85.9
Common stocks 572.3 463.1 514.5 436.6 319.3
Preferred stocks-equity 88.2 79.8 89.5 113.1 151.2
Mortgage loans 3288.1 4393.1 4735.4 4663.0 4535.5
Real estate 576.0 488.7 256.2 282.0 267.9
Policy loans 763.1 1840.0 1892.4 1960.9 1939.7
Other long-term investments 464.8 432.0 401.8 463.3 553.8
------- ------- ------- ------- -------
Total Investments 29818.8 37929.5 35578.4 35368.6 36113.1
------- ------- ------- ------- -------
Invest in unconsol affiliates 21.0 18.8 25.8 6.4 8.1
Cash and invested cash 3794.7 2433.4 1895.9 1927.4 3095.5
Property and equipment 189.8 174.8 203.8 228.2 257.5
Premiums and fees receivable 197.5 246.2 259.6 296.7 400.1
Accrued investment income 423.0 528.5 533.2 546.4 563.5
Assets held in separate accounts 37138.8 43408.9 53654.2 50579.9 44833.4
Federal income taxes recoverable 204.1 345.0 207.5 15.1
Amounts recoverable from
reinsurers 2350.8 3127.1 3954.3 3747.7 6030.4
Deferred acquisition costs 1623.8 1964.4 2800.3 3070.5 2885.3
Other intangible assets 124.7 95.1 92.3 73.7 50.1
Present value of in-force 489.2 1753.3 1654.2 1483.3 1362.5
Goodwill 457.7 1484.3 1423.0 1286.0 1211.8
Other 544.8 468.0 675.7 1021.6 1174.9
------- ------- -------- ------- -------
Total Assets 77174.7 93836.3 103095.7 99844.1 98001.3
======= ======= ======== ======= =======
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 8228.7 16434.2 17071.4 17841.2 17917.0
Health reserves 2300.4 2600.1 2507.8 2523.8 2537.9
Unpaid claims-life and health 682.0 1043.4 1269.8 1316.6 1087.5
Unearned premiums 55.3 62.3 75.8 46.5 66.9
Premium deposit funds 19803.0 20171.9 19624.1 17715.5 18585.0
Participating policyholders'
funds 79.8 142.7 132.0 139.4 100.2
Other policyholders' funds 180.6 438.4 472.6 522.2 562.7
Liab related to separate accounts 37138.8 43408.9 53654.2 50579.9 44833.4
------- ------- -------- ------- -------
Total Ins and Inv Contr
Liabilities 68468.5 84301.9 94807.7 90685.1 85690.6
Federal income taxes 487.8
Short-term debt 297.2 314.6 460.2 312.9 350.2
Long-term debt 511.0 712.2 712.0 712.2 861.8
Minority Interest - pref sec of a
sub 315.0 745.0 745.0 745.0 474.7
Other liabilities 2112.2 2374.6 2107.0 2434.7 4216.1
Deferred gain on indemnity
reinsurance 1144.5
------- ------- -------- ------- -------
Total Liabilities 72191.8 88448.3 98831.9 94890.0 92737.8
------- ------- -------- ------- -------
S/Hs' equity-unrealized gains
(losses)-cont op. 436.0 552.4 (465.7) 12.0 199.6
S/Hs' equity-foreign currency 46.2 50.0 30.0 21.9 (8.1)
S/Hs' equity-minimum pension
liability adjustment (36.0)
S/Hs' equity-other 4500.7 4785.5 4699.6 4920.2 5090.4
Cumulative effect of accounting
change 17.6
------- ------- -------- ------- -------
Total Shareholders' Equity 4982.9 5387.9 4263.9 4954.1 5263.5
------- ------- -------- ------- -------
------- ------- -------- ------- -------
Total Liabilities
and Shareholders' Equity 77174.7 93836.3 103095.7 99844.1 98001.3
======= ======= ======== ======= =======
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $22.48 $23.86 $24.14 $25.85 $26.94
Common shares outstanding 202.3 202.6 196.0 191.2 187.3
PAGE 16
Quarterly Balance Sheet
Unaudited [Millions of Dollars except Common Share Data]
Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
ASSETS
Investments
Corporate bonds 21119.5 21188.0 20719.1 21064.7 21249.7 21855.2
U.S. government bonds 538.3 572.4 566.2 575.5 542.9 536.6
Foreign government bonds 1447.5 1416.4 1377.4 1277.7 1321.1 1240.8
Mortgage backed securities 4404.0 4393.4 4242.4 4172.5 4160.4 4009.8
State and municipal bonds 14.7 14.7 14.1 14.3 14.6 14.7
Preferred stocks - redeemable 164.7 159.7 159.2 159.5 161.2 154.1
Common stocks 514.5 496.4 467.8 479.9 436.6 388.6
Preferred stocks-equity 89.5 91.3 92.2 90.3 113.1 170.9
Mortgage loans 4735.4 4833.9 4783.8 4767.3 4663.0 4641.2
Real estate 256.2 283.4 282.1 297.6 282.0 308.1
Policy loans 1892.4 1896.3 1914.7 1935.6 1960.9 1947.0
Other long-term investments 401.8 428.8 438.2 470.5 463.3 477.4
------- ------- ------- ------- ------- -------
Total Investments 35578.4 35774.6 35057.2 35305.4 35368.6 35744.5
------- ------- ------- ------- ------- -------
Invest in unconsol affiliates 25.8 (0.9) 5.8 6.4 7.3
Cash and invested cash 1895.9 1510.1 1619.3 1435.9 1927.4 2015.2
Property and equipment 203.8 207.7 205.5 213.8 228.2 242.1
Premiums and fees receivable 259.6 190.2 247.8 240.8 296.7 282.8
Accrued investment income 533.2 575.0 544.0 569.2 546.4 581.9
Assets held in separate accounts 53654.2 56907.6 54924.2 54410.9 50579.9 44506.2
Federal income taxes recoverable 345.0 300.4 246.1 267.3 207.5 106.6
Amount recoverable from
reinsurers 3954.3 3851.0 3775.3 3774.7 3747.7 3706.4
Deferred acquisition costs 2800.3 2870.4 2968.0 3048.0 3070.5 2963.4
Other intangible assets 92.3 86.7 82.3 78.1 73.7 69.3
Present value of in-force 1654.2 1618.8 1564.3 1520.3 1483.3 1436.0
Goodwill 1423.0 1349.6 1335.4 1296.6 1286.0 1274.5
Other 675.7 1097.8 1279.1 1076.4 1021.6 1186.3
-------- ------- ------- ------- ------- -------
Total Assets 103095.7 106340.0 103847.6 103243.1 99844.1 94122.4
======== ======== ======== ======== ======== ========
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 17071.4 17172.1 17247.3 17500.0 17841.2 17733.0
Health reserves 2507.8 2547.4 2494.2 2520.2 2523.8 2534.8
Unpaid claims-life and health 1269.8 1177.3 1204.1 1202.8 1316.6 1255.3
Unearned premiums 75.8 57.1 52.8 51.8 46.5 45.9
Premium deposit funds 19624.1 18899.3 18407.2 18072.1 17715.5 17667.1
Participating policyholders'
funds 132.0 130.7 130.4 135.4 139.4 145.0
Other policyholders' funds 472.6 478.9 490.6 500.7 522.2 532.1
Liab related to separate account 53654.2 56907.6 54924.2 54410.9 50579.9 44506.2
------- ------- ------- ------- ------- -------
Total Ins and Inv Contr
Liabilities 94807.7 97370.5 94950.8 94394.0 90685.1 84419.3
Federal income taxes
Short-term debt 460.2 474.2 355.7 330.3 312.9 415.3
Long-term debt 712.0 712.0 712.1 712.2 712.2 712.3
Minority Interest - pref sec of
sub 745.0 745.0 745.0 745.0 745.0 745.0
Notes payable to LNC
Other liabilities 2107.0 2697.9 2860.3 2522.9 2434.7 2734.2
Deferred gain on indemnity
reinsurance
------- -------- ------- ------- ------- -------
Total Liabilities 98831.9 101999.6 99623.9 98704.5 94890.0 89026.0
------- -------- ------- ------- ------- -------
S/Hs' equity-unrealized gns
(losses)- inv. (465.7) (411.2) (556.6) (337.7) 12.0 190.4
S/Hs' equity- gains
(losses)-derivatives 5.7
S/Hs' equity-foreign currency 30.0 22.8 21.8 19.9 21.9 4.1
S/Hs' equity-minimum pension
liability adj
S/Hs' equity-other 4699.6 4728.8 4758.5 4856.4 4920.1 4878.5
Cumulative effect of accounting
change 17.6
------- ------- ------- ------- ------- -------
Total Shareholders' Equity 4263.9 4340.4 4223.7 4538.6 4954.1 5096.4
------- ------- ------- ------- ------- -------
Total Liabilities
and Shareholders' Equity 103095.7 106340.0 103847.6 103243.1 99844.1 94122.4
======== ======== ======== ======== ======== ========
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $24.14 $24.58 $25.01 $25.43 $25.85 $25.96
Common shares outstanding 196.0 193.3 191.1 191.8 191.2 188.1
Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
ASSETS
Investments
Corporate bonds 22116.6 23424.3 23105.1 23470.4 23993.6 25484.6
U.S. government bonds 510.0 467.7 410.5 429.1 441.6 495.3
Foreign government bonds 1236.3 1160.3 1174.7 1180.1 1120.1 1038.6
Mortgage backed securities 3844.6 3765.6 3524.7 3613.9 4031.0 4843.7
State and municipal bonds 14.1 14.4 44.7 62.6 58.8 97.8
Preferred stocks - redeemable 152.2 99.3 85.9 84.6 79.6 76.8
Common stocks 373.3 311.2 319.3 284.4 267.7 237.2
Preferred stocks-equity 160.8 166.5 151.2 154.2 151.8 160.3
Mortgage loans 4652.8 4663.1 4535.5 4448.2 4395.4 4285.2
Real estate 306.9 288.8 267.9 258.2 258.7 286.4
Policy loans 1947.4 1943.4 1939.7 1918.0 1906.1 1899.0
Other long-term investments 480.9 483.4 553.8 459.6 456.0 457.7
------- ------- ------- ------- ------- -------
Total Investments 35796.0 36788.0 36113.1 36363.1 37160.1 39362.6
------- ------- ------- ------- ------- -------
Invest in unconsol affiliates 6.1 6.5 8.1 8.1 7.5
Cash and invested cash 1501.9 1996.3 3095.5 1699.5 2265.4 1599.9
Property and equipment 251.4 261.0 257.5 266.4 253.5 252.7
Premiums and fees receivable 303.7 264.5 400.1 376.3 461.4 577.2
Accrued investment income 573.2 615.1 563.5 577.1 556.3 568.2
Assets held in separate accounts 47140.2 39479.8 44833.4 44916.7 40579.6 34069.0
Federal income taxes recoverable 177.5 35.3 15.1 551.3 438.4 292.9
Amount recoverable from
reinsurers 3662.0 3818.3 6030.4 6096.3 6509.9 7094.5
Deferred acquisition costs 3129.1 3087.2 2885.3 3114.9 3056.6 2868.7
Other intangible assets 66.7 64.1 50.1 47.9 45.8 43.8
Present value of in-force 1412.3 1387.4 1362.5 1336.1 1321.4 1286.9
Goodwill 1263.6 1253.2 1211.8 1211.5 1212.4 1232.7
Other 1147.7 1149.4 1174.9 1280.9 1200.6 1187.1
------- ------- ------- ------- ------- -------
Total Assets 96431.2 90206.0 98001.3 97846.4 95069.2 90436.2
------- ------- ------- ------- ------- -------
LIABILITIES and SHAREHOLDERS'
EQUITY
Liabilities
Insurance and Inv Contract
Liabilities:
Life and annuity reserves 17865.3 17990.8 17917.0 18014.6 18611.2 19142.5
Health reserves 2533.9 2573.2 2537.9 2492.4 2176.1 2448.3
Unpaid claims-life and health 1136.5 1206.6 1087.5 1153.6 1086.1 1100.9
Unearned premiums 19.0 8.1 66.9 66.5 154.3 185.8
Premium deposit funds 17715.9 18509.7 18585.0 18669.6 19157.8 20054.4
Participating policyholders'
funds 135.2 118.3 100.2 98.6 91.9 90.5
Other policyholders' funds 541.4 554.3 562.7 571.9 584.7 595.7
Liab related to separate accounts 47140.2 39479.8 44833.4 44916.7 40579.6 34069.0
------- ------- ------- ------- ------- -------
Total Ins and Inv Contr
Liabilities 87087.2 80440.8 85690.6 85983.9 82441.8 77687.1
Federal income taxes
Short-term debt 351.3 539.0 350.2 510.2 211.0 120.0
Long-term debt 712.4 712.4 861.8 861.8 1112.3 1118.1
Minority Interest - pref sec of a
sub 745.0 305.0 474.7 376.2 380.0 390.6
Notes payable to LNC (0.0) 0.0 (0.0)
Other liabilities 2479.4 2840.2 4216.1 3864.6 4501.1 4661.9
Deferred gain on indemnity
reinsurance 1144.5 1118.6 1115.2 1069.5
------- ------- ------- ------- ------- -------
Total Liabilities 91375.3 84837.4 92737.8 92715.3 89761.4 85047.1
------- ------- ------- ------- ------- -------
S/Hs' equity-unrealized gns
(losses)- inv. 76.2 247.9 195.7 31.8 325.7 817.5
S/Hs' equity- gains
(losses)-derivatives 9.4 2.9 3.9 22.6 22.7 27.3
S/Hs' equity-foreign currency (15.3) 6.9 (8.1) (20.9) 21.9 35.3
S/Hs' equity-minimum pension
liability adj (36.0) (35.2) (37.8) (35.2)
S/Hs' equity-other 4968.2 5093.4 5090.4 5132.7 4975.4 4544.1
Cumulative effect of accounting
change 17.6 17.6 17.6
------- ------- ------- ------- ------- -------
Total Shareholders' Equity 5055.9 5368.6 5263.5 5131.1 5307.9 5389.0
------- ------- ------- ------- ------- -------
Total Liabilities
and Shareholders' Equity 96431.2 90206.0 98001.3 97846.4 95069.2 90436.2
======= ======= ======= ======= ======= =======
Shareholders' Equity Per Share
[Book Value, Securities at Cost] $26.32 $26.87 $26.94 $27.02 $26.88 $25.61
Common shares outstanding 188.2 189.8 187.3 187.9 184.5 177.5
PAGE 17
Lincoln Retirement
Income Statements & Operational Data
Unaudited [Millions of Dollars] YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------ ------ ------ ------ ------ ------ ------
Operating Revenue
Premiums 84.2 53.9 65.2 64.3 77.5 64.8 38.7
Surrender charges 29.8 33.5 37.9 41.8 31.2 24.0 23.8
Expense assessments 367.2 459.9 536.2 628.4 537.7 411.5 364.1
Other revenue and fees 1.2 1.7 14.5 11.0 16.7 6.7 0.6
Net investment income 1477.1 1501.6 1474.2 1393.5 1370.0 1027.3 1060.7
------ ------ ------ ------ ------ ------ ------
Operating Revenue 1959.5 2050.6 2128.0 2138.9 2033.1 1534.4 1487.9
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 292.6 271.6 259.1 254.7 263.9 208.6 235.8
Interest credited to policy bal. 974.4 955.2 925.2 866.1 863.8 636.3 672.1
------ ------ ------ ------ ------ ------ ------
Total benefits 1267.0 1226.8 1184.3 1120.8 1127.7 845.0 907.8
Underwriting, acquisition,
insurance and other expenses*:
Commissions 226.5 236.7 341.4 326.8 336.3 239.6 248.0
Other volume related expenses 34.1 33.1 42.8 52.0 49.7 36.7 46.5
Operating and administrative
expenses 157.9 194.0 208.6 200.6 225.5 159.2 156.6
Taxes, licenses and fees 16.9 13.8 0.3 9.3 13.7 9.2 11.9
Par policyholder interests (3.2) - - - - - -
------ ------ ------ ------ ------ ------ ------
Subtotal 432.1 477.6 593.2 588.8 625.3 444.6 463.0
Deferral of acquisition costs - - - - (240.9) (169.0) (188.6)
DAC amortization - - - - 125.5 104.6 128.0
------ ------ ------ ------ ------ ------ ------
DAC deferral net of amortization (17.2) 9.7 (47.7) (37.5) (115.4) (64.4) (60.6)
PVIF amortization - 11.4 15.3 24.2 14.7 13.2 11.8
Other intangibles amortization - - - - - - -
Total underwriting, acquisition,
insurance and other expenses 415.0 498.8 560.8 575.5 524.5 393.4 414.2
Goodwill amortization - 2.2 2.0 (0.6) 1.2 0.9 -
Interest - - - - - - -
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 1682.0 1727.8 1747.1 1695.7 1653.5 1239.3 1322.1
------ ------ ------ ------ ------ ------ ------
Income from Operations Before Tax 277.5 322.8 380.9 443.2 379.6 295.1 165.8
Federal income taxes 54.5 60.4 81.4 81.2 59.3 49.6 14.8
------ ------ ------ ------ ------ ------ ------
Income from Operations 223.0 262.4 299.4 362.0 320.3 245.5 151.0
------ ------ ------ ------ ------ ------ ------
Realized gains (losses) on
investments 40.3 11.4 (7.9) (3.4) (42.3) (21.6) (97.4)
Gains (losses) on derivatives (0.2) (0.3) (0.8)
Restructuring charges (1.3) (1.3) (1.0)
------ ------ ------ ------ ------ ------ ------
Income before Accounting Changes 263.3 273.8 291.5 358.6 276.5 222.4 51.8
Cumulative effect of accounting
changes (7.3) (7.3) 0.0
------ ------ ------ ------ ------ ------ ------
Net Income 263.3 273.8 291.5 358.6 269.2 215.1 51.8
====== ====== ====== ====== ====== ====== ======
Inc from Oper -before Goodwill
Amort. 223.0 264.6 301.5 361.4 321.5 246.4 151.0
Net Income -before Goodwill
Amort. 263.3 276.0 293.6 358.0 270.5 216.0 51.8
Effective tax rate 19.6% 18.7% 21.4% 18.3% 15.6% 16.8% 8.9%
Operating Revenue 1959.5 2050.6 2128.0 2138.9 2033.1 1534.4 1487.9
Realized gains (losses) on
investments 63.5 17.5 (12.1) (5.2) (64.5) (33.2) (150.5)
Gains (losses) on derivatives (0.3) (0.4) (1.2)
------ ------ ------ ------ ------ ------ ------
Total Revenue 2023.0 2068.1 2115.8 2133.7 1968.3 1500.7 1336.3
====== ====== ====== ====== ====== ====== ======
Average capital 1373.0 1592.6 1562.0 1601.8 1828.2 1829.3 2279.4
Return on average capital 16.2% 16.5% 19.2% 22.6% 17.5% 17.9% 8.8%
-------------------------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-period 812.5 812.5 912.8
Deferral 240.9 169.0 188.6
Amortization (125.5) (104.6) (128.0)
------ ------ ------
Operating 115.4 64.4 60.5
Adjustment related to realized
(gains) losses
on securities available-for--sale 68.2 34.1 56.9
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (90.0) (136.5) (171.5)
Other** 6.7 6.7 (14.8)
------ ------ ------
Balance at end-of-period 912.8 781.2 843.9
====== ====== ======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-period 169.2 169.2 154.5
Amortization (14.7) (13.3) (11.7)
Other
------ ------ ------
Balance at end-of-period 154.5 155.9 142.7
====== ====== ======
* Does not include restructuring charges which is consistent with the definition of
"Income from Operations" (see page 5).
** Includes the transfer of the Legacy Life block of business to the Life Insurance
segment in the first quarter of 2002.
PAGE 18
Lincoln Retirement
Income Statements & Operational Data
Unaudited [Millions of Dollars]
Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------ ------ ------ ------ ------ ------
Operating Revenue
Premiums 21.0 13.3 16.8 18.0 16.2 19.1
Surrender charges 9.8 11.1 11.2 10.4 9.1 9.1
Expense assessments 140.5 155.1 155.7 163.4 154.2 141.6
Other revenue and fees 6.4 2.2 0.6 4.6 3.5 1.7
Net investment income 366.0 362.9 345.8 349.8 335.0 341.3
------ ------ ------ ------ ------ ------
Operating Revenue 543.7 544.6 530.1 546.2 518.1 512.8
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 77.2 61.6 65.7 68.4 59.0 69.8
Interest credited to policy bal. 234.1 228.2 219.4 205.4 213.2 209.4
------ ------ ------ ------ ------ ------
Total benefits 311.3 289.8 285.1 273.7 272.2 279.2
Underwriting, acquisition,
insurance and other expenses*:
Commissions 86.5 83.1 75.4 83.8 84.5 72.6
Other volume related expenses 15.1 14.5 14.1 11.3 12.2 11.2
Operating and administrative
expenses 53.8 44.4 46.0 55.5 54.8 51.4
Taxes, licenses and fees (7.9) 2.8 1.5 4.6 0.5 4.3
Par policyholder interests - - - - - -
------ ------ ------ ------ ------ ------
Subtotal 147.5 144.8 136.9 155.2 152.0 139.6
Deferral of acquisition costs - - - - - (50.2)
DAC amortization - - - - - 40.7
------ ------ ------ ------ ------ ------
DAC deferral net of amortization (23.3) (6.2) (1.6) (11.3) (18.4) (9.5)
PVIF amortization 10.5 6.0 4.5 4.1 9.6 4.6
Other intangibles amortization - - - - - -
------ ------ ------ ------ ------ ------
Total underwriting, acquisition,
insurance and other expenses 134.7 144.5 139.8 147.9 143.2 134.6
Goodwill amortization 0.5 (1.5) 0.3 0.3 0.3 0.3
Interest - - - - - -
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 446.5 432.8 425.2 421.9 415.7 414.1
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 97.2 111.8 104.8 124.2 102.3 98.7
Federal income taxes 23.5 23.3 20.7 21.3 15.9 16.3
------ ------ ------ ------ ------ ------
Income from Operations 73.7 88.5 84.1 102.9 86.4 82.3
------ ------ ------ ------ ------ ------
Realized gains (losses) on
investments (3.7) 2.7 0.3 (9.1) 2.8 (1.4)
Gains (losses) on derivatives (0.1)
Restructuring charges (0.7)
------ ------ ------ ------ ------ ------
Income before Accounting Changes 69.9 91.2 84.4 93.8 89.2 80.2
Cumulative effect of accounting
changes (3.6)
------ ------ ------ ------ ------ ------
Net Income 69.9 91.2 84.4 93.8 89.2 76.6
====== ====== ====== ====== ====== ======
Inc from Oper -before Goodwill
Amort. 74.2 87.0 84.4 103.2 86.7 82.6
Net Income -before Goodwill
Amort. 70.4 89.7 84.7 94.1 89.5 76.9
Effective tax rate 24.2% 20.8% 19.7% 17.1% 15.6% 16.6%
Operating Revenue 543.7 544.6 530.1 546.2 518.1 512.8
Realized gains (losses) on
investments (5.8) 4.2 0.4 (14.1) 4.2 (2.2)
Gains (losses) on derivatives (0.2)
------ ------ ------ ------ ------ ------
Total Revenue 538.0 548.7 530.5 532.1 522.3 510.4
====== ====== ====== ====== ====== ======
Average capital 1559.0 1438.4 1647.7 1635.2 1686.0 1797.9
Return on average capital 18.9% 24.6% 20.4% 25.2% 20.5% 18.3%
-----------------------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 812.5
Deferral 50.2
Amortization (40.7)
------
Operating 9.5
Adjustment related to realized
(gains) losses
on securities available-for-sale 12.8
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (78.6)
Other** 6.5
------
Balance at end-of-quarter 762.6
======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 169.2
Amortization (4.6)
Other
------
Balance at end-of-quarter 164.6
======
Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------ ------ ------ ------ ------ ------
Operating Revenue
Premiums 32.5 13.2 12.7 12.2 13.1 13.4
Surrender charges 8.5 6.5 7.2 7.9 7.2 8.7
Expense assessments 138.0 132.0 126.2 127.7 127.1 109.3
Other revenue and fees 3.9 1.2 10.0 5.8 (1.3) (4.0)
Net investment income 339.3 346.6 342.6 349.9 352.7 358.1
------ ------ ------ ------ ------ ------
Operating Revenue 522.1 499.5 498.7 503.5 498.8 485.6
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 72.6 66.3 55.3 55.4 72.5 107.8
Interest credited to policy bal. 209.7 217.2 227.5 226.1 221.8 224.2
------ ------ ------ ------ ------ ------
Total benefits 282.3 283.5 282.8 281.5 294.3 332.0
Underwriting, acquisition,
insurance and other expenses*:
Commissions 85.8 81.1 96.7 82.4 82.5 83.0
Other volume related expenses 12.8 12.7 13.1 10.0 16.9 19.6
Operating and administrative
expenses 52.4 55.3 66.4 53.0 52.2 51.4
Taxes, licenses and fees 2.7 2.2 4.5 4.7 4.2 3.0
Par policyholder interests - - - - - -
------ ------ ------ ------ ------ ------
Subtotal 153.7 151.3 180.7 150.2 155.8 157.0
Deferral of acquisition costs (60.2) (58.7) (71.9) (61.7) (60.8) (66.1)
DAC amortization 28.3 35.6 20.8 32.7 48.2 47.2
------ ------ ------ ------ ------ ------
DAC deferral net of amortization (31.9) (23.0) (51.0) (29.1) (12.6) (18.9)
PVIF amortization 4.1 4.5 1.4 3.8 3.9 4.1
Other intangibles amortization - - - - - -
------ ------ ------ ------ ------ ------
Total underwriting, acquisition,
insurance and other expenses 126.0 132.8 131.1 124.9 147.2 142.2
Goodwill amortization 0.3 0.3 0.3 - - -
Interest - - - - - -
------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 408.6 416.6 414.2 406.4 441.5 474.2
------ ------ ------ ------ ------ ------
Income from Operations Before Tax 113.6 82.9 84.5 97.1 57.3 11.4
Federal income taxes 22.8 10.4 9.7 16.7 9.5 (11.4)
------ ------ ------ ------ ------ ------
Income from Operations 90.8 72.4 74.8 80.4 47.8 22.8
------ ------ ------ ------ ------ ------
Realized gains (losses) on
investments (6.7) (13.5) (20.7) (32.8) (36.6) (28.0)
Gains (losses) on derivatives (0.1) (0.3) 0.1 0.0 0.1 (0.8)
Restructuring charges (0.6) 0.0 0.0 0.0 (1.0) 0.0
------ ------ ------ ------ ------ ------
Income before Accounting Changes 83.6 58.6 54.2 47.6 10.2 (6.0)
Cumulative effect of accounting
changes (3.7) 0.0 0.0 0.0 0.0 0.0
------ ------ ------ ------ ------ ------
Net Income 79.9 58.6 54.2 47.6 10.2 (6.0)
====== ====== ====== ====== ====== ======
Inc from Oper -before Goodwill
Amort. 91.1 72.7 75.1 80.4 47.8 22.8
Net Income -before Goodwill
Amort. 80.2 58.9 54.5 47.6 10.2 (6.0)
Effective tax rate 20.1% 12.6% 11.5% 17.2% 16.5% (100.0%)
Operating Revenue 522.1 499.5 498.7 503.5 498.8 485.6
Realized gains (losses) on
investments (10.3) (20.8) (31.3) (50.5) (56.2) (43.8)
Gains (losses) on derivatives 0.2 (0.5) 0.2 0.0 (0.1) (1.1)
------ ------ ------ ------ ------ ------
Total Revenue 512.1 478.2 467.5 453.0 442.6 440.7
====== ====== ====== ====== ====== ======
Average capital 1787.1 1902.9 1824.9 2041.6 2391.2 2405.5
Return on average capital 20.3% 15.2% 16.4% 15.8% 8.0% 3.8%
-----------------------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 762.6 831.3 781.2 912.8 1,031.0 967.8
Deferral 60.2 58.7 71.9 61.7 60.8 66.1
Amortization (28.3) (35.6) (20.8) (32.7) (48.2) (47.2)
------ ------ ------ ------ ------ ------
Operating 31.9 23.0 51.0 29.1 12.6 18.9
Adjustment related to realized
(gains) losses
on securities available-for-sale 4.9 16.4 34.1 25.7 20.9 10.3
Adjustment related to unrealized
(gains) losses
on securities available-for-sale 31.9 (89.7) 46.5 78.2 (96.6) (153.1)
Other** (0.0) 0.3 (0.0) (14.8)
------ ------ ------ ------ ------ ------
Balance at end-of-quarter 831.3 781.2 912.8 1,031.0 967.8 843.9
====== ====== ====== ====== ====== ======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 164.6 160.4 155.9 154.5 150.7 146.8
Amortization (4.2) (4.5) (1.4) (3.8) (3.9) (4.1)
Other
------ ------ ------ ------ ------ ------
Balance at end-of-quarter 160.4 155.9 154.5 150.7 146.8 142.7
====== ====== ====== ====== ====== ======
* Does not include restructuring charges which is consistent with
the definition of "Income from Operations" (see page 5).
** Includes the transfer of the Legacy Life block of business to
the Life Insurance segment in the first quarter of 2002.
PAGE 19
Lincoln Retirement
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars] YTD YTD
Sep Sep
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities- Bal Beg-of-Year 17.634 17.214 18.111 18.210 16.615 16.615 18.004
Gross Deposits 1.632 1.452 2.563 2.074 3.342 2.124 2.850
Withdrawals (incl charges) &
deaths (2.220) (2.468) (2.521 (3.283) (2.448) (1.886) (2.106)
-------- -------- -------- -------- -------- -------- --------
Net cash flows (0.588) (1.016) 0.042 (1.209) 0.894 0.238 0.744
Transfer from (to) var annuities (1.336) (0.356) (0.783 (1.329) (0.428) (0.215) 0.115
Interest credited 0.978 0.994 0.840 0.944 0.923 0.679 0.699
Acq of new business/companies 0.527 1.274
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities-Gross 17.214 18.111 18.210 16.615 18.004 17.317 19.562
Reinsurance Ceded (1.757) (1.606) (1.419 (1.221) (1.514) (1.266) (1.913)
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities-Bal End -of-Year 15.458 16.505 16.791 15.394 16.491 16.051 17.649
-------- -------- -------- -------- -------- -------- --------
Fixed Annuities Incremental
Deposits* 1.412 1.265 2.310 1.918 3.213 2.020 2.792
Variable Annuities-Bal
Beg-of-Year 20.383 27.346 33.358 41.493 39.427 39.427 34.638
Gross Deposits 2.695 2.791 2.553 3.165 3.067 2.274 2.198
Withdrawals (incl charges) &
deaths (2.038) (3.019) (3.760 (4.830) (3.856) (3.038) (2.562)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.657 (0.228) (1.207 (1.665) (0.789) (0.764) (0.364)
Transfer from (to) fixed
annuities 1.335 0.389 0.787 1.320 0.428 0.215 (0.122)
Invest inc & change in mkt value 4.971 5.414 8.555 (1.721) (4.428) (8.372) (8.210)
Acq(sale) of new
business/companies 0.437
-------- -------- -------- -------- -------- -------- --------
Var Annuities-Bal End-of-Year 27.346 33.358 41.493 39.427 34.638 30.506 25.942
-------- -------- -------- -------- -------- -------- --------
Variable Annuities Incremental
Deposits* 2.585 2.641 2.409 2.667 2.624 1.899 2.042
Total Annuities - Bal Beg-of-Year 38.017 44.561 51.469 59.704 56.043 56.043 52.643
Gross Deposits 4.327 4.244 5.116 5.239 6.409 4.398 5.048
Withdrawals (incl charges) &
deaths (4.258) (5.487) (6.281 (8.113) (6.304) (4.924) (4.668)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.069 (1.244) (1.165 (2.874) 0.105 (0.526) 0.380
Transfers (0.001) 0.033 0.004 (0.009) 0.000 0.000 (0.007)
Interest credited & change in mkt
value 5.949 6.408 9.395 (0.777) (3.505) (7.693) (7.511)
Acq of new business/companies 0.527 1.711
-------- -------- -------- -------- -------- -------- --------
Total Gross Annuities-Bal
End-of-Year 44.561 51.469 59.704 56.043 52.643 47.824 45.505
Reinsurance Ceded (1.757) (1.606) (1.419 (1.221) (1.514) (1.266) (1.913)
-------- -------- -------- -------- -------- -------- --------
Total Annuities (Net of Ceded) -
Bal End-of-Year 42.804 49.863 58.284 54.821 51.129 46.558 43.592
======== ======== ======== ======== ======== ======== ========
Total Annuities Incremental
Deposits* 3.997 3.906 4.719 4.585 5.837 3.919 4.834
Var Ann Under Agree - Included
above 0.649 0.719 0.941 1.077 0.907 1.083
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.709 0.459 1.712 0.978 1.494
Withdrawals (1.367) (2.271) (1.604) (1.252) (1.246)
Net Flows (0.658) (1.812) 0.108 (0.274) 0.248
Gross Fixed Account Values 10.219
Reinsurance Ceded (1.913)
Net Fixed Account Values 8.306
Variable Annuities - including
fixed portion of variable
contracts
Deposits 4.407 4.780 4.697 3.420 3.554
Withdrawals (4.915) (5.842) (4.700) (3.672) (3.422)
Net Flows (0.508) (1.062) (0.003) (0.252) 0.132
Variable Account Values 35.286
Fixed Portion of Variable
Contracts
Deposits 1.853 1.615 1.630 1.146 1.356
Withdrawals (1.154) (1.012) (0.844) (0.634) (0.860)
Net Flows 0.699 0.603 0.786 0.512 0.496
Fixed Portion of Variable Account
Values 9.343
---------------------------------------------------------------------------------------------------------------------------------
Average Daily Variable Account Values 35.932 41.776 35.573 36.359 31.955
Annuity Product Spread
Information**
Net Investment Income 7.22% 7.38% 7.38% 7.42% 7.04%
Interest Credited 5.13% 5.24% 5.33% 5.34% 4.94%
-------- -------- -------- -------- --------
Spread 2.09% 2.14% 2.05% 2.08% 2.10%
* Incremental Deposits represent gross deposits reduced by transfers from other Lincoln
Retirement products.
** For the annuity products spread, the yield on earning assets is calculated as net
investment income on fixed product investment portfolios divided by average earning
assets. The average crediting rate is calculated using interest credited on annuity
products less bonus credits and excess DCA interest, divided by average fixed account
values net of co-insured account values. Fixed account values reinsured under modified
co-insurance agreements are included in account values for this calculation since assets
(and therefore margin) are retained under these agreements.
PAGE 20
Lincoln Retirement
Annuity Account Value Roll Forward
Unaudited [Billions of Dollars]
Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal
Beg-of-Quarter 18.406 18.210 17.615 17.200 16.930 16.615
Gross Deposits 0.741 0.589 0.490 0.513 0.482 0.560
Withdrawals (incl charges) &
deaths (0.782) (0.875) (0.796) (0.802) (0.810) (0.787)
------ ------ ------ ------ ------ ------
Net cash flows (0.040) (0.287) (0.307) (0.288) (0.328) (0.227)
Transfer from (to) var annuities (0.300) (0.550) (0.346) (0.217) (0.216) (0.014)
Interest credited 0.144 0.241 0.238 0.235 0.230 0.225
Acq of new business/companies
------ ------ ------ ------ ------ ------
Fixed Annuities-Gross 18.210 17.615 17.200 16.930 16.615 16.599
Reinsurance Ceded (1.419) (1.371) (1.316) (1.270) (1.221) (1.169)
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal
End-of-Quarter 16.791 16.244 15.884 15.660 15.394 15.430
------ ------ ------ ------ ------ ------
Fixed Annuities Incremental
Deposits* 0.582 0.560 0.447 0.464 0.447 0.536
Variable Annuities-Bal
Beg-of-Quarter 35.613 41.493 44.640 43.097 42.743 39.427
Gross Deposits 0.634 0.797 0.793 0.729 0.846 0.887
Withdrawals (incl charges) &
deaths (1.084) (1.210) (1.168) (1.253) (1.199) (1.250)
------ ------ ------ ------ ------ ------
Net cash flows (0.450) (0.413) (0.375) (0.524) (0.353) (0.363)
Transfer from (to) fixed
annuities 0.303 0.549 0.343 0.216 0.212 0.011
Invest inc & change in mkt value 6.027 3.011 (1.511) (0.046) (3.175) (4.342)
Acq(sale) of new
business/companies
------ ------ ------ ------ ------ ------
Var Annuities-Bal End-of-Quarter 41.493 44.640 43.097 42.743 39.427 34.733
------ ------ ------ ------ ------ ------
Variable Annuities Incremental
Deposits 0.592 0.732 0.699 0.586 0.650 0.683
Total Annuities -Bal
Beg-of-Quarter 54.020 59.704 62.255 60.297 59.673 56.043
Gross Deposits 1.375 1.386 1.283 1.242 1.328 1.447
Withdrawals (incl charges) &
deaths (1.865) (2.085) (1.964) (2.055) (2.009) (2.037)
------ ------ ------ ------ ------ ------
Net cash flows (0.490) (0.700) (0.682) (0.812) (0.681) (0.590)
Transfers 0.003 (0.001) (0.003) (0.001) (0.004) (0.003)
Interest credited & change in mkt
value 6.171 3.252 (1.273) 0.189 (2.945) (4.117)
Acq of new business/companies
Total Gross Annuities-Bal ------ ------ ------ ------ ------ ------
End-of-Quarter 59.704 62.255 60.297 59.673 56.043 51.332
Reinsurance Ceded (1.419) (1.371) (1.316) (1.270) (1.221) (1.169)
------ ------ ------ ------ ------ ------
Total Annuities (Net of Ceded) -
Bal End-of-Qtr 58.284 60.884 58.981 58.403 54.821 50.163
====== ====== ====== ====== ====== ======
Total Annuities Incremental
Deposits* 1.174 1.292 1.145 1.050 1.097 1.219
Var Ann Under Agree - Included
above 0.719 0.866 0.868 0.962 0.941 0.904
-------------------------------------------------------------------------------------------------------------------------------
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.275 0.134 0.126 0.114 0.085 0.160
Withdrawals (0.428) (0.612) (0.557) (0.532) (0.570) (0.556)
Net Flows (0.152) (0.479) (0.431) (0.417) (0.485) (0.396)
Gross Fixed Account Values
Reinsurance Ceded
Net Fixed Account Values
Variable Annuities - including
fixed portion of variable
contracts
Deposits 1.100 1.252 1.157 1.128 1.243 1.287
Withdrawals (1.438) (1.473) (1.408) (1.523) (1.439) (1.481)
Net Flows (0.338) (0.221) (0.251) (0.395) (0.196) (0.194)
Variable Account Values
Fixed Portion of Variable
Contracts
Deposits 0.466 0.455 0.364 0.399 0.397 0.400
Withdrawals (0.354) (0.263) (0.240) (0.270) (0.240) (0.231)
Net Flows 0.112 0.192 0.124 0.129 0.157 0.169
Fixed Portion of Variable Account
Values
Average Daily Variable Account
Values 37.845 42.185 42.182 43.055 39.682 38.180
-------------------------------------------------------------------------------------------------------------------------------
Annuity Product Spread
Information**
Net Investment Income 7.26% 7.35% 7.41% 7.40% 7.37% 7.50%
Interest Credited 5.15% 5.33% 5.37% 5.12% 5.14% 5.40%
------ ------ ------ ------ ------ ------
Spread 2.11% 2.02% 2.04% 2.28% 2.23% 2.10%
Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal
Beg-of-Quarter 16.599 16.697 17.317 18.004 18.178 18.679
Gross Deposits 0.668 0.896 1.218 0.906 0.853 1.091
Withdrawals (incl charges) &
deaths (0.574) (0.525) (0.562) (0.730) (0.551) (0.825)
------ ------ ------ ------ ------ ------
Net cash flows 0.094 0.372 0.656 0.176 0.302 0.266
Transfer from (to) var annuities (0.222) 0.021 (0.213) (0.232) (0.032) 0.379
Interest credited 0.226 0.228 0.244 0.230 0.231 0.238
Acq of new business/companies
------ ------ ------ ------ ------ ------
Fixed Annuities-Gross 16.697 17.317 18.004 18.178 18.679 19.562
Reinsurance Ceded (1.146) (1.266) (1.514) (1.645) (1.770) (1.913)
------ ------ ------ ------ ------ ------
Fixed Annuities-Bal
End-of-Quarter 15.551 16.051 16.491 16.533 16.909 17.649
------ ------ ------ ------ ------ ------
Fixed Annuities Incremental
Deposits* 0.611 0.873 1.193 0.881 0.839 1.072
Variable Annuities-Bal
Beg-of-Quarter 34.733 36.961 30.506 34.638 35.150 31.206
Gross Deposits 0.703 0.684 0.793 0.808 0.787 0.603
Withdrawals (incl charges) &
deaths (0.993) (0.795) (0.818) (0.896) (0.866) (0.800)
------ ------ ------ ------ ------ ------
Net cash flows (0.290) (0.111) (0.025) (0.088) (0.079) (0.197)
Transfer from (to) fixed
annuities 0.227 (0.023) 0.213 0.234 0.032 (0.388)
Invest inc & change in mkt value 2.291 (6.321) 3.944 0.366 (3.897) (4.679)
Acq(sale) of new
business/companies
------ ------ ------ ------ ------ ------
Var Annuities-Bal End-of-Quarter 36.961 30.506 34.638 35.150 31.206 25.942
------ ------ ------ ------ ------ ------
Variable Annuities Incremental
Deposits 0.612 0.604 0.725 0.725 0.744 0.573
Total Annuities -Bal
Beg-of-Quarter 51.332 53.658 47.824 52.643 53.329 49.886
Gross Deposits 1.371 1.580 2.011 1.714 1.640 1.694
Withdrawals (incl charges) &
deaths (1.567) (1.320) (1.380) (1.626) (1.417) (1.625)
------ ------ ------ ------ ------ ------
Net cash flows (0.196) 0.261 0.631 0.088 0.223 0.069
Transfers 0.005 (0.002) 0.002 (0.009)
Interest credited & change in mkt
value 2.517 (6.093) 4.188 0.596 (3.666) (4.441)
Acq of new business/companies
Total Gross Annuities-Bal
------ ------ ------ ------ ------ ------
End-of-Quarter 53.658 47.824 52.643 53.329 49.886 45.505
Reinsurance Ceded (1.146) (1.266) (1.514) (1.645) (1.770) (1.913)
------ ------ ------ ------ ------ ------
Total Annuities (Net of Ceded) -
Bal End-of-Qtr 52.512 46.558 51.129 51.684 48.116 43.592
====== ====== ====== ====== ====== ======
Total Annuities Incremental
Deposits* 1.223 1.477 1.918 1.606 1.583 1.645
Var Ann Under Agree - Included
above 0.975 0.907 1.077 1.207 1.175 1.083
-----------------------------------------------------------------------------------------------------------------------------
Fixed Annuities - excluding fixed
portion of variable contracts
Deposits 0.329 0.489 0.734 0.505 0.430 0.559
Withdrawals (0.356) (0.340) (0.352) (0.463) (0.267) (0.516)
Net Flows (0.027) 0.149 0.382 0.042 0.163 0.043
Gross Fixed Account Values 9.761 10.048 10.219
Reinsurance Ceded (1.645) (1.770) (1.913)
------ ------ ------
Net Fixed Account Values 8.116 8.278 8.306
Variable Annuities - including
fixed portion of variable
contracts
Deposits 1.042 1.091 1.277 1.209 1.210 1.135
Withdrawals (1.211) (0.979) (1.028) (1.163) (1.150) (1.109)
Net Flows (0.169) 0.112 0.249 0.046 0.060 0.026
Variable Account Values 43.568 39.838 35.286
Fixed Portion of Variable
Contracts
Deposits 0.339 0.407 0.484 0.401 0.423 0.532
Withdrawals (0.218) (0.184) (0.210) (0.267) (0.284) (0.309)
Net Flows 0.121 0.223 0.274 0.134 0.139 0.223
Fixed Portion of Variable Account
Values 8.417 8.631 9.343
Average Daily Variable Account
Values 36.499 34.399 33.216 34.341 33.502 28.023
-----------------------------------------------------------------------------------------------------------------------------
Annuity Product Spread Information**
Net Investment Income 7.45% 7.33% 7.26% 7.15% 7.11% 6.87%
Interest Credited 5.29% 5.34% 5.28% 5.14% 4.92% 4.76%
------ ------ ------ ------ ------ ------
Spread 2.16% 1.99% 1.98% 2.01% 2.18% 2.11%
* Incremental Deposits represent gross deposits reduced by transfers from other Lincoln Retirement products.
** For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed
product investment portfolios divided by average earning assets. The average crediting rate is calculated using
interest credited on annuity products less bonus credits and excess DCA interest, divided by average fixed
account values net of co-insured account values. Fixed account values reinsured under modified co-insurance
agreements are included in account values for this calculation since assets (and therefore margin) are retained
under these agreements.
PAGE 21
Life Insurance Segment
Income Statements
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
1997 1998 1999 2000 2001 2001 2002
------ ------ ------ ------ ------ ------ ------
Operating Revenue
Premiums 64.8 185.9 235.8 227.3 212.4 148.0 147.4
Surrender charges 9.8 52.1 66.3 66.4 66.1 46.3 38.6
Mortality assessments 161.2 350.1 444.6 465.2 499.4 373.8 374.2
Expense assessments 28.6 146.2 165.8 191.8 191.4 138.6 143.2
Other revenue and fees 9.0 2.6 9.8 14.2 17.9 11.9 17.5
Net investment income 268.2 642.6 840.1 871.5 910.2 683.6 675.8
------ ------ ------ ------ ------ ------ ------
Operating Revenue 541.5 1379.5 1762.6 1836.4 1897.5 1402.2 1396.7
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 143.6 371.2 430.5 411.5 418.5 305.7 312.9
Div accum & div to policyholders 20.4 70.7 81.5 80.8 78.5 53.1 53.2
Interest credited to policy bal. 153.0 393.1 493.8 525.4 569.9 423.0 447.8
------ ------ ------ ------ ------ ------ ------
Total benefits 317.0 835.1 1,005.8 1,017.8 1,067.0 781.8 813.9
Underwriting, acquisition,
insurance and other expenses*:
Commissions 41.8 107.5 163.4 152.8 142.1 96.9 101.2
Other volume related expenses 42.0 122.7 185.6 200.9 176.4 119.5 132.0
Operating and administrative
expenses 77.1 144.9 171.2 164.4 161.0 122.7 114.1
Taxes, licenses and fees 16.6 29.7 51.8 48.5 49.2 36.8 41.7
Par policyholder interests (9.3) (4.3) 3.3 1.1 - - -
------ ------ ------ ------ ------ ------ ------
Subtotal 168.2 400.6 575.2 567.6 528.7 375.9 389.1
Deferral of acquisition costs - - - - (324.8) (218.6) (235.2)
DAC amortization - - - - 95.0 64.8 69.6
------ ------ ------ ------ ------ ------ ------
DAC deferral net of amortization 3.9 (159.3) (235.0) (286.5) (229.8) (153.7) (165.6)
PVIF amortization - 51.9 58.8 103.7 75.9 61.1 56.5
Other intangibles amortization - - - - - - -
------ ------ ------ ------ ------ ------ ------
Total underwriting, acquisition,
insurance and other expenses 172.1 293.1 399.1 384.8 374.7 283.3 279.9
Goodwill amortization 0.1 19.7 23.4 23.7 23.7 17.8 -
Interest - - - - 0.0 - 0.0
------ ------ ------ ------ ------ ------ ------
Operating Benefits and Expenses 489.3 1147.8 1428.2 1426.3 1465.4 1082.9 1093.9
------ ------ ------ ------ ------ ------ ------
Income from Operations Before Tax 52.3 231.6 334.3 410.1 432.1 319.3 302.8
Federal income taxes 12.4 82.4 122.3 150.1 153.0 113.5 94.7
------ ------ ------ ------ ------ ------ ------
Income from Operations 39.9 149.2 212.0 259.9 279.0 205.8 208.1
------ ------ ------ ------ ------ ------ ------
Realized gains (losses) on
investments (0.8) (1.7) (0.5) (10.7) (38.5) (17.2) (60.2)
Gains (losses) on derivatives 1.6 0.1 0.9
Restructuring charges 0.0 (20.0) 0.0 0.0 (3.5) (2.0) 0.0
------ ------ ------ ------ ------ ------ ------
Income before Accounting Changes 39.1 127.5 211.5 249.3 238.6 186.7 148.7
Cumulative effect of accounting
changes (5.5) (5.5) 0.0
------ ------ ------ ------ ------ ------ ------
Net Income 39.1 127.5 211.5 249.3 233.1 181.2 148.7
====== ====== ====== ====== ====== ====== ======
Inc from Oper -before Goodwill
Amort. 40.0 168.9 235.4 283.6 302.7 223.6 208.1
Net Income -before Goodwill
Amort. 39.2 147.1 234.9 273.0 256.7 198.9 148.7
Effective tax rate 23.7% 35.6% 36.6% 36.6% 35.4% 35.6% 31.3%
Operating Revenue 541.5 1,379.5 1,762.6 1836.4 1897.5 1402.2 1396.7
Realized gains (losses) on
investments 3.2 (1.0) (2.2) (17.4) (57.6) (26.5) (92.7)
Gains (losses) on derivatives 0.7 0.1 1.4
------ ------ ------ ------ ------ ------ ------
Total Revenue 544.8 1378.5 1760.4 1819.0 1840.6 1375.9 1305.4
====== ====== ====== ====== ====== ====== ======
Average capital 384.9 1948.0 2712.3 2640.2 2731.5 2727.3 2840.2
Return on average capital 10.4% 7.7% 7.8% 9.8% 10.2% 10.1% 9.8%
------ ------ ------ ------ ------ ------ ------
------------------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-period 1,079.3 1,079.3 1,265.6
Deferral 324.8 218.6 235.2
Amortization (95.0) (64.8) (69.6)
------ ------ ------
Operating 229.8 153.7 165.6
Adjustment related to realized
(gains) losses
on securities available-for-sale 43.0 28.3 38.7
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (89.0) (107.5) (127.2)
Other** 2.5 2.2 19.3
------ ------ ------
Balance at end-of-period 1,265.6 1,156.0 1,362.1
====== ====== ======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-period 1,040.5 1,040.5 964.0
Amortization (75.9) (61.1) (56.5)
Other (0.7) (0.7) (0.1)
------ ------ ------
Balance at end-of-period 964.0 978.7 907.4
====== ====== ======
* Does not include restructuring charges which is consistent with the definition of "Income from Operations" (see page 5).
** Includes the transfer of the Legacy Life block of business from the Lincoln Retirement segment in the first quarter of
2002.
PAGE 22
Life Insurance Segment
Income Statements
Unaudited [Millions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 71.1 53.0 56.3 50.9 67.1 50.9
Surrender charges 18.0 16.2 16.5 13.8 19.9 17.2
Mortality assessments 113.9 112.2 114.5 116.3 122.1 124.3
Expense assessments 48.0 45.3 44.1 46.9 55.5 47.4
Other revenue and fees 3.9 3.2 3.6 3.8 3.7 5.1
Net investment income 214.8 215.6 215.5 220.6 219.7 223.0
------- ------- ------- ------- ------- -------
Operating Revenue 469.6 445.5 450.5 452.4 488.0 467.9
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 112.8 98.4 96.3 95.8 121.0 99.9
Div accum & div to policyholders 21.0 20.4 18.7 16.4 25.3 17.5
Interest credited to policy bal. 122.3 126.3 128.7 134.0 136.5 138.3
------- ------- ------- ------- ------- -------
Total benefits 256.1 245.0 243.8 246.2 282.9 255.7
Underwriting, acquisition,
insurance and other expenses*:
Commissions 58.7 32.2 34.2 39.8 46.6 33.4
Other volume related expenses 67.0 43.5 44.8 48.6 64.0 34.8
Operating and administrative
expenses 46.3 40.4 40.8 39.4 43.8 40.4
Taxes, licenses and fees 17.2 13.4 9.8 11.4 13.9 12.5
Par policyholder interests 4.2 (1.5) 1.6 1.4 (0.5) (0.0)
------- ------- ------- ------- ------- -------
Subtotal 193.3 128.0 131.1 140.7 167.9 121.1
Deferral of acquisition costs - - - - - (64.5)
DAC amortization - - - - - 19.3
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (92.1) (53.2) (53.6) (76.8) (103.0) (45.2)
PVIF amortization 16.5 24.6 23.4 31.0 24.7 22.9
Other intangibles amortization - - - - - -
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 117.8 99.4 100.9 94.9 89.6 98.8
Goodwill amortization 6.0 5.9 5.9 5.9 5.9 5.9
Interest - - - - - -
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 379.9 350.3 350.6 347.0 378.4 360.5
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 89.8 95.2 99.9 105.4 109.6 107.4
Federal income taxes 32.8 34.8 37.4 38.9 39.0 38.8
------- ------- ------- ------- ------- -------
Income from Operations 57.0 60.4 62.4 66.5 70.6 68.6
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 2.8 (2.4) (4.0) 1.0 (5.2) (5.4)
Gains (losses) on derivatives (0.0)
Restructuring charges
------- ------- ------- ------- ------- -------
Income before Accounting Changes 59.7 58.1 58.4 67.4 65.4 63.2
Cumulative effect of accounting
changes (0.2)
------- ------- ------- ------- ------- -------
Net Income 59.7 58.1 58.4 67.4 65.4 62.9
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 63.0 66.3 68.4 72.4 76.5 74.5
Net Income -before Goodwill
Amort. 65.8 64.0 64.4 73.4 71.3 68.9
Effective tax rate 36.5% 36.5% 37.5% 36.9% 35.6% 36.1%
Operating Revenue 469.6 445.5 450.5 452.4 488.0 467.9
Realized gains (losses) on
investments 3.4 (3.8) (6.3) 0.8 (8.1) (8.2)
Gains (losses) on derivatives (0.0)
------- ------- ------- ------- ------- -------
Total Revenue 473.1 441.7 444.2 453.2 479.9 459.6
======= ======= ======= ======= ======= =======
Average capital 2686.0 2655.3 2615.0 2650.5 2640.0 2729.8
Return on average capital 8.5% 9.1% 9.6% 10.0% 10.7% 10.1%
--------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 1079.3
Deferral 64.5
Amortization (19.3)
------- ------- ------- ------- ------- -------
Operating 45.2
Adjustment related to realized
(gains) losses
on securities available-for-sale 7.8
Adjustment related to unrealized
(gains) losses
on securities available-for-sale (68.5)
Other** 0.2
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 1064.1
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 1040.5
Amortization (22.9)
Other
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 1017.6
======= ======= ======= ======= ======= =======
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 50.7 46.4 64.4 51.1 47.6 48.6
Surrender charges 13.5 15.6 19.9 11.7 13.5 13.4
Mortality assessments 124.8 124.7 125.5 123.9 123.9 126.3
Expense assessments 45.3 46.0 52.8 46.9 47.2 49.2
Other revenue and fees 3.8 3.0 6.0 5.7 6.7 5.1
Net investment income 227.4 233.2 226.6 226.0 225.7 224.1
------- ------- ------- ------- ------- -------
Operating Revenue 465.5 468.9 495.2 465.3 464.6 466.8
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 103.5 102.3 112.9 104.1 103.6 105.2
Div accum & div to policyholders 19.0 16.5 25.4 17.8 18.2 17.2
Interest credited to policy bal. 141.2 143.5 146.9 146.3 148.9 152.6
------- ------- ------- ------- ------- -------
Total benefits 263.8 262.3 285.1 268.1 270.8 275.1
Underwriting, acquisition,
insurance and other expenses*:
Commissions 31.1 32.5 45.1 34.6 34.8 31.8
Other volume related expenses 43.3 41.4 56.9 42.7 43.6 45.8
Operating and administrative
expenses 40.7 41.6 38.3 37.1 37.1 40.0
Taxes, licenses and fees 12.3 12.0 12.5 13.2 15.3 13.2
Par policyholder interests 0.0 - - - - -
------- ------- ------- ------- ------- -------
Subtotal 127.3 127.5 152.8 127.5 130.8 130.7
Deferral of acquisition costs (68.8) (85.3) (106.3) (74.3) (82.2) (78.7)
DAC amortization 15.8 29.7 30.2 22.1 23.6 23.9
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (53.0) (55.5) (76.1) (52.3) (58.6) (54.8)
PVIF amortization 17.7 20.5 14.7 16.9 16.3 23.3
Other intangibles amortization - - - - - -
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 92.0 92.5 91.4 92.1 88.5 99.3
Goodwill amortization 5.9 5.9 5.9 - - -
Interest - - 0.0 0.0 0.0 -
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 361.7 360.8 382.5 360.2 359.3 374.4
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 103.8 108.1 112.7 105.1 105.3 92.4
Federal income taxes 36.7 38.1 39.5 34.0 31.8 29.0
------- ------- ------- ------- ------- -------
Income from Operations 67.1 70.1 73.2 71.1 73.5 63.4
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments (6.4) (5.3) (21.3) (26.9) (16.4) (16.9)
Gains (losses) on derivatives 0.1 (0.0) 1.5 0.0 0.3 0.6
Restructuring charges (2.0) (1.5)
------- ------- ------- ------- ------- -------
Income before Accounting Changes 58.8 64.7 51.9 44.2 57.4 47.1
Cumulative effect of accounting
changes (5.3) 0.0 (0.0) 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Net Income 53.5 64.7 51.9 44.2 57.4 47.1
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 73.0 76.0 79.1 71.1 73.5 63.4
Net Income -before Goodwill
Amort. 59.5 70.6 57.8 44.2 57.4 47.1
Effective tax rate 35.3% 35.2% 35.0% 32.3% 30.2% 31.3%
Operating Revenue 465.5 468.9 495.2 465.3 464.6 466.8
Realized gains (losses) on
investments (10.0) (8.2) (31.1) (41.4) (25.4) (25.9)
Gains (losses) on derivatives 0.2 (0.1) 0.6 0.0 0.6 0.7
------- ------- ------- ------- ------- -------
Total Revenue 455.7 460.6 464.7 423.9 439.8 441.6
======= ======= ======= ======= ======= =======
Average capital 2715.7 2736.3 2744.4 2801.9 2865.8 2852.9
Return on average capital 9.9% 10.2% 10.7% 10.2% 10.3% 8.9%
--------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-quarter 1064.1 1151.1 1156.0 1265.6 1385.3 1404.9
Deferral 68.8 85.3 106.3 74.3 82.2 78.7
Amortization (15.8) (29.7) (30.2) (22.1) (23.6) (23.9)
------- ------- ------- ------- ------- -------
Operating 53.0 55.5 76.1 52.3 58.6 54.8
Adjustment related to realized
(gains) losses
on securities available-for-sale 13.3 7.2 14.7 15.8 11.2 11.7
Adjustment related to unrealized
(gains) losses
on securities available-for-sale 20.7 (59.6) 18.5 34.0 (51.9) (109.3)
Other** 0.1 1.8 0.3 17.6 1.7
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 1151.1 1156.0 1265.6 1385.3 1404.9 1362.1
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-quarter 1017.6 999.9 978.7 964.0 947.1 930.7
Amortization (17.7) (20.5) (14.7) (16.9) (16.3) (23.3)
Other (0.7) (0.1)
------- ------- ------- ------- ------- -------
Balance at end-of-quarter 999.9 978.7 964.0 947.1 930.7 907.4
======= ======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of "Income from
Operations" (see page 5).
** Includes the transfer of the Legacy Life block of business from the Lincoln Retirement
segment in the first quarter of 2002.
PAGE 23
Life Insurance Segment
Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
First Year Premiums by Product
(Millions)
Universal Life 114.0 233.0 342.9 289.3 292.7 195.1 318.2
Variable Universal Life 52.9 101.3 142.2 218.7 228.6 158.4 107.5
Whole Life 5.4 20.0 23.9 22.4 26.3 15.9 19.3
Term 33.0 48.0 45.9 41.9 30.8 21.8 24.2
------- ------- ------- ------- ------- ------- -------
Total Retail 205.3 402.3 555.0 572.3 578.4 391.2 469.2
Corporate Owned Life Insurance (COLI) 0.0 4.0 14.7 87.0 47.3 33.1 61.3
------- ------- ------- ------- ------- ------- -------
Total 205.3 406.3 569.7 659.3 625.6 424.3 530.5
------- ------- ------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 71.0 35.0 188.3 200.6 196.1 128.0 136.8
Lincoln Financial Distributors 134.3 356.3 367.9 444.7 413.0 283.5 385.2
Other* 0.0 15.0 13.5 14.0 16.6 12.8 8.5
------- ------- ------- ------- ------- ------- -------
Total by Distribution 205.3 406.3 569.7 659.3 625.6 424.3 530.5
======= ======= ======= ======= ======= ======= =======
Life Insurance In-Force
(Billions)
Universal Life & Other 32.827 105.837 109.288 115.872 121.168 119.029 124.085
Term Insurance 30.337 67.076 85.701 100.130 113.226 108.723 123.945
------- ------- ------- ------- ------- ------- -------
Total Life Segment In-Force 63.164 172.914 194.988 216.002 234.394 227.751 248.030
For the Quarter Ended Dec Mar Jun Sep Dec Mar Jun
1999 2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- ------- -------
First Year Premiums by Product
(Millions)
Universal Life 113.2 72.3 63.7 72.4 80.9 57.7 70.0
Variable Universal Life 55.6 44.0 44.5 55.1 75.1 56.0 52.2
Whole Life 8.0 3.9 4.5 6.0 8.0 4.1 5.1
Term 11.0 13.1 12.1 9.1 7.6 6.5 7.2
------- ------- ------- ------- ------- ------- -------
Total Retail 187.8 133.3 124.8 142.6 171.6 124.2 134.6
Corporate Owned Life Insurance (COLI) 4.0 12.7 19.5 5.8 49.0 7.1 21.0
------- ------- ------- ------- ------- ------- -------
Total 191.9 146.0 144.3 148.4 220.7 131.3 155.6
------- ------- ------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 72.8 46.1 37.0 51.3 66.2 38.1 48.2
Lincoln Financial Distributors 115.0 96.8 104.4 92.9 150.6 89.1 104.0
Other* 4.1 3.0 2.9 4.2 3.9 4.2 3.4
------- ------- ------- ------- ------- ------- -------
Total by Distribution 191.9 146.0 144.3 148.4 220.7 131.3 155.6
======= ======= ======= ======= ======= ======= =======
Insurance In-Force (Billions)
Universal Life & Other 109.288 108.817 110.448 112.884 115.872 116.747 118.007
Term Insurance 85.701 92.857 97.039 98.424 100.130 102.467 105.265
------- ------- ------- ------- ------- ------- -------
Total Segment In-Force 194.988 201.674 207.487 211.308 216.002 219.214 223.272
For the Quarter Ended Sep Dec Mar Jun Sep
2001 2001 2002 2002 2002
------- ------- ------- ------- -------
First Year Premiums by Product
(Millions)
Universal Life 67.4 97.5 86.4 98.9 132.9
Variable Universal Life 50.1 70.2 39.0 42.4 26.1
Whole Life 6.7 10.4 5.2 6.4 7.7
Term 8.1 9.1 8.7 8.1 7.3
------- ------- ------- ------- -------
Total Retail 132.4 187.2 139.4 155.8 174.0
Corporate Owned Life Insurance (COLI) 5.1 14.2 6.9 46.6 7.8
------- ------- ------- ------- -------
Total 137.4 201.3 146.3 202.4 181.8
------- ------- ------- ------- -------
First Year Premiums by
Distribution (Millions)
Lincoln Financial Advisors 41.8 68.0 41.5 48.3 46.9
Lincoln Financial Distributors 90.4 129.5 100.9 151.6 132.7
Other* 5.2 3.8 3.8 2.6 2.2
------- ------- ------- ------- -------
Total by Distribution 137.4 201.3 146.3 202.4 181.8
======= ======= ======= ======= =======
Insurance In-Force (Billions)
Universal Life & Other 119.029 121.168 122.316 123.674 124.085
Term Insurance 108.723 113.226 117.752 121.076 123.945
------- ------- ------- ------- -------
Total Segment In-Force 227.751 234.394 240.068 244.750 248.030
* Other consists of distribution arrangements with third-party intermediaries.
PAGE 24
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
YTD YTD
Sep Sep
1997 1998 1999 2000 2001 2001 2002
-------- -------- -------- -------- -------- -------- --------
Universal Life-Bal Beg-of-Year 2.530 2.558 6.259 6.650 6.976 6.976 7.508
Deposits 0.278 0.675 1.017 0.955 1.043 0.729 0.921
Withdrawals & deaths (0.399) (0.701) (0.452) (0.426) (0.319) (0.247) (0.302)
-------- -------- -------- -------- -------- -------- --------
Net cash flows (0.121) (0.026) 0.564 0.528 0.724 0.483 0.620
Policyholder assessments (0.544) (0.584) (0.598) (0.444) (0.479)
Interest credited 0.149 0.350 0.370 0.382 0.405 0.300 0.320
Acq of new business/transfers
between segments 0.000 3.378 0.000 0.000 0.000 0.000 0.018
-------- -------- -------- -------- -------- -------- --------
Universal Life-Bal End of Year (1) 2.558 6.259 6.650 6.976 7.508 7.315 7.987
-------- -------- -------- -------- -------- -------- --------
Variable Universal Life-Bal
Beg-of-Year 0.339 0.480 1.200 1.605 1.808 1.808 1.746
Deposits 0.106 0.193 0.326 0.607 0.584 0.397 0.379
Withdrawals & deaths (0.040) (0.100) (0.099) (0.132) (0.251) (0.163) (0.146)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.065 0.093 0.228 0.475 0.332 0.234 0.233
Policyholder assessments 0.000 (0.084) (0.141) (0.170) (0.125) (0.139)
Invest inc & chg in mkt value 0.076 0.105 0.370 (0.130) (0.225) (0.391) (0.397)
Acq of new business/transfers
between segments 0.000 0.522 (0.110) 0.000 0.000 0.000 0.132
-------- -------- -------- -------- -------- -------- --------
Variable Universal Life -Bal
End-of-Year 0.480 1.200 1.605 1.808 1.746 1.527 1.575
-------- -------- -------- -------- -------- -------- --------
Interest Sensitive Whole Life -
Bal Beg-of-Year 1.784 1.963 2.062 2.062 2.123
Deposits 0.340 0.355 0.322 0.307 0.202 0.202
Withdrawals & deaths (0.294) (0.162) (0.168) (0.200) (0.139) (0.136)
-------- -------- -------- -------- -------- -------- --------
Net cash flows 0.046 0.193 0.154 0.107 0.063 0.065
Policyholder assessments (0.168) (0.168) (0.164) (0.117) (0.121)
Interest credited 0.096 0.109 0.113 0.118 0.088 0.096
Acq of new business/transfers
between segments 1.642 0.045
-------- -------- -------- -------- -------- -------- --------
Int Sensitive Whole Life-Bal End
-of -Year 1.784 1.963 2.062 2.123 2.096 2.164
-------- -------- -------- -------- -------- -------- --------
------------------------------------------------------------------------------------------------------------------
Total Segment- Life Insurance
Account Values
Bal Beg-of-Year 2.869 3.038 9.243 10.217 10.847 10.847 11.377
Deposits 0.384 1.207 1.698 1.884 1.934 1.328 1.502
Withdrawals & deaths (0.439) (1.095) (0.713) (0.727) (0.771) (0.549) (0.584)
-------- -------- -------- -------- -------- -------- --------
Net cash flows (0.056) 0.113 0.985 1.158 1.163 0.780 0.918
Policyholder assessments (0.795) (0.893) (0.931) (0.685) (0.738)
Invest inc & change in market
value 0.225 0.551 0.849 0.364 0.299 (0.002) 0.019
Acq of new business/transfers
between segments 5.542 (0.065) 0.150
-------- -------- -------- -------- -------- -------- --------
Total Segment -Bal End-of-Year 3.038 9.243 10.217 10.847 11.377 10.939 11.726
======== ======== ======== ======== ======== ======== ========
(1) Includes fixed investment option of VUL products.
PAGE 25
Life Insurance Segment
Life Insurance Account Value Roll Forward
Unaudited [Billions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Universal Life-Bal Beg-of-Quarter 6.519 6.650 6.729 6.782 6.878 6.976
Deposits 0.306 0.252 0.212 0.227 0.265 0.227
Withdrawals & deaths (0.124) (0.121) (0.111) (0.080) (0.114) (0.091)
------- ------- ------- ------- ------- -------
Net cash flows 0.182 0.131 0.101 0.146 0.151 0.136
Policyholder assessments (0.145) (0.145) (0.143) (0.146) (0.150) (0.147)
Interest credited 0.093 0.093 0.095 0.096 0.097 0.098
Acq of new business/transfers
between segments 0.000 0.000
------- ------- ------- ------- ------- -------
Universal Life-Bal End-of-Quarter (1) 6.650 6.729 6.782 6.878 6.976 7.063
------- ------- ------- ------- ------- -------
Variable Universal Life-Bal Beg
of Quarter 1.285 1.605 1.771 1.764 1.812 1.808
Deposits 0.107 0.112 0.128 0.123 0.245 0.136
Withdrawals & deaths (0.025) (0.019) (0.028) (0.037) (0.048) (0.049)
------- ------- ------- ------- ------- -------
Net cash flows 0.082 0.093 0.100 0.085 0.197 0.087
Policyholder assessments (0.024) (0.032) (0.033) (0.036) (0.041) (0.041)
Invest inc & chg in mkt value 0.262 0.105 (0.074) (0.001) (0.160) (0.221)
Acq of new business/transfers
between segments 0.000
------- ------- ------- ------- ------- -------
Variable Universal Life -Bal
End-of-Quarter 1.605 1.771 1.764 1.812 1.808 1.633
------- ------- ------- ------- ------- -------
Interest Sensitive Whole Life -
Bal Beg-of-Quarter 1.922 1.963 1.970 1.993 2.026 2.062
Deposits 0.113 0.060 0.071 0.079 0.113 0.056
Withdrawals & deaths (0.050) (0.042) (0.037) (0.033) (0.056) (0.041)
------- ------- ------- ------- ------- -------
Net cash flows 0.062 0.018 0.034 0.045 0.057 0.014
Policyholder assessments (0.048) (0.039) (0.040) (0.040) (0.050) (0.037)
Interest credited 0.026 0.028 0.028 0.027 0.029 0.028
Acq of new business/transfers
between segments
------- ------- ------- ------- ------- -------
Int Sensitive Whole Life-Bal
End-of-Quarter 1.963 1.970 1.993 2.026 2.062 2.068
------- ------- ------- ------- ------- -------
-------------------------------------------------------------------------------------------------------
Total Segment- Life Insurance Account Values
Bal Beg-of-Quarter 9.726 10.217 10.470 10.538 10.716 10.847
Deposits 0.526 0.424 0.411 0.428 0.622 0.418
Withdrawals & deaths (0.199) (0.182) (0.176) (0.151) (0.218) (0.181)
------- ------- ------- ------- ------- -------
Net cash flows 0.327 0.242 0.235 0.277 0.404 0.237
Policyholder assessments (0.216) (0.215) (0.216) (0.221) (0.241) (0.225)
Invest inc & change in market
value 0.381 0.227 0.048 0.123 (0.033) (0.094)
Acq of new business/transfers
between segments 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Total Segment -Bal End-of-Quarter 10.217 10.470 10.538 10.716 10.847 10.764
======= ======= ======= ======= ======= =======
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Universal Life-Bal Beg-of-Quarter 7.063 7.216 7.315 7.508 7.622 7.838
Deposits 0.270 0.233 0.314 0.248 0.364 0.310
Withdrawals & deaths (0.071) (0.085) (0.073) (0.098) (0.096) (0.108)
------- ------- ------- ------- ------- -------
Net cash flows 0.199 0.147 0.241 0.150 0.268 0.201
Policyholder assessments (0.147) (0.150) (0.153) (0.158) (0.158) (0.162)
Interest credited 0.100 0.102 0.105 0.104 0.106 0.110
Acq of new business/transfers
between segments 0.000 0.018
------- ------- ------- ------- ------- -------
Universal Life-Bal End-of-Quarter (1) 7.216 7.315 7.508 7.622 7.838 7.987
------- ------- ------- ------- ------- -------
Variable Universal Life-Bal Beg
of Quarter 1.633 1.766 1.527 1.746 1.919 1.776
Deposits 0.138 0.124 0.186 0.129 0.147 0.102
Withdrawals & deaths (0.060) (0.055) (0.088) (0.055) (0.057) (0.034)
------- ------- ------- ------- ------- -------
Net cash flows 0.078 0.069 0.098 0.074 0.090 0.068
Policyholder assessments (0.041) (0.042) (0.045) (0.047) (0.046) (0.046)
Invest inc & chg in mkt value 0.096 (0.266) 0.166 0.013 (0.186) (0.224)
Acq of new business/transfers
between segments 0.000 0.000 0.132
------- ------- ------- ------- ------- -------
Variable Universal Life -Bal
End-of-Quarter 1.766 1.527 1.746 1.919 1.776 1.575
------- ------- ------- ------- ------- -------
Interest Sensitive Whole Life -
Bal Beg-of-Quarter 2.068 2.084 2.096 2.123 2.126 2.145
Deposits 0.069 0.077 0.105 0.063 0.066 0.073
Withdrawals & deaths (0.043) (0.054) (0.061) (0.051) (0.039) (0.045)
------- ------- ------- ------- ------- -------
Net cash flows 0.027 0.022 0.044 0.012 0.026 0.027
Policyholder assessments (0.040) (0.041) (0.047) (0.042) (0.039) (0.040)
Interest credited 0.030 0.030 0.030 0.033 0.032 0.031
Acq of new business/transfers
between segments
------- ------- ------- ------- ------- -------
Int Sensitive Whole Life-Bal
End-of-Quarter 2.084 2.096 2.123 2.126 2.145 2.164
------- ------- ------- ------- ------- -------
-------------------------------------------------------------------------------------------------------
Total Segment- Life Insurance Account Values
Bal Beg-of-Quarter 10.764 11.066 10.939 11.377 11.667 11.759
Deposits 0.477 0.434 0.605 0.440 0.577 0.484
Withdrawals & deaths (0.173) (0.195) (0.222) (0.204) (0.192) (0.187)
------- ------- ------- ------- ------- -------
Net cash flows 0.304 0.239 0.383 0.236 0.385 0.297
Policyholder assessments (0.228) (0.232) (0.246) (0.246) (0.244) (0.248)
Invest inc & change in market
value 0.226 (0.134) 0.301 0.151 (0.049) (0.082)
Acq of new business/transfers
between segments 0.000 0.000 0.000 0.150 0.000 0.000
------- ------- ------- ------- ------- -------
Total Segment -Bal End-of-Quarter 11.066 10.939 11.377 11.667 11.759 11.726
======= ======= ======= ======= ======= =======
(1) Includes fixed investment option of VUL products.
PAGE 26
Investment Management
Income Statements
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Investment advisory fees -
External 229.9 249.0 248.6 231.6 197.2 147.8 138.7
Investment advisory fees -
Insurance Assets 68.5 82.5 83.6 88.9 87.5 65.4 62.7
Other revenue and fees 76.3 92.5 106.6 115.9 99.2 75.9 64.9
Net investment income 72.8 67.0 56.9 57.7 53.6 40.8 37.9
------- ------- ------- ------- ------- ------- -------
Operating Revenue 447.5 491.0 495.6 494.2 437.4 329.9 304.2
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses*:
Operating and administrative
expenses 366.2 366.9 350.2 375.4 364.8 276.5 261.1
Taxes, licenses and fees 12.4 15.9 16.4 17.1 22.2 16.5 14.5
------- ------- ------- ------- ------- ------- -------
Subtotal 378.5 382.7 366.6 392.5 387.0 293.0 275.6
Other intangibles amortization 17.6 18.8 17.7 16.3 10.8 8.5 6.2
------- ------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 396.1 401.5 384.3 408.7 397.8 301.5 281.8
Goodwill amortization 15.5 16.3 16.2 16.2 16.2 12.2 0.0
Interest 0.1 0.4 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 411.8 418.2 400.5 425.0 414.1 313.6 281.8
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax 35.8 72.8 95.1 69.2 23.4 16.2 22.3
Federal income taxes 17.7 28.9 34.1 25.1 8.7 6.7 3.7
------- ------- ------- ------- ------- ------- -------
Income from Operations 18.1 43.9 61.0 44.1 14.6 9.6 18.6
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 7.0 0.5 (0.1) (2.5) (2.4) (1.7) (2.6)
Gains (losses) on derivatives 0.0 0.0 0.0
Restructuring charges 0.0 0.0 (9.2) (4.6) (0.4) 0.0 0.3
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes 25.1 44.4 51.6 37.0 11.9 7.9 16.3
Cumulative effect of accounting
changes (0.1) (0.1)
------- ------- ------- ------- ------- ------- -------
Net Income 25.1 44.4 51.6 37.0 11.8 7.8 16.3
======= ======= ======= ======= ======= ======= =======
Income from Operations-
before Goodwill Amortization 33.6 60.3 77.2 60.3 30.9 21.7 18.6
before Goodwill & Intang. Amort 45.2 72.6 88.7 70.9 37.9 27.3 22.7
Net Income -before Goodwill
Amortization 40.6 60.8 67.9 53.2 28.0 19.9 16.3
Net Income -before Goodwill &
Intang. Amort. 52.2 73.1 79.4 63.8 35.0 25.5 20.4
Operating Revenue 447.5 491.0 495.6 494.2 437.4 329.9 304.2
Realized gains (losses) on
investments 11.6 0.9 (0.1) (3.9) (3.7) (2.6) (4.0)
Gains (losses) on derivatives
------- ------- ------- ------- ------- ------- -------
Total Revenue 459.1 491.9 495.5 490.3 433.7 327.2 300.2
======= ======= ======= ======= ======= ======= =======
Average Capital (Securities at
Cost) 653.3 642.3 593.9 575.2 543.7 544.8 560.6
Return on Capital 2.8% 6.8% 10.3% 7.7% 2.7% 2.3% 4.4%
* Does not include restructuring charges which is consistent with the definition of "Income from
Operations" (see page 5).
PAGE 27
Investment Management
Income Statements
Unaudited [Millions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
-------- -------- -------- -------- -------- --------
Operating Revenue
Investment advisory fees -
External 60.3 60.0 57.9 56.9 56.7 50.5
Investment advisory fees -
Insurance Assets 22.1 21.0 22.3 22.5 23.1 22.1
Other revenue and fees 29.8 31.9 31.0 26.4 26.6 26.3
Net investment income 13.9 13.0 12.6 18.3 13.8 14.1
-------- -------- -------- -------- -------- --------
Operating Revenue 26.1 126.0 123.8 124.1 120.2 113.0
-------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses*:
Operating and administrative
expenses 88.4 92.7 90.5 96.3 95.9 94.3
Taxes, licenses and fees 3.6 5.5 4.8 3.6 3.2 6.4
-------- -------- -------- -------- -------- --------
Subtotal 92.0 98.2 95.3 99.9 99.1 100.8
Other intangibles amortization 4.4 4.4 4.0 4.0 4.0 4.0
-------- -------- -------- -------- -------- --------
Total underwriting, acquisition,
insurance and other expenses 96.3 102.5 99.3 103.9 103.0 104.7
Goodwill amortization 4.1 4.1 4.1 4.1 4.1 4.1
Interest 0.0 0.0 0.0 0.0 (0.0) 0.0
-------- -------- -------- -------- -------- --------
Operating Benefits & Expenses 100.4 106.6 103.3 107.9 107.1 108.8
-------- -------- -------- -------- -------- --------
Income from Operations Before Tax 25.7 19.4 20.5 16.2 13.1 4.2
Federal income taxes 9.1 7.0 7.4 6.3 4.4 1.8
-------- -------- -------- -------- -------- --------
Income from Operations 16.5 12.4 13.1 9.9 8.7 2.4
-------- -------- -------- -------- -------- --------
Realized gains (losses) on
investments 0.4 (0.1) (2.0) (0.2) (0.2) (0.5)
Gains (losses) on derivatives
Restructuring charges 2.9 0.0 (2.7) 0.0 (1.9) 0.0
-------- -------- -------- -------- -------- --------
Income before Accounting Changes 19.8 12.3 8.4 9.7 6.6 2.0
Cumulative effect of accounting
changes
-------- -------- -------- -------- -------- --------
Net Income 19.8 12.3 8.4 9.7 6.6 2.0
======== ======== ======== ======== ======== ========
Inc from Oper -before
Goodwill Amortization 20.6 16.5 17.1 14.0 12.7 6.5
Inc from Oper -before
Goodwill & Intang. Amort 23.3 19.4 19.7 16.6 15.2 9.1
Net Income -before
Goodwill Amortization 23.9 16.4 12.4 13.7 10.6 6.0
Net Income -before
Goodwill & Intang. Amort 26.6 19.2 15.0 16.3 13.1 8.6
Operating Revenue 126.1 126.0 123.8 124.1 120.2 113.0
Realized gains (losses) on
investments 0.6 (0.2) (3.1) (0.4) (0.3) (0.7)
Gains (losses) on derivatives 0.0
-------- -------- -------- -------- -------- --------
Total Revenue 126.6 125.8 120.7 123.8 120.0 112.3
======== ======== ======== ======== ======== ========
Average Capital (Securities at
Cost) 84.2 581.5 593.0 567.7 558.5 548.3
Return on Capital 11.3% 8.6% 8.8% 7.0% 6.2% 1.8%
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
-------- -------- -------- -------- -------- --------
Operating Revenue
Investment advisory fees -
External 51.1 46.2 49.3 48.0 47.8 42.9
Investment advisory fees -
Insurance Assets 21.6 21.8 22.0 21.2 20.7 20.8
Other revenue and fees 25.7 23.9 23.4 23.0 22.0 19.9
Net investment income 13.0 13.6 12.8 12.8 12.7 12.4
-------- -------- -------- -------- -------- --------
Operating Revenue 111.4 105.5 107.6 105.1 103.1 96.0
-------- -------- -------- -------- -------- --------
Operating Benefits and Expenses
Underwriting, acquisition,
insurance and other expenses*:
Operating and administrative
expenses 94.1 88.0 88.4 86.9 87.6 86.6
Taxes, licenses and fees 5.3 4.8 5.7 6.3 5.3 2.9
-------- -------- -------- -------- -------- --------
Subtotal 99.4 92.8 94.1 93.2 92.9 89.5
Other intangibles amortization 2.3 2.3 2.3 2.2 2.0 2.0
-------- -------- -------- -------- -------- --------
Total underwriting, acquisition,
insurance and other expenses 101.6 95.1 96.4 95.4 95.0 91.5
Goodwill amortization 4.1 4.1 4.1 0.0 0.0 0.0
Interest 0.0 0.0 0.0 0.0 0.0 0.0
-------- -------- -------- -------- -------- --------
Operating Benefits & Expenses 105.7 99.2 100.4 95.4 95.0 91.5
-------- -------- -------- -------- -------- --------
Income from Operations Before Tax 5.7 6.3 7.1 9.7 8.1 4.6
Federal income taxes 2.0 2.9 2.1 1.7 1.5 0.6
-------- -------- -------- -------- -------- --------
Income from Operations 3.7 3.5 5.1 8.0 6.6 4.0
-------- -------- -------- -------- -------- --------
Realized gains (losses) on
investments (0.7) (0.5) (0.7) (1.0) (0.4) (1.2)
Gains (losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring charges 0.0 0.0 (0.4) 0.0 0.0 0.3
-------- -------- -------- -------- -------- --------
Income before Accounting Changes 3.0 2.9 4.0 7.0 6.2 3.1
Cumulative effect of accounting
changes (0.1) 0.0 0.0 0.0 0.0 0.0
-------- -------- -------- -------- -------- --------
Net Income 2.9 2.9 4.0 7.0 6.2 3.1
======== ======== ======== ======== ======== ========
Inc from Oper -before
Goodwill Amortization 7.7 7.5 9.1 8.0 6.6 4.0
Inc from Oper -before
Goodwill & Intang. Amort 9.2 9.0 10.6 9.4 7.9 5.3
Net Income -before
Goodwill Amortization 6.9 7.0 8.1 7.0 6.2 3.1
Net Income -before
Goodwill & Intang. Amort 8.4 8.5 9.5 8.4 7.5 4.4
Operating Revenue 111.4 105.5 107.6 105.1 103.1 96.0
Realized gains (losses) on
investments (1.1) (0.8) (1.1) (1.5) (0.7) (1.8)
Gains (losses) on derivatives 0.0
-------- -------- -------- -------- -------- --------
Total Revenue 110.3 104.7 106.5 103.5 102.4 94.3
======== ======== ======== ======== ======== ========
Average Capital (Securities at
Cost) 542.8 543.1 540.6 546.1 568.6 567.1
Return on Capital 2.7% 2.5% 3.8% 5.8% 4.6% 2.8%
* Does not include restructuring charges which is consistent with the definition of "Income from Operations"
(see page 5).
PAGE 28
Investment Management
Assets Under Management Roll
Forward
Unaudited [Billions of Dollars]
YTD YTD
Sep Sep
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Retail Fixed - Bal Beg-of-Year 5.853 8.125 8.217 7.423 6.608 6.608 7.120
Fund Sales 0.961 1.165 0.991 0.770 0.876 0.658 0.890
Redemptions (1.271) (1.235) (1.424) (1.401) (1.050) (0.809) (0.873)
Net Money Market (0.069) (0.140) (0.110) (0.207) (0.047) (0.015) (0.014)
Transfers (0.220) 0.132 0.177 (0.168) 0.403 0.432 0.114
------- ------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.599) (0.078) (0.366) (1.006) 0.183 0.266 0.117
Market 0.324 0.170 (0.428) 0.097 0.329 0.331 0.279
Acquisitions/addition of Assets
under Administration(1) 2.547 0.094
------- ------- ------- ------- ------- ------- -------
Balance End-of-Year 8.125 8.217 7.423 6.608 7.120 7.205 7.515
------- ------- ------- ------- ------- ------- -------
Retail Equity - Bal Beg-of-Year 13.152 17.754 22.080 23.384 21.523 21.523 17.987
Fund Sales 2.953 3.581 3.271 4.116 2.816 2.236 3.133
Redemptions (1.926) (2.460) (4.971) (4.431) (2.839) (2.231) (2.808)
Net Money Market 0.000 (0.002) (0.001) 0.001 0.000
Transfers 0.209 0.730 (0.143) (0.178) (0.538) (0.557) (0.137)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows(1) 1.236 1.849 (1.844) (0.493) (0.561) (0.553) 0.189
Market 3.323 2.476 3.148 (1.710) (2.974) (5.099) (4.476)
Acquisitions/addition of Assets
under Administration(1) 0.043 0.342
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 17.754 22.080 23.384 21.523 17.987 15.871 13.700
------- ------- ------- ------- ------- ------- -------
Total Retail - Bal Beg-of-Year 19.005 25.879 30.297 30.807 28.130 28.130 25.107
Retail Sales-Annuities 2.163 2.238 1.561 1.782 1.702 1.378 1.946
Retail Sales-Mutual Funds 1.218 1.913 2.153 2.578 1.522 1.174 1.430
Retail Sales-Managed Acct. &
Other 0.533 0.596 0.550 0.525 0.468 0.342 0.647
------- ------- ------- ------- ------- ------- -------
Total Retail Sales 3.914 4.747 4.264 4.886 3.692 2.894 4.023
Redemptions (3.197) (3.695) (6.395) (5.833) (3.889) (3.040) (3.681)
Net Money Market (0.068) (0.141) (0.111) (0.206) (0.047) (0.015) (0.014)
Transfers (0.011) 0.862 0.034 (0.346) (0.135) (0.126) (0.022)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows(1) 0.637 1.773 (2.208) (1.499) (0.379) (0.287) 0.305
Market 3.647 2.647 2.720 (1.613) (2.645) (4.768) (4.197)
Acquisitions/addition of Assets
under Administration(1) 2.590 0.435
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 25.879 30.297 30.807 28.130 25.107 23.076 21.215
------- ------- ------- ------- ------- ------- -------
----------------------------------------------------------------------------------------------------------------
Institutional Fixed - Bal
Beg-of-Year 3.580 5.708 6.955 6.936 6.111 6.111 5.490
Inflows 2.509 2.169 2.000 0.771 0.643 0.563 1.997
Withdrawals/Terminations (0.787) (1.242) (1.699) (1.973) (1.228) (1.037) (0.708)
Transfers 0.013 (0.074) (0.001) (0.005) 0.017 0.014 0.006
------- ------- ------- ------- ------- ------- -------
Net Cash Flows 1.735 0.853 0.300 (1.207) (0.568) (0.460) 1.296
Market 0.343 0.394 (0.319) 0.382 (0.053) (0.011) 0.421
Acquisitions 0.051
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 5.708 6.955 6.936 6.111 5.490 5.640 7.207
------- ------- ------- ------- ------- ------- -------
Institutional Equity - Bal
Beg-of-Year 22.886 24.871 24.235 23.631 19.112 19.112 17.814
Inflows 2.465 3.840 5.248 2.730 3.182 2.567 1.873
Withdrawals/Terminations (6.447) (7.441) (7.801) (7.209) (2.878) (2.255) (1.670)
Transfers (0.068) 0.047 0.011 (0.008) 0.036 0.020 0.036
------- ------- ------- ------- ------- ------- -------
Net Cash Flows (4.049) (3.555) (2.542) (4.487) 0.340 0.332 0.238
Market 6.035 2.919 1.938 (0.032) (1.638) (3.203) (3.118)
Acquisitions
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 24.871 24.235 23.631 19.112 17.814 16.241 14.935
------- ------- ------- ------- ------- ------- -------
Total Institutional - Bal
Beg-of-Year 26.465 30.579 31.191 30.568 25.223 25.223 23.304
Inflows 4.975 6.009 7.248 3.501 3.825 3.130 3.870
Withdrawals/Terminations (7.234) (8.683) (9.500) (9.182) (4.106) (3.292) (2.378)
Transfers (0.055) (0.027) 0.010 (0.014) 0.053 0.034 0.042
------- ------- ------- ------- ------- ------- -------
Net Cash Flows (2.314) (2.702) (2.242) (5.694) (0.228) (0.128) 1.534
Market 6.377 3.313 1.619 0.350 (1.691) (3.214) (2.697)
Acquisitions 0.051
------- ------- ------- ------- ------- ------- -------
Balance at End-of-Year 30.579 31.191 30.568 25.223 23.304 21.881 22.142
Total Retail/Institutional - At ------- ------- ------- ------- ------- ------- -------
End-of-Year 56.458 61.488 61.375 53.354 48.411 44.957 43.357
------- ------- ------- ------- ------- ------- -------
Insurance Assets - At End-of-Year 35.684 39.432 35.934 35.686 38.119 37.337 40.416
------- ------- ------- ------- ------- ------- -------
Total Assets Under Management
------- ------- ------- ------- ------- ------- -------
At End-of-Year 92.142 100.920 97.309 89.040 86.530 82.294 83.773
======= ======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets under administration for
which the segment receives asset based revenues beginning in January of 2000. Net Cash Flows from
Assets Under Administration are: 0.018 0.081 0.047 0.196
PAGE 29
Investment Management
Assets Under Management Roll
Forward
Unaudited [Billions of Dollars]
Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Retail Fixed - Bal-Beg-of-Qtr 7.680 7.424 7.057 6.764 6.631 6.606
Fund Sales 0.181 0.168 0.166 0.223 0.212 0.248
Redemptions (0.403) (0.456) (0.339) (0.328) (0.277) (0.261)
Net Money Market (0.030) (0.067) (0.058) (0.031) (0.051) 0.010
Transfers 0.154 (0.102) (0.046) (0.031) 0.010 0.047
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.098) (0.457) (0.277) (0.167) (0.106) 0.044
Market (0.158) (0.003) (0.017) 0.035 0.081 0.100
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.094 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 7.424 7.057 6.764 6.631 6.606 6.750
------- ------- ------- ------- ------- -------
Retail Equity - Bal-Beg-of-Qtr 20.873 23.383 24.478 23.496 24.047 21.523
Fund Sales 0.894 1.234 0.884 0.927 1.071 0.916
Redemptions (1.120) (1.565) (0.989) (1.040) (0.837) (0.911)
Net Money Market 0.000 0.000 0.000 0.001 0.000 0.000
Transfers (0.086) (0.091) 0.018 (0.036) (0.069) (0.070)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.312) (0.423) (0.087) (0.148) 0.165 (0.064)
Market 2.822 1.176 (0.895) 0.699 (2.689) (3.205)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.342 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 23.383 24.478 23.496 24.047 21.523 18.254
------- ------- ------- ------- ------- -------
Total Retail - Bal-Beg-of-Qtr 28.553 30.807 31.535 30.260 30.679 28.130
Retail Sales-Annuities 0.409 0.379 0.358 0.456 0.589 0.542
Retail Sales-Mutual Funds 0.587 0.876 0.586 0.554 0.562 0.484
Retail Sales-Managed Acct. &
Other 0.079 0.148 0.106 0.140 0.131 0.140
------- ------- ------- ------- ------- -------
Total Retail Sales 1.075 1.403 1.050 1.150 1.283 1.166
Redemptions (1.523) (2.021) (1.329) (1.368) (1.114) (1.172)
Net Money Market (0.030) (0.067) (0.058) (0.030) (0.051) 0.010
Transfers 0.068 (0.193) (0.027) (0.067) (0.059) (0.023)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.410) (0.879) (0.364) (0.315) 0.059 (0.019)
Market 2.664 1.173 (0.911) 0.734 (2.608) (3.105)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.435 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 30.807 31.535 30.260 30.679 28.130 25.004
------- ------- ------- ------- ------- -------
Institutional Fixed -
Bal-Beg-of-Qtr 7.218 6.937 6.873 6.485 6.276 6.112
Inflows 0.420 0.180 0.148 0.308 0.135 0.310
Withdrawals/Terminations (0.781) (0.353) (0.520) (0.532) (0.568) (0.432)
Transfers 0.001 (0.005) (0.001) 0.000 0.001 0.003
------- ------- ------- ------- ------- -------
Net Cash Flows (0.360) (0.178) (0.373) (0.224) (0.433) (0.119)
Market 0.079 0.114 (0.015) 0.015 0.269 (0.102)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 6.937 6.873 6.485 6.276 6.112 5.891
------- ------- ------- ------- ------- -------
Institutional Equity -
Bal-Beg-of-Qtr 23.098 23.631 20.304 20.241 19.044 19.113
Inflows 0.934 0.904 0.669 0.407 0.750 0.881
Withdrawals/Terminations (2.043) (3.333) (1.354) (1.154) (1.368) (1.199)
Transfers (0.010) (0.004) 0.002 (0.013) 0.007 0.019
------- ------- ------- ------- ------- -------
Net Cash Flows (1.119) (2.433) (0.683) (0.760) (0.611) (0.299)
Market 1.652 (0.894) 0.620 (0.438) 0.680 (1.502)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 23.631 20.304 20.241 19.044 19.113 17.312
------- ------- ------- ------- ------- -------
Total Institutional -
Bal-Beg-of-Qtr 30.316 30.568 27.177 26.726 25.320 25.225
Inflows 1.354 1.084 0.817 0.715 0.885 1.191
Withdrawals/Terminations (2.824) (3.686) (1.874) (1.686) (1.936) (1.631)
Transfers (0.009) (0.009) 0.001 (0.012) 0.008 0.022
------- ------- ------- ------- ------- -------
Net Cash Flows (1.479) (2.611) (1.056) (0.983) (1.043) (0.418)
Market 1.731 (0.780) 0.605 (0.423) 0.949 (1.604)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 30.568 27.177 26.726 25.320 25.225 23.203
------- ------- ------- ------- ------- -------
Total Retail/Inst - At End-of-Qtr 61.375 58.712 56.986 55.998 53.355 48.208
Insurance Assets-End-of-Qtr 35.934 35.541 34.891 34.981 35.686 36.324
Total Assets Under Management ------- ------- ------- ------- ------- -------
At End-of-Qtr 97.309 94.253 91.877 90.979 89.041 84.532
======= ======= ======= ======= ======= =======
0.006 0.000 0.011 0.001 0.027
Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Retail Fixed - Bal-Beg-of-Qtr 6.750 6.767 7.205 7.120 7.087 7.168
Fund Sales 0.204 0.206 0.218 0.292 0.272 0.325
Redemptions (0.286) (0.262) (0.242) (0.291) (0.306) (0.277)
Net Money Market (0.030) 0.005 (0.031) (0.003) (0.002) (0.009)
Transfers (0.003) 0.388 (0.027) (0.040) 0.021 0.134
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.115) 0.337 (0.083) (0.042) (0.015) 0.173
Market 0.131 0.101 (0.002) 0.009 0.096 0.174
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 6.767 7.205 7.120 7.087 7.168 7.515
------- ------- ------- ------- ------- -------
Retail Equity - Bal-Beg-of-Qtr 18.254 19.754 15.871 17.988 18.254 16.610
Fund Sales 0.681 0.638 0.580 0.910 1.084 1.140
Redemptions (0.667) (0.654) (0.607) (0.791) (0.881) (1.137)
Net Money Market 0.000 0.000 0.000 0.000 0.000 0.000
Transfers (0.046) (0.441) 0.019 0.014 (0.022) (0.128)
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.032) (0.456) (0.008) 0.133 0.182 (0.126)
Market 1.532 (3.427) 2.125 0.134 (1.826) (2.785)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 19.754 15.871 17.988 18.254 16.610 13.700
------- ------- ------- ------- ------- -------
Total Retail - Bal-Beg-of-Qtr 25.004 26.521 23.076 25.108 25.342 23.778
Retail Sales-Annuities 0.403 0.434 0.324 0.590 0.601 0.756
Retail Sales-Mutual Funds 0.354 0.335 0.348 0.452 0.562 0.416
Retail Sales-Managed Acct. &
Other 0.127 0.074 0.126 0.160 0.194 0.293
------- ------- ------- ------- ------- -------
Total Retail Sales 0.884 0.843 0.798 1.202 1.356 1.465
Redemptions (0.952) (0.915) (0.850) (1.082) (1.186) (1.414)
Net Money Market (0.030) 0.005 (0.031) (0.003) (0.002) (0.009)
Transfers (0.049) (0.053) (0.008) (0.027) (0.001) 0.006
------- ------- ------- ------- ------- -------
Net Cash Flows(1) (0.148) (0.120) (0.091) 0.091 0.167 0.048
Market 1.663 (3.326) 2.123 0.143 (1.730) (2.611)
Acquisitions/addition of Assets
under Admin.(1) 0.000 0.000 0.000 0.000 0.000 0.000
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 26.521 23.076 25.108 25.342 23.778 21.215
------- ------- ------- ------- ------- -------
Institutional Fixed -
Bal-Beg-of-Qtr 5.891 5.810 5.640 5.490 6.018 6.844
Inflows 0.233 0.020 0.080 0.804 0.663 0.530
Withdrawals/Terminations (0.112) (0.493) (0.191) (0.239) (0.161) (0.308)
Transfers 0.010 0.001 0.002 (0.001) 0.000 0.007
------- ------- ------- ------- ------- -------
Net Cash Flows 0.131 (0.472) (0.109) 0.564 0.503 0.229
Market (0.212) 0.302 (0.041) (0.036) 0.323 0.134
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 5.810 5.640 5.490 6.018 6.844 7.207
------- ------- ------- ------- ------- -------
Institutional Equity -
Bal-Beg-of-Qtr 17.312 18.406 16.241 17.814 18.641 18.116
Inflows 0.823 0.863 0.615 0.672 0.569 0.631
Withdrawals/Terminations (0.501) (0.555) (0.624) (0.512) (0.635) (0.523)
Transfers (0.008) 0.009 0.016 0.006 0.018 0.011
------- ------- ------- ------- ------- -------
Net Cash Flows 0.314 0.317 0.007 0.166 (0.047) 0.120
Market 0.780 (2.482) 1.566 0.661 (0.477) (3.301)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 18.406 16.241 17.814 18.641 18.116 14.935
------- ------- ------- ------- ------- -------
Total Institutional -
Bal-Beg-of-Qtr 23.203 24.216 21.881 23.304 24.659 24.960
Inflows 1.056 0.883 0.695 1.476 1.232 1.162
Withdrawals/Terminations (0.613) (1.048) (0.815) (0.751) (0.796) (0.831)
Transfers 0.002 0.010 0.018 0.005 0.019 0.018
------- ------- ------- ------- ------- -------
Net Cash Flows 0.445 (0.155) (0.102) 0.730 0.455 0.349
Market 0.568 (2.180) 1.525 0.625 (0.154) (3.167)
------- ------- ------- ------- ------- -------
Balance at End-of-Qtr 24.216 21.881 23.304 24.659 24.960 22.142
------- ------- ------- ------- ------- -------
Total Retail/Inst - At End-of-Qtr 50.736 44.957 48.412 50.001 48.738 43.357
Insurance Assets-End-of-Qtr 36.018 37.337 38.119 37.171 38.476 40.416
Total Assets Under Management ------- ------- ------- ------- ------- -------
At End-of-Qtr 86.754 82.294 86.531 87.172 87.214 83.773
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets under administration for
which the segment receives asset based revenues beginning in January of 2000. Net Cash Flows from
Assets Under Administration are: 0.013 0.007 0.034 0.090 0.061 0.045
PAGE 30
Lincoln UK
Income Statements
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 145.4 156.6 145.1 148.4 46.1 34.2 36.5
Mortality assessments 25.2 29.3 27.1 31.4 33.9 26.8 23.5
Expense assessments 166.1 153.6 182.3 178.1 134.8 110.7 82.4
Other revenue and fees 3.3 11.2 13.8 6.9 1.3 0.7 2.4
Net investment income 85.1 87.9 75.3 70.3 64.8 49.6 45.5
------- ------- ------- ------- ------- ------- -------
Operating Revenue 425.2 438.6 443.6 435.0 280.9 222.0 190.3
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 339.6 151.0 306.2 178.5 83.4 62.6 61.1
Underwriting, acquisition,
insurance and other expenses*:
Commissions 58.4 52.6 54.5 37.7 10.8 8.9 4.8
Operating and administrative
expenses 159.5 125.8 153.0 140.5 80.0 56.0 54.5
------- ------- ------- ------- ------- ------- -------
Subtotal 217.9 178.5 207.4 178.2 90.8 64.8 59.3
Deferral of acquisition costs - - - - (4.2) (3.3) (2.8)
DAC amortization - - - - 38.5 32.6 26.9
------- ------- ------- ------- ------- ------- -------
DAC deferral net of amortization (33.4) (16.0) (12.4) (2.8) 34.3 29.3 24.2
PVIF amortization - 13.2 28.4 4.7 22.5 16.9 25.2
Other intangibles amortization - - - - - - -
------- ------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 184.5 175.6 223.5 180.0 147.6 111.1 108.7
Goodwill amortization - 6.3 7.0 4.0 0.6 0.5 -
Interest - - - - - - -
------- ------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 524.1 332.9 536.7 362.6 231.7 174.1 169.8
------- ------- ------- ------- ------- ------- -------
Income from Operations Before Tax (99.0) 105.8 (93.1) 72.4 49.2 47.8 20.5
Federal income taxes 9.3 34.8 (79.2) 11.3 (11.1) 7.1 (0.6)
------- ------- ------- ------- ------- ------- -------
Income from Operations (108.3) 70.9 (13.9) 61.0 60.2 40.7 21.1
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.5 0.8 2.1 2.3 8.7 5.7 0.5
Restructuring charges 0.0 0.0 (6.5) (76.5) 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes (106.8) 71.7 (18.2) (13.2) 68.9 46.4 21.5
Cumulative effect of accounting
changes 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Net Income (106.8) 71.7 (18.2) (13.2) 68.9 46.4 21.5
======= ======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. (108.3) 77.2 (6.9) 65.1 60.9 41.2 21.1
Net Income -before Goodwill
Amort. (106.8) 78.0 (11.3) (9.2) 69.6 46.9 21.5
Effective tax rate (9.4%) 32.9% 85.1% 15.7% (22.5%) 14.8% (3.0%)
Operating revenue 425.2 438.6 443.6 435.0 280.9 222.0 190.3
Realized gains (losses) on
investments 2.1 1.1 3.0 3.2 12.4 8.1 0.7
Gains(losses) on derivatives 0.0 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Total Revenue 427.3 439.7 446.6 438.2 293.3 230.1 190.9
======= ======= ======= ======= ======= ======= =======
Average capital 618.1 517.7 551.2 488.2 559.7 559.1 498.5
Return on average capital (17.5%) 13.7% (2.5%) 12.5% 10.8% 9.7% 5.6%
----------------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 635.0 635.0 587.3
Deferral 4.2 3.3 2.8
Amortization (38.5) (32.6) (26.9)
------- ------- -------
Operating (34.3) (29.3) (24.2)
Foreign currency translation
adjustment (16.0) (8.8) 43.2
Other 2.7 (7.2) (34.6)
------- ------- -------
Balance at end-of-year 587.3 589.7 571.8
======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 273.6 273.6 244.0
Amortization (22.5) (16.9) (25.2)
Foreign currency translation
adjustment (7.0) (3.9) 18.0
Other ------- ------- -------
Balance at end-of-year 244.0 252.8 236.8
======= ======= =======
* Does not include restructuring charges which is consistent with the definition of "Income from Operations"
(see page 5).
PAGE 31
Lincoln UK
Income Statements
Unaudited [Millions of Dollars]
For the Quarter Ended Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 38.7 39.0 36.3 32.5 40.5 12.8
Mortality assessments 5.0 6.3 8.0 9.6 7.5 9.4
Expense assessments 37.2 46.5 44.3 52.6 34.6 43.7
Other revenue and fees 3.8 2.4 1.3 2.0 1.3 0.6
Net investment income 17.7 18.9 18.5 16.1 16.7 17.9
------- ------- ------- ------- ------- -------
Operating Revenue 102.4 113.2 108.4 112.8 100.6 84.4
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 211.8 35.0 37.4 51.9 54.2 24.0
Underwriting, acquisition,
insurance and other expenses*:
Commissions 14.8 13.8 11.1 9.3 3.5 3.0
Operating and administrative expenses 34.1 44.9 36.9 39.4 19.3 18.7
------- ------- ------- ------- ------- -------
Subtotal 48.9 58.8 48.0 48.7 22.7 21.7
Deferral of acquisition costs - - - - - (0.9)
DAC amortization - - - - - 14.6
------- ------- ------- ------- ------- -------
DAC deferral net of amortization (8.8) (3.7) (7.6) (4.6) 13.1 13.7
PVIF amortization 11.3 1.3 3.1 1.2 (0.9) 5.8
Other intangibles amortization - - - - - -
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 51.4 56.4 43.5 45.2 34.9 41.1
Goodwill amortization 3.3 1.3 1.3 1.2 0.2 0.2
Interest - - - - - -
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 266.6 92.8 82.2 98.3 89.3 65.3
------- ------- ------- ------- ------- -------
Income from Operations Before Tax (164.2) 20.4 26.2 14.5 11.3 19.1
Federal income taxes (97.1) 4.7 6.9 3.9 (4.2) 4.7
------- ------- ------- ------- ------- -------
Income from Operations (67.1) 15.7 19.3 10.6 15.5 14.4
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.0 (0.2) (0.1) (0.0) 2.6 0.4
Restructuring charges (6.5) 0.0 0.0 (40.5) (36.1) 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes (72.6) 15.5 19.1 (29.9) (17.9) 14.8
Cumulative effect of accounting
changes
------- ------- ------- ------- ------- -------
Net Income (72.6) 15.5 19.1 (29.9) (17.9) 14.8
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. (63.8) 17.1 20.5 11.8 15.7 14.5
Net Income -before Goodwill
Amort. (69.3) 16.8 20.4 (28.7) (17.8) 14.9
Effective tax rate 59.1% 22.9% 26.4% 27.2% (37.1%) 24.6%
Operating revenue 102.4 113.2 108.4 112.8 100.6 84.4
Realized gains (losses) on
investments 1.4 (0.4) (0.2) (0.0) 3.8 0.6
------- ------- ------- ------- ------- -------
Total Revenue 103.8 112.8 108.2 112.8 104.3 84.9
======= ======= ======= ======= ======= =======
Average capital 585.0 516.4 500.8 486.5 448.9 548.7
Return on average capital (45.9%) 12.2% 15.4% 8.7% 13.8% 10.5%
--------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 635.0
Deferral 0.9
Amortization (14.6)
------- ------- ------- ------- ------- -------
Operating (13.7)
Foreign currency translation
adjustment (32.4)
Other (3.8)
------- ------- ------- ------- ------- -------
Balance at end-of-year 585.1
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 273.6
Amortization (5.8)
Foreign currency translation adjustment (14.0)
Other
------- ------- ------- ------- ------- -------
Balance at end-of-year 253.8
======= ======= ======= ======= ======= =======
For the Quarter Ended Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Operating Revenue
Premiums 9.6 11.8 11.9 12.1 12.1 12.4
Mortality assessments 8.9 8.5 7.1 6.5 8.3 8.7
Expense assessments 31.4 35.5 24.1 25.3 27.8 29.4
Other revenue and fees 0.1 0.0 0.6 0.3 0.0 2.0
Net investment income 16.9 14.8 15.2 14.7 15.3 15.6
------- ------- ------- ------- ------- -------
Operating Revenue 66.9 70.7 58.9 58.8 63.4 68.1
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses
Benefits paid or provided:
Benefits 17.9 20.7 20.8 18.3 19.0 23.8
Underwriting, acquisition,
insurance and other expenses*:
Commissions 3.3 2.6 1.9 1.3 1.9 1.6
Operating and administrative expenses 17.6 19.7 24.1 16.6 18.3 19.6
------- ------- ------- ------- ------- -------
Subtotal 20.9 22.3 25.9 17.9 20.2 21.1
Deferral of acquisition costs (1.1) (1.3) (0.9) (0.9) (1.0) (0.9)
DAC amortization 8.0 9.9 6.0 7.2 8.4 11.3
------- ------- ------- ------- ------- -------
DAC deferral net of amortization 6.9 8.7 5.0 6.2 7.4 10.5
PVIF amortization 1.8 9.4 5.6 0.7 11.7 12.8
Other intangibles amortization - - - - - -
------- ------- ------- ------- ------- -------
Total underwriting, acquisition,
insurance and other expenses 29.7 40.3 36.5 24.9 39.3 44.5
Goodwill amortization 0.2 0.2 0.2 - - -
Interest - - - - - -
------- ------- ------- ------- ------- -------
Operating Benefits and Expenses 47.7 61.1 57.5 43.2 58.4 68.3
------- ------- ------- ------- ------- -------
Income from Operations Before Tax 19.1 9.6 1.4 15.6 5.1 (0.2)
Federal income taxes 2.9 (0.5) (18.1) 1.1 (1.6) (0.2)
------- ------- ------- ------- ------- -------
Income from Operations 16.2 10.1 19.5 14.4 6.7 (0.0)
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.4 3.9 3.0 (3.6) 3.2 0.9
Restructuring charges 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes 17.6 14.0 22.5 10.8 9.8 0.8
Cumulative effect of accounting
changes 0.0
------- ------- ------- ------- ------- -------
Net Income 17.6 14.0 22.5 10.8 9.8 0.8
======= ======= ======= ======= ======= =======
Inc from Oper -before Goodwill
Amort. 16.4 10.3 19.7 14.4 6.7 (0.0)
Net Income -before Goodwill
Amort. 17.8 14.2 22.7 10.8 9.8 0.8
Effective tax rate 15.3% (5.7%) (1337.4%) 7.3% (31.3%) 88.2%
Operating revenue 66.9 70.7 58.9 58.8 63.4 68.1
Realized gains (losses) on
investments 2.0 5.5 4.3 (5.1) 4.5 1.2
------- ------- ------- ------- ------- -------
Total Revenue 68.9 76.3 63.2 53.6 68.0 69.3
======= ======= ======= ======= ======= =======
Average capital 553.2 575.4 561.3 510.0 485.3 500.3
Return on average capital 11.7% 7.0% 13.9% 11.3% 5.5% (0.0%)
--------------------------------------------------------------------------------------------------------
Roll Forward of Deferred
Acquisition Costs
Balance at beginning-of-year 585.1 583.4 589.7 587.3 569.4 591.0
Deferral 1.1 1.3 0.9 0.9 1.0 0.9
Amortization (8.0) (9.9) (6.0) (7.2) (8.4) (11.3)
------- ------- ------- ------- ------- -------
Operating (6.9) (8.7) (5.0) (6.2) (7.5) (10.5)
Foreign currency translation
adjustment (0.2) 23.8 (7.2) (12.2) 41.7 13.8
Other 5.4 (8.8) 9.9 0.5 (12.6) (22.5)
------- ------- ------- ------- ------- -------
Balance at end-of-year 583.4 589.7 587.3 569.4 591.0 571.8
======= ======= ======= ======= ======= =======
Roll Forward of Present Value of
In-Force
Balance at beginning-of-year 253.8 251.9 252.8 244.0 238.3 243.9
Amortization (1.8) (9.4) (5.6) (0.7) (11.7) (12.8)
Foreign currency translation adjustment (0.1) 10.3 (3.2) (5.1) 17.4 5.7
Other
------- ------- ------- ------- ------- -------
Balance at end-of-year 251.9 252.8 244.0 238.3 243.9 236.8
======= ======= ======= ======= ======= =======
* Does not include restructuring charges which is consistent with the definition of "Income from
Operations" (see page 5).
PAGE 32
Lincoln UK
Operational Data
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Unit Linked Assets - Beg-of-Year
(Billions) 5.074 5.643 6.265 7.220 6.441 6.441 5.607
Deposits 0.569 0.473 0.537 0.554 0.481 0.370 0.349
Withdrawals (incl. chgs) & Deaths (0.503) (0.547) (0.566) (0.644) (0.529) (0.413) (0.390)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows 0.066 (0.074) (0.029) (0.090) (0.048) (0.044) (0.041)
Inv Inc & Chg in Mkt Val 0.682 0.662 1.154 (0.154) (0.617) (1.074) (1.150)
Acq of new business/companies 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Foreign currency adjustment (0.179) 0.035 (0.170) (0.536) (0.169) (0.106) 0.409
------- ------- ------- ------- ------- ------- -------
Unit Linked Assets - End-of-Year 5.643 6.265 7.220 6.441 5.607 5.218 4.825
======= ======= ======= ======= ======= ======= =======
Individual Life In-force
(Billions) 25.026 25.002 25.698 24.290 20.878 21.299 19.815
Exchange Rate - Dollars to Pounds
For-the-Period 1.644 1.658 1.617 1.518 1.441 1.439 1.481
End-of-Period 1.651 1.660 1.615 1.493 1.456 1.474 1.569
For the Quarter Ended Dec Mar Jun Sep Dec Mar Jun
1999 2000 2000 2000 2000 2001 2001
------- ------- ------- ------- ------- ------- -------
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 6.568 7.220 7.031 6.726 6.499 6.441 5.677
Deposits 0.156 0.159 0.134 0.145 0.116 0.132 0.111
Withdrawals (incl. chgs) & Deaths (0.158) (0.170) (0.162) (0.159) (0.153) (0.147) (0.131)
------- ------- ------- ------- ------- ------- -------
Net Cash Flows (0.002) (0.011) (0.028) (0.014) (0.037) (0.015) (0.020)
Inv Inc & Chg in Mkt Val 0.784 (0.077) 0.047 (0.025) (0.100) (0.421) 0.115
Acq of new business/companies
Foreign currency adjustment (0.130) (0.101) (0.324) (0.189) 0.078 (0.328) (0.004)
------- ------- ------- ------- ------- ------- -------
Unit Linked Assets -
End-of-Quarter 7.220 7.031 6.726 6.499 6.441 5.677 5.768
======= ======= ======= ======= ======= ======= =======
Individual Life In-force
(Billions) 25.698 26.514 25.225 24.535 24.290 21.894 21.519
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.625 1.599 1.536 1.482 1.454 1.455 1.421
End-of-Quarter 1.615 1.591 1.517 1.475 1.493 1.416 1.415
For the Quarter Ended Sep Dec Mar Jun Sep
2001 2001 2002 2002 2002
------- ------- ------- ------- -------
Unit Linked Assets
Balance-Beg-of-Quarter (Billions) 5.768 5.218 5.607 5.618 5.520
Deposits 0.128 0.111 0.114 0.115 0.119
Withdrawals (incl. chgs) & Deaths (0.136) (0.115) (0.127) (0.137) (0.126)
------- ------- ------- ------- -------
Net Cash Flows (0.009) (0.004) (0.013) (0.022) (0.006)
Inv Inc & Chg in Mkt Val (0.768) 0.457 0.141 (0.479) (0.812)
Acq of new business/companies
Foreign currency adjustment 0.226 (0.063) (0.117) 0.403 0.123
------- ------- ------- ------- -------
Unit Linked Assets -
End-of-Quarter 5.218 5.607 5.618 5.520 4.825
======= ======= ======= ======= =======
Individual Life In-force
(Billions) 21.299 20.878 20.010 20.401 19.815
Exchange Rate - Dollars to Pounds
For-the-Quarter 1.442 1.448 1.423 1.464 1.555
End-of-Quarter 1.474 1.456 1.426 1.532 1.569
PAGE 33
Other Operations
Unaudited [Millions of Dollars]
YTD YTD
Sep Sep
For the Year Ended December 31 1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 125.3 286.4 317.0 377.5 360.7 244.0 228.4
Lincoln Financial Distributors 20.5 33.5 107.5 119.9 113.4 78.4 90.5
------- ------- ------- ------- ------- ------- -------
Total Distribution 145.8 319.9 424.4 497.4 474.0 322.4 318.9
Reinsurance 1362.3 1581.2 1824.1 1770.6 1699.4 1433.8 0.0
Amortization of deferred gain on
indemnity reinsurance* 20.4 0.0 68.3
Other [Including
Consolidating Adjustments] (105.9) (192.7) (277.5) (292.6) (360.4) (261.7) (131.3)
------- ------- ------- ------- ------- ------- -------
Operating Revenue 1402.2 1708.3 1971.0 1975.4 1833.4 1494.4 255.9
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 42.1 0.5 14.4 (5.0) 8.2 (21.3) 23.1
Gains (losses) on derivatives (9.7) (0.0) 0.6
Gain on sale of reinsurance
subsidiaries 12.8 0.0 0.0
------- ------- ------- ------- ------- ------- -------
Total Revenue 1444.3 1708.9 1985.4 1970.4 1844.7 1473.0 279.6
======= ======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (5.3) (23.7) (20.8) (11.7) (15.9) (23.3) (24.8)
Lincoln Financial Distributors (11.2) (8.2) (14.0) (18.5) (30.7) (26.2) (26.2)
------- ------- ------- ------- ------- ------- -------
Total Distribution (16.5) (31.9) (34.8) (30.2) (46.6) (49.6) (51.1)
Reinsurance (150.1) 104.9 40.1 122.5 128.8 98.1 0.0
Amortization of deferred gain on
indemnity reinsurance* 12.9 44.4
LNC Financing (31.6) (51.5) (83.5) (84.9) (77.9) (63.2) (29.4)
Other Corporate (25.1) (17.5) (5.0) (15.4) (2.4) 3.0 (0.4)
------- ------- ------- ------- ------- ------- -------
Inc (Loss) from Operations (223.3) 4.0 (83.1) (8.0) 14.8 (11.7) (36.5)
------- ------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 24.9 2.7 10.2 (3.2) 5.9 (13.8) 15.9
Gains (losses) on derivatives (6.3) (0.0) 0.4
Gain on sale of reinsurance
subsidiaries 15.0 0.0 0.0
Reserve increase on business sold
through reinsurance (190.8)
Restructuring charges 0.0 (14.3) (3.2) 1.0 (19.5) (1.2) 1.1
------- ------- ------- ------- ------- ------- -------
Income before Accounting Changes (198.4) (7.6) (76.1) (10.2) 9.9 (26.8) (210.0)
Cumulative effect of accounting
changes (2.7) (2.7) 0.0
------- ------- ------- ------- ------- ------- -------
Total Net Income (Loss) (198.4) (7.6) (76.1) (10.2) 7.2 (29.4) (210.0)
======= ======= ======= ======= ======= ======= =======
Dec Mar Jun Sep Dec Mar
For the Quarter Ended 1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 104.0 86.4 90.0 91.3 109.8 81.2
Lincoln Financial Distributors 34.2 29.3 28.1 27.5 35.0 25.7
------- ------- ------- ------- ------- -------
Total Distribution 138.2 115.8 118.1 118.8 144.8 106.9
Reinsurance 575.1 392.7 458.9 457.9 461.0 515.1
Amortization of deferred gain on
indemnity reinsurance*
Other [Including
Consolidating Adjustments] (147.0) (67.6) (86.7) (79.2) (59.2) (80.5)
------- ------- ------- ------- ------- -------
Operating Revenue 566.4 440.9 490.3 497.5 546.6 541.5
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 0.0 (0.8) (1.3) (3.4) 0.4 (10.0)
Gains (losses) on derivatives 0.1
Gain on sale of reinsurance
subsidiaries
------- ------- ------- ------- ------- -------
Total Revenue 566.4 440.2 489.0 494.1 547.0 531.6
======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors 2.7 (7.4) (2.9) (3.1) 1.6 (6.8)
Lincoln Financial Distributors (3.7) (3.3) (5.2) (5.0) (5.1) (6.9)
------- ------- ------- ------- ------- -------
Total Distribution (1.0) (10.7) (8.1) (8.0) (3.4) (13.8)
Reinsurance (19.5) 31.9 25.8 28.2 36.6 46.8
Amortization of deferred gain on
indemnity reinsurance* 0.0 0.0 0.0 0.0 0.0 0.0
LNC Financing (21.6) (21.9) (22.2) (20.9) (19.8) (21.7)
Other Corporate (1.4) (5.7) (1.5) 1.6 (9.8) (0.5)
------- ------- ------- ------- ------- -------
Inc (Loss) from Oper (43.5) (6.5) (5.9) 0.9 3.5 10.9
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.3 (0.4) (0.8) (3.2) 1.2 (6.5)
Gains (losses) on derivatives 0.1
Gain on sale of reinsurance
subsidiaries 0.0
Reserve increase on business
sold through reinsurance
Restructuring charges 1.0 0.0
------- ------- ------- ------- ------- -------
Income before Accounting Changes (42.2) (6.8) (6.8) (2.3) 5.7 4.4
Cumulative effect of accounting
changes (0.4)
------- ------- ------- ------- ------- -------
Total Net Income (Loss) (42.2) (6.8) (6.8) (2.3) 5.7 4.0
======= ======= ======= ======= ======= =======
Jun Sep Dec Mar Jun Sep
For the Quarter Ended 2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Revenue
Lincoln Financial Advisors 83.8 78.9 116.7 75.9 78.1 74.4
Lincoln Financial Distributors 20.7 32.0 35.0 29.4 29.3 31.8
------- ------- ------- ------- ------- -------
Total Distribution 104.5 111.0 151.7 105.3 107.4 106.2
Reinsurance 451.4 467.4 265.6 0.0 0.0 0.0
Amortization of deferred gain on
indemnity reinsurance* 20.4 24.1 22.1 22.1
Other [Including
Consolidating Adjustments] (105.2) (76.0) (98.7) (32.2) (33.4) (65.6)
------- ------- ------- ------- ------- -------
Operating Revenue 450.7 502.3 339.0 97.1 96.1 62.7
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.4 (12.8) 29.5 (4.9) (3.8) 31.8
Gains (losses) on derivatives (0.1) (0.0) (9.7) 0.1 (0.1) 0.6
Gain on sale of reinsurance
subsidiaries 12.8 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total Revenue 452.0 489.5 371.7 92.3 92.2 95.1
======= ======= ======= ======= ======= =======
Income (Loss)
Lincoln Financial Advisors (12.3) (4.2) 7.4 (9.1) (7.7) (8.0)
Lincoln Financial Distributors (11.5) (7.8) (4.5) (6.2) (7.3) (12.7)
------- ------- ------- ------- ------- -------
Total Distribution (23.8) (12.0) 3.0 (15.4) (15.0) (20.7)
Reinsurance 34.1 17.2 30.7 0.0 0.0 0.0
Amortization of deferred gain on
indemnity reinsurance* 0.0 0.0 12.9 15.7 14.4 14.4
LNC Financing (22.0) (19.5) (14.7) (8.2) (9.6) (11.6)
Other Corporate 2.0 1.5 (5.3) (4.1) 2.9 0.7
------- ------- ------- ------- ------- -------
Inc (Loss) from Oper (9.7) (12.9) 26.5 (12.0) (7.3) (17.2)
------- ------- ------- ------- ------- -------
Realized gains (losses) on
investments 1.0 (8.3) 19.7 (3.3) (2.4) 21.6
Gains (losses) on derivatives (0.1) (0.0) (6.3) 0.1 (0.1) 0.4
Gain on sale of reinsurance
subsidiaries 0.0 0.0 15.0 0.0 0.0 0.0
Reserve increase on business
sold through reinsurance (14.4) (176.4)
Restructuring charges (1.2) 0.0 (18.3) 0.0 0.0 1.1
------- ------- ------- ------- ------- -------
Income before Accounting Changes (10.0) (21.2) 36.7 (15.2) (24.2) (170.6)
Cumulative effect of accounting
changes (2.2) 0.0 (0.0) 0.0 0.0 0.0
------- ------- ------- ------- ------- -------
Total Net Income (Loss) (12.2) (21.2) 36.7 (15.2) (24.2) (170.6)
======= ======= ======= ======= ======= =======
* The amortization of deferred gain on sale of reinsurance business represents the amortization of
deferred gain recognized on the business sold through indemnity reinsurance to Swiss Re.
PAGE 34
Consolidated Domestic Retail
Deposits/Account Balances
Unaudited [Billions of Dollars]
YTD YTD
Sep Sep
1997 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- ------- -------
Deposits - For the Year
Lincoln Retirement - Fixed
Annuities 1.632 1.452 2.563 2.074 3.342 2.124 2.850
Lincoln Retirement - Variable
Annuities 2.695 2.791 2.553 3.165 3.067 2.274 2.198
Lincoln Retirement - Life
Insurance 0.000 0.000 0.017 0.014 0.012 0.010
Life Insurance Segment - Life
Insurance 0.384 1.207 1.698 1.884 1.934 1.328 1.502
Inv Mgmt - Annuities 2.163 2.238 1.561 1.782 1.702 1.378 1.946
Inv Mgmt - Mutual Funds(1) 1.218 1.913 2.153 2.578 1.522 1.174 1.430
Inv Mgmt - Wrap Fee & Other 0.533 0.596 0.550 0.525 0.468 0.342 0.647
Consolidating Adjustments (0.966) (1.041) (0.499) (0.406) (1.039) (0.759) (1.184)
------- ------- ------- ------- ------- ------- -------
Gross Deposits 7.658 9.157 10.597 11.617 11.008 7.871 9.389
Account Balances - End of Year
Lincoln Retirement - Fixed
Annuities 15.458 16.505 16.791 15.394 16.491
Lincoln Retirement - Variable
Annuities 27.346 33.358 41.493 39.427 34.638
Lincoln Retirement - Life
Insurance 0.155 0.160 0.149
Life Insurance Segment - Life
Insurance 3.038 9.243 10.217 10.847 11.377
Inv Mgmt - Annuities 10.991 14.257 15.557 13.527 11.835
Inv Mgmt - Mutual Funds(1) 12.484 13.528 13.632 13.261 11.552
Inv Mgmt - Wrap Fee & Other 2.403 2.512 1.618 1.342 1.719
Consolidating Adjustments (6.806) (8.891) (9.175) (7.753) (6.717)
------- ------- ------- ------- ------- ------- -------
Account Balances 64.914 80.512 90.288 86.205 81.044
Dec Mar Jun Sep Dec Mar
1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Lincoln Retirement - Fixed
Annuities 0.741 0.589 0.490 0.513 0.482 0.560
Lincoln Retirement - Variable
Annuities 0.634 0.797 0.793 0.729 0.846 0.887
Lincoln Retirement - Life
Insurance 0.005 0.003 0.003 0.004 0.004 0.003
Life Insurance Segment - Life
Insurance 0.526 0.424 0.411 0.428 0.622 0.418
Inv Mgmt - Annuities 0.409 0.379 0.358 0.456 0.589 0.542
Inv Mgmt - Mutual Funds(1) 0.587 0.876 0.586 0.554 0.562 0.484
Inv Mgmt - Managed Acct. & Other 0.079 0.148 0.106 0.140 0.131 0.140
Consolidating Adjustments (0.118) (0.099) (0.062) (0.100) (0.145) (0.262)
------- ------- ------- ------- ------- -------
Gross Deposits 2.864 3.116 2.685 2.724 3.091 2.771
------- ------- ------- ------- ------- -------
Account Balances - End of Quarter
Lincoln Retirement - Fixed
Annuities 16.791 16.244 15.884 15.660 15.394 15.430
Lincoln Retirement - Variable
Annuities 41.493 44.640 43.097 42.743 39.427 34.733
Lincoln Retirement - Life
Insurance 0.155 0.169 0.165 0.166 0.160 0.147
Life Insurance Segment - Life
Insurance 10.217 10.470 10.538 10.716 10.847 10.764
Inv Mgmt - Annuities 15.557 15.557 14.888 14.853 13.527 11.822
Inv Mgmt - Mutual Funds(1) 13.632 14.671 14.069 14.571 13.261 11.530
Inv Mgmt - Managed Acct. & Other 1.618 1.309 1.304 1.256 1.342 1.653
Consolidating Adjustments (9.175) (8.768) (8.419) (8.644) (7.753) (6.834)
------- ------- ------- ------- ------- -------
Account Balances 90.288 94.292 91.526 91.322 86.205 79.245
------- ------- ------- ------- ------- -------
Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Deposits - For the Quarter
Lincoln Retirement - Fixed
Annuities 0.668 0.896 1.218 0.906 0.853 1.091
Lincoln Retirement - Variable
Annuities 0.703 0.684 0.793 0.808 0.787 0.603
Lincoln Retirement - Life
Insurance 0.004 0.003 0.002
Life Insurance Segment - Life
Insurance 0.477 0.434 0.605 0.440 0.577 0.484
Inv Mgmt - Annuities 0.403 0.434 0.324 0.590 0.601 0.756
Inv Mgmt - Mutual Funds(1) 0.354 0.335 0.348 0.452 0.562 0.416
Inv Mgmt - Managed Acct. & Other 0.127 0.074 0.126 0.160 0.194 0.293
Consolidating Adjustments (0.202) (0.295) (0.279) (0.309) (0.371) (0.504)
------- ------ ------- ------- ------- -------
Gross Deposits 2.534 2.566 3.137 3.047 3.203 3.139
------- ------ ------- ------- ------- -------
Account Balances - End of Quarter
Lincoln Retirement - Fixed
Annuities 15.551 16.051 16.491 16.533 16.909 17.649
Lincoln Retirement - Variable
Annuities 36.961 30.506 34.638 35.150 31.206 25.942
Lincoln Retirement - Life
Insurance 0.157 0.134 0.149
Life Insurance Segment - Life
Insurance 11.066 10.939 11.377 11.667 11.759 11.726
Inv Mgmt - Annuities 12.532 10.714 11.835 11.920 10.896 9.327
Inv Mgmt - Mutual Funds(1) 12.215 10.726 11.552 11.597 11.033 10.069
Inv Mgmt - Managed Acct. & Other 1.774 1.635 1.719 1.821 1.847 1.820
Consolidating Adjustments (7.007) (6.023) (6.717) (6.684) (6.007) (4.875)
------- ------ ------- ------- ------- -------
Account Balances 83.250 74.682 81.044 82.005 77.644 71.658
------- ------ ------- ------- ------- -------
-----------------------------------------------------------------------------------------------------------------
Total Domestic Net Flows
Unaudited [Billions of Dollars]
YTD YTD
Sep Sep
For the Year 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- -------
Lincoln Retirement (1.244) (1.165) (2.874) 0.105 (0.526) 0.380
Life Insurance Segment 0.113 0.985 1.158 1.163 0.780 0.918
Investment Management Segment-
Retail(1) 1.772 (2.209) (1.499) (0.379) (0.287) 0.305
Consolidating Adjustments (0.158) 1.276 1.406 (0.150) (0.097) 0.247)
------- ------- ------- ------- ------- -------
Total Retail Net Flows 0.483 (1.114) (1.810) 0.739 (0.129) 1.357
Investment Management Segment-
Institutional (2.702) (2.240) (5.694) (0.228) (0.128) 1.534
------- ------- ------- ------- ------- -------
Total Net Flows (2.219) (3.354) (7.504) 0.511 (0.257) 2.891
------- ------- ------- ------- ------- -------
Dec Mar Jun Sep Dec Mar
For the Quarter 1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Lincoln Retirement (0.490) (0.700) (0.682) (0.812) (0.681) (0.590)
Life Insurance Segment 0.327 0.242 0.235 0.277 0.404 0.237
Investment Management Segment-
Retail(1) (0.410) (0.879) (0.364) (0.315) 0.059 (0.019)
Consolidating Adjustments 0.463 0.717 0.342 0.194 0.152 0.019
------- ------- ------- ------- ------- -------
Total Retail Net Flows (0.111) (0.620) (0.470) (0.657) (0.065) (0.354)
Investment Management Segment-
Instit. (1.479) (2.611) (1.056) (0.983) (1.043) (0.418)
------- ------- ------- ------- ------- -------
Total Net Flows (1.590) (3.231) (1.526) (1.640) (1.109) (0.772)
------- ------- ------- ------- ------- -------
Jun Sep Dec Mar Jun Sep
2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Lincoln Retirement (0.196) 0.261 0.631 0.088 0.223 0.069
Life Insurance Segment 0.304 0.239 0.383 0.236 0.385 0.297
Investment Management Segment-
Retail(1) (0.148) (0.120) (0.091) 0.091 0.167 0.048
Consolidating Adjustments (0.034) (0.081) (0.053) (0.037) (0.086) (0.124)
------- ------- ------- ------- ------- -------
Total Retail Net Flows (0.074) 0.299 0.871 0.378 0.688 0.290
Investment Management Segment-
Instit. 0.445 (0.155) (0.102) 0.730 0.455 0.349
------- ------- ------- ------- ------- -------
Total Net Flows 0.371 0.144 0.769 1.108 1.143 0.639
------- ------- ------- ------- ------- -------
NOTE: Excludes amounts reported as Assets Under Management - Insurance Assets
(1) Retail assets under management have been restated to include assets under administration beginning
in January of 2000. See details on pages 28 and 29.
PAGE 35
Consolidated Investment Data -
Assets Managed
Unaudited [Billions of Dollars]
December 31 1997 1998 1999 2000 2001
------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 24.066 30.233 27.689 27.450 28.346
Equity securities 0.660 0.543 0.604 0.550 0.470
Other investments 5.092 7.154 7.286 7.369 7.297
------- ------- ------- ------- -------
Total LNC Investments(1) 29.819 37.929 35.578 35.369 36.113
Separate accounts 37.139 43.409 53.654 50.580 44.833
Cash and Invested Cash 3.795 2.433 1.896 1.927 3.095
Discontinued Operations ------- ------- ------- ------- -------
Total LNC 70.752 83.772 91.128 87.876 84.042
------- ------- ------- ------- -------
Non-affiliate assets managed 48.331 50.061 49.314 43.397 42.199
------- ------- ------- ------- -------
Total Assets Managed 119.083 133.833 140.443 131.273 126.241
======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 56.457 61.488 61.374 53.354 48.411
(See page 22 for additional
detail)
DLIA-Corp 35.684 39.432 35.934 35.686 38.119
(Assets managed internally-see
page 22)
Lincoln (UK) 6.775 7.573 8.589 7.873 6.847
Policy Loans (within business
units) 0.763 1.840 1.892 1.961 1.940
Non-LNC Affiliates 19.404 23.500 32.654 32.399 30.924
------- ------- ------- ------- -------
Total Assets Managed 119.083 133.833 140.443 131.273 126.241
======= ======= ======= ======= =======
Dec Mar Jun Sep Dec Mar
End of Quarter 1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 27.689 27.745 27.078 27.264 27.450 27.811
Equity securities 0.604 0.588 0.560 0.570 0.550 0.560
Other investments 7.286 7.442 7.419 7.471 7.369 7.374
------- ------- ------- ------- ------- -------
Total LNC Investments(1) 35.578 35.775 35.057 35.305 35.369 35.744
Separate accounts 53.654 56.908 54.924 54.411 50.580 44.506
Cash and invested cash 1.896 1.510 1.619 1.436 1.927 2.015
------- ------- ------- ------- ------- -------
Total LNC 91.128 94.192 91.601 91.152 87.876 82.266
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 49.314 47.150 45.945 45.119 43.397 41.904
------- ------- ------- ------- ------- -------
Total Assets Managed 140.443 141.342 137.546 136.271 131.273 124.170
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 61.375 58.712 56.986 55.998 53.355 48.208
(See page 23 for additional
detail)
DLIA-Corp 35.934 35.541 34.891 34.981 35.686 36.324
(Assets managed internally-see
page 23)
Lincoln (UK) 8.589 8.423 8.058 7.838 7.873 7.012
Policy Loans (within business
units) 1.892 1.896 1.915 1.936 1.961 1.947
Non-LNC Affiliates 32.653 36.770 35.696 35.518 32.397 30.680
------- ------- ------- ------- ------- -------
Total Assets Managed 140.443 141.342 137.546 136.271 131.273 124.170
======= ======= ======= ======= ======= =======
Jun Sep Dec Mar Jun Sep
End of Quarter 2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Assets Managed by Source
LNC's Investments and Cash:
Fixed maturity securities 27.874 28.932 28.346 28.841 29.725 32.037
Equity securities 0.534 0.478 0.470 0.439 0.419 0.397
Other investments 7.388 7.379 7.297 7.084 7.016 6.928
------- ------- ------- ------- ------- -------
Total LNC Investments(1) 35.796 36.788 36.113 36.363 37.160 39.363
Separate accounts 47.140 39.480 44.833 44.917 40.580 34.069
Cash and invested cash 1.502 1.996 3.095 1.700 2.265 1.600
------- ------- ------- ------- ------- -------
Total LNC 84.438 78.264 84.042 82.979 80.005 75.031
------- ------- ------- ------- ------- -------
Non-affiliate assets managed 44.069 39.198 42.199 43.708 43.031 38.506
------- ------- ------- ------- ------- -------
Total Assets Managed 128.507 117.462 126.241 126.687 123.036 113.538
======= ======= ======= ======= ======= =======
Assets Managed by Advisor
Investment Management segment(1) 50.736 44.957 48.412 50.001 48.738 43.357
(See page 23 for additional
detail)
DLIA-Corp 36.018 37.337 38.119 37.171 38.476 40.416
(Assets managed internally-see
page 23)
Lincoln (UK) 7.027 6.474 6.847 6.772 6.753 6.068
Policy Loans (within business
units) 1.947 1.943 1.940 1.918 1.906 1.899
Non-LNC Affiliates 32.778 26.751 30.923 30.825 27.163 21.798
------- ------- ------- ------- ------- -------
Total Assets Managed 128.507 117.462 126.241 126.687 123.036 113.538
======= ======= ======= ======= ======= =======
(1) Retail assets under management have been restated to include assets under administration beginning
in January of 2000. See details on pages 28 and 29.
PAGE 36
Consolidated Investment Data
Unaudited [Millions of Dollars
except as noted]
For the Year Ended December 31 1997
-------
Net Investment Income
Fixed Maturity Securities 1832.1
Equity Securities 19.1
Mortgage loans on real estate 279.2
Real estate 99.4
Policy loans 44.5
Invested cash 102.4
Other investments 20.6
-------
Investment revenue 2397.3
Investment expense 146.6
-------
Net Investment Income 2250.8
-------
Gross-up of Tax Exempt Income 12.7
-------
Adjusted Net Invest Income 2263.5
=======
Mean Invested Assets (Cost Basis) 30337.3
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.46%
Investment Gains
Realized Gains (Losses) on
Investments 72.9
Gains(Losses) on Derivatives 0.0
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) 159.6
Incr (Decr) on Derivatives*
Incr (Decr) in Foreign Exchange (20.3)
Incr (Decr) in minimum pension
liability
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 24.066
Fixed Maturity Sec (Adjusted
Cost) 22.624
Equity Securities (Market) 0.660
Equity Securities (Adjusted Cost) 0.518
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 27.6%
AA or better 35.1%
BB or less 7.3%
YTD YTD
Sep Sep
For the Year Ended December 31 1998 1999 2000 2001 2001 2002
------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 2065.8 2232.9 2148.7 2121.0 1590.9 1580.0
Equity Securities 22.8 20.1 19.5 17.6 12.5 10.3
Mortgage loans on real estate 383.6 369.2 373.8 374.5 282.2 270.5
Real estate 86.8 64.1 51.8 49.5 38.6 34.2
Policy loans 99.5 116.5 125.0 125.3 93.8 92.5
Invested cash 156.8 110.3 87.2 68.4 57.1 29.4
Other investments 88.4 51.8 66.8 69.5 66.1 16.5
------- ------- ------- ------- ------- -------
Investment revenue 2903.7 2964.8 2872.8 2825.8 2140.9 2033.1
Investment expense 222.3 157.3 125.7 146.2 108.0 87.1
------- ------- ------- ------- ------- -------
Net Investment Income 2681.4 2807.5 2747.1 2679.6 2033.0 1946.1
------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 11.6 8.1 7.8 7.2 5.0 5.0
------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 2693.0 2815.6 2754.9 2686.8 2038.0 1951.2
======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 36573.8 39027.5 37471.3 37616.9 37339.4 38527.0
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.36% 7.21% 7.35% 7.14% 7.28% 6.75%
Investment Gains
Realized Gains (Losses) on
Investments 13.7 3.8 (17.5) (68.7) (48.6) (143.9)
Gains(Losses) on Derivatives 0.0 0.0 0.0 (4.9) (0.2) 0.5
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) 116.4 (1018.1) 477.7 183.7 236.0 621.8
Incr (Decr) on Derivatives* 21.4 20.2 5.9
Incr (Decr) in Foreign Exchange 3.8 (19.9) (8.1) (30.0) (15.0) 43.4
Incr (Decr) in minimum pension
liability (36.0) 0.0 0.7
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 30.233 27.689 27.450 28.346 28.932 32.037
Fixed Maturity Sec (Adjusted
Cost) 28.640 28.357 27.373 27.956 28.253 30.419
Equity Securities (Market) 0.543 0.604 0.550 0.470 0.478 0.397
Equity Securities (Adjusted Cost) 0.437 0.482 0.458 0.444 0.453 0.374
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 25.6% 22.8% 22.1% 17.2% 17.9% 20.0%
AA or better 32.6% 29.8% 29.2% 23.6% 24.3% 26.7%
BB or less 7.0% 8.0% 6.7% 8.3% 7.2% 6.6%
------------------------------------------------------------------------------------------------------
Dec Mar Jun Sep Dec Mar
For the Quarter Ended 1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 548.0 541.3 544.4 525.3 537.7 526.9
Equity Securities 6.9 3.7 5.7 3.6 6.5 1.0
Mortgage loans on real estate 94.5 92.0 95.1 94.4 92.3 95.7
Real estate 12.5 11.2 12.5 11.8 16.3 12.8
Policy loans 29.9 30.7 30.9 30.5 32.9 31.4
Invested cash 22.0 27.2 15.1 26.5 18.4 22.5
Other investments 20.9 35.1 2.0 26.9 2.9 19.6
------- ------- ------- ------- ------- -------
Investment revenue 734.9 741.1 705.7 719.1 706.9 709.9
Investment expense 34.8 30.0 31.8 29.0 34.8 36.1
------- ------- ------- ------- ------- -------
Net Investment Income 700.1 711.1 673.8 690.0 672.1 673.7
------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 2.6 1.5 2.3 1.4 2.6 0.5
------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 702.7 712.6 676.1 691.5 674.7 674.2
======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 38438.6 38237.4 37306.1 37250.8 37090.8 37238.0
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.31% 7.45% 7.25% 7.43% 7.28% 7.24%
Investment Gains
Realized Gains (Losses) on
Investments 1.6 (0.4) (6.7) (11.6) 1.2 (13.4)
Gains (Losses) on Derivatives 0.0 0.0 0.0 0.0 0.0 (0.1)
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) (361.9) 54.5 (145.4) 218.8 349.8 178.4
Incr (Decr) on Derivatives* .2 1.2 0.0 4.6
Incr (Decr) in Foreign Exchange (10.2) (7.3) (0.9) (2.0) 2.0 (17.8)
Incr (Decr) in minimum pension
liability (36.0) 0.7 (2.6) 2.6
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 27.689 27.745 27.078 27.264 27.450 27.811
Fixed Maturity Sec (Adjusted
Cost) 28.357 28.295 27.788 27.727 27.373 27.367
Equity Securities (Market) 0.604 0.588 0.560 0.570 0.550 0.560
Equity Securities (Adjusted Cost) 0.482 0.475 0.446 0.450 0.458 0.507
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 22.8% 22.7% 22.3% 22.3% 22.1% 20.3%
AA or better 29.8% 29.5% 29.3% 29.4% 29.2% 27.1%
BB or less 8.0% 7.4% 7.4% 6.8% 6.7% 7.2%
Jun Sep Dec Mar Jun Sep
For the Quarter Ended 2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Net Investment Income
Fixed Maturity Securities 527.0 536.9 530.1 522.5 523.8 533.6
Equity Securities 7.8 3.7 5.1 3.4 4.3 2.7
Mortgage loans on real estate 92.4 94.2 92.4 89.5 90.2 90.8
Real estate 13.1 12.7 10.9 12.3 11.9 10.0
Policy loans 31.4 31.0 31.6 30.2 31.1 31.1
Invested cash 19.8 14.8 11.3 12.4 9.1 7.9
Other investments 18.2 28.2 3.5 7.8 9.8 (1.2)
------- ------- ------- ------- ------- -------
Investment revenue 709.7 721.4 684.8 678.0 680.2 675.0
Investment expense 36.6 35.2 38.2 29.9 29.2 28.0
------- ------- ------- ------- ------- -------
Net Investment Income 673.1 686.2 646.6 648.1 651.0 647.0
------- ------- ------- ------- ------- -------
Gross-up of Tax Exempt Income 3.0 1.5 2.1 1.5 2.0 1.5
------- ------- ------- ------- ------- -------
Adjusted Net Invest Income 676.1 687.7 648.7 649.7 653.0 648.5
======= ======= ======= ======= ======= =======
Mean Invested Assets (Cost Basis) 37094.5 37685.8 38449.3 38169.9 38235.5 39175.8
Ratio of Adjusted Net Invest Inc
Over Mean Invested Assets 7.29% 7.30% 6.75% 6.81% 6.83% 6.62%
Investment Gains
Realized Gains (Losses) on
Investments (11.5) (23.8) (20.0) (67.6) (52.7) (23.6)
Gains (Losses) on Derivatives 0.2 (0.4) (4.6) 0.1 0.3 0.2
Incr (Decr) in Unreal Gains on
Sec
Avail-for-Sale (after DAC/Tax) (114.2) 171.8 (52.2) (163.9) 293.8 491.9
Incr (Decr) on Derivatives* 3.7 (6.7) 1.2 1.2 0.0 4.6
Incr (Decr) in Foreign Exchange (19.5) 22.2 (14.9) (12.8) 42.8 13.4
Incr (Decr) in minimum pension
liability (36.0) 0.7 (2.6) 2.6
Securities Available-for-Sale
[Billions of Dollars at End of
Year]
Fixed Maturity Sec (Market) 27.874 28.932 28.346 28.841 29.725 32.037
Fixed Maturity Sec (Adjusted
Cost) 27.681 28.253 27.956 28.831 29.133 30.419
Equity Securities (Market) 0.534 0.478 0.470 0.439 0.419 0.397
Equity Securities (Adjusted Cost) 0.477 0.453 0.444 0.398 0.374 0.374
% of Fixed Maturity Securities
(Based on Market)
Treasuries and AAA 19.3% 17.9% 17.2% 17.8% 18.2% 20.0%
AA or better 26.0% 24.3% 23.6% 24.7% 25.0% 26.7%
BB or less 7.8% 7.2% 8.3% 7.5% 6.4% 6.6%
* 2001 includes the cumulative effect of accounting change related to the adjustment recorded upon
adoption of FAS #133.
PAGE 37
Common Stock / Debt Information
Unaudited [Dollars per Share,
except Percentages]
For the Year Ended December 31 1991 1992 1993 1994 1995
------- ------- ------- ------- -------
Common Stock [1]
Highest Price 13.813 19.032 24.125 22.188 26.875
Lowest Price 9.500 12.625 17.344 17.313 17.313
------- ------- ------- ------- -------
Closing Price 13.688 18.500 21.750 17.500 26.875
------- ------- ------- ------- -------
Dividend Payout Ratio [2] 63.5% 38.9% 52.6% 51.0% 39.7%
Yield [3] 5.3% 4.1% 3.8% 4.9% 3.4%
Preferred Stock Dividend
(Millions) 13.033 17.246 17.212 17.119 8.644
Debt: (End of Period)
Senior Debt Ratings
A.M. Best
Fitch AA AA- AA- AA-
Moody's A2 A2 A1 A2
Standard and Poors A+ A+ A+ A
Claims Paying Ratings:
Lincoln Life - A.M. Best A+ A+ A+ A+
Lincoln Life - Fitch AAA AAA AAA AA+
Lincoln Life - Moody's A1 A1 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA-
First Penn - A.M. Best* A A+ A+ A+
First Penn - Fitch
First Penn - Moody's
First Penn - Standard & Poors* AA- AA- AA- AA-
LLA of New York - A.M. Best*
LLA of New York - Fitch*
LLA of New York - Moody's
LLA of New York - Standard &
Poors*
Ratios
Debt to Total Capitalization [4] 25.7% 21.1% 19.9% 22.8%
Debt to Equity [4] 34.7% 26.7% 24.9% 29.5%
For the Year Ended December 31 1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
Common Stock [1]
Highest Price 28.500 39.063 49.438 57.500 56.375 52.750
Lowest Price 20.375 24.500 33.500 36.000 22.625 38.000
------- ------- ------- ------- ------- -------
Closing Price 26.250 39.063 40.907 40.000 47.313 48.570
------- ------- ------- ------- ------- -------
Dividend Payout Ratio [2] 38.2% 22.8% 43.9% 50.5% 38.3% 41.9%
Yield [3] 3.7% 2.7% 2.7% 2.9% 2.6% 2.6%
Preferred Stock Dividend
(Millions) 0.112 0.106 0.100 0.089 0.078 0.071
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a
Fitch AA- AA- A+ A+ A+ A+
Moody's A2 A2 A2 A2 A3 A3
Standard and Poors A A A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A+ A+ A A A A
Lincoln Life - Fitch AA+ AA+ AA+ AA+ AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A+ A+ A A A A
First Penn - Fitch AA+ AA+ AA+ AA AA
First Penn - Moody's A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A+ A+ A A A A
LLA of New York - Fitch* AA+ AA+ AA+ AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 18.8% 17.0% 21.2% 23.2% 20.8% 21.4%
Debt to Equity [4] 23.1% 20.5% 26.9% 30.3% 26.3% 27.2%
Dec Mar Jun Sep Dec Mar
For the Quarter Ended 1999 2000 2000 2000 2000 2001
------- ------- ------- ------- ------- -------
Common Stock:
Highest Price 48.313 41.375 40.063 56.375 50.938 48.250
Lowest Price 36.500 22.625 29.000 35.625 40.875 38.000
------- ------- ------- ------- ------- -------
Closing Price 40.000 33.500 36.125 48.125 47.313 42.470
------- ------- ------- ------- ------- -------
Yield [3] 2.9% 3.5% 3.2% 2.4% 2.6% 2.9%
Preferred Stock Dividend 0.014 0.022 0.022 0.021 0.013 0.019
(Millions)
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a a
Fitch A+ A+ A+ A+ A+ A+
Moody's A2 A2 A2 A2 A3 A3
Standard and Poors A- A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A A A A A A
Lincoln Life - Fitch AA+ AA+ AA+ AA+ AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A A A A A
First Penn - Fitch AA+ AA+ AA+ AA+ AA AA
First Penn - Moody's A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A A A A A A
LLA of New York - Fitch* AA+ AA+ AA+ AA+ AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 23.2% 23.3% 21.8% 21.2% 20.8% 22.2%
Debt to Equity [4] 30.3% 30.4% 28.0% 27.0% 26.3% 28.5%
Jun Sep Dec Mar Jun Sep
For the Quarter Ended 2001 2001 2001 2002 2002 2002
------- ------- ------- ------- ------- -------
Common Stock:
Highest Price 52.300 52.750 49.450 53.650 52.540 42.080
Lowest Price 41.280 41.000 40.000 47.200 40.750 29.120
------- ------- ------- ------- ------- -------
Closing Price 51.750 46.630 48.570 50.730 42.000 30.550
------- ------- ------- ------- ------- -------
Yield [3] 2.4% 2.6% 2.6% 2.5% 3.0% 4.2%
Preferred Stock Dividend 0.018 0.017 0.017 0.016 0.015 0.015
(Millions)
Debt: (End of Period)
Senior Debt Ratings
A.M. Best a a a a a a
Fitch A+ A+ A+ A+ A+ A
Moody's A3 A3 A3 A3 A3 A3
Standard and Poors A- A- A- A- A- A-
Claims Paying Ratings:
Lincoln Life - A.M. Best A A A A A+ A+
Lincoln Life - Fitch AA AA AA AA AA AA
Lincoln Life - Moody's Aa3 Aa3 Aa3 Aa3 Aa3 Aa3
Lincoln Life - Standard & Poors AA- AA- AA- AA- AA- AA-
First Penn - A.M. Best* A A A A A+ A+
First Penn - Fitch AA AA AA AA AA AA
First Penn - Moody's A1 A1 A1 A1 A1 A1
First Penn - Standard & Poors* AA- AA- AA- AA- AA- AA-
LLA of New York - A.M. Best* A A A A A+ A+
LLA of New York - Fitch* AA AA AA AA AA AA
LLA of New York - Moody's A1 A1 A1 A1 A1 A1
LLA of New York - Standard &
Poors* AA- AA- AA- AA- AA- AA-
Ratios
Debt to Total Capitalization [4] 21.2% 21.1% 21.4% 22.7% 22.6% 23.1%
Debt to Equity [4] 27.0% 26.7% 27.2% 29.4% 29.2% 30.0%
* Rating based on affiliation with Lincoln Life
[1] Stock prices shown above include 2-for-1 splits in June 1993, and June 1999
[2] Indicated dividend divided by net income
[3] Indicated dividend divided by the closing price
[4] Equity used in calculation assumes securities at cost. Minority interest-preferred securities of
subsidiary companies (hybrid securities) are considered 50% debt and 50% equity.
Return on Equity/Return on Capital: In order to accommodate the various perspectives, LNC presents
two separate Return on Equity numbers on pages 2, 5 and 6 of this Statistical Report. "Net Income
Divided by Average Shareholders' Equity" tends to fluctuate from period to period due to the
realization of gains and losses on investments or sale of subsidiaries. "Income from Operations
Divided by Average Shareholders' Equity" is less volatile but leaves out an important element of
earnings for a company that has a long-term goal of enhancing shareholder value by realizing
investment gains.
Return on capital measures the effectiveness of LNC's use of its total capital, which is made up of
equity, debt and hybrid securities. Return on capital is calculated by dividing income from
operations (after adding back after-tax interest expense) by average capital. The difference between
return on capital and return on equity presents the effect of leveraging on LNC's consolidated
results.