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Slide 1: Lincoln Statistical Report second QUARTER 2006 The financial data in this document is dated August 8, 2006 and has not been updated since that date. LNC does not intend to update this document.
Slide 2: Lincoln Financial Group Statistical Report Second Quarter 2006 Table of Contents LFG Analyst Coverage Notes Financial Highlights Consolidated Expense Detail Operating Results Summary Consolidated Statements of Income Consolidating Statements of Income from Operations Consolidated Balance Sheet Balance Sheet Data - Segment Highlights Individual Markets Individual Life Insurance Income Statements & Operational Data Operational Data Account Value Rollforward Individual Annuities Income Statements & Operational Data Account Value Rollforward Account Values Employer Markets Retirement Products Income Statements & Operational Data Account Value Rollforward Supplemental Data Benefit Partners Income Statements & Operational Data Supplemental Data Executive Benefits & Other Income Statements & Operational Data Account Value Roll Forward and Supplemental Data Investment Management Income Statements Assets Under Management Roll Forward Lincoln UK Income Statements Operational Data Lincoln Financial Media Other Operations Domestic Retail Deposits / Account Balances / Net Flows Investment Data Assets Managed Other Investment Data 1-4 5 6 7 8-11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 31 32 33 34
Slide 3: LFG Analyst Coverage Second Quarter, 2006 FIRM A.G. Edwards Banc of America Securities Bear Stearns Bernstein Citigroup Credit Suisse Deutsche Bank Fox-Pitt Kelton Goldman Sachs & Company JP Morgan Keefe, Bruyette & Woods, Inc. Langen McAlenney Lehman Brothers Merrill Lynch Morgan Stanley Raymond James & Associates Inc. SunTrust Robinson Humphrey UBS Value Line Wachovia ANALYST Jeff Hopson Tamara Kravec Saul Martinez Suneet Kamath Colin Devine Tom Gallagher Darin Arita Jason Zucker Joan Zief Jimmy Bhullar Jeff Schuman Bob Glasspiegel Eric Berg Ed Spehar Nigel Dally Steven Schwartz David Lewis Andrew Kligerman Bill Lewittes John Hall PHONE NUMBER 314-955-2639 212-583-8212 212-272-3528 212-756-4587 212-816-1682 212-538-2010 212-250-7321 212-857-6146 212-902-6778 212-622-6397 860-722-5902 860-724-1203 212-526-2805 212-449-4245 212-761-6235 312-612-7686 404-926-5097 212-713-2492 212-907-1707 212-214-8032 Investor inquiries may be directed to: Jim Sjoreen, Vice President, Investor Relations Email: jsjoreen@lfg.com Voice: (215) 448-1420 Fax: (215) 448-3962 Note: This list is provided for informational purposes only. LFG does not endorse the analyses, conclusions, or recommendations contained in any report issued by these or any other analysts. ** Statistical data will be available immediately after the release of earnings for each quarter through LNC’s Investor Relations website http://www.lfg.com/investor/finance
Slide 4: 6/30/2006 NOTES ii On April 3, 2006, LNC completed its previously announced merger with Jefferson Pilot Corporation ("JP"). Beginning with the second quarter of 2006, we are reporting results through the following segments: Individual Markets - Annuities, Individual Markets - Life Insurance, Employer Markets - Retirement Products & Other, Employer Markets - Benefit Partners, Investment Management, Lincoln UK and Lincoln Financial Media. Historical information presented in this report has been restated to reflect the new organizational structure. As described below, certain reclassifications have been made to historically reported items to reflect the new reporting practices of LNC. Definitions and Presentation "Income from Operations," "Operating Revenue," "Return on Capital," and "Broadcast Cash Flow" are non-GAAP financial measures and do not replace GAAP net income (loss) and revenues. Detailed reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure are included in this statistical supplement. * We exclude the after-tax effects of the following items from GAAP net income to arrive at income from operations: * * * * * * Realized gains and losses on investments and derivatives, Gains and losses related to reinsurance embedded derivatives/trading account securities, The cumulative effect of accounting changes, Reserve changes on business sold through reinsurance net of related deferred gain amortization, Gains and losses on the sale of subsidiaries and blocks of business, Loss on early retirement of debt, including subordinated debt NOTE: Income from operations is lower than previously reported as it now includes restructuring charges previously excluded in the determination of income from operations * Operating revenue represents revenue excluding the following, as applicable: * Realized gains or losses on investments and derivatives, * Gains and losses related to reinsurance embedded derivatives/trading account securities, * Gains and losses on the sale of subsidiaries and blocks of business, * Deferred gain amortization related to reserve changes on business sold through reinsurance, Return on capital measures the effectiveness of LNC's use of its total capital, which includes equity (excluding accumulated other comprehensive income), debt, capital securities and junior subordinated debentures issued to affiliated trusts. Return on capital is calculated by dividing income from operations (after adding back interest expense) by average capital. The difference between return on capital and return on shareholders' equity represents the effect of leveraging on LNC's consolidated results. Broadcast cash flow is calculated as communications revenues less operating costs and expenses before depreciation and amortization. * * Income from operations, operating revenue, return on capital, and broadcast cash flow are internal measures used by LNC in the management of its operations. Management believes that these performance measures explain the results of operations of LNC's ongoing operations in a manner that allows for a better understanding of the underlying trends in LNC's current business because the excluded items are either unpredictable and/or not related to decisions regarding the underlying businesses. * Certain operating and statistical measures are included in this report to provide supplemental data regarding the performance of LNC’s current business. These measures include deposits, sales, net flows, first year premium, inforce, spread, and assets under management. Sales as reported consist of the following: * Universal life ("UL"), including Moneyguard, and COLI - first year commissionable premium plus 5% of excess premium received, including UL internal replacements * Whole life and term - first year paid premium * Annuity - deposits from new and existing customers * Benefit Partners - annualized first year premium from new policies * Investment Management Retail Sales and Institutional Inflows - contributions, transfer in kind purchases, and reinvested dividends for new and existing accounts. * Reclassifications Certain reclassifications have been made in the historical presentation of certain revenue and expense items. The principal reclassifications consist of the following: * Deferred Front End Loads ("DFEL") - capitalization and amortization of DFEL is reported as a component of expense assessments revenue. Depending on the segment, these had previously been reported as a component of either other revenue, benefits expense or DAC amortization. Investment Management Advisory Fees and General and Administrative Expenses - certain reclassifications have been made between revenue and expenses for such items as distribution fees and management fee waivers to conform to current industry practices. *
Slide 5: 6/30/2006 PAGE 1 Financial Highlights Unaudited [Millions of Dollars, except Common Share Data] For the Quarter Ended June 30 2006 2005 Amount Amount Change Income from Operations - By Segment Individual Life Insurance Individual Annuities Individual Markets Retirement Products Benefit Partners Executive Benefits & Other Employer Markets Investment Management Lincoln UK Lincoln Financial Media Other Operations (1) Total Income from Operations Realized losses Net gain (loss) on reinsurance derivative/trading account securities Gain on sale of subsidiaries/ businesses Reserve development/ amortization of related deferred gain Net Income Earnings per share (diluted) Income from Operations Realized losses Net gain (loss) on reinsurance derivative/trading account securities Gain on sale of subsidiaries/ businesses Reserve development/ amortization of related deferred gain Net Income (1) % Change 135.0% 69.5% 105.1% 19.9% NM 276.7% 116.9% NM -3.9% NM NM 72.6% -40.7% 136.4% NM 76.4% $ For the Six Months Ended June 30 2006 2005 Amount Amount Change 216.1 $ 155.5 371.6 106.8 37.0 23.8 167.6 27.3 20.6 11.9 (26.0) 573.0 (8.2) 5.0 0.4 570.2 120.8 $ 102.1 222.8 88.5 7.7 96.2 3.1 20.2 32.5 374.9 (0.1) (7.4) (0.5) 9.3 0.4 376.8 $ -0.1 95.3 53.4 148.8 18.3 37.0 16.1 71.4 24.2 0.4 11.9 (58.5) 198.1 (0.8) 5.5 (9.3) 193.4 % Change 78.9% 52.3% 66.8% 20.7% NM 209.1% 74.2% NM 2.0% NM NM 52.8% -10.8% NM -100.0% 51.3% $ 147.1 $ 89.0 236.1 54.3 37.0 16.2 107.6 12.0 9.9 11.9 (26.1) 351.4 (3.8) 1.2 0.2 349.0 62.6 $ 52.5 115.1 45.3 4.3 49.6 (1.4) 10.3 30.1 203.6 0.1 (2.7) (3.3) 0.2 197.9 $ 0.0 84.5 36.5 121.0 9.0 37.0 11.9 58.0 13.4 (0.4) 11.9 (56.2) 147.8 (1.1) 4.5 151.1 $ $ $ $ $ 1.24 $ (0.01) 1.23 - 1.16 $ (0.01) (0.02) 1.13 $ - 0.08 0.02 0.10 6.9% 100.0% NM NM 8.8% $ 2.48 $ (0.04) 0.02 2.47 $ (0.01) 2.13 $ (0.04) 0.05 2.14 - 0.35 0.02 (0.05) 0.33 16.4% NM -100.0% NM 15.4% $ $ $ $ Operating Revenue- By Segment Individual Life Insurance Individual Annuities Individual Markets Retirement Products Benefit Partners Executive Benefits & Other Employer Markets Investment Management Lincoln UK Lincoln Financial Media Other Operations Total Operating Revenue Realized losses Gain (loss) on reinsurance derivative/trading account securities Gain on sale of subsidiaries/ businesses Amortization of deferred gain-reserve development Total Revenue $ 901.4 $ 552.6 1,454.0 248.9 354.9 101.2 704.9 134.7 81.4 57.7 67.6 2,500.3 (6.7) 1.8 0.3 2,495.6 475.4 $ 348.2 823.6 234.3 53.2 287.5 114.4 78.4 79.2 1,383.2 (0.0) (4.0) (5.1) 0.3 1,374.4 $ 426.0 204.4 630.4 14.6 354.9 48.0 417.4 20.3 3.0 57.7 (11.6) 1,117.1 (2.7) 6.9 1,121.2 89.6% 58.7% 76.5% 6.2% NM 90.2% 145.2% 17.7% 3.8% NM -14.6% 80.8% -67.5% NM NM 81.6% $ 1,402.0 $ 927.4 2,329.4 498.1 354.9 158.4 1,011.3 274.3 150.9 57.7 99.3 3,922.8 0.1 (13.6) 7.7 0.6 3,917.4 951.0 $ 688.0 1,639.0 467.6 106.3 573.9 224.2 153.0 100.4 2,690.7 (0.2) (11.2) 451.0 239.4 690.4 30.5 354.9 52.1 437.4 50.1 (2.1) 57.7 (1.1) 1,232.1 (2.4) 47.4% 34.8% 42.1% 6.5% NM 49.0% 76.2% 22.3% -1.4% NM -1.1% 45.8% -21.4% (0.7) 8.4 NM 14.2 (14.2) -100.0% 0.6 $ $ $ $ 2,693.6 $ 1,223.8 45.4% 0.0 (1) Income from operations includes after-tax restructuring charges of $6.2 million, or 2 cents per share, and $15.0 million, or 9 cents per share, for the quarters ended June 30, 2006 and 2005, respectively, and $6.5 million, or 2 cents per share, and $16.3 million, or 9 cents per share, for the six months ended June 30, 2006 and 2005, respectively. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 6: 6/30/2006 PAGE 2 Financial Highlights Unaudited [in Billions] Operational Data by Segment For the Quarter Ended June 30 2006 2005 Amount Amount Change % Change For the Six Months Ended June 30 2006 2005 Amount Amount Change % Change Individual Markets Individual Annuities Gross deposits Net flows Account values (gross) Account values (net of reinsurance) $ 2.750 0.844 61.219 59.070 132.3 490.027 25.479 $ 1.862 0.748 44.242 41.966 74.3 306.727 13.496 $ 0.888 0.096 16.976 17.104 58.0 183.300 11.982 47.7% 12.8% 38.4% 40.8% 78.1% 59.8% 88.8% $ 4.886 1.613 61.219 59.070 200.3 490.027 25.479 $ 3.623 1.392 44.242 41.966 139.6 306.727 13.496 $ 1.263 0.222 16.976 17.104 60.6 183.300 11.982 34.9% 15.9% 38.4% 40.8% 43.4% 59.8% 88.8% Individual Life Insurance Sales (in millions) Life insurance in-force Account values (1) Employer Markets Retirement Products Gross deposits (2) Net flows Account values - annuities Alliance Mutual Funds Account values including Alliance Mutual Funds $ 1.159 0.114 27.194 4.330 31.524 17.2 15.373 4.228 45.3 64.7% $ 3.282 0.322 2.764 0.687 6.046 1.008 85.926 65.637 151.563 7.519 153.286 1.854 9.917 2.494 212.495 $ $ 1.032 0.181 25.358 3.432 28.790 5.0 7.278 1.194 4.334 2.147 6.110 3.875 10.444 6.022 66.851 43.917 110.768 7.085 110.476 3.476 13.023 7.449 156.405 $ $ 0.127 (0.067) 1.836 0.899 2.735 12.2 8.095 3.033 45.3 NM (1.052) (1.826) (3.346) (3.188) (4.398) (5.014) 19.075 21.720 40.794 0.434 42.810 (1.622) (3.105) (4.955) 56.089 12.3% -37.0% 7.2% 26.2% 9.5% 244.0% 111.2% 254.0% NM NM -24.3% -85.0% -54.8% -82.3% -42.1% -83.3% 28.5% 49.5% 36.8% 6.1% 38.8% -46.7% -23.8% -66.5% 35.9% $ $ 2.400 0.295 27.194 4.330 31.524 34.1 15.373 4.228 45.3 64.7% 7.302 1.627 7.808 4.279 15.110 5.906 85.926 65.637 151.563 14.968 153.286 4.489 22.153 8.682 212.495 $ $ 2.313 0.418 25.358 3.432 28.790 22.7 7.278 1.194 7.900 3.574 8.303 5.220 16.203 8.794 66.851 43.917 110.768 13.681 110.476 6.041 21.436 11.236 156.405 $ $ 0.087 (0.123) 1.836 0.899 2.735 11.4 8.095 3.033 45.3 NM (0.598) (1.947) (0.495) (0.941) (1.093) (2.888) 19.075 21.720 40.794 1.287 42.810 (1.552) 0.717 (2.554) 56.089 3.8% -29.4% 7.2% 26.2% 9.5% 50.2% 111.2% 254.0% NM NM -7.6% -54.5% -6.0% -18.0% -6.7% -32.8% 28.5% 49.5% 36.8% 9.4% 38.8% -25.7% 3.3% -22.7% 35.9% Executive Benefits COLI/BOLI sales (in millions) Life insurance in-force Account values Benefit Partners Annualized sales (in millions) (3) Loss ratio Investment Management Segment Retail deposits Retail net flows Institutional in-flows Institutional net flows Total Deposits and In-flows Total Net Flows Assets Under Management- Retail and Institutional Assets Under Management - General Account Assets Under Management - Total Segment Consolidated Domestic Retail Deposits Domestic Retail Account Balances Domestic Retail Net Flows Domestic Deposits Domestic Net Flows Assets Under Management (1) $ $ $ $ $ $ Sales for Individual Life Insurance consist of first year commissionable premium for Universal life ("UL"), including Moneyguard, and COLI plus 5% of excess premium received, including UL internal replacements, and first year paid premiums for Whole life and Term products Includes deposits for Alliance Mutual Funds which are not included in separate account liabilities on our balance sheet. (3) Represents combined loss ratio for Life, Disability and Dental business. (2) This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 7: 6/30/2006 PAGE 3 Financial Highlights Unaudited [Millions of Dollars, except Common Share Data] For the Quarter Ended June 30 2005 Amount Change $ 119,014.5 $ 48,365.5 For the Six Months Ended June 30 2006 2005 Amount Amount Change % Change $ 167,380.0 $ 119,014.5 $ 48,365.5 40.6% 2006 Amount Balance Sheet Assets - End of Period Shareholders' Equity Beg of period (including AOCI) End of period (including AOCI) End of period (excluding AOCI) Average equity (excluding AOCI) Return on Equity Net income/average equity (excluding AOCI) Inc from operations/average equity (excluding AOCI) Return on Capital Inc from operations/average capital Common Stock Outstanding Average for the period - diluted End of period - assuming conv of preferreds End of period - diluted Book value (including AOCI) Book value (excluding AOCI) Cash Returned to Shareholders Share repurchase - dollar amount Dividends declared to shareholders Total Cash Returned to Shareholders Share repurchase - number of shares Dividend declared on common stock - per share Dividend payout ratio (1) Annualized yield(2) Comprehensive Income (Loss) Net income Net unrealized gains (losses) on securities Gains (losses) on derivatives Foreign currency translation Minimum pension liability adjustment Comprehensive Income Ratios: Debt to total capitalization (3) Debt to equity (3) $ $ $ 167,380.0 % Change 40.6% $ 6,338.2 11,404.8 11,439.8 11,311.3 $ 6,043.0 6,363.5 5,448.4 5,407.1 $ 295.3 5,041.3 5,991.5 5,904.2 $ 6,384.4 11,404.8 11,439.8 8,633.1 $ 6,175.6 6,363.5 5,448.4 5,356.2 $ 208.8 5,041.3 5,991.5 3,276.9 12.3% 12.4% 14.6% 15.1% 13.2% 13.3% 14.1% 14.0% 10.1% 12.5% 11.0% 11.7% 282.6 281.8 285.0 40.48 40.60 $ $ 175.4 172.6 174.8 36.87 31.56 $ $ 107.3 109.2 110.1 3.61 9.04 61.2% 63.2% 63.0% 9.8% 28.6% $ $ 230.5 281.8 285.0 40.48 40.60 $ $ 175.8 172.6 174.8 36.87 31.56 $ $ 54.7 109.2 110.1 3.61 9.04 31.1% 63.2% 63.0% 9.8% 28.6% $ $ 502.6 147.4 650.0 $ $ 69.0 63.6 132.6 $ $ 433.6 83.9 517.5 6.484 0.015 $ $ 502.6 214.9 717.5 $ $ 103.6 127.3 230.9 $ $ 399.0 87.6 486.6 5.729 0.030 $ 8.060 0.380 $ 30.9% 2.7% 1.576 0.365 $ 32.3% 3.1% 4.1% $ 8.060 0.760 $ 30.7% 2.7% 2.331 0.730 $ 34.1% 3.1% 4.1% $ $ 349.0 $ (371.7) 16.4 38.8 (3.5) 29.0 $ 197.9 268.4 4.2 (37.1) 2.6 435.9 $ $ 570.2 $ (648.1) 44.2 45.1 (4.0) 7.3 $ 376.8 28.4 (2.2) (44.9) 3.2 361.3 22.1% 28.5% 22.3% 28.7% 22.1% 28.5% 22.3% 28.7% Ratings as of August 1, 2006: A.M. Best Senior Debt Ratings: Financial Strength Ratings: Lincoln National Life Insurance Company First Penn-Pacific Life Insurance Company Lincoln Life & Annuity Company of New York Jefferson-Pilot Life Insurance Company Jefferson-Pilot Financial Insurance Company Jefferson-Pilot LifeAmerica Insurance Company [1] [2] Fitch A Moody's A3 Standard & Poors A+ a A+ A+ A+ A+ A+ A+ AA AA AA AA AA AA Aa3 A1 Aa3 Aa3 Aa3 N/R AA AAAA AA AA AA Indicated dividend divided by net income Indicated dividend divided by the closing price [3] Equity used in calculation excludes accumulated other comprehensive income (loss). Capital securities are considered 25% debt and 75% equity. The calculation for the second quarter of 2006 includes adjustments to beginning equity for stock issued in connection with the April 3, 2006 merger with Jefferson-Pilot Corporation ("JP") and the accelerated stock repurchase transaction. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 8: 6/30/2006 PAGE 4 Combined Production Data Unaudited [in Billions] Three Months Ended Dec Mar 2005 2006 (1) Jun 2005 Sep 2005 Jun 2006 % Change Jun 2005 Six Months Ended Jun % 2006 Change Individual Markets Individual Life Insurance Sales by Product (millions) Universal Life Excluding MoneyGuard MoneyGuard Total Variable universal life Whole life Term Total Sales by Product Individual Annuity Deposits Fixed Variable Equity indexed annuities Total Individual Annuities $ $ $ $ 102.0 8.0 110.0 17.1 0.7 10.2 138.0 0.634 1.339 0.218 2.191 $ $ $ $ 118.8 9.1 127.9 14.5 0.8 10.0 153.2 0.600 1.424 0.197 2.221 $ $ $ $ 117.2 9.4 126.5 20.6 0.9 10.7 158.7 0.567 1.533 0.178 2.278 $ $ $ $ 83.4 7.7 91.1 16.4 1.2 11.2 120.0 0.560 1.680 0.173 2.413 $ $ $ $ 97.5 7.5 105.0 15.7 0.4 11.3 132.3 0.644 1.877 0.228 2.750 - -4.4% -6.3% -4.5% -8.2% -42.9% 10.8% -4.1% $ $ 186.9 15.4 202.3 35.4 2.1 20.8 260.5 $ $ 180.9 15.2 196.1 32.1 1.6 22.5 252.3 -3.2% -1.3% -3.1% -9.3% -23.8% 8.2% -3.1% $ $ $ $ $ $ 1.6% 40.2% 4.6% 25.5% $ $ 1.178 2.639 0.412 4.229 $ $ 1.205 3.557 0.401 5.163 2.3% 34.8% -2.7% 22.1% Employer Markets Retirement Products Fixed Variable Alliance Mutual Funds Deposits Total Annuity and Alliance Mutual Funds Benefit Partners Annualized Sales (millions) Life Disability Dental Executive Benefits COLI/BOLI sales (millions) $ 0.286 0.524 0.810 0.222 1.032 $ 0.259 0.553 0.812 0.200 1.012 $ 0.230 0.615 0.845 0.223 1.068 $ 0.257 0.666 0.923 0.318 1.241 $ 0.226 0.599 0.825 0.204 1.029 -21.0% 14.3% 1.9% -8.1% -0.3% $ 0.583 1.086 1.669 0.643 2.313 $ 0.483 1.265 1.748 0.522 2.270 -17.2% 16.5% 4.7% -18.8% -1.9% $ $ $ $ $ $ $ $ 15.6 27.2 9.4 $ 19.3 30.5 8.0 $ 29.4 44.5 6.9 $ 23.6 34.2 6.2 $ 15.3 22.9 7.1 -1.9% -15.8% -24.5% $ 37.9 66.0 18.9 $ 38.9 57.1 13.3 2.6% -13.5% -29.6% $ 5.4 $ 16.4 $ 12.7 $ 17.5 $ 17.2 218.5% $ 23.2 $ 34.7 49.6% Investment Management Sales and Inflows Retail Annuities Mutual funds Managed accounts & other Institutional Total Sales and Inflows $ 0.701 1.487 2.146 4.334 6.110 10.444 $ 0.642 1.331 1.599 3.572 3.166 6.738 $ 0.713 1.657 1.260 3.629 4.833 8.462 $ 0.885 1.329 1.806 4.019 5.044 9.063 $ 0.869 1.370 1.043 3.282 2.764 6.046 24.0% -7.9% -51.4% -24.3% -54.8% -42.1% $ 1.414 3.007 3.479 7.900 8.303 16.203 $ 1.754 2.699 2.849 7.302 7.808 15.110 24.0% -10.2% -18.1% -7.6% -6.0% -6.7% $ $ $ $ $ $ $ Total Annuity & Alliance Mutual Fund Deposits Fixed Annuities Individual Employer Markets Variable Annuities Individual Employer Markets Total Annuities Alliance Mutual Funds Total Annuity and Alliance Mutual Funds (1) $ 0.852 0.286 1.138 1.339 0.524 1.863 3.001 0.222 3.223 $ 0.797 0.259 1.056 1.424 0.553 1.977 3.033 0.200 3.233 $ 0.745 0.230 0.975 1.533 0.615 2.148 3.123 0.223 3.346 $ 0.733 0.257 0.990 1.680 0.666 2.346 3.336 0.318 3.654 $ 0.872 0.226 1.098 1.877 0.599 2.477 3.575 0.204 3.779 2.3% -21.0% -3.5% 40.2% 14.3% 33.0% 19.1% -8.1% 17.3% $ 1.590 0.583 2.173 2.639 1.086 3.725 5.898 0.643 6.542 $ 1.605 0.483 2.088 3.557 1.265 4.823 6.911 0.522 7.432 0.9% -17.2% -3.9% 34.8% 16.5% 29.5% 17.2% -18.8% 13.6% $ $ $ $ $ $ $ This schedule combines the previously reported data for LNC and JP and does not reflect any adjustments that may have resulted had the merger been completed prior to the periods presented. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 9: 6/30/2006 PAGE 5 Consolidated Expense Detail Unaudited (In Millions) Three Months Ended Dec Mar 2005 2006 $ 183.3 $ 186.9 $ Six Months Ended Jun % 2006 Change $ 531.1 67.7% Jun 2005 Commissions General and administrative expenses: General and administrative expenses Merger-related expenses Total general and administrative expenses Restructuring charges Taxes, licenses and fees Interest Total commissions and expenses incurred Less: commissions and expenses capitalized Amortization: DAC/VOBA Amortization Amortization of intangibles Total amortization Broker/Dealer Commissions Total $ $ 167.3 $ Sep 2005 182.2 Jun 2006 344.2 % Change 105.7% $ Jun 2005 316.7 357.1 357.1 23.2 24.4 21.8 593.8 (224.0) 383.3 383.3 2.7 21.4 21.4 611.0 (239.3) 369.9 369.9 1.5 17.3 21.8 593.8 (263.0) 331.9 331.9 0.3 33.3 21.5 573.9 (244.5) 420.3 7.4 427.7 9.6 47.3 65.0 893.9 (391.6) 17.7% NM 19.8% -58.6% 93.9% 198.2% 50.5% -74.8% 686.5 686.5 25.1 56.8 44.0 1,129.1 (435.4) 752.2 7.4 759.6 9.9 80.6 86.5 1,467.8 (636.1) 9.6% NM 10.6% -60.6% 41.9% 96.6% 30.0% -46.1% 142.3 1.9 144.2 32.5 546.5 (0.0) $ 99.1 2.0 101.1 29.9 502.8 0.0 $ 144.8 2.0 146.8 31.2 508.8 (0.0) $ 165.0 2.0 167.0 28.8 525.1 0.0 $ 222.2 5.6 227.7 51.9 781.9 - 56.1% 194.7% 57.9% 59.7% 43.1% 296.8 3.8 300.6 62.2 $ 1,056.5 (0.0) 387.2 7.6 394.7 80.7 $ 1,307.0 0.0 30.5% 100.0% 31.3% 29.7% 23.7% General & administrative expenses - basis points on assets - Annualized 121 127 120 105 102 (19) 117 104 (13) Merger-related expenses: (1) Severance and employee-related charges Systems integration and related expenses Other expenses Total Merger-related expenses (1) $ - $ - $ - $ - $ $ $ $ $ $ 12.8 0.8 3.1 16.7 NM NM NM NM $ - $ $ $ 12.8 0.8 3.1 16.7 NM NM NM NM Represents merger-related expenses included in general and administrative expenses and restructuring charges. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 10: 6/30/2006 PAGE 6 Operating Results Summary Unaudited [Millions of Dollars, except Common Share Data] Jun 2005 Operating Revenue Individual Life Insurance Individual Annuities Individual Markets Retirement Products Benefit Partners Executive Benefits & Other Employer Markets Investment Management Lincoln UK Lincoln Financial Media Other Operations Total Operating Revenue Realized gains (losses) on investments and derivatives Net gain (loss) on reinsurance derivative/trading account securities Gain on sale of subsidiaries/ businesses Amortization of deferred gain-reserve development Total Revenue Income from Operations (1) Individual Life Insurance Individual Annuities Individual Markets Retirement Products Benefit Partners Executive Benefits & Other Employer Markets Investment Management Lincoln UK Lincoln Financial Media Other Operations Income from Operations $ 475.4 348.2 823.6 234.3 53.2 287.5 114.4 78.4 79.2 1,383.2 (4.0) (5.1) 0.3 1,374.4 $ 62.6 $ 52.5 115.1 45.3 4.3 49.6 (1.4) 10.3 30.1 203.6 (2.7) (3.3) 0.2 197.9 $ (0.1) $ Sep 2005 458.5 362.4 820.9 238.7 59.4 298.1 123.2 102.8 45.9 1,391.0 (1.6) 5.3 0.3 1,395.0 64.9 79.0 144.0 53.4 2.4 55.8 4.9 9.6 12.1 226.3 (1.1) 3.5 0.2 228.8 0.1 $ Three Months Ended Dec Mar 2005 2006 501.1 372.1 873.2 241.2 61.6 302.8 127.9 62.5 28.9 1,395.4 (9.3) 0.3 1,386.4 73.8 70.9 144.7 45.2 9.5 54.7 9.0 13.5 9.5 231.4 (6.1) 0.2 225.4 0.1 $ 500.6 374.8 875.4 249.2 57.2 306.4 139.5 69.5 31.7 1,422.5 (6.9) 5.9 0.3 1,421.8 69.0 66.4 135.4 52.4 7.5 60.0 15.3 10.7 0.1 221.6 (4.4) 3.8 0.2 221.2 $ Jun 2006 901.4 552.6 1,454.0 248.9 354.9 101.2 704.9 134.7 81.4 57.7 67.6 2,500.3 (6.7) 1.8 0.3 2,495.6 0.1 147.1 89.0 236.1 54.3 37.0 16.2 107.6 12.0 9.9 11.9 (26.1) 351.4 (3.8) 1.2 0.2 349.0 - % Change 89.6% 58.7% 76.5% 6.2% NM 90.2% 145.2% 17.7% 3.8% NM -14.6% 80.8% -67.5% NM NM 81.6% $ $ Jun 2005 Six Months Ended Jun % 2006 Change 1,402.0 927.4 2,329.4 498.1 354.9 158.4 1,011.3 274.3 150.9 57.7 99.3 3,922.8 0.1 (13.6) 7.7 0.6 3,917.4 47.4% 34.8% 42.1% 6.5% NM 49.0% 76.2% 22.3% -1.4% NM -1.1% 45.8% -21.4% NM NM 45.4% 951.0 $ 688.0 1,639.0 467.6 106.3 573.9 224.2 153.0 100.4 2,690.7 (0.2) (11.2) (0.7) 14.2 0.6 2,693.6 $ (0.0) 120.8 $ 102.1 222.8 88.5 7.7 96.2 3.1 20.2 32.5 374.9 (0.1) (7.4) (0.5) 9.3 0.4 376.8 $ (0.1) $ $ $ $ $ $ $ $ (1) 135.0% 69.5% 105.1% 19.9% NM 276.7% 116.9% NM -3.9% NM NM 72.6% -40.7% NM NM NM 76.4% $ Realized gains (losses) on investments and derivatives Net gain (loss) on reinsurance derivative/trading account securities Gain on sale of subsidiaries/ businesses Reserve development/ amortization of related deferred gain Loss on early retirement of debt Net Income OTHER DATA 216.1 155.5 371.6 106.8 37.0 23.8 167.6 27.3 20.6 11.9 (26.0) 573.0 0.1 (8.2) 5.0 0.4 570.2 - 78.9% 52.3% 66.8% 20.7% NM 209.1% 74.2% NM 2.0% NM NM 52.8% -10.8% NM -100.0% NM 51.3% $ $ $ $ $ Jun 2005 Shareholders' Equity Beg of period (including AOCI) End of period (including AOCI) End of period (excluding AOCI) Average equity (excluding AOCI) (2) Common Shares Outstanding Average for the period - diluted End of period - diluted Per Share Data (Diluted) Net Income Income from Operations $ 6,042.9 $ 6,363.5 5,448.3 5,407.1 Sep 2005 Three Months Ended Dec Mar 2005 2006 6,284.4 $ 6,384.4 5,856.6 5,760.0 Jun 2006 $ Six Months Ended Jun Jun 2005 2006 6,175.6 $ 6,338.2 6,363.5 11,404.8 5,448.3 11,439.8 5,356.2 8,633.1 6,363.5 $ 6,284.4 5,663.5 5,555.9 6,384.4 $ 6,338.2 6,338.2 11,404.8 6,053.2 11,439.8 5,954.9 11,311.3 175.4 174.8 175.8 176.3 176.6 176.9 177.9 178.5 282.6 285.0 175.4 174.8 230.5 285.0 $ (1) 1.13 1.16 $ 1.30 1.29 $ 1.28 1.31 $ 1.24 1.25 $ 1.23 1.24 $ 2.14 2.13 $ 2.47 2.48 Shareholders' Equity Per Share Shareholders' Equity (including AOCI) Shareholders' Equity (excluding AOCI) Dividends declared (Common Stock) Return on Equity Net Income/Average Equity Inc from Operations/Average Equity Market Value of Common Stock Highest price Lowest price Closing price (1) $ 36.86 31.56 0.365 $ 36.23 32.65 0.365 $ 36.69 33.66 0.380 $ 35.99 34.37 0.380 $ 40.48 40.60 0.380 $ 36.86 31.56 0.730 $ 40.48 40.60 0.760 14.6% 15.1% 16.5% 16.3% 15.7% 16.1% 14.9% 14.9% 12.3% 12.4% 14.1% 14.0% 13.2% 13.3% $ $ 47.77 41.59 46.92 $ $ 52.42 46.59 52.02 $ $ 54.41 46.94 53.03 $ $ 57.97 52.00 54.59 $ $ 60.52 54.30 56.44 $ $ 49.42 41.59 46.92 $ $ 60.52 52.00 56.44 Income from operations includes after-tax restructuring charges of $1.3 million, or 1 cent per share, for the first quarter of 2005; $15.0 million, or 9 cents per share, for the second quarter of 2005; $1.8 million, or 1 cent per share, for the third quarter of 2005; $1.1 million, or 1 cent per share, for the fourth quarter of 2005; $0.2 million, or -0- cents per share, for the first quarter of 2006, and $6.2 million, or 2 cents per share, for the second quarter of 2006. (2) Average equity was adjusted to reflect the merger with Jefferson-Pilot effective April 3, 2006. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 11: 6/30/2006 PAGE 7 Consolidated Statements of Income Unaudited [Millions of Dollars] Jun 2005 Revenue Premiums Surrender charges Mortality assessments Expense assessments Investment advisory fees Communications revenue Net investment income Other revenue and fees Amortization of deferred gain Amortization of deferred gain-reserve development Realized gains (losses) Total Revenue Benefits and Expenses Insurance benefits Interest credited to contractholder funds Communications expenses Operating and acquisition expenses Taxes, licenses and fees Interest and debt expense Total Benefits and Expenses Income Before Federal Income Tax Federal income taxes Net Income $ 72.6 $ 16.5 142.1 267.4 62.0 703.7 100.0 18.9 0.3 (9.1) 1,374.4 Sep 2005 83.1 18.6 138.8 290.8 67.9 670.9 101.8 18.9 0.3 3.7 1,395.0 $ Three Months Ended Dec Mar 2005 2006 82.4 $ 18.0 145.1 294.1 70.9 668.2 97.6 18.9 0.3 (9.3) 1,386.3 78.4 $ 18.7 146.2 309.5 77.8 678.4 94.8 18.8 0.3 (1.0) 1,421.8 Jun 2006 454.3 27.3 294.7 367.6 81.2 57.5 1,068.2 130.7 18.8 0.3 (5.0) 2,495.6 (0.0) % Change NM 65.5% 107.4% 37.5% 31.0% NM 51.8% 30.7% -0.5% 45.1% 81.6% $ Jun 2005 Six Months Ended Jun % 2006 Change $ 532.7 46.0 440.9 677.1 159.0 57.5 1,746.6 225.5 37.5 0.6 (6.0) 3,917.4 272.5% 25.3% 55.0% 28.9% 35.9% NM 28.1% 23.2% -1.1% NM 45.4% 143.0 36.7 284.4 525.1 117.0 1,363.5 183.1 37.9 0.6 2.3 2,693.4 209.7 380.1 500.4 24.4 21.8 1,136.4 237.9 40.1 197.9 206.7 382.6 460.0 21.4 21.4 1,092.1 302.8 74.0 228.8 198.0 383.4 469.7 17.3 21.8 1,090.2 296.1 70.6 225.4 200.4 381.3 470.3 33.3 21.5 1,106.8 315.0 93.9 221.2 589.3 589.3 29.8 669.5 47.3 65.0 1,990.3 (0.0) 181.0% 55.0% NM 33.8% 93.9% 198.2% 75.1% 112.4% 289.8% 76.4% 400.8 760.2 955.8 56.8 44.0 2,217.6 475.7 99.0 376.8 (0.1) 789.7 970.6 29.8 1,139.8 80.6 86.5 3,097.1 820.3 250.2 570.1 0.0 97.0% 27.7% NM 19.3% 41.9% 96.6% 39.7% 72.4% 152.7% 51.3% 505.3 156.3 349.0 0.0 $ $ $ $ $ $ $ Roll Forward of Deferred Acquisition Costs & Value of Business Acquired Balance at beginning of period Deferral Amortization Included in Total Benefits and Expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Foreign currency translation adjustment Business acquired Balance at end of period Roll Forward of Deferred Front-End Load Balance at beginning of period Deferral Amortization Included in Expense Assessments Foreign currency translation adjustment Balance at end of period Roll Forward of Deferred Sales Inducements Balance at beginning of period Deferral Amortization Included in Income from Operations Balance at end of period $ $ $ Jun 2005 4,841.0 $ 224.0 (142.3) 81.7 (14.3) (204.8) (46.2) 4,657.4 $ Three Months Ended Sep Dec Mar 2005 2005 2006 4,657.4 $ 4,989.1 $ 5,163.3 $ 239.3 263.0 244.5 (99.1) (144.8) (165.0) 140.1 118.2 79.6 (13.8) 217.4 (12.1) 4,989.1 $ (8.7) 84.7 (20.0) 5,163.3 $ (10.9) 194.2 7.7 5,433.8 Jun 2006 5,433.8 391.6 (222.2) 169.4 (18.9) 221.5 48.3 2,474.2 8,328.4 (0.0) $ Six Months Ended Jun Jun 2005 2006 4,590.3 $ 5,163.3 435.4 636.1 (296.8) (387.2) 138.6 249.0 (26.0) 10.9 (56.4) 4,657.4 $ (29.8) 415.7 56.1 2,474.2 8,328.4 (0.0) $ $ $ $ 811.4 $ 31.0 (26.7) 4.4 (23.3) 792.5 $ 792.5 $ 30.2 (29.8) 0.4 (5.9) 786.9 $ 786.9 $ 33.2 (15.0) 18.2 (9.5) 795.7 $ 795.7 $ 31.1 (24.7) 6.4 3.8 805.8 $ $ 805.8 32.7 (28.7) 4.0 23.6 833.3 0.1 $ $ 814.2 $ 61.5 (54.7) 6.8 (28.5) 792.5 $ $ 795.7 63.8 (53.4) 10.4 27.4 833.3 0.1 $ 94.9 $ 15.5 (3.8) 11.7 106.6 $ 106.6 $ 15.1 (3.6) 11.5 118.1 $ 118.1 $ 15.6 (4.4) 11.3 129.4 $ 129.4 $ 15.7 (5.2) 10.5 139.9 $ $ 139.9 19.9 (5.2) 14.7 154.6 - $ $ $ 85.5 $ 28.8 (7.7) 21.1 106.6 $ $ 129.4 35.6 (10.4) 25.2 154.6 - This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 12: 6/30/2006 PAGE 8 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] For the Quarter Ended June 30, 2006 Individual Markets Retirement Products Employer Markets Benefit Partners Executive Benefits & Other Investment Management Lincoln Financial Media Other Operations Consolidating Adjustments Life Operating Revenue Premiums Surrender charges Mortality assessments Expense assessments Investment advisory fees Communications revenue Net investment income Amortization of deferred gain Other revenue and fees Total Operating Revenue Operating Expenses Insurance benefits Interest credited to contractholder funds Communications expenses Operating and acquisition expenses Taxes, licenses and fees Interest Total Operating Expenses Income (Loss) from Operations before Federal income taxes Federal income taxes Income from Operations $ Annuities Lincoln UK Consolidated $ 89.9 15.5 277.3 90.6 415.9 12.2 901.4 - $ 15.3 9.6 182.7 263.2 81.8 552.6 0.0 $ 2.1 54.7 187.5 4.6 248.9 - $ 328.9 25.1 0.8 354.9 (0.0) $ 0.0 0.0 8.5 4.9 86.5 1.3 101.2 - $ 104.6 30.0 134.7 - $ 19.9 8.9 34.7 17.8 0.0 81.4 - $ 57.5 0.2 57.7 - $ 0.3 (0.0) 0.0 72.2 18.8 5.2 96.5 - $ (23.5) (0.2) (5.3) (28.9) - $ 454.3 27.3 294.7 367.6 81.2 57.5 1,068.2 18.8 130.7 2,500.3 (0.0) 256.0 241.5 155.4 27.5 0.0 680.4 (0.0) 45.3 168.8 212.0 4.6 0.2 431.0 - 0.0 102.4 66.7 2.8 0.0 171.9 - 226.0 64.0 8.0 297.9 - 30.4 40.2 5.9 1.3 77.7 - 114.0 2.4 116.4 - 27.5 38.9 66.3 - 29.8 7.7 0.5 38.1 - 4.1 36.5 33.9 0.6 64.3 139.5 - (28.9) 0.0 (28.9) - 589.3 589.3 29.8 669.5 47.3 65.0 1,990.3 (0.0) 221.0 - 121.5 - 77.0 - 56.9 - 23.5 - 18.3 - 15.1 - 19.6 - (43.1) - (0.0) 510.0 - 73.9 147.1 0.0 32.5 $ 89.0 $ 22.7 54.3 0.0 19.9 $ 37.0 $ 7.3 16.2 $ 6.3 12.0 (0.0) 5.2 $ 9.9 $ 7.7 11.9 $ (17.0) (26.1) 0.0 $ $ 158.5 351.4 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 13: 6/30/2006 PAGE 9 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] For the Quarter Ended June 30, 2005 Individual Markets Retirement Products Employer Markets Benefit Partners Executive Benefits & Other Investment Management Lincoln Financial Media Other Operations Consolidating Adjustments Life Operating Revenue Premiums Surrender charges Mortality assessments Expense assessments Investment advisory fees Communications revenue Net investment income Amortization of deferred gain Other revenue and fees Total Operating Revenue Operating Expenses Insurance benefits Interest credited to contractholder funds Communications expenses Operating and acquisition expenses Taxes, licenses and fees Interest Total Operating Expenses Income (Loss) from Operations before Federal income taxes Federal income taxes Income from Operations $ Annuities Lincoln UK Consolidated $ 47.8 9.4 130.6 49.1 227.8 10.7 475.4 - $ 7.3 5.2 131.7 154.8 49.3 348.2 - $ 2.2 49.1 176.7 6.3 234.3 0.0 $ - $ 0.5 (0.2) 2.1 4.4 45.2 1.2 53.2 - $ 86.6 27.8 114.4 - $ 16.4 9.4 33.0 19.6 78.4 - $ - $ 0.6 80.6 18.9 1.2 101.3 - $ (24.6) (1.0) 3.6 (22.0) - $ 72.6 16.5 142.1 267.4 62.0 703.7 18.9 100.0 1,383.2 (0.0) 119.1 138.0 112.1 13.3 382.5 - 31.4 98.9 148.5 4.2 283.1 - 100.4 68.1 3.1 171.6 0.0 - 30.7 9.6 6.6 0.9 47.8 - 114.4 2.2 116.6 - 27.9 34.7 62.6 - - 0.5 33.2 37.1 0.8 22.6 94.2 - (21.3) (0.8) (22.0) - 209.7 380.1 500.4 24.4 21.8 1,136.4 (0.0) 92.9 - 65.1 - 62.7 - - 5.3 - (2.2) - 15.8 - - 7.0 - 0.0 - 246.8 - 30.3 62.6 $ 12.7 52.5 $ 17.4 45.3 0.0 $ $ 1.0 4.3 $ (0.8) (1.4) 0.0 5.6 $ 10.2 $ $ (22.9) 30.0 $ 0.0 43.3 $ 203.6 (0.1) This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 14: 6/30/2006 PAGE 10 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] Six Months Ended June 30, 2006 Individual Markets Retirement Products Employer Markets Benefit Partners Executive Benefits & Other Investment Management Lincoln Financial Media Other Operations Consolidating Adjustments Life Operating Revenue Premiums Surrender charges Mortality assessments Expense assessments Investment advisory fees Communications revenue Net investment income Amortization of deferred gain Other revenue and fees Total Operating Revenue Operating Expenses Insurance benefits Interest credited to contractholder funds Communications expenses Operating and acquisition expenses Taxes, licenses and fees Interest Total Operating Expenses Income (Loss) from Operations before Federal income taxes Federal income taxes Income from Operations $ Annuities Lincoln UK Consolidated $ 141.0 25.8 413.0 144.9 655.4 21.9 1,402.0 - $ 24.6 15.8 350.8 411.1 125.1 927.4 0.0 $ 4.4 110.3 373.2 10.2 498.1 (0.0) $ 328.9 25.1 0.8 354.9 (0.0) $ 1.1 0.0 11.3 8.2 135.2 2.7 158.4 - $ 207.5 66.7 274.3 - $ 36.5 16.7 62.7 34.9 0.1 150.9 - $ 57.5 0.2 57.7 - $ 0.6 (0.0) 0.3 112.3 37.5 6.4 157.1 - $ (48.5) (0.9) (8.4) (57.8) - $ 532.7 46.0 440.9 677.1 159.0 57.5 1,746.6 37.5 225.5 3,922.8 (0.0) 376.3 383.7 271.9 43.9 0.0 1,075.7 - 65.7 263.9 379.2 10.1 0.2 719.1 - 0.0 203.1 137.0 5.8 0.0 345.9 0.0 226.0 64.0 8.0 297.9 - 63.2 49.4 9.4 2.4 124.3 - 225.3 7.2 232.5 - 52.9 66.5 119.3 - 29.8 7.7 0.5 38.1 - 5.8 70.4 36.3 3.4 86.3 202.2 - (57.3) 0.0 (0.5) (57.8) - 789.7 970.6 29.8 1,139.8 80.6 86.5 3,097.1 - 326.3 - 208.3 - 152.2 - 56.9 - 34.0 - 41.8 - 31.6 - 19.6 - (45.1) - - 825.7 - 110.2 216.1 0.0 52.8 $ 155.5 $ 45.4 106.8 (0.0) 19.9 $ 37.0 $ 10.3 23.8 $ 14.5 27.3 (0.0) 11.0 $ 20.6 $ 7.7 11.9 $ (19.1) (26.0) 0.0 $ $ 252.7 573.0 (0.0) This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 15: 6/30/2006 PAGE 11 Consolidating Statements of Income from Operations Unaudited [Millions of Dollars] Six Months Ended June 30, 2005 Individual Markets Retirement Products Employer Markets Benefit Partners Executive Benefits & Other Investment Management Lincoln Financial Media Other Operations Consolidating Adjustments Life Operating Revenue Premiums Surrender charges Mortality assessments Expense assessments Investment advisory fees Communications revenue Net investment income Amortization of deferred gain Other revenue and fees Total Operating Revenue Operating Expenses Insurance benefits Interest credited to contractholder funds Communications expenses Operating and acquisition expenses Taxes, licenses and fees Interest Total Operating Expenses Income (Loss) from Operations before Federal income taxes Federal income taxes Income from Operations $ Annuities Lincoln UK Consolidated $ 93.3 21.4 261.7 99.2 451.7 23.6 951.0 - $ 17.9 10.5 256.2 311.7 91.7 688.0 - $ 5.1 97.1 352.7 12.7 467.6 (0.0) $ - $ 0.5 (0.2) 4.3 8.8 90.5 2.5 106.3 - $ 166.4 57.8 224.2 - $ 31.0 18.4 63.6 39.9 0.1 153.0 - $ - $ 0.3 118.8 37.9 2.4 159.4 - $ (49.4) (2.0) (7.5) (58.9) - $ 143.0 36.7 284.4 525.1 117.0 1,363.5 37.9 183.1 2,690.7 (0.1) 232.9 276.9 232.7 29.3 771.8 - 52.6 199.0 299.7 10.2 561.5 - 200.1 137.8 7.3 345.1 0.1 - 62.5 18.9 13.5 1.9 96.9 - 214.3 5.3 219.6 - 53.0 68.7 121.8 (0.0) - (0.2) 65.3 46.6 2.6 45.5 159.8 - (57.4) (1.5) (58.9) - 400.8 760.2 955.8 56.8 44.0 2,217.6 (0.0) 179.2 - 126.5 - 122.5 - - 9.4 - 4.6 - 31.2 - - (0.4) - (0.0) 473.0 - 58.4 120.8 0.0 24.4 $ 102.1 $ 34.0 88.5 0.0 $ $ 1.8 7.7 $ 1.5 3.1 (0.0) 11.0 $ 20.2 0.1 $ $ (32.9) 32.5 $ $ 98.1 374.9 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 16: 6/30/2006 PAGE 12 Consolidated Balance Sheet Unaudited [Millions of Dollars, except Common Share Data] Jun 2005 ASSETS Investments Corporate bonds U.S. government bonds Foreign government bonds Mortgage backed securities State and municipal bonds Preferred stocks - redeemable Common stocks Preferred stocks-equity Total AFS Securities Trading securities Mortgage loans Real estate Policy loans Other long-term investments Total Investments Cash and invested cash Premiums and fees receivable Accrued investment income Amount recoverable from reinsurers Deferred acquisition costs and VOBA Goodwill Other Assets held in separate accounts Total Assets LIABILITIES and SHAREHOLDERS' EQUITY Liabilities Insurance and Investment Contract Liabilities: Reserves Unpaid claims Premium deposit funds Policyholders' funds Total Insurance and Investment Contract Liabilities Short-term debt Long-term debt - senior notes Long-term debt - subordinated Capital securities Junior subordinated debentures issued to affiliated trusts Embedded derivative - modco Deferred gain on indemnity reinsurance Federal income taxes Other liabilities Liabilities related to separate accounts Total Liabilities Preferred Stock Capital stock Retained earnings Unrealized gains on investments Gains - derivatives Foreign currency Minimum pension liability Total Shareholders' Equity Total Liabilities and Shareholders' Equity Shareholders' Equity Per Share Book Value, Excluding AOCI Common shares outstanding (in millions) Sep 2005 Dec 2005 Mar 2006 Jun 2006 $ 26,757.7 $ 174.4 1,248.0 6,503.0 160.8 131.2 64.2 90.3 35,129.6 3,345.1 3,750.6 209.8 1,866.9 561.3 44,863.3 26,453.6 $ 158.3 1,195.0 6,237.1 157.9 123.0 62.2 89.4 34,476.5 3,287.0 3,696.2 196.6 1,856.4 572.3 44,085.0 25,860.7 161.8 1,203.3 5,951.2 128.8 137.4 55.9 88.8 33,587.9 3,246.0 3,662.6 182.7 1,862.2 626.9 43,168.4 $ 25,418.0 $ 173.4 1,169.7 5,868.8 126.0 136.9 61.0 115.0 33,068.8 3,190.1 3,586.2 180.4 1,860.4 687.5 42,573.2 1,974.0 363.2 532.1 6,899.4 5,433.7 1,194.4 1,517.7 67,984.2 128,472.0 $ 43,881.6 287.6 1,188.0 8,370.3 166.5 130.1 458.8 119.7 54,602.6 3,109.0 7,741.2 428.6 2,716.4 1,116.6 69,714.4 0.0 1,658.9 1,601.9 2,311.7 222.8 332.6 343.2 537.5 565.2 526.4 7,241.6 7,211.0 6,926.3 4,657.4 4,989.0 5,163.2 1,194.8 1,194.6 1,194.2 1,398.3 1,379.5 1,479.3 57,240.0 60,811.5 63,746.8 $ 119,014.5 $ 122,170.2 $ 124,859.6 $ 1,499.8 343.9 879.0 7,967.2 8,328.4 4,502.6 3,049.6 71,095.2 167,380.0 (0.0) $ 11,035.9 1,116.2 22,075.8 13,444.7 47,672.6 222.5 1,000.6 338.7 420.3 874.5 160.8 4,721.0 57,240.0 112,651.0 0.5 1,690.2 3,757.6 851.2 11.9 109.4 (57.3) 6,363.5 $ 10,981.4 1,038.9 21,932.7 13,637.9 47,590.9 165.1 999.5 335.9 314.1 855.2 31.5 4,782.1 60,811.5 115,885.8 0.5 1,740.2 3,922.8 569.0 8.9 99.6 (56.6) 6,284.4 $ 10,659.7 1,042.9 21,713.3 13,878.8 47,294.8 119.9 999.0 334.0 292.2 836.0 19.8 4,832.8 63,746.8 118,475.2 0.5 1,774.6 4,081.5 496.6 7.3 83.4 (59.5) 6,384.4 $ 10,657.2 $ 981.3 21,448.6 13,991.5 47,078.6 10.6 998.5 332.3 192.0 816.9 4,720.7 67,984.2 122,133.8 0.5 1,817.5 4,235.2 220.2 35.2 89.7 (60.1) 6,338.2 13,512.1 1,211.7 21,198.4 37,430.3 73,352.5 561.0 2,329.1 1,071.8 330.5 126.7 797.8 563.8 5,746.7 71,095.2 155,975.2 (0.0) 0.5 7,425.7 4,013.7 (151.5) 51.5 128.5 (63.6) 11,404.8 0.0 $ $ 167,380.0 (0.0) 40.48 40.60 281.8 $ 119,014.5 $ $ 36.87 $ 122,170.2 $ 36.23 $ 124,859.6 $ 36.69 33.66 174.0 $ $ $ 128,472.0 35.99 31.56 $ 172.6 32.65 $ 173.5 34.37 $ 176.1 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 17: 6/30/2006 PAGE 13 Balance Sheet Data - Segment Highlights Unaudited [Millions of Dollars] Individual Markets Retirement Products Employer Markets Benefit Partners Executive Benefits & Other Investment Management Lincoln Financial Media Other (1) Operations As of June 30, 2006 Assets Allocated Investments DAC and VOBA Goodwill Other intangibles Amounts recoverable from reinsurers Assets held in separate accounts Liabilities and Capital Insurance and Investment Contract Liabilities: Insurance policy & claim reserves Contractholder funds Total Insurance and Inv Contract Liabilities Allocated capital (2) Annuities Life Lincoln UK Consolidated $ 18,450.5 1,994.4 1,031.5 154.6 956.1 41,284.5 $ 25,477.9 4,592.2 2,188.4 99.0 1,739.6 4,532.0 $ 11,542.3 564.0 20.2 16,141.5 $ 1,285.5 121.4 278.9 29.5 - $ 5,469.1 274.1 4.0 791.3 $ 260.8 10.3 - $ 1,020.7 781.7 15.3 67.6 7,857.0 $ 707.6 665.6 - $ 6,468.4 0.7 5,170.3 488.9 $ 69,714.4 8,328.4 4,502.6 929.5 7,967.2 71,095.2 438.0 19,253.7 19,691.7 3,285.9 5,681.5 22,558.1 28,239.5 7,233.1 0.0 11,017.4 11,017.4 936.4 1,156.3 15.6 1,171.9 889.7 1,783.6 3,690.4 5,474.0 513.2 338.1 1,064.3 413.4 1,477.6 412.2 1,155.2 4,592.4 1,687.8 6,280.3 (3,323.9) $ 14,716.1 58,636.4 73,352.5 11,439.9 As of December 31, 2005 Assets Allocated Investments DAC and VOBA Goodwill Other intangibles Amounts recoverable from reinsurers Assets held in separate accounts Liabilities and Capital Insurance and Investment Contract Liabilities: Insurance policy & claim reserves Contractholder funds Total Insurance and Inv Contract Liabilities Allocated capital (1) (2) (2) $ 8,104.7 1,559.3 43.9 129.4 1,085.9 37,903.9 $ 14,990.3 2,543.9 855.1 1,270.2 2,482.7 $ 13,666.6 151.6 20.2 15,243.9 $ - $ 2,879.4 113.6 2.8 796.7 $ 260.8 13.9 - $ 996.6 743.4 14.3 59.9 7,319.6 $ - $ 2,530.8 51.4 4,507.5 - $ 43,168.4 5,163.2 1,194.2 143.3 6,926.3 63,746.8 445.7 8,613.7 9,059.4 1,785.0 3,562.9 12,866.3 16,429.2 3,231.9 11,033.4 11,033.4 978.7 - 1,915.9 751.4 2,667.3 346.0 360.0 1,013.7 395.0 1,408.7 430.6 - 4,764.5 1,932.3 6,634.4 (1,275.6) $ 11,702.7 35,592.1 47,232.4 5,856.6 Includes consolidating adjustments. Allocated capital is based on internal economic capital models plus certain other items (principally intangibles including DAC and VOBA, goodwill and other items). This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 18: 6/30/2006 PAGE 14 Individual Markets - Individual Life Insurance Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 $ 57.7 11.6 135.3 58.8 227.5 10.3 501.1 $ 51.1 10.3 135.6 54.3 239.5 9.7 500.6 $ Six Months Ended Jun 2006 $ 141.0 25.8 413.0 144.9 655.4 21.9 1,402.0 - Jun 2005 Sep 2005 $ 47.4 10.9 127.7 31.7 229.5 11.2 458.5 Jun 2006 89.9 15.5 277.3 90.6 415.9 12.2 901.4 - % Change 88.1% 64.9% 112.3% 84.5% 82.6% 14.0% 89.6% $ Jun 2005 93.3 21.4 261.7 99.2 451.7 23.6 951.0 - % Change 51.1% 20.6% 57.8% 46.1% 45.1% -7.2% 47.4% Operating Revenue Premiums Surrender charges Mortality assessments Expense assessments Net investment income Other revenue and fees Total Operating Revenue $ 47.8 9.4 130.6 49.1 227.8 10.7 475.4 Operating Expenses Insurance benefits Interest credited to contractholder funds Operating and acquisition expenses Total Operating Expenses Income from operations before Federal income taxes Federal income taxes Income from Operations Effective tax rate Average equity Return on average equity $ $ 119.1 138.0 125.4 382.5 92.9 30.3 62.6 32.6% 3,227.9 $ 7.8% $ 109.9 140.9 110.9 361.8 96.7 31.8 64.9 32.8% 3,212.8 $ 8.1% $ 118.6 142.1 130.1 390.8 110.4 36.5 73.8 33.1% 3,278.0 $ 9.0% $ 120.2 142.2 132.8 395.3 105.3 36.3 69.0 34.5% 3,266.0 $ 8.5% $ 256.0 241.5 182.9 680.4 (0.0) 114.9% 75.0% 45.9% 77.9% 137.9% 143.9% 135.0% $ 232.9 276.9 262.1 771.8 179.2 - 376.3 383.7 315.7 1,075.7 - 61.6% 38.6% 20.5% 39.4% 82.1% 88.7% 78.9% 221.0 0.0 73.9 147.1 0.0 326.3 0.0 58.4 120.8 - 110.2 $ 216.1 0.0 33.4% 7,051.8 8.3% $ 32.6% 3,167.6 $ 7.6% 33.8% 5,158.9 8.4% Operating and Acquisition Expenses Commissions General and administrative expenses Taxes, licenses and fees Total commissions and expenses incurred Less: commissions and expenses capitalized Amortization of DAC and VOBA Net Operating and Acquisition Expenses General and administrative expenses basis points on account values - Annualized $ $ 36.5 $ 94.5 13.3 144.3 (85.7) 66.9 125.4 $ 282 43.4 $ 105.3 12.4 161.1 (94.7) 44.6 110.9 $ 309 50.3 $ 105.6 12.9 168.7 (113.8) 75.2 130.1 $ 304 44.2 $ 88.9 16.3 149.4 (90.1) 73.6 132.8 $ 251 125.4 123.0 27.5 275.9 (199.8) 106.7 182.9 (0.0) 194 243.4% 30.1% 107.8% 91.3% NM 59.6% 45.9% $ $ 72.8 $ 186.3 29.3 288.4 (165.3) 138.9 262.1 $ 278 169.6 211.9 43.9 425.4 (289.9) 180.3 315.7 0.0 214 133.0% 13.7% 49.8% 47.5% -75.4% 29.8% 20.5% (88) (64) Roll Forward of Deferred Acquisition Costs & Value of Business Acquired Balance at beginning of period Deferral Amortization Included in Total Operating Expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Business acquired Other Balance at end of period Roll Forward of Deferred Front-End Loads Balance at beginning of period Deferral Amortization Included in Expense Assessments Balance at end of period $ 312.5 $ 20.0 (16.7) 3.4 315.9 $ (0.0) 315.9 19.0 3.6 22.6 338.5 $ 338.5 $ 21.8 (17.6) 4.2 342.6 $ 0.0 342.6 $ 19.7 (18.0) 1.7 344.3 $ 344.3 21.4 (18.1) 3.2 347.5 $ 311.1 $ 40.2 (35.5) 4.8 315.9 $ (0.0) 342.6 41.0 (36.1) 4.9 347.5 $ 2,425.4 $ 85.7 (66.9) 18.9 (5.9) (88.4) (0.1) 2,350.0 $ (0.1) 2,350.0 $ 94.7 (44.6) 50.1 (6.1) 85.9 0.0 2,479.9 $ (0.0) 2,479.9 $ 113.8 (75.2) 38.6 (1.2) 26.5 0.1 2,543.9 $ (0.1) 2,543.9 $ 90.1 (73.6) 16.6 (3.4) 86.7 0.0 2,643.8 0.0 2,643.8 199.8 (106.7) 93.0 (7.9) 96.7 1,766.6 4,592.2 (0.0) $ 2,359.0 $ 165.3 (138.9) 26.3 (8.1) (27.3) 0.1 2,350.0 $ (0.0) 2,543.9 289.9 (180.3) 109.6 (11.3) 183.4 1,766.6 0.0 4,592.2 0.0 $ $ $ $ $ $ This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 19: 6/30/2006 PAGE 15 Individual Markets- Individual Life Insurance Operational Data Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 Six Months Ended Jun % 2006 Change Jun 2005 Sep 2005 Jun 2006 % Change Jun 2005 Sales by Product (Millions) (1) Universal Life Excluding MoneyGuard MoneyGuard Total Variable universal life Whole life Term Total $ 47.3 8.0 55.3 10.2 0.2 8.6 74.3 $ 46.3 9.1 55.4 9.1 0.4 8.1 72.9 $ 59.6 9.4 69.0 13.4 0.4 7.9 90.7 $ 41.3 7.7 49.0 10.0 0.7 8.2 67.9 $ 97.5 7.5 105.0 15.7 0.4 11.3 132.3 106.1% -6.3% 89.9% 53.9% 100.0% 31.4% 78.1% $ 85.8 15.4 101.2 19.7 1.0 17.7 139.6 $ 138.7 15.2 154.0 25.7 1.1 19.5 200.3 61.7% -1.3% 52.2% 30.5% 10.0% 10.2% 43.5% $ $ $ $ $ $ $ First-Year Paid Premiums (Millions) Universal Life Excluding MoneyGuard MoneyGuard Total Variable universal life Whole life Term Total $ 103.6 53.4 157.0 23.8 8.3 9.1 198.2 $ 102.3 60.8 163.1 23.4 10.2 8.6 205.3 $ 144.0 62.5 206.5 33.4 14.4 8.4 262.7 $ 108.2 51.5 159.7 27.1 8.3 8.6 203.7 $ 261.2 50.0 311.2 40.5 9.5 11.5 372.7 152.1% -6.4% 98.2% 70.2% 14.5% 26.4% 88.0% $ 190.0 102.8 292.8 49.7 16.1 18.9 377.5 $ 369.4 101.5 470.9 67.6 17.8 20.1 576.4 94.4% -1.3% 60.8% 36.0% 10.6% 6.3% 52.7% $ $ $ $ $ $ $ Life Insurance In-Force (Billions) Universal life & other Term insurance Total Life Segment In-Force $ 126.069 $ 126.976 $ 128.791 $ 129.584 $ 180.659 184.334 187.850 191.825 $ 306.727 $ 311.310 $ 316.641 $ 321.409 $ 260.945 229.082 490.027 - 107.0% 26.8% 59.8% $ $ 126.069 $ 180.659 306.727 $ 260.945 229.082 490.027 107.0% 26.8% 59.8% (1) Sales for Individual Life Insurance consist of first year commissionable premium for Universal life ("UL"), including Moneyguard, including UL internal replacements, and first year paid premiums for Whole life and Term products. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 20: 6/30/2006 PAGE 16 Individual Markets - Individual Life Insurance Account Value Roll Forward Unaudited [Billions of Dollars] Interest Sensitive Life-Balance Beginning-of-Period Business acquired Deposits Withdrawals & deaths Net flows Policyholder assessments Interest credited Interest Sensitive Life-Balance End-of-Period (1) Variable Universal Life-Balance Beginning of Period Business acquired Deposits Withdrawals & deaths Net flows Policyholder assessments Investment income and change in market value Variable Universal Life -Balance End-of-Period Total Segment- Life Insurance Account Value Rollforward Balance Beginning-of-Period Business acquired Deposits Withdrawals & deaths Net flows Policyholder assessments Investment income and change in market value Total Segment -Balance End-of-Period $ $ $ $ Jun 2005 11.325 0.390 (0.166) 0.223 (0.239) 0.134 11.443 2.003 0.081 (0.041) 0.040 (0.042) 0.052 2.053 - $ $ $ $ Sep 2005 11.443 0.415 (0.161) 0.253 (0.242) 0.136 11.591 2.053 0.082 (0.041) 0.041 (0.043) 0.103 2.154 - Three Months Ended Dec Mar 2005 2006 $ 11.591 $ 11.809 0.499 0.401 (0.160) (0.182) 0.339 0.219 (0.257) (0.250) 0.136 0.135 $ 11.809 $ 11.913 $ 2.154 $ 2.242 0.097 0.087 (0.036) (0.049) 0.061 0.038 (0.044) (0.044) 0.071 0.119 $ 2.242 $ 2.355 13.745 $ 0.596 (0.196) 0.400 (0.301) 0.206 14.051 $ - $ $ $ $ Jun 2006 11.913 9.150 0.799 (0.317) 0.482 (0.493) 0.233 21.285 2.355 1.918 0.224 (0.158) 0.066 (0.077) (0.068) 4.194 (0.000) 14.268 11.068 1.023 (0.476) 0.548 (0.571) 0.165 25.479 (0.000) % Change 5.2% NM 104.9% -91.0% 116.1% NM 73.9% 86.0% 17.6% NM 176.5% NM 65.0% -83.3% NM 104.3% $ $ $ $ Six Months Ended Jun Jun % 2005 2006 Change 11.232 $ 11.809 5.1% 9.150 NM 0.771 1.201 55.8% (0.354) (0.499) -41.0% 0.417 0.701 68.1% (0.477) (0.743) -55.8% 0.272 0.368 35.3% 11.443 $ 21.285 86.0% 2.028 $ 2.242 10.6% 1.918 NM 0.167 0.311 86.2% (0.084) (0.207) NM 0.083 0.103 24.1% (0.084) (0.121) -44.0% 0.027 0.051 88.9% 2.053 $ 4.194 104.3% (0.000) 13.259 $ 0.938 (0.438) 0.500 (0.561) 0.298 13.496 $ 14.051 11.068 1.511 (0.706) 0.805 (0.864) 0.420 25.479 (0.000) 6.0% NM 61.1% -61.2% 61.0% -54.0% 40.9% 88.8% $ $ 13.328 $ 0.470 (0.207) 0.263 (0.281) 0.187 13.496 $ - 13.496 $ 0.497 (0.202) 0.295 (0.285) 0.239 13.745 $ - 14.051 $ 0.488 (0.231) 0.257 (0.294) 0.254 14.268 $ - 7.1% NM 117.7% NM 108.4% NM -11.8% 88.8% $ $ Life Product Spread Information Interest Sensitive Products Net investment income (3) (4) Interest credited to policyholders Spread (3)(4) Traditional Products Net investment income (3) (2) 6.38% 4.65% 1.74% 6.35% 4.70% 1.65% 6.26% 4.66% 1.60% 6.48% 4.60% 1.88% 6.22% 4.46% 1.76% Change (Basis Points) (16) (19) 2 6.34% 4.69% 1.65% 6.31% 4.51% 1.79% Change (Basis Points) (3) (18) 14 6.59% 6.62% 6.42% 6.72% 6.59% - 6.59% 6.65% 6 (1) (2) Includes universal life, interest sensitive life, and the fixed investment option of VUL products. Interest Sensitive Products - For the life 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 life products divided by average fixed account values. Traditional Products - the yield on earning assets is calculated as net investment income on traditional investment portfolios divided by average earning assets. As of June 30, 2006, interest sensitive products represented 80% of total interest sensitive and traditional earning assets. (3) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread for interest sensitive products was 13 bps in the 2nd quarter of 2006, 7 bps in the 1st quarter of 2006, 8 bps in the 4th quarter of 2005, 4 bps in the 3rd quarter of 2005, and 12 bps in the 2nd quarter of 2005 . The impact was 12 basis points for the first six months of 2006 and 6 basis points for the first six months of 2005. There was an impact on traditional products of 14 bps in the 2nd quarter of 2006, 15 bps in the 1st quarter of 2006, 0 bps in the 4th quarter of 2005, 20 bps in the 3rd quarter of 2005 and 11 bps in the 2nd quarter of 2005. The impact was 15 basis points for the first six months of 2006 and 11 basis points for the first six months of 2005. (4) The net investment income and spread for the first quarter of 2006 includes 17 basis points of incremental yield from special investments. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 21: 6/30/2006 PAGE 17 Individual Markets - Individual Annuities Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 8.5 $ 4.4 155.5 150.4 53.3 372.1 9.3 $ 6.2 168.0 148.0 43.4 374.8 Six Months Ended Jun 2006 24.6 15.8 350.8 411.1 125.1 927.4 0.0 Jun 2005 Sep 2005 10.7 $ 5.0 147.7 151.7 47.3 362.4 Jun 2006 15.3 9.6 182.7 263.2 81.8 552.6 0.0 % Change 109.6% 84.6% 38.7% 70.0% 65.9% 58.7% $ Jun 2005 % Change 37.3% 50.6% 36.9% 31.9% 36.4% 34.8% Operating Revenue Premiums Surrender charges Expense assessments Net investment income Other revenue and fees (1) Total Operating Revenue $ 7.3 $ 5.2 131.7 154.8 49.3 348.2 17.9 $ 10.5 256.2 311.7 91.7 688.0 - Operating Expenses Insurance benefits Interest credited to contractholder funds Operating and acquisition expenses Total Operating Expenses Income from operations before Federal income taxes Federal income taxes Income from Operations Effective tax rate Average equity Return on average equity Basis points on average account values Operating and Acquisition Expenses Commissions General and administrative expenses Broker-dealer general and administrative expenses Taxes, licenses and fees Total commissions and expenses incurred Less: commissions and expenses capitalized Amortization of DAC and VOBA Net Operating and Acquisition Expenses General and administrative expenses - basis (2) points on gross account values - Annualized $ $ 31.4 98.9 152.7 283.1 - 20.5 97.3 139.8 257.6 - 21.2 96.3 164.7 282.2 - 20.4 95.1 172.6 288.1 - 45.3 168.8 216.9 431.0 - 44.3% 70.7% 42.0% 52.2% 86.6% 155.9% 69.5% $ 52.6 199.0 309.9 561.5 - 65.7 263.9 389.4 719.1 - 24.9% 32.6% 25.7% 28.1% 64.7% 116.8% 52.3% 65.1 12.7 52.5 19.4% 1,705.9 $ 12.3% 49 $ 104.8 25.8 79.0 24.6% 1,713.7 $ 18.5% 69 $ 89.9 19.0 70.9 21.1% 1,773.7 $ 16.0% 60 $ 86.7 20.3 66.4 23.4% 1,744.1 $ 15.2% 52 $ 121.5 32.5 89.0 - 126.5 - 208.3 - 24.4 102.1 $ - 52.8 155.5 - 26.7% 3,269.2 10.9% 58 $ 19.3% 1,684.5 $ 12.1% 48 25.4% 2,506.6 12.4% 56 $ 124.2 $ 68.7 20.4 4.2 217.5 (108.6) 43.8 152.7 $ 131.7 $ 68.4 19.9 5.0 225.0 (112.1) 26.8 139.8 $ 1E-06 60 131.6 $ 70.9 23.0 (1.4) 224.1 (118.9) 59.5 164.7 $ 140.0 $ 66.2 17.8 5.4 229.5 (122.7) 65.8 172.6 $ 200.3 69.3 20.0 4.6 294.2 (150.0) 72.7 216.9 45 61.3% 0.9% -2.0% 9.5% 35.3% -38.1% 66.0% 42.0% $ 244.0 $ 132.2 38.0 10.2 424.4 (210.9) 96.3 309.8 $ 0.1 62 340.3 135.5 37.8 10.1 523.7 (272.7) 138.5 389.4 49 39.5% 2.5% -0.5% -1.2% 23.4% -29.3% 43.7% 25.7% $ $ 64 60 52 (19) (13) Roll Forward of Deferred Acquisition Costs & Value of Business Acquired Balance at beginning of period Deferral Amortization Included in Total Operating Expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Business acquired Balance at end of period Roll Forward of Deferred Front-End Loads Balance at beginning of period Deferral Amortization Included in Income from Operations Balance at end of period Roll Forward of Deferred Sales Inducements Balance at beginning of period Deferral Amortization Included in Income from Operations Balance at end of period (1) (2) $ 1,097.6 $ 108.6 (43.8) 64.8 (1.8) (42.1) 1,118.5 $ (0.1) 1,118.5 $ 112.1 (26.8) 85.2 (4.7) 51.7 1,250.6 $ 0.1 1,250.6 $ 118.9 (59.5) 59.4 (3.5) 21.5 1,328.0 $ 0.0 1,328.0 $ 122.7 (65.8) 56.9 (2.7) 32.7 1,414.9 $ (0.0) 1,414.9 150.0 (72.7) 77.3 (4.1) 57.3 448.9 1,994.4 (0.0) $ 999.4 $ 210.9 (96.3) 114.6 (8.9) 13.3 1,118.5 $ (0.1) 1,328.0 272.7 (138.5) 134.2 (6.8) 90.0 448.9 1,994.4 (0.0) $ $ $ $ 55.2 $ 9.0 (3.1) 5.9 61.1 $ - 61.1 $ 9.4 (4.8) 4.6 65.6 $ 0.1 65.6 $ 9.5 (3.1) 6.4 72.0 $ - 72.0 $ 9.4 (3.3) 6.1 78.1 $ - 78.1 9.8 (3.0) 6.8 84.8 0.1 $ $ 50.1 $ 16.9 (5.9) 11.0 61.1 $ - 72.0 19.2 (6.3) 12.9 84.8 0.1 $ $ 94.9 $ 15.5 (3.8) 11.7 106.6 $ 106.6 $ 15.1 (3.6) 11.5 118.1 $ 118.1 $ 15.6 (4.4) 11.3 129.4 $ 129.4 $ 15.7 (5.2) 10.5 139.9 $ $ 139.9 19.9 (5.2) 14.7 154.6 - $ $ $ 85.5 $ 28.8 (7.7) 21.1 106.6 $ $ 129.4 35.6 (10.4) 25.2 154.6 - Primarily broker-dealer revenue. Includes distribution costs. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 22: 6/30/2006 PAGE 18 Individual Markets - Individual Annuities Account Value Rollforward Unaudited [Billions of Dollars] Jun 2005 Fixed Annuities - Balance at Beginning of Period Business acquired Gross deposits Withdrawals & deaths Net flows Transfer from (to) variable annuities Interest credited Fixed Annuities - Gross Reinsurance ceded Fixed Annuities - Balance at End of Period $ 11.411 $ 0.534 (0.339) 0.196 (0.282) 0.117 11.441 (2.277) 9.165 $ - Sep 2005 11.441 $ 0.494 (0.340) 0.155 (0.338) 0.117 11.375 (2.257) 9.117 $ - Three Months Ended Dec Mar 2005 2006 11.375 $ 0.486 (0.370) 0.116 (0.768) 0.115 10.837 (2.233) 8.605 $ - Jun 2006 10.561 9.343 0.872 (0.892) (0.019) (0.395) 0.186 19.675 (2.149) 17.526 - % Change -7.4% NM 63.3% NM NM -40.1% 59.0% 72.0% 5.6% 91.2% $ Jun 2005 Six Months Ended Jun % 2006 Change 10.837 9.343 1.343 (1.299) 0.044 (0.847) 0.298 19.675 (2.149) 17.526 - 10.837 $ 0.471 (0.408) 0.063 (0.451) 0.112 10.561 (2.202) 8.359 $ - 11.448 $ 1.007 (0.700) 0.307 (0.546) 0.232 11.441 (4.568) 9.165 $ - -5.3% NM 33.4% -85.6% -85.7% -55.1% 28.4% 72.0% 53.0% 91.2% (1) $ $ Variable Annuities - Balance at Beginning of Period Business acquired Gross deposits Withdrawals & deaths Net flows Transfer from (to) fixed annuities Investment increase & change in market value Variable Annuities - Balance at End of Period (2) $ 31.100 $ 1.327 (0.775) 0.552 0.384 0.765 32.801 $ 42.510 $ 1.862 (1.114) 0.748 0.102 0.882 44.242 (2.277) 41.966 $ - 32.801 $ 1.410 (0.847) 0.563 0.418 1.494 35.276 $ 44.242 $ 1.904 (1.187) 0.717 0.080 1.611 46.651 (2.257) 44.393 $ - 35.276 $ 1.513 (0.862) 0.651 0.469 1.266 37.662 $ 46.651 $ 1.999 (1.232) 0.767 (0.299) 1.381 48.499 (2.233) 46.266 $ - 37.662 $ 1.665 (0.959) 0.706 0.451 1.682 40.501 $ 48.499 $ 2.136 (1.367) 0.769 1.794 51.062 (2.202) 48.861 $ - 40.501 0.250 1.877 (1.014) 0.864 0.395 (0.467) 41.543 51.062 9.593 2.750 (1.905) 0.844 0.000 (0.281) 61.219 (2.149) 59.070 (0.000) 30.2% NM 41.4% -30.8% 56.5% 2.9% NM 26.7% $ 30.684 $ 2.616 (1.531) 1.085 0.768 0.264 32.801 $ 42.132 $ 3.623 (2.231) 1.392 0.223 0.496 44.242 (4.568) 41.966 $ - 37.662 0.250 3.543 (1.973) 1.570 0.847 1.215 41.543 48.499 9.593 4.886 (3.272) 1.613 0.000 1.513 61.219 (2.149) 59.070 (0.000) 22.7% NM 35.4% -28.9% 44.7% 10.3% NM 26.7% $ $ Total Annuities - Balance at Beginning of Period Business acquired Gross deposits Withdrawals & deaths Net flows Transfers Interest credited & change in market value Total Annuities - Gross Reinsurance ceded Total Annuities (Net of Ceded) - Balance at End of Period $ 20.1% NM 47.7% -71.0% 12.8% -100.0% NM 38.4% 5.6% 40.8% $ 15.1% NM 34.9% -46.7% 15.9% -100.0% 205.0% 38.4% 53.0% 40.8% $ $ Variable Annuities Under Agreement - Included above Incremental Deposits (3) : Fixed annuities Variable annuities Total Incremental Deposits (1) (2) (3) $ 0.213 $ 0.226 $ 0.197 $ 0.190 $ 0.000 0.173 -18.8% $ 0.213 $ 0.173 -18.8% $ 0.523 $ 1.293 1.816 0.481 $ 1.383 1.864 0.472 $ 1.481 1.953 0.461 $ 1.650 2.111 $ 0.861 1.850 2.711 - 64.6% 43.1% 49.3% 0.978 $ 2.552 3.529 $0.000 $ 1.322 3.500 4.822 - 35.2% 37.1% 36.6% Includes fixed portion of variable annuities. Excludes the fixed portion of variable annuities. Incremental Deposits represent gross deposits reduced by transfers from other Lincoln products. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 23: 6/30/2006 PAGE 19 Individual Markets - Individual Annuities Account Values Unaudited [Billions of Dollars] Jun 2005 Fixed Annuities - excluding fixed portion of variable contracts Deposits Withdrawals Net flows Gross fixed contract account values Reinsurance ceded Net Fixed Contract Account Values $ $ $ $ 0.045 $ (0.226) (0.180) $ 8.089 $ (2.277) 5.812 $ Sep 2005 0.024 $ (0.172) (0.149) $ 8.019 $ (2.257) 5.761 $ Three Months Ended Dec Mar 2005 2006 0.025 $ (0.218) (0.193) $ 7.823 $ (2.233) 5.590 $ 0.022 $ (0.244) (0.222) $ 7.676 $ (2.202) 5.474 $ Jun 2006 0.137 (0.660) (0.523) 12.335 (2.149) 10.186 % Change 204.4% NM NM 52.5% 5.6% 75.3% $ $ $ $ Jun 2005 Six Months Ended Jun % 2006 Change 0.159 (0.904) (0.745) 12.335 (2.149) 10.186 59.0% -90.3% -98.7% 52.5% 5.6% 75.3% 0.100 $ (0.475) (0.375) $ 8.089 $ (2.277) 5.812 $ - Equity-indexed Annuities Deposits Withdrawals Net flows Equity-indexed Contract Account Values $ $ $ - $ $ $ - $ $ $ - $ $ $ - $ $ $ 0.228 (0.047) 0.181 3.210 NM NM NM NM $ $ $ - $ $ $ 0.228 (0.047) 0.181 3.210 NM NM NM NM Fixed Portion of Variable Contracts Deposits Withdrawals Net flows Fixed Portion of Variable Contract Account Values $ $ $ 0.489 $ (0.113) 0.376 $ 3.111 $ 0.470 $ (0.164) 0.306 $ 3.115 $ 0.460 $ (0.145) 0.315 $ 2.773 $ 0.449 $ (0.164) 0.285 $ 2.642 $ 0.507 (0.185) 0.322 4.130 3.7% -63.7% -14.4% 32.8% $ $ $ 0.906 $ (0.225) 0.681 $ 3.111 $ 0.956 (0.348) 0.608 4.130 5.5% -54.7% -10.7% 32.8% Variable Annuities - including fixed portion of variable contracts Deposits Withdrawals Net Flows Variable Contract Account Values Average Daily Variable Annuity Account Values $ $ $ $ 1.817 $ (0.889) 0.928 $ 35.912 $ 31.660 $ 1.880 $ (1.011) 0.868 $ 38.391 $ 34.367 $ 1.973 $ (1.007) 0.966 $ 40.435 $ 36.089 $ 2.114 $ (1.123) 0.991 $ 43.082 $ 39.947 $ 2.384 (1.198) 1.186 45.673 41.214 31.2% -34.8% 27.8% 27.2% 30.2% $ $ $ $ 3.523 $ (1.756) 1.766 $ 35.912 $ 31.281 $ 4.499 (2.321) 2.177 45.673 40.580 27.7% -32.2% 23.3% 27.2% 29.7% Change Change (Basis Point) (Basis Point) 5.67% (7) 5.76% 5.72% (4) 3.81% (14) 3.96% 3.89% (7) 1.86% 7 1.81% 1.84% 3 $ $ $ (1) 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. (2) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread wa 2 bps in the second quarter of 2006, 9 bps in the first quarter of 2006, 6 bps in the fourth quarter of 2005, 1 bp in the third quarter of 2005 and 2 bps in the second quarter of 2005. The impact was 4 bps in the first six months 2006 and 1 bp in the first six months of 2005. Net investment income Interest credited to policyholders Spread (1) (2) (1) (2) Individual Annuity Product Spread Information 5.74% 3.95% 1.79% 5.68% 3.93% 1.75% 5.73% 3.92% 1.81% 5.84% 3.93% 1.91% This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 24: 6/30/2006 PAGE 20 Employer Markets - Retirement Products Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 2.0 $ 51.7 181.3 6.2 241.2 2.3 $ 55.6 185.7 5.6 249.2 Six Months Ended Jun 2006 4.4 110.3 373.2 10.2 498.1 (0.0) Jun 2005 Sep 2005 2.8 $ 51.8 177.5 6.6 238.7 Jun 2006 2.1 54.7 187.5 4.6 248.9 - % Change -4.5% 11.4% 6.1% -27.0% 6.2% $ Jun 2005 % Change -13.7% 13.6% 5.8% -19.7% 6.5% Operating Revenue Surrender charges Expense assessments Net investment income Other revenue and fees Total Operating Revenue $ 2.2 $ 49.1 176.7 6.3 234.3 5.1 $ 97.1 352.7 12.7 467.6 (0.0) Operating Expenses Interest credited to contractholder funds Operating and acquisition expenses Total Operating Expenses Income from operations before Federal income taxes Federal income taxes Income from Operations Effective tax rate Average equity Return on average equity Basis points on average account values Operating and Acquisition Expenses Commissions General and administrative expenses Taxes, licenses and fees Total commissions and expenses incurred Less: commissions and expenses capitalized Amortization of DAC and VOBA Net Operating and Acquisition Expenses General and administrative expenses - basis (1) points on account values - Annualized $ $ 100.4 71.2 171.6 62.7 17.4 45.3 27.7% 876.8 $ 20.7% 64 $ 100.7 62.2 162.9 75.8 22.4 53.4 29.5% 909.9 $ 23.5% 73 $ 101.1 77.2 178.3 62.9 17.7 45.2 28.2% 939.1 $ 19.3% 60 $ 100.7 73.3 174.0 75.2 22.7 52.5 30.2% 1,006.4 $ 20.9% 67 $ 102.4 69.5 171.9 - 2.0% -2.4% 0.2% 22.8% 30.5% 19.9% $ 200.1 145.1 345.1 0.1 203.1 142.8 345.9 0.0 1.5% -1.6% 0.2% 24.2% 33.5% 20.7% 77.0 0.0 22.7 54.3 0.0 122.5 34.0 88.5 0.0 152.2 - 45.4 $ 106.8 (0.0) 29.4% 985.3 22.0% 69 $ 27.7% 886.4 $ 20.0% 63 29.8% 995.9 21.5% 68 $ 24.9 $ 48.8 3.1 76.8 (23.7) 18.1 71.2 69 $ 26.4 $ 60.6 (0.8) 86.2 (24.5) 0.5 62.2 83 $ 25.1 $ 57.4 1.2 83.7 (24.4) 17.9 77.2 0.1 77 $ 26.2 $ 49.7 2.9 78.8 (25.5) 20.0 73.3 $ (0.1) 64 22.2 47.2 2.8 72.3 (22.6) 19.8 69.5 60 -10.8% -3.3% -9.7% -5.9% 4.6% 9.4% -2.4% $ 51.4 $ 97.6 7.3 156.3 (48.4) 37.2 145.1 $ 69 48.4 96.9 5.8 151.1 (48.1) 39.9 142.8 62 -5.8% -0.7% -20.5% -3.3% 0.6% 7.3% -1.6% $ $ (9) (7) Roll Forward of Deferred Acquisition Costs & Value of Business Acquired Balance at beginning of period Deferral Amortization Included in Total Operating Expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Business acquired Other Balance at end of period $ 395.6 $ 23.7 (18.1) 5.6 (6.6) (62.5) 332.0 $ (0.0) (1) 332.0 $ 24.5 (0.5) 24.1 (3.7) 67.7 420.1 $ 0.1 420.1 $ 24.4 (17.9) 6.6 (3.9) 32.1 454.9 $ -0.03652222 0.1 454.9 $ 25.5 (20.0) 5.5 (4.4) 61.2 517.2 $ 3.6E-07 (0.0) 517.2 22.6 (19.8) 2.7 (6.1) 50.2 564.0 (0.0) - $ 304.1 $ 48.4 (37.2) 11.2 (9.2) 26.0 332.0 $ (0.0) 454.9 48.1 (39.9) 8.2 (10.6) 111.5 564.0 (0.0) (0.0) $ $ $ Includes distribution costs. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 25: 6/30/2006 PAGE 21 Employer Markets - Retirement Products Account Value Rollforward Account Value Rollforward Unaudited [Billions of Dollars] Jun 2005 Fixed Annuities - Balance at Beginning of Period Gross deposits (1) Withdrawals & deaths Net flows Transfer from (to) variable annuities Interest credited Fixed Annuities - Balance at End of Period (2) $ 10.688 $ 0.286 (0.332) (0.046) (0.033) 0.100 10.710 $ - Sep 2005 10.710 $ 0.259 (0.330) (0.071) (0.055) 0.102 10.686 $ - Three Months Ended Dec Mar 2005 2006 10.686 $ 0.240 (0.342) (0.103) 0.304 0.108 10.995 $ - Jun 2006 11.028 0.242 (0.345) (0.103) 0.039 0.090 11.054 - % Change 3.2% -15.4% -3.9% NM 218.2% -10.0% 3.2% $ Jun 2005 Six Months Ended Jun % 2006 Change 10.995 0.495 (0.673) (0.178) 0.053 0.184 11.054 - $ 10.995 $ 0.253 (0.328) (0.075) 0.014 0.094 11.028 $ - $ 10.837 $ 0.584 (0.790) (0.206) (0.119) 0.198 10.710 $ - 1.5% -15.2% 14.8% 13.7% NM -7.2% 3.2% Variable Annuities - Balance at Beginning of Period Gross deposits (1) Withdrawals & deaths Net flows Transfer from (to) fixed annuities Investment increase & change in market value Variable Annuities - Balance at End of Period (3) Total Annuities - Balance at Beginning of Period Gross Deposits (1) Withdrawals & deaths Net flows Transfers Interest credited & change in market value Total Annuities - Balance at End of Period Alliance Mutual Funds - Balance at Beginning of Period Plan/Participant Rollovers Additional contributions Gross deposits Withdrawals & deaths Net flows Transfers Interest credited & change in market value Total Alliance Mutual Funds - Balance at End of Period (4) $ $ $ 14.346 $ 0.524 (0.497) 0.026 (0.066) 0.341 14.648 $ - 14.648 $ 0.527 (0.522) 0.005 (0.025) 0.665 15.293 $ - 15.293 $ 0.642 (0.579) 0.062 (0.001) 0.348 15.702 $ - 15.702 $ 0.669 (0.676) (0.006) (0.015) 0.774 16.455 $ - 16.455 0.714 (0.647) 0.067 (0.032) (0.350) 16.140 - 14.7% 36.3% -30.2% 157.7% 51.5% NM 10.2% 9.8% 17.9% -19.7% -89.5% NM NM 7.2% 34.3% -67.7% 16.6% -8.1% NM -25.4% 100.0% NM 26.2% $ $ $ 14.576 $ 1.085 (1.009) 0.076 (0.096) 0.092 14.648 $ - 15.702 1.383 (1.322) 0.061 (0.047) 0.424 16.140 - 7.7% 27.4% -31.0% -19.9% 51.4% NM 10.2% 5.1% 12.5% -10.9% 10.0% NM 109.5% 7.2% 31.8% -54.9% 17.5% -18.9% -15.4% -24.9% NM NM 26.2% $ $ $ 25.034 0.810 (0.829) (0.019) (0.099) 0.442 25.358 3.163 0.065 0.157 0.222 (0.022) 0.201 (0.006) 0.075 3.432 - $ $ $ $ 25.358 0.786 (0.852) (0.066) (0.080) 0.766 25.979 3.432 0.036 0.164 0.200 (0.107) 0.093 (0.000) 0.147 3.672 - $ $ $ $ 25.979 0.882 (0.922) (0.040) 0.302 0.456 26.697 3.672 0.063 0.160 0.223 (0.208) 0.014 (0.003) 0.088 3.772 - $ $ $ $ 26.697 0.923 (1.004) (0.081) (0.001) 0.868 27.483 3.772 0.125 0.193 0.318 (0.056) 0.262 0.005 0.209 4.248 - $ $ $ 27.483 0.955 (0.992) (0.036) 0.007 (0.260) 27.194 0.000 $ $ $ 4.248 0.021 0.183 0.204 (0.054) 0.150 (0.068) 4.330 (0.000) $ 25.413 1.669 (1.800) (0.130) (0.215) 0.290 25.358 2.861 0.323 0.320 0.643 (0.095) 0.548 (0.004) 0.027 3.432 - $ $ $ 26.697 1.878 (1.995) (0.117) 0.007 0.608 27.194 0.000 $ 3.772 0.146 0.376 0.522 (0.110) 0.412 0.005 0.142 4.330 (0.000) Total Retirement Products Segment Account Valuesincluding Alliance Mutual Funds Balance at Beginning of Period Gross deposits (1) Withdrawals & deaths Net flows Transfers Interest credited & change in market value Total Retirement Products Segment Account ValuesBalance at End of Period Variable Annuities Under Agreement - Included above - - - - $ 28.197 $ 1.032 (0.851) 0.181 (0.105) 0.516 28.790 $ 0.019 28.790 $ 0.986 (0.958) 0.028 (0.080) 0.914 29.651 $ 0.019 29.651 $ 1.104 (1.130) (0.026) 0.300 0.544 30.469 $ 0.019 30.469 $ 1.241 (1.060) 0.181 0.005 1.077 31.731 $ 0.018 31.731 1.159 (1.045) 0.114 0.007 (0.327) 31.524 0.001 12.5% 12.3% -22.8% -37.0% 106.7% NM 9.5% -10.5% $ 28.274 $ 2.313 (1.895) 0.418 (0.219) 0.317 28.790 $ 0.019 30.469 2.400 (2.105) 0.295 0.012 0.749 31.524 0.001 7.8% 3.8% -11.1% -29.4% NM 136.4% 9.5% -10.5% $ $ 0.017 0.017 0.226 -20.4% $ 0.578 $ 0.480 -17.0% 0.709 36.1% 1.078 1.363 26.5% 0.935 16.1% 1.656 1.843 11.3% 0.204 -8.1% 0.643 0.522 -18.8% $ 1.139 10.8% $ 2.299 $ 2.365 2.9% $0.000 $0.000 $0.000 (1) Gross deposits for the second quarter and first six months of 2006 include approximately $20 million and $110 million of fixed and variable annuity deposits, respectively, resulting from JP employee plan deposits into the LNC employee plan as a result of the merger. (2) Includes Fixed Annuity products offered under the Alliance mutual funds and the fixed portion of variable annuities. (3) Excludes the fixed portion of variable annuities. (4) Represents amounts attributable to Alliance mutual fund net flows. Alliance mutual fund account values are not included in the separate accounts reported on our balance sheet. (5) Incremental Deposits represent gross deposits reduced by transfers from other Lincoln products. Incremental Deposits (5) : Fixed Annuities Variable Annuities Total Annuities Incremental Deposits Total Alliance Mutual Funds Incremental Deposits Total Retirement Products Incremental Deposits $ 0.284 $ 0.521 0.805 0.222 1.028 $ 0.243 $ 0.553 0.796 0.200 0.996 $ 0.200 $ 0.614 0.814 0.223 1.036 $ 0.254 $ 0.654 0.908 0.318 1.226 $ This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 26: 6/30/2006 PAGE 22 Employer Markets - Retirement Products Supplemental Data Unaudited [Billions of Dollars] Jun 2005 Fixed Annuities - excluding fixed portion of variable contracts Deposits (1) Withdrawals Net Flows Fixed Contract Account Values Fixed Portion of Variable Contracts Deposits Withdrawals Net Flows Fixed Portion of Variable Contract Account Values Variable Annuities - including fixed portion of variable contracts Deposits (1) Withdrawals Net Flows Variable Contract Account Values Average Daily Variable Annuity Account Values $ $ $ 0.135 $ (0.077) 0.058 $ 3.592 $ Sep 2005 0.121 $ (0.154) (0.033) $ 3.599 $ Three Months Ended Dec Mar 2005 2006 0.133 $ (0.156) (0.023) $ 3.696 $ 0.135 $ (0.108) 0.027 $ 3.745 $ Jun 2006 0.121 (0.114) 0.008 - % Change -10.4% -48.1% -86.2% -0.5% $ $ $ Jun 2005 Six Months Ended Jun % 2006 Change 0.256 (0.222) 0.035 - 0.278 $ (0.282) (0.004) $ (0.000) -7.9% 21.3% NM -0.5% 3.573 3.592 $ 3.573 $ $ $ 0.151 $ (0.254) (0.103) $ 7.118 $ 0.139 $ (0.179) (0.040) $ 7.087 $ 0.108 $ (0.194) (0.086) $ 7.299 $ 0.118 $ (0.220) (0.102) $ 7.283 $ 0.120 (0.231) (0.111) 7.482 -20.5% 9.1% -7.8% 5.1% $ $ $ 0.306 $ (0.509) (0.202) $ 7.118 $ 0.239 (0.452) (0.213) 7.482 -21.9% 11.2% -5.4% 5.1% $ $ $ $ 0.675 $ (0.752) (0.077) $ 21.766 14.328 $ $ 0.692 $ (0.728) (0.036) $ 22.380 15.087 $ $ 0.724 $ (0.747) (0.023) $ 23.001 15.323 $ $ 0.788 $ (0.896) (0.108) $ 23.738 16.177 $ $ 0.834 (0.878) (0.044) 23.621 16.270 23.6% -16.8% 42.9% 8.5% 13.6% $ $ $ $ 1.392 $ (1.518) (0.126) $ 21.766 14.359 $ $ 1.622 (1.774) (0.152) - 16.5% -16.9% -20.6% 8.5% 13.0% 23.621 16.223 Total Annuity based Retirement Plan Product Spread Information (2) Net investment income (3) Interest credited to policyholders Spread (3) 6.25% 3.68% 2.57% 6.25% 3.67% 2.58% 6.36% 3.67% 2.69% 6.34% 3.66% 2.68% 6.31% 3.73% 2.58% Change (Basis Point) 6 5 1 6.27% 3.69% 2.58% 6.33% 3.70% 2.63% Change (Basis Point) 6 1 5 (1) Gross deposits for the second quarter and first six months of 2006 include approximately $20 million and $110 million of fixed and variable annuity deposits, respectively, resulting from JP employee plan deposits into the LNC employee plan as a result of the merger. 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. (3) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread was 12 bps in the 2nd quarter of 2006, 15 bps in the 1st quarter of 2006, 17 bps in the 4th quarter of 2005, 7 bps in the 3rd quarter of 2005 and 13 bps in the 2nd quarter of 2005. (2) This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 27: 6/30/2006 PAGE 23 Employer Markets - Benefit Partners Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 $ $ $ Six Months Ended Jun 2006 $ 328.9 25.1 0.8 354.9 Jun 2005 Sep 2005 $ Jun 2006 328.9 25.1 0.8 354.9 (0.0) % Change NM NM NM NM $ Jun 2005 % Change NM NM NM NM Operating Revenue Premiums Net investment income Other revenue and fees Total Operating Revenue $ Operating Expenses Insurance benefits Operating and acquisition expenses Total Operating Expenses Income from operations before Federal income taxes Federal income taxes Income from Operations Effective tax rate $ $ $ $ $ 226.0 72.0 297.9 - NM NM NM NM NM NM $ $ 226.0 72.0 297.9 56.9 19.9 37.0 35.0% NM NM NM NM NM NM 56.9 19.9 37.0 - 35.0% Operating and Acquisition Expenses Commissions General and administrative expenses Taxes, licenses and fees Total commissions and expenses incurred Less commissions and expenses capitalized Amortization of DAC and VOBA Net Operating and Acquisition Expenses General and administrative expenses as a percentage of premiums $ - $ - $ - $ - $ 37.3 31.9 8.0 77.1 (11.2) 6.0 72.0 9.7% NM NM NM NM NM NM NM $ - $ 37.3 31.9 8.0 77.1 (11.2) 6.0 72.0 NM NM NM NM NM NM NM $ $ $ $ $ $ $ - - - - NM - 9.7% NM Roll Forward of Deferred Acquisition Costs & Value of Business Acquired Balance at beginning of period Deferral Amortization Included in Total Operating Expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Business acquired Other Balance at end of period $ $ $ $ $ 11.2 (6.0) 5.2 116.2 121.4 0.0 $ $ 11.2 (6.0) 5.2 116.2 121.4 $ $ $ $ $ $ $ This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 28: 6/30/2006 PAGE 24 Employer Markets - Benefit Partners Supplemental Data Unaudited [Millions of Dollars] Jun 2005 Annualized Sales Life Disability Dental Premiums: Life Disability Dental Other Total Product Line Results: Life Disability Dental Other Total Loss Ratios: Life Disability Dental Combined loss ratios Sep 2005 Three Months Ended Dec Mar 2005 2006 Jun 2006 % Change Jun 2005 Six Months Ended Jun % 2006 Change $ - $ - $ - $ - $ 15.3 22.9 7.1 NM NM NM $ - $ 15.3 22.9 7.1 NM NM NM $ - $ - $ - $ - $ 111.6 134.0 31.4 51.9 328.9 NM NM NM NM NM $ - $ 111.6 134.0 31.4 51.9 328.9 NM NM NM NM NM $ - $ - $ - $ - $ $ $ $ - $ - $ - $ - $ 13.5 21.1 1.4 1.0 37.0 NM NM NM NM NM $ - $ 13.5 21.1 1.4 1.0 37.0 NM NM NM NM NM $ $ $ $ $ $ $ - - - - 67.8% 59.4% 76.3% 64.7% NM NM NM NM - 67.8% 59.4% 76.3% 64.7% NM NM NM NM This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 29: 6/30/2006 PAGE 25 Employer Markets - Executive Benefits & Other Income Statements & Operational Data Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 7.4 $ (0.1) 2.0 3.7 45.1 1.3 59.4 0.7 0.0 2.5 6.1 51.0 1.3 61.6 $ 1.1 0.0 2.8 3.3 48.7 1.4 57.2 $ Six Months Ended Jun 2006 1.1 0.0 11.3 8.2 135.2 2.7 158.4 - Jun 2005 Sep 2005 0.5 $ (0.2) 2.1 4.4 45.2 1.2 53.2 Jun 2006 0.0 0.0 8.5 4.9 86.5 1.3 101.2 - % Change -100.0% NM NM 11.4% 91.4% 8.3% 90.2% $ Jun 2005 % Change 120.0% NM 162.8% -6.8% 49.4% 8.0% 49.0% Operating Revenue Premiums Surrender charges Mortality assessments Expense assessments Net investment income Other revenue and fees Total Operating Revenue $ 0.5 $ (0.2) 4.3 8.8 90.5 2.5 106.3 - Operating Expenses Insurance benefits Interest credited to contractholder funds Operating and acquisition expenses Total Operating Expenses Income from operations before Federal income taxes Federal income taxes Income from Operations Effective tax rate Average equity Return on average equity $ $ 30.7 9.6 7.5 47.8 5.3 1.0 4.3 19.3% 296.8 $ 5.8% $ 39.9 10.4 6.4 56.8 2.7 0.2 2.5 7.6% 283.1 $ 3.5% $ 31.2 9.5 7.3 48.0 13.6 4.1 9.5 30.0% 321.8 $ 11.8% $ 32.8 9.3 4.6 46.7 10.5 3.0 7.5 28.5% 334.5 $ 9.0% $ 30.4 40.2 7.2 77.7 - -1.0% NM -4.0% 62.6% NM NM 276.7% $ 62.5 18.9 15.5 96.9 - 63.2 49.4 11.7 124.3 - 1.1% 161.4% -24.5% 28.3% 261.7% NM 209.1% 23.5 7.3 16.2 - 9.4 - 34.0 - 1.8 7.7 - 10.3 $ 23.8 - 31.0% 524.8 12.4% $ 18.7% 292.9 $ 5.2% 30.2% 429.7 11.1% Operating and Acquisition Expenses Commissions General and administrative expenses Taxes, licenses and fees Total commissions and expenses incurred Less: commissions and expenses capitalized Amortization of DAC and VOBA Net Operating and Acquisition Expenses General and administrative expenses - basis (1) points on account values - Annualized $ 5.4 $ 4.0 0.9 10.2 (5.3) 2.6 7.5 136 $ 6.7 $ 5.8 1.5 14.0 (7.3) (0.3) 6.4 189 $ 5.1 $ 5.0 1.0 11.1 (5.1) 1.3 7.3 155 $ 5.1 $ 3.7 1.1 9.9 (5.7) 0.3 4.5 0.1 109 $ 8.1 2.8 1.3 12.2 (8.0) 2.9 7.2 26 50.0% -30.0% 44.4% 19.6% -50.9% 11.5% -4.0% $ 10.1 $ 8.3 1.9 20.3 (10.8) 5.9 15.5 142 $ 13.3 6.5 2.4 22.1 (13.7) 3.2 11.7 47 31.7% -21.7% 26.3% 8.9% -26.9% -45.8% -24.5% $ $ (110) (95) Roll Forward of Deferred Acquisition Costs & Value of Business Acquired Balance at beginning of period Deferral Amortization Included in Total Operating Expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Business acquired Other Balance at end of period Roll Forward of Deferred Front-End Loads Balance at beginning of period Deferral Amortization Included in Income from Operations Balance at end of period (1) $ 99.5 $ 5.3 (2.6) 2.7 0.0 102.2 $ 0.0 15.5 $ 0.9 (0.7) 0.1 15.6 $ - 102.2 $ 7.3 0.3 7.6 (0.0) 109.8 $ 0.0 15.6 1.0 0.4 1.3 16.9 $ 109.8 $ 5.1 (1.3) 3.8 (0.0) 113.6 $ 0.0 16.9 $ 1.2 (0.3) 0.9 17.9 $ 0.0 113.6 $ 5.7 (0.3) 5.4 0.0 119.0 $ 0.0 17.9 $ 1.0 (0.0) 1.0 18.9 $ - 119.0 8.0 (2.9) 5.1 7.6 142.5 274.1 (0.0) 18.9 1.0 (0.2) 0.8 19.7 - $ 97.3 $ 10.8 (5.9) 4.9 0.0 (0.0) 102.2 $ 0.0 15.5 $ 1.7 (1.6) 0.1 15.6 $ - 113.6 13.7 (3.2) 10.4 7.6 142.5 0.0 274.1 (0.0) $ $ $ $ $ $ $ 17.9 2.0 (0.2) 1.8 19.7 - Includes distribution costs. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 30: 6/30/2006 PAGE 26 Employer Markets - Executive Benefits & Other Account Value Roll Forward and Supplemental Data Unaudited [Billions of Dollars] COLI/BOLI- Balance Beginning-of-Period Business acquired Deposits Withdrawals & deaths Net flows Policyholder assessments Interest credited and change in market value COLI/BOLI-Balance End-of-Period Three Months Ended Jun Sep Dec Mar Jun 2005 2005 2005 2006 2006 $ 1.138 $ 1.194 $ 1.256 $ 1.318 $ 1.387 2.795 0.056 0.057 0.052 0.047 0.077 (0.011) (0.015) (0.002) (0.007) (0.042) 0.045 0.042 0.049 0.039 0.035 (0.008) (0.008) (0.011) (0.009) (0.017) 0.019 0.028 0.023 0.038 0.028 $ 1.194 $ 1.256 $ 1.318 $ 1.387 $ 4.228 0.000 $ 7.278 $ 7.506 $ 7.729 $ 7.979 $ 15.373 % Change 21.9% NM 37.5% NM -22.2% NM 47.4% 254.1% Six Months Ended Jun Jun % 2005 2006 Change $ 1.122 $ 1.318 17.5% 2.795 NM 0.101 0.124 22.8% (0.031) (0.049) -58.1% 0.070 0.075 7.1% (0.016) (0.026) -62.5% 0.019 0.066 247.4% $ 1.194 $ 4.228 254.1% 0.000 $ 7.278 $ 15.373 111.2% COLI/BOLI In-Force 111.2% Run Off Institutional Pensions Account Values Balance at End of Period $ 2.883 $ 2.877 $ 2.737 $ 2.753 $ 2.707 -6.1% $ 2.883 $ 2.707 -6.1% This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 31: 6/30/2006 PAGE 27 Investment Management Income Statements Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 $ 70.9 24.5 32.5 127.9 $ 77.8 25.1 36.7 139.6 $ Six Months Ended Jun 2006 $ 159.0 48.6 66.7 274.3 - Jun 2005 Sep 2005 $ 67.9 24.9 30.4 123.2 Jun 2006 81.2 23.5 30.0 134.7 - % Change 31.0% -4.5% 7.9% 17.7% $ Jun 2005 % Change 35.9% -1.6% 15.4% 22.3% Operating Revenue Investment advisory fees - External Investment advisory fees - Insurance-related Other revenue and fees Operating Revenue $ 62.0 24.6 27.8 114.4 117.0 49.4 57.8 224.2 - Operating Expenses Operating and administrative expenses Total Operating Expenses Income (Loss) from operations before Federal income taxes Federal income taxes Income (Loss) from Operations Effective tax rate $ 116.6 116.6 (2.2) (0.8) (1.4) $ 36.4% 115.0 115.0 8.2 3.4 4.8 41.5% $ 114.4 114.4 13.5 4.6 8.9 34.1% $ 116.1 116.1 23.5 8.2 15.3 34.9% $ 116.4 116.4 - -0.2% -0.2% NM NM NM $ 219.6 219.6 - 232.5 232.5 - 5.9% 5.9% NM NM NM 18.3 (0.0) 6.3 12.0 34.4% 4.6 1.5 3.1 $ 32.6% 41.8 14.5 27.3 34.7% Operating and Acquisition Expenses General and administrative expenses Depreciation and amortization Sub-advisory fees Total general and administrative expenses Taxes, licenses and fees Amortization of intangibles Total expenses incurred General and administrative expenses basis points on assets under (1) management - Annualized $ $ 101.0 $ 2.5 9.0 112.5 2.2 1.9 116.6 $ (0.0) 38 99.0 1.7 9.8 110.5 2.5 2.0 115.0 0.0 35 $ $ 97.8 2.0 10.1 109.9 2.6 2.0 114.4 0.1 33 $ $ 96.1 2.2 11.0 109.3 4.8 2.0 116.1 31 $ $ 99.4 2.4 10.6 112.4 2.4 1.6 116.4 28 -1.6% -4.0% 17.8% -0.1% 9.1% -15.8% -0.2% $ $ 188.1 4.9 17.3 210.4 5.3 3.8 219.6 $ $ 195.5 4.6 21.6 221.7 7.2 3.6 232.5 - 3.9% -6.1% 24.9% 5.4% 35.8% -5.3% 5.9% (10) 36 29 (7) (1) Includes distribution costs. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 32: 6/30/2006 PAGE 28 Investment Management Assets Under Management Roll Forward Unaudited [Billions of Dollars] Jun 2005 Retail Fixed - Balance-Beginning-of-Period Sales (1) Redemptions Transfers Net Flows Net investment gains and change in market value Balance at End-of-Period Retail Equity - Balance-Beginning-of-Period Sales (1) Redemptions Transfers Net Flows Net investment gains and change in market value Balance at End-of-Period Total Retail - Balance-Beginning-of-Period Retail sales-Annuities Retail sales-Mutual Funds Retail sales-Managed Accounts & Other Total Retail Sales Redemptions Transfers Net Flows Net investment gains and change in market value Balance at End-of-Period $ 8.638 0.905 (0.632) (0.063) 0.211 0.246 9.095 0.000 25.053 3.429 (1.365) (0.127) 1.936 0.736 27.725 (0.000) 33.691 0.701 1.487 2.146 4.334 (1.997) (0.190) 2.147 0.982 36.820 (0.000) 12.715 1.472 (1.016) (0.006) 0.450 0.239 13.403 0.000 12.674 4.638 (1.069) (0.144) 3.425 0.528 16.627 (0.000) 25.390 6.110 (2.085) (0.151) 3.875 0.766 30.031 0.000 66.851 43.917 $ Sep 2005 9.095 0.942 (0.664) 0.023 0.301 (0.025) 9.371 0.000 27.725 2.630 (1.186) (0.025) 1.419 1.844 30.988 0.000 36.820 0.642 1.331 1.599 3.572 (1.850) (0.002) 1.720 1.819 40.359 0.000 13.403 1.036 (0.393) 0.001 0.643 (0.083) 13.964 0.000 16.627 2.131 (0.948) (0.000) 1.182 1.141 18.951 0.000 30.031 3.166 (1.342) 0.000 1.825 1.058 32.915 0.000 73.274 43.095 $ Three Months Ended Dec Mar 2005 2006 9.371 0.965 (0.779) 0.026 0.212 0.043 9.625 0.000 30.988 2.664 (1.700) (0.027) 0.936 0.807 32.732 (0.000) 40.359 0.713 1.657 1.260 3.629 (2.479) (0.002) 1.148 0.850 42.357 (0.000) 13.964 1.175 (0.483) (0.001) 0.691 0.044 14.699 0.000 18.951 3.658 (2.617) 0.001 1.041 0.584 20.576 (0.000) 32.915 4.833 (3.100) (0.001) 1.733 0.629 35.276 (0.000) 77.633 43.086 $ 9.625 0.951 (0.805) (0.056) 0.089 0.046 9.761 (0.000) 32.732 3.069 (1.840) (0.013) 1.216 2.552 36.500 (0.000) 42.357 0.885 1.329 1.806 4.019 (2.645) (0.069) 1.305 2.598 46.261 (0.000) 14.699 3.080 (0.447) 0.002 2.636 (0.074) 17.262 0.000 20.576 1.964 (1.008) 0.000 0.956 1.373 22.906 (0.000) 35.276 5.044 (1.454) 0.003 3.592 1.299 40.167 0.000 86.428 41.995 $ Jun 2006 9.761 1.034 (0.824) 0.030 0.240 0.007 10.007 36.500 2.249 (2.134) (0.032) 0.082 (0.547) 36.035 46.261 0.869 1.370 1.043 3.282 (2.959) (0.002) 0.322 (0.540) 46.042 17.262 1.634 (0.750) 0.008 0.892 0.001 18.154 22.906 1.130 (1.327) (0.008) (0.205) (0.971) 21.729 (0.000) 40.167 2.764 (2.078) 0.000 0.687 (0.971) 39.883 (0.000) 85.926 65.637 % Change 13.0% 14.3% -30.4% NM 13.7% -97.2% 10.0% 45.7% -34.4% -56.3% 74.8% -95.8% NM 30.0% 37.3% 24.0% -7.9% -51.4% -24.3% -48.2% 98.9% -85.0% NM 25.0% $ Jun 2005 Six Months Ended Jun % 2006 Change $ 9.625 1.984 (1.630) (0.026) 0.329 0.053 10.007 (0.000) 32.732 5.318 (3.974) (0.045) 1.298 2.006 36.035 (0.000) 42.357 1.754 2.699 2.849 7.302 (5.604) (0.071) 1.627 2.058 46.042 (0.000) - $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 8.457 1.811 (1.322) (0.038) 0.452 0.185 9.095 (0.000) 24.278 6.089 (2.821) (0.146) 3.122 0.326 27.725 (0.000) 32.735 1.414 3.007 3.479 7.900 (4.143) (0.183) 3.574 0.511 36.820 (0.000) 11.547 3.002 (1.333) (0.006) 1.664 0.192 13.403 0.000 12.849 5.300 (1.601) (0.143) 3.556 0.222 16.627 (0.000) 24.396 8.303 (2.934) (0.148) 5.220 0.415 30.031 0.000 $ $ 13.8% 9.6% -23.3% 31.6% -27.2% -71.4% 10.0% 34.8% -12.7% -40.9% 69.2% -58.4% NM 30.0% 29.4% 24.0% -10.2% -18.1% -7.6% -35.3% 61.2% -54.5% NM 25.0% $ $ $ Institutional Fixed - Balance-Beginning-of-Period Inflows (1) Withdrawals/terminations Transfers Net Flows Net investment gains and change in market value Balance at End-of-Period Institutional Equity - Balance-Beginning-of-Period Inflows (1) Withdrawals/terminations Transfers Net Flows Net investment gains and change in market value Balance at End-of-Period Total Institutional - Balance-Beginning-of-Period Inflows Withdrawals/terminations Transfers Net Flows Net investment gains and change in market value Balance at End-of-Period Total Retail and Institutional - At End-of-Period General Account Assets-End-of-Period Total Assets Under Management At End-of-Period Total Retail and Institutional - Net Flows Subadvised Assets, included in Assets Under Management above Retail Institutional Total Subadvised Assets (2) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 35.8% 11.0% 26.2% NM 98.2% -99.6% 35.4% 80.7% -75.6% -24.1% 94.4% NM NM 30.7% 58.2% -54.8% 0.3% 100.0% -82.3% NM 32.8% 28.5% 49.5% $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 66.851 43.917 14.699 4.714 (1.197) 0.011 3.528 (0.073) 18.154 0.000 20.576 3.094 (2.335) (0.008) 0.751 0.402 21.729 (0.000) 35.276 7.808 (3.532) 0.003 4.279 0.328 39.883 0.000 85.926 65.637 27.3% 57.0% 10.2% NM 112.0% NM 35.4% 60.1% -41.6% -45.8% 94.4% -78.9% 81.1% 30.7% 44.6% -6.0% -20.4% NM -18.0% -21.0% 32.8% 28.5% 49.5% $ $ 110.768 6.022 $ $ 116.369 3.546 $ $ 120.719 2.881 $ $ 128.423 4.898 $ $ 151.563 1.008 36.8% -83.3% $ $ $ 110.768 8.794 - $ $ 151.563 5.906 36.8% -32.8% $ $ 12.202 4.564 16.766 $ $ 14.319 4.986 19.305 $ $ 15.388 5.114 20.503 $ $ 17.320 5.608 22.928 $ $ 16.899 4.593 21.491 38.5% 0.6% 28.2% $ $ 12.202 4.564 16.766 $ $ 16.899 4.593 21.491 38.5% 0.6% 28.2% (1) (2) Sales and in-flows include dividend reinvestments. Balance at June 30, 2006 includes $26.1 billion of assets acquired due to the merger with Jefferson Pilot This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 33: 6/30/2006 PAGE 29 Lincoln UK Income Statements Unaudited [Millions of Dollars] Jun 2005 Sep 2005 $ 16.9 9.0 56.0 20.9 102.9 $ Three Months Ended Dec Mar 2005 2006 15.4 7.3 22.0 17.8 62.6 $ 16.6 7.8 28.0 17.0 0.1 69.5 $ Jun 2006 19.9 8.9 34.7 17.8 0.0 81.4 - % Change 21.3% -5.3% 5.2% -9.2% NM 3.8% $ Jun 2005 Six Months Ended Jun % 2006 Change $ 36.5 16.7 62.7 34.9 0.1 150.9 - Operating Revenue Premiums Mortality assessments Expense assessments Net investment income Other revenue and fees Total Operating Revenue $ 16.4 9.4 33.0 19.6 78.4 31.0 18.4 63.6 39.9 0.1 153.0 - 17.7% -9.2% -1.4% -12.5% -1.4% Operating Expenses Insurance benefits Operating and acquisition expenses Total Operating Expenses Income from operations before Federal income taxes Federal income taxes Income from Operations Effective tax rate on Income from Operations Average equity Return on average equity $ $ 27.9 34.7 62.6 15.8 5.6 10.2 $ 35.5 52.7 88.2 14.7 5.1 9.6 $ 27.5 14.3 41.8 20.8 7.2 13.6 $ 25.4 27.6 53.0 16.5 5.8 10.7 $ 27.5 38.9 66.3 - -1.4% 12.1% 5.9% -4.4% -7.1% -2.9% $ 53.0 68.7 121.8 (0.0) 52.9 66.5 119.3 - -0.2% -3.2% -2.1% 1.3% 15.1 - 31.2 - 31.6 - 5.2 9.9 - 11.0 20.2 0.1 11.0 $ 20.6 - 2.0% 35.5% 446.4 9.1% $ 34.8% 452.7 8.4% $ 34.7% 447.8 12.1% $ 35.1% 427.0 10.0% $ 34.4% 417.8 9.5% $ 35.2% 443.3 9.1% $ 34.8% 422.4 9.8% Operating and Acquisition Expenses Commissions General and administrative expenses Total commissions and expenses incurred Less: commissions and expenses capitalized Amortization of DAC and VOBA Net Operating and Acquisition Expenses $ 0.7 $ 23.8 24.5 (0.7) 10.8 34.7 $ 0.9 $ 24.9 25.8 (0.7) 27.5 52.7 $ 0.1 $ 24.2 24.3 (0.7) (9.3) 14.3 $ 0.9 $ 22.7 23.6 (0.5) 4.5 27.6 $ 1.1 23.9 25.0 (0.1) 13.9 38.9 57.1% 0.4% 2.0% 85.7% 28.7% 12.1% $ 1.3 $ 49.2 50.5 (1.4) 19.6 68.7 $ 2.0 46.6 48.6 (0.6) 18.4 66.5 53.8% -5.3% -3.8% 57.1% -6.1% NM -3.2% $ $ Roll Forward of Deferred Acquisition Costs & Value of Business Acquired Balance at beginning of period Deferral Amortization Included in Total Benefits and Expenses Foreign currency translation adjustment Balance at end of period $ 848.7 $ 0.7 (10.8) (10.1) (46.2) 792.4 $ 792.4 $ 0.7 (27.5) (26.8) (12.1) 753.5 $ 753.5 $ 0.7 9.3 10.0 (20.0) 743.4 $ 743.4 $ 0.5 (4.5) (4.0) 7.7 747.2 $ 747.2 0.1 (13.9) (13.8) 48.3 781.7 (0.0) $ 867.0 $ 1.4 (19.6) (18.2) (56.4) 792.4 $ 743.4 0.6 (18.4) (17.8) 56.1 781.7 (0.0) $ $ Roll Forward of Deferred Front-End Load Balance at beginning of period Deferral Amortization Included in Income from Operations Foreign currency translation adjustment Balance at end of period $ 428.3 $ 1.1 (6.2) (5.1) (23.3) 399.8 $ - $ 399.8 $ 0.9 (29.0) (28.1) (5.9) 365.8 $ (0.0) 365.8 $ 0.7 6.0 6.7 (9.5) 363.1 $ - 363.1 $ 1.0 (3.4) (2.4) 3.8 364.5 $ - 364.5 0.8 (7.6) (6.9) 23.6 381.2 0.0 $ $ 437.5 $ 2.6 (11.8) (9.2) (28.5) 399.8 $ - 363.1 1.8 (11.0) (9.2) 27.4 381.2 0.0 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 34: 6/30/2006 PAGE 30 Lincoln UK Operational Data Unaudited [Billions of Dollars] Three Months Ended Dec Mar 2005 2006 Six Months Ended Jun % 2006 Change Jun 2005 Unit Linked Assets Balance-Beg-of-Period Deposits Withdrawals (including charges) and Deaths Net Flows Investment income and change in market value Foreign Currency Adjustment Unit Linked Assets - End-of-Period Individual Life In-force Exchange Rate - Dollars to Pounds For-the-Period End-of-Period Sep 2005 Jun 2006 % Change Jun 2005 $ 7.173 $ 6.903 $ 7.180 $ 7.320 $ 7.754 0.073 (0.201) (0.128) (0.267) 0.500 7.857 0.001 18.289 8.1% 4.3% -9.8% -13.3% NM 228.2% 13.8% -1.0% $ 7.186 $ 7.320 0.142 (0.387) (0.245) 0.212 0.572 7.857 0.001 18.289 1.9% -2.1% -8.4% -15.0% -47.7% 220.4% 13.8% -1.0% $ $ 0.070 (0.183) (0.113) 0.233 (0.390) 6.903 $ - 0.088 (0.192) (0.104) 0.492 (0.111) 7.180 $ - 0.156 (0.178) (0.023) 0.347 (0.184) 7.320 $ - 0.069 (0.186) (0.118) 0.479 0.072 7.754 $ - $ $ 0.145 (0.357) (0.213) 0.405 (0.475) 6.903 $ - 18.479 $ 18.175 $ 17.521 $ 17.744 $ 18.479 $ 1.855 1.792 1.779 1.764 1.747 1.719 1.754 1.737 1.829 1.849 -1.4% 3.2% 1.880 1.792 1.791 1.849 -4.7% 3.2% This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 35: 6/30/2006 PAGE 31 Lincoln Financial Media Income Statements Unaudited [Millions of Dollars] Jun 2005 Sep 2005 $ $ $ $ Three Months Ended Dec Mar 2005 2006 $ $ $ $ Jun 2006 57.5 7.6 22.2 27.7 6.0 1.8 0.3 19.6 - % Change NM NM NM NM NM NM NM NM NM NM $ $ Jun 2005 - Six Months Ended Jun % 2006 Change $ 57.5 7.6 22.2 27.7 6.0 1.8 0.3 19.6 7.7 $ 11.9 NM NM NM NM NM NM NM NM NM NM Operating Results Communications revenues, net Cost of sales Operating expenses Broadcast cash flow Depreciation and amortization General and administrative expenses Net interest expense and other Income from operations before Federal income taxes Federal income taxes Income from Operations Effective tax rate on Income from Operations $ $ 7.7 11.9 - - 39.3% 39.3% Other Operations (1) Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 Six Months Ended Jun % 2006 Change Jun 2005 Sep 2005 Jun 2006 % Change Jun 2005 Operating Revenue Earnings on investments & other income Amortization of deferred gain on indemnity reinsurance (2) Total Operating Revenue $ 60.3 18.9 79.2 $ 27.0 18.9 45.9 $ 10.0 18.9 28.9 $ 12.9 18.8 31.7 $ 48.8 18.8 67.6 64.3 46.3 110.6 - -19.1% -0.5% -14.6% $ 62.6 37.9 100.4 $ 61.8 37.5 99.3 85.8 58.5 144.3 - -1.3% -1.1% -1.1% Operating Expenses Interest on debt Operating expenses Total Operating Expenses Income (loss) from operations before Federal income taxes Federal income taxes (3) 21.8 50.3 72.2 7.0 (22.9) $ 30.0 $ 21.4 28.5 49.9 (4.0) (16.3) 12.2 $ 21.8 12.8 34.6 (5.7) (15.4) 9.6 $ 21.5 12.2 33.7 (2.0) (2.2) 0.1 $ 195.0% -8.0% 53.2% NM 25.8% NM $ 44.0 56.8 100.8 (0.4) (32.9) 32.5 $ 95.0% 3.0% 43.2% NM 41.9% NM (43.1) 0.0 (45.1) 0.0 (17.0) (26.1) 0.0 (19.1) (26.0) 0.0 Income (loss) from Operations (1) (2) (3) Includes eliminations of intercompany transactions. Represents the amortization of deferred gain recognized on the business sold through indemnity reinsurance to Swiss Re. Includes a reduction of the valuation allowance on the deferred tax asset of our foreign life reinsurance subsidiary of $5.7 million in the 1st quarter of 2005, $23.5 million in the 2nd quarter of 2005, $13.3 million in the 3rd quarter of 2005, $4.3 million in the 4th quarter of 2005, $46.8 million for the full year 2005 This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 36: 6/30/2006 PAGE 32 Consolidated Domestic Deposits/Account Balances Unaudited [Billions of Dollars] Jun 2005 Deposits - For the Period Individual Markets - Fixed Annuities Individual Markets - Variable Annuities Individual Markets - Life Insurance Employer Markets - Fixed Annuities Employer Markets - Variable Products (1) Employer Markets - Executive Benefits & Other Inv Mgmt - Annuities Inv Mgmt - Mutual Funds Inv Mgmt - Managed Acct. & Other Consolidating Adjustments Total Gross Retail Deposits Inv Mgmt - Institutional Consolidating Adjustments Total Gross Deposits $ 0.534 $ 1.327 0.470 0.286 0.746 0.056 0.701 1.487 2.146 (0.670) 7.085 6.110 (0.173) 13.023 $ Sep 2005 0.494 $ 1.410 0.497 0.259 0.726 0.057 0.642 1.331 1.599 (0.624) 6.391 3.166 (0.217) 9.340 $ Three Months Ended Dec Mar 2005 2006 0.486 $ 1.513 0.596 0.240 0.865 0.052 0.713 1.657 1.260 (0.617) 6.763 4.833 (0.265) 11.331 $ 0.471 $ 1.665 0.488 0.253 0.987 0.047 0.885 1.329 1.806 (0.481) 7.449 5.044 (0.257) 12.236 $ Jun 2006 0.872 1.877 1.023 0.242 0.918 0.077 0.869 1.370 1.043 (0.773) 7.519 2.764 (0.365) 9.917 % Change 63.3% 41.4% 117.7% -15.4% 23.1% 37.5% 24.0% -7.9% -51.4% -15.4% 6.1% -54.8% NM -23.9% $ Jun 2005 Six Months Ended Jun % 2006 Change 1.343 3.543 1.511 0.495 1.905 0.124 1.754 2.699 2.849 (1.254) 14.968 7.808 (0.623) 22.153 33.4% 35.4% 61.1% -15.2% 10.2% 22.8% 24.0% -10.2% -18.1% -5.1% 9.4% -6.0% -13.7% 3.3% 1.007 $ 2.616 0.938 0.584 1.729 0.101 1.414 3.007 3.479 (1.193) 13.681 8.303 (0.548) 21.436 $ $ $ Account Balances - End of Period Individual Markets - Fixed Annuities Individual Markets - Variable Annuities Individual Markets - Life Insurance Employer Markets - Fixed Annuities Employer Markets - Variable Products (1) Employer Markets - Executive Benefits & Other Inv Mgmt - Annuities Inv Mgmt - Mutual Funds Inv Mgmt - Managed Acct. & Other Consolidating Adjustments Total Retail Account Balances Inv Mgmt - Institutional Consolidating Adjustments Total Account Balances $ 9.165 $ 32.801 13.496 10.710 18.080 1.194 12.500 14.929 9.392 (11.790) 110.476 30.031 (3.405) 137.102 $ 9.117 $ 35.276 13.745 10.686 18.965 1.256 13.022 15.738 11.599 (12.229) 117.175 32.915 (3.559) 146.530 $ 8.605 $ 37.662 14.051 10.995 19.474 1.318 13.287 16.231 12.839 (12.602) 121.859 35.276 (3.422) 153.712 $ 8.359 $ 40.501 14.268 11.028 20.703 1.387 13.998 17.101 15.162 (13.282) 129.225 40.167 (3.573) 165.820 $ 17.526 41.543 25.479 11.054 20.471 4.228 13.577 16.654 15.812 (13.057) 153.286 39.883 (3.557) 189.613 91.2% 26.7% 88.8% 3.2% 13.2% 254.1% 8.6% 11.6% 68.4% -10.7% 38.8% 32.8% -4.5% 38.3% $ 9.165 $ 32.801 13.496 10.710 18.080 1.194 12.500 14.929 9.392 (11.790) 110.476 30.031 (3.405) 137.102 $ 17.526 41.543 25.479 11.054 20.471 4.228 13.577 16.654 15.812 (13.057) 153.286 39.883 (3.557) 189.613 91.2% 26.7% 88.8% 3.2% 13.2% 254.1% 8.6% 11.6% 68.4% -10.7% 38.8% 32.8% -4.5% 38.3% $ $ Total Domestic Net Flows Unaudited [Billions of Dollars] Three Months Ended Dec Mar 2005 2006 0.400 $ 0.767 (0.026) 0.049 1.148 0.015 2.354 1.733 0.198 4.285 0.257 0.769 0.181 0.039 1.305 0.083 2.635 $ Six Months Ended Jun % 2006 Change $ 0.805 1.613 0.295 0.075 1.627 0.074 4.489 4.279 (0.086) 8.682 61.0% 15.9% -29.4% 7.1% -54.5% -16.9% -25.7% -18.0% NM -22.7% For the Period Ended Individual Markets - Life Individual Markets - Annuities Employer Markets - Retirement Products Employer Markets - Executive Benefits & Other Investment Management - Retail Consolidating Adjustments Total Retail Net Flows Investment Management - Institutional Consolidating Adjustments Total Net Flows $ Jun 2005 0.263 0.748 0.181 0.045 2.147 0.090 3.476 3.875 0.098 7.449 $ Sep 2005 0.295 $ 0.717 0.028 0.042 1.720 (0.053) 2.749 1.825 (0.050) 4.524 $ Jun 2006 0.548 0.844 0.114 0.035 0.322 (0.009) 1.854 0.687 (0.047) 2.494 % Change 108.4% 12.8% -37.0% -22.2% -85.0% NM -46.7% -82.3% NM -66.5% $ Jun 2005 0.500 1.392 0.418 0.070 3.574 0.089 6.041 $ $ $ 3.592 (0.039) 6.188 $ $ 5.220 (0.025) 11.236 $ (1) Includes amounts attributable to Alliance program mutual fund net flows. Account values for the Alliance program are not included in the separate accounts reported on our balance sheet. This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 37: 6/30/2006 PAGE 33 Consolidated Investment Data - Assets Managed Unaudited [Billions of Dollars] As of Jun 2005 Assets Managed by Source LNC's Investments and Cash: Fixed maturity securities available for sale Equity securities - available for sale Trading securities Other investments Total LNC Investments Separate accounts Cash and invested cash Total LNC Non-affiliate assets managed Total Assets Managed Assets Managed by Advisor Investment Management segment (See page 28 for additional detail) DLIA-Corp (Assets managed internally-see page 28) Lincoln UK Domestic Policy Loans (excluding Lincoln UK) Non-LNC Affiliates Total Assets Managed $ Sep 2005 Dec 2005 Mar 2006 Jun 2006 % Change $ 34.975 0.155 3.345 6.389 44.863 57.240 1.659 103.762 52.643 156.405 $ 34.325 0.152 3.287 6.322 44.085 60.812 1.602 106.498 58.446 $ 33.443 0.145 3.246 6.334 43.168 63.747 2.312 109.227 62.528 $ 32.893 0.176 3.190 6.314 42.573 67.984 1.974 112.531 70.464 $ 54.024 0.579 3.109 12.003 69.714 71.095 1.500 142.309 70.185 54.5% 273.5% -7.1% 87.9% 55.4% 24.2% -9.6% 37.1% 33.3% 35.9% $ 164.944 $ 171.755 $ 182.995 $ 212.495 $ 66.851 43.917 8.278 1.862 35.497 156.405 - $ 73.274 43.095 8.518 1.851 38.205 164.944 - $ 77.633 43.086 8.562 1.858 40.617 171.755 - $ 86.428 41.995 8.986 1.856 43.729 182.995 - $ 85.926 65.637 9.171 2.712 49.049 212.495 - 28.5% 49.5% 10.8% 45.6% 38.2% 35.9% $ $ $ $ $ This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
Slide 38: 6/30/066 PAGE 34 Consolidated Investment Data Unaudited [Millions of Dollars] Three Months Ended Dec Mar 2005 2006 Jun 2005 Net Investment Income Fixed maturity AFS securities Equity AFS securities Trading securities Mortgage loans on real estate Real estate Policy loans Invested cash Other investments Investment revenue Investment expense Net Investment Income Mean Invested Assets (Amortized Cost) $ 509.8 $ 2.0 48.8 70.7 31.7 29.8 14.0 24.2 731.1 (27.5) 703.6 43,806.2 $ $ Sep 2005 Jun 2006 % Change 505.7 $ 2.4 48.6 70.9 8.5 29.8 17.0 16.4 699.3 (28.5) 670.8 44,040.1 $ $ 509.7 $ 3.3 48.7 75.1 5.6 29.2 19.2 7.0 697.9 (29.8) 668.1 44,035.2 $ $ 513.7 $ 2.1 49.7 67.2 9.1 29.7 22.8 14.6 708.8 (30.4) 678.3 44,363.6 $ $ 829.0 8.6 49.4 135.0 13.2 42.5 22.2 10.2 1,110.1 (41.9) 1,068.2 70,933.3 62.6% NM 1.2% 90.9% -58.4% 42.6% 58.6% -57.9% 51.8% -52.4% 51.8% $ $ Ratio of Net Invest Income Over Mean Invested Assets 6.42% 6.09% 6.07% 6.12% 6.02% Realized Investment Gains (Losses) Fixed maturities Equity securities Other gains (losses), net Policyholders' interest Capital gains expense Sale of affiliate Total pretax gains (losses) Amortization of DAC, VOBA and deferred sales inducements Income taxes Realized investment gains (losses), net of taxes $ Jun 2005 13.9 $ 5.7 (2.7) 0.3 (2.4) 14.7 (15.3) (0.4) (0.2) $ 0.0 Sep 2005 Three Months Ended Dec Mar 2005 2006 8.2 $ (5.6) $ 4.3 $ (0.6) 2.2 0.3 5.4 6.3 (0.1) 0.7 (1.3) (1.8) (2.4) (2.3) (2.4) 11.3 (0.8) 0.3 (8.8) (3.3) (6.2) $ 0.0 (10.8) (3.3) (7.2) $ (0.0) Jun 2006 8.2 (1.1) 6.3 (1.4) 12.0 (18.9) (2.9) (4.0) % Change -41.0% NM NM NM NM NM -18.4% -23.5% NM NM $ (14.0) (0.7) (2.0) $ (0.0) As of June 30, 2006 Amount % of Total Available-for-Sale and Trading Securities [Millions of Dollars] Fixed Maturity Sec (Fair Value) Fixed Maturity Sec (Amortized Cost) Equity Securities (Fair Value) Equity Securities (Amortized Cost) % of Available-for-Sale Fixed Maturity Securities (Based on Fair Value) Treasuries and AAA AA or better BB or less General Account Investments Fixed maturities- security sector: Corporate bonds U.S. government bonds Foreign government bonds Mortgage backed securities State and municipal bonds Preferred stocks - redeemable Total $ 57,131.0 57,435.1 580.6 570.8 99.0% 99.0% 1.0% 1.0% $ As of Dec 31, 2005 Amount % of Total 36,687.1 35,347.6 146.9 139.0 99.6% 99.6% 0.4% 0.4% 19.4% 27.1% 7.0% As of June 30, 2006 Amount % of Total $ 43,881.6 287.6 1,188.0 8,370.3 166.5 130.1 54,024.1 81.3% 0.5% 2.2% 15.5% 0.3% 0.2% 100.0% $ 23.4% 30.9% 7.4% As of Dec 31, 2005 Amount % of Total 25,860.7 161.8 1,203.3 5,951.2 128.8 137.4 33,443.2 0.0 77.3% 0.5% 3.6% 17.8% 0.4% 0.4% 100.0% $ $ $ $ As of Jun 2005 Composition of Investment Portfolio: Securities available-for-sale, at fair value: Fixed Maturity Equity Trading securities Mortgage loans on real estate & real estate Policy loans Derivative Investments Other investments Total Sep 2005 Dec 2005 Mar 2006 Jun 2006 % Change $ $ 34,975.1 154.5 3,345.1 3,960.4 1,866.9 156.6 404.8 44,863.3 $ $ 34,324.9 151.6 3,287.0 3,892.8 1,856.4 155.9 416.4 44,085.0 $ $ 33,443.2 144.7 3,246.0 3,845.3 1,862.2 174.7 452.2 43,168.4 $ $ 32,892.8 176.0 3,190.1 3,766.5 1,860.4 199.3 488.2 42,573.2 $ $ $ 54,024.1 578.5 3,109.0 8,169.7 2,716.4 279.6 837.0 69,714.4 0.0 54.5% 274.4% -7.1% 106.3% 45.5% 78.5% 106.8% 55.4% This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.