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lincoln national stat1q08_rev 

lincoln national stat1q08_rev

 

 
 
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Published:  December 02, 2010
 
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Slide 1: Lincoln Statistical Report (Revised for New Definition of Operating Revenues and Income from Operations) first Q U A R T E R 2008 This revised Statistical Report solely corrects the Variable Annuity Expense Assessment line item as shown on page 18 for all periods presented. No other financial information has been changed. Except for certain reclassifications, the financial data in this document is dated April 29, 2008 and has not been updated since that date. LNC does not intend to update this document.
Slide 2: Lincoln Financial Group Statistical Report First Quarter 2008 Table of Contents LFG Analyst Coverage Notes Financial Highlights Consolidated Expense Detail Operating Results Summary Details Underlying Realized Gain (Loss), After-DAC Consolidated Statements of Income Consolidating Statements of Income from Operations - Current Year Consolidating Statements of Income from Operations - Prior Year Consolidated Balance Sheets Balance Sheet Data - Segment Highlights Individual Markets Individual Life Insurance Income Statements & Operational Data Operational Data Account Value Roll Forward Individual Annuities Income Statements & Operational Data Roll Forwards of DAC, VOBA, DFEL and DSI Account Value Roll Forward Account Values Employer Markets Defined Contribution Income Statements & Operational Data Roll Forwards of DAC, VOBA and DSI Account Value Roll Forward Account Value Roll Forward - By Product Supplemental Data Executive Benefits Income Statements & Operational Data Account Value Roll Forward & Supplemental Data Group Protection Income Statements & Operational Data Supplemental Data Investment Management Income Statements Assets Under Management Roll Forward Assets Under Management Roll Forward (Continued) Lincoln UK Income Statements Operational Data Other Operations Discontinued Operations Domestic Deposits / Account Balances / Net Flows Consolidated Investment Data Assets Managed Other Investment Data 1-3 4 5 6 7 8 9 9(B) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 29(B) 30 31 32 32 33 34 35
Slide 3: LFG Analyst Coverage First Quarter, 2008 FIRM Banc of America Securities Bernstein Citigroup Credit Suisse Deutsche Bank Dowling & Partners Fox-Pitt Kelton Cochran Caronia Waller Goldman Sachs & Company JP Morgan Keefe, Bruyette & Woods, Inc. Langen McAlenney Lehman Brothers Merrill Lynch Morgan Stanley Raymond James & Associates Inc. UBS Wachovia ANALYST Tamara Kravec Suneet Kamath Colin Devine Tom Gallagher Darin Arita Paul Goulekas Mark Finkelstein Tom Cholnoky Jimmy Bhullar Jeff Schuman Bob Glasspiegel Eric Berg Ed Spehar Nigel Dally Steven Schwartz Andrew Kligerman John Hall PHONE NUMBER 646-855-5212 212-756-4587 212-816-1682 212-538-2010 212-250-7321 860-676-8600 312-425-4079 212-902-3408 212-622-6397 860-722-5902 860-724-1203 212-526-2805 212-449-4245 212-761-6235 312-612-7686 212-713-2492 212-214-8032 Investor inquiries may be directed to: Jim Sjoreen, Vice President, Investor Relations Email: Jim.Sjoreen@lfg.com Voice: (484) 583-1420 Fax: (484) 583-3962 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.LincolnFinancial.com/investor.
Slide 4: 3/31/2008 NOTES ii Definitions and Presentation "Income from Operations," "Operating Revenues" and "Return on Capital" are non-GAAP financial measures and do not replace GAAP revenues and net income (loss). 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 associated with the following (see page 6 for additional detail) ("Excluded realized gains and losses"); * Sale or disposal of securities; * Impairments of securities; * Change in the fair value of embedded derivatives within certain reinsurance arrangements and the change in the fair value of related trading securities; * Change in the fair value of the embedded derivatives of our guaranteed living benefits within our variable annuities ("GLB") net of the change in the fair value of the derivatives we own to hedge the changes in the embedded derivative ("GLB Net Derivatives Results"); * Net difference between the benefit ratio unlocking of SOP 03-1 reserves on our guaranteed death benefit ("GDB") riders within our variable annuities and the change in the fair value of the derivatives excluding our expected cost of the hedging instruments ("GDB Derivative Results"); and * Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products as required under SFAS 133/157 ("Indexed annuity forward-starting option"). * Income (loss) from the initial adoption of changes in accounting principles; * Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance; * Losses on early retirement of debt, including subordinated debt; and * Income (loss) from discontinued operations. "Operating Revenues" represent GAAP revenues excluding the following, as applicable * Excluded realized gains and losses; * Amortization of deferred gains arising from the reserve changes on business sold through reinsurance; and * Revenue adjustments from the initial impact of the adoption of changes in accounting principles. 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 annualized income from operations (after adding back interest expense) by average capital. The difference between return on capital and return on stockholders' equity represents the effect of leveraging on LNC's consolidated results. * * Income from Operations, Operating Revenues and Return on Capital are internal measures used by LNC in the management of its operations. Management believes that these performance measures explain the results 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 not related to decisions regarding the underlying businesses and/or are unpredictable. Accordingly, Income from Operations and Operating Revenues exclude the effects of any realized gains (losses) that are not necessarily indicative of current operating fundamentals or future performance of the business segments, and in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. We report the impact of these items, net of associated impact of amortization expense of DAC, VOBA, DSI and DFEL and changes in other contract holder funds, within realized gain (loss). * 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 premiums, in force, spreads and assets under management. Sales as reported consist of the following: * Universal Life ("UL"), including MoneyGuard ®, and corporate owned life insurance ("COLI") - first year commissionable premiums plus 5% of excess premiums received, including UL internal replacements; * Whole Life and Term - first year paid premiums; * Annuity - deposits from new and existing customers; * Group Protection - annualized first year premiums from new policies; and * Investment Management Retail Sales and Institutional Inflows - contributions, transfer in kind purchases and reinvested dividends for new and existing accounts. *
Slide 5: Our roll forwards of Deferred Acquisition Costs ("DAC") and Value of Business Acquired ("VOBA"), Deferred Sales Inducements ("DSI") and Deferred Front-End Loads ("DFEL") disclose the net impact of prospective and retrospective unlocking on amortization for these accounts. This information helps explain a source of volatility in amortization. * Prospective unlocking - In the third quarter of each year, we review and update our assumptions used in projecting our future estimated gross profits ("EGPs") used to amortize DAC, VOBA, DFEL, DSI and the calculations of embedded derivatives and reserves for annuity and life insurance products with certain guarantees. These updates to assumptions result in unlocking that represents an increase or decrease to our carrying value of DAC, VOBA, DFEL, DSI and other contract holder funds based upon our updated view of future EGPs. The various assumptions that are reviewed include investment margins, mortality, retention and rider utilization. Retrospective unlocking - On a quarterly basis, we “true-up” our models for actual gross profits and in-force experience for the period. To the extent that actual experience differs from previously expected, a positive or negative retrospective adjustment to the amortization of DAC, VOBA, DSI and DFEL is recorded. This update to the models may generate a change in the amortization rate which results in a catch-up to the cumulative amortization, by recalculating the DAC, VOBA, DSI and DFEL balances assuming that the revised amortization rate had been used since issue. Our unlocking process also includes our reserves for our guaranteed benefit features and is described more fully in “Part II - Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates” of our 2007 Form 10-K. * * Book value per share excluding accumulated other comprehensive income ("AOCI") is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) stockholders' equity excluding AOCI, by (b) common shares outstanding. We provide book value per share excluding AOCI to enable investors to analyze the amount of our net worth that is primarily attributable to our business operations. We believe book value per share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per share is the most directly comparable GAAP measure. Pre-tax operating margin is calculated as income (loss) from operations before federal income taxes divided by operating revenues. After-tax operating margin is calculated as income (loss) from operations divided by operating revenues. In 2007, we executed plans to divest our television broadcasting, sports programming and Charlotte radio stations. During the fourth quarter of 2007, we entered into a definitive agreement to sell our television broadcasting, Charlotte radio and sports programming businesses. The divestiture of the sports programming business closed on November 30, 2007, the Charlotte radio station business closed on January 31, 2008 and the television broadcasting closed on March 31, 2008. Accordingly, in the periods prior to the closings, the assets and liabilities of these businesses not sold have been reclassified as held-for-sale for all periods presented, and are reported within other assets and other liabilities on our Consolidated Balance Sheets. The results of operations of these businesses have been reclassified into income from discontinued operations for all periods presented on the Financial Highlights, Operating Results Summary and Consolidated Statements of Income. Inter-segment transfer refers to a transfer from Individual Markets - Annuities to Employer Markets - Defined Contribution. Reclassifications Subsequent to the first quarter of 2008, we decided to change our non-GAAP measures, “Operating Revenues” and “Income from Operations”, to exclude the effects of any realized gains (losses) that are not necessarily indicative of current operating fundamentals or future performance of the business segments, and in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. We believe that our new definitions of “Operating Revenues” and “Income from Operations” provide investors with a more valuable measure of our performance because it better reveals trends in our business. The items that are now excluded from our operating results that were previously included are as follows: GLB net derivatives results; indexed annuity forward-starting option; and GDB derivative results. See page 6 for more information about these items. We have restated all periods presented to conform to our new definition of "Income from Operations," "Operating Revenues" and "Return on Capital." In addition, we have reclassified our derivatives and embedded derivatives related to our GLB, GDB and indexed annuities to realized gain (loss), which were previously reported within insurance fees, net investment income, interest credited or benefits. The associated amortization expense of DAC and VOBA (previously reported within underwriting, acquisition, insurance and other expenses), DSI (previously reported within interest credited) and DFEL (previously reported within insurance fees) and changes in contract holder funds (previously reported within benefits) have also been reclassified to realized gain (loss). These reclassifications had no effect on net income or total stockholders' equity. Therefore, we have restated prior periods for these segments to conform to the current presentation. All items that changed from our previously filed first quarter 2008 Statistical Report are highlighted in blue throughout the document During the first quarter of 2008, our Institutional Pension business was moved from the Executive Benefits segment to Other Operations. Therefore, we have restated prior periods for these segments to conform to the current presentation.
Slide 6: 3/31/2008 PAGE 1 Financial Highlights Unaudited (millions of dollars, except per share data) 2008 Income from Operations - By Segment Individual Life Insurance $ Individual Annuities Total Individual Markets Defined Contribution Executive Benefits Group Protection Total Employer Markets Investment Management Lincoln UK Other Operations Total Income from Operations (1) (2) Excluded realized gain (loss), after-tax Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance, after-tax Income (loss) from discontinued operations, after-tax (3) Net Income $ Earnings per Share (Diluted) (1) Income from operations Excluded realized gain (loss), after-tax Income (loss) from discontinued operations, after-tax Net Income For the Quarters Ended March 31, Change 2007 Amount 166.6 $ 116.6 283.2 49.7 11.9 23.1 84.7 16.2 10.9 (28.0) 367.0 21.5 0.2 7.7 396.5 $ 0.0 1.31 $ 0.08 0.03 1.42 $ 0.0 (21.1) 1.2 (20.0) (9.3) 3.2 (6.1) (4.1) (0.2) (14.3) (44.6) (51.0) 0.2 (11.9) (107.4) % -12.7% 1.0% -7.1% -18.7% 13.9% -7.2% -25.3% -1.8% -51.1% -12.2% NM 100.0% NM -27.1% 145.5 $ 117.8 263.2 40.4 11.9 26.3 78.6 12.1 10.7 (42.3) 322.4 (29.5) 0.4 (4.2) 289.1 $ 0.0 1.23 $ (0.11) (0.02) 1.10 $ 0.0 $ (3) $ (0.08) (0.19) (0.05) (0.32) -6.1% NM NM -22.5% Operating Revenues - By Segment Individual Life Insurance Individual Annuities Total Individual Markets Defined Contribution Executive Benefits Group Protection Total Employer Markets Investment Management Lincoln UK Other Operations Total Operating Revenues Excluded realized gain (loss), pre-tax (2) Amortization of deferred gains arising from reserve changes on business sold through reinsurance, pre-tax Total Revenues (1) $ 987.5 $ 622.6 1,610.1 237.7 65.6 399.4 702.6 120.3 85.6 118.0 2,636.6 (45.2) 971.4 590.4 1,561.7 246.7 69.2 360.4 676.4 150.2 90.7 108.8 2,587.8 32.9 $ 16.1 32.2 48.4 (9.0) (3.6) 39.0 26.2 (29.9) (5.1) 9.2 48.8 (78.1) 1.7% 5.5% 3.1% -3.6% -5.2% 10.8% 3.9% -19.9% -5.6% 8.5% 1.9% NM 0.7 0.3 0.4 133.3% 2,592.0 $ 2,621.1 $ (29.1) -1.1% 0.0 0.0 Income from operations includes restructuring charges, after-tax, of $0.6 million, or -0- cents per share, and $2.5 million, or 1 $ (2) (3) cent per share, for the quarters ended March 31, 2008 and 2007, respectively. See page 6 for detail. Includes discontinued operations and the loss on disposal. See Discontinued Operations on page 32 for details. 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: 3/31/2008 PAGE 2 Financial Highlights Unaudited (billions of dollars) Operational Data by Segment Individual Markets - Annuities Gross deposits Net flows Account values (gross) Account values (net of reinsurance) Individual Markets - Life Insurance (1) Sales (in millions) Life insurance in force Account values Employer Markets - Defined Contribution (2) Gross deposits Net flows Account values - annuities Alliance and Smart Future Mutual Funds Account values including Alliance and Smart Future Mutual Funds Employer Markets - Executive Benefits COLI/BOLI sales (in millions) Life insurance in force Account values Employer Markets - Group Protection Annualized sales (in millions) Loss ratio (3) For the Quarters Ended March 31, Change 2008 2007 Amount % $ 3.025 1.181 72.666 71.361 145.4 521.047 27.881 $ 1.552 0.281 27.509 7.254 34.763 28.2 15.826 4.460 54.1 71.0% $ 3.495 $ (0.655) 1.229 (0.510) 4.724 (1.166) 78.537 67.340 145.877 7.710 172.831 1.359 8.846 0.878 224.725 $ $ $ 2.821 0.754 68.438 66.749 203.5 508.411 26.924 1.487 0.221 28.669 5.807 34.475 20.4 14.747 4.264 60.5 72.7% 3.603 $ 0.233 2.431 (0.321) 6.034 (0.088) 98.146 67.658 165.804 8.217 169.282 1.827 10.536 1.554 237.000 $ $ $ 0.204 0.427 4.228 4.612 (58.0) 12.635 0.957 0.065 0.060 (1.160) 1.447 0.288 7.8 1.080 0.196 (6.5) NM (0.108) (0.888) (1.202) (0.189) (1.311) (1.077) (19.608) (0.318) (19.927) (0.507) 3.549 (0.468) (1.690) (0.676) (12.275) 7.2% 56.6% 6.2% 6.9% -28.5% 2.5% 3.6% 4.4% 27.1% -4.0% 24.9% 0.8% 38.2% 7.3% 4.6% -10.7% NM -3.0% NM -49.4% -58.9% -21.7% NM -20.0% -0.5% -12.0% -6.2% 2.1% -25.6% -16.0% -43.5% -5.2% Investment Management Retail sales Retail net flows Institutional inflows Institutional net flows Total sales and inflows 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 premiums for Universal Life ("UL"), including MoneyGuard ® , plus 5% of excess premiums received, including UL internal replacements, and first year paid premiums for Whole Life and Term products. Includes deposits for Alliance and Smart Future Mutual Funds which are not included in separate account liabilities on our Consolidated Balance Sheets. Represents combined loss ratio for Life, Disability and Dental business. (2) (3) 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: 3/31/2008 PAGE 3 Financial Highlights Unaudited (millions of dollars) For the Quarters Ended March 31, Change 2007 Amount 181,327.1 $ 4,022.2 2008 Balance Sheet Assets - End-of-Period Stockholders' Equity Beginning-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) Income from operations/average equity (excluding AOCI) Return on Capital Income from operations/average capital Common Stock Outstanding Average for the period - diluted End-of-period - assuming conversion 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 available-for-sale securities Losses on derivatives Foreign currency translation Funded status of employee benefit plans Comprehensive Income (Loss) Ratios: Debt to total capitalization (3) Debt to equity (3) $ $ % 2.2% 185,349.3 $ $ 11,718.4 11,086.3 11,408.0 11,450.5 $ 12,201.0 $ 12,032.2 11,372.5 11,480.2 (482.6) (945.9) 35.5 (29.6) 10.1% 11.3% 13.8% 12.8% 9.0% 10.3% 262.8 259.4 260.5 42.74 43.98 $ 279.5 270.9 274.0 44.42 41.98 $ (16.7) (11.5) (13.5) (1.68) 2.00 -6.0% -4.2% -4.9% -3.8% 4.8% $ $ 285.7 107.5 393.3 $ $ 511.7 $ 106.8 618.5 $ 7.215 0.395 $ 27.8% 2.3% (226.0) 0.8 (225.2) (1.765) 0.020 $ 5.450 0.415 $ 37.8% 3.2% 5.1% $ $ 289.1 $ (538.2) (8.8) (0.8) 0.6 (257.9) $ 396.5 46.9 (4.0) 3.2 0.4 443.0 21.7% 27.7% 21.9% 28.1% 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 (1) (2) (3) Ratings as of April 28, 2008 Fitch Moody's Standard & Poor's A A3 A+ a A+ A+ A+ AA AA AA Aa3 A1 Aa3 AA AAAA Indicated dividend divided by net income. Indicated dividend divided by the closing price. Equity used in calculation excludes AOCI and $375 million of senior notes issued in October of 2007 because the proceeds were reinvested in a pool of long-term assets. Capital securities are considered 25% debt and 75% equity. 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: 3/31/2008 PAGE 4 Consolidated Operating Expense Detail Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. March 2007 2007 2008 $ 470.8 $ 501.9 $ 426.6 March 2007 Commissions General and Administrative Expenses General and administrative expenses Merger-related expenses Total General and Administrative Expenses Excluding Broker-Dealer Communications expenses Restructuring charges Taxes, licenses and fees Interest and debt expense Total Commissions and Expenses Incurred Less: Commissions and Expenses Capitalized Amortization DAC/VOBA amortization, net of interest (1) (2) Amortization of intangibles Total Amortization Broker-Dealer Commissions and G&A Total $ $ 446.5 $ June 2007 462.9 % Change -4.4% 390.9 10.1 401.0 14.7 3.9 65.2 62.4 993.7 (487.4) 432.4 23.8 456.2 15.2 6.2 51.8 73.1 1,065.3 (504.9) 418.2 21.9 440.1 13.2 7.4 52.4 68.2 1,052.1 (511.4) 432.7 23.6 456.3 13.5 2.9 48.6 80.3 1,103.5 (554.4) 400.6 13.8 414.4 15.5 0.9 62.3 75.4 995.2 (456.6) 2.5% 36.6% 3.3% 5.9% -76.9% -4.4% 21.0% 0.2% 6.3% 275.2 2.5 277.7 87.2 871.2 0.0 $ 233.4 2.5 235.9 92.8 889.2 0.0 $ 283.4 2.6 286.0 91.8 918.5 (0.0) $ 273.0 2.5 275.5 100.5 925.1 0.0 $ 255.2 1.6 256.7 89.2 884.6 (0.0) -7.3% -37.3% -7.5% 2.3% 1.5% Merger-Related Expenses (3) Severance and employee-related charges Systems integration and related expenses Other expenses Total Merger-Related Expenses $ $ 3.0 5.6 5.4 14.0 $ $ 6.6 17.7 5.7 30.0 $ $ 5.6 17.9 5.8 29.3 $ $ 6.2 15.1 6.6 27.9 $ $ 3.1 9.3 2.3 14.7 3.3% 66.1% -57.4% 5.0% (1) (2) In the second quarter of 2007, we recognized certain adjustments that reduced DAC amortization by $23 million. For the first quarter of 2008, DAC/VOBA amortization excludes the non-operating expense of $5.4 million related to the initial impact of the adoption of SFAS 157. Represents merger-related expenses included in general and administrative expenses and restructuring charges. (3) 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: 3/31/2008 PAGE 5 Operating Results Summary Unaudited (millions of dollars) March 2007 Operating Revenues Individual Life Insurance (1) Individual Annuities Individual Markets Defined Contribution Executive Benefits Group Protection Employer Markets Investment Management Lincoln UK Other Operations Total Operating Revenues Excluded realized gain (loss), pre-tax (2) Amortization of deferred gains arising from reserve changes on business sold through reinsurance, pre-tax Total Revenues Income from Operations (3) Individual Life Insurance Individual Annuities Individual Markets Defined Contribution Executive Benefits Group Protection Employer Markets Investment Management Lincoln UK Other Operations Income from Operations (3) Excluded realized gain (loss), after-tax (2) Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance, after-tax Income (loss) from discontinued operations, after-tax (4) Net Income $ 971.4 $ 590.4 1,561.7 246.7 69.2 360.4 676.4 150.2 90.7 108.8 2,587.8 32.9 0.3 2,621.1 $ (0.0) 166.6 $ 116.6 283.2 49.7 11.9 23.1 84.7 16.2 10.9 (28.0) 367.0 21.5 0.2 7.7 396.5 $ (0.0) June 2007 For the Three Months Ended Sept. Dec. 2007 2007 992.1 $ 647.0 1,639.1 243.4 64.2 367.5 675.2 150.1 88.7 112.9 2,665.9 (65.8) 0.6 2,600.8 $ (0.0) 173.6 $ 125.9 299.5 41.2 8.9 33.2 83.4 21.8 10.3 (49.8) 365.3 (42.7) 0.4 6.6 329.6 $ (0.0) 1,002.1 $ 672.3 1,674.4 243.3 66.1 380.6 690.0 139.0 98.3 127.9 2,729.7 (147.9) 0.7 2,582.5 0.0 March 2008 987.5 622.6 1,610.1 237.7 65.6 399.4 702.6 120.3 85.6 118.0 2,636.6 (45.2) 0.7 2,592.0 0.0 145.5 117.8 263.2 40.4 11.9 26.3 78.6 12.1 10.7 (42.3) 322.4 (29.5) 0.4 (4.2) 289.1 (0.0) % Change 1.7% 5.5% 3.1% -3.7% -5.3% 10.8% 3.9% -19.9% -5.6% 8.4% 1.9% NM 133.3% -1.1% 957.5 $ 623.7 1,581.1 252.0 66.1 391.0 709.2 151.0 92.5 123.6 2,657.4 5.8 7.8 2,670.9 $ 0.0 176.4 $ 123.4 299.8 47.3 10.8 29.0 87.1 11.3 11.7 (36.2) 373.7 4.0 (7.9) 6.3 376.0 $ 0.0 $ $ $ 158.8 $ 118.9 277.7 43.1 11.9 28.2 83.1 27.0 12.7 (59.2) 341.2 (102.4) 0.4 (126.8) 112.5 $ (0.0) -12.7% 1.0% -7.1% -18.7% -0.1% 14.0% -7.2% -25.0% -2.1% -51.1% -12.2% NM 100.0% NM -27.1% $ March 2007 Stockholders' Equity Beginning-of-period (including AOCI) End-of-period (including AOCI) End-of-period (excluding AOCI) Average equity (excluding AOCI) Common Shares Outstanding Average for the period - diluted End-of-period - diluted Per Share Data (Diluted) Net income Income from operations (3) Stockholders' Equity Per Share Stockholders' Equity (including AOCI) Stockholders' Equity (excluding AOCI) Dividends declared (common stock) Return on Equity Net Income/Average Equity Income from Operations/Average Equity Market Value of Common Stock Highest price Lowest price Closing price (1) For the Three Months Ended June Sept. Dec. 2007 2007 2007 $ 12,032.2 11,835.7 11,686.4 11,529.4 $ 11,835.7 11,962.9 11,766.1 11,726.3 $ 11,962.9 11,718.4 11,493.1 11,629.6 $ March 2008 11,718.4 11,086.3 11,408.0 11,450.5 $ 12,201.0 12,032.2 11,372.5 11,480.2 279.5 274.0 274.4 274.5 272.5 271.7 269.4 266.2 262.8 260.5 $ 1.42 1.31 $ 1.37 1.36 $ 1.21 1.34 $ 0.41 1.26 $ 1.10 1.23 $ 44.42 41.98 0.395 $ 43.57 43.02 0.395 $ 44.41 43.68 0.395 $ 44.32 43.46 0.415 $ 42.74 43.98 0.415 13.8% 12.8% 13.0% 13.0% 11.2% 12.5% 3.9% 11.7% 10.1% 11.3% $ $ 71.18 64.29 67.79 $ $ 74.72 66.90 70.95 $ $ 72.28 54.40 65.97 $ $ 70.66 55.84 58.22 $ $ 58.11 45.50 52.00 In the second quarter of 2007, we recognized certain adjustments that reduced operating revenues by $41 million. There were reductions to expenses that offset most of this reduction in revenues. See page 6 for detail. Income from operations includes after-tax restructuring charges of $0.6 million, or -0- cents per share, for the first quarter of 2008, $1.9 million or 1 cent per share, for the fourth quarter of 2007, $4.8 million, or 2 cents per share, for the third quarter of 2007, $4.0 million, or 1 cent per share, for the second quarter of 2007 and $2.5 million, or 1 cent per share, for the first quarter of 2007. (2) (3) (4) Includes discontinued operations and the loss on disposition. See Discontinued Operations on page 32 for details. 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: 3/31/2008 PAGE 6 Details Underlying Realized Gain (Loss), After-DAC (1) Unaudited (millions of dollars) March 2007 Pre-Tax Operating realized gain (loss) (2): Indexed annuity net derivatives results (3) GLB (4) GDB hedge cost (5) Total operating realized gain (loss) Realized gain (loss) related to investments (6) Gain (loss) on certain reinsurance derivative/ trading securities (7) GLB net derivatives results (8) Indexed annuity forward-starting option (9) GDB net derivative results (5) Gain on sale of subsidiaries/businesses Total excluded realized gain (loss) Total realized gain (loss) June 2007 For the Three Months Ended Sept. Dec. 2007 2007 March 2008 % Change $ 0.9 $ 0.8 (0.4) 1.3 26.4 (0.2) 8.4 (1.9) 0.3 32.9 34.3 $ 1.2 $ 1.4 (1.3) 1.3 (8.6) 4.0 4.8 4.9 0.7 5.8 7.1 0.2 $ 1.6 (0.8) 0.9 (35.4) (1.1) (23.2) (6.2) 0.1 (65.8) (64.9) $ (0.1) $ 1.8 0.5 2.2 (108.9) (0.8) (37.3) (6.9) (0.2) 6.2 (147.9) (145.7) $ (1.4) 5.8 5.9 10.3 (41.0) 0.4 (6.6) 4.8 (5.2) 2.5 (45.2) (35.0) NM NM NM NM NM 277.8% NM NM NM NM NM NM $ $ After-Tax Operating realized gain (loss) (2): Indexed annuity net derivatives results (3) GLB (4) GDB hedge cost (5) Total operating realized gain (loss) Realized gain (loss) related to investments (6) Gain (loss) on certain reinsurance derivative/ trading securities (7) GLB net derivatives results (8) Indexed annuity forward-starting option (9) GDB net derivative results (5) Gain on sale of subsidiaries/businesses Total excluded realized gain (loss) Total realized gain (loss) $ 0.6 $ 0.5 (0.3) 0.8 17.1 0.0 5.4 (1.3) 0.2 21.5 22.3 $ 0.8 $ 0.9 (0.9) 0.8 (4.9) 2.1 3.1 3.2 0.4 4.0 4.8 0.1 $ 1.0 (0.5) 0.6 (23.2) (0.5) (15.1) (4.0) 0.1 (42.7) (42.1) $ (0.1) $ 1.1 0.4 1.4 (71.4) (0.3) (24.3) (4.5) (0.1) (1.8) (102.4) (101.0) $ (0.9) 3.8 3.8 6.7 (27.1) 0.6 (4.3) 3.1 (3.4) 1.5 (29.5) (22.8) NM NM NM NM NM NM NM NM NM NM NM NM $ $ (1) (2) (3) (4) (5) (6) (7) (8) (9) DAC refers to the associated amortization expense of DAC, VOBA, DSI, and DFEL and changes in other contract holder funds. We exclude from our definitions of income from operations and operating revenues any realized gains (losses) that are not necessarily indicative of current operating fundamentals or future performance of the business segments, and in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. The net difference between the change in the fair value of the S&P 500 Index® call options that we hold and the change in the fair value of the embedded derivative liabilities of our indexed annuities products. The portion of the GLB rider fees calculated as the attributed fees in excess of the net valuation premium. Net valuation premium represents a level portion of rider fees required to fund potential living benefit claims. The attributed fees are the fees used in the calculation of the embedded derivative and represent net valuation premium plus a margin for risk/profit, including non-performance risk factor required by SFAS 157 benefit costs. We include the change in the fair value of the derivatives that offsets the benefit ratio unlocking of our SOP 03-1 reserves on our GDB riders, including our expected cost of the hedging instruments in operating realized gain (loss). We exclude from our definition of income from operations the net difference between the benefit ratio unlocking of SOP 03-1 reserves on our GDB riders and the change in the fair value of the derivatives excluding our expected cost of the hedging instruments. See page 35 for detail. Changes in the fair values of total return swaps (embedded derivatives) related to various modified coinsurance and coinsurance with funds withheld reinsurance arrangements that have contractual returns related to various assets and liabilities associated with these arrangements. Changes in the fair value of these derivatives are offset by the change in fair value of trading securities in the portfolios that support these arrangements. Represents the net difference in the change in the fair value of the embedded derivative liabilities of our GLB products and the change in the fair value of the derivative instruments we own to hedge. This includes the cost of hedging. The impact of the initial adoption of SFAS 157 was $33.5 million pre-tax and $21.8 million, after-tax in the first quarter of 2008. Changes in the fair value of embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products as required under SFAS 133/157. In addition, $9.6 million, pre-tax and $6.3 million, after-tax is included in the first quarter of 2008 due to the initial impact of adopting SFAS 157. 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: 3/31/2008 PAGE 7 [THIS PAGE INTENTIONALLY LEFT BLANK] 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: 3/31/2008 PAGE 8 Consolidated Statements of Income Unaudited (millions of dollars) March 2007 Revenues Insurance premiums Surrender charges Mortality assessments (1) Expense assessments (1) Investment advisory fees Net investment income Realized gain (loss) (2) Amortization of deferred gains on business sold through reinsurance Other revenues and fees Total Revenues Benefits and Expenses Insurance benefits (1) Interest credited to contract holder funds Operating and acquisition expenses Taxes, licenses and fees Interest and debt expense Total Benefits and Expenses Income from continuing operations before taxes Federal income taxes Income from Continuing Operations Income (loss) from discontinued operations, net of (3) federal income taxes Net Income Earnings per Share (Diluted) Income from continuing operations Income (loss) from discontinued operations, net of federal income taxes (3) Net Income $ 458.9 26.9 311.2 425.9 90.3 1,089.7 34.3 18.9 164.9 2,621.1 (0.0) June 2007 $ 488.9 28.1 299.6 413.9 92.7 1,133.2 7.1 26.4 181.0 2,670.9 0.0 For the Three Months Ended Sept. Dec. 2007 2007 $ 491.1 $ 25.6 320.7 489.6 89.0 1,061.6 (64.9) 19.3 168.8 2,600.8 0.0 March 2008 508.8 27.2 330.8 454.1 76.2 1,065.4 (35.0) 19.1 145.2 2,592.0 (0.0) % Change 10.9% 1.1% 6.3% 6.6% -15.6% -2.2% NM 1.1% -11.9% -1.1% 508.2 $ 25.1 328.4 495.1 87.7 1,093.7 (145.7) 19.3 170.8 2,582.5 0.0 592.8 599.1 743.6 65.2 62.4 2,063.2 - 650.7 606.2 764.2 51.8 73.1 2,146.1 - 622.7 611.3 797.9 52.4 68.2 2,152.6 - 696.2 618.7 796.2 48.6 80.3 2,240.0 0.0 677.5 611.7 746.8 62.3 75.4 2,173.7 (0.0) 14.3% 2.1% 0.4% -4.4% 21.0% 5.4% -25.0% -26.1% -24.6% NM -27.1% 558.0 169.2 388.8 (0.0) 524.9 155.2 369.7 0.0 448.2 125.2 323.0 0.0 342.5 103.2 239.3 0.0 418.3 125.0 293.3 0.0 $ 7.7 396.5 (0.0) $ 6.3 376.0 0.0 $ 6.6 329.6 0.0 $ (126.8) 112.5 $ 0.0 (4.2) 289.1 0.0 $ 1.39 0.03 1.42 $ 1.35 0.02 1.37 $ 1.19 0.02 1.21 $ 0.88 $ 1.12 (0.02) 1.10 -19.4% NM -22.6% $ $ $ $ (0.47) 0.41 $ Roll Forward of DAC & VOBA Balance at beginning-of-period Cumulative effect of adoption of SOP 05-1 Deferrals Amortization, net of interest: (1) Unlocking Other amortization Deferrals, net of amortization included in operating and acquisition expenses Adjustment related to realized (gains) losses on available-for-sale securities and derivatives Adjustment related to unrealized (gains) losses on available-for-sale securities and derivatives Foreign currency translation adjustment Business acquired Balance at end-of-period Roll Forward of DFEL Balance at beginning-of-period Cumulative effect of adoption of SOP 05-1 Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in expense assessments Adjustment related to realized losses on available-for-sale securities and derivatives Foreign currency translation adjustment Balance at end-of-period Roll Forward of DSI Balance at beginning-of-period Cumulative effect of adoption of SOP 05-1 Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in insurance benefits or interest credited Adjustment related to realized (gains) losses on available-for-sale securities and derivatives Balance at end-of-period $ 193.8 $ (2.8) 23.7 1.5 (7.3) 18.0 (2.6) 206.4 $ (0.0) $ 206.4 27.4 0.9 (8.6) 19.6 (1.0) 225.0 $ $ $ 225.0 29.8 0.6 (9.1) 21.3 2.8 249.1 $ 249.1 35.5 (0.9) (10.1) 24.6 5.6 279.2 $ 279.2 26.0 0.5 (6.3) 20.2 (1.9) 297.6 0.0 $ 8,420.4 $ (66.1) 487.4 14.5 (289.7) 212.2 (24.3) (25.5) 4.1 14.0 8,534.7 $ 0.0 8,534.7 504.9 25.3 (258.6) 271.6 (12.8) 290.8 16.3 9,100.6 (0.0) $ 9,100.6 511.4 7.9 (291.3) 228.0 21.1 $ 9,337.0 554.4 17.1 (290.0) 281.5 95.6 $ 9,579.8 456.6 (10.9) (244.2) 201.4 (1.4) 216.6 (0.9) 9,995.5 (0.0) $ $ (27.9) 15.1 9,337.0 $ 0.0 (111.3) (22.9) 9,579.8 $ (0.0) $ 976.9 $ (2.0) 77.2 1.6 (36.7) 42.2 (1.0) 2.0 1,017.9 $ 0.1 1,017.9 125.8 6.9 (52.7) 79.9 $ 1,105.8 97.0 (30.8) (52.5) 13.7 $ 1,128.1 112.4 (0.4) (47.8) 64.2 $ 1,183.1 102.0 (3.2) (46.6) 52.2 0.8 (0.4) 1,235.6 0.0 $ (0.2) 1.2 8.1 7.5 1,105.8 $ 1,128.1 0.047413 0.042586 $ 1.9 (11.2) 1,183.1 $ (0.1) $ $ $ $ $ (1) In the second quarter of 2007, we recognized certain adjustments that reduced expense assessments by $26 million, reduced mortality assessments by $15 million, increased insurance benefits by $3 million and reduced DAC amortization by $23 million. See page 6 for detail Contains discontinued operations and the loss on disposition. See Discontinued Operations on page 32 for additional details. (2) (3) 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: 3/31/2008 PAGE 9 Consolidating Statements of Income from Operations Unaudited (millions of dollars) For the Quarter Ended March 31, 2008 Individual Markets Life Operating Revenues Insurance premiums Surrender charges Mortality assessments Expense assessments Investment advisory fees Net investment income (1) Operating realized gain (loss) Amortization of deferred gain on business sold through reinsurance Other revenues and fees Total Operating Revenues Operating Expenses Insurance benefits Interest credited to contract holder funds Operating and acquisition expenses Taxes, licenses and fees Interest and debt expense Total Operating Expenses Income (loss) from operations before federal income taxes Federal income taxes Income from Operations (1) Annuities Defined Contribution Employer Markets Executive Benefits Group Protection Investment Management Lincoln UK Other Operations Consolidating Adjustments Consolidated $ 86.3 15.8 312.6 116.7 447.4 8.7 987.5 - $ 31.6 9.6 236.0 247.8 10.2 87.4 622.6 (0.0) $ 1.9 59.3 171.7 0.0 4.8 237.7 - $ 0.1 9.1 4.6 51.9 (0.1) 65.6 0.0 $ 370.4 27.7 1.2 399.4 (0.0) $ 96.2 24.1 120.3 - $ 19.1 9.1 37.1 20.3 0.1 85.6 0.0 $ 1.4 (7.2) 7.6 98.6 $ 7.7 (27.6) 0.1 (12.1) (32.0) - $ 508.8 27.2 330.8 454.1 76.2 1,065.4 10.3 18.5 145.2 2,636.6 - 18.5 31.2 150.0 0.0 296.1 258.2 183.0 29.7 767.1 (0.0) 51.3 163.2 241.3 10.4 466.3 0.0 0.0 105.9 71.8 4.4 182.2 - 2.5 38.4 4.7 2.0 47.6 (0.0) 269.2 79.6 10.0 358.8 - 97.4 3.6 101.1 - 30.7 38.5 69.2 - 27.8 45.8 62.5 2.1 75.4 213.6 (0.0) (32.0) (32.0) - 677.5 611.7 746.8 62.3 75.4 2,173.7 (0.0) 220.5 75.0 $ 145.5 (0.0) 156.3 - 55.5 - 18.0 - 40.6 - 19.2 - 16.4 - (63.6) - (0.0) 462.9 - 38.5 $ 117.8 0.0 15.1 $ 40.4 (0.0) 6.1 $ 11.9 (0.0) 14.2 $ 26.3 0.0 7.1 $ 12.1 $ 5.7 10.7 (0.0) (21.2) $ (42.3) (0.0) $ $ 140.5 322.4 0.0 For detail, see page 15. 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: 3/31/2008 PAGE 9(B) Consolidating Statements of Income from Operations Unaudited (millions of dollars) For the Quarter Ended March 31, 2007 Individual Markets Life Operating Revenues Insurance premiums Surrender charges Mortality assessments Expense assessments Investment advisory fees Net investment income (1) Operating realized gain (loss) Amortization of deferred gain on business sold through reinsurance Other revenues and fees Total Operating Revenues Operating Expenses Insurance benefits Interest credited to contract holder funds Operating and acquisition expenses Taxes, licenses and fees Interest and debt expense Total Operating Expenses Income (loss) from operations before federal income taxes Federal income taxes Income from Operations (1) Annuities Defined Contribution Employer Markets Executive Benefits Group Protection Investment Management Lincoln UK Other Operations Consolidating Adjustments Consolidated $ 87.7 15.2 292.3 111.9 454.0 10.2 971.4 - $ 12.8 9.7 210.9 265.3 1.3 90.4 590.4 (0.0) $ 2.0 59.8 180.3 4.7 246.7 - $ 0.1 8.9 4.6 55.8 (0.1) 69.2 0.0 $ 331.3 27.9 1.1 360.4 - $ 114.9 35.3 150.2 - $ 24.2 10.0 37.1 19.3 0.1 90.7 0.0 $ 2.7 (0.0) 1.6 87.2 $ (24.5) (0.0) (10.4) (34.9) - $ 458.9 26.9 311.2 425.9 90.3 1,089.7 1.3 18.6 164.9 2,587.8 - 18.6 33.7 143.8 0.0 246.0 251.7 188.3 32.9 718.9 (0.0) 25.4 161.1 241.1 8.9 436.6 - 0.0 104.3 66.5 5.1 176.0 - 2.8 38.2 9.0 1.2 51.1 0.0 246.6 68.6 9.7 324.9 - 120.5 4.1 124.6 - 36.0 38.0 74.0 - 36.0 43.8 46.6 3.4 62.4 192.1 0.0 (34.9) (34.9) - 592.8 599.1 743.6 65.2 62.4 2,063.2 - 252.5 - 153.8 - 70.8 - 18.2 - 35.5 - 25.6 - 16.7 - (48.3) 0.0 - 524.7 157.7 $ 367.0 (0.1) 85.9 $ 166.6 0.0 37.2 $ 116.6 0.0 21.1 $ 49.7 (0.0) 6.2 $ 11.9 0.0 12.4 $ 23.1 (0.0) 9.3 $ 16.2 $ 5.9 10.9 $ (20.3) (28.0) (0.0) $ - For detail, see page 15. 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: 3/31/2008 PAGE 10 Consolidated Balance Sheets Unaudited (millions of dollars) March 2007 ASSETS Investments Corporate bonds U.S. Government bonds Foreign government bonds Asset and mortgage-backed securities State and municipal bonds Preferred stocks - redeemable Common stocks Preferred stocks - equity Total available-for-sale 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 value of business acquired Goodwill Other assets Separate account assets Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Contract benefits and other contract holder funds: Reserves Unpaid claims Premium deposit funds Contract holders' funds Total future contract benefits and other contract holder funds 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 Separate account liabilities Total Liabilities Preferred stock Capital stock Retained earnings Unrealized gains on investments Gains - derivatives Foreign currency Funded status of employee benefit plans Total Stockholders' Equity Total Liabilities and Stockholders' Equity Stockholders' Equity Per Share Book value, excluding AOCI Common shares outstanding - assuming conversion of preferred shares (in millions) June 2007 As of Sept. 2007 Dec. 2007 March 2008 $ 45,484.0 $ 244.3 1,077.1 9,186.2 155.5 108.4 503.8 210.1 56,969.5 2,909.7 7,416.0 406.2 2,766.8 1,345.5 71,813.6 0.0 44,023.4 $ 248.1 975.0 9,946.2 158.7 95.5 487.9 198.9 56,133.8 2,818.3 7,310.8 387.6 2,787.0 1,395.1 70,832.5 0.0 44,089.7 $ 239.4 1,030.0 10,479.7 152.1 95.3 499.3 171.0 56,756.4 2,716.6 7,280.7 385.0 2,790.2 1,584.0 71,512.9 0.0 44,147.9 222.0 1,037.5 10,604.6 153.1 110.7 413.9 104.1 56,793.7 2,730.2 7,422.7 258.3 2,834.7 1,882.1 71,921.6 0.0 $ 43,535.4 231.9 1,037.4 10,568.8 153.0 97.5 384.2 90.2 56,098.4 2,713.6 7,531.9 175.3 2,804.0 2,232.0 71,555.3 0.0 904.7 989.1 1,327.5 1,665.5 374.9 432.3 401.2 400.6 919.2 861.0 916.5 843.3 8,132.1 8,179.1 8,226.7 8,237.4 8,534.7 9,100.6 9,337.0 9,579.8 4,124.8 4,159.0 4,159.3 4,143.7 3,375.6 3,599.5 3,432.6 3,529.9 83,147.5 89,497.2 92,903.1 91,113.3 $ 181,327.1 $ 187,650.1 $ 192,216.8 $ 191,435.1 $ 2,446.8 468.1 917.3 8,407.2 9,995.5 4,128.4 2,727.7 84,703.1 185,349.3 $ 13,874.7 1,149.5 20,115.8 38,915.2 74,055.2 493.8 2,483.4 1,570.7 154.6 229.8 740.7 1,066.8 5,352.4 83,147.5 169,294.9 0.0 $ 13,870.6 1,171.2 20,201.6 39,206.6 74,450.0 231.0 2,382.4 1,570.8 154.6 157.5 734.3 829.2 5,807.3 89,497.2 175,814.4 (0.0) $ 14,169.0 1,148.3 19,885.4 39,687.2 74,889.9 327.1 2,682.5 1,570.9 154.6 191.5 715.1 902.5 5,916.6 92,903.1 180,253.8 (0.0) $ 14,765.6 1,240.7 19,687.8 39,952.8 75,646.9 550.2 2,892.7 1,570.9 154.6 219.5 695.8 938.1 5,934.8 91,113.3 179,716.7 0.0 $ 15,299.0 1,202.0 19,886.9 40,288.9 76,676.9 410.6 2,901.5 1,571.0 154.6 205.2 676.6 750.0 6,213.4 84,703.1 174,263.0 0.0 0.5 0.5 0.5 0.4 7,318.5 7,362.1 7,308.6 7,200.5 4,053.5 4,323.8 4,457.0 4,292.2 528.1 16.6 56.0 86.0 46.8 35.5 31.9 53.0 168.4 181.4 193.6 174.8 (83.6) (84.2) (84.6) (88.5) 12,032.2 11,835.7 11,962.9 11,718.4 $ 181,327.1 $ 187,650.1 $ 192,216.8 $ 191,435.1 $ (0.0) (0.0) (0.0) (0.0) $ 44.42 $ 43.57 $ 44.41 $ 44.32 $ $ 41.98 $ 270.9 43.02 $ 271.6 43.68 $ 269.4 43.46 264.4 $ 0.4 7,074.8 4,332.8 (452.2) 44.3 174.0 (87.9) 11,086.3 185,349.3 (0.0) 42.74 43.98 259.4 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 17: 3/31/2008 PAGE 11 Balance Sheet Data - Segment Highlights Unaudited (millions of dollars) Individual Markets As of March 31, 2008 Assets Allocated investments and cash and invested cash DAC and VOBA Goodwill DSI and other intangibles Amounts recoverable from reinsurers Separate account assets Liabilities and Capital Future contract benefits and other contract holder funds: Future contract benefits Other contract holder funds Total future contract benefits and other contract holder funds Allocated capital (2) Life Annuities Defined Contribution Employer Markets Executive Benefits Group Protection Investment Management Lincoln UK Other (1) Operations Consolidated $ 29,432.5 5,670.0 2,192.3 92.0 1,967.1 4,216.3 $ 19,099.2 2,570.8 1,039.8 295.7 759.3 54,850.4 $ 11,493.8 564.2 20.2 4.9 16,265.4 $ 3,448.5 298.1 2.0 1,039.7 $ 1,934.2 129.0 274.3 31.7 - $ 119.6 247.7 4.9 - $ 1,365.9 760.4 16.5 70.0 8,079.5 $ 7,108.4 3.0 337.7 385.9 5,577.2 251.8 $ 74,002.1 9,995.5 4,128.4 783.4 8,407.2 84,703.1 5,876.4 25,755.6 31,632.0 7,732.9 1,196.7 17,622.7 18,819.3 3,570.5 2.2 11,207.0 11,209.2 0.0 914.1 353.5 3,053.5 3,407.1 362.4 1,300.3 16.6 1,316.9 983.3 351.4 1,139.7 394.4 1,534.1 389.7 6,632.2 2,126.0 8,758.2 0.1 (2,896.3) 16,501.0 60,175.8 76,676.9 11,408.0 As of December 31, 2007 Assets Allocated investments and cash and invested cash DAC and VOBA Goodwill DSI and other intangibles Amounts recoverable from reinsurers Separate accounts assets Liabilities and Capital Future contract benefits and other contract holder funds: Future contract benefits Other contract holder funds Total future contract benefits and other contract holder funds Allocated capital (2) (1) (2) $ 29,473.9 5,408.7 2,201.0 93.0 1,943.6 4,615.5 $ 18,080.5 2,477.0 1,045.6 278.8 744.4 58,508.4 $ 11,460.9 513.8 20.2 3.4 17,845.2 $ 3,498.2 283.0 (0.0) 4.9 1,032.7 $ 1,934.2 123.4 274.3 31.3 - $ 167.7 247.0 5.4 - $ 1,396.1 772.1 16.5 69.8 8,850.4 $ 7,575.5 1.8 339.2 385.7 5,443.5 261.1 $ 73,587.1 9,579.8 4,143.7 766.3 8,237.4 91,113.3 5,898.7 25,388.1 31,286.8 7,835.8 816.9 17,749.7 18,566.6 3,552.7 0.0 10,891.7 10,891.7 898.7 356.2 3,039.6 3,395.9 353.9 1,273.0 17.2 1,290.2 968.3 348.5 1,146.9 402.9 1,549.8 361.8 6,514.6 2,151.4 8,666.0 (2,826.5) 16,006.3 59,640.6 75,646.9 11,493.1 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: 3/31/2008 PAGE 12 Individual Markets - Individual Life Insurance Income Statements & Operational Data Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 84.7 $ 14.0 303.3 139.8 444.5 6.0 992.1 - March 2007 June 2007 March 2008 86.3 15.8 312.6 116.7 447.4 8.7 987.5 - % Change -1.6% 3.7% 7.0% 4.2% -1.5% -14.6% 1.7% Operating Revenues Insurance premiums Surrender charges Mortality assessments (1) Expense assessments (1) Net investment income Other revenues and fees Total Operating Revenues $ 87.7 $ 15.2 292.3 111.9 454.0 10.2 971.4 - 87.8 $ 15.7 282.4 69.9 493.3 8.3 957.5 - 90.0 $ 14.1 310.3 112.9 464.1 10.7 1,002.1 - Operating Expenses Insurance benefits Interest credited to contract holder 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 $ $ (1) 246.0 251.7 221.2 718.9 (0.0) 263.0 254.0 171.0 688.0 0.0 260.5 255.1 219.0 734.6 0.0 302.6 260.2 199.0 761.8 - 296.1 258.2 212.8 767.1 (0.0) 20.4% 2.6% -3.8% 6.7% -12.7% -12.7% -12.7% 252.5 0.0 269.4 0.0 257.6 - 240.3 0.0 85.9 166.6 $ 0.0 93.0 176.4 $ (0.0) 84.0 173.6 $ 0.0 81.5 158.8 $ (0.0) 220.5 (0.0) 75.0 145.5 - 34.0% 7,557.8 $ 8.8% 34.5% 7,789.2 $ 9.1% 32.6% 7,911.1 $ 8.8% 33.9% 7,925.1 $ 8.0% 34.0% 7,784.3 7.5% 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 of interest Net Operating and Acquisition Expenses General and administrative expenses basis points on account values - Annualized $ $ 227.1 $ 111.0 32.9 371.1 (288.9) 139.1 221.2 $ 166 211.7 $ 115.6 26.6 353.8 (272.4) 89.6 171.0 $ 170 213.1 $ 104.6 27.3 345.1 (270.5) 144.4 219.0 $ 151 211.9 $ 109.3 23.5 344.7 (268.1) 122.5 199.0 $ 0.0 156 182.7 103.7 29.7 316.1 (234.2) 130.8 212.8 148 -19.5% -6.6% -9.7% -14.8% 18.9% -5.9% -3.8% (18) Roll Forward of DAC & VOBA Balance at beginning-of-period Deferrals Amortization, net of interest: (1) Unlocking Other amortization Deferrals, net of amortization included in operating and acquisition expenses Adjustment related to realized (gains) losses on available-for-sale securities and derivatives Adjustment related to unrealized (gains) losses on available-for-sale securities and derivatives Balance at end-of-period Roll Forward of DFEL Balance at beginning-of-period Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in expense assessments Balance at end-of-period (1) $ 4,659.4 $ 288.9 11.3 (150.4) 149.8 (12.5) (0.9) 4,795.8 $ 0.0 4,795.8 $ 272.4 20.8 (110.5) 182.8 (2.4) 150.2 5,126.4 $ 0.0 5,126.4 $ 270.5 (3.8) (140.6) 126.1 0.6 6.5 5,259.6 $ - 5,259.6 $ 268.1 6.1 (128.6) 145.6 56.1 (52.7) 5,408.7 $ (0.0) 5,408.7 234.2 (10.2) (120.6) 103.3 7.0 151.0 5,670.0 (0.0) $ $ 449.5 $ 65.5 2.5 (26.9) 41.0 490.6 $ (0.0) 490.6 $ 112.4 7.1 (41.1) 78.4 569.0 $ - 569.0 $ 83.9 (27.0) (40.7) 16.2 585.2 $ (0.0) 585.2 $ 98.2 0.7 (35.4) 63.5 648.7 $ (0.0) 648.7 87.5 (3.5) (36.0) 48.0 696.7 (0.0) $ In the second quarter of 2007, we recognized certain adjustments that reduced expense assessments by $26 million, reduced mortality assessments by $15 million, increased insurance benefits by $3 million and reduced DAC amortization by $23 million. 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: 3/31/2008 PAGE 13 Individual Markets - Individual Life Insurance Operational Data Unaudited For the Three Months Ended Sept. Dec. 2007 2007 March 2007 June 2007 March 2008 % Change Sales by Product (1) (in millions) Universal Life Excluding MoneyGuard ® MoneyGuard® Total Variable Universal Life Term/Whole Life Total $ $ 166.1 7.4 173.5 20.6 9.4 203.5 $ $ 145.0 9.9 154.9 17.3 7.9 180.0 $ $ 143.9 10.9 154.8 17.7 7.5 179.9 $ $ 141.3 12.1 153.3 21.9 6.9 182.1 $ $ 113.7 11.0 124.8 15.5 5.1 145.4 -31.5% 49.6% -28.1% -24.4% -45.4% -28.5% First-Year Paid Premiums (in millions) Universal Life Excluding MoneyGuard ® MoneyGuard® Total Variable Universal Life Term/Whole Life Total $ 367.9 49.2 417.1 52.5 17.5 487.0 $ 315.7 65.9 381.6 47.8 18.3 447.7 $ 303.8 72.4 376.2 46.4 19.1 441.6 $ 304.6 80.4 385.0 48.9 24.4 458.2 $ 245.4 73.6 318.9 37.0 14.0 369.9 -33.3% 49.6% -23.5% -29.5% -19.8% -24.0% $ $ $ $ $ Life Insurance In Force (in billions) Universal Life and other Term insurance Total Life Segment In Force $ $ 272.921 235.491 508.411 $ $ 276.040 236.155 512.195 $ $ 279.933 236.414 516.347 $ $ 284.305 235.919 520.224 - $ $ 286.187 234.860 521.047 - 4.9% -0.3% 2.5% (1) Sales for Individual Life Insurance consist of first year commissionable premiums for Universal Life ("UL"), includingMoneyGuard® , plus 5% of excess premiums received, 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: 3/31/2008 PAGE 14 Individual Markets - Individual Life Insurance Account Value Roll Forward Unaudited (billions of dollars) March 2007 Interest Sensitive Life - Balance at Beginning-of-Period Deposits Withdrawals and deaths Net flows (1) Contract holder assessments Interest credited (2) Interest Sensitive Life - Balance at End-of-Period Variable Universal Life - Balance at Beginning-of-Period Deposits Withdrawals and deaths Net flows Contract holder assessments Investment income and change in market value Variable Universal Life - Balance at End-of-Period Total Segment - Life Insurance Account Value Roll Forward Balance at Beginning-of-Period Deposits Withdrawals and deaths Net flows Contract holder assessments (1) Investment income and change in market value Total Segment - Balance at End-of-Period $ 21.890 $ 0.882 (0.264) 0.618 (0.523) 0.243 22.228 $ 0.000 4.600 $ 0.157 (0.077) 0.080 (0.079) 0.095 4.696 $ 0.000 26.490 $ 1.039 (0.341) 0.698 (0.602) 0.338 26.924 $ 0.000 June 2007 For the Three Months Ended Sept. Dec. 2007 2007 22.517 $ 0.842 (0.258) 0.585 (0.527) 0.243 22.818 $ (0.000) 4.948 $ 0.137 (0.087) 0.050 (0.080) 0.139 5.057 $ 0.000 27.465 $ 0.980 (0.345) 0.635 (0.607) 0.382 27.875 $ (0.000) 22.818 $ 0.935 (0.262) 0.673 (0.575) 0.246 23.161 $ 5.057 $ 0.151 (0.079) 0.072 (0.082) (0.087) 4.961 $ 27.875 $ 1.086 (0.341) 0.745 (0.657) 0.159 28.122 $ (0.000) March 2008 23.161 0.824 (0.314) 0.509 (0.561) 0.246 23.355 0.000 4.961 0.143 (0.073) 0.070 (0.082) (0.423) 4.526 28.122 0.967 (0.387) 0.579 (0.643) (0.178) 27.881 0.000 % Change 5.8% -6.6% -18.9% -17.6% -7.3% 1.2% 5.1% 7.8% -8.9% 5.2% -12.5% -3.8% NM -3.6% 22.228 $ 0.864 (0.311) 0.553 (0.507) 0.243 22.517 $ 4.696 $ 0.142 (0.109) 0.033 (0.080) 0.299 4.948 $ (0.000) 26.924 $ 1.005 (0.420) 0.586 (0.586) 0.542 27.465 $ (0.000) $ $ $ $ $ 6.2% -6.9% -13.5% -17.0% -6.8% NM 3.6% Life Product Spread Information (3) Interest Sensitive Products Net investment income (4) (5) (6) Interest credited to contract holders Spread (4) (5) (6) Traditional Products Net investment income (4) 6.48% 4.46% 2.02% 6.99% 4.45% 2.54% 6.09% 4.41% 1.68% 6.30% 4.41% 1.89% Change (Basis Points) 6.04% (44) 4.34% (12) 1.70% (32) 6.41% 6.48% 6.18% 6.23% 6.21% (20) (1) (2) (3) Interest sensitive contract holder assessments in the second quarter of 2007 includes +.017 related to certain adjustments. Includes universal life, interest sensitive whole 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. We exclude net investment income earned on investments supporting statutory surplus and reverse repurchase agreement interest expense from our yield and spread calculations. 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 March 31, 2008, interest sensitive products represented approximately 81% of total interest sensitive and traditional earning assets. 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 4 bps in the 1st quarter of 2008, 16 bps in the 4th quarter of 2007, 9 bps in the 3rd quarter of 2007, 22 bps in the 2nd quarter of 2007 and 21 bps in the 1st quarter of 2007. There was an impact on traditional products of 15 bps in the 1st quarter of 2008, 2 bps in the 4th quarter of 2007, 9 bps in the 3rd quarter of 2007, 14 bps in the 2nd quarter of 2007 and 2 bps in the 1st quarter of 2007. (4) (5) The net investment income and spread above include earnings from alternative investments, such as limited partnerships. The impact of these investments on investment income yields for interest sensitive products was (8) bps in the 1st quarter of 2008, 5 bps in the 4th quarter of 2007, (4) bps in the 3rd quarter of 2007, 70 bps in the 2nd quarter of 2007 and 14 bps in the 1st quarter of 2007. The impact of these investments on traditional products was (3) bps in the 1st quarter of 2008, (1) bp in the 4th quarter of 2007 and (6) bps in the 3rd quarter of 2007. (6) The net investment income and spread above is partially offset by amortization associated with prepayment fee income. The impact of this offset to interest sensitive products was -0- bps in the 1st quarter of 2008, 1 bp in the 4th quarter of 2007, -0- bps in the 3rd quarter of 2007 and 8 bps in the 2nd quarter of 2007. There was an impact on traditional products of 4 bps in the 1st quarter of 2008. 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: 3/31/2008 PAGE 15 Individual Markets - Individual Annuities Income Statements & Operational Data Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 42.6 $ 9.8 249.4 249.4 0.9 94.9 647.0 0.1 March 2007 June 2007 March 2008 31.6 9.6 236.0 247.8 10.2 87.4 622.6 (0.0) % Change 146.0% -0.9% 11.9% -6.6% NM -3.3% 5.5% Operating Revenues Insurance premiums Surrender charges Expense assessments Net investment income Operating realized gain (loss) (1) Other revenues and fees (2) Total Operating Revenues $ 12.8 $ 9.7 210.9 265.3 1.3 90.4 590.4 (0.0) 16.6 $ 10.1 233.9 265.3 1.3 96.4 623.7 (0.0) 46.5 $ 9.1 265.2 251.8 2.2 97.6 672.3 (0.0) Operating Expenses Insurance benefits Interest credited to contract holder 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 Income from Operations - basis points on average account values $ $ 25.4 161.1 250.0 436.6 - 26.6 165.1 267.0 458.8 - 56.3 165.3 255.4 477.0 - 62.0 167.9 287.3 517.2 (0.0) 51.3 163.2 251.7 466.3 0.0 102.0% 1.3% 0.7% 6.8% 1.6% 3.7% 1.0% 153.8 (0.0) 164.9 (0.0) 170.0 - 155.1 (0.0) 37.2 116.6 $ 0.0 41.5 123.4 $ 0.0 44.1 125.9 $ - 36.2 118.9 $ (0.0) 156.3 0.0 38.5 117.8 0.0 24.2% 3,446.7 $ 13.5% 25.2% 3,491.1 $ 14.1% 25.9% 3,537.8 $ 14.2% 23.4% 3,549.1 $ 13.4% 24.7% 3,561.6 13.2% 69 69 68 62 64 Operating Realized Gain (Loss) (1) Indexed annuity net derivatives results (3) Guaranteed living benefits risk and profit charges (4) Guaranteed death benefits hedging offset (5) Total Operating Realized Gain (Loss) $ $ $ 0.9 $ 0.8 (0.4) 1.3 $ $ 1.2 $ 1.4 (1.3) 1.3 $ 0.0 $ 0.2 $ 1.6 (0.8) 0.9 $ (0.0) $ (0.1) $ 1.8 0.5 2.2 $ (0.0) $ (1.4) 5.8 5.9 10.2 - NM NM NM NM Operating and Acquisition Expenses Commissions General and administrative expenses Broker-dealer commissions and general and administrative expenses Taxes, licenses and fees Total commissions and expenses incurred Less: commissions and expenses capitalized Amortization of DAC and VOBA, net of interest Net Operating and Acquisition Expenses General and administrative expenses - basis points on gross account values - Annualized (6) (1) (2) (3) $ 152.1 $ 69.2 87.2 8.9 317.4 (157.6) 90.2 250.0 $ 178.8 $ 82.2 92.8 5.7 359.6 (189.3) 96.8 267.0 $ 188.9 $ 80.9 91.8 6.0 367.6 (196.1) 83.9 255.4 $ $ 44 212.3 $ 96.7 100.5 6.1 415.6 (230.5) 102.3 287.3 $ 51 165.6 80.2 89.2 10.4 345.4 (172.8) 79.1 251.7 44 8.9% 15.9% 2.3% 17.2% 8.8% -9.6% -12.3% 0.7% $ 41 46 3 The portion of the FAS 157 Attributed Fee included in in Income from Operations. See notes on page 18 for additional details. Primarily broker-dealer revenues. Changes in the fair value of the S&P 500 Index® call options that we hold and the change in the fair value of the embedded derivative liabilities of our Indexed Annuities products excluding the indexed annuity forward-starting option. The portion of the rider fee revenue for GLB calculated as the attributed fee in excess of net valuation premium. Change in the fair value of the derivatives that offsets the benefit ratio unlocking of our SOP 03-1 reserves on our GMDB riders, including our expected cost of the hedging instruments. Includes distribution costs. (4) (5) (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 22: 3/31/2008 PAGE 16 Individual Markets - Individual Annuities Roll Forwards of DAC, VOBA, DFEL and DSI Unaudited (millions of dollars) Roll Forward of DAC & VOBA March 2007 2,050.4 $ (27.2) 157.6 5.7 (95.9) 67.4 (8.5) (14.0) 14.0 2,082.0 $ 0.0 For the Three Months Ended June Sept. Dec. 2007 2007 2007 2,082.0 $ 2,236.8 $ 2,347.4 189.3 196.1 230.5 8.8 (105.6) 92.6 (10.2) 72.4 2,236.8 19.0 (102.9) 112.2 21.1 (22.8) 2,347.4 $ 10.7 (112.9) 128.2 34.8 (33.5) 2,477.0 $ March 2008 2,477.0 (6.9) 172.8 (0.6) (78.5) 93.7 (10.5) 17.5 2,570.8 0.0 Balance at beginning-of-period Cumulative effect of adoption of SOP 05-1 Inter-segment transfer Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in operating and acquisition expenses Adjustment related to realized (gains) losses on available-for-sale securities and derivatives Adjustment related to unrealized (gains) losses on available-for-sale securities and derivatives Business acquired Balance at end-of-period Roll Forward of DFEL Balance at beginning-of-period Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in expense assessments Adjustment related to realized losses on available-for-sale securities and derivatives Balance at end-of-period Roll Forward of DSI Balance at beginning-of-period Cumulative effect of adoption of SOP 05-1 Inter-segment transfer Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in insurance benefits or interest credited Adjustment related to realized (gains) losses on available-for-sale securities Balance at end-of-period $ $ $ $ $ 100.9 $ (2.0) 9.8 0.5 (3.4) 6.9 (1.0) 104.6 $ 0.1 104.6 11.8 0.2 (4.5) 7.5 $ 111.9 11.5 1.4 (4.1) 8.9 1.2 122.0 0.0 $ 122.0 11.9 (0.4) (4.6) 6.9 $ 130.9 11.9 0.7 (2.7) 9.9 0.8 141.6 0.0 $ (0.2) 111.9 $ 0.0 $ 1.9 130.9 $ (0.0) $ 193.7 $ (2.8) 23.7 1.5 (7.3) 17.9 (2.6) 206.2 $ (0.0) $ 206.2 27.3 0.9 (8.6) 19.5 $ 224.7 29.7 0.6 (9.1) 21.2 2.8 248.7 - $ 248.7 35.5 (0.9) (10.1) 24.5 5.6 278.8 - $ 278.8 (1.3) 25.8 0.5 (6.2) 20.2 (1.9) 295.7 0.0 $ $ (1.0) 224.7 $ $ $ $ $ $ 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: 3/31/2008 PAGE 17 Individual Markets - Individual Annuities Account Value Roll Forward Unaudited (billions of dollars) March 2007 Fixed Annuities - Balance at Beginning-of-Period Business acquired Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfer from (to) variable annuities Interest credited Sales inducements deferred Fixed Annuities - Gross Reinsurance ceded (1) Fixed Annuities (Net of Ceded) - Balance at End-of-Period $ 18.545 $ June 2007 18.139 For the Three Months Ended Sept. Dec. 2007 2007 $ 17.867 $ 17.813 $ March 2008 17.822 (0.089) 1.160 (0.585) 0.575 (0.680) 0.048 0.026 17.701 (1.306) 16.395 (0.000) % Change -3.9% -100.0% NM 41.3% 34.0% NM -22.1% -68.6% 8.3% -2.4% 22.7% -0.3% $ 0.040 0.821 (0.887) (0.066) (0.557) 0.153 0.024 18.139 (1.689) 16.449 $ 0.000 0.982 (0.893) 0.089 (0.560) 0.172 0.027 17.867 (1.598) 16.270 $ - 1.231 (0.891) 0.340 (0.589) 0.166 0.030 17.813 (1.430) 16.383 $ 0.000 1.288 (0.706) 0.582 (0.734) 0.125 0.035 17.822 (1.352) 16.470 $ - Variable Annuities - Balance at Beginning-of-Period Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfer from (to) fixed annuities Investment increase and change in market value (2) Variable Annuities - Balance at End-of-Period $ 48.169 $ 50.300 $ 55.171 $ 58.293 $ 58.643 (0.206) 1.865 (1.259) 0.607 0.680 (4.758) 54.966 0.000 76.464 (0.295) 3.025 (1.844) 1.181 (0.001) (4.710) 0.026 72.666 (1.306) 71.361 (0.001) 21.7% NM -6.8% -6.8% -26.1% 22.3% NM 9.3% $ 2.000 (1.179) 0.821 0.556 0.754 50.300 $ (0.000) 66.714 $ 2.295 (1.247) 1.048 0.560 3.263 55.171 $ 0.000 68.438 $ 2.247 (1.296) 0.951 0.589 1.582 58.293 $ 73.038 $ 2.593 (1.367) 1.226 0.734 (1.611) 58.643 $ 0.000 76.106 $ Total Annuities - Balance at Beginning-of-Period Business acquired Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfers Interest credited and change in market value Sales inducements deferred Total Annuities - Gross Reinsurance ceded Total Annuities (Net of Ceded) - Balance at End-of-Period $ 14.6% -100.0% NM 7.2% 10.8% 56.6% NM 8.3% 6.2% 22.7% 6.9% $ 0.040 2.821 (2.067) 0.754 (0.001) 0.907 0.024 68.438 (1.689) 66.749 $ (0.000) 3.277 (2.140) 1.138 3.435 0.027 73.038 (1.598) 71.441 $ (0.000) 3.478 (2.187) 1.291 1.748 0.030 76.106 (1.430) 74.676 $ 0.000 3.880 (2.072) 1.808 (1.485) 0.035 76.464 (1.352) 75.113 $ 0.000 Variable Annuities Under Agreement - Included Above Incremental Deposits: Fixed annuities Variable annuities Total Incremental Deposits (1) (2) (3) (3) $ 0.163 $ 0.164 $ 0.161 $ 0.149 $ 0.128 -21.5% $ $ $ 0.815 1.979 2.794 - $ $ $ 0.976 2.265 3.241 - $ $ $ 1.224 2.217 3.441 - $ $ $ 1.282 2.558 3.840 - $ $ $ 1.157 1.838 2.994 - 42.0% -7.1% 7.2% 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 24: 3/31/2008 PAGE 18 Individual Markets - Individual Annuities Account Values, Spread Information, GLB Expense Assessments, GLB Attributed Fee and GLB Account Values by Type Unaudited (billions of dollars) March 2007 Fixed Annuities - Excluding Fixed Portion of Variable Contracts Deposits Withdrawals and deaths Net flows Gross fixed contract account values Reinsurance ceded Net fixed contract account values $ $ $ $ $ 0.126 $ (0.674) (0.548) $ 10.818 $ (1.689) 9.129 $ 0.000 $ June 2007 For the Three Months Ended Sept. Dec. 2007 2007 0.286 $ (0.651) (0.365) $ 10.115 $ (1.430) 8.684 $ $ 0.231 $ (0.486) (0.255) $ 9.960 $ (1.352) 8.609 $ $ March 2008 0.086 (0.378) (0.292) 9.767 (1.306) 8.462 - % Change -31.7% 43.9% 46.7% -9.7% 22.7% -7.3% 0.129 $ (0.677) (0.548) $ 10.377 $ (1.598) 8.779 $ 0.000 $ Indexed Annuities Deposits Withdrawals and deaths Net flows Indexed Annuity Account Values $ $ $ 0.160 $ (0.063) 0.098 $ 3.844 $ 0.191 $ (0.061) 0.130 $ 4.033 $ 0.199 $ (0.059) 0.140 $ 4.228 $ 0.204 $ (0.062) 0.143 $ 4.392 $ 0.218 (0.083) 0.135 4.465 36.3% -31.7% 37.8% 16.2% Fixed Portion of Variable Contracts Deposits Withdrawals and deaths Net flows Fixed Portion of Variable Contract Account Values $ $ $ 0.535 $ (0.151) 0.384 $ 3.476 $ 0.662 $ (0.155) 0.507 $ 3.458 $ 0.746 $ (0.181) 0.564 $ 3.470 $ 0.853 $ (0.158) 0.695 $ 3.470 $ 0.856 (0.124) 0.732 3.469 60.0% 17.9% 90.6% -0.2% Variable Annuities - Including Fixed Portion of Variable Contracts Deposits Withdrawals and deaths Net Flows Variable Contract Account Values Average Daily Variable Annuity Separate Account Values $ $ $ $ 2.535 $ (1.330) 1.205 $ - 2.957 $ (1.402) 1.555 $ - 2.993 $ (1.477) 1.516 $ - 3.445 $ (1.525) 1.921 $ - 2.721 (1.383) 1.338 - 7.3% -4.0% 11.0% 8.7% 12.2% 53.776 49.284 $ $ 58.629 53.465 $ $ 61.764 55.827 $ $ 62.112 58.628 $ $ 58.435 55.318 Individual Product Spread Information (1) (2) (3) Net investment income (4) Interest credited to contract holders (1) (2) (3) Spread Variable Annuity Expense Assessments (in millions) GLB Expense Assessments (in millions) (6) Components of Attributed Fees on GLB (in millions) Attributed fee included in operating revenue and income from operations (5) 5.94% 3.63% 2.31% 224.9 24.3 5.92% 3.74% 2.18% 249.7 27.2 5.84% 3.76% 2.08% 267.1 31.7 5.93% 3.77% 2.16% 286.5 37.1 Change (Basis Point) 5.87% (7) 3.81% 18 2.06% 271.6 39.6 (25) 20.8% 63.0% (7) (8) $ $ 3.2 10.9 14.1 $ $ 3.5 12.3 15.8 $ $ 3.8 14.0 17.8 $ $ 4.4 17.0 21.4 $ $ 15.9 19.7 35.6 NM 80.5% 152.6% Attributed fee excluded from operating revenue and income from operations Total attributed fees on GLB GLB Account Values by Type (in billions) (9) Guaranteed withdrawal benefits Guaranteed income benefits (10) Total GLB account values (1) $ $ 14.919 4.899 19.818 $ $ 16.311 6.184 22.495 $ $ 17.723 7.319 25.042 $ $ 18.695 8.372 27.067 $ $ 19.264 8.678 27.942 29.1% 77.1% 41.0% 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. We exclude net investment income earned on investments supporting statutory surplus, reverse repurchase agreement interest expense and inter-segment cash management account interest expense from our yield and spread calculations. The average crediting rate is calculated using interest credited on annuity products before DSI amortization, plus the immediate annuity reserve change (included within benefits), 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 was 5 bps in the 1st quarter of 2008, 11 bps in the 4th quarter of 2007, 4 bps in the 3rd quarter of 2007, 11 bps in the 2nd quarter of 2007 and 5 bps in the 1st quarter of 2007. In the first quarter of 2008, we updated previously reported historical net investment income yields and interest rate spreads to conform to the presentation in the first quarter of 2008, which is excluding hedge derivatives and collateral from average earning assets. The impact of the changes on spreads range from 6 bps - 8 bps per quarter. The 2007 spreads reflect a correction (a decrease) to interest credited to contract holders related to a correction to the opening balance sheet of JP that was finalized in the first quarter of 2007. The impact of this correction was 9 bps in the first quarter of 2007. Comprised of the variable annuity expense assessments included in the expense assessments line item on page 15 and the amounts presented in the components of attributed fees on GLB as described in footnotes 7 and 8 and disclosed above. Comprised of the GLB expense assessments included in the expense assessments line item on page 15 and the amounts presented in the components of (3) (4) (5) (6) attributed fees on GLB as described in footnotes 7 and 8 and disclosed above. The portion of the GLB rider fees calculated as the attributed fees in excess of the net valuation premium. The attributed fees are the fees used in the calculation of the embedded derivative. The net valuation premium represents the rider fees equal to the net present value of future benefit costs. This portion of the attributed fee is reported in realized gains and losses and included in income from operations and operating revenue. (8) Represents the portion of rider fee revenue for GLB required to fund the net valuation premium. This portion of the attributed fee is reported in realized gains and losses and excluded in income from operations and operating revenue. (9) Guaranteed withdrawal benefits include features that offer the contract holder a guarantee equal to the initial deposit (or contract value, if elected after issue), adjusted for any subsequent purchase payments or withdrawals. (10) For our guaranteed income benefits we offer other product riders allowing variable annuity contract holders access and control during the income distribution phase of their contract. This added flexibility allows the contract holder to access the account value for transfers, additional withdrawals, and other service features like portfolio rebalancing. (7) 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: 3/31/2008 PAGE 19 Employer Markets - Defined Contribution Income Statements & Operational Data Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 $ 1.8 63.5 172.9 5.2 243.4 (0.0) March 2007 June 2007 $ 2.2 63.0 182.2 4.6 252.0 - March 2008 $ 1.9 59.3 171.7 4.8 237.7 - % Change -6.9% -0.8% -4.8% 3.6% -3.7% Operating Revenues Surrender charges Expense assessments Net investment income Other revenues and fees Total Operating Revenues $ 2.0 59.8 180.3 4.7 246.7 - $ 1.8 64.7 173.3 3.6 243.3 0.0 Operating Expenses Interest credited to contract holder 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 Income from Operations - basis points on average account values $ $ 104.3 71.6 176.0 - 104.6 80.6 185.2 - 104.6 84.7 189.3 - 104.8 77.3 182.1 - 105.9 76.3 182.2 - 1.5% 6.5% 3.6% -21.6% -28.5% -18.7% 70.8 - 66.8 - 54.1 - 61.2 - 21.1 49.7 (0.0) 19.5 $ 47.3 - 12.9 $ 41.2 - 18.1 $ 43.1 - 55.5 (0.0) 15.1 $ 40.4 (0.0) 29.8% 936.0 21.2% $ 29.2% 906.6 20.9% $ 23.8% 901.4 18.3% $ 29.6% 902.7 19.1% $ 27.2% 906.4 17.8% 58 53 46 47 46 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 of interest Net Operating and Acquisition Expenses General and administrative expenses - basis points on account values - Annualized (1) (1) $ $ 19.3 $ 49.9 5.1 74.2 (22.2) 19.6 71.6 $ 59 21.3 $ 54.9 4.4 80.6 (22.5) 22.5 80.6 $ 62 19.9 $ 59.8 2.2 81.9 (23.7) 26.5 84.7 $ 67 20.3 $ 53.7 2.1 76.1 (23.7) 24.9 77.3 $ 59 19.6 51.9 4.4 75.9 (23.6) 23.9 76.3 59 1.7% 4.1% -13.6% 2.3% -6.2% 22.3% 6.5% 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 26: 3/31/2008 PAGE 20 Employer Markets - Defined Contribution Roll Forwards of DAC, VOBA and DSI Unaudited (millions of dollars) Roll Forward of DAC & VOBA March 2007 497.6 $ (1.4) 22.2 (0.5) (19.0) 2.6 (2.1) (7.2) 489.4 $ 0.0 $ For the Three Months Ended June Sept. Dec. 2007 2007 2007 489.4 $ 541.9 $ 531.8 $ 22.5 23.7 23.7 (2.0) (20.5) (0.0) (0.8) 53.3 541.9 $ $ (5.0) (21.5) (2.8) (0.6) (6.8) 531.8 $ (1.2) (23.7) (1.2) 3.4 (20.2) 513.8 $ March 2008 513.8 6.9 23.6 (2.5) (21.4) (0.4) 0.6 43.2 564.2 (0.1) Balance at beginning-of-period Cumulative effect of adoption of SOP 05-1 Inter-segment transfer Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in operating and acquisition expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Balance at end-of-period Roll Forward of DSI Balance at beginning-of-period Inter-segment transfer Deferrals Amortization, net of interest: Unlocking Deferrals, net of amortization included in insurance benefits or interest credited Balance at end-of-period $ $ $ $ 0.1 0.1 (0.0) 0.1 0.2 - $ 0.2 0.1 0.0 0.1 0.3 - $ 0.3 0.1 (0.0) 0.1 0.4 - $ 0.4 0.0 (0.0) 0.0 0.4 - $ 0.4 1.3 0.2 (0.1) 0.1 1.9 (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 27: 3/31/2008 PAGE 21 Employer Markets - Defined Contribution Account Value Roll Forward Unaudited (billions of dollars) March 2007 Fixed Annuities - Balance at Beginning-of-Period Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfer from (to) variable annuities Interest credited Fixed Annuities - Balance at End-of-Period (1) June 2007 For the Three Months Ended Sept. Dec. 2007 2007 10.940 $ 0.305 (0.450) (0.144) (0.011) 0.106 10.891 - March 2008 10.889 0.089 0.332 (0.370) (0.038) 0.172 0.105 11.217 0.000 % Change -1.1% NM 11.0% 7.3% 62.4% NM 1.0% 2.0% $ 11.006 $ 0.299 (0.399) (0.101) (0.017) 0.104 10.993 - 10.993 $ 0.233 (0.376) (0.143) (0.012) 0.102 10.940 - 10.891 $ 0.268 (0.411) (0.143) 0.031 0.111 10.889 - $ $ $ $ $ Variable Annuities - Balance at Beginning-of-Period Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfer from (to) fixed annuities Investment increase and change in market value (2) Variable Annuities - Balance at End-of-Period Total Annuities - Balance at Beginning-of-Period Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfers Interest credited and change in market value Total Annuities - Balance at End-of-Period Alliance and Smart Future Mutual Funds - Balance at Beginning-of-Period Plan/Participant Rollovers Additional contributions Gross deposits Withdrawals and deaths Net flows Transfers Interest credited and change in market value Total Alliance and Smart Future Mutual Funds (3) Balance at End-of-Period $ $ $ 17.475 $ 0.655 (0.813) (0.158) 0.004 0.354 17.676 $ - 17.676 $ 0.577 (0.747) (0.170) 0.007 0.968 18.480 $ - 18.480 $ 0.564 (0.810) (0.247) (0.028) 0.375 18.581 $ - 18.581 $ 0.560 (0.842) (0.283) (0.012) (0.410) 17.876 $ - 17.876 0.206 0.674 (0.833) (0.158) (0.143) (1.488) 16.292 (0.000) 2.3% NM 2.9% -2.5% NM NM -7.8% 1.0% NM 5.7% 0.7% 24.3% NM NM -4.0% 40.9% -20.8% 27.6% 2.3% -27.8% -0.6% NM NM 24.9% $ $ 28.482 $ 0.953 (1.212) (0.259) (0.012) 0.458 28.669 $ 5.175 $ 0.279 0.254 0.533 (0.054) 0.480 0.005 0.147 5.807 - 28.669 $ 0.809 (1.122) (0.313) (0.005) 1.070 29.421 $ 5.807 $ 0.217 0.247 0.464 (0.077) 0.387 0.040 0.310 6.543 - 29.421 $ 0.869 (1.260) (0.391) (0.039) 0.481 29.471 $ 6.543 $ 0.411 0.245 0.656 (0.132) 0.524 (0.013) 0.111 7.165 - 29.471 $ 0.828 (1.253) (0.426) 0.019 (0.300) 28.765 $ 7.165 $ 0.168 0.269 0.437 (0.102) 0.335 (0.023) (0.184) 7.293 - 28.765 0.295 1.007 (1.203) (0.196) 0.028 (1.383) 27.509 0.000 7.293 0.221 0.324 0.545 (0.069) 0.477 (0.070) (0.445) 7.254 - $ $ $ $ $ Total Defined Contribution Segment Account Values including Alliance and Smart Future Mutual Funds Balance at Beginning-of-Period Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfers Interest credited and change in market value Total Defined Contribution Segment Account Values Balance at End-of-Period Variable Annuities Under Agreement - Included Above - - - - $ 33.656 $ 1.487 (1.266) 0.221 (0.007) 0.606 34.475 0.016 $ 34.475 $ 1.273 (1.199) 0.074 0.035 1.379 35.964 0.017 $ 35.964 $ 1.525 (1.392) 0.133 (0.052) 0.592 36.636 0.018 $ 36.636 $ 1.265 (1.356) (0.091) (0.004) (0.484) 36.058 0.017 $ 36.058 0.295 1.552 (1.271) 0.281 (0.042) (1.828) 34.763 0.000 7.1% NM 4.4% -0.4% 27.1% NM NM 0.8% -6.3% $ 0.015 Incremental Deposits: (4) Fixed annuities Variable annuities Total annuities incremental deposits Total Alliance mutual funds incremental deposits Total Defined Contribution Incremental Deposits (1) (2) (3) $ $ 0.282 0.581 0.862 0.533 1.396 $0.000 $ $ 0.224 0.631 0.855 0.464 1.318 $0.000 $ $ 0.220 0.556 0.776 0.656 1.431 $0.000 $ $ 0.197 0.551 0.747 0.437 1.185 $0.000 $ $ 0.285 0.667 0.953 0.545 1.498 $0.000 1.1% 14.8% 10.6% 2.3% 7.3% Includes fixed annuity products offered under the Alliance Program and the fixed portion of variable annuities. Excludes the fixed portion of variable annuities. Represents amounts attributable to Alliance and Smart Future mutual fund net flows. Alliance and Smart Future mutual fund account values are not included in the separate accounts reported on our Consolidated Balance Sheets. Incremental deposits represent gross deposits reduced by transfers from other Lincoln products. (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: 3/31/2008 PAGE 22 Employer Markets - Defined Contribution Account Value Roll Forward - By Product Unaudited (billions of dollars) March 2007 Total Micro - Small Segment - Balance at Beginning-of-Period Gross deposits Withdrawals and deaths Net flows Transfers Investment increase and change in market value Total Micro - Small Segment - Balance at End-of-Period Total Mid - Large Segment - Balance at Beginning-of-Period Gross deposits Withdrawals and deaths Net flows Transfers Investment increase and change in market value Total Mid - Large Segment - Balance at End-of-Period Total Multi Fund and Other Variable Annuities Balance at Beginning-of-Period Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfers Investment increase and change in market value Total Multi Fund and Other Variable Annuities Balance at End-of-Period Total Defined Contribution Account Values Including Alliance and Smart Future Mutual Funds Balance at Beginning-of-Period Inter-segment transfer Gross deposits Withdrawals and deaths Net flows Transfers Investment increase and change in market value Total Defined Contribution Segment Account Values (1) Balance at End-of-Period (1) June 2007 For the Three Months Ended Sept. Dec. 2007 2007 8.012 $ 0.391 (0.481) (0.090) 0.000 0.155 8.077 $ - March 2008 7.798 0.499 (0.569) (0.070) (0.012) (0.497) 7.218 - % Change 3.5% 8.5% -26.2% NM NM NM -6.1% 35.7% 8.2% -34.7% 2.9% NM NM 24.4% $ $ $ 7.535 $ 0.460 (0.451) 0.009 (0.005) 0.150 7.689 $ - 7.689 $ 0.377 (0.434) (0.056) (0.000) 0.379 8.012 $ - 8.077 $ 0.365 (0.565) (0.201) 0.000 (0.079) 7.798 $ - $ 6.975 $ 0.711 (0.118) 0.593 0.002 0.164 7.734 $ - 7.734 $ 0.590 (0.132) 0.458 0.036 0.328 8.555 $ - 8.555 $ 0.861 (0.263) 0.598 (0.051) 0.130 9.232 $ - 9.232 $ 0.610 (0.212) 0.398 (0.003) (0.163) 9.463 $ - 9.463 0.769 (0.159) 0.610 (0.029) (0.423) 9.621 - $ 19.146 $ 0.316 (0.697) (0.381) (0.004) 0.292 19.053 - 19.053 $ 0.306 (0.633) (0.327) (0.000) 0.672 19.397 - 19.397 $ 0.273 (0.649) (0.376) (0.001) 0.306 19.327 - 19.327 $ 0.290 (0.578) (0.288) (0.000) (0.241) 18.797 - 18.797 0.295 0.284 (0.543) (0.259) (0.001) (0.908) 17.924 - -1.8% NM -10.1% 22.1% 32.0% 75.0% NM -5.9% $ $ $ $ $ $ 33.656 $ 1.487 (1.266) 0.221 (0.007) 0.606 34.475 - 34.475 $ 1.273 (1.199) 0.074 0.035 1.379 35.964 - 35.964 $ 1.525 (1.392) 0.133 (0.052) 0.592 36.636 - 36.636 $ 1.265 (1.356) (0.091) (0.004) (0.484) 36.058 - 36.058 0.295 1.552 (1.271) 0.281 (0.042) (1.828) 34.763 0.000 7.1% NM 4.4% -0.4% 27.1% NM NM 0.8% $ $ $ $ $ Balance at end of period includes Alliance and Smart Future mutual fund account values. Alliance and Smart Future Mutual funds are not included in the separate accounts reported on our Consolidated Balance Sheets. 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: 3/31/2008 PAGE 23 Employer Markets - Defined Contribution Supplemental Data Unaudited (billions of dollars) March 2007 Fixed Annuities - Excluding Fixed Portion of Variable Contracts Deposits Withdrawals and deaths Net flows Fixed Contract Account Values Fixed Portion of Variable Contracts Deposits Withdrawals and deaths Net flows Fixed Portion of Variable Contract Account Values Variable Annuities - Including Fixed Portion of Variable Contracts Deposits Withdrawals and deaths Net flows Variable Contract Account Values Average Daily Variable Annuity Account Values $ $ $ 0.198 $ (0.166) 0.032 $ - June 2007 For the Three Months Ended Sept. Dec. 2007 2007 0.221 $ (0.215) 0.006 $ - March 2008 0.240 (0.160) 0.080 - % Change 21.2% 3.6% 150.0% 6.1% 0.146 $ (0.140) 0.006 $ - 0.189 $ (0.203) (0.014) $ - 4.870 $ 4.917 $ 4.943 $ 4.996 $ 5.166 $ $ $ 0.100 $ (0.233) (0.133) $ 6.123 $ 0.087 $ (0.236) (0.149) $ 6.023 $ 0.084 $ (0.235) (0.150) $ 5.948 $ 0.079 $ (0.208) (0.129) $ 5.893 $ 0.093 (0.210) (0.117) 6.051 -7.0% 9.9% 12.0% -1.2% $ $ $ $ 0.755 $ (1.046) (0.291) $ 23.799 17.582 $ $ 0.664 $ (0.982) (0.319) $ 24.504 18.377 $ $ 0.648 $ (1.045) (0.397) $ 24.528 18.162 $ $ 0.639 $ (1.050) (0.411) $ 23.769 18.235 $ $ 0.767 (1.043) (0.276) 22.343 16.640 1.6% 0.3% 5.2% -6.1% -5.4% Total Annuity Based Retirement Plan Product Spread Information (1) Net investment income (2) (3) Interest credited to contract holders Spread (2) (3) 6.20% 3.81% 2.39% 6.13% 3.82% 2.31% 6.00% 3.84% 2.16% 6.05% 3.85% 2.20% Change (Basis Point) 5.92% (28) 3.81% 2.11% (28) (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. We exclude net investment income earned on investments supporting statutory surplus from our spread calculations. The average crediting rate is calculated using interest credited on annuity products less amortization related to DSI interest, divided by average fixed account values. (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 was 2 bps in the 1st quarter of 2008, 5 bps in the 4th quarter of 2007, 7 bps in the 3rd quarter of 2007, 9 bps in the 2nd quarter of 2007 and 3 bps in the 1st quarter of 2007. (3) The net investment income and spread reported above include earnings from alternative investments, such as limited partnerships and hedge funds. The impact on investment income yields from these investments was (6) bps in the 1st quarter of 2008, (2) bps in the 4th quarter of 2007, (11) bps in the 3rd quarter of 2007, 11 bps in the 2nd quarter of 2007 and 7 bps in the 1st quarter of 2007. 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: 3/31/2008 PAGE 24 Employer Markets - Executive Benefits Income Statements & Operational Data Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 0.1 0.0 8.2 4.7 53.1 0.0 66.1 - March 2007 June 2007 March 2008 0.1 (0.0) 9.1 4.6 51.9 (0.1) 65.6 - % Change 17.5% NM 1.9% 1.0% -7.0% 22.9% -5.3% Operating Revenues Insurance premiums Surrender charges Mortality assessments Expense assessments Net investment income Other revenues and fees Total Operating Revenues $ 0.1 $ (0.0) 8.9 4.6 55.8 (0.1) 69.2 - $ 0.1 $ 0.0 8.4 4.0 51.8 (0.1) 64.2 - 0.0 $ 0.1 9.0 4.7 52.3 (0.0) 66.1 - Operating Expenses Insurance benefits Interest credited to contract holder 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 $ $ 2.8 38.2 10.2 51.1 0.0 2.7 38.1 8.8 49.7 0.0 5.1 37.8 8.7 51.6 - 6.3 38.0 3.7 48.0 - 2.5 38.4 6.7 47.6 (0.0) -9.8% 0.5% -34.1% -6.9% -0.8% -2.1% -0.1% 18.2 0.0 16.5 - 12.7 0.0 18.1 (0.0) 6.2 11.9 (0.0) 5.6 $ 10.8 0.0 3.8 $ 8.9 (0.0) 6.2 $ 11.9 (0.0) 18.0 (0.0) 6.1 $ 11.9 - 34.4% 357.1 13.3% $ 34.3% 345.5 12.5% $ 30.0% 336.5 10.5% $ 34.4% 346.3 13.7% $ 33.9% 358.1 13.3% 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 of interest Net Operating and Acquisition Expenses General and administrative expenses - basis points on account values - Annualized (1) $ $ 6.5 $ 1.7 1.2 9.4 (6.9) 7.7 10.2 $ 16 6.8 $ 1.9 1.0 9.7 (6.7) 5.8 8.8 $ 18 6.4 $ 3.0 1.0 10.4 (6.6) 4.8 8.7 $ 27 14.0 $ 2.3 1.5 17.8 (14.1) 0.0 3.7 $ 21 11.9 2.7 2.0 16.6 (11.6) 1.7 6.7 24 82.8% 61.5% 70.0% 77.4% -67.5% -77.7% -34.1% 8 Roll Forward of DAC & VOBA Balance at beginning-of-period Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in operating and acquisition expenses Adjustment related to realized (gains) losses on available-for-sale securities Adjustment related to unrealized (gains) losses on available-for-sale securities Balance at end-of-period Roll Forward of DFEL Balance at beginning-of-period Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in expense assessments Balance at end-of-period (1) $ 265.3 6.9 (2.7) (5.1) (0.8) (0.5) $ 260.5 6.7 (2.3) (3.4) 0.9 (0.1) 14.9 276.2 0.0 $ 276.2 6.6 (1.5) (3.4) 1.8 0.1 $ 273.2 14.1 2.3 (2.3) 14.1 0.6 $ 283.0 11.6 1.1 (2.8) 9.9 0.2 4.9 298.1 0.0 $ (3.4) 260.5 $ 0.0 $ (4.8) 273.2 $ (0.0) (4.9) 283.0 $ (0.0) $ 21.7 1.1 (0.3) (0.4) 0.3 22.0 0.0 $ 22.0 0.9 (0.6) (0.3) $ 21.9 0.7 0.1 (0.3) 0.5 22.4 - $ 22.4 1.4 0.3 (0.3) 1.4 23.8 - $ 23.8 1.7 0.1 (0.2) 1.6 25.5 - $ $ (0.1) 21.9 $ - $ $ 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 31: 3/31/2008 PAGE 25 Employer Markets - Executive Benefits Account Value Roll Forward & Supplemental Data Unaudited (billions of dollars) COLI/BOLI - Balance at Beginning-of-Period (1) Deposits (1) Withdrawals and deaths Net flows Contract holder assessments Interest credited and change in market value COLI/BOLI - Balance at End-of-Period For the Three Months Ended March June Sept. Dec. March 2007 2007 2007 2007 2008 $ 4.305 $ 4.264 $ 4.353 $ 4.391 $ 4.436 0.065 0.079 0.052 0.107 0.165 (0.140) (0.053) (0.057) (0.070) (0.094) (0.075) 0.026 (0.005) 0.037 0.071 (0.018) (0.017) (0.017) (0.019) (0.020) 0.052 0.080 0.060 0.027 (0.026) $ 4.264 $ 4.353 $ 4.391 $ 4.436 $ 4.460 0.000 (0.000) (0.000) $ 14.747 $ 14.809 $ 14.900 $ 15.292 $ 15.826 % Change 3.0% 153.8% 32.9% 194.7% -11.1% NM 4.6% COLI/BOLI In Force (1) 7.3% 1st quarter 2008 Deposits include $0.044 billion and Withdrawals and deaths include $(0.044) billion related to the exchange of legacy Jefferson-Pilot products with new 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 32: 3/31/2008 PAGE 26 Employer Markets - Group Protection Income Statements & Operational Data Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 336.8 $ 29.5 1.3 367.5 0.0 March 2007 June 2007 March 2008 370.4 27.7 1.2 399.4 (0.0) % Change 11.8% -0.6% 9.6% 10.8% Operating Revenues Insurance premiums Net investment income Other revenues and fees Total Operating Revenues $ 331.3 $ 27.9 1.1 360.4 (0.0) 361.3 $ 28.5 1.2 391.0 (0.0) 349.7 $ 29.5 1.4 380.6 (0.0) 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 Average equity Return on average equity $ $ 246.6 78.3 324.9 - 265.7 80.7 346.3 - 235.0 81.4 316.4 - 252.1 85.1 337.2 - 269.2 89.6 358.8 - 9.2% 14.5% 10.5% 14.1% 14.4% 14.0% 35.5 - 44.7 0.0 51.2 (0.0) 43.4 - 12.4 23.1 (0.0) 15.7 $ 29.0 $ (0.0) 17.9 33.2 $ 0.0 15.2 28.2 $ (0.0) 40.6 0.0 14.2 26.3 0.0 35.0% 915.1 $ 10.1% 35.1% 917.5 $ 12.6% 35.1% 936.2 $ 14.2% 35.1% 956.4 $ 11.8% 35.1% 975.8 10.8% 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 of interest Net Operating and Acquisition Expenses General and administrative expenses as a percentage of premiums $ $ 39.4 $ 32.7 9.7 81.8 (11.2) 7.6 78.3 $ 9.9% 41.4 $ 37.5 9.5 88.4 (13.5) 5.8 80.7 $ 10.4% 40.3 $ 37.9 8.1 86.3 (13.0) 8.1 81.4 $ 11.2% 43.1 $ 42.8 6.2 92.1 (16.7) 9.7 85.1 $ 12.2% 43.5 41.7 10.0 95.3 (13.8) 8.1 89.6 11.3% 10.5% 27.6% 3.2% 16.5% -23.4% 6.6% 14.5% 14.14% Roll Forward of DAC & VOBA Balance at beginning-of-period Cumulative effect of adoption of SOP 05-1 Deferrals Amortization, net of interest Deferrals, net of amortization included in operating and acquisition expenses Balance at end-of-period $ 137.6 $ (37.5) 11.2 (7.6) 3.5 103.7 $ (0.0) 103.7 $ 13.5 (5.8) 7.8 111.4 $ 0.0 111.4 $ 13.0 (8.1) 5.0 116.4 $ 116.4 $ 16.7 (9.7) 7.0 123.4 $ (0.0) 123.4 13.8 (8.1) 5.7 129.0 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 33: 3/31/2008 PAGE 27 Employer Markets - Group Protection Supplemental Data Unaudited (millions of dollars) March 2007 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 June 2007 For the Three Months Ended Sept. Dec. 2007 2007 March 2008 % Change $ 22.5 28.6 9.4 $ 23.8 28.9 9.5 $ 22.0 30.5 8.3 $ 53.9 72.1 16.6 $ 21.3 24.9 7.9 -5.6% -12.9% -16.3% $ $ 118.6 144.8 32.9 35.0 331.3 - $ $ 125.0 150.4 33.5 52.5 361.3 - $ $ 123.4 151.1 34.1 28.3 336.8 - $ $ 126.5 155.2 35.2 32.8 349.7 - $ $ 132.9 163.2 36.5 37.8 370.4 - 12.0% 12.7% 10.9% 8.1% 11.8% $ $ 8.6 13.3 0.2 0.9 23.1 0.0 $ $ 10.0 $ 18.1 (0.1) 1.0 29.0 $ (0.0) 11.0 18.8 1.3 2.2 33.2 0.0 $ $ 11.2 13.7 2.1 1.2 28.2 (0.0) $ $ 10.1 15.4 (0.3) 1.2 26.3 (0.0) 17.2% 15.2% NM 27.6% 14.0% 75.0% 69.5% 79.2% 72.7% 73.9% 66.4% 79.3% 70.8% 71.2% 65.0% 74.9% 68.6% 72.1% 69.1% 73.1% 70.7% 71.9% 68.1% 80.8% 71.0% -4.1% -2.0% 2.0% -2.3% 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: 3/31/2008 PAGE 28 Investment Management Income Statements Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 $ 91.5 20.1 38.5 150.1 - March 2007 June 2007 $ 90.8 21.5 38.7 151.0 - March 2008 $ 76.2 20.0 24.1 120.3 - % Change -14.5% -22.1% -31.8% -19.9% Operating Revenues Investment advisory fees - external Investment advisory fees - inter-segment Other revenues and fees Total Operating Revenues $ 89.2 25.7 35.3 150.2 - $ 88.2 19.8 31.0 139.0 - Operating Expenses Operating and administrative expenses Total Operating Expenses Income from operations before federal income taxes Federal income taxes Income from Operations Effective tax rate Pre-Tax Operating Margin After-Tax Operating Margin $ 124.6 124.6 - 133.1 133.1 - 116.0 116.0 - 96.8 96.8 - 101.1 101.1 - -18.9% -18.9% -24.8% -24.1% -25.3% 25.6 9.3 16.2 $ 36.4% 17.0% 10.8% 17.9 6.6 11.3 $ 36.8% 11.8% 7.5% 34.1 12.3 21.8 $ 36.1% 22.7% 14.5% 42.2 15.2 27.0 $ 35.9% 30.3% 19.4% 19.2 7.1 12.1 36.8% 16.0% 10.1% Operating and Administrative Expenses General and administrative expenses Depreciation and amortization Sub-advisory fees Total general and administrative expenses Taxes, licenses and fees Amortization of intangibles Total Operating and Administrative Expenses $ $ 106.5 2.6 10.0 119.1 4.1 1.4 124.6 $ $ 116.7 2.5 8.4 127.7 4.0 1.4 133.1 $ $ 100.5 2.5 7.7 110.7 3.9 1.4 116.0 $ $ 81.0 2.3 8.1 91.4 4.0 1.4 96.8 $ $ 87.5 2.2 7.2 97.0 3.6 0.5 101.1 -17.8% -15.6% -27.6% -18.6% -11.2% -67.8% -18.9% 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 35: 3/31/2008 PAGE 29 Investment Management Assets Under Management Roll Forward Unaudited (billions of dollars) March 2007 Retail Fixed - Balance at Beginning-of-Period Sales (1) Redemptions (2) Transfers Net flows Net investment gains and change in market value Transfer of assets to third-party (2) Transfer of assets to an intercompany manager (3) Retail Fixed - Balance at End-of-Period (4) Retail Equity - Balance at Beginning-of-Period Sales (1) Redemptions (2) Transfers Net flows Net investment gains and change in market value Transfer of assets to third-party (2) Transfer of assets to an intercompany manager (3) Retail Equity - Balance at End-of-Period (4) Total Retail - Balance at Beginning-of-Period Retail sales - annuities Retail sales - mutual funds Retail sales - managed accounts and other Total retail sales (1) Redemptions (2) Transfers Net flows Net investment gains and change in market value Transfer of assets to third-party (2) Transfer of assets to an intercompany manager (3) Total Retail - Balance at End-of-Period (4) $ 10.993 $ 1.365 (0.910) 0.014 0.470 0.181 11.644 $ 39.627 $ 2.238 (2.455) (0.020) (0.237) 0.861 40.250 $ 50.620 $ 1.300 1.753 0.550 3.603 (3.365) (0.005) 0.233 1.041 51.895 $ June 2007 For the Three Months Ended Sept. Dec. 2007 2007 12.303 $ 1.467 (1.060) 0.027 0.434 0.278 13.014 $ 38.586 1.344 (2.084) (0.029) (0.768) 0.348 38.166 (0.000) 50.889 0.891 1.543 0.377 2.811 (3.144) (0.001) (0.334) 0.626 51.180 (0.000) $ 13.014 $ 1.635 (1.330) 0.017 0.321 0.145 (0.018) 13.463 $ 38.166 $ 1.957 (2.903) (0.025) (0.970) (0.915) (0.030) 36.250 $ 51.180 $ 0.954 2.241 0.398 3.592 (4.233) (0.008) (0.649) (0.770) (0.048) 49.713 $ March 2008 13.463 1.981 (1.395) 0.054 0.640 0.065 14.168 (0.000) 36.250 1.514 (2.752) (0.057) (1.295) (3.492) 31.463 (0.000) 49.713 1.562 1.592 0.341 3.495 (4.147) (0.003) (0.655) (3.427) 45.631 (0.000) (0.000) % Change 22.5% 45.1% -53.3% 285.7% 36.2% -64.1% NM NM 21.7% -8.5% -32.4% -12.1% NM NM NM NM NM -21.8% -1.8% 20.2% -9.2% -38.0% -3.0% -23.2% 40.0% NM NM NM NM -12.1% $ $ 11.644 $ 1.494 (1.062) (0.005) 0.428 0.119 (0.055) 0.166 12.303 $ 40.250 $ 1.778 (2.487) 0.004 (0.704) 2.190 (0.099) (3.051) 38.586 $ 51.895 $ 0.902 1.896 0.474 3.273 (3.548) (0.001) (0.277) 2.309 (0.153) (2.885) 50.889 $ $ $ $ $ $ $ Institutional Fixed - Balance at Beginning-of-Period Inflows (1) Withdrawals/terminations Transfers Net flows Net investment gains and change in market value Transfer of assets to third-party (5) Transfer of assets to an intercompany manager (3) Institutional Fixed - Balance at End-of-Period (4) Institutional Equity - Balance at Beginning-of-Period Inflows (1) Withdrawals/terminations Transfers Net flows Net investment gains and change in market value Transfer of assets to an intercompany manager (3) Institutional Equity - Balance at End-of-Period (4) Total Institutional - Balance at Beginning-of-Period Inflows (1) Withdrawals/terminations Transfers Net flows Net investment gains and change in market value Transfer of assets to third-party (5) Transfer of assets to an intercompany manager (3) Total Institutional - Balance at End-of-Period (4) Total Retail and Institutional - At End-of-Period General Account Assets - At End-of-Period Total Assets Under Management At End-of-Period Total Retail and Institutional - Net Flows Sub-Advised Assets, Included in Assets Under Management Above Retail Institutional Total Sub-Advised Assets (2) (6) (4) $ $ $ $ $ $ $ $ 22.841 1.560 (0.480) 0.000 1.081 0.328 (0.780) 23.469 0.000 23.845 0.870 (2.273) 0.000 (1.402) 0.339 22.782 0.000 46.686 2.431 (2.753) 0.001 (0.321) 0.667 (0.780) 46.251 0.000 98.146 67.658 $ $ $ 23.469 $ 1.514 (1.271) (0.000) 0.242 (0.146) 23.565 $ 22.782 $ 1.363 (1.753) (0.000) (0.390) 1.242 (0.363) 23.271 $ 46.251 $ 2.877 (3.025) (0.001) (0.148) 1.096 (0.363) 46.836 $ 97.725 66.423 $ $ 23.565 $ 2.233 (1.306) (0.001) 0.927 0.345 24.837 $ 23.271 $ 0.701 (1.202) (0.001) (0.501) 0.929 23.699 $ 46.836 $ 2.934 (2.508) (0.001) 0.425 1.274 48.536 $ 99.716 67.324 $ $ 24.837 $ 0.577 (0.673) 0.138 0.041 0.180 (12.313) 12.746 $ 23.699 $ 1.653 (1.996) (0.001) (0.343) (0.457) 22.898 $ 48.536 $ 2.230 (2.669) 0.137 (0.302) (0.277) (12.313) 35.644 $ 85.357 67.416 $ $ $ $ $ $ $ 12.746 0.243 (0.638) 0.002 (0.394) 0.057 12.409 (0.000) 22.898 0.986 (1.100) (0.002) (0.117) (2.284) 20.498 (0.000) 35.644 1.229 (1.739) (0.000) (0.510) (2.227) 32.907 (0.000) 78.537 67.340 -44.2% -84.4% -32.9% NM NM -82.6% NM 100.0% -47.1% -4.0% 13.3% 51.6% NM 91.7% NM NM -10.0% -23.7% -49.4% 36.8% NM -58.9% NM NM 100.0% -28.9% -20.0% -0.5% $ $ 165.804 $ 164.148 $ 167.040 0.091 $ $ 152.774 $ 145.877 (1.166) -12.0% NM (0.088) $ (0.425) $ (0.950) $ $ $ 18.466 4.645 23.111 $ $ 16.329 4.594 20.922 $ $ 16.380 4.734 21.114 $ $ 16.219 4.570 20.789 $ $ 14.212 4.071 18.283 -23.0% -12.4% -20.9% (1) (2) Sales and in-flows include dividend reinvestments. Reflects assets transferred to a third-party manager (Upromise) as a result of Delaware's decision to exit the 529 Plan business. 529 Plan assets which transferred in 2Q07 and 4Q07 are reflected in Transfer of assets to third-party. Reflects assets that were transferred to an intercompany manager which did not impact Lincoln's consolidated assets under management. Includes inter-segment and external assets under management. Reflects the sale of a portion of our institutional fixed-income business to an unaffiliated investment management company in 4Q07. The 1Q07 balance has been restated to reflect adjustments made to Jefferson Pilot separate accounts. The impact of this change was $366 million. (3) (4) (5) (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 36: 3/31/2008 PAGE 29(B) Investment Management Assets Under Management Roll Forward (Continued) (1) Unaudited (billions of dollars) Q12007 Q22007 Q32007 Q42007 Q12008 March 2007 Total Separate Account Assets Balance at Beginning-of-Period Sales/inflows Redemptions/withdrawals/terminations Transfers Net flows Net investment gains and change in market value Transfer of assets to an intercompany manager Total Separate Account Assets Balance at End-of-Period General Account Assets At End-of-Period Total Inter-Segment Assets At End-of-Period June 2007 For the Three Months Ended Sept. Dec. 2007 2007 March 2008 % Change $ 13.729 $ 0.501 (0.735) (0.233) 0.266 (0.780) 12.982 67.658 80.640 $ $ $ 12.982 $ 0.707 (0.766) 0.000 (0.059) 0.550 (3.248) 10.226 66.423 76.648 $ $ $ 10.226 $ 0.545 (0.754) (0.000) (0.209) 0.159 10.175 67.324 77.499 $ $ $ 10.175 $ 0.742 (1.148) 0.133 (0.273) (0.231) 9.672 67.416 77.088 $ $ $ 9.672 0.719 (0.679) 0.040 (0.520) 9.191 67.340 76.531 -29.6% 43.5% 7.6% NM 117.2% NM 100.0% -29.2% -0.5% -5.1% $ $ $ Total External - Balance at Beginning-of-Period Sales/inflows Redemptions/withdrawals/terminations Transfers Net flows Net investment gains and change in market value Transfer of assets to third-party Total External - Balance at End-of-Period (1) (2) $ $ 83.577 $ 5.533 (5.384) (0.005) 0.145 1.442 85.164 $ 85.164 $ 5.443 (5.807) (0.001) (0.366) 2.854 (0.153) 87.499 $ 87.499 $ 5.201 (4.898) (0.003) 0.300 1.741 89.541 $ 89.541 $ 5.080 (5.754) (0.004) (0.677) (0.817) (12.361) 75.686 $ 75.686 4.005 (5.207) (0.003) (1.205) (5.134) 69.346 -9.4% -27.6% 3.3% 40.0% NM NM NM -18.6% (2) This roll forward breaks out total assets under management by inter-segment and external balances which include both retail and institutional assets under management. Includes Delaware's VIP funds. Lincoln Financial insurance subsidiaries as well as unaffiliated insurers participate in these funds. 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: 3/31/2008 PAGE 30 Lincoln UK Income Statements Unaudited (millions of dollars) March 2007 June 2007 $ 24.3 8.9 39.9 19.4 92.5 (0.0) For the Three Months Ended Sept. Dec. 2007 2007 $ 25.6 9.2 33.0 20.9 88.7 (0.0) March 2008 $ 19.1 9.1 37.1 20.3 0.1 85.6 0.0 % Change -21.3% -9.1% -0.1% 5.3% -5.6% Operating Revenues Insurance premiums Mortality assessments Expense assessments Net investment income Other revenues and fees Total Operating Revenues $ 24.2 10.0 37.1 19.3 0.1 90.7 0.0 $ 21.2 9.1 46.6 21.5 98.3 (0.0) 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 Average equity Return on average equity $ $ 36.0 38.0 74.0 - 34.4 40.2 74.6 - 30.2 42.5 72.7 - 36.9 41.9 78.8 - 30.7 38.5 69.2 - -14.8% 1.4% -6.5% -1.9% -1.9% -1.9% 16.7 - 18.0 - 15.9 - 19.5 - 16.4 - 5.9 10.9 - 6.3 $ 11.7 - 5.6 $ 10.3 - 6.8 $ 12.7 - 5.7 $ 10.7 - 35.3% 387.6 $ 11.2% 35.0% 384.9 $ 12.1% 35.2% 379.1 $ 10.9% 34.9% 368.5 $ 13.8% 34.8% 375.7 11.4% 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 of interest Net Operating and Acquisition Expenses $ $ 1.0 $ 26.5 27.6 (0.6) 11.0 38.0 $ - 1.0 $ 26.7 27.8 (0.6) 13.0 40.2 $ - 1.3 $ 26.9 28.2 (1.5) 15.8 42.5 $ - 1.5 $ 28.1 29.6 (1.4) 13.7 41.9 $ - 1.0 26.6 27.7 (0.6) 11.5 38.5 - 1.0% 0.3% 0.4% -9.6% 4.6% 1.4% Roll Forward of DAC & VOBA Balance at beginning-of-period Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in operating and acquisition expenses Foreign currency translation adjustment Balance at end-of-period $ 809.0 0.6 0.7 (11.7) (10.4) 4.1 802.6 $ $ 802.6 0.6 (0.1) (12.9) (12.4) 16.3 806.5 $ $ 806.5 1.5 (0.9) (14.9) (14.3) 15.1 807.3 $ $ 807.3 1.4 (0.9) (12.8) (12.3) (22.9) 772.1 $ $ 772.1 0.6 1.3 (12.8) (10.8) (0.9) 760.4 - $ Roll Forward of DFEL Balance at beginning-of-period Deferrals Amortization, net of interest: Unlocking Other amortization Deferrals, net of amortization included in expense assessments Foreign currency translation adjustment Balance at end-of-period $ 404.5 0.9 (1.0) (6.0) (6.1) 2.0 400.4 $ - $ 400.4 0.7 0.1 (6.7) $ 402.6 0.8 (5.3) (7.4) $ 398.2 0.9 (1.0) (7.5) $ 379.3 0.9 (0.5) (7.7) (7.3) (0.4) 371.5 - $ (5.9) 8.1 402.6 $ - (11.9) 7.5 398.2 $ - (7.7) (11.2) 379.3 $ - 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: 3/31/2008 PAGE 31 Lincoln UK Operational Data Unaudited (billions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 March 2007 Unit Linked Assets Balance at Beginning-of-Period Deposits Withdrawals (including charges) and deaths Net flows Investment income and change in market value Foreign currency adjustment Unit Linked Assets - Balance at End-of-Period Individual Life In Force Exchange Rate - Dollars to Pounds For-the-Period End-of-Period June 2007 March 2008 % Change $ 8.757 $ 8.906 $ 9.168 $ 9.192 $ 8.850 0.060 (0.213) (0.153) (0.608) (0.010) 8.079 18.283 1.1% -11.8% 11.3% 11.0% NM NM -9.3% -5.3% $ $ 0.068 (0.240) (0.172) 0.277 0.045 8.906 $ - 0.100 (0.251) (0.151) 0.229 0.183 9.168 $ 0.000 0.079 (0.251) (0.172) 0.025 0.171 9.192 $ (0.000) 0.075 (0.227) (0.152) 0.070 (0.259) 8.850 $ - 19.307 $ 19.605 $ 19.757 $ 19.022 $ 1.964 1.968 1.989 2.008 2.025 2.046 2.051 1.987 1.987 1.985 1.2% 0.9% 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 39: 3/31/2008 PAGE 32 Other Operations (1) Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 March 2007 Operating Revenues Insurance premiums Net investment income Amortization of deferred gain on business sold through reinsurance (2) Other revenues and fees Communications revenues Inter-segment elimination of investment advisory fees Total Operating Revenues Operating Expenses Insurance benefits Interest credited to contract holder funds Operating and acquisition expenses Taxes, licenses and fees Interest and debt expenses Communications expenses Inter-segment elimination of investment advisory fees Total Operating Expenses Loss from operations before federal income taxes Federal income taxes Loss from Operations $ June 2007 March 2008 % Change $ 2.7 87.2 18.6 0.0 24.8 (24.5) 108.8 0.0 36.0 43.8 21.5 3.4 62.4 14.7 (24.5) 157.2 0.0 $ (1.2) $ 91.4 18.6 5.6 28.8 (19.6) 123.6 (0.0) 38.3 44.4 38.5 0.5 73.1 15.2 (19.6) 190.3 (0.0) 1.3 $ 92.6 18.6 (3.7) 26.6 (22.6) 112.9 35.7 48.4 48.2 3.9 68.2 13.2 (22.6) 195.1 0.0 0.7 $ 101.3 18.6 1.2 26.5 (20.3) 127.9 (0.0) 36.4 47.8 55.2 5.1 80.3 13.5 (20.3) 218.0 (0.0) 1.4 98.6 18.5 (2.2) 21.7 (20.0) 118.0 (0.0) 27.8 45.8 34.9 2.1 75.4 15.5 (20.0) 181.6 0.0 -48.8% 13.2% -0.7% NM -12.6% 18.5% 8.4% -23.0% 4.6% 62.3% -37.4% 21.0% 5.9% 18.5% 15.5% -31.5% -4.7% -50.9% (48.3) 0.0 (66.7) 0.0 (82.2) 0.0 (90.1) (0.0) (63.6) (0.0) (20.3) (28.0) $ (0.0) (30.6) (36.2) $ (0.0) (32.4) (49.8) $ 0.0 (30.8) (59.2) $ (0.0) (21.2) (42.3) 0.0 Run Off Institutional Pensions Account Values Balance at End-of-Period $ 2.734 $ 2.729 $ 2.720 $ 2.094 $ 2.074 -24.1% Discontinued Operations Unaudited (in millions) For the Three Months Ended Sept. Dec. 2007 2007 March 2007 Discontinued Operations Before Disposal Income from discontinued operations before federal income taxes Federal income taxes Income From Discontinued Operations Before Disposal Disposal Gain on disposal before federal income taxes Federal income taxes Loss on Disposal Income (Loss) From Discontinued Operations $ June 2007 March 2008 % Change $ 11.9 4.2 7.7 - $ 9.6 3.4 6.3 - $ 10.2 $ 3.6 6.6 - 13.9 $ 4.8 9.1 57.1 193.0 (135.9) - 7.4 2.6 4.8 (12.3) (3.3) (9.0) - -37.8% -38.0% -37.6% NM NM NM NM 7.7 - $ 6.3 - $ 6.6 - $ (126.8) $ - (4.2) - (1) (2) Includes inter-segment eliminations of transactions. Represents the amortization of deferred gain recognized on the business sold through indemnity reinsurance to Swiss Re. 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 40: 3/31/2008 PAGE 33 Consolidated Domestic Deposits/Account Balances Unaudited (billions of dollars) March 2007 Deposits - For the Period Individual Markets - fixed annuities (1) Individual Markets - variable annuities Individual Markets - Life Insurance Employer Markets - fixed annuities Employer Markets - variable products (2) Employer Markets - Executive Benefits Investment Management - annuities Investment Management - mutual funds Investment Management - managed account and other Consolidating adjustments Total Gross Retail Deposits Investment Management - institutional Consolidating adjustments Total Gross Deposits $ 0.821 $ 2.000 1.039 0.299 1.188 0.065 1.300 1.753 0.550 (0.799) 8.217 2.431 (0.112) 10.536 $ June 2007 For the Three Months Ended Sept. Dec. 2007 2007 1.231 $ 2.247 0.980 0.305 1.219 0.052 0.891 1.543 0.377 (0.878) 7.968 2.934 (0.030) 10.873 $ 1.288 $ 2.593 1.086 0.268 0.997 0.107 0.954 2.241 0.398 (0.926) 9.005 2.230 (0.192) 11.043 $ March 2008 1.160 1.865 0.967 0.332 1.220 0.165 1.562 1.592 0.341 (1.494) 7.710 1.229 (0.092) 8.846 % Change 41.3% -6.8% -6.9% 11.0% 2.7% 153.8% 20.2% -9.2% -38.0% -87.0% -6.2% -49.4% 17.9% -16.0% 0.982 $ 2.295 1.005 0.233 1.041 0.079 0.902 1.896 0.474 (0.890) 8.016 2.877 (0.188) 10.706 $ $ Account Balances - End of Period Individual Markets - fixed annuities (1) Individual Markets - variable annuities Individual Markets - Life Insurance Employer Markets - fixed annuities Employer Markets - variable products (2) Employer Markets - Executive Benefits Investment Management - annuities Investment Management - mutual funds Investment Management - managed account and other Consolidating adjustments Total Retail Account Balances Investment Management - institutional Consolidating adjustments Total Account Balances $ 16.449 $ 50.300 26.924 10.993 23.482 4.264 15.467 18.747 17.681 (15.025) 169.282 46.251 (2.829) 212.704 $ 16.270 $ 55.171 27.465 10.940 25.024 4.353 12.780 19.894 18.215 (12.240) 177.871 46.836 (2.604) 222.103 $ 16.383 $ 58.293 27.875 10.891 25.745 4.391 12.814 20.274 18.092 (12.300) 182.458 48.536 (2.529) 228.465 $ 16.470 $ 58.643 28.122 10.889 25.168 4.436 12.282 19.793 17.638 (11.798) 181.644 35.644 (2.357) 214.931 $ 16.395 54.966 27.881 11.217 23.546 4.460 11.697 18.690 15.244 (11.264) 172.831 32.907 (2.208) 203.529 -0.3% 9.3% 3.6% 2.0% 0.3% 4.6% -24.4% -0.3% -13.8% 25.0% 2.1% -28.9% 22.0% -4.3% $ Total Domestic Net Flows Unaudited (in billions) For the Three Months Ended Sept. Dec. 2007 2007 0.635 $ 1.291 0.133 (0.005) (0.334) 0.071 1.790 0.425 0.128 2.343 0.745 $ 1.808 (0.091) 0.037 (0.649) 0.140 1.991 (0.302) 0.132 1.821 $ March 2007 Retail Net Flows Individual Markets - Life Insurance Individual Markets - Annuities Employer Markets - Defined Contribution Employer Markets - Executive Benefits Investment Management - retail Consolidating adjustments Total Retail Net Flows Investment Management - institutional Consolidating adjustments Total Net Flows $ 0.698 $ 0.754 0.221 (0.075) 0.233 (0.004) 1.827 (0.321) 0.048 1.554 $ June 2007 March 2008 0.579 1.181 0.281 0.071 (0.655) (0.098) 1.359 (0.510) 0.030 0.878 % Change -17.0% 56.6% 27.1% 194.7% NM NM -25.6% -58.9% -37.5% -43.5% 0.586 $ 1.138 0.074 0.026 (0.277) 0.330 1.876 (0.148) (0.026) 1.702 $ $ $ (1) (2) Includes fixed portion of variable annuities. Includes amounts attributable to Alliance and Smart Future mutual fund net flows. Alliance and Smart Future mutual fund account values are not included in the separate accounts reported on our Consolidated Balance Sheets. 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 41: 3/31/2008 PAGE 34 Consolidated Investment Data - Assets Managed Unaudited (billions of dollars) As of March 2007 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 24 for additional detail) DLIA-Corp (Assets managed internally-see page 24) Lincoln UK Domestic policy loans (excluding Lincoln UK) Non-LNC affiliates Total Assets Managed $ June 2007 Sept. 2007 Dec. 2007 March 2008 % Change $ 56.256 0.714 2.910 11.934 71.814 83.147 0.905 155.866 81.134 237.000 $ 55.447 0.687 2.818 11.880 70.832 89.497 0.989 161.319 83.709 $ 56.086 0.670 2.717 12.040 71.513 92.903 1.328 165.744 85.684 $ 56.276 0.518 2.730 12.398 71.922 91.113 1.665 164.700 71.975 $ 55.624 0.474 2.714 12.743 71.555 84.703 2.447 158.705 66.020 -1.1% -33.6% -6.7% 6.8% -0.4% 1.9% 170.4% 1.8% -18.6% -5.2% $ 245.028 $ 251.427 $ 236.675 $ 224.725 $ $ 98.146 67.658 10.255 2.763 58.178 237.000 - $ $ 97.725 66.423 10.536 2.783 67.562 245.028 - $ $ 99.716 67.324 10.589 2.786 71.012 251.427 - $ $ 85.357 67.416 10.247 2.831 70.824 236.675 - $ $ 78.537 67.340 9.445 2.801 66.602 224.725 - -20.0% -0.5% -7.9% 1.4% 14.5% -5.2% 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 42: 3/31/2008 PAGE 35 Consolidated Investment Data - Other Investment Data Unaudited (millions of dollars) For the Three Months Ended Sept. Dec. 2007 2007 854.0 $ 10.4 44.0 123.0 15.5 43.0 16.2 4.3 1,110.4 (48.8) 1,061.6 $ 70,535.5 $ 868.0 $ 10.4 42.4 122.0 13.3 44.6 20.9 17.4 1,138.9 (45.2) 1,093.7 $ 70,718.2 $ March 2007 Net Investment Income Available-for-sale fixed maturity securities Available-for-sale equity securities Trading securities Mortgage loans on real estate Real estate Policy loans Invested cash Other investments Investment income Investment expense Net Investment Income Mean Invested Assets (Amortized Cost) $ 844.0 $ 8.6 45.4 130.6 15.2 42.6 18.9 29.2 1,134.6 (44.8) 1,089.7 $ 69,905.7 $ June 2007 March 2008 858.2 9.1 42.5 121.6 8.0 44.6 18.8 (2.9) 1,099.8 (34.4) 1,065.4 70,941.2 % Change 1.7% 5.7% -6.4% -6.9% -47.4% 4.6% -0.6% NM -3.1% 23.2% -2.2% $ $ 845.4 $ 11.8 44.4 131.8 12.5 44.3 16.7 73.0 1,179.7 (46.5) 1,133.2 $ 70,062.2 $ Ratio of Net Investment Income Over Mean Invested Assets 6.24% 6.47% 6.02% 6.19% 6.01% March 2007 Realized Gain (Loss) Related to Investments Fixed maturity securities available-for-sale Gross gains Gross losses Equity securities Gross gains Gross losses Gain (loss) on other investments Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds Total realized gain (loss) on investments, excluding trading securities Loss on certain derivative instruments Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds Total, pre-tax Income taxes Total, After-Tax June 2007 For the Three Months Ended Sept. Dec. 2007 2007 March 2008 % Change $ 54.9 $ (6.8) 2.3 (0.0) (4.2) (19.9) 26.3 0.2 (0.0) 26.4 9.3 17.1 $ - 26.6 $ (46.3) 4.0 (0.4) 5.3 (1.7) (12.6) 4.0 (0.0) (8.6) (3.8) (4.9) $ - 26.4 $ (44.2) 1.2 (0.0) 5.9 (14.3) (25.0) (10.9) 0.5 (35.4) (12.2) (23.2) $ - 16.7 $ (87.7) 0.3 (110.9) 11.5 65.2 (104.9) (4.1) 0.2 (108.9) (37.4) (71.4) $ - 9.1 (100.0) 2.8 25.1 25.1 (37.9) (3.1) (0.0) (41.0) (14.0) (27.1) (0.0) -83.3% NM 23.5% 100.0% NM 226.2% NM NM NM NM NM NM $ As of March 31, 2008 Amount % of Total Available-for-Sale and Trading Securities Fixed maturity securities (fair value) Fixed maturity security (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 $ 58,335.5 58,952.5 476.5 558.3 99.2% 99.1% 0.8% 0.9% As of December 31, 2007 Amount % of Total $ 59,003.8 58,578.9 520.0 549.9 99.1% 99.1% 0.9% 0.9% 23.4% 32.3% 5.2% As of March 31, 2008 Amount % of Total $ 43,535.4 231.9 1,037.4 10,568.8 153.0 97.5 55,624.0 78.2% 0.4% 1.9% 19.0% 0.3% 0.2% 100.0% As of March 2007 June 2007 Sept. 2007 Dec. 2007 March 2008 $ 23.1% 32.9% 5.1% As of December 31, 2007 Amount % of Total 44,147.9 222.0 1,037.5 10,604.6 153.1 110.7 56,275.7 78.5% 0.4% 1.8% 18.8% 0.3% 0.2% 100.0% $ $ % Change Composition of Investment Portfolio: Securities available-for-sale, at fair value: Fixed maturity Equity Trading securities Mortgage loans on real estate and real estate Policy loans Derivative investments Other investments Total $ $ 56,255.6 713.9 2,909.7 7,822.2 2,766.8 412.6 932.9 71,813.6 0.000 $ $ 55,447.0 686.8 2,818.3 7,698.4 2,787.0 375.9 1,019.1 70,832.5 0.000 $ $ 56,086.1 670.3 2,716.6 7,665.7 2,790.2 554.1 1,030.0 71,512.9 0.000 $ $ 56,275.7 518.0 2,730.2 7,681.0 2,834.7 807.1 1,075.0 71,921.6 0.000 $ $ $ 55,624.0 474.4 2,713.6 7,707.2 2,804.0 1,091.1 1,140.9 71,555.3 0.0 -1.1% -33.5% -6.7% -1.5% 1.3% 164.5% 22.3% -0.4% 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.

   
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