x
|
Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
|
|
For
the quarterly period ended March 31, 2007.
|
|
|
|
¨
|
Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
|
|
For
the transition period from
to .
|
Indiana
|
35-1140070
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
1500
Market Street, Suite 3900, Philadelphia,
Pennsylvania
|
19102-2112
|
(Address
of principal executive offices)
|
(Zip
Code)
|
March
31,
|
|
December
31,
|
|
||||
|
|
2007
|
|
2006
|
|
||
|
|
(Unaudited)
|
|
|
|
||
|
|
(in
millions)
|
|||||
ASSETS
|
|||||||
Investments:
|
|||||||
Securities
available-for-sale, at fair value:
|
|||||||
Fixed
maturity (cost: 2007-$55,268; 2006-$54,960)
|
$
|
56,256
|
$
|
55,853
|
|||
Equity
(cost: 2007-$682; 2006-$681)
|
714
|
701
|
|||||
Trading
securities
|
2,910
|
3,036
|
|||||
Mortgage
loans on real estate
|
7,416
|
7,384
|
|||||
Real
estate
|
406
|
421
|
|||||
Policy
loans
|
2,767
|
2,760
|
|||||
Derivative
investments
|
413
|
415
|
|||||
Other
investments
|
967
|
918
|
|||||
Total
investments
|
71,849
|
71,488
|
|||||
Cash
and invested cash
|
900
|
1,621
|
|||||
Deferred
acquisition costs and value of business acquired
|
8,535
|
8,420
|
|||||
Premiums
and fees receivable
|
375
|
356
|
|||||
Accrued
investment income
|
919
|
866
|
|||||
Amounts
recoverable from reinsurers
|
8,132
|
7,939
|
|||||
Goodwill
|
4,521
|
4,500
|
|||||
Other
assets
|
2,948
|
2,770
|
|||||
Assets
held in separate accounts
|
83,147
|
80,534
|
|||||
Total
assets
|
$
|
181,326
|
$
|
178,494
|
|||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
Liabilities
|
|||||||
Insurance
and investment contract liabilities:
|
|||||||
Insurance
policy and claim reserves
|
$
|
15,014
|
$
|
14,771
|
|||
Investment
contract and policyholder funds
|
58,729
|
58,817
|
|||||
Total
insurance and investment contract liabilities
|
73,743
|
73,588
|
|||||
Short-term
debt
|
593
|
658
|
|||||
Long-term
debt:
|
|||||||
Senior
notes
|
2,383
|
2,231
|
|||||
Junior
subordinated debentures issued to affiliated trusts
|
155
|
155
|
|||||
Capital
securities
|
1,571
|
1,072
|
|||||
Reinsurance
related derivative liability
|
230
|
229
|
|||||
Funds
withheld reinsurance liabilities
|
2,121
|
2,094
|
|||||
Deferred
gain on indemnity reinsurance
|
741
|
760
|
|||||
Other
liabilities
|
4,610
|
4,972
|
|||||
Liabilities
related to separate accounts
|
83,147
|
80,534
|
|||||
Total
liabilities
|
169,294
|
166,293
|
|||||
Commitments
and Contingencies (See Note 9)
|
|||||||
Shareholders'
Equity
|
|||||||
Series
A preferred stock-10,000,000 shares authorized (2007 liquidation
value-$1)
|
1
|
1
|
|||||
Common
stock-800,000,000 shares authorized (shares issued and
outstanding:
|
|||||||
2007-
270,685,522; 2006- 275,752,668)
|
7,318
|
7,449
|
|||||
Retained
earnings
|
4,054
|
4,138
|
|||||
Accumulated
other comprehensive income:
|
|||||||
Net
unrealized gain on securities available-for-sale
|
528
|
493
|
|||||
Net
unrealized gain on derivative instruments
|
47
|
39
|
|||||
Foreign
currency translation adjustment
|
168
|
165
|
|||||
Funded
status of employee benefit plans
|
(84
|
)
|
(84
|
)
|
|||
Total
accumulated other comprehensive income
|
659
|
613
|
|||||
Total
shareholders' equity
|
12,032
|
12,201
|
|||||
Total
liabilities and shareholders' equity
|
$
|
181,326
|
$
|
178,494
|
Three
Months Ended
|
|
||||||
|
|
March
31,
|
|
||||
|
|
2007
|
|
2006
|
|||
(Unaudited)
|
|||||||
(in
millions, except per share amounts)
|
|||||||
Revenue
|
|||||||
Insurance
premiums
|
$
|
459
|
$
|
78
|
|||
Insurance
fees
|
779
|
475
|
|||||
Investment
advisory fees
|
90
|
78
|
|||||
Communications
revenue (net)
|
67
|
-
|
|||||
Net
investment income
|
1,090
|
678
|
|||||
Realized
gain (loss)
|
26
|
(1
|
)
|
||||
Amortization
of deferred gain on indemnity reinsurance
|
19
|
19
|
|||||
Other
revenue and fees
|
140
|
95
|
|||||
Total
revenue
|
2,670
|
1,422
|
|||||
Benefits
and Expenses
|
|||||||
Benefits
|
1,194
|
582
|
|||||
Underwriting,
acquisition, insurance and other expenses
|
805
|
503
|
|||||
Communications
expense
|
41
|
-
|
|||||
Interest
and debt expense
|
61
|
22
|
|||||
Total
benefits and expenses
|
2,101
|
1,107
|
|||||
Income
before taxes
|
569
|
315
|
|||||
Federal
income taxes
|
173
|
94
|
|||||
Net
income
|
$
|
396
|
$
|
221
|
|||
Net
Income Per Common Share
|
|||||||
Basic
|
$
|
1.44
|
$
|
1.27
|
|||
Diluted
|
$
|
1.42
|
$
|
1.24
|
Three
Months Ended March 31,
|
|||||||
2007
|
2006
|
||||||
(Unaudited)
|
|||||||
(in
millions, except for share amounts)
|
|||||||
Series
A Preferred Stock
|
|||||||
Balance
at beginning-of-year
|
$
|
1
|
$
|
1
|
|||
Balance
at end-of-period
|
1
|
1
|
|||||
Common
Stock
|
|||||||
Balance
at beginning-of-year
|
7,449
|
1,775
|
|||||
Issued
for acquisition
|
20
|
-
|
|||||
Stock
compensation/issued for benefit plans
|
41
|
35
|
|||||
Deferred
compensation payable in stock
|
3
|
8
|
|||||
Retirement
of common stock
|
(195
|
)
|
-
|
||||
Balance
at end-of-period
|
7,318
|
1,818
|
|||||
Retained
Earnings
|
|||||||
Balance
at beginning-of-year
|
4,138
|
4,082
|
|||||
Cumulative
effect of adoption of SOP 05-1
|
(41
|
)
|
-
|
||||
Cumulative
effect of adoption of FIN 48
|
(15
|
)
|
-
|
||||
Comprehensive
income (loss)
|
442
|
(23
|
)
|
||||
Less
other comprehensive income (loss) (net of Federal income
tax):
|
|||||||
Net
unrealized gain (loss) on securities available-for-sale, net
of
|
|||||||
reclassification
adjustment
|
35
|
(278
|
)
|
||||
Net
unrealized loss on derivative instruments
|
8
|
28
|
|||||
Foreign
currency translation adjustment
|
3
|
6
|
|||||
Net
income
|
396
|
221
|
|||||
Retirement
of common stock
|
(317
|
)
|
-
|
||||
Dividends
declared:
|
|||||||
Common
(2007-$.395; 2006-$.38)
|
(107
|
)
|
(67
|
)
|
|||
Balance
at end-of-period
|
4,054
|
4,236
|
|||||
Net
Unrealized Gain on Securities Available-for-Sale
|
|||||||
Balance
at beginning-of-year
|
493
|
497
|
|||||
Change
during the period
|
35
|
(278
|
)
|
||||
Balance
at end-of-period
|
528
|
219
|
|||||
Net
Unrealized Gain on Derivative Instruments
|
|||||||
Balance
at beginning-of-year
|
39
|
7
|
|||||
Change
during the period
|
8
|
28
|
|||||
Balance
at end-of-period
|
47
|
35
|
|||||
Foreign
Currency Translation Adjustment
|
|||||||
Balance
at beginning-of-year
|
165
|
83
|
|||||
Change
during the period
|
3
|
6
|
|||||
Balance
at end-of-period
|
168
|
89
|
|||||
Minimum
Pension Liability Adjustment
|
|||||||
Balance
at beginning-of-year
|
-
|
(60
|
)
|
||||
Balance
at end-of-period
|
-
|
(60
|
)
|
||||
Funded
Status of Employee Benefit Plans
|
|||||||
Balance
at beginning-of-year
|
(84
|
)
|
-
|
||||
Balance
at end-of-period
|
(84
|
)
|
-
|
||||
Total
shareholders' equity at end-of-period
|
$
|
12,032
|
$
|
6,338
|
Three
Months Ended March 31,
|
|||||||
2007
|
2006
|
||||||
(Unaudited)
|
|||||||
(Number
of Shares)
|
|||||||
Series
A Preferred Stock
|
|||||||
Balance
at beginning-of-year
|
12,706
|
15,515
|
|||||
Conversion
into common stock
|
(180
|
)
|
(550
|
)
|
|||
Balance
at end-of-period
|
12,526
|
14,965
|
|||||
Common
Stock
|
|||||||
Balance
at beginning-of-year
|
275,752,668
|
173,768,078
|
|||||
Conversion
of series A preferred stock
|
2,880
|
8,800
|
|||||
Stock
compensation/issued for benefit plans
|
2,144,891
|
2,107,311
|
|||||
Retirement
of common stock
|
(7,214,917
|
)
|
-
|
||||
Balance
issued and outstanding at end-of-period
|
270,685,522
|
175,884,189
|
|||||
Common
stock at end-of-period:
|
|||||||
Assuming
conversion of preferred stock
|
270,885,938
|
176,123,629
|
|||||
Diluted
basis
|
274,004,126
|
178,468,931
|
Three
Months Ended
|
|||||||
March
31,
|
|||||||
2007
|
2006
|
||||||
(Unaudited)
|
|||||||
(in
millions)
|
|||||||
Cash
Flows from Operating Activities
|
|||||||
Net
income
|
$
|
396
|
$
|
221
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Deferred
acquisition costs and value of business acquired
|
(206
|
)
|
(80
|
)
|
|||
Premiums
and fees receivable
|
(19
|
)
|
(20
|
)
|
|||
Accrued
investment income
|
(53
|
)
|
(6
|
)
|
|||
Policy
liabilities and accruals
|
243
|
(9
|
)
|
||||
Net
trading securities purchases, sales and maturities
|
126
|
(45
|
)
|
||||
Gain
on reinsurance embedded derivative/trading securities
|
-
|
(6
|
)
|
||||
Contractholder
funds
|
281
|
201
|
|||||
Pension
plan contribution
|
-
|
(1
|
)
|
||||
Amounts
recoverable from reinsurers
|
(193
|
)
|
27
|
||||
Federal
income taxes
|
(186
|
)
|
68
|
||||
Stock-based
compensation expense
|
15
|
9
|
|||||
Depreciation
|
13
|
14
|
|||||
Increase
in funds withheld liability
|
27
|
46
|
|||||
Realized
loss (gain) on investments and derivative instruments
|
(26
|
)
|
7
|
||||
Amortization
of deferred gain
|
(19
|
)
|
(19
|
)
|
|||
Other
|
70
|
(82
|
)
|
||||
Net
adjustments
|
73
|
104
|
|||||
Net
cash provided by operating activities
|
469
|
325
|
|||||
Cash
Flows from Investing Activities
|
|||||||
Securities-available-for-sale:
|
|||||||
Purchases
|
(5,017
|
)
|
(1,836
|
)
|
|||
Sales
|
3,705
|
1,285
|
|||||
Maturities
|
972
|
494
|
|||||
Purchase
of other investments
|
(603
|
)
|
(529
|
)
|
|||
Sale
or maturity of other investments
|
514
|
569
|
|||||
Increase
in cash collateral on loaned securities
|
(288
|
)
|
(35
|
)
|
|||
Other
|
(124
|
)
|
(69
|
)
|
|||
Net
cash used in investing activities
|
(841
|
)
|
(121
|
)
|
|||
Cash
Flows from Financing Activities
|
|||||||
Payment
of long-term debt
|
(314
|
)
|
-
|
||||
Issuance
of long-term debt
|
749
|
-
|
|||||
Net
increase (decrease) in short-term debt
|
150
|
(109
|
)
|
||||
Universal
life and investment contract deposits
|
2,177
|
1,179
|
|||||
Universal
life and investment contract withdrawals
|
(1,968
|
)
|
(1,139
|
)
|
|||
Investment
contract transfers
|
(574
|
)
|
(432
|
)
|
|||
Common
stock issued for benefit plans and excess tax benefits
|
52
|
26
|
|||||
Retirement
of common stock
|
(512
|
)
|
-
|
||||
Dividends
paid to shareholders
|
(109
|
)
|
(67
|
)
|
|||
Net
cash used in financing activities
|
(349
|
)
|
(542
|
)
|
|||
Net
decrease in cash and invested cash
|
(721
|
)
|
(338
|
)
|
|||
Cash
and invested cash at beginning-of-year
|
1,621
|
2,312
|
|||||
Cash
and invested cash at end-of-period
|
$
|
900
|
$
|
1,974
|
(in
millions)
|
||||
Assets
|
||||
Deferred
acquisition costs
|
$
|
31
|
||
Value
of business acquired
|
35
|
|||
Other
assets - deferred sales inducements
|
3
|
|||
Total
assets
|
$
|
69
|
||
Liabilities
and Shareholders' Equity
|
||||
Investment
contract and policyholder funds - deferred front end loads
|
$
|
2
|
||
Insurance
policy and claim reserves - guaranteed minimum death benefit annuity
reserves
|
4
|
|||
Other
liabilities - income tax liabilities
|
22
|
|||
Total
liabilities
|
28
|
|||
Retained
earnings
|
41
|
|||
Total
liabilities and shareholders' equity
|
$
|
69
|
(in
millions, except share data)
|
Share
Amounts
|
||||||
LNC
common shares issued
|
112,301,906
|
||||||
Purchase
price per share of LNC common share (1)
|
$
|
48.98
|
|||||
Fair
value of common shares issued
|
$
|
5,501
|
|||||
Cash
paid to Jefferson-Pilot shareholders
|
1,800
|
||||||
Fair
value of Jefferson-Pilot stock options (2)
|
151
|
||||||
Transaction
costs
|
66
|
||||||
Total
purchase price
|
$
|
7,518
|
|||||
(1) |
The
value of the shares of LNC common stock exchanged with Jefferson-Pilot
shareholders was based upon the average of the closing prices of
LNC
common stock for the five day trading period ranging from two days
before,
to two days after, October 10, 2005, the date the merger was
announced.
|
(2) |
Includes
certain stock options that vested immediately upon the consummation
of the
merger. Any future income tax deduction related to these vested stock
options will be recognized on the option exercise date as an adjustment
to
the purchase price and recorded to goodwill.
|
(in
millions)
|
Fair
Value
|
|||
Investments
|
$
|
27,910
|
||
Due
from reinsurers
|
1,296
|
|||
Value
of business acquired
|
2,486
|
|||
Goodwill
|
3,324
|
|||
Other
assets
|
1,693
|
|||
Assets
held in separate accounts
|
2,574
|
|||
Insurance
and investment contract liabilities
|
(26,641
|
)
|
||
Long-term
debt
|
(905
|
)
|
||
Income
tax liabilities
|
(782
|
)
|
||
Accounts
payable, accruals and other liabilities
|
(863
|
)
|
||
Liabilities
related to separate accounts
|
(2,574
|
)
|
||
Total
purchase price
|
$
|
7,518
|
(in
millions)
|
||||
Individual
Markets:
|
||||
Life Insurance
|
$
|
1,318
|
||
Annuities
|
997
|
|||
Total
Individual Markets
|
2,315
|
|||
Employer
Markets: Group Protection
|
268
|
|||
Lincoln
Financial Media
|
741
|
|||
Total goodwill
|
$
|
3,324
|
||
Weighted
|
|||||||
Average
|
|||||||
Amortization
|
|||||||
(in
millions)
|
Period
|
||||||
Lincoln
Financial Media:
|
|||||||
FCC
licenses
|
$
|
638
|
N/A
|
||||
Sports
production rights
|
11
|
5
years
|
|||||
Network
affiliation agreements
|
10
|
21
years
|
|||||
Other
|
11
|
16
years
|
|||||
Total
Lincoln Financial Media
|
670
|
||||||
Individual
Markets - Life Insurance:
|
|||||||
Sales
force
|
100
|
25
years
|
|||||
Total
indentifiable intangibles
|
$
|
770
|
|||||
Identifiable
intangibles not subject to amortization
|
$
|
638
|
N/A
|
||||
Identifiable
intangibles subject to amortization
|
132
|
22
years
|
|||||
Total
identifiable intangibles
|
$
|
770
|
|||||
Three
Months Ended
|
|||||||
March
31,
|
|||||||
(in
millions)
|
2007
|
2006
|
|||||
Balance
at beginning-of-year
|
$
|
5,116
|
$
|
4,164
|
|||
Cumulative
effect of adoption of SOP 05-1
|
(31
|
)
|
-
|
||||
Deferral
|
473
|
245
|
|||||
Amortization
|
(194
|
)
|
(148
|
)
|
|||
Adjustment
related to realized gains on securities available-for-sale
|
|||||||
and
derivatives
|
(13
|
)
|
(11
|
)
|
|||
Adjustment
related to unrealized (gains) losses on securities
|
|||||||
available-for-sale
and derivatives
|
(15
|
)
|
194
|
||||
Foreign
currency translation adjustment
|
2
|
5
|
|||||
Balance
at end-of-period
|
$
|
5,338
|
$
|
4,449
|
|||
Three
Months Ended
|
|||||||
March
31,
|
|||||||
(in
millions)
|
2007
|
2006
|
|||||
Balance
at beginning-of-year
|
$
|
3,304
|
$
|
999
|
|||
Cumulative
effect of adoption of SOP 05-1
|
(35
|
)
|
-
|
||||
Business
acquired
|
14
|
-
|
|||||
Deferral
of commissions and accretion of interest
|
15
|
-
|
|||||
Amortization
|
(88
|
)
|
(17
|
)
|
|||
Adjustment
related to realized gains on securities
|
|||||||
available-for-sale
and derivatives
|
(5
|
)
|
-
|
||||
Adjustment
related to unrealized gains on securities
|
|||||||
available-for-sale
and derivatives
|
(10
|
)
|
-
|
||||
Foreign
currency translation adjustment
|
2
|
2
|
|||||
Balance
at end-of-period
|
$
|
3,197
|
$
|
984
|
Three
Months Ended
|
|||||||
March
31,
|
|||||||
(in
millions)
|
2007
|
2006
|
|||||
Balance
at beginning-of-year
|
$
|
194
|
$
|
129
|
|||
Cumulative
effect of adoption of SOP 05-1
|
(3
|
)
|
-
|
||||
Deferral
|
23
|
16
|
|||||
Amortization
|
(8
|
)
|
(5
|
)
|
|||
Balance
at end-of-period
|
$
|
206
|
$
|
140
|
Three
Months Ended
|
|
||||||
|
|
March
31,
|
|
||||
(in
millions)
|
|
2007
|
|
2006
|
|||
Commissions
|
$
|
515
|
$
|
242
|
|||
General
and administrative expenses
|
422
|
305
|
|||||
DAC
and VOBA deferrals, net of amortization
|
(206
|
)
|
(80
|
)
|
|||
Other
intangibles amortization
|
4
|
2
|
|||||
Taxes,
licenses and fees
|
66
|
34
|
|||||
Restructuring
charges
|
4
|
-
|
|||||
Total
|
$
|
805
|
$
|
503
|
(in
millions)
|
Balance
at
December
31, 2006
|
Purchase
Accounting and Other Adjustments
|
Balance
at
March
31, 2007
|
|||||||
Individual
Markets:
|
||||||||||
Life
Insurance
|
$
|
2,181
|
$
|
(9
|
)
|
$
|
2,172
|
|||
Annuities
|
1,032
|
9
|
1,041
|
|||||||
Employer
Markets:
|
||||||||||
Retirement
Products
|
20
|
-
|
20
|
|||||||
Group
Protection
|
281
|
(13
|
)
|
268
|
||||||
Investment
Management
|
262
|
-
|
262
|
|||||||
Lincoln
Financial Media
|
707
|
34
|
741
|
|||||||
Lincoln
UK
|
17
|
-
|
17
|
|||||||
Total
|
$
|
4,500
|
$
|
21
|
$
|
4,521
|
March
31,
|
|
December
31,
|
|
||||
(in
millions)
|
|
2007
|
|
2006
|
|||
Premium
deposit funds
|
$
|
20,116
|
$
|
20,541
|
|||
Other
policyholder funds
|
37,492
|
37,197
|
|||||
Deferred
front end loads
|
1,018
|
977
|
|||||
Undistributed
earnings on participating business
|
103
|
102
|
|||||
Total
|
$
|
58,729
|
$
|
58,817
|
|||
In
Event of Death
|
|
||||||
|
|
March
31,
|
|
December
31,
|
|
||
(dollars
in billions)
|
|
2007
|
|
2006
|
|||
Return
of Net Deposit
|
|||||||
Account
value
|
$
|
39.6
|
$
|
38.3
|
|||
Net
amount at risk
|
0.1
|
0.1
|
|||||
Average
attained age of contractholders
|
54
|
54
|
|||||
Return
of Net Deposits Plus a Minimum Return
|
|||||||
Account
value
|
$
|
0.4
|
$
|
0.4
|
|||
Net
amount at risk
|
-
|
-
|
|||||
Average
attained age of contractholders
|
67
|
67
|
|||||
Guaranteed
minimum return
|
5
|
%
|
5
|
%
|
|||
Highest
Specified Anniversary Account Value Minus
|
|||||||
Withdrawals
Post Anniversary
|
|||||||
Account
value
|
$
|
23.1
|
$
|
22.5
|
|||
Net
amount at risk
|
0.2
|
0.2
|
|||||
Average
attained age of contractholders
|
64
|
64
|
March
31,
|
|
March
31,
|
|
||||
(in
millions)
|
|
2007
|
|
2006
|
|||
Balance
at beginning of year
|
$
|
23
|
$
|
15
|
|||
Cumulative
effect of adoption of SOP 05-1
|
(4
|
)
|
-
|
||||
Changes
in reserves
|
6
|
4
|
|||||
Benefits
paid
|
(2
|
)
|
(2
|
)
|
|||
Balance
at end-of-period
|
$
|
23
|
$
|
17
|
|||
March
31,
|
December
31,
|
||||||
(in
billions)
|
2007
|
|
2006
|
||||
Asset
Type
|
|||||||
Domestic
equity
|
$
|
40.3
|
$
|
39.3
|
|||
International
equity
|
6.3
|
5.9
|
|||||
Bonds
|
6.8
|
6.4
|
|||||
Total
|
53.4
|
51.6
|
|||||
Money
market
|
5.9
|
5.6
|
|||||
Total
|
$
|
59.3
|
$
|
57.2
|
|||
Percent
of total variable annuity separate account values
|
87
|
%
|
87
|
%
|
Pension
Benefits
|
|
Other
Postretirement Benefits
|
|
||||||||||
|
|
Three
Months Ended
|
|
Three
Months Ended
|
|
||||||||
|
|
March
31,
|
|
March
31,
|
|
||||||||
(in
millions)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|||||
U.S.
Plans
|
|||||||||||||
Service
cost
|
$
|
9
|
$
|
5
|
$
|
1
|
$
|
1
|
|||||
Interest
cost
|
16
|
9
|
2
|
1
|
|||||||||
Expected
return on plan assets
|
(20
|
)
|
(11
|
)
|
(1
|
)
|
-
|
||||||
Recognized
net actuarial (gains) losses
|
-
|
1
|
-
|
-
|
|||||||||
Net
periodic benefit expense
|
$
|
5
|
$
|
4
|
$
|
2
|
$
|
2
|
|||||
Non-U.S.
Plans
|
|||||||||||||
Interest
cost
|
5
|
4
|
|||||||||||
Expected
return on plan assets
|
(5
|
)
|
(4
|
)
|
|||||||||
Recognized
net actuarial losses
|
1
|
1
|
|||||||||||
Net
periodic benefit expense
|
$
|
1
|
$
|
1
|
Three
Months Ended
March
31, 2007
|
||
Awards
|
||
10-year
LNC stock options
|
348,888
|
|
Non-employee
agent stock options
|
158,075
|
|
Restricted
stock units
|
222,656
|
|
Stock
appreciation rights
|
187,750
|
Three
Months Ended
|
|
||||||
|
|
March
31,
|
|
||||
(in
millions)
|
|
2007
|
|
2006
|
|||
Revenue
|
|||||||
Segment
operating revenue
|
|||||||
Individual
Markets:
|
|||||||
Annuities
|
$
|
605
|
$
|
375
|
|||
Life
Insurance
|
971
|
500
|
|||||
Total
Individual Markets
|
1,576
|
875
|
|||||
Employer
Markets:
|
|||||||
Retirement
Products
|
359
|
306
|
|||||
Group
Protection
|
361
|
-
|
|||||
Total
Employer Markets
|
720
|
306
|
|||||
Investment
Management (1)
|
150
|
140
|
|||||
Lincoln
UK
|
91
|
70
|
|||||
Lincoln
Financial Media (2)
|
67
|
-
|
|||||
Other
Operations
|
75
|
61
|
|||||
Consolidating
adjustments
|
(35
|
)
|
(29
|
)
|
|||
Net
realized investment results (3)
|
26
|
(1
|
)
|
||||
Revenue
|
$
|
2,670
|
$
|
1,422
|
|||
Net
Income
|
|||||||
Segment
operating income
|
|||||||
Individual
Markets:
|
|||||||
Annuities
|
$
|
121
|
$
|
66
|
|||
Life
Insurance
|
167
|
69
|
|||||
Total
Individual Markets
|
288
|
135
|
|||||
Employer
Markets:
|
|||||||
Retirement
Products
|
64
|
60
|
|||||
Group
Protection
|
23
|
-
|
|||||
Total
Employer Markets
|
87
|
60
|
|||||
Investment
Management
|
16
|
15
|
|||||
Lincoln
UK
|
11
|
11
|
|||||
Lincoln
Financial Media
|
12
|
-
|
|||||
Other
Operations
|
(35
|
)
|
-
|
||||
Net
realized investment results (4)
|
17
|
-
|
|||||
Net
income
|
$
|
396
|
$
|
221
|
|||
Three
Months Ended
|
|||||||
March
31,
|
|||||||
2007
|
|
2006
|
|||||
Denominator:
[number of shares]
|
|||||||
Weighted-average
shares, as used in basic calculation
|
274,889,645
|
174,577,421
|
|||||
Shares
to cover conversion of preferred stock
|
200,960
|
243,371
|
|||||
Shares
to cover non-vested stock
|
1,148,067
|
1,560,646
|
|||||
Average
stock options outstanding during the period
|
14,322,952
|
8,850,988
|
|||||
Assumed
acquisition of shares with assumed proceeds
|
|||||||
and
benefits from exercising stock options (at average
|
|||||||
market
price for the year).
|
(12,137,623
|
)
|
(7,778,439
|
)
|
|||
Shares
repurchaseable from measured but unrecognized
|
|||||||
stock
option expense
|
(255,647
|
)
|
(824,764
|
)
|
|||
Average
deferred compensation shares
|
1,308,460
|
1,300,430
|
|||||
Weighted-average
shares, as used in diluted calculation
|
279,476,814
|
177,929,653
|
(in
millions)
|
Total
|
|||
Restructuring
reserve at December 31, 2006
|
$
|
8
|
||
Amounts
incurred in the first three months of 2007
|
||||
Employee
severance and termination benefits
|
1
|
|||
Other
|
3
|
|||
Total
2007 restructuring charges
|
4
|
|||
Amounts
expended in the first three months of 2007
|
(6
|
)
|
||
Restructuring
reserve at March 31, 2007
|
$
|
6
|
||
Additional
amounts expended in the first three months of 2007
|
||||
that
do not qualify as restructuring charges
|
$
|
10
|
||
Total
expected costs
|
180
|
|||
Expected
completion date
|
4th
Quarter 2009
|
·
|
Problems arising with the ability to successfully integrate our and Jefferson-Pilot’s businesses, which may affect our |
|
ability
to operate as effectively and efficiently as expected or to achieve
the
expected synergies from the merger or to achieve such synergies
within our
expected timeframe;
|
·
|
Legislative,
regulatory or tax changes, both domestic and foreign, that affect
the cost
of, or demand for, LNC’s products, the required amount of reserves and/or
surplus, or otherwise affect our ability to conduct business, including
changes to statutory reserves and/or risk-based capital requirements
related to secondary guarantees under universal life and variable
annuity
products such as Actuarial Guideline VACARVM; restrictions on revenue
sharing and 12b-1 payments; and the potential for U.S. Federal
tax
reform;
|
·
|
The
initiation of legal or regulatory proceedings against LNC or its
subsidiaries and the outcome of any legal or regulatory proceedings,
such
as: (a) adverse actions related to present or past business practices
common in businesses in which LNC and its subsidiaries compete;
(b) adverse decisions in significant actions including, but not
limited to, actions brought by federal and state authorities, and
extra-contractual and class action damage cases; (c) new decisions
that result in changes in law; and (d) unexpected trial court
rulings;
|
·
|
Changes
in interest rates causing a reduction of investment income, the
margins of
LNC’s fixed annuity and life insurance businesses and demand for LNC’s
products;
|
·
|
A
decline in the equity markets causing a reduction in the sales
of LNC’s
products, a reduction of asset fees that LNC charges on various
investment
and insurance products, an acceleration of amortization of deferred
acquisition costs (“DAC”), value of business acquired (“VOBA”), deferred
sales inducements (“DSI”) and deferred front-end loads (“DFEL”) and an
increase in liabilities related to guaranteed benefit features
of LNC’s
variable annuity products;
|
·
|
Ineffectiveness
of LNC’s various hedging strategies used to offset the impact of declines
in and volatility of the equity markets;
|
·
|
A
deviation in actual experience regarding future persistency, mortality,
morbidity, interest rates or equity market returns from LNC’s assumptions
used in pricing its products, in establishing related insurance
reserves,
and in the amortization of intangibles that may result in an increase
in
reserves and a decrease in net income, including as a result of
investor-owned life insurance business;
|
·
|
Changes
in accounting principles generally accepted in the United States
(“GAAP”)
that may result in unanticipated changes to LNC’s net income, including
the impact of adopting Statements of Financial Accounting Standard
157 and
159;
|
·
|
Lowering
of one or more of LNC’s debt ratings issued by nationally recognized
statistical rating organizations, and the adverse impact such action
may
have on LNC’s ability to raise capital and on its liquidity and financial
condition;
|
·
|
Lowering
of one or more of the insurer financial strength ratings of LNC’s
insurance subsidiaries and the adverse impact such action may have
on the
premium writings, policy retention, and profitability of its insurance
subsidiaries;
|
·
|
Significant
credit, accounting, fraud or corporate governance issues that may
adversely affect the value of certain investments in the portfolios
of
LNC’s companies requiring that LNC realize losses on such
investments;
|
·
|
The
impact of acquisitions and divestitures, restructurings, product
withdrawals and other unusual items, including LNC’s ability to integrate
acquisitions and to obtain the anticipated results and synergies
from
acquisitions;
|
·
|
The
adequacy and collectibility of reinsurance that LNC has
purchased;
|
·
|
Acts
of terrorism, war, or other man-made and natural catastrophes that
may
adversely affect LNC’s businesses and the cost and availability of
reinsurance;
|
·
|
Competitive
conditions, including pricing pressures, new product offerings
and the
emergence of new competitors, that may affect the level of premiums
and
fees that LNC can charge for its products;
|
·
|
The
unknown impact on LNC’s business resulting from changes in the
demographics of LNC’s client base, as aging baby-boomers move from the
asset-accumulation stage to the asset-distribution stage of
life;
|
·
|
Loss
of key management, portfolio managers in the Investment Management
segment, financial planners or wholesalers; and
|
·
|
Changes
in general economic or business conditions, both domestic and foreign,
that may be less favorable than expected and may affect foreign
exchange
rates, premium levels, claims experience, the level of pension
benefit
costs and funding, and investment
results.
|
·
|
The
continued, successful integration of the Jefferson-Pilot businesses
and
the success of our new unified product
portfolio.
|
·
|
While
recent increases in long-term rates have eased pressure on spreads,
a
continuation of the low interest rate environment creates a challenge
for
our products that generate investment margin profits, such as fixed
annuities and universal life insurance.
|
|
|
·
|
The
ability to generate tangible results from Retirement Income Security
Ventures (“RISV”).
|
·
|
The
continued, successful expansion of our wholesale distribution businesses.
|
·
|
The
ability to improve financial results and sales growth in Employer
Markets.
|
·
|
The
continuation of competitive pressures in the life insurance marketplace,
increased regulatory scrutiny of the life and annuity industry,
which may
lead to higher product costs and negative perceptions about the
industry.
|
|
|
·
|
Continued
focus by the government on tax reform, which may impact our
products.
|
·
|
Taking
market share. We are making sizeable investments in distribution
throughout the organization, recognizing that sales growth is driven
by
our ability to maintain a strong presence in our key accounts and
distribution channels.
|
·
|
Jumpstarting
our RISV. The focus of this cadre of insurance professionals is
to rethink
the products, delivery systems and customer servicing that will
address
the emerging needs of the baby boomers.
|
·
|
Embedding
financial and execution discipline in our operations. We are making
significant investments in operating efficiencies while integrating
and
consolidating systems and processes across the organization. Investment
decisions will be evaluated based on a comprehensive metrics-based
approach.
|
Individual
Markets
|
|
Employer
Markets
|
|
|
|
|
|
||||||||||||
March
31, 2007 (in millions)
|
|
Annuities
|
|
Life
Insurance
|
|
Retirement
Products
|
|
Group
Protection
|
|
Lincoln
UK
|
|
Total
|
|||||||
DAC
and VOBA
|
$
|
2,082
|
$
|
4,796
|
$
|
750
|
$
|
104
|
$
|
803
|
$
|
8,535
|
|||||||
DSI
|
206
|
-
|
-
|
-
|
-
|
206
|
|||||||||||||
Total
DAC, VOBA and DSI
|
2,288
|
4,796
|
750
|
104
|
803
|
8,741
|
|||||||||||||
DFEL
|
105
|
491
|
22
|
-
|
400
|
1,018
|
|||||||||||||
Net
DAC, VOBA, DSI and DFEL
|
$
|
2,183
|
$
|
4,305
|
$
|
728
|
$
|
104
|
$
|
403
|
$
|
7,723
|
Three
Months Ended
|
||||||||||
March
31,
|
Increase
|
|
||||||||
(in
millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Insurance
premiums
|
$
|
459
|
$
|
78
|
NM
|
|||||
Insurance
fees
|
779
|
475
|
64
|
%
|
||||||
Investment
advisory fees
|
90
|
78
|
15
|
%
|
||||||
Communications
revenue (net)
|
67
|
-
|
NM
|
|||||||
Net
investment income
|
1,090
|
678
|
61
|
%
|
||||||
Amortization
of deferred gain on indemnity
|
||||||||||
reinsurance
|
19
|
19
|
0
|
%
|
||||||
Other
revenues and fees
|
140
|
95
|
47
|
%
|
||||||
Realized
gain (loss)
|
26
|
(1
|
)
|
NM
|
||||||
Total
revenue
|
2,670
|
1,422
|
88
|
%
|
||||||
Benefits
|
1,194
|
582
|
105
|
%
|
||||||
Underwriting,
acquisition, insurance and
|
||||||||||
other
expenses
|
805
|
503
|
60
|
%
|
||||||
Communications
expenses
|
41
|
-
|
NM
|
|||||||
Interest
and debt expenses
|
61
|
22
|
177
|
%
|
||||||
Total
benefits and expenses
|
2,101
|
1,107
|
90
|
%
|
||||||
Income
before taxes
|
569
|
315
|
81
|
%
|
||||||
Federal
income taxes
|
173
|
94
|
84
|
%
|
||||||
Net
income
|
$
|
396
|
$
|
221
|
79
|
%
|
||||
Items
included in net income (after-tax):
|
||||||||||
Realized
gain (loss) on investments and
|
||||||||||
derivative
instruments
|
$
|
17
|
$
|
(4
|
)
|
|||||
Net
gain on reinsurance embedded
|
||||||||||
derivative/trading
securities
|
-
|
4
|
||||||||
Restructuring
charges
|
(3
|
)
|
-
|
Three
Months Ended
|
||||||||||
March
31,
|
Improvement
|
|
||||||||
(in
millions)
|
|
2007
|
|
2006
|
|
(Worsening)
|
||||
Realized
gains on investments
|
$
|
66
|
$
|
25
|
164
|
%
|
||||
Realized
losses on investments
|
(20
|
)
|
(21
|
)
|
5
|
%
|
||||
Realized
gain (loss) on derivative instruments
|
-
|
4
|
-100
|
%
|
||||||
Amounts
amortized to balance sheet accounts
|
(18
|
)
|
(11
|
)
|
-64
|
%
|
||||
Gain
on reinsurance embedded derivative/trading securities
|
-
|
6
|
-100
|
%
|
||||||
Investment
expenses
|
(2
|
)
|
(4
|
)
|
50
|
%
|
||||
Net
gains (losses) on investments and derivative instruments
|
$
|
26
|
$
|
(1
|
)
|
NM
|
||||
Write-downs
for other-than-temporary impairments included in
|
||||||||||
realized
losses on investments above
|
$
|
(4
|
)
|
$
|
(2
|
)
|
-100
|
%
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Improvement
|
|
|||||
(in
millions)
|
|
2007
|
|
2006
|
|
(Worsening)
|
||||
Deposits
|
||||||||||
Individual
Markets:
|
||||||||||
Annuities
|
$
|
2,821
|
$
|
2,136
|
32
|
%
|
||||
Life
Insurance
|
1,039
|
488
|
113
|
%
|
||||||
Employer
Markets:
|
||||||||||
Retirement
Products - Defined Contributions
|
1,487
|
1,240
|
20
|
%
|
||||||
Retirement
Products - Executive Benefits
|
65
|
47
|
38
|
%
|
||||||
Investment
Management
|
6,033
|
9,064
|
-33
|
%
|
||||||
Consolidating
adjustments
(1)
|
(909
|
)
|
(739
|
)
|
-23
|
%
|
||||
Total
Deposits
|
$
|
10,536
|
$
|
12,236
|
-14
|
%
|
||||
Net
Flows
|
||||||||||
Individual
Markets:
|
||||||||||
Annuities
|
$
|
754
|
$
|
770
|
-2
|
%
|
||||
Life
Insurance
|
698
|
257
|
172
|
%
|
||||||
Employer
Markets:
|
||||||||||
Retirement
Products - Defined Contributions
|
221
|
180
|
23
|
%
|
||||||
Retirement
Products - Executive Benefits
|
(75
|
)
|
40
|
NM
|
||||||
Investment
Management
|
(89
|
)
|
4,899
|
NM
|
||||||
Consolidating
adjustments (1)
|
45
|
42
|
7
|
%
|
||||||
Total
Net Flows
|
$
|
1,554
|
$
|
6,188
|
-75
|
%
|
||||
As
of
|
|
|
|
|
|
|||||||||||
|
|
As
of March 31,
|
|
December
31,
|
|
Increase
over
|
|
Increase
over
|
|
|||||||
(in
millions)
|
|
2007
|
|
2006
|
|
2006
|
|
Prior
year
|
|
Prior
quarter
|
||||||
Assets
Under Management by Advisor (2)
|
||||||||||||||||
Investment
Management:
|
||||||||||||||||
External
Assets
|
$
|
98,146
|
$
|
86,428
|
$
|
97,306
|
14
|
%
|
1
|
%
|
||||||
Insurance-related
Assets
|
67,292
|
41,995
|
67,067
|
60
|
%
|
0
|
%
|
|||||||||
Lincoln
UK
|
10,255
|
8,986
|
10,108
|
14
|
%
|
1
|
%
|
|||||||||
Within
Business Units (Policy Loans)
|
2,767
|
1,860
|
2,760
|
49
|
%
|
0
|
%
|
|||||||||
By
Non-LNC Entities
|
58,571
|
43,726
|
56,282
|
34
|
%
|
4
|
%
|
|||||||||
$
|
237,031
|
$
|
182,995
|
$
|
233,523
|
30
|
%
|
2
|
%
|
(1)
|
Consolidating
adjustments represent the elimination of deposits and net flows
on
products affecting more than one segment.
|
(2)
|
Assets
under management by advisor provides a breakdown of assets that
we manage
or administer either directly or through unaffiliated third parties.
These
assets represent our investments, assets held in separate accounts
and
assets that we manage or administer for individuals or other companies.
We
earn insurance fees, investment advisory fees or investment income
on
these assets.
|
Three
Months Ended
|
|
||||||
|
|
March
31,
|
|
||||
(in
millions)
|
|
2007
|
|
2006
|
|||
Revenue
|
|||||||
Segment
operating revenue
|
|||||||
Individual
Markets:
|
|||||||
Annuities
|
$
|
605
|
$
|
375
|
|||
Life
Insurance
|
971
|
500
|
|||||
Total
Individual Markets
|
1,576
|
875
|
|||||
Employer
Markets:
|
|||||||
Retirement
Products
|
359
|
306
|
|||||
Group
Protection
|
361
|
-
|
|||||
Total
Employer Markets
|
720
|
306
|
|||||
Investment
Management (1)
|
150
|
140
|
|||||
Lincoln
UK
|
91
|
70
|
|||||
Lincoln
Financial Media (2)
|
67
|
-
|
|||||
Other
Operations
|
75
|
61
|
|||||
Consolidating
adjustments
|
(35
|
)
|
(29
|
)
|
|||
Net
realized investment results (3)
|
26
|
(1
|
)
|
||||
Revenue
|
$
|
2,670
|
$
|
1,422
|
|||
Net
Income
|
|||||||
Segment
operating income
|
|||||||
Individual
Markets:
|
|||||||
Annuities
|
$
|
121
|
$
|
66
|
|||
Life
Insurance
|
167
|
69
|
|||||
Total
Individual Markets
|
288
|
135
|
|||||
Employer
Markets:
|
|||||||
Retirement
Products
|
64
|
60
|
|||||
Group
Protection
|
23
|
-
|
|||||
Total
Employer Markets
|
87
|
60
|
|||||
Investment
Management
|
16
|
15
|
|||||
Lincoln
UK
|
11
|
11
|
|||||
Lincoln
Financial Media
|
12
|
-
|
|||||
Other
Operations
|
(35
|
)
|
-
|
||||
Net
realized investment results (4)
|
17
|
-
|
|||||
Net
income
|
$
|
396
|
$
|
221
|
(1)
|
Revenues
for the Investment Management segment include inter-segment revenues
for
asset management services provided to our other segments. These
inter-segment revenues totaled $25 million for both the three months
ended
March 31, 2007 and 2006.
|
(2)
|
Lincoln
Financial Media revenues are net of $8 million of commissions paid
to
agencies for the three months ended March 31, 2007.
|
(3)
|
Includes
realized gains (losses) on investments of $26 million and $(11)
million
for the three months ended March 31, 2007 and 2006, respectively;
realized
gains on derivative instruments of $4 million for the three months
ended
March 31, 2006; and gains on reinsurance embedded derivative/trading
securities of $6 million for the three months ended March 31,
2006.
|
(4)
|
Includes
realized gains (losses) on investments of $17 million and $(6)
million for
the three months ended March 31, 2007 and 2006; realized gains
on
derivative instruments of $2 million for the three months ended
March 31,
2006; and gains on reinsurance embedded derivative/trading securities
of
$4 million for the three months ended March 31, 2006.
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Insurance
premiums
|
$
|
13
|
$
|
9
|
44
|
%
|
||||
Insurance
fees
|
236
|
174
|
36
|
%
|
||||||
Net
investment income
|
266
|
148
|
80
|
%
|
||||||
Other
revenues and fees
|
90
|
44
|
105
|
%
|
||||||
Total
operating revenues
|
605
|
375
|
61
|
%
|
||||||
Operating
Expenses
|
||||||||||
Insurance
benefits
|
188
|
115
|
63
|
%
|
||||||
Underwriting,
acquisition, insurance and other expenses
|
256
|
173
|
48
|
%
|
||||||
Total
operating expenses
|
444
|
288
|
54
|
%
|
||||||
Income
from operations before taxes
|
161
|
87
|
85
|
%
|
||||||
Federal
income taxes
|
40
|
21
|
90
|
%
|
||||||
Income
from operations
|
$
|
121
|
$
|
66
|
83
|
%
|
||||
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Improvement
|
|
|||||
Net
Flows (in millions)
|
|
2007
|
|
2006
|
|
(Worsening)
|
||||
Variable
portion of variable annuity deposits
|
$
|
2,000
|
$
|
1,666
|
20
|
%
|
||||
Variable
portion of variable annuity withdrawals
|
(1,179
|
)
|
(959
|
)
|
-23
|
%
|
||||
Variable
portion of variable annuity net flows
|
821
|
707
|
16
|
%
|
||||||
Fixed
portion of variable annuity deposits
|
535
|
449
|
19
|
%
|
||||||
Fixed
portion of variable annuity withdrawals
|
(151
|
)
|
(164
|
)
|
8
|
%
|
||||
Fixed
portion of variable annuity net flows
|
384
|
285
|
35
|
%
|
||||||
Total
variable annuity deposits
|
2,535
|
2,115
|
20
|
%
|
||||||
Total
variable annuity withdrawals
|
(1,330
|
)
|
(1,123
|
)
|
-18
|
%
|
||||
Total
variable annuity net flows
|
1,205
|
992
|
21
|
%
|
||||||
Indexed
annuity deposits
|
160
|
-
|
NM
|
|||||||
Indexed
annuity withdrawals
|
(63
|
)
|
-
|
NM
|
||||||
Indexed
annuity net flows
|
97
|
-
|
NM
|
|||||||
Fixed
annuity deposits
|
126
|
21
|
NM
|
|||||||
Fixed
annuity withdrawals
|
(674
|
)
|
(243
|
)
|
NM
|
|||||
Fixed
annuity net flows
|
(548
|
)
|
(222
|
)
|
NM
|
|||||
Total
annuity deposits
|
2,821
|
2,136
|
32
|
%
|
||||||
Total
annuity withdrawals
|
(2,067
|
)
|
(1,366
|
)
|
-51
|
%
|
||||
Total
annuity net flows
|
$
|
754
|
$
|
770
|
-2
|
%
|
||||
Annuities
incremental deposits
|
$
|
2,794
|
$
|
2,111
|
32
|
%
|
As
of March 31,
|
|
Increase
|
|
|||||||
Account
Values (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Variable
annuities
|
$
|
53,776
|
$
|
44,314
|
21
|
%
|
||||
Fixed
annuities (including indexed annuities)
|
14,663
|
6,745
|
117
|
%
|
||||||
Fixed
annuities ceded to reinsurers
|
(1,689
|
)
|
(2,202
|
)
|
23
|
%
|
||||
Total
fixed annuitites
|
12,974
|
4,543
|
186
|
%
|
||||||
Total
annuities
|
$
|
66,750
|
$
|
48,857
|
37
|
%
|
||||
Fixed
portion of variable annuities
|
$
|
3,476
|
$
|
3,819
|
-9
|
%
|
Three
Months Ended
|
|
Basis
Points
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Interest
Rate Spreads
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Net
investment income yield
|
5.87
|
%
|
5.84
|
%
|
3
|
|||||
Interest
rate credited to policyholders
|
3.75
|
%
|
3.93
|
%
|
(18
|
)
|
||||
Interest
rate spread
|
2.12
|
%
|
1.91
|
%
|
21
|
|||||
Effect
on yield and interest rate spread:
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
0.05
|
%
|
0.09
|
%
|
(4
|
)
|
||||
Interest
rate spread, excluding the above items
|
2.07
|
%
|
1.82
|
%
|
25
|
|||||
Average
fixed annuity account values (in millions)
|
$
|
17,738
|
$
|
9,695
|
||||||
Effect
on income from operations (after-DAC,
|
||||||||||
after-tax)
(in millions):
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
$
|
1
|
$
|
1
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
March
31, (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Average
Daily Variable Account Values
|
$
|
49,284
|
$
|
39,947
|
23
|
%
|
Type
of GMDB Feature
|
|
|||||||||||||||
|
|
Return
of
|
|
High
Water
|
|
|
|
|
|
|
|
|||||
|
|
Premium
|
|
Mark
|
|
Roll-up
|
|
No
GMDB
|
|
Total
|
||||||
Variable
Annuity Account Value (billions)
|
$
|
25.3
|
$
|
23.1
|
$
|
0.4
|
$
|
5.0
|
$
|
53.8
|
||||||
%
of Total Annuity Account Value
|
47.0
|
%
|
42.9
|
%
|
0.7
|
%
|
9.4
|
%
|
100.0
|
%
|
||||||
Average
Account Value (thousands)
|
$
|
109.0
|
$
|
108.3
|
$
|
82.5
|
$
|
75.8
|
$
|
104.3
|
||||||
Average
NAR (thousands)
|
5.0
|
6.4
|
12.3
|
N/A
|
6.4
|
|||||||||||
NAR
(billions)
|
0.1
|
0.2
|
-
|
-
|
0.3
|
|||||||||||
Average
Age of Contract Holder
|
64
|
64
|
67
|
62
|
57
|
|||||||||||
%
of Contract Holders > 70 Years of Age
|
14.7
|
%
|
31.1
|
%
|
41.6
|
%
|
31.7
|
%
|
20.0
|
%
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Insurance
premiums
|
$
|
88
|
$
|
51
|
73
|
%
|
||||
Insurance
fees
|
419
|
200
|
110
|
%
|
||||||
Net
investment income
|
454
|
239
|
90
|
%
|
||||||
Other
revenues and fees
|
10
|
10
|
0
|
%
|
||||||
Total
operating revenues
|
971
|
500
|
94
|
%
|
||||||
Operating
Expenses
|
||||||||||
Insurance
benefits
|
498
|
262
|
90
|
%
|
||||||
Underwriting,
acquisition, insurance and other expenses
|
221
|
133
|
66
|
%
|
||||||
Total
operating expenses
|
719
|
395
|
82
|
%
|
||||||
Income
from operations before taxes
|
252
|
105
|
140
|
%
|
||||||
Federal
income taxes
|
85
|
36
|
136
|
%
|
||||||
Income
from operations
|
$
|
167
|
$
|
69
|
142
|
%
|
||||
|
Three
Months Ended
|
|
Basis
Points
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Interest
Rate Spreads
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Interest-Sensitive
Products
|
||||||||||
Net
investment income yield
|
6.48
|
%
|
6.48
|
%
|
-
|
|||||
Interest
rate credited to policyholders
|
4.46
|
%
|
4.60
|
%
|
(14
|
)
|
||||
Interest
rate spread
|
2.02
|
%
|
1.88
|
%
|
14
|
|||||
Effect
on yield and interest rate spreads:
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
0.21
|
%
|
0.07
|
%
|
14
|
|||||
Interest
rate spread, excluding the above items
|
1.81
|
%
|
1.81
|
%
|
-
|
|||||
Effect
on income from operations (after-DAC,
|
||||||||||
after-tax)
(in millions):
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
$
|
4
|
$
|
2
|
||||||
Traditional
Products
|
||||||||||
Net
investment income yield
|
6.41
|
%
|
6.72
|
%
|
(31
|
)
|
||||
Effect
on yield:
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
0.02
|
%
|
0.15
|
%
|
(13
|
)
|
||||
Net
investment income yield, excluding the above items
|
6.39
|
%
|
6.57
|
%
|
(18
|
)
|
||||
Effect
on income from operations (after-tax) (in millions)
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
$
|
-
|
$
|
1
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
(in
millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Sales
by Product
|
||||||||||
Universal
Life ("UL")
|
||||||||||
Excluding
MoneyGuard®
|
$
|
166
|
$
|
41
|
NM
|
|||||
MoneyGuard®
|
7
|
8
|
-13
|
%
|
||||||
Total
Universal Life
|
173
|
49
|
253
|
%
|
||||||
Variable
Universal Life ("VUL")
|
21
|
10
|
110
|
%
|
||||||
Whole
Life
|
-
|
1
|
-100
|
%
|
||||||
Term
|
9
|
8
|
13
|
%
|
||||||
Total
|
$
|
203
|
$
|
68
|
199
|
%
|
||||
Net
Flows (in millions)
|
||||||||||
Deposits
|
$
|
1,039
|
$
|
488
|
113
|
%
|
||||
Withdrawals
and Deaths
|
(341
|
)
|
(231
|
)
|
-48
|
%
|
||||
Net
flows
|
$
|
698
|
$
|
257
|
172
|
%
|
||||
Policyholder
Assessments
|
$
|
601
|
$
|
294
|
104
|
%
|
As
of March 31,
|
|
Increase
|
|
|||||||
(in
millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Account
Values
|
||||||||||
Universal
Life
|
$
|
22,228
|
$
|
11,913
|
87
|
%
|
||||
Variable
Universal Life
|
4,696
|
2,355
|
99
|
%
|
||||||
Total
life insurance account values
|
$
|
26,924
|
$
|
14,268
|
89
|
%
|
||||
In-Force
Face Amount
|
||||||||||
Universal
Life and Other
|
$
|
272,920
|
$
|
129,584
|
111
|
%
|
||||
Term
Insurance
|
235,491
|
191,825
|
23
|
%
|
||||||
Total
in-force
|
$
|
508,411
|
$
|
321,409
|
58
|
%
|
||||
Net
Amount at Risk
|
||||||||||
Universal
Life and Other
|
$
|
242,100
|
$
|
112,900
|
114
|
%
|
||||
Term
Insurance
|
234,300
|
190,900
|
23
|
%
|
||||||
Total
net amount at risk
|
$
|
476,400
|
$
|
303,800
|
57
|
%
|
§ |
UL,
VUL, MoneyGuard® - 100% of annualized expected target premium plus 5% of
paid excess premium, including an adjustment for internal replacements
at
approximately 50% of target.
|
§ |
Whole
Life and Term - 100% of first year paid
premiums.
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Insurance
premiums
|
$
|
1
|
$
|
1
|
0
|
%
|
||||
Insurance
fees
|
77
|
64
|
20
|
%
|
||||||
Net
investment income
|
275
|
235
|
17
|
%
|
||||||
Other
revenues and fees
|
6
|
6
|
0
|
%
|
||||||
Total
operating revenues
|
359
|
306
|
17
|
%
|
||||||
Operating
Expenses
|
||||||||||
Insurance
benefits
|
182
|
143
|
27
|
%
|
||||||
Underwriting,
acquisition, insurance and other expenses
|
85
|
77
|
10
|
%
|
||||||
Total
operating expenses
|
267
|
220
|
21
|
%
|
||||||
Income
from operations before taxes
|
92
|
86
|
7
|
%
|
||||||
Federal
income taxes
|
28
|
26
|
8
|
%
|
||||||
Income
from operations
|
$
|
64
|
$
|
60
|
7
|
%
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Insurance
fees
|
$
|
62
|
$
|
58
|
7
|
%
|
||||
Net
investment income
|
180
|
186
|
-3
|
%
|
||||||
Other
revenues and fees
|
5
|
5
|
0
|
%
|
||||||
Total
operating revenues
|
247
|
249
|
-1
|
%
|
||||||
Operating
Expenses
|
||||||||||
Insurance
benefits
|
104
|
101
|
3
|
%
|
||||||
Underwriting,
acquisition, insurance and other expenses
|
72
|
73
|
-1
|
%
|
||||||
Total
operating expenses
|
176
|
174
|
1
|
%
|
||||||
Income
from operations before taxes
|
71
|
75
|
-5
|
%
|
||||||
Federal
income taxes
|
21
|
23
|
-9
|
%
|
||||||
Income
from operations
|
$
|
50
|
$
|
52
|
-4
|
%
|
|
|
March
31,
|
|
Increase
|
|
|||||
(in
millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Account
Values
|
||||||||||
Variable
Annuities
|
$
|
17,676
|
$
|
16,454
|
7
|
%
|
||||
Fixed
Annuities
|
10,993
|
11,033
|
0
|
%
|
||||||
Total
Annuities
|
28,669
|
27,487
|
4
|
%
|
||||||
Alliance
Mutual Funds
|
5,807
|
4,248
|
37
|
%
|
||||||
Total
Annuities and Alliance
|
$
|
34,476
|
$
|
31,735
|
9
|
%
|
||||
Fixed
Portion of Variable Annuity
|
$
|
6,123
|
$
|
6,343
|
-3
|
%
|
||||
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Improvement
|
|
|||||
Net
Flows (in millions)
|
|
2007
|
|
2006
|
|
(Worsening)
|
||||
Variable
Portion of Variable Annuity Deposits
|
$
|
655
|
$
|
669
|
-2
|
%
|
||||
Variable
Portion of Variable Annuity Withdrawals
|
(813
|
)
|
(676
|
)
|
-20
|
%
|
||||
Variable
Portion of Variable Annuity Net Flows
|
(158
|
)
|
(7
|
)
|
NM
|
|||||
Fixed
Portion of Variable Annuity Deposits
|
100
|
118
|
-15
|
%
|
||||||
Fixed
Portion of Variable Annuity Withdrawals
|
(233
|
)
|
(220
|
)
|
-6
|
%
|
||||
Fixed
Portion of Variable Annuity Net Flows
|
(133
|
)
|
(102
|
)
|
-30
|
%
|
||||
Total
Variable Annuity Deposits
|
755
|
787
|
-4
|
%
|
||||||
Total
Variable Annuity Withdrawals
|
(1,046
|
)
|
(896
|
)
|
-17
|
%
|
||||
Total
Variable Annuity Net Flows
|
(291
|
)
|
(109
|
)
|
NM
|
|||||
Fixed
Annuity Deposits
|
198
|
135
|
47
|
%
|
||||||
Fixed
Annuity Withdrawals
|
(166
|
)
|
(108
|
)
|
-54
|
%
|
||||
Fixed
Annuity Net Flows
|
32
|
27
|
19
|
%
|
||||||
Total
Annuity Deposits
|
953
|
922
|
3
|
%
|
||||||
Total
Annuity Withdrawals
|
(1,212
|
)
|
(1,004
|
)
|
-21
|
%
|
||||
Total
Annuity Net Flows
|
(259
|
)
|
(82
|
)
|
NM
|
|||||
Alliance
Mutual Fund Deposits
|
534
|
318
|
68
|
%
|
||||||
Alliance
Mutual Fund Withdrawals
|
(54
|
)
|
(56
|
)
|
4
|
%
|
||||
Total
Alliance Mutual Fund Net Flows
|
480
|
262
|
83
|
%
|
||||||
Total
Annuity and Alliance Deposits
|
1,487
|
1,240
|
20
|
%
|
||||||
Total
Annuity and Alliance Withdrawals
|
(1,266
|
)
|
(1,060
|
)
|
-19
|
%
|
||||
Total
Annuity and Alliance Net Flows
|
$
|
221
|
$
|
180
|
23
|
%
|
||||
Annuities
Incremental Deposits
|
$
|
863
|
$
|
908
|
-5
|
%
|
||||
Alliance
Mutual Fund Incremental Deposits
|
533
|
318
|
68
|
%
|
||||||
Total
Annuities and Alliance Incremental Deposits
(1)
|
$
|
1,396
|
$
|
1,226
|
14
|
%
|
Three
Months Ended
|
|
Basis
Points
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Interest
Rate Spread
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Net
investment income yield
|
6.20
|
%
|
6.35
|
%
|
(15
|
)
|
||||
Interest
rate credited to policyholders
|
3.81
|
%
|
3.66
|
%
|
15
|
|||||
Interest
rate spread
|
2.39
|
%
|
2.69
|
%
|
(30
|
)
|
||||
Effect
on yield and interest rate spread:
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
0.03
|
%
|
0.15
|
%
|
(12
|
)
|
||||
Interest
rate spread adjusted for above items
|
2.36
|
%
|
2.54
|
%
|
(18
|
)
|
||||
Average
fixed annuity account values (in millions)
|
$
|
10,955
|
$
|
11,003
|
||||||
Effect
on income from operations (after-DAC, after-tax)
|
||||||||||
(in
millions):
|
||||||||||
Commercial
mortgage loan prepayment
|
||||||||||
and
bond makewhole premiums
|
$
|
-
|
$
|
1
|
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Insurance
premiums
|
$
|
1
|
$
|
1
|
0
|
%
|
||||
Insurance
fees
|
15
|
6
|
150
|
%
|
||||||
Net
investment income
|
95
|
49
|
94
|
%
|
||||||
Other
revenues and fees
|
1
|
1
|
0
|
%
|
||||||
Total
operating revenues
|
112
|
57
|
96
|
%
|
||||||
Operating
Expenses
|
||||||||||
Insurance
benefits
|
78
|
42
|
86
|
%
|
||||||
Underwriting,
acquisition, insurance and other expenses
|
13
|
4
|
225
|
%
|
||||||
Total
Operating Expenses
|
91
|
46
|
98
|
%
|
||||||
Income
from operations before taxes
|
21
|
11
|
91
|
%
|
||||||
Federal
income taxes
|
7
|
3
|
133
|
%
|
||||||
Income
from operations
|
$
|
14
|
$
|
8
|
75
|
%
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Improvement
|
|
|||||
Operational
Data (in millions)
|
|
2007
|
|
2006
|
|
(Worsening)
|
||||
COLI/BOLI
- Sales
|
$
|
20
|
$
|
17
|
18
|
%
|
||||
COLI/BOLI-
Balance Beginning-of-Period
|
$
|
4,305
|
$
|
1,318
|
227
|
%
|
||||
Business
acquired
|
-
|
-
|
NM
|
|||||||
Deposits
|
65
|
47
|
38
|
%
|
||||||
Withdrawals
& deaths
|
(140
|
)
|
(7
|
)
|
NM
|
|||||
Net
flows
|
(75
|
)
|
40
|
NM
|
||||||
Policyholder
assessments
|
(18
|
)
|
(9
|
)
|
-100
|
%
|
||||
Interest
credited and change in market value
|
52
|
38
|
37
|
%
|
||||||
COLI/BOLI-Balance
End-of-Period
|
$
|
4,264
|
$
|
1,387
|
207
|
%
|
March
31,
|
||||||||||
2007
|
|
2006
|
||||||||
COLI/BOLI
In-Force
|
$
|
14,747
|
$
|
7,979
|
85
|
%
|
||||
Institutional
Pensions
|
$
|
2,734
|
$
|
2,753
|
-1
|
%
|
||||
Three
Months Ended
|
|
|||
|
|
March
31,
|
|
|
|
|
|
|
|
Operating
Summary (in millions)
|
|
2007
|
||
Operating
Revenues
|
||||
Insurance
premiums
|
$
|
332
|
||
Net
investment income
|
28
|
|||
Other
revenues and fees
|
1
|
|||
Total
operating revenues
|
361
|
|||
Operating
Expenses
|
||||
Insurance
benefits
|
247
|
|||
Underwriting,
acquisition, insurance and other expenses
|
78
|
|||
Total
operating expenses
|
325
|
|||
Income
from operations before taxes
|
36
|
|||
Federal
income taxes
|
13
|
|||
Income
from operations
|
$
|
23
|
||
Product
Line Data
|
Three
Months Ended March 31, 2007
|
|
||||||||
|
|
Income
from
|
|
Earned
|
|
|
|
|||
(in
millions)
|
|
Operations
|
|
Premiums
|
|
Loss
Ratios
|
||||
Life
|
$
|
9
|
$
|
119
|
75.0
|
%
|
||||
Disability
|
13
|
145
|
69.5
|
%
|
||||||
Dental
|
-
|
32
|
79.2
|
%
|
||||||
Total
Non-medical
|
22
|
296
|
72.7
|
%
|
||||||
Medical
|
1
|
35
|
||||||||
Total
|
$
|
23
|
$
|
331
|
||||||
Expense
ratios:
|
||||||||||
General
and administrative expenses
|
||||||||||
to
earned premiums
|
9.9
|
%
|
||||||||
Total
expenses to earned premiums
|
23.6
|
%
|
||||||||
Sales
- annualized premium
|
||||||||||
Life,
disability and dental combined
|
$
|
61
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Investment
advisory fees
|
$
|
90
|
$
|
78
|
15
|
%
|
||||
Investment
advisory fees - insurance-related
|
25
|
25
|
-
|
|||||||
Other
revenues and fees
|
35
|
37
|
-5
|
%
|
||||||
Total
operating revenues
|
150
|
140
|
7
|
%
|
||||||
Operating
Expenses
|
||||||||||
Operating
and administrative expenses
|
125
|
116
|
8
|
%
|
||||||
Total
operating expenses
|
125
|
116
|
8
|
%
|
||||||
Income
from operations before taxes
|
25
|
24
|
4
|
%
|
||||||
Federal
income taxes
|
9
|
8
|
13
|
%
|
||||||
Income
from operations
|
$
|
16
|
$
|
15
|
7
|
%
|
||||
Margin
Data
|
||||||||||
Pre-tax
operating margin
|
17.0
|
%
|
16.8
|
%
|
||||||
|
|
|
|
Increase
|
|
|||||
Assets
under management at March 31, (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Retail-equity
|
$
|
40,250
|
$
|
36,500
|
10
|
%
|
||||
Retail-fixed
|
11,645
|
9,761
|
19
|
%
|
||||||
Total
retail
|
51,895
|
46,261
|
12
|
%
|
||||||
Institutional-equity
|
22,782
|
22,905
|
-1
|
%
|
||||||
Institutional-fixed
|
23,469
|
17,262
|
36
|
%
|
||||||
Total
institutional
|
46,251
|
40,167
|
15
|
%
|
||||||
Insurance-related
assets
|
67,292
|
41,995
|
60
|
%
|
||||||
Total
assets under management
|
$
|
165,438
|
$
|
128,423
|
29
|
%
|
||||
Total
Sub-advised Assets, included in above amounts
|
||||||||||
Retail
|
$
|
18,466
|
$
|
17,320
|
7
|
%
|
||||
Institutional
|
4,645
|
5,608
|
-17
|
%
|
||||||
Total
sub-advised assets at the end of the period
|
$
|
23,111
|
$
|
22,928
|
1
|
%
|
||||
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Improvement
|
|
|||||
Net
flows (in millions)
|
|
2007
|
|
2006
|
|
(Worsening)
|
||||
Retail
|
||||||||||
Equity
|
||||||||||
Sales
|
$
|
2,238
|
$
|
3,069
|
-27
|
%
|
||||
Redemptions
and transfers
|
(2,475
|
)
|
(1,853
|
)
|
-34
|
%
|
||||
Net
flows-equity
|
(237
|
)
|
1,216
|
NM
|
||||||
Fixed
income
|
||||||||||
Sales
|
1,365
|
951
|
44
|
%
|
||||||
Redemptions
and transfers
|
(895
|
)
|
(861
|
)
|
-4
|
%
|
||||
Net
flows-fixed income
|
470
|
90
|
NM
|
|||||||
Total
retail
|
||||||||||
Sales
|
3,603
|
4,020
|
-10
|
%
|
||||||
Redemptions
and transfers
|
(3,370
|
)
|
(2,714
|
)
|
-24
|
%
|
||||
Net
flows-total retail
|
233
|
1,306
|
-82
|
%
|
||||||
Institutional
|
||||||||||
Equity
|
||||||||||
Inflows
|
870
|
1,964
|
-56
|
%
|
||||||
Withdrawals
and transfers
|
(2,273
|
)
|
(1,007
|
)
|
NM
|
|||||
Net
flows-equity
|
(1,403
|
)
|
957
|
NM
|
||||||
Fixed
income
|
||||||||||
Inflows
|
1,560
|
3,080
|
-49
|
%
|
||||||
Withdrawals
and transfers
|
(479
|
)
|
(444
|
)
|
-8
|
%
|
||||
Net
flows-fixed income
|
1,081
|
2,636
|
-59
|
%
|
||||||
Total
institutional
|
||||||||||
Inflows
|
2,430
|
5,044
|
-52
|
%
|
||||||
Withdrawals
and transfers
|
(2,752
|
)
|
(1,451
|
)
|
-90
|
%
|
||||
Net
flows-total institutional
|
(322
|
)
|
3,593
|
NM
|
||||||
Combined
Retail and Institutional
|
||||||||||
Sales/inflows
|
6,033
|
9,064
|
-33
|
%
|
||||||
Redemptions,
withdrawals and transfers
|
(6,122
|
)
|
(4,165
|
)
|
-47
|
%
|
||||
Net
flows-combined retail and institutional
|
$
|
(89
|
)
|
$
|
4,899
|
NM
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Insurance
premiums
|
$
|
24
|
$
|
17
|
41
|
%
|
||||
Insurance
fees
|
47
|
36
|
31
|
%
|
||||||
Net
investment income
|
20
|
17
|
18
|
%
|
||||||
Total
operating revenues
|
91
|
70
|
30
|
%
|
||||||
Operating
Expenses
|
||||||||||
Insurance
benefits
|
36
|
25
|
44
|
%
|
||||||
Underwriting,
acquisition, insurance and other expenses
|
38
|
28
|
36
|
%
|
||||||
Total
operating expenses
|
74
|
53
|
40
|
%
|
||||||
Income
from operations before taxes
|
17
|
17
|
0
|
%
|
||||||
Federal
income taxes
|
6
|
6
|
0
|
%
|
||||||
Income
from operations
|
$
|
11
|
$
|
11
|
0
|
%
|
||||
|
||||||||||
|
|
|
|
|
|
|
Increase
|
|||
March
31, (in millions, except exchange rate)
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
||
Unit-linked
assets
|
$
|
8,906
|
$
|
7,754
|
15
|
%
|
||||
Individual
life insurance in-force
|
19,307
|
17,744
|
9
|
%
|
||||||
Exchange
rate ratio-U.S. dollars to pounds sterling:
|
||||||||||
Average
for the period
|
1.964
|
1.754
|
12
|
%
|
||||||
End
of period
|
1.968
|
1.737
|
13
|
%
|
Three
Months Ended
|
|
|||
|
|
March
31,
|
||
Operating
Summary (in millions)
|
2007
|
|||
Operating
Revenue
|
||||
Communications
revenues (net)(1)
|
$
|
67
|
||
Operating
Expenses
|
||||
Operating
expenses
|
48
|
|||
Income
from operations before taxes
|
19
|
|||
Federal
income taxes
|
7
|
|||
Income
from Operations
|
$
|
12
|
Three
Months Ended
|
|
|
|
|||||||
|
|
March
31,
|
|
Increase
|
|
|||||
Operating
Summary (in millions)
|
|
2007
|
|
2006
|
|
(Decrease)
|
||||
Operating
Revenues
|
||||||||||
Premiums
|
$
|
2
|
$
|
-
|
NM
|
|||||
Net
investment income
|
47
|
40
|
18
|
%
|
||||||
Amortization
of deferred gain on indemnity reinsurance
|
19
|
19
|
0
|
%
|
||||||
Other
revenue and fees
|
(3
|
)
|
(2
|
)
|
-50
|
%
|
||||
Inter-segment
elimination of investment advisory fees
|
(25
|
)
|
(25
|
)
|
0
|
%
|
||||
Total
operating revenues
|
40
|
32
|
25
|
%
|
||||||
Operating
Expenses
|
||||||||||
Insurance
benefits
|
6
|
2
|
200
|
%
|
||||||
Interest
credited to contractholder funds
|
37
|
34
|
9
|
%
|
||||||
Insurance
and other expenses
|
20
|
2
|
NM
|
|||||||
Interest
and debt expense
|
61
|
21
|
190
|
%
|
||||||
Inter-segment
elimination of investment advisory fees
|
(25
|
)
|
(25
|
)
|
0
|
%
|
||||
Total
operating expenses
|
99
|
34
|
191
|
%
|
||||||
Income
(loss) from operations before taxes
|
(59
|
)
|
(2
|
)
|
NM
|
|||||
Federal
income taxes
|
(24
|
)
|
(2
|
)
|
NM
|
|||||
Income
(loss) from operations
|
$
|
(35
|
)
|
$
|
-
|
NM
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
|||||
(in
millions)
|
|
2007
|
|
2006
|
|
2006
|
||||
Total
consolidated investments (at fair value)
|
$
|
71,849
|
$
|
71,488
|
$
|
42,573
|
||||
Average
invested assets at amortized cost (1)
|
69,906
|
64,099
|
44,364
|
|||||||
|
Three
Months Ended March 31,
|
Increase
|
||||||||
(in
millions)
|
2007
|
|
|
2006
|
|
|
(Decrease)
|
|
||
Net
investment income
|
$
|
1,090
|
$
|
680
|
60
|
%
|
||||
Investment
yield (ratio of net investment
|
||||||||||
income
to average invested assets)
|
6.24
|
%
|
6.13
|
%
|
||||||
Items
included in net investment income:
|
||||||||||
Limited
partnership investment income
|
$
|
19
|
$
|
11
|
73
|
%
|
||||
Prepayment
and makewhole premiums
|
15
|
10
|
50
|
%
|
||||||
Consent
fees
|
7
|
1
|
NM
|
|||||||
Standby
real estate equity commitments
|
4
|
4
|
0
|
%
|
(in
millions)
|
|||||||||||||
NAIC
Designation
|
Rating
Agency Equivalent Designation
|
Amortized
Cost
|
Estimated
Fair
Value
|
%
of Total
|
|||||||||
1
|
AAA / AA / A |
$
|
33,369
|
$
|
33,936
|
60.3
|
%
|
||||||
2
|
BBB |
18,634
|
18,945
|
33.7
|
%
|
||||||||
3
|
BB |
2,121
|
2,172
|
3.9
|
%
|
||||||||
4
|
B |
978
|
1,024
|
1.8
|
%
|
||||||||
5
|
CCC and lower |
148
|
162
|
0.3
|
%
|
||||||||
6
|
In or near default |
18
|
17
|
0.0
|
%
|
||||||||
$
|
55,268
|
$
|
56,256
|
100.0
|
%
|
March
31,
|
|
December
31,
|
|
||||
(in
millions)
|
|
2007
|
|
2006
|
|||
Total
portfolio (net of reserves)
|
$
|
7,416
|
$
|
7,384
|
|||
Percentage
of total investment portfolio
|
10.3
|
%
|
10.3
|
%
|
|||
Percentage
of investment by property type:
|
|||||||
Commercial
office buildings
|
33.6
|
%
|
33.6
|
%
|
|||
Retail
stores
|
24.2
|
%
|
24.7
|
%
|
|||
Industrial
buildings
|
23.2
|
%
|
22.0
|
%
|
|||
Apartments
|
10.8
|
%
|
11.1
|
%
|
|||
Hotels/motels
|
6.1
|
%
|
6.4
|
%
|
|||
Other
|
2.1
|
%
|
2.2
|
%
|
|||
Impaired
mortgage loans
|
$
|
29
|
$
|
29
|
|||
Impaired
mortgage loans as a percentage of total mortgage loans
|
0.4
|
%
|
0.4
|
%
|
|||
Restructured
loans in good standing
|
$
|
58
|
$
|
59
|
|||
Reserve
for mortgage loans
|
2
|
2
|
Fair
|
%
Fair
|
Amortized
|
%
Amortized
|
Unrealized
|
%
Unrealized
|
||||||||||||||
(in
millions)
|
Value
|
|
Value
|
|
Cost
|
|
Cost
|
|
Loss
|
|
Loss
|
||||||||
<
= 90 days
|
$
|
6,186
|
37.2
|
%
|
$
|
6,272
|
37.0
|
%
|
$
|
(86
|
)
|
26.2
|
%
|
||||||
>
90 days but < 180 days
|
1,353
|
8.1
|
%
|
1,372
|
8.1
|
%
|
(19
|
)
|
5.8
|
%
|
|||||||||
>
180 days but < 270 days
|
289
|
1.7
|
%
|
301
|
1.8
|
%
|
(12
|
)
|
3.7
|
%
|
|||||||||
>
270 days but < 1 year
|
1,408
|
8.5
|
%
|
1,433
|
8.4
|
%
|
(25
|
)
|
7.6
|
%
|
|||||||||
>
1 year
|
7,410
|
44.5
|
%
|
7,596
|
44.7
|
%
|
(186
|
)
|
56.7
|
%
|
|||||||||
Total
|
$
|
16,646
|
100.0
|
%
|
$
|
16,974
|
100.0
|
%
|
$
|
(328
|
)
|
100.0
|
%
|
Fair
|
|
%
Fair
|
|
Amortized
|
|
%
Amortized
|
|
Unrealized
|
|
%
Unrealized
|
|
||||||||
(in
millions)
|
|
Value
|
|
Value
|
|
Cost
|
|
Cost
|
|
Loss
|
|
Loss
|
|||||||
Banking
|
$
|
1,555
|
9.3
|
%
|
$
|
1,592
|
9.4
|
%
|
$
|
(37
|
)
|
11.3
|
%
|
||||||
Collateralized
mortgage obligations ("CMO")
|
1,973
|
12.0
|
%
|
2,002
|
11.9
|
%
|
(29
|
)
|
8.9
|
%
|
|||||||||
Electric
|
1,172
|
7.0
|
%
|
1,193
|
7.0
|
%
|
(21
|
)
|
6.5
|
%
|
|||||||||
ABS
|
1,270
|
7.6
|
%
|
1,289
|
7.6
|
%
|
(19
|
)
|
5.8
|
%
|
|||||||||
CMBS
|
982
|
5.9
|
%
|
997
|
5.9
|
%
|
(15
|
)
|
4.6
|
%
|
|||||||||
Automotive
|
196
|
1.2
|
%
|
208
|
1.2
|
%
|
(12
|
)
|
3.7
|
%
|
|||||||||
Distributors
|
333
|
2.0
|
%
|
344
|
2.0
|
%
|
(11
|
)
|
3.4
|
%
|
|||||||||
Food
and Beverage
|
505
|
3.0
|
%
|
515
|
3.0
|
%
|
(10
|
)
|
3.0
|
%
|
|||||||||
Retailers
|
283
|
1.7
|
%
|
292
|
1.7
|
%
|
(9
|
)
|
2.7
|
%
|
|||||||||
Sovereigns
|
337
|
2.0
|
%
|
346
|
2.0
|
%
|
(9
|
)
|
2.7
|
%
|
|||||||||
Media
Non-cable
|
285
|
1.7
|
%
|
293
|
1.7
|
%
|
(8
|
)
|
2.4
|
%
|
|||||||||
Chemicals
|
215
|
1.3
|
%
|
223
|
1.3
|
%
|
(8
|
)
|
2.4
|
%
|
|||||||||
Paper
|
217
|
1.3
|
%
|
224
|
1.3
|
%
|
(7
|
)
|
2.1
|
%
|
|||||||||
Property
& Casualty insurers ("P&C")
|
472
|
2.8
|
%
|
479
|
2.8
|
%
|
(7
|
)
|
2.1
|
%
|
|||||||||
Technology
|
199
|
1.2
|
%
|
206
|
1.2
|
%
|
(7
|
)
|
2.1
|
%
|
|||||||||
Pipelines
|
349
|
2.2
|
%
|
355
|
2.1
|
%
|
(6
|
)
|
1.8
|
%
|
|||||||||
Gaming
|
141
|
0.8
|
%
|
147
|
0.9
|
%
|
(6
|
)
|
1.8
|
%
|
|||||||||
Metals
and Mining
|
286
|
1.7
|
%
|
292
|
1.7
|
%
|
(6
|
)
|
1.8
|
%
|
|||||||||
Government
Sponsored
|
393
|
2.4
|
%
|
398
|
2.3
|
%
|
(5
|
)
|
1.5
|
%
|
|||||||||
Entertainment
|
263
|
1.6
|
%
|
268
|
1.6
|
%
|
(5
|
)
|
1.5
|
%
|
|||||||||
Railroads
|
231
|
1.4
|
%
|
236
|
1.4
|
%
|
(5
|
)
|
1.5
|
%
|
|||||||||
Wirelines
|
204
|
1.2
|
%
|
208
|
1.2
|
%
|
(4
|
)
|
1.2
|
%
|
|||||||||
Real
Estate Investment Trusts ("REITS")
|
266
|
1.6
|
%
|
270
|
1.6
|
%
|
(4
|
)
|
1.2
|
%
|
|||||||||
Consumer
Products
|
158
|
0.9
|
%
|
162
|
1.0
|
%
|
(4
|
)
|
1.2
|
%
|
|||||||||
Industrial
Other
|
227
|
1.4
|
%
|
231
|
1.4
|
%
|
(4
|
)
|
1.2
|
%
|
|||||||||
Home
Construction
|
179
|
1.1
|
%
|
183
|
1.1
|
%
|
(4
|
)
|
1.2
|
%
|
|||||||||
Airlines
|
37
|
0.2
|
%
|
41
|
0.2
|
%
|
(4
|
)
|
1.2
|
%
|
|||||||||
Oil
Field Services
|
299
|
1.8
|
%
|
302
|
1.8
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Transportation
Services
|
173
|
1.0
|
%
|
176
|
1.0
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Financial
Other
|
185
|
1.1
|
%
|
188
|
1.1
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Wireless
|
112
|
0.7
|
%
|
115
|
0.7
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Building
Materials
|
167
|
1.0
|
%
|
170
|
1.0
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Independent
|
190
|
1.1
|
%
|
193
|
1.1
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Conventional
30yr
|
301
|
1.8
|
%
|
304
|
1.8
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Brokerage
|
190
|
1.1
|
%
|
193
|
1.1
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Owned
No Guarantee
|
122
|
0.7
|
%
|
125
|
0.7
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Packaging
|
134
|
0.8
|
%
|
137
|
0.8
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Diversified
Manufacturing
|
249
|
1.5
|
%
|
252
|
1.5
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Municipal
|
88
|
0.5
|
%
|
91
|
0.5
|
%
|
(3
|
)
|
0.9
|
%
|
|||||||||
Integrated
|
104
|
0.6
|
%
|
106
|
0.6
|
%
|
(2
|
)
|
0.7
|
%
|
|||||||||
Healthcare
|
185
|
1.1
|
%
|
187
|
1.1
|
%
|
(2
|
)
|
0.7
|
%
|
|||||||||
Pharmaceuticals
|
89
|
0.5
|
%
|
91
|
0.5
|
%
|
(2
|
)
|
0.7
|
%
|
|||||||||
Local
Authorities
|
61
|
0.4
|
%
|
63
|
0.4
|
%
|
(2
|
)
|
0.7
|
%
|
|||||||||
Non
Captive Consumer
|
201
|
1.2
|
%
|
203
|
1.2
|
%
|
(2
|
)
|
0.7
|
%
|
|||||||||
Consumer
Cyclical Services
|
30
|
0.2
|
%
|
32
|
0.3
|
%
|
(2
|
)
|
0.7
|
%
|
|||||||||
Non
Captive Diversified
|
113
|
0.7
|
%
|
114
|
0.7
|
%
|
(1
|
)
|
0.3
|
%
|
|||||||||
Non
Agency
|
65
|
0.4
|
%
|
66
|
0.4
|
%
|
(1
|
)
|
0.3
|
%
|
|||||||||
Lodging
|
127
|
0.8
|
%
|
128
|
0.8
|
%
|
(1
|
)
|
0.3
|
%
|
|||||||||
Restaurants
|
33
|
0.2
|
%
|
34
|
0.2
|
%
|
(1
|
)
|
0.3
|
%
|
|||||||||
Utility-Other
|
54
|
0.3
|
%
|
55
|
0.3
|
%
|
(1
|
)
|
0.3
|
%
|
|||||||||
Life
|
105
|
0.6
|
%
|
106
|
0.6
|
%
|
(1
|
)
|
0.3
|
%
|
|||||||||
Industries
with U/R Losses < $1MM
|
541
|
3.4
|
%
|
549
|
3.3
|
%
|
(8
|
)
|
2.4
|
%
|
|||||||||
Total
|
$
|
16,646
|
100.0
|
%
|
$
|
16,974
|
100.0
|
%
|
$
|
(328
|
)
|
100.0
|
%
|
Aging
Category (in millions)
|
Ratio
of Amortized
Cost
to
Fair Value
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Unrealized
Loss
|
||||||
<=90
days
|
70%
to 100%
|
|
$
|
197
|
$
|
201
|
$
|
(4
|
)
|
||||
|
40%
to 70%
|
-
|
-
|
-
|
|||||||||
Below
40%
|
-
|
3
|
(3
|
)
|
|||||||||
<=90
days total
|
197
|
204
|
(7
|
)
|
|||||||||
>90
days but <=180 days
|
70%
to 100%
|
|
79
|
82
|
(3
|
)
|
|||||||
|
40%
to 70%
|
-
|
-
|
-
|
|||||||||
|
Below
40%
|
-
|
-
|
-
|
|||||||||
>90
days but <=180 days total
|
79
|
82
|
(3
|
)
|
|||||||||
>180
days but <=270 days
|
70%
to 100%
|
|
54
|
58
|
(4
|
)
|
|||||||
|
40%
to 70%
|
-
|
-
|
-
|
|||||||||
|
Below
40%
|
-
|
-
|
-
|
|||||||||
>180
days but <=270 days total
|
54
|
58
|
(4
|
)
|
|||||||||
>270
days but <=1 year
|
70%
to 100%
|
|
100
|
104
|
(4
|
)
|
|||||||
|
40%
to 70%
|
-
|
-
|
-
|
|||||||||
|
Below
40%
|
-
|
-
|
-
|
|||||||||
>270
days but <=1 year total
|
100
|
104
|
(4
|
)
|
|||||||||
>1
year
|
70%
to 100%
|
|
278
|
296
|
(18
|
)
|
|||||||
|
40%
to 70%
|
-
|
-
|
-
|
|||||||||
|
Below
40%
|
-
|
-
|
-
|
|||||||||
>1
year total
|
278
|
296
|
(18
|
)
|
|||||||||
Total below-investment-grade
|
$
|
708
|
$
|
744
|
$
|
(36
|
)
|
Three
Months Ended
|
|
Year
Ended
|
|
|||||||
|
|
March
31,
|
|
December
31,
|
|
|||||
(in
millions)
|
|
2007
|
|
2006
|
|
2006
|
||||
Dividends
from subsidiaries:
|
||||||||||
LNL
|
$
|
75
|
$
|
100
|
$
|
350
|
||||
Jefferson
Pilot Life Insurance Company
|
-
|
-
|
2
|
|||||||
Jefferson
Pilot Financial Insurance Company
|
71
|
-
|
217
|
|||||||
Lincoln
Financial Media
|
17
|
-
|
39
|
|||||||
Delaware
Investments
|
15
|
12
|
48
|
|||||||
Other
non-regulated companies(1)
|
-
|
-
|
235
|
|||||||
Lincoln
UK
|
16
|
19
|
85
|
|||||||
Other
|
-
|
-
|
11
|
|||||||
Subsidiary
loan repayments and interest:
|
||||||||||
LNL
interest on surplus notes
|
20
|
20
|
78
|
|||||||
Jefferson
Pilot Financial Insurance Company
|
1
|
-
|
4
|
|||||||
$
|
215
|
$
|
151
|
$
|
1,069
|
|||||
Other
cash flow and liquidity items:
|
||||||||||
Return
of seed capital
|
$
|
-
|
$
|
-
|
$
|
21
|
||||
Net
capital received from stock option exercises
|
47
|
40
|
191
|
|||||||
$
|
47
|
$
|
40
|
$
|
212
|
|||||
· |
In
March 2007, LNC issued $500 million of 6.05% Capital Securities (callable
in year 10 at par) due April 20, 2067 and $250 million 3-year floating
rate senior notes at LIBOR plus 8 basis points due April 20, 2010
for
aggregate gross proceeds of $750
million.
|
· |
On
January 11, 2007, we redeemed all of the outstanding 8.14% Junior
Subordinated Deferrable Interest Debentures, Series A due 2046, which
were
held by Jefferson-Pilot Capital Trust A. The redemption price for
the
Capital Securities, Series A was $1,040.70 per security, for a total
principal amount of $206 million, plus $16 million for accrued interest
through the redemption date.
|
· |
On
March 1, 2007, we redeemed all of the outstanding 8.285% Junior
Subordinated Deferrable Interest Debentures, Series B due 2046, which
were
held by Jefferson-Pilot Capital Trust B. The redemption price for
the
Capital Securities, Series B was $1,041.43 per security, for a total
principal amount of $103 million, plus $8 million for accrued interest
through the redemption date.
|
· |
a
$1.6 billion five-year credit facility entered into in March 2006
and
maturing in March 2011, allowing for borrowing or issuances of letters
of
credit (“LOC”);
|
· |
a
$1 billion five-year credit facility entered into in February 2006
and
maturing in February 2011, allowing for borrowing or issuances of
LOCs;
and
|
· |
a
10 million pounds sterling ($20 million at March 31, 2007) one-year
U.K.
credit facility for use by our U.K. subsidiary renewed in December
2006
and maturing in December 2007.
|
Three
Months Ended
|
|
||||||
|
|
March
31,
|
|
||||
(in
millions, except per share data)
|
|
2007
|
|
2006
|
|||
Dividends
to shareholders
|
$
|
107
|
$
|
67
|
|||
Repurchase
of common stock
|
512
|
-
|
|||||
Total
cash returned to shareholders
|
$
|
619
|
$
|
67
|
|||
Number
of shares repurchased
|
7.215
|
-
|
|||||
Average
price per share
|
$
|
70.92
|
$
|
-
|
Three
Months Ended
|
|
||||||
|
|
March
31,
|
|
||||
(in
millions)
|
|
2007
|
|
2006
|
|||
Debt
service (interest paid)
|
$
|
54
|
$
|
22
|
|||
Common
dividends
|
109
|
67
|
|||||
Common
stock repurchase
|
514
|
-
|
|||||
Total
|
$
|
677
|
$
|
89
|
· |
A
total of $27 million notional of interest rate swap agreements matured
or
was terminated, resulting in a remaining notional of $1.2 billion.
A loss
of $0.3 million was recognized on the terminations. These interest
rate
swap agreements convert floating rate bond coupon payments into a
fixed
rate of return.
|
· |
Entered
into $250 million notional of forward-starting interest rate swap
agreements. These swaps partially hedged the future cash flows of
a
forecasted debt issuance. The entire $250 million notional was terminated
resulting in a $2 million loss recorded in Other Comprehensive Income.
The
loss will be recognized into income over the life of the
debt.
|
· |
Terminated
0.3 million call options on LNC stock, resulting in a total of 0.6
million
call options remaining on an equal number of shares of LNC stock.
These
call options are hedging the increase in liabilities arising from
stock
appreciation rights granted on LNC
stock.
|
· |
We
had financial futures net purchase/termination activity in the amount
of
$0.2 billion notional resulting in a remaining notional of $3.3 billion.
These futures are hedging a portion of the liability exposure on
certain
options in variable annuity products. No gain or loss was recognized
as a
result of the expirations or
terminations.
|
· |
Entered
into $0.2 billion notional of put option agreements, resulting in
a total
notional of $2.4 billion. These put options are hedging a portion
of the
liability exposure on certain options in variable annuity products.
We
will receive a payment from the counterparty if the strike rate in
the
agreement is higher than the specified index rate at maturity. No
gain or
loss was recognized as a result of the
terminations.
|
· |
Entered
into foreign exchange forward contracts in the amount of $16 million
notional that are hedging dividends received from our Lincoln UK
subsidiary. The full amount expired resulting in no remaining
notional.
|
· |
Entered
into $156 million notional of foreign currency swaps, resulting in
a total
notional of $242 million. These
foreign currency swap agreements are part of a hedging strategy.
We own
various foreign issue securities. Interest payments from these securities
are received in a foreign currency and then swapped into U.S.
dollars.
|
· |
Entered
into $0.5 billion notional of S&P 500 call options. A total of $0.3
billion notional expired, resulting in a remaining notional of $2.5
billion. These call options are hedging the impact of the equity-index
interest credited to our equity indexed annuity
products.
|
Period
|
|
(a)
Total
Number
of
Shares
(or
Units)
Purchased
(1)
|
|
(b)
Average
Price
Paid
per
Share
(or
Unit)
|
|
(c)
Total Number
of
Shares (or Units)
Purchased
as Part of
Publicly
Announced
Plans
or Programs
(2)
|
|
(d)
Approximate Dollar
Value
of Shares that
May
Yet Be Purchased
Under
the Plans or
Programs
(in
millions)(3)
|
|||||
1/1/07
- 1/31/07
|
62,100
|
$
|
65.74
|
-
|
$
|
2,649.5
|
|||||||
2/1/07
- 2/28/07
|
19,246
|
69.69
|
-
|
2,649.5
|
|||||||||
3/1/07
- 3/31/07
|
7,221,540
|
70.91
|
7,214,971
|
2,137.9
|
(1)
|
Of
the total number of shares purchased, 71,463 shares were received
in
connection with the exercise of stock options and related taxes
and 16,452
shares were withheld for taxes on the vesting of restricted stock.
For the
quarter ended March 31, 2007, 7,214,971 shares were purchased as
part of
publicly announced plans or programs.
|
(2)
|
On
February 23, 2007, we announced that our Board approved a $2 billion
increase in our securities repurchase authorization, bringing the
total
authorization to $2.6 billion. The authorization does not have
an
expiration date. The
amount and timing of share repurchase depends on key capital ratios,
rating agency expectations, the generation of free cash flow and
an
evaluation of the costs and benefits associated with alternative
uses of
capital.
|
(3)
|
As
of the last day of the applicable month.
|
|
LINCOLN
NATIONAL CORPORATION
|
|
By:
|
/s/ FREDERICK
J. CRAWFORD
|
|
Frederick
J. Crawford
Senior
Vice President and Chief Financial Officer
|
||
By:
|
/s/ DOUGLAS
N. MILLER
|
|
Douglas
N. Miller
Vice
President and Chief Accounting Officer
|
||
Date:
May 10, 2007
|
4.1
|
Fifth
Supplemental Junior Subordinated Indenture, dated as of March 13,
2007,
between Lincoln National Corporation and the Bank of New York Trust
Company, N.A., as trustee is incorporated by reference from Exhibit
4.1 of
LNC’s Form 8-K (File No. 1-6028) filed with the SEC on March 13,
2007.
|
4.2
|
Form
of 6.05% Capital Securities due 2067 is incorporated by reference
from
Exhibit 4.2 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
March 13, 2007.
|
4.3
|
Form
of Floating Rate Senior Notes due 2010 is incorporated by reference
from
Exhibit 4.3 of LNC’s Form 8-K (File No. 1-6028) filed with the SEC on
March 13, 2007.
|
4.4
|
|
10.1
|
|
10.2
|
|
12
|
|
31.1
|
|
31.2
|
|
32.1
|
|
32.2
|