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| EX-99.1 - EXHIBIT 99.1 - LINCOLN NATIONAL CORP | ex99-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
December 31,
2009
Date
of Report (Date of earliest event reported)
Lincoln National
Corporation
(Exact
name of registrant as specified in its charter)
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Indiana
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1-6028
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35-1140070
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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150 N. Radnor Chester Road,
Radnor, PA 19087
(Address
of principal executive offices) (Zip Code)
(484)
583-1400
(Registrant’s
telephone number, including area code)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
[
] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[
] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17
CFR 240.14d-2(b))
[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17
CFR 240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement
On
December 31, 2009, Lincoln National Corporation’s (“LNC”) newly formed, indirect
wholly owned subsidiaries, Lincoln Reinsurance Company of Vermont I (“LRCVI”)
and its direct parent Lincoln Financial Holdings, LLC II (“LFHII” and together
with LRCVI, the “Reimbursement Parties”), entered into a Reimbursement Agreement
(the “Reimbursement Agreement”), with Credit Suisse AG, New York Branch, as
issuing lender, lender and administrative agent thereunder (“Credit Suisse”).
Under the Reimbursement Agreement, on December 31, 2009, Credit Suisse issued a
$550 million 10-year letter of credit (the “LC”) for the benefit of
LNC’s wholly owned subsidiary, The Lincoln National Life Insurance Company
(“LNL”). The LC was issued to support certain obligations of LRCVI to provide
collateral to LNL for a portion of reserves related to level premium term life
insurance policies reinsured by LRCVI from LNL under an indemnity reinsurance
agreement, effective as of December 31, 2009. We estimate that the
transactions contemplated by the indemnity reinsurance agreement and
Reimbursement Agreement will result in approximately $400 million of initial
statutory capital relief to LNL as of the year ended December 31,
2009. The estimated annual expense under generally accepted
accounting principles is $10 million, after-tax.
Pursuant
to the terms of the Reimbursement Agreement, in the event amounts are drawn
under the LC by LNL, the Reimbursement Parties, jointly and severally, will be
obligated, subject to certain limited conditions, to reimburse Credit Suisse for
the amount of any such drawn amount (including interest thereon). The
Reimbursement Agreement is “non-recourse” to LNC and LNL, meaning that neither
is liable to Credit Suisse to reimburse any drawn amounts (or interest thereon);
provided, however that LNC has agreed, pursuant to the terms of a fee letter
with Credit Suisse, to be severally and jointly liable with the Reimbursement
Parties for the payment of LC fees. In connection with the Reimbursement
Agreement, each of the Reimbursement Parties has collateralized their
obligations to Credit Suisse by granting it a security interest in all of their
respective assets.
On
January 7, 2010, we issued a press release describing the transaction, which is
filed as exhibit 99.1 hereto.
Forward
Looking Statements — Cautionary Language
Certain
statements made in this press release are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995
("PSLRA"). A forward-looking statement is a statement that is not a
historical fact and, without limitation, includes any statement that may
predict, forecast, indicate or imply future results, performance or
achievements, and may contain words like: "believe", "anticipate", "expect",
"estimate", "project", "will", "shall" and other words or phrases with similar
meaning in connection with a discussion of future operating or financial
performance. In particular, these include statements relating to
future actions, trends in our businesses, prospective services or products,
future performance or financial results, and the outcome of contingencies, such
as legal proceedings. Lincoln claims the protection afforded by the
safe harbor for forward-looking statements provided by the PSLRA.
Forward-looking
statements involve risks and uncertainties that may cause actual results to
differ materially from the results contained in the forward-looking
statements. Risks and uncertainties that may cause actual results to
vary materially, some of which are described within the forward-looking
statements include, among others:
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·
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Deterioration
in general economic and business conditions, both domestic and foreign,
that may affect foreign exchange rates, premium levels, claims experience,
the level of pension benefit costs and funding and investment
results;
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·
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Future
economic declines and credit market illiquidity could cause us to realize
additional impairments on investments and certain intangible assets,
including goodwill and a valuation allowance against deferred tax assets,
which may reduce future earnings and/or affect its financial condition and
ability to raise additional capital or refinance existing debt as it
matures;
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·
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Uncertainty
about the impact of the U.S. Treasury's Troubled Asset Relief Program on
the economy;
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·
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The
cost and other consequences of our participation in the
Capital Purchase Program, including the impact of existing and
future regulations to which we may become
subject;
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·
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Legislative,
regulatory or tax changes, both domestic and foreign, that affect the cost
of, or demand for, Lincoln'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 43 also known as
VACARVM; restrictions on revenue sharing and 12b-1 payments; and the
potential for U.S. Federal tax
reform;
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·
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The
initiation of legal or regulatory proceedings against us, and the outcome
of any legal or regulatory proceedings, such as: adverse
actions related to present or past business practices common in businesses
in which we compete; 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; new decisions that result
in changes in law; and unexpected trial court
rulings;
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·
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Changes
in interest rates causing a reduction of investment income, the margins on
our fixed annuity and life insurance businesses and demand for our
products;
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·
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A
decline in the equity markets causing a reduction in the sales of our
products, a reduction of asset-based fees that we charge on various
investment and insurance products, an acceleration of amortization of
deferred acquisition costs, value of business acquired, deferred sales
inducements and deferred front-end loads and an increase in liabilities
related to guaranteed benefit features of our variable annuity
products;
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·
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Ineffectiveness
of our various hedging strategies used to offset the impact of changes in
the value of liabilities due to changes in the level and volatility of the
equity markets and interest rates;
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·
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A
deviation in actual experience regarding future persistency, mortality,
morbidity, interest rates or equity market returns from the assumptions
used in pricing our 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;
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·
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Changes
in GAAP that may result in unanticipated changes to our net
income;
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·
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Lowering
of one or more of our debt ratings issued by nationally recognized
statistical rating organizations and the adverse impact such action may
have on our ability to raise capital and on its liquidity and financial
condition;
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·
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Lowering
of one or more of the insurer financial strength ratings of our insurance
subsidiaries and the adverse impact such action may have on the premium
writings, policy retention, profitability and liquidity of our insurance
subsidiaries;
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·
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Significant
credit, accounting, fraud or corporate governance issues that may
adversely affect the value of certain investments in the portfolios of our
companies requiring that we realize losses on such
investments;
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·
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The
impact of acquisitions and divestitures, restructurings, product
withdrawals and other unusual items, including our ability to integrate
acquisitions and to obtain the anticipated results and synergies from
acquisitions;
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·
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The
adequacy and collectibility of reinsurance that we have
purchased;
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·
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Acts
of terrorism, a pandemic, war or other man-made and natural catastrophes
that may adversely affect our businesses and the cost and availability of
reinsurance;
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·
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Competitive
conditions, including pricing pressures, new product offerings and the
emergence of new competitors, that may affect the level of premiums and
fees that we can charge for our
products;
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·
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The
unknown impact on our business resulting from changes in the demographics
of our client base, as aging baby-boomers move from the asset-accumulation
stage to the asset-distribution stage of life;
and
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·
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Loss
of key management, financial planners or
wholesalers.
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The risks
included here are not exhaustive. Our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and other documents filed with
the SEC include additional factors which could impact our business and financial
performance. Moreover, we operate in a rapidly changing and competitive
environment. New risk factors emerge from time to time and it is not possible
for management to predict all such risk factors.
Further,
it is not possible to assess the impact of all risk factors on our business or
the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking
statements. Given these risks and uncertainties, investors should not place
undue reliance on forward-looking statements as a prediction of actual results.
In addition, we disclaim any obligation to update any forward-looking statements
to reflect events or circumstances that occur after the date of this
release.
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Item
9.01.
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Financial
Statements and Exhibits.
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(d)
Exhibits.
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Exhibit
Number
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Description
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99.1
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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LINCOLN
NATIONAL CORPORATION
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By
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/s/ Frederick J.
Crawford
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Name:
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Frederick
J. Crawford
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Title:
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Executive
Vice President and
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Chief
Financial Officer
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Date: January
7, 2010
INDEX
TO EXHIBITS
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Exhibit
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Number
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Description
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99.1
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