Attached files
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8-K - FORM 8-K - LINCOLN NATIONAL CORP | lincoln8k.htm |
EX-99.1 - PRESS RELEASE - LINCOLN NATIONAL CORP | ex99-1.htm |
Lincoln Financial Group
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Table of Contents
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First Quarter 2012
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Lincoln Financial Group Analyst Coverage
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i
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Notes
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ii-iii
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Financial Highlights
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1 - 3
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Consolidated Operating Expense Detail
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4
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Selected Financial Results Summary
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5
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Details Underlying Realized Gain (Loss), After-DAC and Benefit Ratio Unlocking
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6
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Consolidated Statements of Income (Loss)
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7
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Consolidated Roll Forwards of DAC, VOBA, DSI and DFEL
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8
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Consolidating Statements of Income (Loss) from Operations - Current Year - Quarter
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9
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Consolidating Statements of Income (Loss) from Operations - Prior Year - Quarter
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10
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Consolidated Balance Sheets and Selected Share Data
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11
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Balance Sheet Data - Segment Highlights
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12
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Annuities:
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Income (Loss) from Operations and Operational Data
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13
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DAC, VOBA, DSI and DFEL Roll Forwards
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14
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Account Value Roll Forwards and Information
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15
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Account Value Information
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16
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Interest Rate Spread Information, GLB Expense Assessments, GLB Attributed Fee
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and GLB Account Values by Type
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17
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Retirement Plan Services:
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Income (Loss) from Operations, Operational Data and DAC, VOBA and DSI Roll Forwards
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18
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Account Value Roll Forwards and Information
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19
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Account Value Roll Forwards by Product
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20
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Account Value and Interest Rate Spread Information
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21
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Life Insurance:
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Income (Loss) from Operations, Operational Data and DAC, VOBA and DFEL Roll Forwards
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22
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Additional Operational Data
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23
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Account Value Roll Forwards
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24
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Group Protection:
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Income (Loss) from Operations and Operational Data
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25
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Other Operations
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26
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Discontinued Operations
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26
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Consolidated Deposits, Net Flows and Account Balances
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27
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Consolidated Investment Data
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28
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3/31/2012
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i
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Lincoln Financial Group Analyst Coverage
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First Quarter 2012
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Firm
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Analyst
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Phone Number
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Bank of America - Merrill Lynch
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Ed Spehar
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646-855-1744
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Barclays Capital
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Jay Gelb
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212-526-1561
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Credit Suisse
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Tom Gallagher
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212-538-2010
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Dowling & Partners
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Ryan Krueger
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860-676-8600
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Evercore Partners
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Mark Finkelstein
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312-445-6440
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FBR Capital Markets
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Randy Binner
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703-312-1890
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Goldman Sachs & Company
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Christopher Giovanni
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212-357-3560
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J.P. Morgan Securities
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Jimmy Bhullar
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212-622-6397
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Keefe, Bruyette & Woods
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Jeff Schuman
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860-722-5902
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Langen McAlenney
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Bob Glasspiegel
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860-724-1203
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Macquarie Capital
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Sean Dargan
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212-231-0663
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Morgan Stanley
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Nigel Dally
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212-761-4132
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Raymond James & Associates
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Steven Schwartz
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312-612-7686
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RBC Capital
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Eric Berg
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212-618-7593
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Sandler O'Neil & Partners
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Edward Shields
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312-281-3487
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Scotia Capital
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Joanne Smith
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212-225-5071
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Sterne, Agee & Leach, Inc.
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John Nadel
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212-338-4717
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UBS
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Andrew Kligerman
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212-713-2492
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Wells Fargo Securities
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John Hall
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212-214-8032
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Investor Inquiries May Be Directed To
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Jim Sjoreen, Senior Vice President, Investor Relations
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Email: Jim.Sjoreen@lfg.com
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Voice: (484) 583-1420
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Fax: (484) 583-3962
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Notes
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This list is provided for informational purposes only. Lincoln Financial Group does not endorse the analyses, conclusions, or recommendations contained in any report issued by these or any other analysts.
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Lincoln Financial Group's Statistical Report will be available immediately after the release of earnings for each quarter through our Investor Relations website: www.LincolnFinancial.com/investor
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3/31/2012
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ii
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NOTES
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Definitions and Presentation
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"Income (loss) from operations," "operating revenues" and "return on capital" are non-GAAP financial measures and do not replace GAAP
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revenues, net income (loss) and return on stockholders' equity. Detailed reconciliations of these non-GAAP financial measures to the most directly
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comparable GAAP financial measure are included in this statistical supplement.
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•
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We exclude the after-tax effects of the following items from GAAP net income (loss) to arrive at income (loss) from operations:
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•
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Realized gains and losses associated with the following ("excluded realized gain (loss)"):
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•
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Sale or disposal of securities;
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Impairments of securities;
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Change in the fair value of derivative investments, embedded derivatives within certain reinsurance arrangements and our trading securities;
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Change in the fair value of the derivatives we own to hedge our guaranteed death benefit ("GDB") riders within our variable annuities, which
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is referred to as "GDB derivatives results;"
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Change in the fair value of the embedded derivatives of our guaranteed living benefit (“GLB”) riders within our variable annuities accounted
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for under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the Financial Accounting Standards Board
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("FASB") Accounting Standards Codification ("ASC") (“embedded derivative reserves”), net of the change in the fair value of the derivatives
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we own to hedge the changes in the embedded derivative reserves, the net of which is referred to as “GLB net derivative results;” and
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•
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Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract
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holder index allocations applicable to future reset periods for our indexed annuity products accounted for under the Derivatives and Hedging
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and the Fair Value Measurements and Disclosures Topics of the FASB ASC (“indexed annuity forward-starting option”).
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•
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Change in reserves accounted for under the Financial Services - Insurance - Claim Costs and Liabilities for Future Policy Benefits Subtopic of
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the FASB ASC resulting from benefit ratio unlocking on our GDB and GLB riders ("benefit ratio unlocking");
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•
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Income (loss) from the initial adoption of new accounting standards;
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Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance;
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Gain (loss) on early extinguishment of debt;
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Losses from the impairment of intangible assets; and
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Income (loss) from discontinued operations.
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Income (loss) from operations available to common stockholders is net income (loss) available to common stockholders (used in the calculation of
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earnings (loss) per share) in accordance with GAAP, excluding the after-tax effects of the items above and the acceleration of our Series B preferred
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stock discount as a result of redemption prior to five years from the date of issuance.
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Operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
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Excluded realized gain (loss);
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Amortization of deferred front-end loads ("DFEL") arising from changes in GDB and GLB benefit ratio unlocking;
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Amortization of deferred gains arising from the reserve changes on business sold through reinsurance; and
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Revenue adjustments from the initial adoption of new accounting standards.
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Return on equity measures how efficiently we generate profits from the resources provided by our net assets. Return on equity is calculated
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by dividing annualized net income (loss) by average equity, excluding accumulated other comprehensive income (loss) ("AOCI"). Management
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evaluates return on equity by both including and excluding average goodwill within average equity.
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•
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Return on capital measures the effectiveness of our use of total capital, which includes equity (excluding accumulated other
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comprehensive income), debt, capital securities and junior subordinated debentures issued to affiliated trusts. Return on capital is
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calculated by dividing annualized income (loss) from operations (after adding back interest expense) by average capital. The difference
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between return on capital and return on stockholders' equity represents the effect of leveraging on our consolidated results.
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Income (loss) from operations, operating revenues, return on equity (including and excluding average goodwill within average equity), excluding AOCI,
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using annualized income (loss) from operations and return on capital are financial measures we use to evaluate and assess our results. Our management
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and Board of Directors believe that these performance measures explain the results of our ongoing businesses in a manner that allows for a better
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understanding of the underlying trends in our current business because the excluded items are unpredictable and not necessarily indicative of current
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operating fundamentals or future performance of the business segments, and, in most instances, decisions regarding these items do not necessarily relate
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to the operations of the individual segments. In addition, we believe that our definitions of operating revenues and income (loss) from operations
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will provide investors with a more valuable measure of our performance because it better reveals trends in our business.
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•
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Certain operating and statistical measures are included in this report to provide supplemental data regarding the performance of our
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current business. These measures include deposits, sales, net flows, first-year premiums, in force and spreads.
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•
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Sales as reported consist of the following:
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•
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Universal life ("UL") (excluding linked-benefit products) and variable universal life ("VUL"), including corporate-owned life
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insurance ("COLI") and bank-owned life insurance ("BOLI") - first year commissionable premiums plus 5% of excess premiums
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received, including an adjustment for internal replacements at approximately 50% of target;
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Whole life and term - 100% of first year paid premiums;
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Linked-benefit - 15% of premium deposits;
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Annuities - deposits from new and existing customers; and
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•
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Group Protection - annualized first year premiums from new policies.
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iii
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Book value per share excluding AOCI is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) stockholders' equity
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excluding AOCI , by (b) common shares outstanding, assuming conversion of Series A preferred shares. We provide book value per share excluding
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AOCI to enable investors to analyze the amount of our net worth that is attributable primarily to our business operations. We believe book value per
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share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily
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based on changes in interest rates. Book value per share is the most directly comparable GAAP measure.
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Pre-tax operating margin is calculated as income (loss) from operations before federal income taxes divided by operating revenues. After-tax operating
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margin is calculated as income (loss) from operations divided by operating revenues.
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We use our prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently
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in our financial statements and federal income tax returns when reconciling our non-GAAP measures to the most comparable GAAP measure.
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Throughout the document, "after-DAC" refers to the associated amortization expense of DAC, VOBA, DSI and DFEL and changes in other contract
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holder funds and funds withheld reinsurance liabilities.
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We adopted the provisions of ASU 2010-26 “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts” (“ASU 2010-26”)
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effective January 1, 2012, and elected to retrospectively restate all prior periods, including herein. ASU No. 2010-26 clarified the types of costs incurred
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by an insurance entity that can be capitalized in the acquisition of insurance contracts. Only those costs incurred that result directly from and are
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essential to the successful acquisition of new or renewal insurance contracts may be capitalized as deferrable acquisition costs. The determination of
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deferability must be made on a contract-level basis.
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Reclassifications
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In addition to the items discussed above, certain amounts reported in prior periods have been reclassified to the presentation adopted in the current
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period. These reclassifications had no effect on net income, income from operations or stockholders' equity in the prior period.
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3/31/2012
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PAGE 1 | |||||||||||
Financial Highlights
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Unaudited (in millions, except per share data)
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For the Three Months Ended March 31,
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Change
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2012
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2011
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Amount
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%
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Income (Loss) from Operations - By Segment
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Annuities
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$ | 136.6 | $ | 144.0 | $ | (7.4 | ) | -5.1 | % | |||
Retirement Plan Services
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34.6 | 48.2 | (13.6 | ) | -28.2 | % | ||||||
Life Insurance
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142.3 | 142.4 | (0.1 | ) | -0.1 | % | ||||||
Group Protection
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16.1 | 24.1 | (8.0 | ) | -33.2 | % | ||||||
Other Operations
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(33.9 | ) | (37.0 | ) | 3.1 | 8.4 | % | |||||
Income (Loss) from Operations (1) | 295.7 | 321.7 | (26.0 | ) | -8.1 | % | ||||||
Excluded realized gain (loss), after-tax (2) (3)
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(73.4 | ) | (13.5 | ) | (59.9 | ) |
NM
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Benefit ratio unlocking, after-tax (2) (3)
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23.4 | 4.9 | 18.5 |
NM
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Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance, after-tax (3)
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0.4 | 0.4 | - | 0.0 | % | |||||||
Income (loss) from discontinued operations, after-tax (4)
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(0.8 | ) | - | (0.8 | ) |
NM
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Net Income (Loss) | $ | 245.3 | $ | 313.5 | $ | (68.2 | ) | -21.8 | % | |||
Earnings Per Common Share - Diluted
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Income (loss) from operations (1) (5)
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$ | 1.00 | $ | 1.00 | $ | - | - | |||||
Excluded realized gain (loss), after-tax (2) (3)
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(0.25 | ) | (0.04 | ) | (0.21 | ) |
NM
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Benefit ratio unlocking, after-tax (2) (3)
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0.08 | 0.01 | 0.07 |
NM
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Net Income (Loss) (5) | $ | 0.83 | $ | 0.97 | $ | (0.14 | ) | -14.4 | % | |||
Operating Revenues - By Segment
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Annuities
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$ | 730.7 | $ | 733.2 | $ | (2.5 | ) | -0.3 | % | |||
Retirement Plan Services
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252.1 | 263.3 | (11.2 | ) | -4.3 | % | ||||||
Life Insurance
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1,232.6 | 1,147.1 | 85.5 | 7.5 | % | |||||||
Group Protection
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503.6 | 477.9 | 25.7 | 5.4 | % | |||||||
Other Operations
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106.5 | 116.4 | (9.9 | ) | -8.5 | % | ||||||
Total Operating Revenues | 2,825.5 | 2,737.9 | 87.6 | 3.2 | % | |||||||
Excluded realized gain (loss), pre-tax (2)
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(113.0 | ) | (20.8 | ) | (92.2 | ) |
NM
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Amortization income of DFEL associated with benefit ratio unlocking, pre-tax
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1.2 | 0.2 | 1.0 |
NM
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Amortization of deferred gains arising from reserve changes on business sold through reinsurance, pre-tax | 0.7 | 0.7 | - | - | ||||||||
Total Revenues | $ | 2,714.4 | $ | 2,718.0 | $ | (3.6 | ) | -0.1 | % |
(1)
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Income (loss) from operations includes restructuring charges. See page 5 for detail.
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(2)
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See page 6 for detail.
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(3)
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We use our prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns when reconciling our non-GAAP
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measures to the most comparable GAAP measure.
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(4)
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Includes discontinued operations and the gain (loss) on disposal. See Discontinued Operations on page 26 for details.
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(5)
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The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans if the effect of equity classification would be more dilutive to our diluted EPS.
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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.
3/31/2012
|
PAGE 2 | |||||||||||
Financial Highlights (Continued)
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Unaudited (in billions)
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For the Three Months Ended March 31,
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Change
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2012
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2011
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Amount
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%
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Annuities
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Gross deposits
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$ | 2.480 | $ | 2.639 | $ | (0.159 | ) | -6.0 | % | |||
Net flows
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0.293 | 0.483 | (0.190 | ) | -39.3 | % | ||||||
Account values (gross)
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92.552 | 88.734 | 3.818 | 4.3 | % | |||||||
Account values (net of reinsurance)
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91.668 | 87.785 | 3.883 | 4.4 | % | |||||||
Retirement Plan Services
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Gross deposits (1)
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$ | 1.511 | $ | 1.341 | $ | 0.170 | 12.7 | % | ||||
Net flows
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0.212 | 0.134 | 0.078 | 58.2 | % | |||||||
Account values - annuities
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27.779 | 27.356 | 0.423 | 1.5 | % | |||||||
Alliance and Smart Future mutual funds
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14.241 | 12.952 | 1.289 | 10.0 | % | |||||||
Total annuities and mutual fund account values
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42.020 | 40.308 | 1.712 | 4.2 | % | |||||||
Life Insurance
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Sales (in millions)
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$ | 121.7 | $ | 159.0 | $ | (37.3 | ) | -23.5 | % | |||
Life insurance in force
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579.963 | 566.684 | 13.279 | 2.3 | % | |||||||
Gross deposits
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1.159 | 1.270 | (0.111 | ) | -8.7 | % | ||||||
Net flows
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0.751 | 0.821 | (0.070 | ) | -8.5 | % | ||||||
Account values (net of reinsurance)
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36.008 | 34.149 | 1.859 | 5.4 | % | |||||||
Group Protection
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Annualized sales (in millions)
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$ | 66.6 | $ | 45.4 | $ | 21.2 | 46.7 | % | ||||
Loss ratio (2)
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74.9 | % | 74.1 | % |
NM
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NM
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Consolidated
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Total deposits
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$ | 5.150 | $ | 5.250 | $ | (0.100 | ) | -1.9 | % | |||
Total account balances
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169.696 | 162.242 | 7.454 | 4.6 | % | |||||||
Total net flows
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1.256 | 1.438 | (0.182 | ) | -12.7 | % |
(1)
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Includes deposits for mutual funds. Mutual fund account values are not included in the separate accounts reported on our Consolidated Balance Sheets, as we do not have any ownership interest in them.
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(2)
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Represents combined loss ratio for life, disability and dental businesses.
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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.
3/31/2012
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PAGE 3 | |||||||||||
Financial Highlights (Continued)
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Unaudited (in millions)
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For the Three Months Ended March 31,
|
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Change
|
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2012
|
2011
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Amount
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%
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||||||||||
Balance Sheet Assets - End-of-Period
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$ | 208,018.2 | $ | 196,740.4 | $ | 11,277.8 | 5.7 | % | |||||
Stockholders' Equity
|
|||||||||||||
Beginning-of-period, including AOCI
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$ | 13,237.9 | $ | 11,814.2 | $ | 1,423.7 | 12.1 | % | |||||
End-of-period, including AOCI
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13,261.0 | 12,058.8 | 1,202.2 | 10.0 | % | ||||||||
End-of-period, excluding AOCI
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10,639.1 | 11,186.1 | (547.0 | ) | -4.9 | % | |||||||
Average equity, excluding AOCI
|
10,599.1 | 11,074.6 | (475.5 | ) | -4.3 | % | |||||||
Return on Equity, Excluding AOCI
|
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Income (loss) from operations with average equity:
|
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Including goodwill
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11.2 | % | 11.6 | % | |||||||||
Excluding goodwill
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14.2 | % | 16.0 | % | |||||||||
Return on Capital
|
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Income (loss) from operations/average capital
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8.3 | % | 8.8 | % | |||||||||
Common Shares Outstanding
|
|||||||||||||
Average for the period - basic
|
289.1 | 315.0 | (25.9 | ) | -8.2 | % | |||||||
Average for the period - diluted
|
295.9 | 322.9 | (27.0 | ) | -8.4 | % | |||||||
End-of-period - assuming conversion of preferreds
|
285.6 | 313.6 | (28.0 | ) | -8.9 | % | |||||||
End-of-period - diluted
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293.0 | 321.3 | (28.3 | ) | -8.8 | % | |||||||
Book value per common share, including AOCI
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$ | 46.43 | $ | 38.45 | $ | 7.98 | 20.8 | % | |||||
Book value per common share, excluding AOCI
|
37.25 | 35.67 | 1.58 | 4.4 | % | ||||||||
Cash Returned to Common Stockholders
|
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Share repurchase - dollar amount
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$ | 150.10 | $ | 75.00 | $ | 75.10 | 100.1 | % | |||||
Common dividends declared
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22.80 | 15.80 | 7.00 | 44.3 | % | ||||||||
Total cash returned to common stockholders | $ | 172.90 | $ | 90.80 | $ | 82.10 | 90.4 | % | |||||
Share repurchase - number of shares
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6.02 | 2.41 | 3.60 | 149.3 | % | ||||||||
Dividend declared on common stock - per share
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$ | 0.080 | $ | 0.050 | $ | 0.030 | 60.0 | % | |||||
Dividend payout ratio
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9.6 | % | 5.2 | % | |||||||||
Annualized yield (1)
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1.2 | % | 0.7 | % | |||||||||
Comprehensive Income (Loss)
|
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Net income (loss)
|
$ | 245.3 | $ | 313.5 | $ | (68.2 | ) | -21.8 | % | ||||
Net unrealized gain (loss) on available-for-sale securities
|
(13.4 | ) | 8.1 | (21.5 | ) |
NM
|
|||||||
Unrealized other-than-temporary impairment on available-for-sale securities
|
(9.3 | ) | 21.6 | (30.9 | ) |
NM
|
|||||||
Net unrealized gain (loss) on derivative instruments
|
(29.8 | ) | (8.4 | ) | (21.4 | ) |
NM
|
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Foreign currency translation adjustment
|
(3.5 | ) | 1.0 | (4.5 | ) |
NM
|
|||||||
Funded status of employee benefit plans
|
(1.0 | ) | (0.8 | ) | (0.2 | ) | -25.0 | % | |||||
Comprehensive income (loss) | $ | 188.3 | $ | 335.0 | $ | (146.7 | ) | -43.8 | % | ||||
As of March 31,
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Change
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2012 | 2011 |
Amount
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%
|
||||||||||
Leverage Ratio
|
|||||||||||||
Short-term debt
|
$ | 299.9 | $ | 351.6 | $ | (51.7 | ) | -14.7 | % | ||||
Long-term debt
|
5,606.4 | 5,369.6 | 236.8 | 4.4 | % | ||||||||
Total debt
|
5,906.3 | 5,721.2 | 185.1 | 3.2 | % | ||||||||
Less:
|
|||||||||||||
Long-term operating debt (2)
|
1,122.3 | 1,122.2 | 0.1 | 0.0 | % | ||||||||
75% of capital securities
|
908.1 | 1,114.1 | (206.0 | ) | -18.5 | % | |||||||
Carrying value of fair value hedge
|
233.9 | 25.1 | 208.8 |
NM
|
|||||||||
Total numerator
|
$ | 3,642.0 | $ | 3,459.8 | $ | 182.2 | 5.3 | % | |||||
Stockholders' equity, excluding AOCI
|
$ | 10,639.1 | $ | 11,186.1 | $ | (547.0 | ) | -4.9 | % | ||||
Total debt
|
5,906.3 | 5,721.2 | 185.1 | 3.2 | % | ||||||||
Total denominator
|
$ | 16,545.4 | $ | 16,907.3 | $ | (361.9 | ) | -2.1 | % | ||||
Leverage Ratio
|
22.0 | % | 20.5 | % | |||||||||
Ratings as of May 2, 2012
|
|||||||||||||
Standard &
|
|||||||||||||
A.M. Best
|
Fitch
|
Moody's
|
Poor's
|
||||||||||
Senior Debt Ratings
|
a- |
BBB+
|
Baa2
|
A- | |||||||||
Financial Strength Ratings
|
|||||||||||||
Lincoln National Life Insurance Company
|
A+ | A+ | A2 |
AA-
|
|||||||||
First Penn-Pacific Life Insurance Company
|
A+ | A+ | A2 | A- | |||||||||
Lincoln Life & Annuity Company of New York
|
A+ | A+ | A2 |
AA-
|
(1)
|
Indicated dividend divided by the closing price.
|
||||||||||||
(2)
|
We have categorized as operating debt the senior notes issued in October 2007 and June 2010 because the proceeds were used as a long-term
|
||||||||||||
structured solution to reduce the strain on increasing statutory reserves associated with secondary guarantee UL and term policies and the
|
|||||||||||||
senior note issued in September 2008 by our primary insurance subsidiary.
|
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.
3/31/2012
|
PAGE 4 | |||||||||||||||||
Consolidated Operating Expense Detail
|
||||||||||||||||||
Unaudited (in millions)
|
||||||||||||||||||
|
|
|||||||||||||||||
For the Three Months Ended
|
||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
|||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
|||||||||||||
Commissions and Expenses Incurred
|
||||||||||||||||||
General and administrative expenses
|
$ | 365.0 | $ | 366.1 | $ | 368.4 | $ | 409.5 | $ | 398.6 | 9.2 | % | ||||||
Commissions
|
484.3 | 491.9 | 474.2 | 482.7 | 450.9 | -6.9 | % | |||||||||||
Media expenses
|
16.7 | 16.8 | 17.3 | 18.3 | 16.1 | -3.6 | % | |||||||||||
Taxes, licenses and fees
|
61.8 | 52.8 | 75.2 | 62.3 | 62.5 | 1.1 | % | |||||||||||
Interest and debt expense
|
71.6 | 72.0 | 71.0 | 70.5 | 67.5 | -5.7 | % | |||||||||||
Expenses associated with reserve financing and unrelated letters of credit ("LOCs")
|
11.4 | 12.4 | 10.7 | 12.9 | 13.1 | 14.9 | % | |||||||||||
Total Commissions and Expenses Incurred | 1,010.8 | 1,012.0 | 1,016.8 | 1,056.2 | 1,008.7 | -0.2 | % | |||||||||||
Less: Commissions and Expenses Capitalized
|
||||||||||||||||||
General and administrative expenses capitalized
|
(41.8 | ) | (44.4 | ) | (46.8 | ) | (60.2 | ) | (42.3 | ) | -1.2 | % | ||||||
Commissions capitalized
|
(284.8 | ) | (296.1 | ) | (281.4 | ) | (290.1 | ) | (238.5 | ) | 16.3 | % | ||||||
Taxes, licenses and fees capitalized
|
(11.7 | ) | (11.3 | ) | (12.8 | ) | (13.9 | ) | (9.6 | ) | 17.9 | % | ||||||
Total Commissions and Expenses Capitalized
|
(338.3 | ) | (351.8 | ) | (341.0 | ) | (364.2 | ) | (290.4 | ) | 14.2 | % | ||||||
Total Expenses Incurred, Net of Amounts Capitalized, Excluding Amortization | 672.5 | 660.2 | 675.8 | 692.0 | 718.3 | 6.8 | % | |||||||||||
Amortization
|
||||||||||||||||||
Amortization of DAC and VOBA, net of interest
|
166.5 | 84.7 | 424.8 | 169.6 | 199.8 | 20.0 | % | |||||||||||
Amortization of intangibles
|
1.0 | 1.1 | 1.0 | 1.0 | 1.0 | 0.0 | % | |||||||||||
Total Amortization | 167.5 | 85.8 | 425.8 | 170.6 | 200.8 | 19.9 | % | |||||||||||
Total | $ | 840.0 | $ | 746.0 | $ | 1,101.6 | $ | 862.6 | $ | 919.1 | 9.4 | % | ||||||
General and Administrative Expenses, Net of Amounts Capitalized - As a Percentage of Operating Revenues | 11.8 | % | 11.3 | % | 11.8 | % | 12.9 | % | 12.6 | % |
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.
3/31/2012
|
|
PAGE 5 | |||||||||||||||||
Selected Financial Results Summary
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Operating Revenues
|
|||||||||||||||||||
Annuities
|
$ | 733.2 | $ | 734.8 | $ | 711.0 | $ | 691.7 | $ | 730.7 | -0.3 | % | |||||||
Retirement Plan Services
|
263.3 | 259.7 | 247.8 | 246.3 | 252.1 | -4.3 | % | ||||||||||||
Life Insurance
|
1,147.1 | 1,229.0 | 1,176.3 | 1,187.0 | 1,232.6 | 7.5 | % | ||||||||||||
Group Protection
|
477.9 | 500.6 | 479.4 | 481.0 | 503.6 | 5.4 | % | ||||||||||||
Other Operations
|
116.4 | 115.3 | 120.1 | 109.3 | 106.5 | -8.5 | % | ||||||||||||
Total Operating Revenues | 2,737.9 | 2,839.4 | 2,734.6 | 2,715.3 | 2,825.5 | 3.2 | % | ||||||||||||
Excluded realized gain (loss), pre-tax (1)
|
(20.8 | ) | (32.6 | ) | (186.1 | ) | (149.1 | ) | (113.0 | ) |
NM
|
||||||||
Amortization of DFEL associated with benefit ratio unlocking, pre-tax
|
0.2 | - | (1.7 | ) | 1.0 | 1.2 |
NM
|
||||||||||||
Amortization of deferred gains arising from reserve changes on business sold through reinsurance, pre-tax | 0.7 | 0.7 | 0.7 | 0.7 | 0.7 | 0.0 | % | ||||||||||||
Total Revenues | $ | 2,718.0 | $ | 2,807.5 | $ | 2,547.5 | $ | 2,567.9 | $ | 2,714.4 | -0.1 | % | |||||||
Income (Loss) from Operations
|
|||||||||||||||||||
Annuities
|
$ | 144.0 | $ | 144.8 | $ | 153.3 | $ | 130.8 | $ | 136.6 | -5.1 | % | |||||||
Retirement Plan Services
|
48.2 | 41.4 | 39.2 | 33.3 | 34.6 | -28.2 | % | ||||||||||||
Life Insurance
|
142.4 | 136.4 | 153.8 | 138.2 | 142.3 | -0.1 | % | ||||||||||||
Group Protection
|
24.1 | 25.6 | 26.8 | 20.5 | 16.1 | -33.2 | % | ||||||||||||
Other Operations
|
(37.0 | ) | (22.2 | ) | (44.2 | ) | (42.8 | ) | (33.9 | ) | 8.4 | % | |||||||
Income (Loss) from Operations | 321.7 | 326.0 | 328.9 | 280.0 | 295.7 | -8.1 | % | ||||||||||||
Excluded realized gain (loss), after-tax (1) (2)
|
(13.5 | ) | (21.2 | ) | (121.0 | ) | (96.9 | ) | (73.4 | ) |
NM
|
||||||||
Benefit ratio unlocking, after-tax (1) (2)
|
4.9 | (1.3 | ) | (41.5 | ) | 24.5 | 23.4 |
NM
|
|||||||||||
Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance, after-tax (2) | 0.4 | 0.4 | 0.4 | 0.4 | 0.4 | 0.0 | % | ||||||||||||
Gain (loss) on early extinguishment of debt, after-tax (2)
|
- | - | (5.5 | ) | - | - |
NM
|
||||||||||||
Impairment of intangibles, after-tax (2)
|
- | - | - | (746.7 | ) | - |
NM
|
||||||||||||
Income (loss) from discontinued operations, after-tax (3)
|
- | - | (8.4 | ) | - | (0.8 | ) |
NM
|
|||||||||||
Net Income (Loss) | 313.5 | 303.9 | 152.9 | (538.7 | ) | 245.3 | -21.8 | % | |||||||||||
Adjustment for deferred units of LNC stock in our deferred
|
|||||||||||||||||||
compensation plans (4)
|
- | (1.3 | ) | (6.3 | ) | - | - |
NM
|
|||||||||||
Net Income (Loss) Available to Common Stockholders - Diluted | $ | 313.5 | $ | 302.6 | $ | 146.6 | $ | (538.7 | ) | $ | 245.3 | -21.8 | % | ||||||
Stockholders' Equity
|
|||||||||||||||||||
Beginning-of-period, including AOCI
|
$ | 11,814.2 | $ | 12,058.8 | $ | 12,557.8 | $ | 13,986.9 | $ | 13,237.9 | |||||||||
End-of-period, including AOCI
|
12,058.8 | 12,557.8 | 13,986.9 | 13,237.9 | 13,261.0 | ||||||||||||||
End-of-period, excluding AOCI
|
11,186.1 | 11,331.3 | 11,323.0 | 10,559.0 | 10,639.1 | ||||||||||||||
Average Stockholders' Equity
|
|||||||||||||||||||
Average equity, including average AOCI
|
$ | 11,936.5 | $ | 12,308.3 | $ | 13,272.4 | $ | 13,612.4 | $ | 13,249.5 | |||||||||
Average AOCI
|
861.9 | 1,049.6 | 1,945.3 | 2,671.4 | 2,650.4 | ||||||||||||||
Average equity, excluding AOCI
|
11,074.6 | 11,258.7 | 11,327.1 | 10,941.0 | 10,599.1 | ||||||||||||||
Average goodwill
|
3,019.4 | 3,019.4 | 3,019.4 | 2,646.1 | 2,272.8 | ||||||||||||||
Average equity, excluding AOCI and goodwill
|
$ | 8,055.2 | $ | 8,239.3 | $ | 8,307.7 | $ | 8,294.9 | $ | 8,326.3 | |||||||||
Common Shares Outstanding
|
|||||||||||||||||||
Average for the period - basic
|
315.0 | 311.4 | 304.8 | 297.9 | 289.1 | ||||||||||||||
Average for the period - diluted
|
322.9 | 319.9 | 312.0 | 303.4 | 295.9 | ||||||||||||||
End-of-period - diluted
|
321.3 | 316.8 | 306.9 | 297.0 | 293.0 | ||||||||||||||
Earnings (Loss) Per Common Share - Diluted
|
|||||||||||||||||||
Income (loss) from operations (5)
|
$ | 1.00 | $ | 1.02 | $ | 1.04 | $ | 0.92 | $ | 1.00 | |||||||||
Net income (loss) (5)
|
0.97 | 0.95 | 0.47 | (1.81 | ) | 0.83 | |||||||||||||
Stockholders' Equity Per Common Share
|
|||||||||||||||||||
Stockholders' equity, including AOCI
|
$ | 38.45 | $ | 40.71 | $ | 46.34 | $ | 45.41 | $ | 46.43 | |||||||||
Stockholders' equity, excluding AOCI
|
35.67 | 36.73 | 37.52 | 36.22 | 37.25 | ||||||||||||||
Dividends declared (common stock)
|
0.050 | 0.050 | 0.050 | 0.080 | 0.080 | ||||||||||||||
Return on Equity, Excluding AOCI
|
|||||||||||||||||||
Net income (loss) with average equity including goodwill
|
11.3 | % | 10.8 | % | 5.4 | % | -19.7 | % | 9.3 | % | |||||||||
Income (loss) from operations with average equity including goodwill
|
11.6 | % | 11.6 | % | 11.6 | % | 10.2 | % | 11.2 | % | |||||||||
Income (loss) from operations with average equity excluding goodwill
|
16.0 | % | 15.8 | % | 15.8 | % | 13.5 | % | 14.2 | % | |||||||||
Market Value of Common Shares
|
|||||||||||||||||||
Highest price
|
$ | 32.68 | $ | 32.39 | $ | 29.67 | $ | 21.88 | $ | 27.54 | |||||||||
Lowest price
|
28.00 | 25.97 | 15.00 | 13.75 | 19.38 | ||||||||||||||
Closing price
|
30.04 | 28.49 | 15.63 | 19.42 | 26.36 | ||||||||||||||
(1)
|
See page 6 for detail.
|
||||||||||||||||||
(2)
|
We use our prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns when reconciling our non-GAAP
|
||||||||||||||||||
measures to the most comparable GAAP measure.
|
|||||||||||||||||||
(3)
|
Includes discontinued operations and the gain (loss) on disposal. See Discontinued Operations on page 26 for details.
|
||||||||||||||||||
(4)
|
The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans if the effect of equity classification would be more dilutive to our diluted EPS.
|
||||||||||||||||||
(5)
|
For any period where a loss from continuing operations is experienced, shares used in the diluted EPS calculation represent basic shares since using diluted shares would be anti-dilutive to the calculation. In these periods we would also exclude the
|
||||||||||||||||||
adjustment discussed in footnote (4) above when arriving at EPS. |
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.
3/31/2012
|
PAGE 6 | |||||||||||||||||
Details Underlying Realized Gain (Loss), After-DAC and Benefit Ratio Unlocking
|
||||||||||||||||||
Unaudited (in millions)
|
||||||||||||||||||
For the Three Months Ended
|
||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
|||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
|||||||||||||
Components of Realized Gain (Loss), Pre-Tax
|
||||||||||||||||||
Total operating realized gain (loss) (1)(2)
|
$ | 22.9 | $ | 23.5 | $ | 23.1 | $ | 24.9 | $ | 27.3 | 19.2 | % | ||||||
Total excluded realized gain (loss) (3)(4)(5)(6)(7)
|
(20.8 | ) | (32.6 | ) | (186.1 | ) | (149.1 | ) | (113.0 | ) |
NM
|
|||||||
Total realized gain (loss), pre-tax | $ | 2.1 | $ | (9.1 | ) | $ | (163.0 | ) | $ | (124.2 | ) | $ | (85.7 | ) |
NM
|
|||
Reconciliation of Excluded Realized Gain (Loss) Net of Benefit Ratio Unlocking, After-Tax (8) | ||||||||||||||||||
Total excluded realized gain (loss) (3)(4)(5)(6)(7)
|
$ | (13.5 | ) | $ | (21.2 | ) | $ | (121.0 | ) | $ | (96.9 | ) | $ | (73.4 | ) |
NM
|
||
Benefit ratio unlocking (9)
|
4.9 | (1.3 | ) | (41.5 | ) | 24.5 | 23.4 |
NM
|
||||||||||
Excluded realized gain (loss) net of benefit ratio unlocking, after-tax | $ | (8.6 | ) | $ | (22.5 | ) | $ | (162.5 | ) | $ | (72.4 | ) | $ | (50.0 | ) |
NM
|
||
Components of Excluded Realized Gain (Loss) Net of Benefit Ratio Unlocking, After-Tax (8) | ||||||||||||||||||
Realized gain (loss) related to certain investments (3)
|
$ | (9.6 | ) | $ | (21.2 | ) | $ | (28.7 | ) | $ | (37.0 | ) | $ | (31.6 | ) |
NM
|
||
Gain (loss) on the mark-to-market on certaininstruments (4) | 6.8 | (0.5 | ) | (68.5 | ) | 8.7 | 37.5 |
NM
|
||||||||||
Variable annuity net derivatives results: (5)(6)(9)
|
||||||||||||||||||
Hedge program performance | (18.0 | ) | (11.5 | ) | (91.5 | ) | 5.8 | 18.6 | 203.3 | % | ||||||||
Unlocking for GLB reserves hedged | - | - | (78.3 | ) | - | - |
NM
|
|||||||||||
GLB NPR component | 10.5 | 10.5 | 106.3 | (49.5 | ) | (84.3 | ) |
NM
|
||||||||||
Total variable annuity net derivatives results | (7.5 | ) | (1.0 | ) | (63.5 | ) | (43.7 | ) | (65.7 | ) |
NM
|
|||||||
Indexed annuity forward-starting option (7)
|
1.7 | 0.2 | (1.8 | ) | (0.4 | ) | 9.8 |
NM
|
||||||||||
Excluded realized gain (loss) net of benefit ratiounlocking, after-tax | $ | (8.6 | ) | $ | (22.5 | ) | $ | (162.5 | ) | $ | (72.4 | ) | $ | (50.0 | ) |
NM
|
(1)
|
Includes 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 annuity products. The change in the fair value
|
of the liability for the embedded derivative represents the amount that is credited to the indexed annuity contract.
|
|
(2)
|
Includes the "risk/profit margin" portion of the attributed GLB rider fees. We have certain GLB variable annuity riders with GWB and GIB features that are embedded derivatives. We attribute to the embedded derivative the portion of total fees collected
|
from the contract holder that relates to the GLB riders (the “attributed fees”). These attributed fees represent the present value of future claims expected to be paid for the GLB at the inception of the contract (the “net valuation premium”) plus a margin that a
|
|
theoretical market participant would include for risk/profit (the “risk/profit margin”). We include the net valuation premium of the GLB attributed rider fees in excluded realized gain (loss). For our Annuities and Retirement Plan Services segments, the
|
|
total fees collected from the contract holders in excess of the GLB attributed fees are reported in insurance fees.
|
|
(3)
|
See page 28 for detail.
|
(4)
|
Includes changes in the fair values of certain derivative investments (including the credit default swaps and contingent forwards associated with consolidated VIEs), total return swaps (embedded derivatives that are theoretically included
|
in our various modified coinsurance and coinsurance with funds withheld reinsurance arrangements that have contractual returns related to various assets and liabilities associated with these arrangements) and trading securities.
|
|
(5)
|
Includes the net valuation premium, the change in GLB embedded derivative reserves and the change in the fair value of the derivative instruments we own to hedge them, including the cost of purchasing the hedging instruments. In addition, these
|
results include the changes in reserves not accounted for at fair value and resulting benefit ratio unlocking on our GDB and GLB riders and the change in the fair value of the derivative instruments we own to hedge them.
|
|
(6)
|
Includes the change in the fair value of the derivatives we own to hedge the change in the GDB riders.
|
(7)
|
Includes 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.
|
(8)
|
We use our prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns when reconciling our
|
non-GAAP measures to the most comparable GAAP measure.
|
|
(9)
|
Represents or includes changes in reserves not accounted for at fair value and resulting from benefit ratio unlocking on our GDB and GLB riders.
|
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.
3/31/2012
|
|
PAGE 7 | |||||||||||||||||
Consolidated Statements of Income (Loss)
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Revenues
|
|||||||||||||||||||
Insurance premiums
|
$ | 567.8 | $ | 594.1 | $ | 559.0 | $ | 573.1 | $ | 588.9 | 3.7 | % | |||||||
Surrender charges
|
34.2 | 40.2 | 29.5 | 29.2 | 29.4 | -14.0 | % | ||||||||||||
Mortality assessments
|
324.7 | 326.7 | 335.1 | 325.1 | 336.9 | 3.8 | % | ||||||||||||
Expense assessments
|
458.8 | 533.2 | 499.8 | 500.0 | 540.7 | 17.9 | % | ||||||||||||
Net investment income
|
1,191.2 | 1,180.6 | 1,150.7 | 1,129.3 | 1,165.8 | -2.1 | % | ||||||||||||
Realized gain (loss):
|
|||||||||||||||||||
Total other-than-temporary impairment losses on securities | (43.6 | ) | (47.1 | ) | (44.1 | ) | (33.9 | ) | (97.2 | ) |
NM
|
||||||||
Portion of loss recognized in other comprehensive income | 2.9 | 16.0 | 17.6 | 8.5 | 49.8 |
NM
|
|||||||||||||
Net other-than-temporary impairment losses on securities recognized in earnings | (40.7 | ) | (31.1 | ) | (26.5 | ) | (25.4 | ) | (47.4 | ) | -16.5 | % | |||||||
Realized gain (loss), excluding other-than-temporary impairment losses on securities | 42.8 | 22.0 | (136.5 | ) | (98.8 | ) | (38.3 | ) |
NM
|
||||||||||
Total realized gain (loss) (1) | 2.1 | (9.1 | ) | (163.0 | ) | (124.2 | ) | (85.7 | ) |
NM
|
|||||||||
Amortization of deferred gains on business sold through reinsurance | 18.7 | 18.7 | 18.7 | 18.7 | 18.6 | -0.5 | % | ||||||||||||
Other revenues and fees
|
120.5 | 123.1 | 117.7 | 116.7 | 119.8 | -0.6 | % | ||||||||||||
Total Revenues | 2,718.0 | 2,807.5 | 2,547.5 | 2,567.9 | 2,714.4 | -0.1 | % | ||||||||||||
Benefits and Expenses
|
|||||||||||||||||||
Interest credited
|
614.8 | 624.6 | 624.8 | 623.6 | 624.8 | 1.6 | % | ||||||||||||
Benefits
|
833.4 | 1,028.3 | 664.8 | 818.9 | 858.4 | 3.0 | % | ||||||||||||
Underwriting, acquisition, insurance and other expenses
|
769.3 | 673.9 | 1,023.6 | 797.2 | 856.2 | 11.3 | % | ||||||||||||
Interest and debt expense
|
71.6 | 72.0 | 79.4 | 70.5 | 67.5 | -5.7 | % | ||||||||||||
Impairment of intangibles
|
- | - | - | 746.7 | - |
NM
|
|||||||||||||
Total Benefits and Expenses | 2,289.1 | 2,398.8 | 2,392.6 | 3,056.9 | 2,406.9 | 5.1 | % | ||||||||||||
Income (loss) from continuing operations before taxes
|
428.9 | 408.7 | 154.9 | (489.0 | ) | 307.5 | -28.3 | % | |||||||||||
Federal income tax expense (benefit)
|
115.4 | 104.8 | (6.4 | ) | 49.7 | 61.4 | -46.8 | % | |||||||||||
Income (Loss) from Continuing Operations | 313.5 | 303.9 | 161.3 | (538.7 | ) | 246.1 | -21.5 | % | |||||||||||
Income (loss) from discontinued operations, net offederal income taxes (2) | - | - | (8.4 | ) | - | (0.8 | ) |
NM
|
|||||||||||
Net Income (Loss) | 313.5 | 303.9 | 152.9 | (538.7 | ) | 245.3 | -21.8 | % | |||||||||||
Adjustment for deferred units of LNC stock in our deferred compensation plans (3)
|
- | (1.3 | ) | (6.3 | ) | - | - |
NM
|
|||||||||||
Net Income (Loss) Available to CommonStockholders - Diluted | $ | 313.5 | $ | 302.6 | $ | 146.6 | $ | (538.7 | ) | $ | 245.3 | -21.8 | % | ||||||
Earnings (Loss) Per Common Share (Diluted)
|
|||||||||||||||||||
Income (loss) from continuing operations
|
$ | 0.97 | $ | 0.95 | $ | 0.50 | $ | (1.81 | ) | $ | 0.83 | -14.4 | % | ||||||
Income (loss) from discontinued operations, net of federal income taxes (2) | - | - | (0.03 | ) | - | - |
NM
|
||||||||||||
Net Income (Loss) (4) | $ | 0.97 | $ | 0.95 | $ | 0.47 | $ | (1.81 | ) | $ | 0.83 | -14.4 | % |
(1)
|
See page 6 for detail.
|
||||||||||||||||||
(2)
|
Includes discontinued operations and the gain (loss) on disposal. See Discontinued Operations on page 26 for details.
|
||||||||||||||||||
(3)
|
The numerator used in the calculation of our diluted EPS is adjusted to remove the mark-to-market adjustment for deferred units of LNC stock in our deferred compensation plans if the effect of equity classification would be more dilutive to our diluted EPS.
|
||||||||||||||||||
(4)
|
For any period where a loss from continuing operations is experienced, shares used in the diluted EPS calculation represent basic shares since using diluted shares would be anti-dilutive to the calculation. In these periods we would also exclude the
|
||||||||||||||||||
adjustment discussed infootnote (3) above when arriving at EPS.
|
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.
3/31/2012
|
|
PAGE 8 | ||||||||||||||
Consolidated Roll Forwards of DAC, VOBA, DSI and DFEL
|
||||||||||||||||
Unaudited (in millions)
|
||||||||||||||||
For the Three Months Ended
|
||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
||||||||||||
DAC and VOBA
|
2011
|
2011
|
2011
|
2011
|
2012
|
|||||||||||
Balance as of beginning-of-period
|
$ | 7,414.2 | $ | 7,695.5 | $ | 7,698.9 | $ | 6,704.7 | $ | 6,775.8 | ||||||
Business acquired through reinsurance
|
- | - | 1.7 | 10.6 | - | |||||||||||
Deferrals
|
338.3 | 351.8 | 341.0 | 364.2 | 290.4 | |||||||||||
Amortization, net of interest | (166.5 | ) | (84.7 | ) | (424.8 | ) | (169.6 | ) | (199.8 | ) | ||||||
Deferrals, net of amortization included in operating underwriting, acquisition, insurance and other expenses | 171.8 | 267.1 | (83.8 | ) | 194.6 | 90.6 | ||||||||||
Amortization, net of interest, associated with benefit ratio unlocking | (0.9 | ) | 0.1 | 7.1 | (4.9 | ) | (4.5 | ) | ||||||||
Adjustment related to realized (gains) losses
|
(21.7 | ) | (18.1 | ) | 3.4 | 12.3 | 18.9 | |||||||||
Adjustment related to unrealized (gains) losses
|
132.1 | (245.7 | ) | (922.6 | ) | (141.5 | ) | (0.6 | ) | |||||||
Balance as of End-of-Period | $ | 7,695.5 | $ | 7,698.9 | $ | 6,704.7 | $ | 6,775.8 | $ | 6,880.0 | ||||||
DSI
|
||||||||||||||||
Balance as of beginning-of-period
|
$ | 285.6 | $ | 285.9 | $ | 276.2 | $ | 267.7 | $ | 271.2 | ||||||
Deferrals
|
9.7 | 8.7 | 10.5 | 10.5 | 8.7 | |||||||||||
Amortization, net of interest | (12.7 | ) | (11.2 | ) | (10.5 | ) | (5.3 | ) | (12.2 | ) | ||||||
Deferrals, net of amortization included in operating insurance benefits or interest credited | (3.0 | ) | (2.5 | ) | - | 5.1 | (3.5 | ) | ||||||||
Amortization, net of interest, associated with benefit ratio unlocking
|
(0.2 | ) | - | 1.2 | (0.9 | ) | (0.7 | ) | ||||||||
Adjustment related to realized (gains) losses
|
(0.7 | ) | (1.4 | ) | (0.7 | ) | 1.5 | 2.5 | ||||||||
Adjustment related to unrealized (gains) losses
|
4.2 | (5.8 | ) | (9.0 | ) | (2.2 | ) | (1.1 | ) | |||||||
Balance as of End-of-Period | $ | 285.9 | $ | 276.2 | $ | 267.7 | $ | 271.2 | $ | 268.4 | ||||||
DFEL
|
||||||||||||||||
Balance as of beginning-of-period
|
$ | 1,501.9 | $ | 1,639.8 | $ | 1,693.8 | $ | 1,337.6 | $ | 1,368.3 | ||||||
Deferrals
|
142.7 | 134.3 | 134.4 | 132.2 | 89.7 | |||||||||||
Amortization, net of interest | (5.3 | ) | (54.1 | ) | (40.2 | ) | (35.8 | ) | (50.0 | ) | ||||||
Deferrals, net of amortization included in operating expense assessments | 137.4 | 80.2 | 94.2 | 96.4 | 39.7 | |||||||||||
Amortization, net of interest, associated with benefit ratio unlocking | (0.2 | ) | - | 1.6 | (1.0 | ) | (1.1 | ) | ||||||||
Adjustment related to realized (gains) losses
|
(3.7 | ) | (2.1 | ) | (4.2 | ) | 1.4 | 5.5 | ||||||||
Adjustment related to unrealized (gains) losses
|
4.4 | (24.1 | ) | (447.8 | ) | (66.1 | ) | (8.7 | ) | |||||||
Balance as of End-of-Period | $ | 1,639.8 | $ | 1,693.8 | $ | 1,337.6 | $ | 1,368.3 | $ | 1,403.7 |
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.
3/31/2012
|
|
PAGE 9 | |||||||||||||||||
Consolidating Statements of Income (Loss) From Operations
|
|||||||||||||||||||
For the Quarter Ended March 31, 2012
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
Retirement
|
|||||||||||||||||||
Plan
|
Life
|
Group
|
Other
|
||||||||||||||||
Annuities
|
Services
|
Insurance
|
Protection
|
Operations (1)
|
Consolidated
|
||||||||||||||
Operating Revenues
|
|||||||||||||||||||
Insurance premiums
|
$ | 17.3 | $ | - | $ | 108.6 | $ | 463.0 | $ | 0.1 | $ | 589.0 | |||||||
Surrender charges
|
5.7 | 0.4 | 23.2 | - | - | 29.3 | |||||||||||||
Mortality assessments
|
- | - | 336.8 | - | - | 336.8 | |||||||||||||
Expense assessments
|
319.4 | 51.3 | 168.6 | - | - | 539.3 | |||||||||||||
Net investment income
|
272.3 | 197.0 | 588.3 | 38.4 | 69.8 | 1,165.8 | |||||||||||||
Operating realized gain (loss) (2)
|
27.0 | 0.1 | - | - | - | 27.1 | |||||||||||||
Amortization of deferred gain on business sold through reinsurance | - | - | - | - | 18.0 | 18.0 | |||||||||||||
Other revenues and fees
|
89.0 | 3.3 | 7.1 | 2.2 | 18.6 | 120.2 | |||||||||||||
Total Operating Revenues | 730.7 | 252.1 | 1,232.6 | 503.6 | 106.5 | 2,825.5 | |||||||||||||
Operating Expenses
|
|||||||||||||||||||
Interest credited
|
170.5 | 110.7 | 311.2 | 0.8 | 31.1 | 624.3 | |||||||||||||
Benefits
|
46.2 | 0.1 | 474.5 | 349.9 | 27.7 | 898.4 | |||||||||||||
Underwriting, acquisition, insurance and other expenses
|
352.6 | 94.5 | 239.1 | 128.0 | 37.3 | 851.5 | |||||||||||||
Interest and debt expense
|
- | - | - | - | 67.5 | 67.5 | |||||||||||||
Total Operating Expenses | 569.3 | 205.3 | 1,024.8 | 478.7 | 163.6 | 2,441.7 | |||||||||||||
Income (loss) from operations before federal income taxes
|
161.4 | 46.8 | 207.8 | 24.9 | (57.1 | ) | 383.8 | ||||||||||||
Federal income tax expense (benefit)
|
24.8 | 12.2 | 65.5 | 8.8 | (23.2 | ) | 88.1 | ||||||||||||
Income (Loss) from Operations | $ | 136.6 | $ | 34.6 | $ | 142.3 | $ | 16.1 | $ | (33.9 | ) | $ | 295.7 | ||||||
(1)
|
Includes inter-segment eliminations.
|
||||||||||||||||||
(2)
|
For detail, see pages 13 and 18.
|
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.
3/31/2012
|
|
PAGE 10 | |||||||||||||||||
Consolidating Statements of Income (Loss) From Operations
|
|||||||||||||||||||
For the Quarter Ended March 31, 2011
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
Retirement
|
|||||||||||||||||||
Plan
|
Life
|
Group
|
Other
|
||||||||||||||||
Annuities
|
Services
|
Insurance
|
Protection
|
Operations (1)
|
Consolidated
|
||||||||||||||
Operating Revenues
|
|||||||||||||||||||
Insurance premiums
|
$ | 23.1 | $ | - | $ | 108.1 | $ | 436.6 | $ | 0.1 | $ | 567.9 | |||||||
Surrender charges
|
10.5 | 0.7 | 23.0 | - | - | 34.2 | |||||||||||||
Mortality assessments
|
- | - | 324.7 | - | - | 324.7 | |||||||||||||
Expense assessments
|
299.4 | 53.9 | 104.7 | - | - | 458.0 | |||||||||||||
Net investment income
|
288.1 | 204.9 | 579.1 | 39.1 | 80.1 | 1,191.3 | |||||||||||||
Operating realized gain (loss) (2)
|
22.8 | 0.1 | - | - | - | 22.9 | |||||||||||||
Amortization of deferred gain on business sold through reinsurance | - | - | - | - | 18.0 | 18.0 | |||||||||||||
Other revenues and fees
|
89.3 | 3.7 | 7.5 | 2.2 | 18.2 | 120.9 | |||||||||||||
Total Operating Revenues | 733.2 | 263.3 | 1,147.1 | 477.9 | 116.4 | 2,737.9 | |||||||||||||
Operating Expenses
|
|||||||||||||||||||
Interest credited
|
174.4 | 108.3 | 302.2 | 0.9 | 28.8 | 614.6 | |||||||||||||
Benefits
|
35.4 | - | 447.2 | 326.7 | 32.5 | 841.8 | |||||||||||||
Underwriting, acquisition, insurance and other expenses
|
339.5 | 85.5 | 187.2 | 113.1 | 43.0 | 768.3 | |||||||||||||
Interest and debt expense
|
- | - | - | - | 71.6 | 71.6 | |||||||||||||
Total Operating Expenses | 549.3 | 193.8 | 936.6 | 440.7 | 175.9 | 2,296.3 | |||||||||||||
Income (loss) from operations before federal income taxes
|
183.9 | 69.5 | 210.5 | 37.2 | (59.5 | ) | 441.6 | ||||||||||||
Federal income tax expense (benefit)
|
39.9 | 21.3 | 68.1 | 13.1 | (22.5 | ) | 119.9 | ||||||||||||
Income (Loss) from Operations | $ | 144.0 | $ | 48.2 | $ | 142.4 | $ | 24.1 | $ | (37.0 | ) | $ | 321.7 | ||||||
(1)
|
Includes inter-segment eliminations.
|
||||||||||||||||||
(2)
|
For detail, see pages 13 and 18.
|
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.
3/31/2012
|
PAGE 11 | |||||||||||||||
Consolidated Balance Sheets and Selected Share Data
|
||||||||||||||||
Unaudited (in millions)
|
||||||||||||||||
As of
|
||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
||||||||||||
ASSETS
|
||||||||||||||||
Investments:
|
||||||||||||||||
Corporate bonds | $ | 53,174.8 | $ | 54,830.4 | $ | 58,262.0 | $ | 59,261.1 | $ | 60,599.5 | ||||||
U.S. Government bonds | 161.8 | 239.7 | 286.0 | 494.6 | 486.3 | |||||||||||
Foreign government bonds | 516.0 | 592.6 | 641.9 | 732.4 | 650.3 | |||||||||||
Mortgage-backed securities | 10,541.6 | 10,334.3 | 10,119.5 | 9,638.7 | 9,095.5 | |||||||||||
Asset-backed securities | 136.8 | 126.1 | 110.4 | 101.6 | 101.8 | |||||||||||
State and municipal bonds | 3,280.0 | 3,479.3 | 3,969.7 | 4,047.2 | 4,124.5 | |||||||||||
Hybrid and redeemable preferred securities | 1,420.0 | 1,317.8 | 1,202.0 | 1,157.2 | 1,196.5 | |||||||||||
VIEs' fixed maturity securities | 586.8 | 592.6 | 699.5 | 700.1 | 701.9 | |||||||||||
Equity securities | 144.6 | 143.7 | 137.4 | 138.8 | 125.6 | |||||||||||
Total available-for-sale securities | 69,962.4 | 71,656.5 | 75,428.4 | 76,271.7 | 77,081.9 | |||||||||||
Trading securities | 2,598.0 | 2,624.7 | 2,726.2 | 2,674.7 | 2,649.7 | |||||||||||
Mortgage loans on real estate | 6,748.7 | 6,870.5 | 6,893.3 | 6,942.6 | 6,937.6 | |||||||||||
Real estate | 188.9 | 149.9 | 135.8 | 136.8 | 112.6 | |||||||||||
Policy loans | 2,837.1 | 2,877.1 | 2,873.5 | 2,884.6 | 2,841.8 | |||||||||||
Derivative investments | 945.7 | 1,097.0 | 3,028.7 | 3,151.0 | 2,244.5 | |||||||||||
Other investments | 1,029.4 | 1,002.3 | 1,104.7 | 1,068.6 | 1,043.6 | |||||||||||
Total investments | 84,310.2 | 86,278.0 | 92,190.6 | 93,130.0 | 92,911.7 | |||||||||||
Cash and invested cash
|
2,216.4 | 2,911.8 | 4,832.7 | 4,510.2 | 3,515.8 | |||||||||||
DAC and VOBA
|
7,695.5 | 7,699.0 | 6,704.7 | 6,775.8 | 6,880.0 | |||||||||||
Premiums and fees receivable
|
400.8 | 370.3 | 383.4 | 407.5 | 436.8 | |||||||||||
Accrued investment income
|
988.9 | 994.2 | 1,023.3 | 981.4 | 1,026.4 | |||||||||||
Reinsurance recoverables
|
6,580.0 | 6,556.2 | 6,658.8 | 6,526.0 | 6,534.2 | |||||||||||
Funds withheld reinsurance assets
|
889.0 | 884.9 | 881.2 | 874.1 | 865.9 | |||||||||||
Goodwill
|
3,019.4 | 3,019.4 | 3,019.4 | 2,272.8 | 2,272.8 | |||||||||||
Other assets
|
2,403.9 | 2,422.5 | 2,433.2 | 2,535.9 | 2,486.4 | |||||||||||
Separate account assets
|
88,236.3 | 88,845.6 | 78,194.6 | 83,476.5 | 91,088.2 | |||||||||||
Total Assets | $ | 196,740.4 | $ | 199,981.9 | $ | 196,321.9 | $ | 201,490.2 | $ | 208,018.2 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||||||||||
Liabilities
|
||||||||||||||||
Future contract benefits
|
$ | 17,333.3 | $ | 17,873.9 | $ | 19,988.5 | $ | 19,813.4 | $ | 18,783.8 | ||||||
Other contract holder funds
|
67,098.8 | 67,838.1 | 68,552.3 | 69,465.5 | 70,027.7 | |||||||||||
Short-term debt
|
351.6 | 251.3 | 549.9 | 299.9 | 299.9 | |||||||||||
Long-term debt categorized by standard rating agency leverage definitions:
|
||||||||||||||||
Operating (see note (4) on page 3 for details)
|
1,122.2 | 1,122.2 | 1,122.3 | 1,122.3 | 1,122.3 | |||||||||||
Financial
|
4,247.4 | 4,606.5 | 4,226.1 | 4,269.1 | 4,484.1 | |||||||||||
Reinsurance related embedded derivatives
|
91.0 | 119.1 | 177.3 | 167.5 | 158.0 | |||||||||||
Funds withheld reinsurance liabilities
|
1,134.7 | 1,107.1 | 1,072.0 | 1,044.8 | 1,042.8 | |||||||||||
Deferred gain on indemnity reinsurance
|
449.6 | 430.9 | 412.2 | 393.5 | 374.9 | |||||||||||
Payables for collateral on investments
|
1,554.2 | 1,805.5 | 3,855.1 | 3,733.3 | 2,874.5 | |||||||||||
VIEs' liabilities
|
130.0 | 129.5 | 203.0 | 193.4 | 149.5 | |||||||||||
Other liabilities
|
2,932.5 | 3,294.4 | 3,981.7 | 4,273.1 | 4,351.5 | |||||||||||
Separate account liabilities
|
88,236.3 | 88,845.6 | 78,194.6 | 83,476.5 | 91,088.2 | |||||||||||
Total liabilities | 184,681.6 | 187,424.1 | 182,335.0 | 188,252.3 | 194,757.2 | |||||||||||
Stockholders' Equity
|
||||||||||||||||
Series A preferred stock
|
0.4 | 0.4 | 0.4 | 0.4 | 0.3 | |||||||||||
Common stock
|
8,063.5 | 7,937.6 | 7,791.5 | 7,589.6 | 7,447.4 | |||||||||||
Retained earnings
|
3,122.2 | 3,393.3 | 3,531.1 | 2,969.0 | 3,191.4 | |||||||||||
AOCI:
|
||||||||||||||||
Net unrealized gain (loss) on available-for-sale securities | 1,184.9 | 1,555.5 | 2,842.5 | 2,946.6 | 2,933.2 | |||||||||||
Unrealized other-than-temporary impairment on available-for-sale securities | (112.1 | ) | (111.0 | ) | (110.0 | ) | (109.6 | ) | (118.9 | ) | ||||||
Net unrealized gain (loss) on derivative instruments | (19.6 | ) | (37.0 | ) | 111.7 | 119.2 | 89.4 | |||||||||
Foreign currency translation adjustment | 1.6 | (2.6 | ) | 2.7 | 0.5 | (3.0 | ) | |||||||||
Funded status of employee benefit plans | (182.1 | ) | (178.4 | ) | (183.0 | ) | (277.8 | ) | (278.8 | ) | ||||||
Total accumulated other comprehensive income (loss) | 872.7 | 1,226.5 | 2,663.9 | 2,678.9 | 2,621.9 | |||||||||||
Total stockholders' equity | 12,058.8 | 12,557.8 | 13,986.9 | 13,237.9 | 13,261.0 | |||||||||||
Total Liabilities and Stockholders' Equity | $ | 196,740.4 | $ | 199,981.9 | $ | 196,321.9 | $ | 201,490.2 | $ | 208,018.2 | ||||||
Share Data Per Common Share
|
||||||||||||||||
Stockholders' equity per share
|
$ | 38.45 | $ | 40.71 | $ | 46.34 | $ | 45.41 | $ | 46.43 | ||||||
Book value, excluding AOCI
|
35.67 | 36.73 | 37.52 | 36.22 | 37.26 | |||||||||||
Common shares outstanding - assuming conversion of Series A preferred shares
|
313.6 | 308.5 | 301.8 | 291.5 | 285.6 |
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.
3/31/2012
|
|
PAGE 12 | |||||||||||||||||
Balance Sheet Data - Segment Highlights
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
As of March 31, 2012
|
Retirement
|
||||||||||||||||||
Plan
|
Life
|
Group
|
Other
|
||||||||||||||||
Annuities
|
Services
|
Insurance
|
Protection
|
Operations (1)
|
Consolidated
|
||||||||||||||
Assets
|
|||||||||||||||||||
Allocated investments and cash and invested cash (2)
|
$ | 26,656.3 | $ | 15,548.0 | $ | 43,935.9 | $ | 2,893.2 | $ | 7,394.1 | $ | 96,427.5 | |||||||
DAC and VOBA
|
1,965.1 | 165.0 | 4,585.9 | 164.0 | - | 6,880.0 | |||||||||||||
Goodwill
|
439.8 | 20.2 | 1,538.5 | 274.3 | - | 2,272.8 | |||||||||||||
DSI and other intangibles
|
266.8 | 3.6 | 76.0 | - | 118.2 | 464.6 | |||||||||||||
Reinsurance recoverables
|
497.8 | - | 2,080.5 | 52.3 | 3,903.6 | 6,534.2 | |||||||||||||
Separate account assets
|
70,992.7 | 13,949.4 | 5,977.1 | - | 169.0 | 91,088.2 | |||||||||||||
Liabilities and Capital
|
|||||||||||||||||||
Future contract benefits
|
2,393.1 | 3.2 | 8,104.3 | 1,780.3 | 6,502.9 | 18,783.8 | |||||||||||||
Other contract holder funds
|
20,774.6 | 13,814.1 | 34,366.4 | 235.9 | 836.7 | 70,027.7 | |||||||||||||
Allocated capital (3)
|
3,513.2 | 969.0 | 7,318.7 | 1,188.0 | (2,349.8 | ) | 10,639.1 | ||||||||||||
As of December 31, 2011
|
|||||||||||||||||||
Assets
|
|||||||||||||||||||
Allocated investments and cash and invested cash (2)
|
$ | 28,466.8 | $ | 15,395.1 | $ | 43,628.0 | $ | 2,854.9 | $ | 7,295.4 | $ | 97,640.2 | |||||||
DAC and VOBA
|
1,912.1 | 183.1 | 4,515.6 | 165.0 | - | 6,775.8 | |||||||||||||
Goodwill
|
439.8 | 20.2 | 1,538.5 | 274.3 | - | 2,272.8 | |||||||||||||
DSI and other intangibles
|
269.5 | 3.6 | 77.0 | - | 118.3 | 468.4 | |||||||||||||
Reinsurance recoverables
|
560.5 | - | 2,069.6 | 48.8 | 3,847.1 | 6,526.0 | |||||||||||||
Separate account assets
|
64,946.5 | 12,858.3 | 5,508.6 | - | 163.1 | 83,476.5 | |||||||||||||
Liabilities and Capital
|
|||||||||||||||||||
Future contract benefits
|
3,642.4 | 7.4 | 7,983.8 | 1,741.7 | 6,438.1 | 19,813.4 | |||||||||||||
Other contract holder funds
|
20,701.3 | 13,623.8 | 34,065.6 | 236.1 | 838.7 | 69,465.5 | |||||||||||||
Allocated capital (3)
|
3,279.8 | 881.2 | 7,178.9 | 1,172.5 | (1,953.3 | ) | 10,559.1 | ||||||||||||
(1)
|
Includes inter-segment eliminations.
|
||||||||||||||||||
(2)
|
Includes inter-segment cash management balances our segments utilize to borrow money to meet their short-term needs and also to invest short-term funds with other segments. These balances eliminate in consolidation.
|
||||||||||||||||||
(3)
|
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.
3/31/2012
|
|
PAGE 13 | |||||||||||||||||
Annuities
|
|||||||||||||||||||
Income (Loss) from Operations and Operational Data
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Operating Revenues
|
|||||||||||||||||||
Insurance premiums (1)
|
$ | 23.1 | $ | 21.8 | $ | 14.6 | $ | 14.2 | $ | 17.3 | -25.1 | % | |||||||
Surrender charges
|
10.5 | 10.0 | 8.1 | 5.9 | 5.7 | -45.7 | % | ||||||||||||
Expense assessments
|
299.4 | 311.5 | 308.7 | 293.0 | 319.4 | 6.7 | % | ||||||||||||
Net investment income
|
288.1 | 277.7 | 270.9 | 269.6 | 272.3 | -5.5 | % | ||||||||||||
Operating realized gain (loss) (2)
|
22.8 | 23.4 | 23.0 | 24.8 | 27.0 | 18.4 | % | ||||||||||||
Other revenues and fees (3)
|
89.3 | 90.4 | 85.7 | 84.2 | 89.0 | -0.3 | % | ||||||||||||
Total Operating Revenues | 733.2 | 734.8 | 711.0 | 691.7 | 730.7 | -0.3 | % | ||||||||||||
Operating Expenses
|
|||||||||||||||||||
Interest credited
|
174.4 | 178.0 | 177.2 | 168.9 | 170.5 | -2.2 | % | ||||||||||||
Benefits (1)
|
35.4 | 42.6 | 87.0 | 47.1 | 46.2 | 30.5 | % | ||||||||||||
Underwriting, acquisition, insurance and other expenses
|
339.5 | 335.5 | 286.8 | 321.4 | 352.6 | 3.9 | % | ||||||||||||
Total Operating Expenses | 549.3 | 556.1 | 551.0 | 537.4 | 569.3 | 3.6 | % | ||||||||||||
Income (loss) from operations before federal income taxes
|
183.9 | 178.7 | 160.0 | 154.3 | 161.4 | -12.2 | % | ||||||||||||
Federal income tax expense (benefit)
|
39.9 | 33.9 | 6.7 | 23.5 | 24.8 | -37.8 | % | ||||||||||||
Income (Loss) from Operations | $ | 144.0 | $ | 144.8 | $ | 153.3 | $ | 130.8 | $ | 136.6 | -5.1 | % | |||||||
Effective Tax Rate
|
21.7 | % | 19.0 | % | 4.2 | % | 15.2 | % | 15.4 | % | |||||||||
Average Stockholders' Equity, Excluding AOCI
|
|||||||||||||||||||
Average equity, including goodwill
|
$ | 2,732.0 | $ | 2,756.5 | $ | 3,020.0 | $ | 3,267.6 | $ | 3,396.5 | |||||||||
Average goodwill
|
439.8 | 439.8 | 439.8 | 439.8 | 439.8 | ||||||||||||||
Average equity, excluding goodwill
|
$ | 2,292.2 | $ | 2,316.7 | $ | 2,580.2 | $ | 2,827.8 | $ | 2,956.7 | |||||||||
Return on Equity, Excluding AOCI
|
|||||||||||||||||||
Including goodwill
|
21.1 | % | 21.0 | % | 20.3 | % | 16.0 | % | 16.1 | % | |||||||||
Excluding goodwill
|
25.1 | % | 25.0 | % | 23.8 | % | 18.5 | % | 18.5 | % | |||||||||
Income (Loss) from Operations - Basis Points onAverage Account Values - Annualized | 66 | 65 | 71 | 61 | 61 | (5 | ) | ||||||||||||
Operating Realized Gain (Loss) (2)
|
|||||||||||||||||||
Indexed annuity net derivatives results (4)
|
$ | 1.1 | $ | 0.4 | $ | (1.0 | ) | $ | 0.5 | $ | 1.4 | 27.3 | % | ||||||
GLB (5)
|
21.7 | 23.0 | 24.0 | 24.3 | 25.6 | 18.0 | % | ||||||||||||
Total Operating Realized Gain (Loss) | $ | 22.8 | $ | 23.4 | $ | 23.0 | $ | 24.8 | $ | 27.0 | 18.4 | % | |||||||
Underwriting, Acquisition, Insurance and Other Expenses
|
|||||||||||||||||||
Commissions
|
$ | 176.6 | $ | 193.4 | $ | 182.4 | $ | 173.2 | $ | 183.4 | 3.9 | % | |||||||
General and administrative expenses
|
86.9 | 93.1 | 85.5 | 94.6 | 97.6 | 12.3 | % | ||||||||||||
Inter-segment reimbursement associated with reserve financing and LOC expenses (6)
|
(0.5 | ) | 0.4 | (0.9 | ) | 0.2 | - | 100.0 | % | ||||||||||
Broker-dealer commissions and general and administrative expenses
|
90.8 | 88.5 | 85.0 | 83.1 | 87.9 | -3.2 | % | ||||||||||||
Taxes, licenses and fees
|
9.4 | 8.2 | 6.7 | 2.7 | 10.0 | 6.4 | % | ||||||||||||
Total commissions and expenses incurred | 363.2 | 383.6 | 358.7 | 353.8 | 378.9 | 4.3 | % | ||||||||||||
Less: commissions and expenses capitalized
|
(127.0 | ) | (140.8 | ) | (136.8 | ) | (122.7 | ) | (124.5 | ) | 2.0 | % | |||||||
Amortization of DAC and VOBA, net of interest
|
103.3 | 92.7 | 64.9 | 90.3 | 98.2 | -4.9 | % | ||||||||||||
Total Underwriting, Acquisition, Insurance and Other Expenses | $ | 339.5 | $ | 335.5 | $ | 286.8 | $ | 321.4 | $ | 352.6 | 3.9 | % | |||||||
General and Administrative Expenses - Basis Points on Average Account Values - Annualized (7)
|
40 | 42 | 40 | 44 | 43 | 3 | |||||||||||||
(1)
|
Includes our single premium immediate annuities, which have a corresponding offset to benefits for changes in reserves.
|
||||||||||||||||||
(2)
|
Included in income (loss) from operations.
|
||||||||||||||||||
(3)
|
Other revenues and fees consists primarily of fees attributable to broker-dealer services that are subject to market volatility.
|
||||||||||||||||||
(4)
|
See note (1) on page 6 for details.
|
||||||||||||||||||
(5)
|
See note (2) on page 6 for details.
|
||||||||||||||||||
(6)
|
Represents reimbursements to Annuities from the Life Insurance segment for reserve financing, net of expenses incurred by Annuities for its use of LOCs. The inter-segment amounts are not reported on our Consolidated Statements of Income (Loss).
|
||||||||||||||||||
(7)
|
Includes distribution costs.
|
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
3/31/2012
|
|
PAGE 14 | |||||||||||||
Annuities
|
|||||||||||||||
DAC, VOBA, DSI and DFEL Roll Forwards
|
|||||||||||||||
Unaudited (in millions)
|
|||||||||||||||
For the Three Months Ended
|
|||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
|||||||||||
DAC and VOBA
|
2011
|
2011
|
2011
|
2011
|
2012
|
||||||||||
Balance as of beginning-of-period
|
$ | 1,881.7 | $ | 1,949.4 | $ | 1,913.3 | $ | 1,876.9 | $ | 1,912.1 | |||||
Deferrals
|
127.0 | 140.8 | 136.8 | 122.7 | 124.5 | ||||||||||
Amortization, net of interest | (103.3 | ) | (92.7 | ) | (64.9 | ) | (90.3 | ) | (98.2 | ) | |||||
Deferrals, net of amortization included in operating underwriting, acquisition, insurance and other expenses | 23.7 | 48.1 | 71.9 | 32.4 | 26.3 | ||||||||||
Amortization, net of interest, associated with benefit ratio unlocking | (0.9 | ) | 0.1 | 7.0 | (4.7 | ) | (4.5 | ) | |||||||
Adjustment related to realized (gains) losses
|
(6.9 | ) | (8.5 | ) | 0.8 | 12.9 | 17.4 | ||||||||
Adjustment related to unrealized (gains) losses
|
51.8 | (75.8 | ) | (116.1 | ) | (5.4 | ) | 13.8 | |||||||
Balance as of End-of-Period | $ | 1,949.4 | $ | 1,913.3 | $ | 1,876.9 | $ | 1,912.1 | $ | 1,965.1 | |||||
DSI
|
|||||||||||||||
Balance as of beginning-of-period
|
$ | 283.6 | $ | 283.8 | $ | 274.2 | $ | 265.7 | $ | 269.5 | |||||
Deferrals
|
9.7 | 8.7 | 10.5 | 10.4 | 8.7 | ||||||||||
Amortization, net of interest | (12.7 | ) | (11.1 | ) | (10.6 | ) | (5.2 | ) | (12.1 | ) | |||||
Deferrals, net of amortization included in operating interest credited | (3.0 | ) | (2.4 | ) | (0.1 | ) | 5.2 | (3.4 | ) | ||||||
Amortization, net of interest, associated with benefit ratio unlocking | (0.2 | ) | - | 1.2 | (0.9 | ) | (0.7 | ) | |||||||
Adjustment related to realized (gains) losses
|
(0.7 | ) | (1.4 | ) | (0.7 | ) | 1.5 | 2.5 | |||||||
Adjustment related to unrealized (gains) losses
|
4.1 | (5.8 | ) | (8.9 | ) | (2.0 | ) | (1.1 | ) | ||||||
Balance as of End-of-Period | $ | 283.8 | $ | 274.2 | $ | 265.7 | $ | 269.5 | $ | 266.8 | |||||
DFEL
|
|||||||||||||||
Balance as of beginning-of-period
|
$ | 222.0 | $ | 234.2 | $ | 246.9 | $ | 249.2 | $ | 262.6 | |||||
Deferrals
|
16.8 | 18.6 | 15.7 | 9.9 | 6.4 | ||||||||||
Amortization, net of interest | (5.7 | ) | (4.7 | ) | (9.1 | ) | 3.5 | (5.3 | ) | ||||||
Deferrals, net of amortization included in operating expense assessments | 11.1 | 13.9 | 6.6 | 13.4 | 1.1 | ||||||||||
Amortization, net of interest, associated with benefitratio unlocking | (0.2 | ) | - | 1.6 | (1.0 | ) | (1.1 | ) | |||||||
Adjustment related to realized (gains) losses
|
(1.7 | ) | (0.7 | ) | (4.7 | ) | 1.6 | 5.3 | |||||||
Adjustment related to unrealized (gains) losses
|
3.0 | (0.5 | ) | (1.2 | ) | (0.6 | ) | (0.7 | ) | ||||||
Balance as of End-of-Period | $ | 234.2 | $ | 246.9 | $ | 249.2 | $ | 262.6 | $ | 267.2 |
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.
3/31/2012
|
|
PAGE 15 | |||||||||||||||||
Annuities
|
|||||||||||||||||||
Account Value Roll Forwards and Information
|
|||||||||||||||||||
Unaudited (in billions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Fixed Annuities (1)
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 20.952 | $ | 20.947 | $ | 21.224 | $ | 21.375 | $ | 21.426 | 2.3 | % | |||||||
Gross deposits
|
1.116 | 1.307 | 1.294 | 1.062 | 1.008 | -9.7 | % | ||||||||||||
Withdrawals and deaths
|
(0.513 | ) | (0.525 | ) | (0.590 | ) | (0.564 | ) | (0.549 | ) | -7.0 | % | |||||||
Net flows | 0.603 | 0.782 | 0.704 | 0.498 | 0.459 | -23.9 | % | ||||||||||||
Transfers to variable annuities
|
(0.832 | ) | (0.699 | ) | (0.609 | ) | (0.704 | ) | (0.671 | ) | 19.4 | % | |||||||
Interest credited
|
0.214 | 0.186 | 0.046 | 0.247 | 0.270 | 26.2 | % | ||||||||||||
Sales inducements deferred
|
0.010 | 0.008 | 0.010 | 0.010 | 0.009 | -10.0 | % | ||||||||||||
Balance as of End-of-Period (Gross) | 20.947 | 21.224 | 21.375 | 21.426 | 21.493 | 2.6 | % | ||||||||||||
Reinsurance ceded
|
(0.949 | ) | (0.935 | ) | (0.920 | ) | (0.902 | ) | (0.884 | ) | 6.8 | % | |||||||
Balance as of End-of-Period (Net of Ceded) | $ | 19.998 | $ | 20.289 | $ | 20.455 | $ | 20.524 | $ | 20.609 | 3.1 | % | |||||||
Variable Annuities (2)
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 64.858 | $ | 67.787 | $ | 68.551 | $ | 60.774 | $ | 65.010 | 0.2 | % | |||||||
Gross deposits
|
1.523 | 1.620 | 1.415 | 1.313 | 1.472 | -3.3 | % | ||||||||||||
Withdrawals and deaths
|
(1.643 | ) | (1.702 | ) | (1.456 | ) | (1.466 | ) | (1.638 | ) | 0.3 | % | |||||||
Net flows | (0.120 | ) | (0.082 | ) | (0.041 | ) | (0.153 | ) | (0.166 | ) | -38.3 | % | |||||||
Transfers from fixed annuities
|
0.832 | 0.699 | 0.609 | 0.704 | 0.671 | -19.4 | % | ||||||||||||
Investment increase and change in market value
|
2.217 | 0.147 | (8.345 | ) | 3.685 | 5.544 | 150.1 | % | |||||||||||
Balance as of End-of-Period | $ | 67.787 | $ | 68.551 | $ | 60.774 | $ | 65.010 | $ | 71.059 | 4.8 | % | |||||||
Total Annuities
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 85.810 | $ | 88.734 | $ | 89.775 | $ | 82.149 | $ | 86.436 | 0.7 | % | |||||||
Gross deposits
|
2.639 | 2.927 | 2.709 | 2.375 | 2.480 | -6.0 | % | ||||||||||||
Withdrawals and deaths
|
(2.156 | ) | (2.227 | ) | (2.046 | ) | (2.030 | ) | (2.187 | ) | -1.4 | % | |||||||
Net flows | 0.483 | 0.700 | 0.663 | 0.345 | 0.293 | -39.3 | % | ||||||||||||
Interest credited and change in market value
|
2.431 | 0.333 | (8.299 | ) | 3.932 | 5.814 | 139.2 | % | |||||||||||
Sales inducements deferred
|
0.010 | 0.008 | 0.010 | 0.010 | 0.009 | -10.0 | % | ||||||||||||
Balance as of End-of-Period (Gross) | 88.734 | 89.775 | 82.149 | 86.436 | 92.552 | 4.3 | % | ||||||||||||
Reinsurance ceded
|
(0.949 | ) | (0.935 | ) | (0.920 | ) | (0.902 | ) | (0.884 | ) | 6.8 | % | |||||||
Balance as of End-of-Period (Net of Ceded) | $ | 87.785 | $ | 88.840 | $ | 81.229 | $ | 85.534 | $ | 91.668 | 4.4 | % | |||||||
Variable Annuities Under Agreement - Included Above
|
$ | 0.076 | $ | 0.073 | $ | 0.060 | $ | 0.062 | $ | 0.065 | -14.5 | % | |||||||
Incremental Deposits (3)
|
|||||||||||||||||||
Fixed annuities
|
$ | 1.114 | $ | 1.306 | $ | 1.292 | $ | 1.062 | $ | 1.006 | -9.7 | % | |||||||
Variable annuities
|
1.515 | 1.614 | 1.411 | 1.309 | 1.464 | -3.4 | % | ||||||||||||
Total Incremental Deposits
|
$ | 2.629 | $ | 2.920 | $ | 2.703 | $ | 2.371 | $ | 2.470 | -6.0 | % | |||||||
(1)
|
Includes the fixed portion of variable annuities.
|
||||||||||||||||||
(2)
|
Excludes the fixed portion of variable annuities.
|
||||||||||||||||||
(3)
|
Represents 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.
3/31/2012
|
PAGE 16 | |||||||||||||||||
Annuities
|
||||||||||||||||||
Account Value Information
|
||||||||||||||||||
Unaudited (in billions)
|
||||||||||||||||||
For the Three Months Ended
|
||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
|||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
|||||||||||||
Fixed Annuities, Excluding Fixed Portion of Variable Contracts | ||||||||||||||||||
Deposits
|
$ | 0.077 | $ | 0.091 | $ | 0.092 | $ | 0.052 | $ | 0.048 | -37.7 | % | ||||||
Withdrawals and deaths
|
(0.266 | ) | (0.284 | ) | (0.318 | ) | (0.272 | ) | (0.248 | ) | 6.8 | % | ||||||
Net flows | $ | (0.189 | ) | $ | (0.193 | ) | $ | (0.226 | ) | $ | (0.220 | ) | $ | (0.200 | ) | -5.8 | % | |
Gross fixed contract account values
|
$ | 8.627 | $ | 8.517 | $ | 8.375 | $ | 8.231 | $ | 8.106 | -6.0 | % | ||||||
Reinsurance ceded
|
(0.947 | ) | (0.933 | ) | (0.918 | ) | (0.899 | ) | (0.882 | ) | 6.9 | % | ||||||
Net fixed contract account values | $ | 7.680 | $ | 7.584 | $ | 7.457 | $ | 7.332 | $ | 7.224 | -5.9 | % | ||||||
Indexed Annuities
|
||||||||||||||||||
Deposits
|
$ | 0.378 | $ | 0.480 | $ | 0.462 | $ | 0.295 | $ | 0.247 | -34.7 | % | ||||||
Withdrawals and deaths
|
(0.158 | ) | (0.153 | ) | (0.190 | ) | (0.203 | ) | (0.217 | ) | -37.3 | % | ||||||
Net flows | $ | 0.220 | $ | 0.327 | $ | 0.272 | $ | 0.092 | $ | 0.030 | -86.4 | % | ||||||
Gross indexed contract account values
|
$ | 9.016 | $ | 9.421 | $ | 9.634 | $ | 9.875 | $ | 10.080 | 11.8 | % | ||||||
Reinsurance ceded
|
(0.002 | ) | (0.002 | ) | (0.002 | ) | (0.002 | ) | (0.001 | ) | 50.0 | % | ||||||
Net indexed contract account values | $ | 9.014 | $ | 9.419 | $ | 9.632 | $ | 9.873 | $ | 10.079 | 11.8 | % | ||||||
Fixed Portion of Variable Contracts
|
||||||||||||||||||
Deposits
|
$ | 0.661 | $ | 0.736 | $ | 0.740 | $ | 0.715 | $ | 0.713 | 7.9 | % | ||||||
Withdrawals and deaths
|
(0.089 | ) | (0.088 | ) | (0.082 | ) | (0.089 | ) | (0.084 | ) | 5.6 | % | ||||||
Net flows | $ | 0.572 | $ | 0.648 | $ | 0.658 | $ | 0.626 | $ | 0.629 | 10.0 | % | ||||||
Gross fixed portion of variable contract account values
|
$ | 3.304 | $ | 3.286 | $ | 3.366 | $ | 3.320 | $ | 3.307 | 0.1 | % | ||||||
Reinsurance ceded
|
- | - | - | (0.001 | ) | (0.001 | ) |
NM
|
||||||||||
Net fixed portion of variable contract account values | $ | 3.304 | $ | 3.286 | $ | 3.366 | $ | 3.319 | $ | 3.306 | 0.1 | % | ||||||
Variable Annuities, Including Fixed Portion of Variable Contracts
|
||||||||||||||||||
Deposits
|
$ | 2.184 | $ | 2.356 | $ | 2.155 | $ | 2.028 | $ | 2.185 | 0.0 | % | ||||||
Withdrawals and deaths
|
(1.732 | ) | (1.790 | ) | (1.538 | ) | (1.555 | ) | (1.722 | ) | 0.6 | % | ||||||
Net flows | $ | 0.452 | $ | 0.566 | $ | 0.617 | $ | 0.473 | $ | 0.463 | 2.4 | % | ||||||
Variable Contract Account Values
|
$ | 71.091 | $ | 71.837 | $ | 64.140 | $ | 68.329 | $ | 74.366 | 4.6 | % | ||||||
Average Daily Variable Annuity Separate Account Values | $ | 66.459 | $ | 68.262 | $ | 65.169 | $ | 64.173 | $ | 69.003 | 3.8 | % |
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.
3/31/2012
|
PAGE 17 | |||||||||||||||||
Annuities
|
||||||||||||||||||
Interest Rate Spread Information, GLB Expense Assessments,
|
||||||||||||||||||
GLB Attributed Fee and GLB Account Values by Type
|
||||||||||||||||||
Unaudited (in billions)
|
||||||||||||||||||
For the Three Months Ended
|
||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
|||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
|||||||||||||
(Basis Point)
|
||||||||||||||||||
Interest Rate Spread (1)
|
Change
|
|||||||||||||||||
Fixed maturity securities, mortgage loans on real estate and other, net of investment expenses | 5.27 | % | 5.19 | % | 5.08 | % | 4.98 | % | 4.93 | % | (34 | ) | ||||||
Commercial mortgage loan prepayment and bond make whole premiums | 0.26 | % | 0.11 | % | 0.12 | % | 0.09 | % | 0.04 | % | (22 | ) | ||||||
Alternative investments
|
0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | (1 | ) | ||||||
Net investment income yield on reserves | 5.54 | % | 5.30 | % | 5.20 | % | 5.07 | % | 4.97 | % | (57 | ) | ||||||
Interest rate credited to contract holders | 3.31 | % | 3.38 | % | 3.33 | % | 3.26 | % | 3.15 | % | (16 | ) | ||||||
Interest rate spread | 2.23 | % | 1.92 | % | 1.87 | % | 1.81 | % | 1.82 | % | (41 | ) | ||||||
Variable Annuity Expense Assessments (in millions) (2) | $ | 365.7 | $ | 380.8 | $ | 381.3 | $ | 367.8 | $ | 399.8 | 9.3 | % | ||||||
GLB Expense Assessments (in millions) (3)
|
$ | 81.7 | $ | 86.8 | $ | 91.0 | $ | 94.2 | $ | 99.8 | 22.2 | % | ||||||
Components of Attributed Fees on GLB (in millions)
|
||||||||||||||||||
Attributed fee included in operating revenues and income from operations (4) | $ | 28.1 | $ | 29.4 | $ | 30.6 | $ | 31.2 | $ | 32.8 | 16.7 | % | ||||||
Attributed fee excluded from operating revenues and income from operations (5) | 38.3 | 40.1 | 42.0 | 43.9 | 47.8 | 24.8 | % | |||||||||||
Total Attributed Fees on GLB | $ | 66.4 | $ | 69.5 | $ | 72.6 | $ | 75.1 | $ | 80.6 | 21.4 | % | ||||||
GLB Account Values by Type
|
||||||||||||||||||
Guaranteed withdrawal benefits (6)
|
$ | 31.920 | $ | 32.606 | $ | 29.554 | $ | 31.786 | $ | 34.895 | 9.3 | % | ||||||
Guaranteed income benefits (7)
|
12.131 | 12.605 | 11.513 | 12.450 | 13.752 | 13.4 | % | |||||||||||
Total GLB Account Values | $ | 44.051 | $ | 45.211 | $ | 41.067 | $ | 44.237 | $ | 48.647 | 10.4 | % |
(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 invested assets on reserves. 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 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)
|
Comprised of the variable annuity expense assessments included in the expense assessments line item on page 13 and the amounts presented in the components of attributed fees on GLB, as described in note (4) and note (5) and disclosed above.
|
(3)
|
Comprised of the GLB expense assessments included in the expense assessments line item on page 13 and the amounts presented in the components of attributed fees on GLB, as described in note (4) and note (5) and disclosed above.
|
(4)
|
Includes the risk/profit margin portion of the GLB attributed rider fees in operating realized gain (loss) and the amount reported in expense assessments. See note (2) on page 6 for further discussion.
|
(5)
|
Includes the net valuation premium of the GLB attributed rider fees in excluded realized gain (loss). See note (6) on page 6 for further discussion.
|
(6)
|
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.
|
(7)
|
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 holdervalue for transfers,
|
to access the account additional withdrawals and other service features, such as portfolio rebalancing.
|
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.
3/31/2012
|
|
PAGE 18 | |||||||||||||||||
Retirement Plan Services
|
|||||||||||||||||||
Income (Loss) from Operations, Operational Data and DAC, VOBA and DSI Roll Forwards
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Operating Revenues
|
|||||||||||||||||||
Surrender charges
|
$ | 0.7 | $ | 0.7 | $ | 0.5 | $ | 0.4 | $ | 0.4 | -42.9 | % | |||||||
Expense assessments
|
53.9 | 54.7 | 50.5 | 48.7 | 51.3 | -4.8 | % | ||||||||||||
Net investment income
|
204.9 | 199.9 | 193.3 | 194.1 | 197.0 | -3.9 | % | ||||||||||||
Operating realized gain (loss) (1)
|
0.1 | 0.1 | 0.1 | 0.1 | 0.1 | 0.0 | % | ||||||||||||
Other revenues and fees (2)
|
3.7 | 4.3 | 3.4 | 3.0 | 3.3 | -10.8 | % | ||||||||||||
Total Operating Revenues | 263.3 | 259.7 | 247.8 | 246.3 | 252.1 | -4.3 | % | ||||||||||||
Operating Expenses
|
|||||||||||||||||||
Interest credited
|
108.3 | 108.6 | 109.5 | 111.0 | 110.7 | 2.2 | % | ||||||||||||
Benefits
|
- | - | 1.6 | - | 0.1 |
NM
|
|||||||||||||
Underwriting, acquisition, insurance and other expenses
|
85.5 | 92.9 | 83.2 | 90.0 | 94.5 | 10.5 | % | ||||||||||||
Total Operating Expenses | 193.8 | 201.5 | 194.3 | 201.0 | 205.3 | 5.9 | % | ||||||||||||
Income (loss) from operations before federal income taxes
|
69.5 | 58.2 | 53.5 | 45.3 | 46.8 | -32.7 | % | ||||||||||||
Federal income tax expense (benefit)
|
21.3 | 16.8 | 14.3 | 12.0 | 12.2 | -42.7 | % | ||||||||||||
Income (Loss) from Operations | $ | 48.2 | $ | 41.4 | $ | 39.2 | $ | 33.3 | $ | 34.6 | -28.2 | % | |||||||
Effective Tax Rate
|
30.6 | % | 28.9 | % | 26.7 | % | 26.5 | % | 26.1 | % | |||||||||
Average Stockholders' Equity, Excluding AOCI
|
|||||||||||||||||||
Average equity, including goodwill
|
$ | 908.4 | $ | 901.8 | $ | 884.2 | $ | 877.5 | $ | 925.1 | |||||||||
Average goodwill
|
20.2 | 20.2 | 20.2 | 20.2 | 20.2 | ||||||||||||||
Average equity, excluding goodwill
|
$ | 888.2 | $ | 881.6 | $ | 864.0 | $ | 857.3 | $ | 904.9 | |||||||||
Return on Equity, Excluding AOCI
|
|||||||||||||||||||
Including goodwill
|
21.2 | % | 18.4 | % | 17.7 | % | 15.2 | % | 15.0 | % | |||||||||
Excluding goodwill
|
21.7 | % | 18.8 | % | 18.1 | % | 15.5 | % | 15.3 | % | |||||||||
Income (Loss) from Operations - Basis Points on Average Account Values - Annualized | 49 | 41 | 41 | 35 | 34 | (15 | ) | ||||||||||||
Operating Realized Gain (Loss) (1)
|
|||||||||||||||||||
GLB (3)
|
$ | 0.1 | $ | 0.1 | $ | 0.1 | $ | 0.1 | $ | 0.1 | 0.0 | % | |||||||
Total Operating Realized Gain (Loss) | $ | 0.1 | $ | 0.1 | $ | 0.1 | $ | 0.1 | $ | 0.1 | 0.0 | % | |||||||
Underwriting, Acquisition, Insurance and Other Expenses
|
|||||||||||||||||||
Commissions
|
$ | 17.0 | $ | 16.9 | $ | 15.9 | $ | 17.5 | $ | 17.8 | 4.7 | % | |||||||
General and administrative expenses
|
63.3 | 71.4 | 65.4 | 73.3 | 71.5 | 13.0 | % | ||||||||||||
Taxes, licenses and fees
|
4.8 | 3.8 | 3.4 | 1.2 | 5.2 | 8.3 | % | ||||||||||||
Total commissions and expenses incurred | 85.1 | 92.1 | 84.7 | 92.0 | 94.5 | 11.0 | % | ||||||||||||
Less: commissions and expenses capitalized
|
(8.4 | ) | (9.0 | ) | (8.3 | ) | (9.2 | ) | (9.6 | ) | -14.3 | % | |||||||
Amortization of DAC and VOBA, net of interest
|
8.8 | 9.8 | 6.8 | 7.2 | 9.6 | 9.1 | % | ||||||||||||
Total Underwriting, Acquisition, Insurance and Other Expenses | $ | 85.5 | $ | 92.9 | $ | 83.2 | $ | 90.0 | $ | 94.5 | 10.5 | % | |||||||
General and Administrative Expenses - Basis Points on Average Account Values - Annualized (4) | 64 | 71 | 68 | 76 | 70 | 6 | |||||||||||||
DAC and VOBA
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 195.3 | $ | 230.5 | $ | 217.2 | $ | 189.0 | $ | 183.1 | |||||||||
Deferrals
|
8.4 | 9.0 | 8.3 | 9.2 | 9.6 | ||||||||||||||
Amortization, net of interest | (8.8 | ) | (9.8 | ) | (6.8 | ) | (7.2 | ) | (9.6 | ) | |||||||||
Deferrals, net of amortization included in operating underwriting, acquisition, insurance and other expenses | (0.4 | ) | (0.8 | ) | 1.5 | 2.0 | - | ||||||||||||
Amortization, net of interest, associated with benefitratio unlocking | - | - | 0.1 | (0.2 | ) | - | |||||||||||||
Adjustment related to realized (gains) losses
|
- | (0.3 | ) | (0.3 | ) | 0.1 | 0.1 | ||||||||||||
Adjustment related to unrealized (gains) losses
|
35.6 | (12.2 | ) | (29.5 | ) | (7.8 | ) | (18.2 | ) | ||||||||||
Balance as of End-of-Period | $ | 230.5 | $ | 217.2 | $ | 189.0 | $ | 183.1 | $ | 165.0 | |||||||||
DSI
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 2.0 | $ | 2.1 | $ | 2.0 | $ | 2.0 | $ | 1.7 | |||||||||
Amortization, net of interest | - | (0.1 | ) | 0.1 | (0.1 | ) | (0.1 | ) | |||||||||||
Adjustment related to unrealized (gains) losses
|
0.1 | - | (0.1 | ) | (0.2 | ) | - | ||||||||||||
Balance as of End-of-Period | $ | 2.1 | $ | 2.0 | $ | 2.0 | $ | 1.7 | $ | 1.6 | |||||||||
(1)
|
Included in income (loss) from operations.
|
||||||||||||||||||
(2)
|
Other revenues and fees consist primarily of mutual fund account program fees for mid-to-large employers.
|
||||||||||||||||||
(3)
|
See note (2) on page 6 for details.
|
||||||||||||||||||
(4)
|
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.
3/31/2012
|
|
PAGE 19 | |||||||||||||||||
Retirement Plan Services
|
|||||||||||||||||||
Account Value Roll Forwards and Information
|
|||||||||||||||||||
Unaudited (in billions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Fixed Annuities (1)
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 12.779 | $ | 12.956 | $ | 13.025 | $ | 13.395 | $ | 13.630 | 6.7 | % | |||||||
Gross deposits
|
0.346 | 0.318 | 0.378 | 0.394 | 0.370 | 6.9 | % | ||||||||||||
Withdrawals and deaths
|
(0.336 | ) | (0.437 | ) | (0.356 | ) | (0.413 | ) | (0.405 | ) | -20.5 | % | |||||||
Net flows | 0.010 | (0.119 | ) | 0.022 | (0.019 | ) | (0.035 | ) |
NM
|
||||||||||
Transfers from variable annuities
|
0.060 | 0.080 | 0.237 | 0.142 | 0.115 | 91.7 | % | ||||||||||||
Interest credited
|
0.107 | 0.108 | 0.111 | 0.112 | 0.110 | 2.8 | % | ||||||||||||
Balance as of End-of-Period | $ | 12.956 | $ | 13.025 | $ | 13.395 | $ | 13.630 | $ | 13.820 | 6.7 | % | |||||||
Variable Annuities (2)
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 13.927 | $ | 14.400 | $ | 14.254 | $ | 12.122 | $ | 12.867 | -7.6 | % | |||||||
Gross deposits
|
0.415 | 0.393 | 0.391 | 0.416 | 0.468 | 12.8 | % | ||||||||||||
Withdrawals and deaths
|
(0.587 | ) | (0.516 | ) | (0.511 | ) | (0.498 | ) | (0.572 | ) | 2.6 | % | |||||||
Net flows | (0.172 | ) | (0.123 | ) | (0.120 | ) | (0.082 | ) | (0.104 | ) | 39.5 | % | |||||||
Transfers to fixed annuities
|
(0.050 | ) | (0.040 | ) | (0.124 | ) | (0.069 | ) | (0.062 | ) | -24.0 | % | |||||||
Investment increase and change in market value
|
0.695 | 0.017 | (1.888 | ) | 0.896 | 1.258 | 81.0 | % | |||||||||||
Balance as of End-of-Period | $ | 14.400 | $ | 14.254 | $ | 12.122 | $ | 12.867 | $ | 13.959 | -3.1 | % | |||||||
Total Annuities
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 26.706 | $ | 27.356 | $ | 27.279 | $ | 25.517 | $ | 26.497 | -0.8 | % | |||||||
Gross deposits
|
0.761 | 0.711 | 0.769 | 0.810 | 0.838 | 10.1 | % | ||||||||||||
Withdrawals and deaths
|
(0.923 | ) | (0.953 | ) | (0.867 | ) | (0.911 | ) | (0.977 | ) | -5.9 | % | |||||||
Net flows | (0.162 | ) | (0.242 | ) | (0.098 | ) | (0.101 | ) | (0.139 | ) | 14.2 | % | |||||||
Transfers between fixed and variable accounts
|
0.010 | 0.040 | 0.113 | 0.073 | 0.053 |
NM
|
|||||||||||||
Interest credited and change in market value
|
0.802 | 0.125 | (1.777 | ) | 1.008 | 1.368 | 70.6 | % | |||||||||||
Balance as of End-of-Period | $ | 27.356 | $ | 27.279 | $ | 25.517 | $ | 26.497 | $ | 27.779 | 1.5 | % | |||||||
Alliance and Smart Future Mutual Funds (3)
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 12.118 | $ | 12.952 | $ | 13.008 | $ | 11.503 | $ | 12.636 | 4.3 | % | |||||||
Plan/participant rollovers
|
0.097 | 0.061 | 0.277 | 0.369 | 0.131 | 35.1 | % | ||||||||||||
Additional contributions
|
0.483 | 0.427 | 0.410 | 0.391 | 0.542 | 12.2 | % | ||||||||||||
Gross deposits | 0.580 | 0.488 | 0.687 | 0.760 | 0.673 | 16.0 | % | ||||||||||||
Withdrawals and deaths
|
(0.284 | ) | (0.424 | ) | (0.260 | ) | (0.440 | ) | (0.322 | ) | -13.4 | % | |||||||
Net flows | 0.296 | 0.064 | 0.427 | 0.320 | 0.351 | 18.6 | % | ||||||||||||
Transfers
|
(0.037 | ) | (0.057 | ) | (0.132 | ) | (0.073 | ) | (0.066 | ) | -78.4 | % | |||||||
Interest credited and change in market value
|
0.575 | 0.049 | (1.800 | ) | 0.886 | 1.320 | 129.6 | % | |||||||||||
Balance as of End-of-Period | $ | 12.952 | $ | 13.008 | $ | 11.503 | $ | 12.636 | $ | 14.241 | 10.0 | % | |||||||
Total Annuities and Mutual Funds
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 38.824 | $ | 40.308 | $ | 40.287 | $ | 37.020 | $ | 39.133 | 0.8 | % | |||||||
Gross deposits
|
1.341 | 1.199 | 1.456 | 1.570 | 1.511 | 12.7 | % | ||||||||||||
Withdrawals and deaths
|
(1.207 | ) | (1.377 | ) | (1.127 | ) | (1.351 | ) | (1.299 | ) | -7.6 | % | |||||||
Net flows | 0.134 | (0.178 | ) | 0.329 | 0.219 | 0.212 | 58.2 | % | |||||||||||
Transfers
|
(0.027 | ) | (0.017 | ) | (0.019 | ) | - | (0.013 | ) | 51.9 | % | ||||||||
Interest credited and change in market value
|
1.377 | 0.174 | (3.577 | ) | 1.894 | 2.688 | 95.2 | % | |||||||||||
Balance as of End-of-Period | $ | 40.308 | $ | 40.287 | $ | 37.020 | $ | 39.133 | $ | 42.020 | 4.2 | % | |||||||
Variable Annuities Under Agreement - Included Above
|
$ | 0.010 | $ | 0.010 | $ | 0.008 | $ | 0.009 | $ | 0.009 | -10.0 | % | |||||||
(1)
|
Includes fixed annuity products offered under our mutual fund products and the fixed portion of variable annuities.
|
||||||||||||||||||
(2)
|
Excludes the fixed portion of variable annuities.
|
||||||||||||||||||
(3)
|
Includes mutual fund account values and other third party trustee-held assets. These items are not included in the separate accounts
|
||||||||||||||||||
reported on our Consolidated Balance Sheets, as we do not have any ownership interest in them.
|
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.
3/31/2012
|
PAGE 20
|
||||||||||||||||||
Retirement Plan Services
|
|||||||||||||||||||
Account Value Roll Forwards by Product
|
|||||||||||||||||||
Unaudited (in billions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Total Micro - Small Segment
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 6.396 | $ | 6.594 | $ | 6.566 | $ | 5.856 | $ | 6.167 | -3.6 | % | |||||||
Gross deposits
|
0.326 | 0.315 | 0.312 | 0.354 | 0.418 | 28.2 | % | ||||||||||||
Withdrawals and deaths
|
(0.384 | ) | (0.325 | ) | (0.336 | ) | (0.357 | ) | (0.412 | ) | -7.3 | % | |||||||
Net flows | (0.058 | ) | (0.010 | ) | (0.024 | ) | (0.003 | ) | 0.006 | 110.3 | % | ||||||||
Transfers between fixed and variable accounts
|
(0.006 | ) | - | - | 0.011 | (0.011 | ) | -83.3 | % | ||||||||||
Investment increase and change in market value
|
0.262 | (0.018 | ) | (0.686 | ) | 0.303 | 0.479 | 82.8 | % | ||||||||||
Balance as of End-of-Period | $ | 6.594 | $ | 6.566 | $ | 5.856 | $ | 6.167 | $ | 6.641 | 0.7 | % | |||||||
Total Mid - Large Segment
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 16.207 | $ | 17.224 | $ | 17.333 | $ | 16.106 | $ | 17.435 | 7.6 | % | |||||||
Gross deposits
|
0.831 | 0.704 | 0.969 | 1.053 | 0.920 | 10.7 | % | ||||||||||||
Withdrawals and deaths
|
(0.398 | ) | (0.657 | ) | (0.408 | ) | (0.632 | ) | (0.505 | ) | -26.9 | % | |||||||
Net flows | 0.433 | 0.047 | 0.561 | 0.421 | 0.415 | -4.2 | % | ||||||||||||
Transfers between fixed and variable accounts
|
(0.021 | ) | (0.017 | ) | (0.019 | ) | (0.011 | ) | (0.002 | ) | 90.5 | % | |||||||
Investment increase and change in market value
|
0.605 | 0.079 | (1.769 | ) | 0.919 | 1.351 | 123.3 | % | |||||||||||
Balance as of End-of-Period | $ | 17.224 | $ | 17.333 | $ | 16.106 | $ | 17.435 | $ | 19.199 | 11.5 | % | |||||||
Total Multi-Fund® and Other Variable Annuities
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 16.221 | $ | 16.490 | $ | 16.388 | $ | 15.058 | $ | 15.531 | -4.3 | % | |||||||
Gross deposits
|
0.184 | 0.180 | 0.175 | 0.163 | 0.173 | -6.0 | % | ||||||||||||
Withdrawals and deaths
|
(0.425 | ) | (0.395 | ) | (0.383 | ) | (0.362 | ) | (0.382 | ) | 10.1 | % | |||||||
Net flows | (0.241 | ) | (0.215 | ) | (0.208 | ) | (0.199 | ) | (0.209 | ) | 13.3 | % | |||||||
Investment increase and change in market value
|
0.510 | 0.113 | (1.122 | ) | 0.672 | 0.858 | 68.2 | % | |||||||||||
Balance as of End-of-Period | $ | 16.490 | $ | 16.388 | $ | 15.058 | $ | 15.531 | $ | 16.180 | -1.9 | % | |||||||
Total Annuities and Mutual Funds (1)
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 38.824 | $ | 40.308 | $ | 40.287 | $ | 37.020 | $ | 39.133 | 0.8 | % | |||||||
Gross deposits
|
1.341 | 1.199 | 1.456 | 1.570 | 1.511 | 12.7 | % | ||||||||||||
Withdrawals and deaths
|
(1.207 | ) | (1.377 | ) | (1.127 | ) | (1.351 | ) | (1.299 | ) | -7.6 | % | |||||||
Net flows | 0.134 | (0.178 | ) | 0.329 | 0.219 | 0.212 | 58.2 | % | |||||||||||
Transfers between fixed and variable accounts
|
(0.027 | ) | (0.017 | ) | (0.019 | ) | - | (0.013 | ) | 51.9 | % | ||||||||
Investment increase and change in market value
|
1.377 | 0.174 | (3.577 | ) | 1.894 | 2.688 | 95.2 | % | |||||||||||
Balance as of End-of-Period | $ | 40.308 | $ | 40.287 | $ | 37.020 | $ | 39.133 | $ | 42.020 | 4.2 | % | |||||||
(1)
|
Includes mutual fund account values and other third party trustee-held assets. These items are not included in the separate accounts reported on our Consolidated Balance Sheets, as we do not have any ownership interest in them.
|
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.
3/31/2012
|
PAGE 21 | ||||||||||||||||||
Retirement Plan Services
|
|||||||||||||||||||
Account Value and Interest Rate Spread Information
|
|||||||||||||||||||
Unaudited (in billions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Fixed Annuities, Excluding Fixed Portion of Variable Contracts | |||||||||||||||||||
Deposits
|
$ | 0.269 | $ | 0.233 | $ | 0.301 | $ | 0.314 | $ | 0.273 | 1.5 | % | |||||||
Withdrawals and deaths
|
(0.160 | ) | (0.285 | ) | (0.194 | ) | (0.251 | ) | (0.228 | ) | -42.5 | % | |||||||
Net flows | $ | 0.109 | $ | (0.052 | ) | $ | 0.107 | $ | 0.063 | $ | 0.045 | -58.7 | % | ||||||
Fixed Contract Account Values
|
$ | 6.807 | $ | 6.847 | $ | 7.122 | $ | 7.301 | $ | 7.465 | 9.7 | % | |||||||
Fixed Portion of Variable Contracts
|
|||||||||||||||||||
Deposits
|
$ | 0.077 | $ | 0.085 | $ | 0.077 | $ | 0.080 | $ | 0.097 | 26.0 | % | |||||||
Withdrawals and deaths
|
(0.176 | ) | (0.152 | ) | (0.162 | ) | (0.162 | ) | (0.177 | ) | -0.6 | % | |||||||
Net flows | $ | (0.099 | ) | $ | (0.067 | ) | $ | (0.085 | ) | $ | (0.082 | ) | $ | (0.080 | ) | 19.2 | % | ||
Fixed Portion of Variable Contract Account Values
|
$ | 6.149 | $ | 6.178 | $ | 6.273 | $ | 6.329 | $ | 6.355 | 3.4 | % | |||||||
Variable Annuities, Including Fixed Portion of Variable Contracts | |||||||||||||||||||
Deposits
|
$ | 0.492 | $ | 0.478 | $ | 0.468 | $ | 0.496 | $ | 0.565 | 14.8 | % | |||||||
Withdrawals and deaths
|
(0.763 | ) | (0.668 | ) | (0.673 | ) | (0.660 | ) | (0.749 | ) | 1.8 | % | |||||||
Net flows | $ | (0.271 | ) | $ | (0.190 | ) | $ | (0.205 | ) | $ | (0.164 | ) | $ | (0.184 | ) | 32.1 | % | ||
Variable Contract Account Values
|
$ | 20.549 | $ | 20.432 | $ | 18.395 | $ | 19.196 | $ | 20.314 | -1.1 | % | |||||||
Average Daily Variable Annuity Separate Account Values | $ | 14.178 | $ | 14.284 | $ | 13.217 | $ | 12.783 | $ | 13.589 | -4.2 | % | |||||||
(Basis Point)
|
|||||||||||||||||||
Interest Rate Spread (1)
|
Change
|
||||||||||||||||||
Fixed maturity securities, mortgage loans on real estate and other, net of investment expenses | 5.61 | % | 5.55 | % | 5.53 | % | 5.40 | % | 5.34 | % | (27 | ) | |||||||
Commercial mortgage loan prepayment and bond make whole premiums | 0.35 | % | 0.23 | % | 0.04 | % | 0.05 | % | 0.04 | % | (31 | ) | |||||||
Alternative investments
|
0.03 | % | 0.01 | % | 0.00 | % | 0.01 | % | 0.01 | % | (2 | ) | |||||||
Net investment income yield on reserves | 5.99 | % | 5.79 | % | 5.57 | % | 5.46 | % | 5.39 | % | (60 | ) | |||||||
Interest rate credited to contract holders
|
3.36 | % | 3.34 | % | 3.31 | % | 3.28 | % | 3.22 | % | (14 | ) | |||||||
Interest rate spread | 2.63 | % | 2.45 | % | 2.26 | % | 2.18 | % | 2.17 | % | (46 | ) | |||||||
(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 invested assets on reserves. We exclude net investment income
|
||||||||||||||||||
earned on investments supporting statutory surplus from our spread calculations. The average crediting rate is calculated as interest credited before DSI amortization, plus the immediate annuity reserve change (included within benefits),
|
|||||||||||||||||||
divided by the average fixed account values, including the fixed portion of variable annuities. |
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.
3/31/2012
|
|
PAGE 22 | ||||||||||||||||
Life Insurance
|
||||||||||||||||||
Income (Loss) from Operations, Operational Data and DAC, VOBA and DFEL Roll Forwards
|
||||||||||||||||||
Unaudited (in millions)
|
||||||||||||||||||
For the Three Months Ended
|
||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
|||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
|||||||||||||
Operating Revenues
|
||||||||||||||||||
Insurance premiums
|
$ | 108.1 | $ | 112.0 | $ | 104.0 | $ | 117.1 | $ | 108.6 | 0.5 | % | ||||||
Surrender charges
|
23.0 | 29.6 | 20.9 | 22.9 | 23.2 | 0.9 | % | |||||||||||
Mortality assessments
|
324.7 | 326.7 | 335.0 | 325.1 | 336.8 | 3.7 | % | |||||||||||
Expense assessments
|
104.7 | 166.7 | 142.2 | 157.1 | 168.6 | 61.0 | % | |||||||||||
Net investment income
|
579.1 | 588.0 | 568.7 | 558.1 | 588.3 | 1.6 | % | |||||||||||
Other revenues and fees
|
7.5 | 6.0 | 5.5 | 6.7 | 7.1 | -5.3 | % | |||||||||||
Total Operating Revenues | 1,147.1 | 1,229.0 | 1,176.3 | 1,187.0 | 1,232.6 | 7.5 | % | |||||||||||
Operating Expenses
|
||||||||||||||||||
Interest credited
|
302.2 | 307.5 | 311.9 | 313.6 | 311.2 | 3.0 | % | |||||||||||
Benefits
|
447.2 | 609.4 | 152.5 | 460.1 | 474.5 | 6.1 | % | |||||||||||
Underwriting, acquisition, insurance and other expenses
|
187.2 | 110.6 | 492.7 | 209.1 | 239.1 | 27.7 | % | |||||||||||
Total Operating Expenses | 936.6 | 1,027.5 | 957.1 | 982.8 | 1,024.8 | 9.4 | % | |||||||||||
Income (loss) from operations before federal income taxes
|
210.5 | 201.5 | 219.2 | 204.2 | 207.8 | -1.3 | % | |||||||||||
Federal income tax expense (benefit)
|
68.1 | 65.1 | 65.4 | 66.0 | 65.5 | -3.8 | % | |||||||||||
Income (Loss) from Operations | $ | 142.4 | $ | 136.4 | $ | 153.8 | $ | 138.2 | $ | 142.3 | -0.1 | % | ||||||
Effective Tax Rate
|
32.4 | % | 32.3 | % | 29.8 | % | 32.3 | % | 31.5 | % | ||||||||
Average Stockholders' Equity, Excluding AOCI
|
||||||||||||||||||
Average equity, including goodwill
|
$ | 7,751.4 | $ | 7,850.5 | $ | 7,848.9 | $ | 7,491.4 | $ | 7,248.8 | ||||||||
Average goodwill
|
2,188.5 | 2,188.5 | 2,188.5 | 1,863.5 | 1,538.5 | |||||||||||||
Average equity, excluding goodwill
|
$ | 5,562.9 | $ | 5,662.0 | $ | 5,660.4 | $ | 5,627.9 | $ | 5,710.3 | ||||||||
Return on Equity, Excluding AOCI
|
||||||||||||||||||
Including goodwill
|
7.3 | % | 6.9 | % | 7.8 | % | 7.4 | % | 7.9 | % | ||||||||
Excluding goodwill
|
10.2 | % | 9.6 | % | 10.9 | % | 9.8 | % | 10.0 | % | ||||||||
Underwriting, Acquisition, Insurance and Other Expenses
|
||||||||||||||||||
Commissions
|
$ | 172.8 | $ | 166.3 | $ | 160.8 | $ | 178.7 | $ | 129.6 | -25.0 | % | ||||||
General and administrative expenses
|
112.7 | 114.2 | 116.3 | 130.2 | 123.4 | 9.5 | % | |||||||||||
Expenses associated with reserve financing
|
13.8 | 14.4 | 13.9 | 15.3 | 15.9 | 15.2 | % | |||||||||||
Taxes, licenses and fees
|
36.1 | 34.0 | 39.7 | 33.9 | 34.5 | -4.4 | % | |||||||||||
Amortization of sales force intangibles
|
1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 0.0 | % | |||||||||||
Total commissions and expenses incurred | 336.4 | 329.9 | 331.7 | 359.1 | 304.4 | -9.5 | % | |||||||||||
Less: commissions and expenses capitalized
|
(194.0 | ) | (192.2 | ) | (183.2 | ) | (211.0 | ) | (145.4 | ) | 25.1 | % | ||||||
Amortization of DAC and VOBA, net of interest
|
44.8 | (27.1 | ) | 344.2 | 61.0 | 80.1 | 78.8 | % | ||||||||||
Total Underwriting, Acquisition, Insurance and Other Expenses | $ | 187.2 | $ | 110.6 | $ | 492.7 | $ | 209.1 | $ | 239.1 | 27.7 | % | ||||||
General and Administrative Expenses - Basis Points on Average Account Values - Annualized | 133 | 133 | 135 | 149 | 138 | 5 | ||||||||||||
DAC and VOBA
|
||||||||||||||||||
Balance as of beginning-of-period
|
$ | 5,186.0 | $ | 5,365.1 | $ | 5,417.4 | $ | 4,484.0 | $ | 4,515.6 | ||||||||
Business acquired through reinsurance
|
- | - | 1.7 | 10.6 | - | |||||||||||||
Deferrals
|
194.0 | 192.2 | 183.2 | 211.0 | 145.4 | |||||||||||||
Amortization, net of interest | (44.8 | ) | (27.1 | ) | (334.2 | ) | (61.0 | ) | (80.1 | ) | ||||||||
Deferrals, net of amortization included in operating underwriting, acquisition, insurance and other expenses | 149.2 | 219.3 | (161.0 | ) | 150.0 | 65.3 | ||||||||||||
Adjustment related to realized (gains) losses
|
(14.8 | ) | (9.3 | ) | 2.9 | (0.7 | ) | 1.4 | ||||||||||
Adjustment related to unrealized (gains) losses
|
44.7 | (157.7 | ) | (777.0 | ) | (128.3 | ) | 3.8 | ||||||||||
Balance as of End-of-Period | $ | 5,365.1 | $ | 5,417.4 | $ | 4,484.0 | $ | 4,515.6 | $ | 4,585.9 | ||||||||
DFEL
|
||||||||||||||||||
Balance as of beginning-of-period
|
$ | 1,279.9 | $ | 1,405.6 | $ | 1,446.9 | $ | 1,088.4 | $ | 1,105.7 | ||||||||
Deferrals
|
125.9 | 115.7 | 118.7 | 122.3 | 83.3 | |||||||||||||
Amortization, net of interest | 0.4 | (49.4 | ) | (31.1 | ) | (39.3 | ) | (44.7 | ) | |||||||||
Deferrals, net of amortization included in operating expense assessments | 126.3 | 66.3 | 87.6 | 83.0 | 38.6 | |||||||||||||
Adjustment related to realized (gains) losses
|
(2.0 | ) | (1.4 | ) | 0.5 | (0.2 | ) | 0.2 | ||||||||||
Adjustment related to unrealized (gains) losses
|
1.4 | (23.6 | ) | (446.6 | ) | (65.5 | ) | (8.0 | ) | |||||||||
Balance as of End-of-Period | $ | 1,405.6 | $ | 1,446.9 | $ | 1,088.4 | $ | 1,105.7 | $ | 1,136.5 | ||||||||
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.
3/31/2012
|
PAGE 23 | |||||||||||||||||
Life Insurance
|
||||||||||||||||||
Additional Operational Data
|
||||||||||||||||||
Unaudited (in billions)
|
||||||||||||||||||
For the Three Months Ended
|
||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
|||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
|||||||||||||
Sales by Product (in millions)
|
||||||||||||||||||
UL
|
||||||||||||||||||
Excluding MoneyGuard® | $ | 84.9 | $ | 82.9 | $ | 74.2 | $ | 74.9 | $ | 47.0 | -44.6 | % | ||||||
MoneyGuard® | 34.3 | 38.5 | 48.0 | 65.4 | 40.8 | 19.0 | % | |||||||||||
Total | 119.2 | 121.4 | 122.2 | 140.3 | 87.8 | -26.3 | % | |||||||||||
VUL
|
10.0 | 11.4 | 12.8 | 16.2 | 9.6 | -4.0 | % | |||||||||||
COLI and BOLI (1)
|
17.0 | 10.0 | 7.5 | 57.1 | 11.2 | -34.1 | % | |||||||||||
Term
|
12.8 | 14.1 | 12.4 | 15.2 | 13.1 | 2.3 | % | |||||||||||
Total | $ | 159.0 | $ | 156.9 | $ | 154.9 | $ | 228.8 | $ | 121.7 | -23.5 | % | ||||||
First Year Paid Premiums (in millions)
|
||||||||||||||||||
UL
|
||||||||||||||||||
Excluding MoneyGuard® | $ | 301.8 | $ | 300.9 | $ | 286.0 | $ | 251.0 | $ | 132.7 | -56.0 | % | ||||||
MoneyGuard® | 225.8 | 251.2 | 313.0 | 427.0 | 261.6 | 15.9 | % | |||||||||||
Total | 527.6 | 552.1 | 599.0 | 678.0 | 394.3 | -25.3 | % | |||||||||||
VUL
|
24.2 | 32.0 | 33.0 | 37.9 | 26.4 | 9.1 | % | |||||||||||
COLI and BOLI (1)
|
40.3 | 21.5 | 27.5 | 62.9 | 13.2 | -67.2 | % | |||||||||||
Term
|
12.8 | 14.1 | 12.4 | 15.2 | 13.1 | 2.3 | % | |||||||||||
Total | $ | 604.9 | $ | 619.7 | $ | 671.9 | $ | 794.0 | $ | 447.0 | -26.1 | % | ||||||
Life Insurance In Force
|
||||||||||||||||||
UL and other
|
$ | 299.920 | $ | 302.205 | $ | 304.475 | $ | 307.900 | $ | 307.957 | 2.7 | % | ||||||
Term insurance
|
266.764 | 268.520 | 269.969 | 271.931 | 272.006 | 2.0 | % | |||||||||||
Total | $ | 566.684 | $ | 570.725 | $ | 574.444 | $ | 579.831 | $ | 579.963 | 2.3 | % | ||||||
(Basis Point)
|
||||||||||||||||||
Interest-Sensitive Products Interest Rate Spreads(2)
|
Change
|
|||||||||||||||||
Fixed maturity securities, mortgage loans on real estate and other, net of investment expenses (3) | 5.91 | % | 5.82 | % | 5.74 | % | 5.71 | % | 5.77 | % | (14 | ) | ||||||
Commercial mortgage loan prepayment and bond make-whole premiums
|
0.04 | % | 0.14 | % | 0.06 | % | 0.03 | % | 0.02 | % | (2 | ) | ||||||
Alternative investments
|
0.32 | % | 0.29 | % | 0.16 | % | 0.00 | % | 0.17 | % | (15 | ) | ||||||
Net investment income yield on reserves | 6.27 | % | 6.25 | % | 5.96 | % | 5.74 | % | 5.96 | % | (31 | ) | ||||||
Interest rate credited to contract holders
|
4.09 | % | 4.09 | % | 4.10 | % | 4.05 | % | 3.95 | % | (14 | ) | ||||||
Interest rate spread | 2.18 | % | 2.16 | % | 1.86 | % | 1.69 | % | 2.01 | % | (17 | ) | ||||||
Traditional Products Interest Rate Spreads(4)
|
||||||||||||||||||
Fixed maturity securities, mortgage loans on real estate and other, net of investment expenses | 5.89 | % | 6.00 | % | 5.90 | % | 5.81 | % | 5.73 | % | (16 | ) | ||||||
Commercial mortgage loan prepayment and bond make-whole premiums
|
0.10 | % | 0.00 | % | 0.03 | % | 0.01 | % | 0.00 | % | (10 | ) | ||||||
Alternative investments
|
0.02 | % | 0.00 | % | 0.00 | % | 0.01 | % | 0.01 | % | (1 | ) | ||||||
Net investment income yield on reserves | 6.01 | % | 6.00 | % | 5.93 | % | 5.83 | % | 5.74 | % | (27 | ) |
(1)
|
COLI and BOLI are interest-sensitive and contain both UL and VUL products.
|
(2)
|
For the interest-sensitive 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.
|
|
(3)
|
Our yields on net investment income have been lowered due to holding higher cash balances related to our short-term liquidity strategy during recent volatile markets. The increased
|
cash and short-term investment balances for the three months ended March 31, 2011 reduced our yields by approximately 2 bps.There was no impact for the three months ended June 30, 2011,
|
|
September 30, 2011, December 31, 2011 and March 31,2012.
|
|
(4)
|
For the traditional life 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, 2012,
|
interest-sensitive products represented approximately 89% of total interest-sensitive and traditional earning assets.
|
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.
3/31/2012
|
PAGE 24 | ||||||||||||||||||
Life Insurance
|
|||||||||||||||||||
Account Value Roll Forwards
|
|||||||||||||||||||
Unaudited (in billions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Interest-Sensitive Life (1)
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 29.365 | $ | 29.739 | $ | 30.148 | $ | 30.638 | $ | 31.219 | 6.3 | % | |||||||
Deposits
|
1.085 | 1.126 | 1.165 | 1.297 | 0.991 | -8.7 | % | ||||||||||||
Withdrawals and deaths
|
(0.295 | ) | (0.296 | ) | (0.232 | ) | (0.268 | ) | (0.307 | ) | -4.1 | % | |||||||
Net flows | 0.790 | 0.830 | 0.933 | 1.029 | 0.684 | -13.4 | % | ||||||||||||
Contract holder assessments
|
(0.715 | ) | (0.724 | ) | (0.726 | ) | (0.751 | ) | (0.710 | ) | 0.7 | % | |||||||
Interest credited
|
0.299 | 0.303 | 0.283 | 0.303 | 0.301 | 0.7 | % | ||||||||||||
Balance as of End-of-Period (Gross) | 29.739 | 30.148 | 30.638 | 31.219 | 31.494 | 5.9 | % | ||||||||||||
Reinsurance ceded
|
(0.885 | ) | (0.881 | ) | (0.877 | ) | (0.870 | ) | (0.862 | ) | 2.6 | % | |||||||
Balance as of End-of-Period (Net of Ceded) | $ | 28.854 | $ | 29.267 | $ | 29.761 | $ | 30.349 | $ | 30.632 | 6.2 | % | |||||||
|
|||||||||||||||||||
VUL
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 5.962 | $ | 6.171 | $ | 6.157 | $ | 5.375 | $ | 5.687 | -4.6 | % | |||||||
Deposits
|
0.185 | 0.148 | 0.178 | 0.209 | 0.168 | -9.2 | % | ||||||||||||
Withdrawals and deaths
|
(0.154 | ) | (0.110 | ) | (0.148 | ) | (0.207 | ) | (0.101 | ) | 34.4 | % | |||||||
Net flows | 0.031 | 0.038 | 0.030 | 0.002 | 0.067 | 116.1 | % | ||||||||||||
Contract holder assessments
|
(0.092 | ) | (0.091 | ) | (0.093 | ) | (0.093 | ) | (0.095 | ) | -3.3 | % | |||||||
Investment income and change in market value
|
0.270 | 0.039 | (0.719 | ) | 0.403 | 0.543 | 101.1 | % | |||||||||||
Balance as of End-of-Period (Gross) | 6.171 | 6.157 | 5.375 | 5.687 | 6.202 | 0.5 | % | ||||||||||||
Reinsurance ceded
|
(0.876 | ) | (0.857 | ) | (0.717 | ) | (0.758 | ) | (0.826 | ) | 5.7 | % | |||||||
Balance as of End-of-Period (Net of Ceded) | $ | 5.295 | $ | 5.300 | $ | 4.658 | $ | 4.929 | $ | 5.376 | 1.5 | % | |||||||
Total Life Insurance
|
|||||||||||||||||||
Balance as of beginning-of-period
|
$ | 35.327 | $ | 35.910 | $ | 36.305 | $ | 36.013 | $ | 36.906 | 4.5 | % | |||||||
Deposits
|
1.270 | 1.274 | 1.343 | 1.506 | 1.159 | -8.7 | % | ||||||||||||
Withdrawals and deaths
|
(0.449 | ) | (0.406 | ) | (0.380 | ) | (0.475 | ) | (0.408 | ) | 9.1 | % | |||||||
Net flows | 0.821 | 0.868 | 0.963 | 1.031 | 0.751 | -8.5 | % | ||||||||||||
Contract holder assessments
|
(0.807 | ) | (0.815 | ) | (0.819 | ) | (0.844 | ) | (0.805 | ) | 0.2 | % | |||||||
Investment income and change in market value
|
0.569 | 0.342 | (0.436 | ) | 0.706 | 0.844 | 48.3 | % | |||||||||||
Balance as of End-of-Period (Gross) | 35.910 | 36.305 | 36.013 | 36.906 | 37.696 | 5.0 | % | ||||||||||||
Reinsurance ceded
|
(1.761 | ) | (1.738 | ) | (1.594 | ) | (1.628 | ) | (1.688 | ) | 4.1 | % | |||||||
Balance as of End-of-Period (Net of Ceded) | $ | 34.149 | $ | 34.567 | $ | 34.419 | $ | 35.278 | $ | 36.008 | 5.4 | % | |||||||
(1)
|
Includes UL, interest-sensitive whole life and the fixed investment option of VUL 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.
3/31/2012
|
|
PAGE 25
|
||||||||||||||||
Group Protection
|
||||||||||||||||||
Income (Loss) from Operations and Operational Data
|
||||||||||||||||||
Unaudited (in millions)
|
||||||||||||||||||
For the Three Months Ended
|
||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
|||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
|||||||||||||
Operating Revenues
|
||||||||||||||||||
Insurance premiums
|
$ | 436.6 | $ | 460.2 | $ | 439.7 | $ | 441.8 | $ | 463.0 | 6.0 | % | ||||||
Net investment income
|
39.1 | 38.5 | 37.8 | 36.7 | 38.4 | -1.8 | % | |||||||||||
Other revenues and fees
|
2.2 | 1.9 | 1.9 | 2.5 | 2.2 | 0.0 | % | |||||||||||
Total Operating Revenues | 477.9 | 500.6 | 479.4 | 481.0 | 503.6 | 5.4 | % | |||||||||||
Operating Expenses
|
||||||||||||||||||
Interest credited
|
0.9 | 0.8 | 0.8 | 0.9 | 0.8 | -11.1 | % | |||||||||||
Benefits
|
326.7 | 345.1 | 319.3 | 322.8 | 349.9 | 7.1 | % | |||||||||||
Underwriting, acquisition, insurance and other expenses
|
113.1 | 115.3 | 118.0 | 125.8 | 128.0 | 13.2 | % | |||||||||||
Total Operating Expenses | 440.7 | 461.2 | 438.1 | 449.5 | 478.7 | 8.6 | % | |||||||||||
Income (loss) from operations before federal income taxes
|
37.2 | 39.4 | 41.3 | 31.5 | 24.9 | -33.1 | % | |||||||||||
Federal income tax expense (benefit)
|
13.1 | 13.8 | 14.5 | 11.0 | 8.8 | -32.8 | % | |||||||||||
Income (Loss) from Operations | $ | 24.1 | $ | 25.6 | $ | 26.8 | $ | 20.5 | $ | 16.1 | -33.2 | % | ||||||
Effective Tax Rate
|
35.2 | % | 35.0 | % | 35.1 | % | 34.9 | % | 35.3 | % | ||||||||
Average Stockholders' Equity, Excluding AOCI
|
||||||||||||||||||
Average equity, including goodwill
|
$ | 1,161.9 | $ | 1,152.4 | $ | 1,149.4 | $ | 1,162.8 | $ | 1,180.2 | ||||||||
Average goodwill
|
274.3 | 274.3 | 274.3 | 274.3 | 274.3 | |||||||||||||
Average equity, excluding goodwill
|
$ | 887.6 | $ | 878.1 | $ | 875.1 | $ | 888.5 | $ | 905.9 | ||||||||
Return on Equity, Excluding AOCI
|
||||||||||||||||||
Including goodwill
|
8.3 | % | 8.9 | % | 9.3 | % | 7.1 | % | 5.5 | % | ||||||||
Excluding goodwill
|
10.9 | % | 11.7 | % | 12.3 | % | 9.2 | % | 7.1 | % | ||||||||
Underwriting, Acquisition, Insurance and Other Expenses
|
||||||||||||||||||
Commissions
|
$ | 50.3 | $ | 49.3 | $ | 50.0 | $ | 51.3 | $ | 54.0 | 7.4 | % | ||||||
General and administrative expenses
|
51.4 | 56.4 | 60.1 | 75.6 | 61.4 | 19.5 | % | |||||||||||
Taxes, licenses and fees
|
10.7 | 10.1 | 11.7 | 9.1 | 11.6 | 8.4 | % | |||||||||||
Total commissions and expenses incurred | 112.4 | 115.8 | 121.8 | 136.0 | 127.0 | 13.0 | % | |||||||||||
Less: commissions and expenses capitalized
|
(8.9 | ) | (9.8 | ) | (12.7 | ) | (21.3 | ) | (10.9 | ) | -22.5 | % | ||||||
Amortization of DAC and VOBA, net of interest
|
9.6 | 9.3 | 8.9 | 11.1 | 11.9 | 24.0 | % | |||||||||||
Total Underwriting, Acquisition, Insurance and Other Expenses | $ | 113.1 | $ | 115.3 | $ | 118.0 | $ | 125.8 | $ | 128.0 | 13.2 | % | ||||||
General and Administrative Expenses as a Percentage of Premiums | 11.8 | % | 12.3 | % | 13.7 | % | 17.1 | % | 13.3 | % | ||||||||
DAC and VOBA
|
||||||||||||||||||
Balance as of beginning-of-period
|
$ | 151.2 | $ | 150.5 | $ | 151.0 | $ | 154.8 | $ | 165.0 | ||||||||
Deferrals
|
8.9 | 9.8 | 12.7 | 21.3 | 10.9 | |||||||||||||
Amortization, net of interest
|
(9.6 | ) | (9.3 | ) | (8.9 | ) | (11.1 | ) | (11.9 | ) | ||||||||
Deferrals, net of amortization included in operating underwriting, acquisition, insurance and other expenses | (0.7 | ) | 0.5 | 3.8 | 10.2 | (1.0 | ) | |||||||||||
Balance as of End-of-Period | $ | 150.5 | $ | 151.0 | $ | 154.8 | $ | 165.0 | $ | 164.0 | ||||||||
Annualized Sales by Product Line
|
||||||||||||||||||
Life
|
$ | 17.4 | $ | 23.6 | $ | 30.8 | $ | 89.6 | $ | 28.2 | 62.1 | % | ||||||
Disability
|
18.0 | 30.7 | 34.3 | 92.8 | 28.2 | 56.7 | % | |||||||||||
Dental
|
10.0 | 12.8 | 9.6 | 25.0 | 10.2 | 2.0 | % | |||||||||||
Total | $ | 45.4 | $ | 67.1 | $ | 74.7 | $ | 207.4 | $ | 66.6 | 46.7 | % | ||||||
Insurance Premiums by Product Line
|
||||||||||||||||||
Life
|
$ | 170.4 | $ | 173.6 | $ | 173.5 | $ | 175.5 | $ | 185.9 | 9.1 | % | ||||||
Disability
|
186.2 | 189.8 | 190.5 | 190.7 | 198.8 | 6.8 | % | |||||||||||
Dental
|
46.1 | 45.3 | 45.9 | 46.2 | 45.8 | -0.7 | % | |||||||||||
Other
|
33.9 | 51.5 | 29.8 | 29.4 | 32.5 | -4.1 | % | |||||||||||
Total | $ | 436.6 | $ | 460.2 | $ | 439.7 | $ | 441.8 | $ | 463.0 | 6.0 | % | ||||||
Income (Loss) from Operations by Product Line
|
||||||||||||||||||
Life
|
$ | 8.1 | $ | 8.8 | $ | 11.0 | $ | 4.3 | $ | 2.4 | -70.4 | % | ||||||
Disability
|
16.5 | 16.9 | 14.6 | 13.6 | 14.0 | -15.2 | % | |||||||||||
Dental
|
(1.9 | ) | (1.4 | ) | 0.1 | 1.6 | (1.5 | ) | 21.1 | % | ||||||||
Other
|
1.4 | 1.3 | 1.1 | 1.0 | 1.2 | -14.3 | % | |||||||||||
Total | $ | 24.1 | $ | 25.6 | $ | 26.8 | $ | 20.5 | $ | 16.1 | -33.2 | % | ||||||
Loss Ratios by Product Line
|
||||||||||||||||||
Life
|
75.9 | % | 76.1 | % | 72.1 | % | 75.1 | % | 78.2 | % | ||||||||
Disability
|
70.1 | % | 69.4 | % | 70.4 | % | 69.6 | % | 70.1 | % | ||||||||
Dental
|
83.7 | % | 79.9 | % | 76.2 | % | 71.6 | % | 82.1 | % | ||||||||
Combined Loss Ratios | 74.1 | % | 73.4 | % | 71.8 | % | 72.2 | % | 74.9 | % |
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.
3/31/2012
|
|
PAGE 26 | |||||||||||||||||
Other Operations
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Operating Revenues
|
|||||||||||||||||||
Insurance premiums
|
$ | 0.1 | $ | - | $ | 0.8 | $ | - | $ | 0.1 | 0.0 | % | |||||||
Net investment income
|
80.1 | 76.4 | 79.9 | 70.7 | 69.8 | -12.9 | % | ||||||||||||
Amortization of deferred gain on business sold through reinsurance (1) | 18.0 | 18.0 | 18.1 | 18.0 | 18.0 | 0.0 | % | ||||||||||||
Other revenues and fees
|
1.7 | 1.5 | 1.4 | (0.7 | ) | 1.2 | -29.4 | % | |||||||||||
Media revenues
|
16.5 | 19.4 | 19.9 | 21.3 | 17.4 | 5.5 | % | ||||||||||||
Total Operating Revenues | 116.4 | 115.3 | 120.1 | 109.3 | 106.5 | -8.5 | % | ||||||||||||
Operating Expenses
|
|||||||||||||||||||
Interest credited
|
28.8 | 29.8 | 26.5 | 28.5 | 31.1 | 8.0 | % | ||||||||||||
Benefits
|
32.5 | 29.1 | 33.7 | 31.1 | 27.7 | -14.8 | % | ||||||||||||
Underwriting, acquisition, insurance and other expenses
|
27.6 | 8.4 | 21.6 | 14.7 | 22.7 | -17.8 | % | ||||||||||||
Inter-segment reimbursement associated with reserve
|
|||||||||||||||||||
financing and LOC expenses (2)
|
(2.0 | ) | (2.3 | ) | (2.4 | ) | (2.5 | ) | (2.8 | ) | -40.0 | % | |||||||
Taxes, licenses and fees
|
0.7 | (3.3 | ) | 13.7 | 15.5 | 1.3 | 85.7 | % | |||||||||||
Interest and debt expenses
|
71.6 | 72.0 | 71.0 | 70.5 | 67.5 | -5.7 | % | ||||||||||||
Media expenses
|
16.7 | 16.8 | 17.3 | 18.3 | 16.1 | -3.6 | % | ||||||||||||
Total Operating Expenses | 175.9 | 150.5 | 181.4 | 176.1 | 163.6 | -7.0 | % | ||||||||||||
Income (Loss) from operations before federal income taxes
|
(59.5 | ) | (35.2 | ) | (61.3 | ) | (66.8 | ) | (57.1 | ) | 4.0 | % | |||||||
Federal income tax expense (benefit)
|
(22.5 | ) | (13.0 | ) | (17.1 | ) | (24.0 | ) | (23.2 | ) | -3.1 | % | |||||||
Income (Loss) From Operations | $ | (37.0 | ) | $ | (22.2 | ) | $ | (44.2 | ) | $ | (42.8 | ) | $ | (33.9 | ) | 8.4 | % | ||
Run Off Institutional Pensions Account Values - Balance at End-of-Period | $ | 1.867 | $ | 1.845 | $ | 1.822 | $ | 1.809 | $ | 1.808 | -3.2 | % | |||||||
Discontinued Operations
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011 | 2011 | 2011 | 2011 | 2012 |
Change
|
||||||||||||||
Discontinued Operations Before Disposal
|
|||||||||||||||||||
Income (loss) from discontinued operations before federal income taxes | $ | - | $ | - | $ | - | $ | - | $ | - |
NM
|
||||||||
Federal income tax expense (benefit)
|
- | - | - | - | - |
NM
|
|||||||||||||
Income (Loss) From Discontinued Operations Before Disposal | - | - | - | - | - |
NM
|
|||||||||||||
Disposal
|
|||||||||||||||||||
Gain (loss) on disposal before federal income taxes
|
- | - | (2.9 | ) | - | (1.3 | ) |
NM
|
|||||||||||
Federal income tax expense (benefit)
|
- | - | 5.5 | - | (0.5 | ) |
NM
|
||||||||||||
Gain (Loss) on Disposal | - | - | (8.4 | ) | - | (0.8 | ) |
NM
|
|||||||||||
Income (Loss) From Discontinued Operations | $ | - | $ | - | $ | (8.4 | ) | $ | - | $ | (0.8 | ) |
NM
|
||||||
(1)
|
Represents the amortization of deferred gain recognized on the business sold through indemnity reinsurance to Swiss Re.
|
||||||||||||||||||
(2)
|
Represents reimbursements to Other Operations from the Life Insurance segment for the use of proceeds from certain issuances of senior notes that were used as long-term structured solutions, net of expenses incurred by Other Operations
|
||||||||||||||||||
for its use of LOCs. The inter-segment amounts are not reported on our Consolidated Statements of Income (Loss).
|
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.
3/31/2012
|
PAGE 27 | ||||||||||||||||||
Consolidated Deposits, Net Flows and Account Balances
|
|||||||||||||||||||
Unaudited (in billions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Deposits
|
|||||||||||||||||||
Annuities - fixed annuities (1)
|
$ | 1.116 | $ | 1.307 | $ | 1.294 | $ | 1.062 | $ | 1.008 | -9.7 | % | |||||||
Retirement Plan Services - fixed annuities
|
0.346 | 0.318 | 0.378 | 0.394 | 0.370 | 6.9 | % | ||||||||||||
Annuities - variable annuities
|
1.523 | 1.620 | 1.415 | 1.313 | 1.472 | -3.3 | % | ||||||||||||
Retirement Plan Services - variable products (2)
|
0.995 | 0.881 | 1.078 | 1.176 | 1.141 | 14.7 | % | ||||||||||||
Life Insurance:
|
|||||||||||||||||||
Interest-Sensitive Life | 1.085 | 1.126 | 1.165 | 1.297 | 0.991 | -8.7 | % | ||||||||||||
VUL | 0.185 | 0.148 | 0.178 | 0.209 | 0.168 | -9.2 | % | ||||||||||||
Total Deposits | $ | 5.250 | $ | 5.400 | $ | 5.508 | $ | 5.451 | $ | 5.150 | -1.9 | % | |||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011 | 2011 | 2011 | 2011 | 2012 |
Change
|
||||||||||||||
Net Flows
|
|||||||||||||||||||
Annuities - fixed annuities (1)
|
$ | 0.603 | $ | 0.782 | $ | 0.704 | $ | 0.498 | $ | 0.459 | -23.9 | % | |||||||
Retirement Plan Services - fixed annuities
|
0.010 | (0.119 | ) | 0.022 | (0.019 | ) | (0.035 | ) |
NM
|
||||||||||
Annuities - variable annuities
|
(0.120 | ) | (0.082 | ) | (0.041 | ) | (0.153 | ) | (0.166 | ) | -38.3 | % | |||||||
Retirement Plan Services - variable products (2)
|
0.124 | (0.059 | ) | 0.307 | 0.238 | 0.247 | 99.2 | % | |||||||||||
Life Insurance:
|
|||||||||||||||||||
Interest-Sensitive Life | 0.790 | 0.830 | 0.933 | 1.029 | 0.684 | -13.4 | % | ||||||||||||
VUL | 0.031 | 0.038 | 0.030 | 0.002 | 0.067 | 116.1 | % | ||||||||||||
Total Net Flows | $ | 1.438 | $ | 1.390 | $ | 1.955 | $ | 1.595 | $ | 1.256 | -12.7 | % | |||||||
As of
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011 | 2011 | 2011 | 2011 | 2012 |
Change
|
||||||||||||||
Account Balances
|
|||||||||||||||||||
Annuities - fixed annuities (1)
|
$ | 19.998 | $ | 20.289 | $ | 20.455 | $ | 20.524 | $ | 20.609 | 3.1 | % | |||||||
Retirement Plan Services - fixed annuities
|
12.956 | 13.025 | 13.395 | 13.630 | 13.820 | 6.7 | % | ||||||||||||
Annuities - variable annuities
|
67.787 | 68.551 | 60.774 | 65.010 | 71.059 | 4.8 | % | ||||||||||||
Retirement Plan Services - variable products (2)
|
27.352 | 27.262 | 23.625 | 25.503 | 28.200 | 3.1 | % | ||||||||||||
Life Insurance:
|
|||||||||||||||||||
Interest-Sensitive Life | 28.854 | 29.267 | 29.761 | 30.349 | 30.632 | 6.2 | % | ||||||||||||
VUL | 5.295 | 5.300 | 4.658 | 4.929 | 5.376 | 1.5 | % | ||||||||||||
Total Account Balances | $ | 162.242 | $ | 163.694 | $ | 152.668 | $ | 159.945 | $ | 169.696 | 4.6 | % | |||||||
(1)
|
Includes fixed portion of variable annuities.
|
||||||||||||||||||
(2)
|
Includes amounts attributable to mutual fund net flows. Mutual fund account values are not included in the separate accounts reported on our Consolidated Balance Sheets, as we do not have any ownership interest in them.
|
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.
3/31/2012
|
PAGE 28 | ||||||||||||||||||
Consolidated Investment Data
|
|||||||||||||||||||
Unaudited (in millions)
|
|||||||||||||||||||
For the Three Months Ended
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
2011
|
2011
|
2011
|
2011
|
2012
|
Change
|
||||||||||||||
Net Investment Income
|
|||||||||||||||||||
Available-for-sale fixed maturity securities
|
$ | 984.8 | $ | 982.5 | $ | 972.7 | $ | 972.0 | $ | 974.2 | -1.1 | % | |||||||
Available-for-sale equity securities
|
1.2 | 1.1 | 1.2 | 1.7 | 1.4 | 16.7 | % | ||||||||||||
Available-for-sale VIEs' fixed maturity securities
|
3.1 | 3.1 | 3.6 | 3.9 | 4.2 | 35.5 | % | ||||||||||||
Trading securities
|
38.6 | 38.7 | 38.4 | 38.1 | 37.5 | -2.8 | % | ||||||||||||
Mortgage loans on real estate
|
104.1 | 106.1 | 106.9 | 103.2 | 101.7 | -2.3 | % | ||||||||||||
Real estate
|
7.7 | 5.5 | 5.0 | 4.4 | 4.5 | -41.6 | % | ||||||||||||
Policy loans
|
40.6 | 43.1 | 41.7 | 40.1 | 45.7 | 12.6 | % | ||||||||||||
Invested cash
|
1.4 | 0.8 | 1.0 | 0.5 | 0.5 | -64.3 | % | ||||||||||||
Other investments
|
38.0 | 27.3 | 9.8 | (9.0 | ) | 22.4 | -41.1 | % | |||||||||||
Investment income | 1,219.5 | 1,208.2 | 1,180.3 | 1,154.9 | 1,192.1 | -2.2 | % | ||||||||||||
Investment expense
|
(28.3 | ) | (27.6 | ) | (29.6 | ) | (25.7 | ) | (26.3 | ) | 7.1 | % | |||||||
Net Investment Income | $ | 1,191.2 | $ | 1,180.6 | $ | 1,150.7 | $ | 1,129.2 | $ | 1,165.8 | -2.1 | % | |||||||
Average Invested Assets (Amortized Cost)
|
$ | 79,995.7 | $ | 81,101.9 | $ | 82,253.8 | $ | 83,210.5 | $ | 83,883.0 | |||||||||
Net investment income yield on invested assets
|
5.96 | % | 5.82 | % | 5.60 | % | 5.43 | % | 5.56 | % | |||||||||
Realized Gain (Loss) Related to Investments
|
|||||||||||||||||||
Available-for-sale fixed maturity securities:
|
|||||||||||||||||||
Gross gains | $ | 36.1 | $ | 30.6 | $ | 17.5 | $ | 1.5 | $ | 4.7 | -87.0 | % | |||||||
Gross losses | (62.7 | ) | (50.8 | ) | (63.1 | ) | (50.4 | ) | (63.0 | ) | -0.5 | % | |||||||
Equity securities:
|
|||||||||||||||||||
Gross gains | 8.3 | 1.1 | 0.2 | 2.1 | 0.7 | -91.6 | % | ||||||||||||
Gross losses | (0.2 | ) | - | - | (0.1 | ) | (0.2 | ) | 0.0 | % | |||||||||
Gain (loss) on other investments
|
12.8 | (8.2 | ) | (3.3 | ) | (9.9 | ) | 7.1 | -44.5 | % | |||||||||
Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds and funds withheld reinsurance liabilities | (9.1 | ) | (5.3 | ) | 4.5 | (0.1 | ) | 2.1 | 123.1 | % | |||||||||
Total realized gain (loss) on investments, pre-tax
|
(14.8 | ) | (32.6 | ) | (44.2 | ) | (56.9 | ) | (48.6 | ) |
NM
|
||||||||
Federal income tax expense (benefit) (1) | (5.2 | ) | (11.4 | ) | (15.5 | ) | (19.9 | ) | (17.0 | ) |
NM
|
||||||||
Total, After-Tax | $ | (9.6 | ) | $ | (21.2 | ) | $ | (28.7 | ) | $ | (37.0 | ) | $ | (31.6 | ) |
NM
|
|||
As of December 31, 2011
|
As of March 31, 2012 |
|
|||||||||||||||||
Amount
|
% of Total |
Amount
|
% of Total |
|
|||||||||||||||
Available-for-Sale and Trading Securities
|
|||||||||||||||||||
Fixed maturity securities (fair value)
|
$ | 78,805.4 | 99.8 | % | $ | 79,603.9 | 99.8 | % | |||||||||||
Fixed maturity securities (amortized cost)
|
71,959.8 | 99.8 | % | 72,858.8 | 99.8 | % | |||||||||||||
Equity securities (fair value)
|
141.0 | 0.2 | % | 127.8 | 0.2 | % | |||||||||||||
Equity securities (amortized cost)
|
136.9 | 0.2 | % | 115.2 | 0.2 | % | |||||||||||||
% of Available-for-Sale Fixed Maturity Securities, Based on Amortized Cost | |||||||||||||||||||
Investment grade
|
94.4 | % | 94.3 | % | |||||||||||||||
Below investment grade
|
5.6 | % | 5.7 | % | |||||||||||||||
General Account Investments at Amortized Cost
|
As of December 31, 2011
|
As of March 31, 2012 |
|
||||||||||||||||
Amount
|
% of Total |
Amount
|
% of Total |
|
|||||||||||||||
Available-for-Sale Fixed Maturities Securities:
|
|||||||||||||||||||
Corporate bonds
|
$ | 53,661.5 | 77.0 | % | $ | 55,255.7 | 78.3 | % | |||||||||||
U.S. Government bonds
|
439.2 | 0.6 | % | 450.0 | 0.6 | % | |||||||||||||
Foreign government bonds
|
667.7 | 1.0 | % | 584.9 | 0.8 | % | |||||||||||||
Mortgage-backed securities
|
9,331.3 | 13.4 | % | 8,729.4 | 12.4 | % | |||||||||||||
ABS CDOs
|
120.8 | 0.2 | % | 116.6 | 0.2 | % | |||||||||||||
State and municipal bonds
|
3,490.0 | 5.0 | % | 3,496.7 | 4.9 | % | |||||||||||||
Hybrid and redeemable preferred securities
|
1,277.2 | 1.8 | % | 1,256.2 | 1.8 | % | |||||||||||||
VIEs' fixed maturity securities
|
673.3 | 1.0 | % | 674.3 | 1.0 | % | |||||||||||||
Total | $ | 69,661.0 | 100.0 | % | $ | 70,563.8 | 100.0 | % | |||||||||||
As of
|
|||||||||||||||||||
March
|
June
|
Sept.
|
Dec.
|
March
|
%
|
||||||||||||||
Composition of Investment Portfolio
|
2011 | 2011 | 2011 | 2011 | 2012 |
Change
|
|||||||||||||
Available-for-sale securities, at fair value:
|
|||||||||||||||||||
Fixed maturity | $ | 69,231.0 | $ | 70,920.2 | $ | 74,591.5 | $ | 75,432.8 | $ | 76,254.4 | 10.1 | % | |||||||
Equity | 144.6 | 143.7 | 137.4 | 138.8 | 125.6 | -13.1 | % | ||||||||||||
VIEs' fixed maturity | 586.8 | 592.6 | 699.5 | 700.1 | 701.9 | 19.6 | % | ||||||||||||
Trading securities
|
2,598.0 | 2,624.7 | 2,726.2 | 2,674.7 | 2,649.7 | 2.0 | % | ||||||||||||
Mortgage loans on real estate and real estate
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6,937.6 | 7,020.4 | 7,029.1 | 7,079.4 | 7,050.2 | 1.6 | % | ||||||||||||
Policy loans
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2,837.1 | 2,877.1 | 2,873.5 | 2,884.6 | 2,841.8 | 0.2 | % | ||||||||||||
Derivative investments
|
945.7 | 1,097.0 | 3,028.7 | 3,151.0 | 2,244.5 | 137.3 | % | ||||||||||||
Other investments
|
1,029.4 | 1,002.3 | 1,104.7 | 1,068.6 | 1,043.6 | 1.4 | % | ||||||||||||
Total | $ | 84,310.2 | $ | 86,278.0 | $ | 92,190.6 | $ | 93,130.0 | $ | 92,911.7 | 10.2 | % | |||||||
(1)
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We use our prevailing corporate federal income tax rate of 35% while taking into account any permanent differences for events recognized differently in our financial statements and federal income tax returns
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when reconciling our non-GAAP measures to the most comparable GAAP measure. |
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.