Lincoln National (LNC) 8-K Lincoln Financial Group Reports Fourth Quarter and Full Year 2012 Results

 

Lincoln Financial Group
Table of Contents
Analyst Coverage		1
Notes		2
Consolidated Statements of Income (Loss)		3
Consolidated Balance Sheets		4
Earnings, Shares, Return on Equity and Return to Stockholder Highlights		5
Income (Loss) from Operations, Average Equity and ROE By Segment		6
Select Earnings Drivers By Segment		7
Deposits, Net Flows and Account Balances By Segment		8
Sales By Segment		9
Operating Revenues and General and Administrative Expenses By Segment		10
Operating Commissions and Other Expenses		11
Interest Rate Yields and Spreads By Segment		12
Select Investment Data		13
Realized Gain (Loss) and Benefit Ratio Unlocking, After-DAC		14
Select Liquidity and Ratings Agency Data		15
Select Earnings and Operational Data:
	Annuities	16
	Retirement Plan Services	17
	Life Insurance	18
	Group Protection	19
	Other Operations and Discontinued Operations	20
DAC, VOBA, DSI and DFEL Roll Forwards:
	Consolidated	21
	Annuities	22
	Retirement Plan Services, Life Insurance and Group Protection	23
Account Value Roll Forwards:
	Annuities	24
	Retirement Plan Services	25
	Life Insurance	26
Select Non-GAAP to GAAP Reconciliations		27

Lincoln Financial Group
Analyst Coverage
Firm	Analyst	Phone Number
Bank of America - Merrill Lynch	Seth Weiss	646-855-3783
Barclays Capital	Jay Gelb	212-526-1561
Citi Investment Research	Erik Bass	212-816-5257
Credit Suisse	Tom Gallagher	212-538-2010
Deutsche Bank	Yaron Kinar	212-250-7927
Dowling and Partners	Ryan Krueger	860-676-8600
Evercore Partners	Mark Finkelstein	312-445-6440
FBR Capital Markets	Randy Binner	703-312-1890
Goldman Sachs and Company	Christopher Giovanni	212-357-3560
JP Morgan Securities	Jimmy Bhullar	212-622-6397
Keefe, Bruyette and Woods	Jeff Schuman	860-722-5902
Langen McAlenney	Bob Glasspiegel	860-724-1203
Macquarie Capital	Sean Dargan	212-231-0663
Morgan Stanley	Nigel Dally	212-761-4132
Raymond James and Associates	Steven Schwartz	312-612-7686
RBC Capital	Eric Berg	212-618-7593
Sandler O'Neil and Partners	Edward Shields	312-281-3487
Scotia Capital	Joanne Smith	212-225-5071
Sterne, Agee and Leach, Inc.	John Nadel	212-338-4717
UBS	Suneet Kamath	212-713-1355
Wells Fargo Securities	John Hall	212-214-8032
Investor Inquiries May Be Directed To
Jim Sjoreen, Senior Vice President, Investor Relations
Email: Jim.Sjoreen@lfg.com
Voice: 484-583-1420
Fax: 484-583-3962
Notes
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.
Lincoln Financial Group's Statistical Supplement will be available immediately after the release of earnings for each quarter through our Investor Relations website:  www.LincolnFinancial.com/investor.

Page 1

Lincoln Financial Group

Notes

Computations

The quarterly financial information for the current year may not sum to the corresponding year-to-date amount because both are rounded to millions.

The financial ratios reported herein are calculated using whole dollars instead of dollars rounded to millions.

If the effect of equity classification would result in a more dilutive EPS, 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.  In addition, for any period where a loss from continuing operations is experienced, shares used in the diluted EPS calculation represent basic shares, as using dilutive shares would be anti-dilutive to the calculation.  In these periods, we would also exclude the deferred compensation adjustment.

Return on equity ("ROE") measures how efficiently we generate profits from the resources provided by our net assets.  ROE is calculated by dividing annualized net income (loss) (or income (loss) from operations) by average equity, excluding accumulated other comprehensive income (loss) ("AOCI").  Management evaluates consolidated ROE by both including and excluding the effect of average goodwill.

Book value per share, excluding AOCI, is calculated by dividing stockholders' equity, excluding AOCI, by common shares outstanding assuming the conversion of our Series A preferred shares.  We provide book value per share, excluding AOCI, to enable investors to analyze the amount of our net worth that is attributable primarily to our business operations.

Basis of Presentation

We adopted the provisions of ASU 2010-26 “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts” (“ASU 2010-26”) effective January 1, 2012, and elected to retrospectively restate all prior periods.  ASU 2010-26 clarified the types of costs incurred by an insurance entity that can be capitalized in the acquisition of insurance contracts.  Only those costs incurred that result directly from and are essential to the successful acquisition of new or renewal insurance contracts may be capitalized as deferred acquisition costs ("DAC").  The determination of deferability must be made on a contract-level basis.

As of December 31, 2012, we completed a review of our income tax balances that resulted in the identification of certain errors in our income tax accounts primarily associated with the accounting for affordable housing tax credits.  These errors were not material for any of our previously filed annual or quarterly financial statements; however, the adjustment to correct the cumulative effect of these errors would be material if recorded in 2012.  Accordingly, we have adjusted prior period information in this Statistical Supplement.  We will be restating the applicable period financials in our Form 10-K for the year ended December 31, 2012.  The following summarizes the increase (decrease) to federal income tax expense, with the offset to other liabilities, and the reduction (increase) to income from operations and net income (in millions) as a result of these adjustments:

																For the Twelve
	For the Three Months Ended															Months Ended
	3/31/11		6/30/11		9/30/11		12/31/11		3/31/12		6/30/12		9/30/12			12/31/11			12/31/12
Retirement Plan Services	$	-	$	-	$	-	$	-	$	-	$	-	$	-		$	(1	)	$	-
Life Insurance		3		3		3		3		3		3		2			12			7
Other Operations		-		-		-		-		-		-		(29	)		-			(29	)
Total	$	3	$	3	$	3	$	3	$	3	$	3	$	(27	)	$	11		$	(22	)

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Lincoln Financial Group
Notes
The following summarizes the changes in earnings (loss) per common share - diluted as a result of these adjustments:
	For the Three Months Ended
	3/31/11			6/30/11			9/30/11		12/31/11			3/31/12		6/30/12		9/30/12
Income (loss) from operations - as previously reported	$	1.00		$	1.01		$	1.03	$	0.92		$	1.00	$	1.09	$	1.18
Income (loss) from operations - as adjusted		0.99			1.01			1.03		0.91			0.99		1.09		1.27
Net income (loss) - as previously reported		0.97			0.95			0.47		(1.81	)		0.83		1.10		1.41
Net income (loss) - as adjusted		0.96			0.94			0.46		(1.82	)		0.82		1.09		1.51
Average shares - diluted		322.9			319.9			312.0		303.4			295.9		290.0		284.7
In addition, we reduced (increased) the beginning balance of retained earnings as of January 1, 2011, for the cumulative effect of the corrections (in millions) as follows:
				Retirement
				Plan			Life		Other
	Annuities			Services			Insurance		Operations			Total
Retained earnings	$	(4	)	$	(5	)	$	40	$	97		$	128

Certain other amounts reported in prior periods have been reclassified to the presentation adopted in the current period.  These reclassifications had no effect on net income, income from operations or stockholders' equity in the prior periods.
Definitions
Holding company available liquidity consists of cash and cash equivalents, excluding cash held as collateral, investments maturing in one year or less at origination and receivables under the inter-company cash management program, less payables under the inter-company cash management program, payables from purchases of securities not settled as of the balance sheet date and commercial paper outstanding.
Sales as reported consist of the following:
	•	MoneyGuard® (our linked-benefit product) – 15% of single premium deposits;
	•	MoneyGuard® (flexible premium option), universal life ("UL") (excluding linked-benefit products) and variable universal life ("VUL"), including corporate-owned life insurance ("COLI") and bank-owned life insurance ("BOLI") - first year commissionable premiums plus 5% of excess premiums received, including an adjustment for internal replacements at approximately 50% of target;
	•	Term - 100% of first year paid premiums;
	•	Annuities - deposits from new and existing customers; and
	•	Group Protection - annualized first year premiums from new policies.
Throughout the document, "after-DAC" refers to the associated amortization expense of DAC, value of business acquired ("VOBA"), deferred sales inducements ("DSI") and DFEL and changes in other contract holder funds.
Non-GAAP Performance Measures
Non-GAAP measures do not replace the most directly comparable GAAP measures, and we have included detailed reconciliations herein.

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Lincoln Financial Group
Notes
Non-GAAP Performance Measures
Non-GAAP measures do not replace the most directly comparable GAAP measures, and we have included detailed reconciliations herein.
We exclude the after-tax effects of the following items from GAAP net income (loss) to arrive at income (loss) from operations:
	•	Realized gains and losses associated with the following ("excluded realized gain (loss)"):
		▪	Sales or disposals and impairments of securities;
		▪	Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities ("gain (loss) on the mark-to-market on certain instruments");
		▪	Changes in the fair value of the derivatives we own to hedge our guaranteed death benefit ("GDB") riders reflected within variable annuity net derivative results;
		▪	Changes in the fair value of the embedded derivatives of our guaranteed living benefit ("GLB") riders accounted for at fair value, net of the change in the fair value of the derivatives we own to hedge them reflected within variable annuity net derivative results; and
		▪	Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for at fair value ("indexed annuity forward-starting option");
	•	Changes in reserves resulting from benefit ratio unlocking on our GDB and GLB riders ("benefit ratio unlocking") reflected within variable annuity net derivative results;
	•	Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance;
	•	Gains (losses) on early extinguishment of debt;
	•	Losses from the impairment of intangible assets;
	•	Income (loss) from discontinued operations; and
	•	Income (loss) from the initial adoption of new accounting standards.
Operating revenues represent GAAP revenues excluding the pre-tax effects of the following items:
	•	Excluded realized gain (loss);
	•	Revenue adjustments from the initial adoption of new accounting standards;
	•	Amortization of deferred front-end loads ("DFEL") arising from changes in GDB and GLB benefit ratio unlocking; and
	•	Amortization of deferred gains arising from reserve changes on business sold through reinsurance.
We use our 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.
Management believes that the non-GAAP performance measures discussed above explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying trends in our current business because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments.  In addition, we believe that our definitions of operating revenues and income from operations provide investors with more valuable measures of our performance because they better reveal trends in our business.
Statistical Supplement is Dated
The financial data in this document is dated February 6, 2013, and has not been updated since that date.  Lincoln Financial Group does not intend to update this document.

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Lincoln Financial Group
Consolidated Statements of Income (Loss)
Unaudited (millions of dollars, except per share data)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Revenues
Insurance premiums	$	573		$	589		$	630		$	606		$	637			11.2	%	$	2,294		$	2,462			7.3	%
Insurance fees		854			907			887			990			948			11.0	%		3,437			3,733			8.6	%
Net investment income		1,129			1,166			1,197			1,146			1,190			5.4	%		4,652			4,698			1.0	%
Realized gain (loss):
Other-than-temporary impairment ("OTTI")		(25	)		(47	)		(33	)		(32	)		(41	)		-64.0	%		(124	)		(153	)		-23.4	%
Realized gain (loss), excluding OTTI		(99	)		(38	)		76			102			88			147.5	%		(170	)		227			233.5	%
Total realized gain (loss)		(124	)		(85	)		43			70			47			137.9	%		(294	)		74			125.2	%
Amortization of deferred gains on business sold through reinsurance		19			19			18			19			19			0.0	%		75			74			-1.3	%
Other revenues and fees		117			119			124			123			123			5.1	%		477			491			2.9	%
Total revenues		2,568			2,715			2,899			2,954			2,964			15.4	%		10,641			11,532			8.4	%
Expenses
Interest credited		628			624			615			609			624			-0.6	%		2,488			2,470			-0.7	%
Benefits		815			859			946			812			919			12.8	%		3,345			3,538			5.8	%
Commissions and other expenses		797			856			828			1,047			951			19.3	%		3,264			3,683			12.8	%
Interest and debt expense		70			68			68			68			70			0.0	%		294			273			-7.1	%
Impairment of intangibles		747			-			-			-			-			-100.0	%		747			-			-100.0	%
Total expenses		3,057			2,407			2,457			2,536			2,564			-16.1	%		10,138			9,964			-1.7	%
Income (loss) from continuing operations before taxes		(489	)		308			442			418			400			181.8	%		503			1,568			211.7	%
Federal income tax expense (benefit)		52			64			121			18			80			53.8	%		274			282			2.9	%
Income (loss) from continuing operations		(541	)		244			321			400			320			159.1	%		229			1,286		NM
Income (loss) from discontinued operations		-			(1	)		-			28			-		NM				(8	)		27		NM
Net income (loss)		(541	)		243			321			428			320			159.1	%		221			1,313		NM
Adjustment for LNC stock units in our deferred compensation plans		-			-			(4	)		-			-		NM				(5	)		-			100.0	%
Net income (loss) available to common stockholders - diluted	$	(541	)	$	243		$	317		$	428		$	320			159.1	%	$	216		$	1,313		NM
Earnings (Loss) Per Common Share - Diluted
Income (loss) from continuing operations	$	(1.82	)	$	0.82		$	1.09		$	1.41		$	1.14			162.6	%	$	0.72		$	4.47		NM
Income (loss) from discontinued operations		-			-			-			0.10			-		NM				(0.03	)		0.09		NM
Net income (loss)	$	(1.82	)	$	0.82		$	1.09		$	1.51		$	1.14			162.6	%	$	0.69		$	4.56		NM

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Lincoln Financial Group
Consolidated Balance Sheets
Unaudited (millions of dollars)
	As of
	12/31/11		3/31/12		6/30/12		9/30/12		12/31/12		Change
ASSETS
Investments:
Available-for-sale ("AFS") securities:
Corporate bonds	$	59,261	$	60,599	$	63,914	$	66,476	$	68,016		14.8	%
U.S. government bonds		494		486		517		508		442		-10.5	%
Foreign government bonds		733		650		664		661		654		-10.8	%
Mortgage-backed securities		9,639		9,095		8,504		7,863		7,174		-25.6	%
Asset-backed collateralized debt obligations		102		102		120		147		180		76.5	%
State and municipal bonds		4,047		4,126		4,284		4,338		4,353		7.6	%
Hybrid and redeemable preferred securities		1,157		1,196		1,188		1,186		1,217		5.2	%
VIEs' fixed maturity securities		700		702		705		706		708		1.1	%
Equity securities		139		126		154		156		157		12.9	%
Total AFS securities		76,272		77,082		80,050		82,041		82,901		8.7	%
Trading securities		2,675		2,650		2,649		2,650		2,554		-4.5	%
Mortgage loans on real estate		6,942		6,938		6,804		6,690		7,029		1.3	%
Real estate		137		113		116		112		65		-52.6	%
Policy loans		2,884		2,842		2,829		2,780		2,766		-4.1	%
Derivative investments		3,151		2,244		3,399		3,072		2,652		-15.8	%
Other investments		1,069		1,043		1,041		1,123		1,098		2.7	%
Total investments		93,130		92,912		96,888		98,468		99,065		6.4	%
Cash and invested cash		4,510		3,516		5,257		4,373		4,230		-6.2	%
DAC and VOBA		6,776		6,880		6,505		5,813		6,667		-1.6	%
Premiums and fees receivable		408		437		388		366		380		-6.9	%
Accrued investment income		981		1,026		1,021		1,067		1,015		3.5	%
Reinsurance recoverables		6,526		6,534		6,601		6,424		6,449		-1.2	%
Funds withheld reinsurance assets		874		866		863		846		837		-4.2	%
Goodwill		2,273		2,273		2,273		2,273		2,273		0.0	%
Other assets		2,536		2,486		2,475		2,502		2,580		1.7	%
Separate account assets		83,477		91,088		88,839		93,326		95,373		14.3	%
Total assets	$	201,491	$	208,018	$	211,110	$	215,458	$	218,869		8.6	%

Page 4a

Lincoln Financial Group
Consolidated Balance Sheets
Unaudited (millions of dollars)
	As of
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Future contract benefits	$	19,814		$	18,784		$	19,930		$	19,232		$	19,780			-0.2	%
Other contract holder funds		69,465			70,027			70,422			70,706			72,257			4.0	%
Short-term debt		300			300			300			200			200			-33.3	%
Long-term debt by rating agency leverage definitions:
Operating (see note (1) on page 15 for details)		1,122			1,122			1,122			1,122			1,122			0.0	%
Financial		4,269			4,484			4,597			4,372			4,317			1.1	%
Reinsurance related embedded derivatives		168			158			185			215			215			28.0	%
Funds withheld reinsurance liabilities		1,045			1,043			999			987			940			-10.0	%
Deferred gain on business sold through reinsurance		394			375			356			338			319			-19.0	%
Payables for collateral on investments		3,733			2,875			5,070			4,566			4,181			12.0	%
VIEs' liabilities		193			149			158			121			92			-52.3	%
Other liabilities		4,411			4,493			5,093			5,153			5,100			15.6	%
Separate account liabilities		83,477			91,088			88,839			93,326			95,373			14.3	%
Total liabilities		188,391			194,898			197,071			200,338			203,896			8.2	%
Stockholders' Equity
Common stock		7,590			7,448			7,310			7,214			7,121			-6.2	%
Retained earnings		2,831			3,050			3,350			3,756			4,044			42.8	%
AOCI:
Unrealized gain (loss) on AFS securities		2,948			2,934			3,627			4,354			4,066			37.9	%
Unrealized OTTI on AFS securities		(110	)		(119	)		(117	)		(99	)		(107	)		2.7	%
Unrealized gain (loss) on derivative instruments		119			89			150			177			163			37.0	%
Foreign currency translation adjustment		-			(3	)		(4	)		(3	)		(4	)	NM
Funded status of employee benefit plans		(278	)		(279	)		(277	)		(279	)		(310	)		-11.5	%
Total AOCI		2,679			2,622			3,379			4,150			3,808			42.1	%
Total stockholders' equity		13,100			13,120			14,039			15,120			14,973			14.3	%
Total liabilities and stockholders' equity	$	201,491		$	208,018		$	211,110		$	215,458		$	218,869			8.6	%

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Lincoln Financial Group
Earnings, Shares, Return on Equity and Return to Stockholder Highlights
Unaudited (millions of dollars, except per share data)
	As of or For the Three Months Ended																		As of or For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Income (Loss)
Income (loss) from operations	$	277		$	293		$	319		$	362		$	310			11.9	%	$	1,246		$	1,284			3.0	%
Net income (loss)		(541	)		243			321			428			320			159.1	%		221			1,313		NM
Earnings (Loss) Per Diluted Share
Income (loss) from operations	$	0.91		$	0.99		$	1.09		$	1.27		$	1.10			20.9	%	$	3.94		$	4.47			13.5	%
Net income (loss)		(1.82	)		0.82			1.09			1.51			1.14			162.6	%		0.69			4.56		NM
Average Stockholders' Equity
Average equity, including AOCI	$	13,475		$	13,110		$	13,579		$	14,580		$	15,048			11.7	%	$	12,649		$	14,080			11.3	%
Average AOCI		2,671			2,650			3,000			3,764			3,979			49.0	%		1,632			3,348			105.1	%
Average equity, excluding AOCI	$	10,804		$	10,460		$	10,579		$	10,816		$	11,069			2.5	%	$	11,017		$	10,732			-2.6	%
ROE
Income (loss) from operations		10.3	%		11.2	%		12.1	%		13.4	%		11.2	%					11.3	%		12.0	%
Net income (loss)		-20.0	%		9.3	%		12.2	%		15.8	%		11.6	%					2.0	%		12.2	%
Per Share
Dividends declared during the period	$	0.08		$	0.08		$	0.08		$	0.08		$	0.12			50.0	%	$	0.23		$	0.36			56.5	%
Book value, including AOCI		44.94			45.94			50.26			54.94			55.14			22.7	%		44.94			55.14			22.7	%
Book value, excluding AOCI		35.75			36.76			38.16			39.86			41.11			15.0	%		35.75			41.11			15.0	%
Shares
Repurchased during the period		10.4			6.0			6.5			4.2			3.8			-63.2	%		24.7			20.5			-17.0	%
Average for the period - diluted		303.4			295.9			290.0			284.7			281.1			-7.4	%		315.0			287.6			-8.7	%
End-of-period - assuming conversion of preferred		291.5			285.6			279.3			275.2			271.6			-6.8	%		291.5			271.6			-6.8	%
End-of-period - diluted		297.0			293.0			286.8			282.4			279.1			-6.0	%		297.0			279.1			-6.0	%
Cash Returned to Common Stockholders
Shares repurchased	$	200		$	150		$	150		$	100		$	92			-54.0	%	$	575		$	492			-14.4	%
Common dividends		15			23			23			22			22			46.7	%		62			90			45.2	%
Total cash returned to common stockholders	$	215		$	173		$	173		$	122		$	114			-47.0	%	$	637		$	582			-8.6	%

Page 5

Lincoln Financial Group
Income (Loss) from Operations, Average Equity and ROE By Segment
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Income (Loss) from Operations
Annuities	$	131		$	137		$	158		$	139		$	162			23.7	%	$	573		$	595			3.8	%
Retirement Plan Services		33			35			38			29			28			-15.2	%		163			130			-20.2	%
Life Insurance		135			139			135			152			147			8.9	%		559			574			2.7	%
Group Protection		20			16			27			16			13			-35.0	%		97			72			-25.8	%
Other Operations		(42	)		(34	)		(39	)		26			(40	)		4.8	%		(146	)		(87	)		40.4	%
Income (loss) from operations	$	277		$	293		$	319		$	362		$	310			11.9	%	$	1,246		$	1,284			3.0	%
Average Equity, Excluding AOCI
Segment equity, excluding goodwill:
Annuities	$	2,831		$	2,960		$	3,091		$	3,110		$	3,053			7.8	%	$	2,514		$	3,053			21.4	%
Retirement Plan Services		863			911			1,001			1,031			941			9.0	%		878			971			10.6	%
Life Insurance		5,576			5,655			5,805			5,879			5,919			6.2	%		5,579			5,814			4.2	%
Group Protection		889			906			927			955			992			11.6	%		882			945			7.1	%
Total segment equity, excluding goodwill		10,159			10,432			10,824			10,975			10,905			7.3	%		9,853			10,783			9.4	%
Other Operations and goodwill		645			28			(245	)		(159	)		164			-74.6	%		1,164			(51	)	NM
Total average equity, excluding AOCI	$	10,804		$	10,460		$	10,579		$	10,816		$	11,069			2.5	%	$	11,017		$	10,732			-2.6	%
ROE
Segment ROE, excluding goodwill:
Annuities		18.5	%		18.5	%		20.4	%		17.9	%		21.2	%					22.8	%		19.5	%
Retirement Plan Services		15.5	%		15.2	%		15.1	%		11.2	%		12.0	%					18.5	%		13.3	%
Life Insurance		9.7	%		9.9	%		9.3	%		10.3	%		10.0	%					10.0	%		9.9	%
Group Protection		9.2	%		7.1	%		11.6	%		6.5	%		5.3	%					11.0	%		7.6	%
Consolidated ROE - income (loss) from operations		10.3	%		11.2	%		12.1	%		13.4	%		11.2	%					11.3	%		12.0	%

Page 6

Lincoln Financial Group
Select Earnings Drivers By Segment
Unaudited (millions of dollars)
	For the Three Months Ended													For the Twelve Months Ended
	12/31/11		3/31/12		6/30/12		9/30/12		12/31/12		Change			12/31/11		12/31/12		Change
Annuities
Operating revenues	$	692	$	731	$	734	$	745	$	766		10.7	%	$	2,871	$	2,975		3.6	%
Average account values		84,708		89,537		89,890		92,323		94,709		11.8	%		86,242		91,638		6.3	%
Net flows		345		293		701		396		1,060		207.2	%		2,191		2,451		11.9	%
Retirement Plan Services
Operating revenues	$	246	$	252	$	258	$	255	$	259		5.3	%	$	1,017	$	1,024		0.7	%
Average account values		38,634		40,834		41,315		42,315		43,385		12.3	%		39,422		41,955		6.4	%
Net flows		219		212		194		232		348		58.9	%		504		987		95.8	%
Life Insurance
Operating revenues	$	1,187	$	1,232	$	1,237	$	1,296	$	1,288		8.5	%	$	4,740	$	5,053		6.6	%
Average account values		34,848		35,643		36,064		36,355		36,957		6.1	%		34,392		36,255		5.4	%
Average in-force face amount		577,137		579,897		581,015		583,264		587,509		1.8	%		570,816		582,921		2.1	%
Net flows		1,021		741		713		685		1,148		12.4	%		3,662		3,289		-10.2	%
Group Protection
Operating revenues	$	481	$	504	$	540	$	517	$	531		10.4	%	$	1,938	$	2,091		7.9	%
Non-medical earned premiums		412		431		441		450		462		12.1	%		1,634		1,784		9.2	%
Consolidated
Operating revenues	$	2,715	$	2,824	$	2,882	$	2,914	$	2,947		8.5	%	$	11,027	$	11,566		4.9	%
Average account values		158,190		166,014		167,269		170,993		175,051		10.7	%		160,056		169,848		6.1	%
Net flows		1,585		1,246		1,608		1,313		2,556		61.3	%		6,357		6,727		5.8	%

Page 7

Lincoln Financial Group
Deposits, Net Flows and Account Balances By Segment
Unaudited (millions of dollars)
	As of or For the Three Months Ended													As of or For the Twelve Months Ended
	12/31/11		3/31/12		6/30/12		9/30/12		12/31/12		Change			12/31/11		12/31/12		Change
Deposits
Annuities	$	2,375	$	2,480	$	2,867	$	2,677	$	3,539		49.0	%	$	10,650	$	11,564		8.6	%
Retirement Plan Services		1,570		1,511		1,291		1,717		1,861		18.5	%		5,566		6,381		14.6	%
Life Insurance		1,506		1,159		1,137		1,106		1,546		2.7	%		5,393		4,949		-8.2	%
Total deposits	$	5,451	$	5,150	$	5,295	$	5,500	$	6,946		27.4	%	$	21,609	$	22,894		5.9	%
Net Flows
Annuities	$	345	$	293	$	701	$	396	$	1,060		207.2	%	$	2,191	$	2,451		11.9	%
Retirement Plan Services		219		212		194		232		348		58.9	%		504		987		95.8	%
Life Insurance		1,021		741		713		685		1,148		12.4	%		3,662		3,289		-10.2	%
Total net flows	$	1,585	$	1,246	$	1,608	$	1,313	$	2,556		61.3	%	$	6,357	$	6,727		5.8	%
Account Balances as of End-of-Period
Annuities	$	85,534	$	91,668	$	90,377	$	94,193	$	96,514		12.8	%	$	85,534	$	96,514		12.8	%
Retirement Plan Services		39,133		42,020		41,397		43,103		43,931		12.3	%		39,133		43,931		12.3	%
Life Insurance		35,278		36,008		36,121		36,589		37,325		5.8	%		35,278		37,325		5.8	%
Total account balances	$	159,945	$	169,696	$	167,895	$	173,885	$	177,770		11.1	%	$	159,945	$	177,770		11.1	%
Average Account Balances
Annuities	$	84,708	$	89,537	$	89,890	$	92,323	$	94,709		11.8	%	$	86,242	$	91,638		6.3	%
Retirement Plan Services		38,634		40,834		41,315		42,315		43,385		12.3	%		39,422		41,955		6.4	%
Life Insurance		34,848		35,643		36,064		36,355		36,957		6.1	%		34,392		36,255		5.4	%
Total average account balances	$	158,190	$	166,014	$	167,269	$	170,993	$	175,051		10.7	%	$	160,056	$	169,848		6.1	%

Page 8

Lincoln Financial Group
Sales By Segment
Unaudited (millions of dollars)
	For the Three Months Ended													For the Twelve Months Ended
	12/31/11		3/31/12		6/30/12		9/30/12		12/31/12		Change			12/31/11		12/31/12		Change
Sales
Annuities:
Variable	$	2,028	$	2,185	$	2,422	$	2,188	$	3,019		48.9	%	$	8,723	$	9,815		12.5	%
Fixed		347		295		445		489		520		49.9	%		1,927		1,749		-9.2	%
Total Annuities	$	2,375	$	2,480	$	2,867	$	2,677	$	3,539	��	49.0	%	$	10,650	$	11,564		8.6	%
Retirement Plan Services:
Small market	$	354	$	418	$	372	$	362	$	577		63.0	%	$	1,307	$	1,729		32.3	%
Mid - large market		1,053		920		746		1,186		1,123		6.6	%		3,557		3,974		11.7	%
Multi-Fund® and other variable		163		173		173		169		161		-1.2	%		702		678		-3.4	%
Total Retirement Plan Services	$	1,570	$	1,511	$	1,291	$	1,717	$	1,861		18.5	%	$	5,566	$	6,381		14.6	%
Life Insurance:
UL, excluding MoneyGuard®	$	75	$	47	$	51	$	38	$	52		-30.7	%	$	317	$	188		-40.7	%
MoneyGuard®		65		41		41		40		47		-27.7	%		186		169		-9.1	%
VUL		16		10		12		9		30		87.5	%		50		61		22.0	%
COLI and BOLI		57		11		11		9		78		36.8	%		92		109		18.5	%
Term		15		13		13		16		19		26.7	%		55		61		10.9	%
Total Life Insurance	$	228	$	122	$	128	$	112	$	226		-0.9	%	$	700	$	588		-16.0	%
Group Protection:
Life	$	91	$	29	$	33	$	41	$	84		-7.7	%	$	161	$	185		14.9	%
Disability		93		28		38		41		97		4.3	%		177		204		15.3	%
Dental		25		10		18		15		25		0.0	%		57		69		21.1	%
Total Group Protection	$	209	$	67	$	89	$	97	$	206		-1.4	%	$	395	$	458		15.9	%

Page 9

Lincoln Financial Group
Operating Revenues and General and Administrative Expenses By Segment
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Operating Revenues
Annuities	$	692		$	731		$	734		$	745		$	766			10.7	%	$	2,871		$	2,975			3.6	%
Retirement Plan Services		246			252			258			255			259			5.3	%		1,017			1,024			0.7	%
Life Insurance		1,187			1,232			1,237			1,296			1,288			8.5	%		4,740			5,053			6.6	%
Group Protection		481			504			540			517			531			10.4	%		1,938			2,091			7.9	%
Other Operations		109			105			113			101			103			-5.5	%		461			423			-8.2	%
Total	$	2,715		$	2,824		$	2,882		$	2,914		$	2,947			8.5	%	$	11,027		$	11,566			4.9	%
General and Administrative Expenses, Net of Amounts Capitalized
Annuities	$	100		$	107		$	97		$	103		$	118			18.0	%	$	385		$	425			10.4	%
Retirement Plan Services		69			67			70			73			86			24.6	%		259			296			14.3	%
Life Insurance		110			107			102			105			113			2.7	%		408			428			4.9	%
Group Protection		55			51			55			57			63			14.5	%		193			226			17.1	%
Other Operations		14			22			23			24			23			64.3	%		73			91			24.7	%
Total	$	348		$	354		$	347		$	362		$	403			15.8	%	$	1,318		$	1,466			11.2	%
General and Administrative Expenses, Net of Amounts Capitalized, As a % of Operating Revenues
Annuities		14.4	%		14.6	%		13.2	%		13.9	%		15.4	%					13.4	%		14.3	%
Retirement Plan Services		28.2	%		26.6	%		27.3	%		28.7	%		33.1	%					25.5	%		28.9	%
Life Insurance		9.3	%		8.8	%		8.3	%		8.1	%		8.8	%					8.6	%		8.5	%
Group Protection		11.5	%		10.0	%		10.2	%		11.0	%		11.9	%					9.9	%		10.8	%
Other Operations		13.4	%		21.3	%		19.4	%		24.8	%		22.0	%					15.7	%		21.8	%
Total		12.8	%		12.5	%		12.0	%		12.4	%		13.7	%					12.0	%		12.7	%

Page 10

Lincoln Financial Group
Operating Commissions and Other Expenses
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Operating Commissions and Other Expenses Incurred
General and administrative expenses	$	408		$	397		$	395		$	405		$	467			14.5	%	$	1,511		$	1,664			10.1	%
Commissions		483			450			465			454			551			14.1	%		1,934			1,920			-0.7	%
Media expenses		18			16			16			16			17			-5.6	%		69			66			-4.3	%
Taxes, licenses and fees		62			62			55			70			58			-6.5	%		252			245			-2.8	%
Interest and debt expense		70			68			68			68			65			-7.1	%		285			268			-6.0	%
Expenses associated with reserve financing and unrelated letters of credit		13			13			13			14			15			15.4	%		47			56			19.1	%
Total operating commissions and other expenses incurred		1,054			1,006			1,012			1,027			1,173			11.3	%		4,098			4,219			3.0	%
Less Amounts Capitalized
General and administrative expenses		(60	)		(43	)		(48	)		(43	)		(64	)		-6.7	%		(193	)		(198	)		-2.6	%
Commissions		(290	)		(237	)		(261	)		(242	)		(328	)		-13.1	%		(1,152	)		(1,069	)		7.2	%
Taxes, licenses and fees		(14	)		(10	)		(10	)		(8	)		(12	)		14.3	%		(50	)		(39	)		22.0	%
Total amounts capitalized		(364	)		(290	)		(319	)		(293	)		(404	)		-11.0	%		(1,395	)		(1,306	)		6.4	%
Total expenses incurred, net of amounts capitalized, excluding amortization		690			716			693			734			769			11.4	%		2,703			2,913			7.8	%
Amortization
Amortization of DAC and VOBA		170			200			204			376			245			44.1	%		846			1,026			21.3	%
Amortization of intangibles		1			1			1			1			1			0.0	%		4			4			0.0	%
Total amortization		171			201			205			377			246			43.9	%		850			1,030			21.2	%
Total operating commissions and other expenses	$	861		$	917		$	898		$	1,111		$	1,015			17.9	%	$	3,553		$	3,943			11.0	%

Page 11

Lincoln Financial Group
Interest Rate Yields and Spreads By Segment
Unaudited
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Annuities
Investments on reserves, excluding alternative		4.98	%		4.93	%		4.86	%		4.83	%		4.69	%		(29	)		5.13	%		4.83	%		(30	)
Prepayment and make whole premiums		0.09	%		0.04	%		0.07	%		0.04	%		0.08	%		(1	)		0.14	%		0.06	%		(8	)
Alternative investments		0.00	%		0.00	%		0.01	%		0.00	%		0.00	%		-			0.00	%		0.00	%		-
Net investment income yield on reserves		5.07	%		4.97	%		4.94	%		4.87	%		4.77	%		(30	)		5.27	%		4.89	%		(38	)
Interest rate credited to contract holders		3.26	%		3.15	%		3.03	%		2.94	%		2.79	%		(47	)		3.33	%		2.98	%		(35	)
Interest rate spread		1.81	%		1.82	%		1.91	%		1.93	%		1.98	%		17			1.94	%		1.91	%		(3	)
Retirement Plan Services
Investments on reserves, excluding alternative		5.40	%		5.34	%		5.28	%		5.23	%		5.04	%		(36	)		5.53	%		5.21	%		(32	)
Prepayment and make whole premiums		0.05	%		0.04	%		0.02	%		0.01	%		0.07	%		2			0.16	%		0.04	%		(12	)
Alternative investments		0.01	%		0.01	%		0.02	%		0.00	%		0.00	%		(1	)		0.01	%		0.01	%		-
Net investment income yield on reserves		5.46	%		5.39	%		5.32	%		5.24	%		5.11	%		(35	)		5.70	%		5.26	%		(44	)
Interest rate credited to contract holders		3.28	%		3.22	%		3.22	%		3.22	%		3.16	%		(12	)		3.32	%		3.20	%		(12	)
Interest rate spread		2.18	%		2.17	%		2.10	%		2.02	%		1.95	%		(23	)		2.38	%		2.06	%		(32	)
Life Insurance
Attributable to interest-sensitive products:
Investments on reserves, excluding alternative		5.71	%		5.77	%		5.75	%		5.60	%		5.60	%		(11	)		5.79	%		5.68	%		(11	)
Prepayment and make whole premiums		0.03	%		0.02	%		0.07	%		0.02	%		0.13	%		10			0.07	%		0.06	%		(1	)
Alternative investments		0.00	%		0.17	%		0.15	%		0.03	%		0.29	%		29			0.19	%		0.16	%		(3	)
Net investment income yield on reserves		5.74	%		5.96	%		5.97	%		5.65	%		6.02	%		28			6.05	%		5.90	%		(15	)
Interest rate credited to contract holders		3.99	%		3.97	%		3.93	%		3.94	%		3.99	%		-			4.08	%		3.96	%		(12	)
Interest rate spread		1.75	%		1.99	%		2.04	%		1.71	%		2.03	%		28			1.97	%		1.94	%		(3	)
Attributable to traditional products:
Investments on reserves, excluding alternative		5.81	%		5.73	%		5.79	%		5.67	%		5.56	%		(25	)		5.90	%		5.68	%		(22	)
Prepayment and make whole premiums		0.01	%		0.00	%		0.04	%		0.00	%		0.47	%		46			0.03	%		0.13	%		10
Alternative investments		0.01	%		0.01	%		0.02	%		0.00	%		0.00	%		(1	)		0.01	%		0.01	%		-
Net investment income yield on reserves		5.83	%		5.74	%		5.85	%		5.67	%		6.03	%		20			5.94	%		5.82	%		(12	)

Page 12

Lincoln Financial Group
Select Investment Data
Unaudited (millions of dollars)
	As of 12/31/11					As of 12/31/12
	Amount		%			Amount		%
AFS and Trading Securities, at Fair Value
AFS securities:
Corporate bonds	$	59,261		75.1	%	$	68,016		79.6	%
U.S. government bonds		494		0.6	%		442		0.5	%
Foreign government bonds		733		0.9	%		654		0.8	%
Mortgage-backed securities		9,639		12.2	%		7,174		8.4	%
Asset-backed collateralized debt obligations		102		0.1	%		180		0.2	%
State and municipal bonds		4,047		5.1	%		4,353		5.1	%
Hybrid and redeemable preferred securities		1,157		1.5	%		1,217		1.4	%
VIEs' fixed maturity securities		700		0.9	%		708		0.8	%
Equity securities		139		0.2	%		157		0.2	%
Total AFS securities		76,272		96.6	%		82,901		97.0	%
Trading securities		2,675		3.4	%		2,554		3.0	%
Total AFS and trading securities	$	78,947		100.0	%	$	85,455		100.0	%
AFS and Trading Securities, at Amortized Cost
Fixed maturity securities	$	71,960		99.8	%	$	75,520		99.8	%
Equity securities		137		0.2	%		139		0.2	%
Total AFS and trading securities	$	72,097		100.0	%	$	75,659		100.0	%
% of Fixed Maturity AFS Securities, at Amortized Cost
Investment grade				94.4	%				94.5	%
Below investment grade				5.6	%				5.5	%

	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			03/31/12			06/30/12			09/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Net Investment Income	$	1,129		$	1,166		$	1,197		$	1,146		$	1,190			5.4	%	$	4,652		$	4,698			1.0	%
Average Invested Assets, at Amortized Cost		83,211			83,883			84,958			85,802			86,498			4.0	%		81,641			85,285			4.5	%
Net Investment Income Yield		5.43	%		5.56	%		5.64	%		5.34	%		5.50	%		7			5.70	%		5.51	%		(19	)

Page 13

Lincoln Financial Group
Realized Gain (Loss) and Benefit Ratio Unlocking, After-DAC
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Realized Gain (Loss), Pre-Tax
Total operating realized gain (loss)	$	25		$	27		$	25		$	31		$	30			20.0	%	$	94		$	113			20.2	%
Total excluded realized gain (loss)		(149	)		(112	)		18			39			17			111.4	%		(388	)		(39	)		89.9	%
Total realized gain (loss), pre-tax	$	(124	)	$	(85	)	$	43		$	70		$	47			137.9	%	$	(294	)	$	74			125.2	%
Realized Gain (Loss) Net of Benefit Ratio Unlocking, After-Tax
Realized gain (loss) related to investments	$	(28	)	$	6		$	(45	)	$	3		$	(2	)		92.9	%	$	(151	)	$	(37	)		75.5	%
Variable annuity net derivative results:
Hedge program performance, including unlocking for GLB reserves hedged		5			19			(38	)		99			18			260.0	%		(194	)		97			150.0	%
GLB non-performance risk component		(49	)		(85	)		86			(61	)		(5	)		89.8	%		78			(64	)	NM
Total variable annuity net derivative results		(44	)		(66	)		48			38			13			129.5	%		(116	)		33			128.4	%
Indexed annuity forward-starting option		-			10			(1	)		(6	)		2		NM				-			4		NM
Excluded realized gain (loss) net of benefit ratio unlocking, after-tax	$	(72	)	$	(50	)	$	2		$	35		$	13			118.1	%	$	(267	)	$	-			100.0	%
Components of Realized Gain (Loss) Related to Investments, After-Tax
OTTI	$	(16	)	$	(31	)	$	(21	)	$	(21	)	$	(27	)		-64.0	%	$	(81	)	$	(99	)		-23.4	%
Other realized gain (loss) related to certain investments		(21	)		(1	)		(12	)		(14	)		2			108.0	%		(16	)		(25	)		-49.7	%
Gain (loss) on the mark-to-market on certain instruments		9			38			(12	)		38			23			155.6	%		(54	)		87			261.1	%
Total realized gain (loss) related to investments, after-tax	$	(28	)	$	6		$	(45	)	$	3		$	(2	)		92.9	%	$	(151	)	$	(37	)		75.5	%

Page 14

Lincoln Financial Group
Select Liquidity and Rating Agency Data
Unaudited (millions of dollars)
	As of
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change
Leverage Ratio
Short-term debt	$	300		$	300		$	300		$	200		$	200			-33.3	%
Long-term debt		5,391			5,606			5,719			5,494			5,439			0.9	%
Total debt		5,691			5,906			6,019			5,694			5,639			-0.9	%
Less:
Long-term operating debt (1)		1,122			1,122			1,122			1,122			1,122			0.0	%
75% of capital securities		908			908			908			908			908			0.0	%
Carrying value of fair value hedges		320			234			330			307			269			-15.9	%
Total numerator	$	3,341		$	3,642		$	3,659		$	3,357		$	3,340			0.0	%
Stockholders' equity, excluding AOCI	$	10,421		$	10,498		$	10,660		$	10,970		$	11,165			7.1	%
Total debt		5,691			5,906			6,019			5,694			5,639			-0.9	%
Total denominator	$	16,112		$	16,404		$	16,679		$	16,664		$	16,804			4.3	%
Leverage ratio		20.7	%		22.2	%		21.9	%		20.1	%		19.9	%
Holding Company Available Liquidity	$	588		$	833		$	802		$	618		$	706			20.1	%
							Ratings as of February 6, 2013
																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) 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.

Page 15

Lincoln Financial Group
Annuities - Select Earnings and Operational Data
Unaudited (millions of dollars)
	As of or For the Three Months Ended																		As of or For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Income (Loss) from Operations
Operating revenues:
Insurance premiums	$	14		$	17		$	18		$	29		$	34			142.9	%	$	74		$	98			32.4	%
Insurance fees		299			325			323			332			351			17.4	%		1,247			1,331			6.7	%
Net investment income		270			272			279			268			263			-2.6	%		1,106			1,082			-2.2	%
Operating realized gain (loss)		25			27			25			30			31			24.0	%		94			113			20.2	%
Other revenues and fees		84			90			89			86			87			3.6	%		350			351			0.3	%
Total operating revenues		692			731			734			745			766			10.7	%		2,871			2,975			3.6	%
Operating expenses:
Interest credited		169			171			163			146			153			-9.5	%		698			633			-9.3	%
Benefits		47			45			49			131			55			17.0	%		212			281			32.5	%
Commissions incurred		173			183			202			203			245			41.6	%		725			833			14.9	%
Other expenses incurred		181			196			187			190			212			17.1	%		735			784			6.7	%
Amounts capitalized		(123	)		(124	)		(149	)		(138	)		(182	)		-48.0	%		(527	)		(593	)		-12.5	%
Amortization		90			98			86			40			97			7.8	%		351			321			-8.5	%
Total operating expenses		537			569			538			572			580			8.0	%		2,194			2,259			3.0	%
Income (loss) from operations before taxes		155			162			196			173			186			20.0	%		677			716			5.8	%
Federal income tax expense (benefit)		24			25			38			34			24			0.0	%		104			121			16.3	%
Income (loss) from operations	$	131		$	137		$	158		$	139		$	162			23.7	%	$	573		$	595			3.8	%
Effective Federal Income Tax Rate		15.3	%		15.4	%		19.7	%		19.6	%		12.7	%					15.4	%		16.9	%
Average Equity, Excluding Goodwill and AOCI	$	2,831		$	2,960		$	3,091		$	3,110		$	3,053			7.8	%	$	2,514		$	3,053			21.4	%
ROE, Excluding Goodwill		18.5	%		18.5	%		20.4	%		17.9	%		21.2	%					22.8	%		19.5	%
Return on Average Account Values		62			61			70			60			68			6			66			65			(1	)
Account Values
Separate account values:
Average	$	64,173		$	69,003		$	69,222		$	71,535		$	73,804			15.0	%	$	66,007		$	70,901			7.4	%
End-of-period		65,010			71,059			69,615			73,401			75,501			16.1	%		65,010			75,501			16.1	%
General account values:
Average		20,535			20,534			20,668			20,788			20,905			1.8	%		20,235			20,737			2.5	%
End-of-period		20,524			20,609			20,762			20,792			21,013			2.4	%		20,524			21,013			2.4	%

Page 16

Lincoln Financial Group
Retirement Plan Services - Select Earnings and Operational Data
Unaudited (millions of dollars)
	As of or For the Three Months Ended																		As of or For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Income (Loss) from Operations
Operating revenues:
Insurance fees	$	49		$	52		$	53		$	53		$	54			10.2	%	$	210		$	212			1.0	%
Net investment income		194			197			202			199			201			3.6	%		792			799			0.9	%
Other revenues and fees		3			3			3			3			4			33.3	%		15			13			-13.3	%
Total operating revenues		246			252			258			255			259			5.3	%		1,017			1,024			0.7	%
Operating expenses:
Interest credited		112			111			112			114			115			2.7	%		437			451			3.2	%
Benefits		-			-			-			-			-		NM				2			-			-100.0	%
Commissions incurred		17			18			17			17			19			11.8	%		67			71			6.0	%
Other expenses incurred		74			76			78			81			93			25.7	%		287			330			15.0	%
Amounts capitalized		(9	)		(10	)		(9	)		(9	)		(10	)		-11.1	%		(35	)		(38	)		-8.6	%
Amortization		7			10			10			13			10			42.9	%		33			42			27.3	%
Total operating expenses		201			205			208			216			227			12.9	%		791			856			8.2	%
Income (loss) from operations before taxes		45			47			50			39			32			-28.9	%		226			168			-25.7	%
Federal income tax expense (benefit)		12			12			12			10			4			-66.7	%		63			38			-39.7	%
Income (loss) from operations	$	33		$	35		$	38		$	29		$	28			-15.2	%	$	163		$	130			-20.2	%
Effective Federal Income Tax Rate		26.0	%		25.9	%		23.8	%		26.0	%		13.0	%					28.2	%		22.8	%
Average Equity, Excluding Goodwill and AOCI	$	863		$	911		$	1,001		$	1,031		$	941			9.0	%	$	878		$	971			10.6	%
ROE, Excluding Goodwill		15.5	%		15.2	%		15.1	%		11.2	%		12.0	%					18.5	%		13.3	%
Return on Average Account Values		35			34			37			27			26			(9	)		41			31			(10	)
Account Values
Separate account values:
Average	$	12,783		$	13,589		$	13,373		$	13,558		$	13,536			5.9	%	$	13,611		$	13,514			-0.7	%
End-of-period		12,867			13,959			13,338			13,788			13,466			4.7	%		12,867			13,466			4.7	%
Mutual fund account values:
Average		12,327			13,522			14,039			14,631			15,404			25.0	%		12,643			14,386			13.8	%
End-of-period		12,636			14,241			14,056			15,073			15,747			24.6	%		12,636			15,747			24.6	%
General account values:
Average		13,524			13,723			13,903			14,126			14,445			6.8	%		13,168			14,055			6.7	%
End-of-period		13,630			13,820			14,003			14,242			14,718			8.0	%		13,630			14,718			8.0	%

Page 17

Lincoln Financial Group
Life Insurance - Select Earnings and Operational Data
Unaudited (millions of dollars)
	As of or For the Three Months Ended																		As of or For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Income (Loss) from Operations
Operating revenues:
Insurance premiums	$	117		$	109		$	114		$	103		$	116			-0.9	%	$	441		$	441			0.0	%
Insurance fees		505			529			511			605			543			7.5	%		1,979			2,188			10.6	%
Net investment income		558			588			606			578			624			11.8	%		2,294			2,396			4.4	%
Operating realized gain (loss)		-			-			(1	)		1			(1	)	NM				-			-		NM
Other revenues and fees		7			6			7			9			6			-14.3	%		26			28			7.7	%
Total operating revenues		1,187			1,232			1,237			1,296			1,288			8.5	%		4,740			5,053			6.6	%
Operating expenses:
Interest credited		318			310			310			318			324			1.9	%		1,235			1,261			2.1	%
Benefits		456			476			478			297			469			2.9	%		1,669			1,721			3.1	%
Commissions incurred		179			130			126			115			161			-10.1	%		678			532			-21.5	%
Other expenses incurred		180			174			168			168			178			-1.1	%		680			687			1.0	%
Amounts capitalized		(211	)		(145	)		(143	)		(131	)		(181	)		14.2	%		(780	)		(600	)		23.1	%
Amortization		61			80			97			313			124			103.3	%		423			614			45.2	%
Total operating expenses		983			1,025			1,036			1,080			1,075			9.4	%		3,905			4,215			7.9	%
Income (loss) from operations before taxes		204			207			201			216			213			4.4	%		835			838			0.4	%
Federal income tax expense (benefit)		69			68			66			64			66			-4.3	%		276			264			-4.3	%
Income (loss) from operations	$	135		$	139		$	135		$	152		$	147			8.9	%	$	559		$	574			2.7	%
Effective Federal Income Tax Rate		33.7	%		32.9	%		32.7	%		29.7	%		30.8	%					33.1	%		31.5	%
Average Equity, Excluding Goodwill and AOCI	$	5,576		$	5,655		$	5,805		$	5,879		$	5,919			6.2	%	$	5,579		$	5,814			4.2	%
ROE, Excluding Goodwill		9.7	%		9.9	%		9.3	%		10.3	%		10.0	%					10.0	%		9.9	%
Average Account Values	$	34,848		$	35,643		$	36,064		$	36,355		$	36,957			6.1	%	$	34,392		$	36,255			5.4	%
In-Force Face Amount
UL and other	$	307,900		$	307,957		$	308,763		$	308,470		$	311,235			1.1	%	$	307,900		$	311,235			1.1	%
Term insurance		271,931			272,006			273,305			275,992			279,322			2.7	%		271,931			279,322			2.7	%
Total in-force face amount	$	579,831		$	579,963		$	582,068		$	584,462		$	590,557			1.8	%	$	579,831		$	590,557			1.8	%

Page 18

Lincoln Financial Group
Group Protection - Select Earnings and Operational Data
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Income (Loss) from Operations
Operating revenues:
Insurance premiums	$	442		$	463		$	495		$	473		$	487			10.2	%	$	1,778		$	1,919			7.9	%
Net investment income		37			38			42			41			41			10.8	%		152			162			6.6	%
Other revenues and fees		2			3			3			3			3			50.0	%		8			10			25.0	%
Total operating revenues		481			504			540			517			531			10.4	%		1,938			2,091			7.9	%
Operating expenses:
Interest credited		1			1			1			1			1			0.0	%		3			3			0.0	%
Benefits		323			350			368			360			367			13.6	%		1,314			1,444			9.9	%
Commissions incurred		51			54			53			55			61			19.6	%		201			223			10.9	%
Other expenses incurred		85			73			82			82			99			16.5	%		285			337			18.2	%
Amounts capitalized		(21	)		(11	)		(17	)		(15	)		(31	)		-47.6	%		(53	)		(75	)		-41.5	%
Amortization		11			12			11			10			14			27.3	%		39			48			23.1	%
Total operating expenses		450			479			498			493			511			13.6	%		1,789			1,980			10.7	%
Income (loss) from operations before taxes		31			25			42			24			20			-35.5	%		149			111			-25.5	%
Federal income tax expense (benefit)		11			9			15			8			7			-36.4	%		52			39			-25.0	%
Income (loss) from operations	$	20		$	16		$	27		$	16		$	13			-35.0	%	$	97		$	72			-25.8	%
Effective Federal Income Tax Rate		35.0	%		35.0	%		35.6	%		34.2	%		34.9	%					35.0	%		35.0	%
Average Equity, Excluding Goodwill and AOCI	$	889		$	906		$	927		$	955		$	992			11.6	%	$	882		$	945			7.1	%
ROE, Excluding Goodwill		9.2	%		7.1	%		11.6	%		6.5	%		5.3	%					11.0	%		7.6	%
Loss Ratios by Product Line
Life		75.1	%		78.2	%		75.0	%		76.8	%		72.3	%					74.8	%		75.5	%
Disability		69.6	%		70.1	%		69.6	%		76.3	%		77.9	%					69.9	%		73.6	%
Dental		71.6	%		82.1	%		76.5	%		69.0	%		70.8	%					77.9	%		74.5	%
Total non-medical		72.2	%		74.9	%		72.7	%		75.7	%		74.7	%					72.9	%		74.5	%
Medical		88.6	%		87.6	%		89.7	%		85.4	%		86.7	%					87.9	%		87.8	%

Page 19

Lincoln Financial Group
Other Operations and Discontinued Operations - Select Earnings Data
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Other Operations
Operating revenues:
Insurance premiums	$	-		$	-		$	3		$	-		$	-		NM			$	1		$	4			300.0	%
Net investment income		71			70			68			61			61			-14.1	%		307			259			-15.6	%
Amortization of deferred gain on business sold through reinsurance		18			18			18			18			18			0.0	%		72			72			0.0	%
Media revenues		21			17			21			21			21			0.0	%		77			81			5.2	%
Other revenues and fees		(1	)		-			3			1			3		NM				4			7			75.0	%
Total operating revenues		109			105			113			101			103			-5.5	%		461			423			-8.2	%
Operating expenses:
Interest credited		28			31			30			30			32			14.3	%		114			122			7.0	%
Benefits		31			28			35			43			32			3.2	%		126			138			9.5	%
Media expenses		18			16			16			16			17			-5.6	%		69			66			-4.3	%
Commissions and other expenses		28			19			15			33			24			-14.3	%		90			93			3.3	%
Interest and debt expenses		70			68			68			68			65			-7.1	%		285			268			-6.0	%
Total operating expenses		175			162			164			190			170			-2.9	%		684			687			0.4	%
Income (loss) from operations before taxes		(66	)		(57	)		(51	)		(89	)		(67	)		-1.5	%		(223	)		(264	)		-18.4	%
Federal income tax expense (benefit)		(24	)		(23	)		(12	)		(115	)		(27	)		-12.5	%		(77	)		(177	)	NM
Income (loss) from operations	$	(42	)	$	(34	)	$	(39	)	$	26		$	(40	)		4.8	%	$	(146	)	$	(87	)		40.4	%
Discontinued Operations
Gain (loss) on disposal before taxes	$	-		$	(1	)	$	-		$	-		$	-		NM			$	(3	)	$	(1	)		66.7	%
Federal income tax expense (benefit)		-			-			-			(28	)		-		NM				5			(28	)	NM
Gain (loss) on disposal	$	-		$	(1	)	$	-		$	28		$	-		NM			$	(8	)	$	27		NM

Page 20

Lincoln Financial Group
Consolidated - DAC, VOBA, DSI and DFEL Roll Forwards
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
DAC and VOBA
Balance as of beginning-of-period	$	6,705		$	6,776		$	6,880		$	6,505		$	5,813			-13.3	%	$	7,414		$	6,776			-8.6	%
Business sold through reinsurance		11			-			-			2			-			-100.0	%		12			2			-83.3	%
Deferrals		364			290			319			293			404			11.0	%		1,395			1,306			-6.4	%
Operating amortization		(170	)		(200	)		(204	)		(376	)		(245	)		-44.1	%		(846	)		(1,026	)		-21.3	%
Deferrals, net of operating amortization		194			90			115			(83	)		159			-18.0	%		549			280			-49.0	%
Amortization associated with benefit ratio unlocking		(5	)		(5	)		2			(2	)		-			100.0	%		2			(6	)	NM
Adjustment related to realized (gains) losses		12			19			(34	)		(30	)		(16	)	NM				(24	)		(61	)	NM
Adjustment related to unrealized (gains) losses		(141	)		-			(458	)		(579	)		711		NM				(1,177	)		(324	)		72.5	%
Balance as of end-of-period	$	6,776		$	6,880		$	6,505		$	5,813		$	6,667			-1.6	%	$	6,776		$	6,667			-1.6	%
DSI
Balance as of beginning-of-period	$	268		$	271		$	268		$	260		$	252			-6.0	%	$	286		$	271			-5.2	%
Deferrals		10			9			10			11			9			-10.0	%		39			39			0.0	%
Operating amortization		(5	)		(12	)		(10	)		3			(12	)	NM				(40	)		(31	)		22.5	%
Deferrals, net of operating amortization		5			(3	)		-			14			(3	)	NM				(1	)		8		NM
Amortization associated with benefit ratio unlocking		(1	)		(1	)		-			-			-			100.0	%		-			(1	)	NM
Adjustment related to realized (gains) losses		2			2			(4	)		(4	)		(3	)	NM				(1	)		(8	)	NM
Adjustment related to unrealized (gains) losses		(3	)		(1	)		(4	)		(18	)		7		NM				(13	)		(17	)		-30.8	%
Balance as of end-of-period	$	271		$	268		$	260		$	252		$	253			-6.6	%	$	271		$	253			-6.6	%
DFEL
Balance as of beginning-of-period	$	1,338		$	1,369		$	1,404		$	1,261		$	1,001			-25.2	%	$	1,502		$	1,369			-8.9	%
Deferrals		132			90			88			78			92			-30.3	%		544			349			-35.8	%
Operating amortization		(36	)		(50	)		(42	)		(130	)		(61	)		-69.4	%		(135	)		(283	)	NM
Deferrals, net of operating amortization		96			40			46			(52	)		31			-67.7	%		409			66			-83.9	%
Amortization associated with benefit ratio unlocking		(1	)		(1	)		-			(1	)		-			100.0	%		-			(2	)	NM
Adjustment related to realized (gains) losses		1			5			(6	)		(12	)		(4	)	NM				(9	)		(18	)		-100.0	%
Adjustment related to unrealized (gains) losses		(65	)		(9	)		(183	)		(195	)		345		NM				(533	)		(42	)		92.1	%
Balance as of end-of-period	$	1,369		$	1,404		$	1,261		$	1,001		$	1,373			0.3	%	$	1,369		$	1,373			0.3	%

Page 21

Lincoln Financial Group
Annuities - DAC, VOBA, DSI and DFEL Roll Forwards
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
DAC and VOBA
Balance as of beginning-of-period	$	1,877		$	1,912		$	1,965		$	1,940		$	1,910			1.8	%	$	1,882		$	1,912			1.6	%
Deferrals		123			125			149			138			182			48.0	%		527			593			12.5	%
Operating amortization		(90	)		(98	)		(86	)		(40	)		(97	)		-7.8	%		(351	)		(321	)		8.5	%
Deferrals, net of operating amortization		33			27			63			98			85			157.6	%		176			272			54.5	%
Amortization associated with benefit ratio unlocking		(5	)		(4	)		2			(2	)		-			100.0	%		2			(5	)	NM
Adjustment related to realized (gains) losses		13			17			(34	)		(32	)		(15	)	NM				(2	)		(63	)	NM
Adjustment related to unrealized (gains) losses		(6	)		13			(56	)		(94	)		112		NM				(146	)		(24	)		83.6	%
Balance as of end-of-period	$	1,912		$	1,965		$	1,940		$	1,910		$	2,092			9.4	%	$	1,912		$	2,092			9.4	%
DSI
Balance as of beginning-of-period	$	266		$	269		$	267		$	258		$	250			-6.0	%	$	284		$	269			-5.3	%
Deferrals		10			9			10			11			7			-30.0	%		39			37			-5.1	%
Operating amortization		(5	)		(12	)		(10	)		3			(12	)	NM				(40	)		(30	)		25.0	%
Deferrals, net of operating amortization		5			(3	)		-			14			(5	)	NM				(1	)		7		NM
Amortization associated with benefit ratio unlocking		(1	)		(1	)		-			-			-			100.0	%		-			(1	)	NM
Adjustment related to realized (gains) losses		1			3			(4	)		(4	)		(3	)	NM				(1	)		(8	)	NM
Adjustment related to unrealized (gains) losses		(2	)		(1	)		(5	)		(18	)		7		NM				(13	)		(18	)		-38.5	%
Balance as of end-of-period	$	269		$	267		$	258		$	250		$	249			-7.4	%	$	269		$	249			-7.4	%
DFEL
Balance as of beginning-of-period	$	249		$	263		$	267		$	265		$	258			3.6	%	$	222		$	263			18.5	%
Deferrals		10			6			7			5			6			-40.0	%		61			24			-60.7	%
Operating amortization		4			(5	)		(3	)		2			(5	)	NM				(16	)		(11	)		31.3	%
Deferrals, net of operating amortization		14			1			4			7			1			-92.9	%		45			13			-71.1	%
Amortization associated with benefit ratio unlocking		(1	)		(1	)		-			(1	)		-			100.0	%		-			(2	)	NM
Adjustment related to realized (gains) losses		2			5			(6	)		(12	)		(4	)	NM				(5	)		(18	)	NM
Adjustment related to unrealized (gains) losses		(1	)		(1	)		-			(1	)		3		NM				1			2			100.0	%
Balance as of end-of-period	$	263		$	267		$	265		$	258		$	258			-1.9	%	$	263		$	258			-1.9	%

Page 22

Lincoln Financial Group
Retirement Plan Services, Life Insurance and Group Protection - DAC, VOBA and DFEL Roll Forwards
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
DAC and VOBA - Retirement Plan Services
Balance as of beginning-of-period	$	189		$	183		$	165		$	145		$	108			-42.9	%	$	195		$	183			-6.2	%
Deferrals		9			10			9			9			10			11.1	%		35			38			8.6	%
Operating amortization		(7	)		(10	)		(10	)		(13	)		(10	)		-42.9	%		(33	)		(42	)		-27.3	%
Deferrals, net of operating amortization		2			-			(1	)		(4	)		-			-100.0	%		2			(4	)	NM
Adjustment related to unrealized (gains) losses		(8	)		(18	)		(19	)		(33	)		(6	)		25.0	%		(14	)		(77	)	NM
Balance as of end-of-period	$	183		$	165		$	145		$	108		$	102			-44.3	%	$	183		$	102			-44.3	%
DAC and VOBA - Life Insurance
Balance as of beginning-of-period	$	4,484		$	4,516		$	4,586		$	4,251		$	3,620			-19.3	%	$	5,186		$	4,516			-12.9	%
Business sold through reinsurance		11			-			-			2			-			-100.0	%		12			2			-83.3	%
Deferrals		211			145			143			131			182			-13.7	%		780			600			-23.1	%
Operating amortization		(61	)		(80	)		(97	)		(313	)		(124	)	NM				(423	)		(614	)		-45.2	%
Deferrals, net of operating amortization		150			65			46			(182	)		58			-61.3	%		357			(14	)	NM
Adjustment related to realized (gains) losses		(1	)		1			(1	)		1			(1	)		0.0	%		(22	)		2			109.1	%
Adjustment related to unrealized (gains) losses		(128	)		4			(380	)		(452	)		604		NM				(1,017	)		(225	)		77.9	%
Balance as of end-of-period	$	4,516		$	4,586		$	4,251		$	3,620		$	4,281			-5.2	%	$	4,516		$	4,281			-5.2	%
DFEL - Life Insurance
Balance as of beginning-of-period	$	1,088		$	1,106		$	1,136		$	997		$	742			-31.8	%	$	1,280		$	1,106			-13.6	%
Deferrals		122			83			82			73			87			-28.7	%		483			325			-32.7	%
Operating amortization		(39	)		(45	)		(39	)		(132	)		(57	)		-46.2	%		(119	)		(272	)	NM
Deferrals, net of operating amortization		83			38			43			(59	)		30			-63.9	%		364			53			-85.4	%
Adjustment related to realized (gains) losses		-			-			-			-			-		NM				(3	)		-			100.0	%
Adjustment related to unrealized (gains) losses		(65	)		(8	)		(182	)		(196	)		343		NM				(535	)		(44	)		91.8	%
Balance as of end-of-period	$	1,106		$	1,136		$	997		$	742		$	1,115			0.8	%	$	1,106		$	1,115			0.8	%
DAC and VOBA - Group Protection
Balance as of beginning-of-period	$	155		$	165		$	164		$	170		$	175			12.9	%	$	151		$	165			9.3	%
Deferrals		21			11			17			15			31			47.6	%		53			75			41.5	%
Operating amortization		(11	)		(12	)		(11	)		(10	)		(14	)		-27.3	%		(39	)		(48	)		-23.1	%
Deferrals, net of operating amortization		10			(1	)		6			5			17			70.0	%		14			27			92.9	%
Balance as of end-of-period	$	165		$	164		$	170		$	175		$	192			16.4	%	$	165		$	192			16.4	%

Page 23

Lincoln Financial Group
Annuities - Account Value Roll Forwards
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Fixed Annuities
Balance as of beginning-of-period	$	18,009		$	18,106		$	18,186		$	18,273		$	18,347			1.9	%	$	17,420		$	18,106			3.9	%
Gross deposits		347			295			445			489			520			49.9	%		1,927			1,749			-9.2	%
Withdrawals and deaths		(475	)		(465	)		(477	)		(599	)		(571	)		-20.2	%		(1,844	)		(2,112	)		-14.5	%
Net flows		(128	)		(170	)		(32	)		(110	)		(51	)		60.2	%		83			(363	)	NM
Reinvested interest credited		215			241			110			173			135			-37.2	%		564			658			16.7	%
Sales inducements deferred		10			9			9			11			7			-30.0	%		39			37			-5.1	%
Balance as of end-of-period, gross		18,106			18,186			18,273			18,347			18,438			1.8	%		18,106			18,438			1.8	%
Reinsurance ceded		(901	)		(883	)		(871	)		(849	)		(830	)		7.9	%		(901	)		(830	)		7.9	%
Balance as of end-of-period, net	$	17,205		$	17,303		$	17,402		$	17,498		$	17,608			2.3	%	$	17,205		$	17,608			2.3	%
Variable Annuities
Balance as of beginning-of-period	$	64,140		$	68,330		$	74,366		$	72,976		$	76,696			19.6	%	$	68,390		$	68,330			-0.1	%
Gross deposits		2,028			2,185			2,422			2,188			3,019			48.9	%		8,723			9,815			12.5	%
Withdrawals and deaths		(1,555	)		(1,722	)		(1,689	)		(1,682	)		(1,908	)		-22.7	%		(6,615	)		(7,001	)		-5.8	%
Net flows		473			463			733			506			1,111			134.9	%		2,108			2,814			33.5	%
Change in market value and reinvestment		3,717			5,573			(2,123	)		3,214			1,099			-70.4	%		(2,168	)		7,762		NM
Balance as of end-of-period, gross		68,330			74,366			72,976			76,696			78,906			15.5	%		68,330			78,906			15.5	%
Reinsurance ceded		(1	)		(1	)		(1	)		(1	)		-			100.0	%		(1	)		-			100.0	%
Balance as of End-of-Period (2)	$	68,329		$	74,365		$	72,975		$	76,695		$	78,906			15.5	%	$	68,329		$	78,906			15.5	%
Total		0			0			0			0			0
Balance as of beginning-of-period	$	82,149		$	86,436		$	92,552		$	91,249		$	95,043			15.7	%	$	85,810		$	86,436			0.7	%
Gross deposits		2,375			2,480			2,867			2,677			3,539			49.0	%		10,650			11,564			8.6	%
Withdrawals and deaths		(2,030	)		(2,187	)		(2,166	)		(2,281	)		(2,479	)		-22.1	%		(8,459	)		(9,113	)		-7.7	%
Net flows		345			293			701			396			1,060			207.2	%		2,191			2,451			11.9	%
Change in market value and reinvestment		3,932			5,814			(2,013	)		3,387			1,234			-68.6	%		(1,604	)		8,420		NM
Sales inducements deferred		10			9			9			11			7			-30.0	%		39			37			-5.1	%
Balance as of end-of-period, gross		86,436			92,552			91,249			95,043			97,344			12.6	%		86,436			97,344			12.6	%
Reinsurance ceded		(902	)		(884	)		(872	)		(850	)		(830	)		8.0	%		(902	)		(830	)		8.0	%
Balance as of end-of-period, net	$	85,534		$	91,668		$	90,377		$	94,193		$	96,514			12.8	%	$	85,534		$	96,514			12.8	%

Page 24

Lincoln Financial Group
Retirement Plan Services - Account Value Roll Forwards
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Small Market
Balance as of beginning-of-period	$	5,856		$	6,167		$	6,641		$	6,470		$	6,766			15.5	%	$	6,396		$	6,167			-3.6	%
Gross deposits		354			418			372			362			577			63.0	%		1,307			1,729			32.3	%
Withdrawals and deaths		(357	)		(412	)		(368	)		(330	)		(405	)		-13.4	%		(1,402	)		(1,515	)		-8.1	%
Net flows		(3	)		6			4			32			172		NM				(95	)		214		NM
Transfers between fixed and variable accounts		11			(11	)		-			(5	)		(22	)	NM				5			(38	)	NM
Change in market value and reinvestment		303			479			(175	)		269			85			-71.9	%		(139	)		658		NM
Balance as of end-of-period	$	6,167		$	6,641		$	6,470		$	6,766		$	7,001			13.5	%	$	6,167		$	7,001			13.5	%
Mid - Large Market
Balance as of beginning-of-period	$	16,106		$	17,435		$	19,199		$	19,139		$	20,293			26.0	%	$	16,207		$	17,435			7.6	%
Gross deposits		1,053			920			746			1,186			1,123			6.6	%		3,557			3,974			11.7	%
Withdrawals and deaths		(632	)		(505	)		(395	)		(798	)		(633	)		-0.2	%		(2,095	)		(2,331	)		-11.3	%
Net flows		421			415			351			388			490			16.4	%		1,462			1,643			12.4	%
Transfers between fixed and variable accounts		(11	)		(2	)		(5	)		(17	)		(12	)		-9.1	%		(68	)		(37	)		45.6	%
Change in market value and reinvestment		919			1,351			(406	)		783			279			-69.6	%		(166	)		2,009		NM
Balance as of end-of-period	$	17,435		$	19,199		$	19,139		$	20,293		$	21,050			20.7	%	$	17,435		$	21,050			20.7	%
Multi-Fund®and Other
Balance as of beginning-of-period	$	15,058		$	15,531		$	16,180		$	15,788		$	16,044			6.5	%	$	16,221		$	15,531			-4.3	%
Gross deposits		163			173			173			169			161			-1.2	%		702			678			-3.4	%
Withdrawals and deaths		(362	)		(382	)		(334	)		(357	)		(475	)		-31.2	%		(1,565	)		(1,548	)		1.1	%
Net flows		(199	)		(209	)		(161	)		(188	)		(314	)		-57.8	%		(863	)		(870	)		-0.8	%
Change in market value and reinvestment		672			858			(231	)		444			150			-77.7	%		173			1,219		NM
Balance as of end-of-period	$	15,531		$	16,180		$	15,788		$	16,044		$	15,880			2.2	%	$	15,531		$	15,880			2.2	%
Total
Balance as of beginning-of-period	$	37,020		$	39,133		$	42,020		$	41,397		$	43,103			16.4	%	$	38,824		$	39,133			0.8	%
Gross deposits		1,570			1,511			1,291			1,717			1,861			18.5	%		5,566			6,381			14.6	%
Withdrawals and deaths		(1,351	)		(1,299	)		(1,097	)		(1,485	)		(1,513	)		-12.0	%		(5,062	)		(5,394	)		-6.6	%
Net flows		219			212			194			232			348			58.9	%		504			987			95.8	%
Transfers between fixed and variable accounts		-			(13	)		(5	)		(22	)		(34	)	NM				(63	)		(75	)		-19.0	%
Change in market value and reinvestment		1,894			2,688			(812	)		1,496			514			-72.9	%		(132	)		3,886		NM
Balance as of end-of-period	$	39,133		$	42,020		$	41,397		$	43,103		$	43,931			12.3	%	$	39,133		$	43,931			12.3	%

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Lincoln Financial Group
Life Insurance - Account Value Roll Forwards
Unaudited (millions of dollars)
	For the Three Months Ended																		For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12			12/31/12			Change			12/31/11			12/31/12			Change
Interest-Sensitive Life
Balance as of beginning-of-period	$	30,638		$	31,219		$	31,494		$	31,750		$	31,986			4.4	%	$	29,365		$	31,219			6.3	%
Deposits		1,297			991			990			971			1,132			-12.7	%		4,673			4,084			-12.6	%
Withdrawals and deaths		(278	)		(317	)		(331	)		(337	)		(267	)		4.0	%		(1,112	)		(1,251	)		-12.5	%
Net flows		1,019			674			659			634			865			-15.1	%		3,561			2,833			-20.4	%
Contract holder assessments		(751	)		(710	)		(712	)		(712	)		(737	)		1.9	%		(2,916	)		(2,871	)		1.5	%
Reinvested interest credited		313			311			309			314			318			1.6	%		1,209			1,251			3.5	%
Balance as of end-of-period, gross		31,219			31,494			31,750			31,986			32,432			3.9	%		31,219			32,432			3.9	%
Reinsurance ceded		(870	)		(862	)		(859	)		(847	)		(838	)		3.7	%		(870	)		(838	)		3.7	%
Balance as of end-of-period, net	$	30,349		$	30,632		$	30,891		$	31,139		$	31,594			4.1	%	$	30,349		$	31,594			4.1	%
VUL
Balance as of beginning-of-period	$	5,375		$	5,687		$	6,202		$	6,005		$	6,262			16.5	%	$	5,962		$	5,687			-4.6	%
Deposits		209			168			147			135			414			98.1	%		720			865			20.1	%
Withdrawals and deaths		(207	)		(101	)		(93	)		(84	)		(131	)		36.7	%		(619	)		(409	)		33.9	%
Net flows		2			67			54			51			283		NM				101			456		NM
Contract holder assessments		(93	)		(95	)		(88	)		(104	)		(126	)		-35.5	%		(369	)		(413	)		-11.9	%
Change in market value and reinvestment		403			543			(163	)		310			104			-74.2	%		(7	)		793		NM
Balance as of end-of-period, gross		5,687			6,202			6,005			6,262			6,523			14.7	%		5,687			6,523			14.7	%
Reinsurance ceded		(758	)		(826	)		(775	)		(812	)		(792	)		-4.5	%		(758	)		(792	)		-4.5	%
Balance as of end-of-period, net	$	4,929		$	5,376		$	5,230		$	5,450		$	5,731			16.3	%	$	4,929		$	5,731			16.3	%
Total
Balance as of beginning-of-period	$	36,013		$	36,906		$	37,696		$	37,755		$	38,248			6.2	%	$	35,327		$	36,906			4.5	%
Deposits		1,506			1,159			1,137			1,106			1,546			2.7	%		5,393			4,949			-8.2	%
Withdrawals and deaths		(485	)		(418	)		(424	)		(421	)		(398	)		17.9	%		(1,731	)		(1,660	)		4.1	%
Net flows		1,021			741			713			685			1,148			12.4	%		3,662			3,289			-10.2	%
Contract holder assessments		(844	)		(805	)		(800	)		(816	)		(863	)		-2.3	%		(3,285	)		(3,284	)		0.0	%
Change in market value and reinvestment		716			854			146			624			422			-41.1	%		1,202			2,044			70.0	%
Balance as of end-of-period, gross		36,906			37,696			37,755			38,248			38,955			5.6	%		36,906			38,955			5.6	%
Reinsurance ceded		(1,628	)		(1,688	)		(1,634	)		(1,659	)		(1,630	)		-0.1	%		(1,628	)		(1,630	)		-0.1	%
Balance as of end-of-period, net	$	35,278		$	36,008		$	36,121		$	36,589		$	37,325			5.8	%	$	35,278		$	37,325			5.8	%

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Lincoln Financial Group
Select Non-GAAP to GAAP Reconciliations
Unaudited (millions of dollars)
	For the Three Months Ended																	For the Twelve Months Ended
	12/31/11			3/31/12			6/30/12			9/30/12		12/31/12			Change			12/31/11			12/31/12			Change
Revenues
Operating revenues	$	2,715		$	2,824		$	2,882		$	2,914	$	2,947			8.5	%	$	11,027		$	11,566			4.9	%
Excluded realized gain (loss)		(149	)		(112	)		18			39		17			111.4	%		(388	)		(39	)		89.9	%
Amortization of DFEL on benefit ratio unlocking		1			1			(1	)		-		(1	)	NM				(1	)		2			300.0	%
Amortization of deferred gains arising from reserve changes on business sold through reinsurance		1			2			-			1		1			0.0	%		3			3			0.0	%
Total revenues	$	2,568		$	2,715		$	2,899		$	2,954	$	2,964			15.4	%	$	10,641		$	11,532			8.4	%
Excluded Realized Gain (Loss) Net of Benefit Ratio Unlocking, After-Tax
Total excluded realized gain (loss)	$	(97	)	$	(73	)	$	12		$	25	$	11			111.3	%	$	(252	)	$	(25	)		90.1	%
Benefit ratio unlocking		25			23			(10	)		10		2			-92.0	%		(15	)		25			266.7	%
Net gain (loss), after-tax	$	(72	)	$	(50	)	$	2		$	35	$	13			118.1	%	$	(267	)	$	-			100.0	%
Net Income
Income (loss) from operations	$	277		$	293		$	319		$	362	$	310			11.9	%	$	1,246		$	1,284			3.0	%
Excluded realized gain (loss)		(97	)		(73	)		12			25		11			111.3	%		(252	)		(25	)		90.1	%
Benefit ratio unlocking		25			23			(10	)		10		2			-92.0	%		(15	)		25			266.7	%
Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance		1			1			-			1		-			-100.0	%		2			3			50.0	%
Gain (loss) on early extinguishment of debt		-			-			-			-		(3	)	NM				(5	)		(3	)		40.0	%
Impairment of intangibles		(747	)		-			-			2		-			100.0	%		(747	)		2			100.3	%
Income (loss) from discontinued operations		-			(1	)		-			28		-		NM				(8	)		27		NM
Net income (loss)	$	(541	)	$	243		$	321		$	428	$	320			159.1	%	$	221		$	1,313		NM
Earnings (Loss) Per Common Share - Diluted
Income (loss) from operations	$	0.91		$	0.99		$	1.09		$	1.27	$	1.10			20.9	%	$	3.94		$	4.47			13.5	%
Excluded realized gain (loss)		(0.33	)		(0.25	)		0.03			0.09		0.04			112.1	%		(0.79	)		(0.09	)		88.6	%
Benefit ratio unlocking		0.08			0.08			(0.03	)		0.04		0.01			-87.5	%		(0.04	)		0.09		NM
Gain (loss) on early extinguishment of debt		-			-			-			-		(0.01	)	NM				(0.02	)		(0.01	)		50.0	%
Impairment of intangibles		(2.51	)		-			-			0.01		-			100.0	%		(2.37	)		0.01			100.4	%
Income (loss) from discontinued operations		-			-			-			0.10		-		NM				(0.03	)		0.09		NM
Adjustment attributable to using different average diluted shares		0.03			-			-			-		-			-100.0	%		-			-		NM
Net income (loss)	$	(1.82	)	$	0.82		$	1.09		$	1.51	$	1.14			162.6	%	$	0.69		$	4.56		NM

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