| | | ii |
NOTES |
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Definitions and Presentation | |
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| "Income from Operations," "Operating Revenue," and "Return on Capital" are non-GAAP financial measures and do not replace GAAP net income (loss) and revenues. Detailed reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure are included in this statistical supplement. | |
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* | We exclude the after-tax effects of the following items from GAAP net income to arrive at income from | |
| | operations: | | |
| | * | Realized gains and losses on investments and derivatives, | |
| | * | Restructuring charges, | |
| | * | Gains and losses related to reinsurance embedded derivatives/trading account assets, | |
| | * | The cumulative effect of accounting changes, | |
| | * | Reserve changes on business sold through reinsurance net of related deferred gain amortization, | |
| | * | Gains and losses on the sale of subsidiaries and blocks of business, | |
| | * | Loss on early retirement of debt, including subordinated debt | |
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* | Operating revenue represents revenue excluding the following, as applicable: | |
| | * | Realized gains or losses on investments and derivatives, | |
| | * | Gains and losses related to reinsurance embedded derivatives/trading account assets, | |
| | * | Gains and losses on the sale of subsidiaries and blocks of business, | |
| | * | Deferred gain amortization related to reserve changes on business sold through reinsurance, | |
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* | Return on capital measures the effectiveness of LNC's use of its total capital, which includes equity (excluding | |
| | accumulated other comprehensive income), debt and junior subordinated debentures issued to affiliated trusts. |
| | Return on capital is calculated by dividing income from operations (after adding back interest expense) by average capital. |
| | The difference between return on capital and return on shareholders' equity represents the effect of leveraging on |
| | LNC's consolidated results. | |
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| Income from operations, operating revenue, and return on capital are internal measures used by LNC in the management of its operations. Management believes that these performance measures explain the results of operations of LNC's ongoing operations in a manner that allows for a better understanding of the underlying trends in LNC's current business because the excluded items are either unpredictable and/or not related to decisions regarding the underlying businesses. | |
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* | Certain operating and statistical measures are included in this report to provide supplemental data regarding the |
| | performance of LNC’s current business. These measures include deposits, sales, net flows, first year premium, inforce, |
| | spread, and assets under management. | |
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* | On September 24, 2004, LNC completed the sale of its London-based international investment unit to its management. Certain metrics pages (2, 28A,29A, 35A, 36A) have been presented excluding the investment assets managed by the London-based international investment unit to provide more consistent comparisons between periods. | |
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* | Certain reclassifications have been made to the prior periods presented to conform to the June 30, 2005 presentation. |
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Accounting Changes | | |
* | Effective January 1, 2004 LNC Implemented the Statement of Position 03-1, "Accounting and reporting by Insurance Enterprises for certain nontraditional long-duration contracts and for Separate Accounts ("the SOP"). Among other things, the SOP establishes standards for computing reserves for products with guaranteed benefits such as GMDB and for certain riders for Universal Life contracts. The effects of implementing the SOP, including any related effects on DAC from changes in estimated gross profits resulting from implementing the provisions of the SOP were recorded as a cumulative effect adjustment. The first quarter of 2004 resulted in a cumulative effect adjustment of $24.5 million ($21.8 million in Lincoln Retirement and $2.7 million in Life Insurance segments). |
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* | Effective January 1, 2003, LNC adopted the fair value recognition method of accounting for its stock option incentive plans under Statement of Financial Accounting Standards ("FAS") No. 123, "Account for Stock-based Compensation" ("FAS 123"). LNC adopted the retroactive restatement method under FAS No. 148, "Accounting for Stock-based Compensation - Transition and Disclosure." As a result, LNC restated 2000, 2001, and 2002 to reflect stock-based compensation cost under the fair value method in FAS 123 for all employee awards granted, modified or settled in fiscal years beginning after December 31, 1994. Years prior to 2000 presented in this statistical report have not been restated. |
