Lincoln Statistical Report | ||||||||||
(Revised for New Definition of Operating Revenues | ||||||||||
and Income from Operations) | ||||||||||
first Q U A R T E R | ||||||||||
2 0 0 8 | ||||||||||
Except for certain reclassifications, the financial data in this document is dated April 29, 2008 and has not been updated since that date. LNC does not intend to update this document. | ||||||||||
LFG Analyst Coverage
First Quarter, 2008
FIRM | ANALYST | PHONE NUMBER |
Banc of America Securities | Tamara Kravec | 646-855-5212 |
Bernstein | Suneet Kamath | 212-756-4587 |
Citigroup | Colin Devine | 212-816-1682 |
Credit Suisse | Tom Gallagher | 212-538-2010 |
Deutsche Bank | Darin Arita | 212-250-7321 |
Dowling & Partners | Paul Goulekas | 860-676-8600 |
Fox-Pitt Kelton Cochran Caronia Waller | Mark Finkelstein | |
Goldman Sachs & Company | Tom Cholnoky | 212-902-3408 |
JP Morgan | Jimmy Bhullar | 212-622-6397 |
Keefe, Bruyette & Woods, Inc. | Jeff Schuman | 860-722-5902 |
Langen McAlenney | Bob Glasspiegel | 860-724-1203 |
Lehman Brothers | Eric Berg | 212-526-2805 |
Merrill Lynch | Ed Spehar | 212-449-4245 |
Morgan Stanley | Nigel Dally | 212-761-6235 |
Raymond James & Associates Inc. | Steven Schwartz | 312-612-7686 |
UBS | Andrew Kligerman | 212-713-2492 |
Wachovia | John Hall | 212-214-8032 |
Investor inquiries may be directed to:
Jim Sjoreen, Vice President, Investor Relations
Email: Jim.Sjoreen@lfg.com |
Voice: (484) 583-1420
Fax: (484) 583-3962
Note: This list is provided for informational purposes only. LFG does not endorse the analyses, conclusions, or recommendations contained in any report issued by these or any other analysts.
** Statistical data will be available immediately after the release of earnings for each quarter through LNC’s Investor Relations website: http://www.LincolnFinancial.com/investor.
Lincoln Financial Group | ||||||||
Statistical Report | ||||||||
First Quarter | ||||||||
2008 | ||||||||
Table of Contents | ||||||||
LFG Analyst Coverage | ||||||||
Notes | ||||||||
Financial Highlights | 1 - 3 | |||||||
Consolidated Expense Detail | 4 | |||||||
Operating Results Summary | 5 | |||||||
Details Underlying Realized Gain (Loss), After-DAC | 6 | |||||||
7 | ||||||||
Consolidated Statements of Income | 8 | |||||||
Consolidating Statements of Income from Operations - Current Year | 9 | |||||||
Consolidating Statements of Income from Operations - Prior Year | 9(B) | |||||||
Consolidated Balance Sheets | 10 | |||||||
Balance Sheet Data - Segment Highlights | 11 | |||||||
Individual Markets | ||||||||
Individual Life Insurance | ||||||||
Income Statements & Operational Data | 12 | |||||||
Operational Data | 13 | |||||||
Account Value Roll Forward | 14 | |||||||
Individual Annuities | ||||||||
Income Statements & Operational Data | 15 | |||||||
Roll Forwards of DAC, VOBA, DFEL and DSI | 16 | |||||||
Account Value Roll Forward | 17 | |||||||
Account Values | 18 | |||||||
Employer Markets | ||||||||
Defined Contribution | ||||||||
Income Statements & Operational Data | 19 | |||||||
Roll Forwards of DAC, VOBA and DSI | 20 | |||||||
Account Value Roll Forward | 21 | |||||||
Account Value Roll Forward - By Product | 22 | |||||||
Supplemental Data | 23 | |||||||
Executive Benefits | ||||||||
Income Statements & Operational Data | 24 | |||||||
Account Value Roll Forward & Supplemental Data | 25 | |||||||
Group Protection | ||||||||
Income Statements & Operational Data | 26 | |||||||
Supplemental Data | 27 | |||||||
Investment Management | ||||||||
Income Statements | 28 | |||||||
Assets Under Management Roll Forward | 29 | |||||||
Assets Under Management Roll Forward (Continued) | 29(B) | |||||||
Lincoln UK | ||||||||
Income Statements | 30 | |||||||
Operational Data | 31 | |||||||
Other Operations | 32 | |||||||
Discontinued Operations | 32 | |||||||
Domestic Deposits / Account Balances / Net Flows | 33 | |||||||
Consolidated Investment Data | ||||||||
Assets Managed | 34 | |||||||
Other Investment Data | 35 |
3/31/2008 | ii | ||
NOTES | |||
Definitions and Presentation | |||
"Income from Operations," "Operating Revenues" and "Return on Capital" are non-GAAP financial measures and do not replace | |||
GAAP revenues and net income (loss). Detailed reconciliations of these non-GAAP financial measures to the most directly | |||
comparable GAAP financial measure are included in this statistical supplement. | |||
* | We exclude the after-tax effects of the following items from GAAP net income to arrive at Income from Operations: | ||
* Realized gains and losses associated with the following (see page 6 for additional detail) ("Excluded realized gains | |||
and losses"); | |||
* Sale or disposal of securities; | |||
* Impairments of securities; | |||
* Change in the fair value of embedded derivatives within certain reinsurance arrangements and the change in | |||
the fair value of related trading securities; | |||
* Change in the fair value of the embedded derivatives of our guaranteed living benefits within our variable | |||
annuities ("GLB") net of the change in the fair value of the derivatives we own to hedge the changes in the | |||
embedded derivative); | |||
* Net difference between the benefit ratio unlocking of SOP 03-1 reserves on our guaranteed death | |||
benefit ("GDB") riders within our variable annuities and the change in the fair value of the derivatives | |||
excluding our expected cost of the hedging instruments ("GDB 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 as required under SFAS 133/157 ("Indexed annuity forward-starting option"). | |||
* Income (loss) from the initial adoption of changes in accounting principles; | |||
* Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance; | |||
* Losses on early retirement of debt, including subordinated debt; and | |||
* Income (loss) from discontinued operations. | |||
* | "Operating Revenues" represent GAAP revenues excluding the following, as applicable: | ||
* Excluded realized gains and losses; | |||
* Amortization of deferred gains arising from the reserve changes on business sold through reinsurance; and | |||
* Revenue adjustments from the initial impact of the adoption of changes in accounting principles. | |||
* | Return on Capital measures the effectiveness of LNC's use of its total capital, which includes equity (excluding | ||
accumulated other comprehensive income), debt, capital securities and junior subordinated debentures issued to | |||
affiliated trusts. Return on capital is calculated by dividing annualized income from operations (after adding back | |||
interest expense) by average capital. The difference between return on capital and return on stockholders' equity | |||
represents the effect of leveraging on LNC's consolidated results. | |||
Income from Operations, Operating Revenues 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 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 not related to decisions regarding the underlying businesses and/or are unpredictable. Accordingly, Income from | |||
Operations and Operating Revenues exclude the effects of any realized gains (losses) that are 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. We report the impact of these items, net of associated impact of | |||
amortization expense of DAC, VOBA, DSI and DFEL and changes in other contract holder funds, within realized gain (loss). | |||
* | 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 premiums, | |||
in force, spreads and assets under management. | |||
* | Sales as reported consist of the following: | ||
* Universal Life ("UL"), including MoneyGuard®, and corporate owned life insurance ("COLI") - first year | |||
commissionable premiums plus 5% of excess premiums received, including UL internal replacements; | |||
* Whole Life and Term - first year paid premiums; | |||
* Annuity - deposits from new and existing customers; | |||
* Group Protection - annualized first year premiums from new policies; and | |||
* Investment Management Retail Sales and Institutional Inflows - contributions, transfer in kind purchases | |||
and reinvested dividends for new and existing accounts. | |||
Our roll forwards of Deferred Acquisition Costs ("DAC") and Value of Business Acquired ("VOBA"), Deferred Sales Inducements | |||
("DSI") and Deferred Front-End Loads ("DFEL") disclose the net impact of prospective and retrospective unlocking on | |||
amortization for these accounts. This information helps explain a source of volatility in amortization. | |||
* | Prospective unlocking - In the third quarter of each year, we review and update our assumptions used in projecting | ||
our future estimated gross profits ("EGPs") used to amortize DAC, VOBA, DFEL, DSI and the calculations of embedded | |||
derivatives and reserves for annuity and life insurance products with certain guarantees. These updates to assumptions | |||
result in unlocking that represents an increase or decrease to our carrying value of DAC, VOBA, DFEL, DSI and other | |||
contract holder funds based upon our updated view of future EGPs. The various assumptions that are reviewed include | |||
investment margins, mortality, retention and rider utilization. | |||
* | Retrospective unlocking - On a quarterly basis, we “true-up” our models for actual gross profits and in-force | ||
experience for the period. To the extent that actual experience differs from previously expected, a positive or | |||
negative retrospective adjustment to the amortization of DAC, VOBA, DSI and DFEL is recorded. This update to | |||
the models may generate a change in the amortization rate which results in a catch-up to the cumulative | |||
amortization, by recalculating the DAC, VOBA, DSI and DFEL balances assuming that the revised amortization | |||
rate had been used since issue. | |||
* | Our unlocking process also includes our reserves for our guaranteed benefit features and is described more fully | ||
in “Part II - Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - | |||
Critical Accounting Policies and Estimates” of our 2007 Form 10-K. | |||
Book value per share excluding accumulated other comprehensive income ("AOCI") is calculated based upon a non-GAAP | |||
financial measure. It is calculated by dividing (a) stockholders' equity excluding AOCI, by (b) common shares outstanding. We | |||
provide book value per share excluding AOCI to enable investors to analyze the amount of our net worth that is primarily | |||
attributable to our business operations. We believe book value per share excluding AOCI is useful to investors because it | |||
eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. | |||
Book value per share is the most directly comparable GAAP measure. | |||
Pre-tax operating margin is calculated as income (loss) from operations before federal income taxes divided by operating | |||
revenues. | |||
After-tax operating margin is calculated as income (loss) from operations divided by operating revenues. | |||
In 2007, we executed plans to divest our television broadcasting, sports programming and Charlotte radio stations. During the | |||
fourth quarter of 2007, we entered into a definitive agreement to sell our television broadcasting, Charlotte radio and sports | |||
programming businesses. The divestiture of the sports programming business closed on November 30, 2007, the Charlotte | |||
radio station business closed on January 31, 2008 and the television broadcasting closed on March 31, 2008. Accordingly, in | |||
the periods prior to the closings, the assets and liabilities of these businesses not sold have been reclassified as held-for-sale | |||
for all periods presented, and are reported within other assets and other liabilities on our Consolidated Balance Sheets. The | |||
results of operations of these businesses have been reclassified into income from discontinued operations for all periods | |||
presented on the Financial Highlights, Operating Results Summary and Consolidated Statements of Income. | |||
Inter-segment transfer refers to a transfer from Individual Markets - Annuities to Employer Markets - Defined Contribution. | |||
Reclassifications | |||
Subsequent to the first quarter of 2008, we decided to change our non-GAAP measures, “Operating Revenues” and “Income from | |||
Operations”, to exclude the effects of any realized gains (losses) that are 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. We believe that our new definitions of “Operating Revenues” and “Income from Operations” provide | |||
investors with a more valuable measure of our performance because it better reveals trends in our business. The items that are now | |||
excluded from our operating results that were previously included are as follows: GLB net derivatives results; indexed annuity | |||
forward-starting option; and GDB derivative results. See page 6 for more information about these items. | |||
We have restated all periods presented to conform to our new definition of "Income from Operations," "Operating Revenues" and "Return | |||
on Capital." In addition, we have reclassified our derivatives and embedded derivatives related to our GLB, GDB and indexed annuities to | |||
realized gain (loss), which were previously reported within insurance fees, net investment income, interest credited or benefits. The | |||
associated amortization expense of DAC and VOBA (previously reported within underwriting, acquisition, insurance and other expenses), | |||
DSI (previously reported within interest credited) and DFEL (previously reported within insurance fees) and changes in contract holder | |||
funds (previously reported within benefits) have also been reclassified to realized gain (loss). These reclassifications had no effect on net | |||
income or total stockholders' equity. Therefore, we have restated prior periods for these segments to conform to the current presentation. | |||
All items that changed from our previously filed first quarter 2008 Statistical Report are highlighted in blue throughout the document | |||
During the first quarter of 2008, our Institutional Pension business was moved from the Executive Benefits segment to Other | |||
Operations. Therefore, we have restated prior periods for these segments to conform to the current presentation. |
3/31/2008 | PAGE 1 | |||||||||||||||
Financial Highlights | ||||||||||||||||
Unaudited (millions of dollars, except per share data) | ||||||||||||||||
For the Quarters Ended March 31, | ||||||||||||||||
Change | ||||||||||||||||
2008 | 2007 | Amount | % | |||||||||||||
Income from Operations - By Segment | ||||||||||||||||
Individual Life Insurance | $ | 145.5 | $ | 166.6 | $ | (21.1 | ) | -12.7 | % | |||||||
Individual Annuities | 117.8 | 116.6 | 1.2 | 1.0 | % | |||||||||||
Total Individual Markets | 263.2 | 283.2 | (20.0 | ) | -7.1 | % | ||||||||||
Defined Contribution | 40.4 | 49.7 | (9.3 | ) | -18.7 | % | ||||||||||
Executive Benefits | 11.9 | 11.9 | - | - | ||||||||||||
Group Protection | 26.3 | 23.1 | 3.2 | 13.9 | % | |||||||||||
Total Employer Markets | 78.6 | 84.7 | (6.1 | ) | -7.2 | % | ||||||||||
Investment Management | 12.1 | 16.2 | (4.1 | ) | -25.3 | % | ||||||||||
Lincoln UK | 10.7 | 10.9 | (0.2 | ) | -1.8 | % | ||||||||||
Other Operations | (42.3 | ) | (28.0 | ) | (14.3 | ) | -51.1 | % | ||||||||
Total Income from Operations (1) | 322.4 | 367.0 | (44.6 | ) | -12.2 | % | ||||||||||
Excluded realized gain (loss), after-tax (2) | (29.5 | ) | 21.5 | (51.0 | ) | NM | ||||||||||
Income (loss) from discontinued operations, after-tax (3) | (4.2 | ) | 7.7 | (11.9 | ) | NM | ||||||||||
Net Income | $ | 289.1 | $ | 396.5 | $ | (107.4 | ) | -27.1 | % | |||||||
Earnings per Share (Diluted) | ||||||||||||||||
Income from operations (1) | $ | 1.23 | $ | 1.31 | $ | (0.08 | ) | -6.1 | % | |||||||
Excluded realized gain (loss), after-tax | (0.11 | ) | 0.08 | (0.19 | ) | NM | ||||||||||
Income (loss) from discontinued operations, after-tax (3) | (0.02 | ) | 0.03 | (0.05 | ) | NM | ||||||||||
Net Income | $ | 1.10 | $ | 1.42 | $ | (0.32 | ) | -22.5 | % | |||||||
Operating Revenues - By Segment | ||||||||||||||||
Individual Life Insurance | $ | 987.5 | $ | 971.4 | $ | 16.1 | 1.7 | % | ||||||||
Individual Annuities | 622.6 | 590.4 | 32.2 | 5.5 | % | |||||||||||
Total Individual Markets | 1,610.1 | 1,561.7 | 48.4 | 3.1 | % | |||||||||||
Defined Contribution | 237.7 | 246.7 | (9.0 | ) | -3.6 | % | ||||||||||
Executive Benefits | 65.6 | 69.2 | (3.6 | ) | -5.2 | % | ||||||||||
Group Protection | 399.4 | 360.4 | 39.0 | 10.8 | % | |||||||||||
Total Employer Markets | 702.6 | 676.4 | 26.2 | 3.9 | % | |||||||||||
Investment Management | 120.3 | 150.2 | (29.9 | ) | -19.9 | % | ||||||||||
Lincoln UK | 85.6 | 90.7 | (5.1 | ) | -5.6 | % | ||||||||||
Other Operations | 118.0 | 108.8 | 9.2 | 8.5 | % | |||||||||||
Total Operating Revenues | 2,636.6 | 2,587.8 | 48.8 | 1.9 | % | |||||||||||
Excluded realized gain (loss), pre-tax (2) | (45.2 | ) | 32.9 | (78.1 | ) | NM | ||||||||||
Amortization of deferred gains arising from reserve changes | ||||||||||||||||
on business sold through reinsurance, pre-tax | 0.7 | 0.3 | 0.4 | 133.3 | % | |||||||||||
Total Revenues | $ | 2,592.0 | $ | 2,621.1 | $ | (29.1 | ) | -1.1 | % | |||||||
(1) Income from operations includes restructuring charges, after-tax, of $0.6 million, or -0- cents per share, and $2.5 million, or 1 cent per share, for the quarters ended March 31, 2008 and 2007, respectively. | ||||||||||||||||
(2) See page 6 for detail. | ||||||||||||||||
(3) Includes discontinued operations and the loss on disposal. See Discontinued Operations on page 32 for details. |
3/31/2008 | PAGE 2 | |||||||||||||||
Financial Highlights | ||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||
Operational Data by Segment | For the Quarters Ended March 31, | |||||||||||||||
Change | ||||||||||||||||
2008 | 2007 | Amount | % | |||||||||||||
Individual Markets - Annuities | ||||||||||||||||
Gross deposits | $ | 3.025 | $ | 2.821 | $ | 0.204 | 7.2 | % | ||||||||
Net flows | 1.181 | 0.754 | 0.427 | 56.6 | % | |||||||||||
Account values (gross) | 72.666 | 68.438 | 4.228 | 6.2 | % | |||||||||||
Account values (net of reinsurance) | 71.361 | 66.749 | 4.612 | 6.9 | % | |||||||||||
Individual Markets - Life Insurance | ||||||||||||||||
Sales (in millions) (1) | 145.4 | 203.5 | (58.0 | ) | -28.5 | % | ||||||||||
Life insurance in force | 521.047 | 508.411 | 12.635 | 2.5 | % | |||||||||||
Account values | 27.881 | 26.924 | 0.957 | 3.6 | % | |||||||||||
Employer Markets - Defined Contribution | ||||||||||||||||
Gross deposits (2) | $ | 1.552 | $ | 1.487 | $ | 0.065 | 4.4 | % | ||||||||
Net flows | 0.281 | 0.221 | 0.060 | 27.1 | % | |||||||||||
Account values - annuities | 27.509 | 28.669 | (1.160 | ) | -4.0 | % | ||||||||||
Alliance and Smart Future Mutual Funds | 7.254 | 5.807 | 1.447 | 24.9 | % | |||||||||||
Account values including Alliance and Smart Future | ||||||||||||||||
Mutual Funds | 34.763 | 34.475 | 0.288 | 0.8 | % | |||||||||||
Employer Markets - Executive Benefits | ||||||||||||||||
COLI/BOLI sales (in millions) | 28.2 | 20.4 | 7.8 | 38.2 | % | |||||||||||
Life insurance in force | 15.826 | 14.747 | 1.080 | 7.3 | % | |||||||||||
Account values | 4.460 | 4.264 | 0.196 | 4.6 | % | |||||||||||
Employer Markets - Group Protection | ||||||||||||||||
Annualized sales (in millions) | 54.1 | 60.5 | (6.5 | ) | -10.7 | % | ||||||||||
Loss ratio (3) | 71.0 | % | 72.7 | % | NM | NM | ||||||||||
Investment Management | ||||||||||||||||
Retail sales | $ | 3.495 | $ | 3.603 | $ | (0.108 | ) | -3.0 | % | |||||||
Retail net flows | (0.655 | ) | 0.233 | (0.888 | ) | NM | ||||||||||
Institutional inflows | 1.229 | 2.431 | (1.202 | ) | -49.4 | % | ||||||||||
Institutional net flows | (0.510 | ) | (0.321 | ) | (0.189 | ) | -58.9 | % | ||||||||
Total sales and inflows | 4.724 | 6.034 | (1.311 | ) | -21.7 | % | ||||||||||
Total net flows | (1.166 | ) | (0.088 | ) | (1.077 | ) | NM | |||||||||
Assets under management - retail and institutional | 78.537 | 98.146 | (19.608 | ) | -20.0 | % | ||||||||||
Assets under management - general account | 67.340 | 67.658 | (0.318 | ) | -0.5 | % | ||||||||||
Assets under management - total segment | 145.877 | 165.804 | (19.927 | ) | -12.0 | % | ||||||||||
Consolidated | ||||||||||||||||
Domestic retail deposits | $ | 7.710 | $ | 8.217 | $ | (0.507 | ) | -6.2 | % | |||||||
Domestic retail account balances | 172.831 | 169.282 | 3.549 | 2.1 | % | |||||||||||
Domestic retail net flows | 1.359 | 1.827 | (0.468 | ) | -25.6 | % | ||||||||||
Domestic deposits | 8.846 | 10.536 | (1.690 | ) | -16.0 | % | ||||||||||
Domestic net flows | 0.878 | 1.554 | (0.676 | ) | -43.5 | % | ||||||||||
Assets under management | 224.725 | 237.000 | (12.275 | ) | -5.2 | % | ||||||||||
(1) Sales for Individual Life Insurance consist of first year commissionable premiums for Universal Life ("UL"), including MoneyGuard® , plus 5% of excess premiums received, including UL internal replacements, and first year paid premiums for Whole Life and Term products. | ||||||||||||||||
(2) Includes deposits for Alliance and Smart Future Mutual Funds which are not included in separate account liabilities on our Consolidated Balance Sheets. | ||||||||||||||||
(3) Represents combined loss ratio for Life, Disability and Dental business. |
3/31/2008 | PAGE 3 | ||||||||||||||||
Financial Highlights | |||||||||||||||||
Unaudited (millions of dollars) | |||||||||||||||||
For the Quarters Ended March 31, | |||||||||||||||||
Change | |||||||||||||||||
2008 | 2007 | Amount | % | ||||||||||||||
Balance Sheet Assets - End-of-Period | $ | 185,349.3 | $ | 181,327.1 | $ | 4,022.2 | 2.2 | % | |||||||||
Stockholders' Equity | |||||||||||||||||
Beginning-of-period (including AOCI) | $ | 11,718.4 | $ | 12,201.0 | $ | (482.6 | ) | ||||||||||
End-of-period (including AOCI) | 11,086.3 | 12,032.2 | (945.9 | ) | |||||||||||||
End-of-period (excluding AOCI) | 11,408.0 | 11,372.5 | 35.5 | ||||||||||||||
Average equity (excluding AOCI) | 11,450.5 | 11,480.2 | (29.6 | ) | |||||||||||||
Return on Equity | |||||||||||||||||
Net income/average equity (excluding AOCI) | 10.1 | % | 13.8 | % | |||||||||||||
Income from operations/average equity (excluding AOCI) | 11.3 | % | 12.8 | % | |||||||||||||
Return on Capital | |||||||||||||||||
Income from operations/average capital | 9.0 | % | 10.3 | % | |||||||||||||
Common Stock Outstanding | |||||||||||||||||
Average for the period - diluted | 262.8 | 279.5 | (16.7 | ) | -6.0 | % | |||||||||||
End-of-period - assuming conversion of preferreds | 259.4 | 270.9 | (11.5 | ) | -4.2 | % | |||||||||||
End-of-period - diluted | 260.5 | 274.0 | (13.5 | ) | -4.9 | % | |||||||||||
Book value (including AOCI) | $ | 42.74 | $ | 44.42 | $ | (1.68 | ) | -3.8 | % | ||||||||
Book value (excluding AOCI) | 43.98 | 41.98 | 2.00 | 4.8 | % | ||||||||||||
Cash Returned to Shareholders | |||||||||||||||||
Share repurchase - dollar amount | $ | 285.7 | $ | 511.7 | $ | (226.0 | ) | ||||||||||
Dividends declared to shareholders | 107.5 | 106.8 | 0.8 | ||||||||||||||
Total Cash Returned to Shareholders | $ | 393.3 | $ | 618.5 | $ | (225.2 | ) | ||||||||||
Share repurchase - number of shares | 5.450 | 7.215 | (1.765 | ) | |||||||||||||
Dividend declared on common stock - per share | $ | 0.415 | $ | 0.395 | $ | 0.020 | 5.1 | % | |||||||||
Dividend payout ratio (1) | 37.8 | % | 27.8 | % | |||||||||||||
Annualized yield (2) | 3.2 | % | 2.3 | % | |||||||||||||
Comprehensive Income (Loss) | |||||||||||||||||
Net income | $ | 289.1 | $ | 396.5 | |||||||||||||
Net unrealized gains (losses) on available-for-sale securities | (538.2 | ) | 46.9 | ||||||||||||||
Losses on derivatives | (8.8 | ) | (4.0 | ) | |||||||||||||
Foreign currency translation | (0.8 | ) | 3.2 | ||||||||||||||
Funded status of employee benefit plans | 0.6 | 0.4 | |||||||||||||||
Comprehensive Income (Loss) | $ | (257.9 | ) | $ | 443.0 | ||||||||||||
Ratios: | |||||||||||||||||
Debt to total capitalization (3) | 21.7 | % | 21.9 | % | |||||||||||||
Debt to equity (3) | 27.7 | % | 28.1 | % | |||||||||||||
Ratings as of April 28, 2008 | |||||
A.M. Best | Fitch | Moody's | Standard & Poor's | ||
Senior Debt Ratings | a | A | A3 | A+ | |
Financial Strength Ratings: | |||||
Lincoln National Life Insurance Company | A+ | AA | Aa3 | AA | |
First Penn-Pacific Life Insurance Company | A+ | AA | A1 | AA- | |
Lincoln Life & Annuity Company of New York | A+ | AA | Aa3 | AA | |
(1) Indicated dividend divided by net income. | |||||
(2) Indicated dividend divided by the closing price. | |||||
(3) Equity used in calculation excludes AOCI and $375 million of senior notes issued in October of 2007 because the proceeds were reinvested in a pool of long-term assets. Capital securities are considered 25% debt and 75% equity. |
3/31/2008 | PAGE 4 | |||||||||||||||||||||||
Consolidated Operating Expense Detail | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Commissions | $ | 446.5 | $ | 462.9 | $ | 470.8 | $ | 501.9 | $ | 426.6 | -4.4 | % | ||||||||||||
General and Administrative Expenses | ||||||||||||||||||||||||
General and administrative expenses | 390.9 | 432.4 | 418.2 | 432.7 | 400.6 | 2.5 | % | |||||||||||||||||
Merger-related expenses | 10.1 | 23.8 | 21.9 | 23.6 | 13.8 | 36.6 | % | |||||||||||||||||
Total General and Administrative Expenses | ||||||||||||||||||||||||
Excluding Broker-Dealer | 401.0 | 456.2 | 440.1 | 456.3 | 414.4 | 3.3 | % | |||||||||||||||||
Communications expenses | 14.7 | 15.2 | 13.2 | 13.5 | 15.5 | 5.9 | % | |||||||||||||||||
Restructuring charges | 3.9 | 6.2 | 7.4 | 2.9 | 0.9 | -76.9 | % | |||||||||||||||||
Taxes, licenses and fees | 65.2 | 51.8 | 52.4 | 48.6 | 62.3 | -4.4 | % | |||||||||||||||||
Interest and debt expense | 62.4 | 73.1 | 68.2 | 80.3 | 75.4 | 21.0 | % | |||||||||||||||||
Total Commissions and Expenses Incurred | 993.7 | 1,065.3 | 1,052.1 | 1,103.5 | 995.2 | 0.2 | % | |||||||||||||||||
Less: Commissions and Expenses Capitalized | (487.4 | ) | (504.9 | ) | (511.4 | ) | (554.4 | ) | (456.6 | ) | 6.3 | % | ||||||||||||
Amortization | ||||||||||||||||||||||||
DAC/VOBA amortization, net of interest (1) (2) | 275.2 | 233.4 | 283.4 | 273.0 | 255.2 | -7.3 | % | |||||||||||||||||
Amortization of intangibles | 2.5 | 2.5 | 2.6 | 2.5 | 1.6 | -37.3 | % | |||||||||||||||||
Total Amortization | 277.7 | 235.9 | 286.0 | 275.5 | 256.7 | -7.6 | % | |||||||||||||||||
Broker-Dealer Commissions and G&A | 87.2 | 92.8 | 91.8 | 100.5 | 89.2 | 2.3 | % | |||||||||||||||||
Total | $ | 871.2 | $ | 889.2 | $ | 918.5 | $ | 925.1 | $ | 884.6 | 1.5 | % | ||||||||||||
Merger-Related Expenses (3) | ||||||||||||||||||||||||
Severance and employee-related charges | $ | 3.0 | $ | 6.6 | $ | 5.6 | $ | 6.2 | $ | 3.1 | 3.3 | % | ||||||||||||
Systems integration and related expenses | 5.6 | 17.7 | 17.9 | 15.1 | 9.3 | 66.1 | % | |||||||||||||||||
Other expenses | 5.4 | 5.7 | 5.8 | 6.6 | 2.3 | -57.4 | % | |||||||||||||||||
Total Merger-Related Expenses | $ | 14.0 | $ | 30.0 | $ | 29.3 | $ | 27.9 | $ | 14.7 | 5.0 | % | ||||||||||||
(1) In the second quarter of 2007, we recognized certain adjustments that reduced DAC amortization by $23 million. | ||||||||||||||||||||||||
(2) For the first quarter of 2008, DAC/VOBA amortization excludes the non-operating expense of $5.4 million related to the initial impact of the adoption of SFAS 157. | ||||||||||||||||||||||||
(3) Represents merger-related expenses included in general and administrative expenses and restructuring charges. |
3/31/2008 | PAGE 5 | |||||||||||||||||||||||
Operating Results Summary | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Individual Life Insurance (1) | $ | 971.4 | $ | 957.5 | $ | 992.1 | $ | 1,002.1 | $ | 987.5 | 1.6 | % | ||||||||||||
Individual Annuities | 590.4 | 623.7 | 647.0 | 672.3 | 622.5 | 5.4 | % | |||||||||||||||||
Individual Markets | 1,561.7 | 1,581.1 | 1,639.1 | 1,674.4 | 1,610.1 | 3.1 | % | |||||||||||||||||
Defined Contribution | 246.7 | 252.0 | 243.4 | 243.3 | 237.7 | -3.7 | % | |||||||||||||||||
Executive Benefits | 69.2 | 66.1 | 64.2 | 66.1 | 65.6 | -5.3 | % | |||||||||||||||||
Group Protection | 360.4 | 391.0 | 367.5 | 380.6 | 399.4 | 10.8 | % | |||||||||||||||||
Employer Markets | 676.4 | 709.2 | 675.2 | 690.0 | 702.6 | 3.9 | % | |||||||||||||||||
Investment Management | 150.2 | 151.0 | 150.1 | 139.0 | 120.3 | -19.9 | % | |||||||||||||||||
Lincoln UK | 90.7 | 92.5 | 88.7 | 98.3 | 85.6 | -5.6 | % | |||||||||||||||||
Other Operations | 108.8 | 123.6 | 112.9 | 127.9 | 118.0 | 8.4 | % | |||||||||||||||||
Total Operating Revenues | 2,587.8 | 2,657.4 | 2,665.9 | 2,729.7 | 2,636.6 | 1.9 | % | |||||||||||||||||
Excluded realized gain (loss), pre-tax (2) | 32.9 | 5.8 | (65.8 | ) | (147.9 | ) | (45.2 | ) | NM | |||||||||||||||
Amortization of deferred gains arising from reserve changes | ||||||||||||||||||||||||
on business sold through reinsurance, pre-tax | 0.3 | 7.8 | 0.6 | 0.7 | 0.7 | 133.3 | % | |||||||||||||||||
Total Revenues | $ | 2,621.1 | $ | 2,670.9 | $ | 2,600.8 | $ | 2,582.5 | $ | 2,592.0 | -1.1 | % | ||||||||||||
Income from Operations (3) | ||||||||||||||||||||||||
Individual Life Insurance | $ | 166.6 | $ | 176.4 | $ | 173.6 | $ | 158.8 | $ | 145.5 | -12.7 | % | ||||||||||||
Individual Annuities | 116.6 | 123.4 | 125.9 | 118.9 | 117.8 | 1.0 | % | |||||||||||||||||
Individual Markets | 283.2 | 299.8 | 299.5 | 277.7 | 263.2 | -7.1 | % | |||||||||||||||||
Defined Contribution | 49.7 | 47.3 | 41.2 | 43.1 | 40.4 | -18.7 | % | |||||||||||||||||
Executive Benefits | 11.9 | 10.8 | 8.9 | 11.9 | 11.9 | -0.1 | % | |||||||||||||||||
Group Protection | 23.1 | 29.0 | 33.2 | 28.2 | 26.3 | 14.0 | % | |||||||||||||||||
Employer Markets | 84.7 | 87.1 | 83.4 | 83.1 | 78.6 | -7.2 | % | |||||||||||||||||
Investment Management | 16.2 | 11.3 | 21.8 | 27.0 | 12.1 | -25.0 | % | |||||||||||||||||
Lincoln UK | 10.9 | 11.7 | 10.3 | 12.7 | 10.7 | -2.1 | % | |||||||||||||||||
Other Operations | (28.0 | ) | (36.2 | ) | (49.8 | ) | (59.2 | ) | (42.3 | ) | -51.1 | % | ||||||||||||
Income from Operations (3) | 367.0 | 373.7 | 365.3 | 341.2 | 322.4 | -12.2 | % | |||||||||||||||||
Excluded realized gain (loss), after-tax (2) | 21.5 | 4.0 | (42.7 | ) | (102.4 | ) | (29.5 | ) | NM | |||||||||||||||
Income (loss) from reserve changes (net of related amortization) | ||||||||||||||||||||||||
on business sold through reinsurance, after-tax | 0.2 | (7.9 | ) | 0.4 | 0.4 | 0.4 | 100.0 | % | ||||||||||||||||
Income (loss) from discontinued operations, after-tax (4) | 7.7 | 6.3 | 6.6 | (126.8 | ) | (4.2 | ) | NM | ||||||||||||||||
Net Income | $ | 396.5 | $ | 376.0 | $ | 329.6 | $ | 112.5 | $ | 289.1 | -27.1 | % | ||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | ||||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | ||||||||||||||||||||
Stockholders' Equity | ||||||||||||||||||||||||
Beginning-of-period (including AOCI) | $ | 12,201.0 | $ | 12,032.2 | $ | 11,835.7 | $ | 11,962.9 | $ | 11,718.4 | ||||||||||||||
End-of-period (including AOCI) | 12,032.2 | 11,835.7 | 11,962.9 | 11,718.4 | 11,086.3 | |||||||||||||||||||
End-of-period (excluding AOCI) | 11,372.5 | 11,686.4 | 11,766.1 | 11,493.1 | 11,408.0 | |||||||||||||||||||
Average equity (excluding AOCI) | 11,480.2 | 11,529.4 | 11,726.3 | 11,629.6 | 11,450.5 | |||||||||||||||||||
Common Shares Outstanding | ||||||||||||||||||||||||
Average for the period - diluted | 279.5 | 274.4 | 272.5 | 269.4 | 262.8 | |||||||||||||||||||
End-of-period - diluted | 274.0 | 274.5 | 271.7 | 266.2 | 260.5 | |||||||||||||||||||
Per Share Data (Diluted) | ||||||||||||||||||||||||
Net income | $ | 1.42 | $ | 1.37 | $ | 1.21 | $ | 0.41 | $ | 1.10 | ||||||||||||||
Income from operations (3) | 1.31 | 1.36 | 1.34 | 1.26 | 1.23 | |||||||||||||||||||
Stockholders' Equity Per Share | ||||||||||||||||||||||||
Stockholders' Equity (including AOCI) | $ | 44.42 | $ | 43.57 | $ | 44.41 | $ | 44.32 | $ | 42.74 | ||||||||||||||
Stockholders' Equity (excluding AOCI) | 41.98 | 43.02 | 43.68 | 43.46 | 43.98 | |||||||||||||||||||
Dividends declared (common stock) | 0.395 | 0.395 | 0.395 | 0.415 | 0.415 | |||||||||||||||||||
Return on Equity | ||||||||||||||||||||||||
Net Income/Average Equity | 13.8 | % | 13.0 | % | 11.2 | % | 3.9 | % | 10.1 | % | ||||||||||||||
Income from Operations/Average Equity | 12.8 | % | 13.0 | % | 12.5 | % | 11.7 | % | 11.3 | % | ||||||||||||||
Market Value of Common Stock | ||||||||||||||||||||||||
Highest price | $ | 71.18 | $ | 74.72 | $ | 72.28 | $ | 70.66 | $ | 58.11 | ||||||||||||||
Lowest price | 64.29 | 66.90 | 54.40 | 55.84 | 45.50 | |||||||||||||||||||
Closing price | $ | 67.79 | $ | 70.95 | $ | 65.97 | $ | 58.22 | $ | 52.00 | ||||||||||||||
(1) In the second quarter of 2007, we recognized certain adjustments that reduced operating revenues by $41 million. There were reductions to expenses | ||||||||||||||||||||||||
that offset most of this reduction in revenues. | ||||||||||||||||||||||||
(2) See page 6 for detail. | ||||||||||||||||||||||||
(3) Income from operations includes after-tax restructuring charges of $0.6 million, or -0- cents per share, for the first quarter of 2008, $1.9 million or 1 cent | ||||||||||||||||||||||||
per share, for the fourth quarter of 2007, $4.8 million, or 2 cents per share, for the third quarter of 2007, $4.0 million, or 1 cent per share, for the second | ||||||||||||||||||||||||
quarter of 2007 and $2.5 million, or 1 cent per share, for the first quarter of 2007. | ||||||||||||||||||||||||
(4) Includes discontinued operations and the loss on disposition. See Discontinued Operations on page 32 for details. |
3/31/2008 | PAGE 6 | |||||||||||||||||||||||
Details Underlying Realized Gain (Loss), After-DAC (1) | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Pre-Tax | ||||||||||||||||||||||||
Operating realized gain (loss) (2): | ||||||||||||||||||||||||
Indexed annuity net derivatives results (3) | $ | 0.9 | $ | 1.2 | $ | 0.2 | $ | (0.1 | ) | $ | (1.4 | ) | NM | |||||||||||
GLB (4) | 0.8 | 1.4 | 1.6 | 1.8 | 5.8 | NM | ||||||||||||||||||
GDB hedge cost (5) | (0.4 | ) | (1.3 | ) | (0.8 | ) | 0.5 | 5.9 | NM | |||||||||||||||
Total operating realized gain (loss) | 1.3 | 1.3 | 0.9 | 2.2 | 10.3 | NM | ||||||||||||||||||
Realized gain (loss) related to investments (6) | 26.4 | (8.6 | ) | (35.4 | ) | (108.9 | ) | (41.0 | ) | NM | ||||||||||||||
Gain (loss) on certain reinsurance derivative/ | ||||||||||||||||||||||||
trading securities (7) | (0.2 | ) | 4.0 | (1.1 | ) | (0.8 | ) | 0.4 | 277.8 | % | ||||||||||||||
GLB net derivatives results (8) | 8.4 | 4.8 | (23.2 | ) | (37.3 | ) | (6.6 | ) | NM | |||||||||||||||
Indexed annuity forward-starting option (9) | (1.9 | ) | 4.9 | (6.2 | ) | (6.9 | ) | 4.8 | NM | |||||||||||||||
GDB net derivative results (5) | 0.3 | 0.7 | 0.1 | (0.2 | ) | (5.2 | ) | NM | ||||||||||||||||
Gain on sale of subsidiaries/businesses | - | - | - | 6.2 | 2.5 | NM | ||||||||||||||||||
Total excluded realized gain (loss) | 32.9 | 5.8 | (65.8 | ) | (147.9 | ) | (45.2 | ) | NM | |||||||||||||||
Total realized gain (loss) | $ | 34.3 | $ | 7.1 | $ | (64.9 | ) | $ | (145.7 | ) | $ | (35.0 | ) | NM | ||||||||||
After-Tax | ||||||||||||||||||||||||
Operating realized gain (loss) (2): | ||||||||||||||||||||||||
Indexed annuity net derivatives results (3) | $ | 0.6 | $ | 0.8 | $ | 0.1 | $ | (0.1 | ) | $ | (0.9 | ) | NM | |||||||||||
GLB (4) | 0.5 | 0.9 | 1.0 | 1.1 | 3.8 | NM | ||||||||||||||||||
GDB hedge cost (5) | (0.3 | ) | (0.9 | ) | (0.5 | ) | 0.4 | 3.8 | NM | |||||||||||||||
Total operating realized gain (loss) | 0.8 | 0.8 | 0.6 | 1.4 | 6.7 | NM | ||||||||||||||||||
Realized gain (loss) related to investments (6) | 17.1 | (4.9 | ) | (23.2 | ) | (71.4 | ) | (27.1 | ) | NM | ||||||||||||||
Gain (loss) on certain reinsurance derivative/ | ||||||||||||||||||||||||
trading securities (7) | 0.0 | 2.1 | (0.5 | ) | (0.3 | ) | 0.6 | NM | ||||||||||||||||
GLB net derivatives results (8) | 5.4 | 3.1 | (15.1 | ) | (24.3 | ) | (4.3 | ) | NM | |||||||||||||||
Indexed annuity forward-starting option (9) | (1.3 | ) | 3.2 | (4.0 | ) | (4.5 | ) | 3.1 | NM | |||||||||||||||
GDB net derivative results (5) | 0.2 | 0.4 | 0.1 | (0.1 | ) | (3.4 | ) | NM | ||||||||||||||||
Gain on sale of subsidiaries/businesses | - | - | - | (1.8 | ) | 1.5 | NM | |||||||||||||||||
Total excluded realized gain (loss) | 21.5 | 4.0 | (42.7 | ) | (102.4 | ) | (29.5 | ) | NM | |||||||||||||||
Total realized gain (loss) | $ | 22.3 | $ | 4.8 | $ | (42.1 | ) | $ | (101.0 | ) | $ | (22.8 | ) | NM |
(1) DAC refers to the associated amortization expense of DAC, VOBA, DSI, and DFEL and changes in other contract holder funds. |
(2) We exclude from our definitions of income from operations and operating revenues any realized gains (losses) that are 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. |
(3) 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 annuities products. |
(4) The portion of the GLB rider fees calculated as the attributed fees in excess of the net valuation premium. Net valuation premium represents a level portion of rider fees required to fund potential living benefit claims. The attributed fees are the fees used in the calculation of the embedded derivative and represent net valuation premium plus a margin for risk/profit, including non-performance risk factor required by SFAS 157 benefit costs. |
(5) We include the change in the fair value of the derivatives that offsets the benefit ratio unlocking of our SOP 03-1 reserves on our GDB riders, including our expected cost of the hedging instruments in operating realized gain (loss). We exclude from our definition of income from operations the net difference between the benefit ratio unlocking of SOP 03-1 reserves on our GDB riders and the change in the fair value of the derivatives excluding our expected cost of the hedging instruments. |
(6) See page 35 for detail. |
(7) Changes in the fair values of total return swaps (embedded derivatives) related to various modified coinsurance and coinsurance with funds withheld reinsurance arrangements that have contractual returns related to various assets and liabilities associated with these arrangements. Changes in the fair value of these derivatives are offset by the change in fair value of trading securities in the portfolios that support these arrangements. |
(8) Represents the net difference in the change in the fair value of the embedded derivative liabilities of our GLB products and the change in the fair value of the derivative instruments we own to hedge. This includes the cost of hedging. The impact of the initial adoption of SFAS 157 was $33.5 million pre-tax and $21.8 million, after-tax in the first quarter of 2008. |
(9) 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 as required under SFAS 133/157. In addition, $9.6 million, pre-tax and $6.3 million, after-tax is included in the first quarter of 2008 due to the initial impact of adopting SFAS 157. |
3/31/2008 | PAGE 7 | |||||||
[THIS PAGE INTENTIONALLY LEFT BLANK] | ||||||||
3/31/2008 | PAGE 8 |
Consolidated Statements of Income | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Insurance premiums | $ | 458.9 | $ | 488.9 | $ | 491.1 | $ | 508.2 | $ | 508.8 | 10.9 | % | ||||||||||||
Surrender charges | 26.9 | 28.1 | 25.6 | 25.1 | 27.2 | 1.1 | % | |||||||||||||||||
Mortality assessments (1) | 311.2 | 299.6 | 320.7 | 328.4 | 330.8 | 6.3 | % | |||||||||||||||||
Expense assessments (1) | 425.9 | 413.9 | 489.6 | 495.1 | 454.1 | 6.6 | % | |||||||||||||||||
Investment advisory fees | 90.3 | 92.7 | 89.0 | 87.7 | 76.2 | -15.6 | % | |||||||||||||||||
Net investment income | 1,089.7 | 1,133.2 | 1,061.6 | 1,093.7 | 1,065.4 | -2.2 | % | |||||||||||||||||
Realized gain (loss) (2) | 34.3 | 7.1 | (64.9 | ) | (145.7 | ) | (35.0 | ) | NM | |||||||||||||||
Amortization of deferred gains on business sold | ||||||||||||||||||||||||
through reinsurance | 18.9 | 26.4 | 19.3 | 19.3 | 19.1 | 1.1 | % | |||||||||||||||||
Other revenues and fees | 164.9 | 181.0 | 168.8 | 170.8 | 145.2 | -11.9 | % | |||||||||||||||||
Total Revenues | 2,621.1 | 2,670.9 | 2,600.8 | 2,582.5 | 2,592.0 | -1.1 | % | |||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||
Insurance benefits (1) | 592.8 | 650.7 | 622.7 | 696.2 | 677.5 | 14.3 | % | |||||||||||||||||
Interest credited to contract holder funds | 599.1 | 606.2 | 611.3 | 618.7 | 611.7 | 2.1 | % | |||||||||||||||||
Operating and acquisition expenses | 743.6 | 764.2 | 797.9 | 796.2 | 746.8 | 0.4 | % | |||||||||||||||||
Taxes, licenses and fees | 65.2 | 51.8 | 52.4 | 48.6 | 62.3 | -4.4 | % | |||||||||||||||||
Interest and debt expense | 62.4 | 73.1 | 68.2 | 80.3 | 75.4 | 21.0 | % | |||||||||||||||||
Total Benefits and Expenses | 2,063.2 | 2,146.1 | 2,152.6 | 2,240.0 | 2,173.7 | 5.4 | % | |||||||||||||||||
Income from continuing operations before taxes | 558.0 | 524.9 | 448.2 | 342.5 | 418.3 | -25.0 | % | |||||||||||||||||
Federal income taxes | 169.2 | 155.2 | 125.2 | 103.2 | 125.0 | -26.1 | % | |||||||||||||||||
Income from Continuing Operations | 388.8 | 369.7 | 323.0 | 239.3 | 293.3 | -24.6 | % | |||||||||||||||||
Income (loss) from discontinued operations, net of | ||||||||||||||||||||||||
federal income taxes (3) | 7.7 | 6.3 | 6.6 | (126.8 | ) | (4.2 | ) | NM | ||||||||||||||||
Net Income | $ | 396.5 | $ | 376.0 | $ | 329.6 | $ | 112.5 | $ | 289.1 | -27.1 | % | ||||||||||||
Earnings per Share (Diluted) | ||||||||||||||||||||||||
Income from continuing operations | $ | 1.39 | $ | 1.35 | $ | 1.19 | $ | 0.88 | $ | 1.12 | -19.4 | % | ||||||||||||
Income (loss) from discontinued operations, net of | ||||||||||||||||||||||||
federal income taxes (3) | 0.03 | 0.02 | 0.02 | (0.47 | ) | (0.02 | ) | NM | ||||||||||||||||
Net Income | $ | 1.42 | $ | 1.37 | $ | 1.21 | $ | 0.41 | $ | 1.10 | -22.6 | % | ||||||||||||
Roll Forward of DAC & VOBA | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 8,420.4 | $ | 8,534.7 | $ | 9,100.6 | $ | 9,337.0 | $ | 9,579.8 | ||||||||||||||
Cumulative effect of adoption of SOP 05-1 | (66.1 | ) | - | - | - | - | ||||||||||||||||||
Deferrals | 487.4 | 504.9 | 511.4 | 554.4 | 456.6 | |||||||||||||||||||
Amortization, net of interest: (1) | ||||||||||||||||||||||||
Unlocking | 14.5 | 25.3 | 7.9 | 17.1 | (10.9 | ) | ||||||||||||||||||
Other amortization | (289.7 | ) | (258.6 | ) | (291.3 | ) | (290.0 | ) | (244.2 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
operating and acquisition expenses | 212.2 | 271.6 | 228.0 | 281.5 | 201.4 | |||||||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||||||
on available-for-sale securities and derivatives | (24.3 | ) | (12.8 | ) | 21.1 | 95.6 | (1.4 | ) | ||||||||||||||||
Adjustment related to unrealized (gains) losses | ||||||||||||||||||||||||
on available-for-sale securities and derivatives | (25.5 | ) | 290.8 | (27.9 | ) | (111.3 | ) | 216.6 | ||||||||||||||||
Foreign currency translation adjustment | 4.1 | 16.3 | 15.1 | (22.9 | ) | (0.9 | ) | |||||||||||||||||
Business acquired | 14.0 | - | - | - | - | |||||||||||||||||||
Balance at end-of-period | $ | 8,534.7 | $ | 9,100.6 | $ | 9,337.0 | $ | 9,579.8 | $ | 9,995.5 | ||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 976.9 | $ | 1,017.9 | $ | 1,105.8 | $ | 1,128.1 | $ | 1,183.1 | ||||||||||||||
Cumulative effect of adoption of SOP 05-1 | (2.0 | ) | - | - | - | - | ||||||||||||||||||
Deferrals | 77.2 | 125.8 | 97.0 | 112.4 | 102.0 | |||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||
Unlocking | 1.6 | 6.9 | (30.8 | ) | (0.4 | ) | (3.2 | ) | ||||||||||||||||
Other amortization | (36.7 | ) | (52.7 | ) | (52.5 | ) | (47.8 | ) | (46.6 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
expense assessments | 42.2 | 79.9 | 13.7 | 64.2 | 52.2 | |||||||||||||||||||
Adjustment related to realized losses | ||||||||||||||||||||||||
on available-for-sale securities and derivatives | (1.0 | ) | (0.2 | ) | 1.2 | 1.9 | 0.8 | |||||||||||||||||
Foreign currency translation adjustment | 2.0 | 8.1 | 7.5 | (11.2 | ) | (0.4 | ) | |||||||||||||||||
Balance at end-of-period | $ | 1,017.9 | $ | 1,105.8 | $ | 1,128.1 | $ | 1,183.1 | $ | 1,235.6 | ||||||||||||||
Roll Forward of DSI | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 193.8 | $ | 206.4 | $ | 225.0 | $ | 249.1 | $ | 279.2 | ||||||||||||||
Cumulative effect of adoption of SOP 05-1 | (2.8 | ) | - | - | - | - | ||||||||||||||||||
Deferrals | 23.7 | 27.4 | 29.8 | 35.5 | 26.0 | |||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||
Unlocking | 1.5 | 0.9 | 0.6 | (0.9 | ) | 0.5 | ||||||||||||||||||
Other amortization | (7.3 | ) | (8.6 | ) | (9.1 | ) | (10.1 | ) | (6.3 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
insurance benefits or interest credited | 18.0 | 19.6 | 21.3 | 24.6 | 20.2 | |||||||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||||||
on available-for-sale securities and derivatives | (2.6 | ) | (1.0 | ) | 2.8 | 5.6 | (1.9 | ) | ||||||||||||||||
Balance at end-of-period | $ | 206.4 | $ | 225.0 | $ | 249.1 | $ | 279.2 | $ | 297.6 |
(1) In the second quarter of 2007, we recognized certain adjustments that reduced expense assessments by $26 million, reduced mortality |
assessments by $15 million, increased insurance benefits by $3 million and reduced DAC amortization by $23 million. |
(2) See page 6 for detail |
(3) Contains discontinued operations and the loss on disposition. See Discontinued Operations on page 32 for additional details. |
3/31/2008 | PAGE 9 |
Consolidating Statements of Income from Operations | ||||||||||||||||||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||||||||||||||||||
For the Quarter Ended March 31, 2008 | ||||||||||||||||||||||||||||||||||||||||
Individual Markets | Employer Markets | |||||||||||||||||||||||||||||||||||||||
Defined | Executive | Group | Investment | Lincoln | Other | Consolidating | ||||||||||||||||||||||||||||||||||
Life | Annuities | Contribution | Benefits | Protection | Management | UK | Operations | Adjustments | Consolidated | |||||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 86.3 | $ | 31.6 | $ | - | $ | 0.1 | $ | 370.4 | $ | - | $ | 19.1 | $ | 1.4 | $ | - | $ | 508.8 | ||||||||||||||||||||
Surrender charges | 15.8 | 9.6 | 1.9 | - | - | - | - | - | - | 27.2 | ||||||||||||||||||||||||||||||
Mortality assessments | 312.6 | - | - | 9.1 | - | - | 9.1 | - | - | 330.8 | ||||||||||||||||||||||||||||||
Expense assessments | 116.7 | 236.0 | 59.3 | 4.6 | - | - | 37.1 | (7.2 | ) | 7.7 | 454.1 | |||||||||||||||||||||||||||||
Investment advisory fees | - | - | - | - | - | 96.2 | - | 7.6 | (27.6 | ) | 76.2 | |||||||||||||||||||||||||||||
Net investment income | 447.4 | 247.8 | 171.7 | 51.9 | 27.7 | - | 20.3 | 98.6 | 0.1 | 1,065.4 | ||||||||||||||||||||||||||||||
Operating realized gain (loss) (1) | - | 10.2 | 0.0 | - | - | - | - | - | 10.3 | |||||||||||||||||||||||||||||||
Amortization of deferred gain on business sold | ||||||||||||||||||||||||||||||||||||||||
through reinsurance | - | - | - | - | - | - | - | 18.5 | - | 18.5 | ||||||||||||||||||||||||||||||
Other revenues and fees | 8.7 | 87.4 | 4.8 | (0.1 | ) | 1.2 | 24.1 | 0.1 | 31.2 | (12.1 | ) | 145.2 | ||||||||||||||||||||||||||||
Total Operating Revenues | 987.5 | 622.6 | 237.7 | 65.6 | 399.4 | 120.3 | 85.6 | 150.0 | (32.0 | ) | 2,636.6 | |||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||||||
Insurance benefits | 296.1 | 51.3 | 0.0 | 2.5 | 269.2 | - | 30.7 | 27.8 | - | 677.5 | ||||||||||||||||||||||||||||||
Interest credited to contract holder funds | 258.2 | 163.2 | 105.9 | 38.4 | - | - | - | 45.8 | - | 611.7 | ||||||||||||||||||||||||||||||
Operating and acquisition expenses | 183.0 | 241.3 | 71.8 | 4.7 | 79.6 | 97.4 | 38.5 | 62.5 | (32.0 | ) | 746.8 | |||||||||||||||||||||||||||||
Taxes, licenses and fees | 29.7 | 10.4 | 4.4 | 2.0 | 10.0 | 3.6 | - | 2.1 | - | 62.3 | ||||||||||||||||||||||||||||||
Interest and debt expense | - | - | - | - | - | - | - | 75.4 | - | 75.4 | ||||||||||||||||||||||||||||||
Total Operating Expenses | 767.1 | 466.3 | 182.2 | 47.6 | 358.8 | 101.1 | 69.2 | 213.6 | (32.0 | ) | 2,173.7 | |||||||||||||||||||||||||||||
Income (loss) from operations before federal income taxes | 220.5 | 156.3 | 55.5 | 18.0 | 40.6 | 19.2 | 16.4 | (63.6 | ) | - | 462.9 | |||||||||||||||||||||||||||||
Federal income taxes | 75.0 | 38.5 | 15.1 | 6.1 | 14.2 | 7.1 | 5.7 | (21.2 | ) | - | 140.5 | |||||||||||||||||||||||||||||
Income from Operations | $ | 145.5 | $ | 117.8 | $ | 40.4 | $ | 11.9 | $ | 26.3 | $ | 12.1 | $ | 10.7 | $ | (42.3 | ) | $ | - | $ | 322.4 | |||||||||||||||||||
(1) For detail, see page 15. |
3/31/2008 | PAGE 9(B) |
Consolidating Statements of Income from Operations | ||||||||||||||||||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||||||||||||||||||
For the Quarter Ended March 31, 2007 | ||||||||||||||||||||||||||||||||||||||||
Individual Markets | Employer Markets | |||||||||||||||||||||||||||||||||||||||
Defined | Executive | Group | Investment | Lincoln | Other | Consolidating | ||||||||||||||||||||||||||||||||||
Life | Annuities | Contribution | Benefits | Protection | Management | UK | Operations | Adjustments | Consolidated | |||||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 87.7 | $ | 12.8 | $ | - | $ | 0.1 | $ | 331.3 | $ | - | $ | 24.2 | $ | 2.7 | $ | - | $ | 458.9 | ||||||||||||||||||||
Surrender charges | 15.2 | 9.7 | 2.0 | - | - | - | - | (0.0 | ) | - | 26.9 | |||||||||||||||||||||||||||||
Mortality assessments | 292.3 | - | - | 8.9 | - | - | 10.0 | - | - | 311.2 | ||||||||||||||||||||||||||||||
Expense assessments | 111.9 | 210.9 | 59.8 | 4.6 | - | - | 37.1 | 1.6 | - | 425.9 | ||||||||||||||||||||||||||||||
Investment advisory fees | - | - | - | - | - | 114.9 | - | - | (24.5 | ) | 90.3 | |||||||||||||||||||||||||||||
Net investment income | 454.0 | 265.3 | 180.3 | 55.8 | 27.9 | - | 19.3 | 87.2 | (0.0 | ) | 1,089.7 | |||||||||||||||||||||||||||||
Operating realized gain (loss) (1) | - | 1.3 | - | - | - | - | - | - | 1.3 | |||||||||||||||||||||||||||||||
Amortization of deferred gain on business sold | ||||||||||||||||||||||||||||||||||||||||
through reinsurance | - | - | - | - | - | - | - | 18.6 | - | 18.6 | ||||||||||||||||||||||||||||||
Other revenues and fees | 10.2 | 90.4 | 4.7 | (0.1 | ) | 1.1 | 35.3 | 0.1 | 33.7 | (10.4 | ) | 164.9 | ||||||||||||||||||||||||||||
Total Operating Revenues | 971.4 | 590.4 | 246.7 | 69.2 | 360.4 | 150.2 | 90.7 | 143.8 | (34.9 | ) | 2,587.8 | |||||||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||||||
Insurance benefits | 246.0 | 25.4 | 0.0 | 2.8 | 246.6 | - | 36.0 | 36.0 | - | 592.8 | ||||||||||||||||||||||||||||||
Interest credited to contract holder funds | 251.7 | 161.1 | 104.3 | 38.2 | - | - | - | 43.8 | - | 599.1 | ||||||||||||||||||||||||||||||
Operating and acquisition expenses | 188.3 | 241.1 | 66.5 | 9.0 | 68.6 | 120.5 | 38.0 | 46.6 | (34.9 | ) | 743.6 | |||||||||||||||||||||||||||||
Taxes, licenses and fees | 32.9 | 8.9 | 5.1 | 1.2 | 9.7 | 4.1 | - | 3.4 | - | 65.2 | ||||||||||||||||||||||||||||||
Interest and debt expense | - | - | - | - | - | - | - | 62.4 | - | 62.4 | ||||||||||||||||||||||||||||||
Total Operating Expenses | 718.9 | 436.6 | 176.0 | 51.1 | 324.9 | 124.6 | 74.0 | 192.1 | (34.9 | ) | 2,063.2 | |||||||||||||||||||||||||||||
Income (loss) from operations before federal income taxes | 252.5 | 153.8 | 70.8 | 18.2 | 35.5 | 25.6 | 16.7 | (48.3 | ) | - | 524.7 | |||||||||||||||||||||||||||||
Federal income taxes | 85.9 | 37.2 | 21.1 | 6.2 | 12.4 | 9.3 | 5.9 | (20.3 | ) | - | 157.7 | |||||||||||||||||||||||||||||
Income from Operations | $ | 166.6 | $ | 116.6 | $ | 49.7 | $ | 11.9 | $ | 23.1 | $ | 16.2 | $ | 10.9 | $ | (28.0 | ) | $ | - | $ | 367.0 | |||||||||||||||||||
(1) For detail, see page 15. |
3/31/2008 | PAGE 10 |
Consolidated Balance Sheets | ||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||
As of | ||||||||||||||||||||
March | June | Sept. | Dec. | March | ||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Corporate bonds | $ | 45,484.0 | $ | 44,023.4 | $ | 44,089.7 | $ | 44,147.9 | $ | 43,535.4 | ||||||||||
U.S. Government bonds | 244.3 | 248.1 | 239.4 | 222.0 | 231.9 | |||||||||||||||
Foreign government bonds | 1,077.1 | 975.0 | 1,030.0 | 1,037.5 | 1,037.4 | |||||||||||||||
Asset and mortgage-backed securities | 9,186.2 | 9,946.2 | 10,479.7 | 10,604.6 | 10,568.8 | |||||||||||||||
State and municipal bonds | 155.5 | 158.7 | 152.1 | 153.1 | 153.0 | |||||||||||||||
Preferred stocks - redeemable | 108.4 | 95.5 | 95.3 | 110.7 | 97.5 | |||||||||||||||
Common stocks | 503.8 | 487.9 | 499.3 | 413.9 | 384.2 | |||||||||||||||
Preferred stocks - equity | 210.1 | 198.9 | 171.0 | 104.1 | 90.2 | |||||||||||||||
Total available-for-sale securities | 56,969.5 | 56,133.8 | 56,756.4 | 56,793.7 | 56,098.4 | |||||||||||||||
Trading securities | 2,909.7 | 2,818.3 | 2,716.6 | 2,730.2 | 2,713.6 | |||||||||||||||
Mortgage loans | 7,416.0 | 7,310.8 | 7,280.7 | 7,422.7 | 7,531.9 | |||||||||||||||
Real estate | 406.2 | 387.6 | 385.0 | 258.3 | 175.3 | |||||||||||||||
Policy loans | 2,766.8 | 2,787.0 | 2,790.2 | 2,834.7 | 2,804.0 | |||||||||||||||
Other long-term investments | 1,345.5 | 1,395.1 | 1,584.0 | 1,882.1 | 2,232.0 | |||||||||||||||
Total Investments | 71,813.6 | 70,832.5 | 71,512.9 | 71,921.6 | 71,555.3 | |||||||||||||||
Cash and invested cash | 904.7 | 989.1 | 1,327.5 | 1,665.5 | 2,446.8 | |||||||||||||||
Premiums and fees receivable | 374.9 | 432.3 | 401.2 | 400.6 | 468.1 | |||||||||||||||
Accrued investment income | 919.2 | 861.0 | 916.5 | 843.3 | 917.3 | |||||||||||||||
Amount recoverable from reinsurers | 8,132.1 | 8,179.1 | 8,226.7 | 8,237.4 | 8,407.2 | |||||||||||||||
Deferred acquisition costs and value of business acquired | 8,534.7 | 9,100.6 | 9,337.0 | 9,579.8 | 9,995.5 | |||||||||||||||
Goodwill | 4,124.8 | 4,159.0 | 4,159.3 | 4,143.7 | 4,128.4 | |||||||||||||||
Other assets | 3,375.6 | 3,599.5 | 3,432.6 | 3,529.9 | 2,727.7 | |||||||||||||||
Separate account assets | 83,147.5 | 89,497.2 | 92,903.1 | 91,113.3 | 84,703.1 | |||||||||||||||
Total Assets | $ | 181,327.1 | $ | 187,650.1 | $ | 192,216.8 | $ | 191,435.1 | $ | 185,349.3 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||
Contract benefits and other contract holder funds: | ||||||||||||||||||||
Reserves | $ | 13,874.7 | $ | 13,870.6 | $ | 14,169.0 | $ | 14,765.6 | $ | 15,299.0 | ||||||||||
Unpaid claims | 1,149.5 | 1,171.2 | 1,148.3 | 1,240.7 | 1,202.0 | |||||||||||||||
Premium deposit funds | 20,115.8 | 20,201.6 | 19,885.4 | 19,687.8 | 19,886.9 | |||||||||||||||
Contract holders' funds | 38,915.2 | 39,206.6 | 39,687.2 | 39,952.8 | 40,288.9 | |||||||||||||||
Total future contract benefits and other | ||||||||||||||||||||
contract holder funds | 74,055.2 | 74,450.0 | 74,889.9 | 75,646.9 | 76,676.9 | |||||||||||||||
Short-term debt | 493.8 | 231.0 | 327.1 | 550.2 | 410.6 | |||||||||||||||
Long-term debt - senior notes | 2,483.4 | 2,382.4 | 2,682.5 | 2,892.7 | 2,901.5 | |||||||||||||||
Long-term debt - subordinated: | ||||||||||||||||||||
Capital securities | 1,570.7 | 1,570.8 | 1,570.9 | 1,570.9 | 1,571.0 | |||||||||||||||
Junior subordinated debentures issued to | ||||||||||||||||||||
affiliated trusts | 154.6 | 154.6 | 154.6 | 154.6 | 154.6 | |||||||||||||||
Embedded derivative - modco | 229.8 | 157.5 | 191.5 | 219.5 | 205.2 | |||||||||||||||
Deferred gain on indemnity reinsurance | 740.7 | 734.3 | 715.1 | 695.8 | 676.6 | |||||||||||||||
Federal income taxes | 1,066.8 | 829.2 | 902.5 | 938.1 | 750.0 | |||||||||||||||
Other liabilities | 5,352.4 | 5,807.3 | 5,916.6 | 5,934.8 | 6,213.4 | |||||||||||||||
Separate account liabilities | 83,147.5 | 89,497.2 | 92,903.1 | 91,113.3 | 84,703.1 | |||||||||||||||
Total Liabilities | 169,294.9 | 175,814.4 | 180,253.8 | 179,716.7 | 174,263.0 | |||||||||||||||
Preferred stock | 0.5 | 0.5 | 0.5 | 0.4 | 0.4 | |||||||||||||||
Capital stock | 7,318.5 | 7,362.1 | 7,308.6 | 7,200.5 | 7,074.8 | |||||||||||||||
Retained earnings | 4,053.5 | 4,323.8 | 4,457.0 | 4,292.2 | 4,332.8 | |||||||||||||||
Unrealized gains on investments | 528.1 | 16.6 | 56.0 | 86.0 | (452.2 | ) | ||||||||||||||
Gains - derivatives | 46.8 | 35.5 | 31.9 | 53.0 | 44.3 | |||||||||||||||
Foreign currency | 168.4 | 181.4 | 193.6 | 174.8 | 174.0 | |||||||||||||||
Funded status of employee benefit plans | (83.6 | ) | (84.2 | ) | (84.6 | ) | (88.5 | ) | (87.9 | ) | ||||||||||
Total Stockholders' Equity | 12,032.2 | 11,835.7 | 11,962.9 | 11,718.4 | 11,086.3 | |||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 181,327.1 | $ | 187,650.1 | $ | 192,216.8 | $ | 191,435.1 | $ | 185,349.3 | ||||||||||
Stockholders' Equity Per Share | $ | 44.42 | $ | 43.57 | $ | 44.41 | $ | 44.32 | $ | 42.74 | ||||||||||
Book value, excluding AOCI | $ | 41.98 | $ | 43.02 | $ | 43.68 | $ | 43.46 | $ | 43.98 | ||||||||||
Common shares outstanding - assuming conversion of | ||||||||||||||||||||
preferred shares (in millions) | 270.9 | 271.6 | 269.4 | 264.4 | 259.4 |
PAGE 11 | ||||||||||||||||||||||||||||||||||||
Balance Sheet Data - Segment Highlights | ||||||||||||||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||||||||||||||
Individual Markets | ||||||||||||||||||||||||||||||||||||
Employer Markets | ||||||||||||||||||||||||||||||||||||
As of March 31, 2008 | Life | Annuities | Defined Contribution | Executive Benefits | Group Protection | Investment Management | Lincoln UK | Other Operations (1) | Consolidated | |||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Allocated investments and cash and invested cash | $ | 29,432.5 | $ | 19,099.2 | $ | 11,493.8 | $ | 3,448.5 | $ | 1,934.2 | $ | 119.6 | $ | 1,365.9 | $ | 7,108.4 | $ | 74,002.1 | ||||||||||||||||||
DAC and VOBA | 5,670.0 | 2,570.8 | 564.2 | 298.1 | 129.0 | - | 760.4 | 3.0 | 9,995.5 | |||||||||||||||||||||||||||
Goodwill | 2,192.3 | 1,039.8 | 20.2 | - | 274.3 | 247.7 | 16.5 | 337.7 | 4,128.4 | |||||||||||||||||||||||||||
DSI and other intangibles | 92.0 | 295.7 | 4.9 | - | - | 4.9 | - | 385.9 | 783.4 | |||||||||||||||||||||||||||
Amounts recoverable from reinsurers | 1,967.1 | 759.3 | - | 2.0 | 31.7 | - | 70.0 | 5,577.2 | 8,407.2 | |||||||||||||||||||||||||||
Separate account assets | 4,216.3 | 54,850.4 | 16,265.4 | 1,039.7 | - | - | 8,079.5 | 251.8 | 84,703.1 | |||||||||||||||||||||||||||
Liabilities and Capital | ||||||||||||||||||||||||||||||||||||
Future contract benefits and other contract holder funds: | ||||||||||||||||||||||||||||||||||||
Future contract benefits | 5,876.4 | 1,196.7 | 2.2 | 353.5 | 1,300.3 | - | 1,139.7 | 6,632.2 | 16,501.0 | |||||||||||||||||||||||||||
Other contract holder funds | 25,755.6 | 17,622.7 | 11,207.0 | 3,053.5 | 16.6 | - | 394.4 | 2,126.0 | 60,175.8 | |||||||||||||||||||||||||||
Total future contract benefits and other contract holder funds | 31,632.0 | 18,819.3 | 11,209.2 | 3,407.1 | 1,316.9 | - | 1,534.1 | 8,758.2 | 76,676.9 | |||||||||||||||||||||||||||
Allocated capital (2) | 7,732.9 | 3,570.5 | 914.1 | 362.4 | 983.3 | 351.4 | 389.7 | (2,896.3 | ) | 11,408.0 | ||||||||||||||||||||||||||
As of December 31, 2007 | ||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Allocated investments and cash and invested cash | $ | 29,473.9 | $ | 18,080.5 | $ | 11,460.9 | $ | 3,498.2 | $ | 1,934.2 | $ | 167.7 | $ | 1,396.1 | $ | 7,575.5 | $ | 73,587.1 | ||||||||||||||||||
DAC and VOBA | 5,408.7 | 2,477.0 | 513.8 | 283.0 | 123.4 | - | 772.1 | 1.8 | 9,579.8 | |||||||||||||||||||||||||||
Goodwill | 2,201.0 | 1,045.6 | 20.2 | (0.0 | ) | 274.3 | 247.0 | 16.5 | 339.2 | 4,143.7 | ||||||||||||||||||||||||||
DSI and other intangibles | 93.0 | 278.8 | 3.4 | - | - | 5.4 | - | 385.7 | 766.3 | |||||||||||||||||||||||||||
Amounts recoverable from reinsurers | 1,943.6 | 744.4 | - | 4.9 | 31.3 | - | 69.8 | 5,443.5 | 8,237.4 | |||||||||||||||||||||||||||
Separate accounts assets | 4,615.5 | 58,508.4 | 17,845.2 | 1,032.7 | - | - | 8,850.4 | 261.1 | 91,113.3 | |||||||||||||||||||||||||||
Liabilities and Capital | ||||||||||||||||||||||||||||||||||||
Future contract benefits and other contract holder funds: | ||||||||||||||||||||||||||||||||||||
Future contract benefits | 5,898.7 | 816.9 | 0.0 | 356.2 | 1,273.0 | - | 1,146.9 | 6,057.9 | 15,549.6 | |||||||||||||||||||||||||||
Other contract holder funds | 25,388.1 | 17,749.7 | 10,891.7 | 3,039.6 | 17.2 | - | 402.9 | 2,608.1 | 60,097.3 | |||||||||||||||||||||||||||
Total future contract benefits and other contract holder funds | 31,286.8 | 18,566.6 | 10,891.7 | 3,395.9 | 1,290.2 | - | 1,549.8 | 8,666.0 | 75,646.9 | |||||||||||||||||||||||||||
Allocated capital (2) | 7,835.8 | 3,552.7 | 898.7 | 353.9 | 968.3 | 348.5 | 361.8 | (2,826.5 | ) | 11,493.1 | ||||||||||||||||||||||||||
(1) Includes consolidating adjustments. | ||||||||||||||||||||||||||||||||||||
(2) Allocated capital is based on internal economic capital models plus certain other items (principally intangibles including DAC and VOBA, goodwill and other items). |
3/31/2008 | PAGE 12 | |||||||||||||||||||||||
Individual Markets - Individual Life Insurance | ||||||||||||||||||||||||
Income Statements & Operational Data | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Insurance premiums | $ | 87.7 | $ | 87.8 | $ | 84.7 | $ | 90.0 | $ | 86.3 | -1.6 | % | ||||||||||||
Surrender charges | 15.2 | 15.7 | 14.0 | 14.1 | 15.8 | 3.7 | % | |||||||||||||||||
Mortality assessments (1) | 292.3 | 282.4 | 303.3 | 310.3 | 312.6 | 7.0 | % | |||||||||||||||||
Expense assessments (1) | 111.9 | 69.9 | 139.8 | 112.9 | 116.7 | 4.2 | % | |||||||||||||||||
Net investment income | 454.0 | 493.3 | 444.5 | 464.1 | 447.4 | -1.5 | % | |||||||||||||||||
Other revenues and fees | 10.2 | 8.3 | 6.0 | 10.7 | 8.7 | -14.6 | % | |||||||||||||||||
Total Operating Revenues | 971.4 | 957.5 | 992.1 | 1,002.1 | 987.5 | 1.7 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Insurance benefits (1) | 246.0 | 263.0 | 260.5 | 302.6 | 296.1 | 20.4 | % | |||||||||||||||||
Interest credited to contract holder funds | 251.7 | 254.0 | 255.1 | 260.2 | 258.2 | 2.6 | % | |||||||||||||||||
Operating and acquisition expenses | 221.2 | 171.0 | 219.0 | 199.0 | 212.8 | -3.8 | % | |||||||||||||||||
Total Operating Expenses | 718.9 | 688.0 | 734.6 | 761.8 | 767.1 | 6.7 | % | |||||||||||||||||
Income from operations before federal income taxes | 252.5 | 269.4 | 257.6 | 240.3 | 220.5 | -12.7 | % | |||||||||||||||||
Federal income taxes | 85.9 | 93.0 | 84.0 | 81.5 | 75.0 | -12.7 | % | |||||||||||||||||
Income from Operations | $ | 166.6 | $ | 176.4 | $ | 173.6 | $ | 158.8 | $ | 145.5 | -12.7 | % | ||||||||||||
Effective tax rate | 34.0 | % | 34.5 | % | 32.6 | % | 33.9 | % | 34.0 | % | ||||||||||||||
Average equity | $ | 7,557.8 | $ | 7,789.2 | $ | 7,911.1 | $ | 7,925.1 | $ | 7,784.3 | ||||||||||||||
Return on average equity | 8.8 | % | 9.1 | % | 8.8 | % | 8.0 | % | 7.5 | % | ||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||
Commissions | $ | 227.1 | $ | 211.7 | $ | 213.1 | $ | 211.9 | $ | 182.7 | -19.5 | % | ||||||||||||
General and administrative expenses | 111.0 | 115.6 | 104.6 | 109.3 | 103.7 | -6.6 | % | |||||||||||||||||
Taxes, licenses and fees | 32.9 | 26.6 | 27.3 | 23.5 | 29.7 | -9.7 | % | |||||||||||||||||
Total commissions and expenses incurred | 371.1 | 353.8 | 345.1 | 344.7 | 316.1 | -14.8 | % | |||||||||||||||||
Less: commissions and expenses capitalized | (288.9 | ) | (272.4 | ) | (270.5 | ) | (268.1 | ) | (234.2 | ) | 18.9 | % | ||||||||||||
Amortization of DAC and VOBA, net of interest | 139.1 | 89.6 | 144.4 | 122.5 | 130.8 | -5.9 | % | |||||||||||||||||
Net Operating and Acquisition Expenses | $ | 221.2 | $ | 171.0 | $ | 219.0 | $ | 199.0 | $ | 212.8 | -3.8 | % | ||||||||||||
General and administrative expenses - | ||||||||||||||||||||||||
basis points on account values - Annualized | 166 | 170 | 151 | 156 | 148 | (18 | ) | |||||||||||||||||
Roll Forward of Deferred Acquisition Costs & Value of Business Acquired | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 4,659.4 | $ | 4,795.8 | $ | 5,126.4 | $ | 5,259.6 | $ | 5,408.7 | ||||||||||||||
Deferrals | 288.9 | 272.4 | 270.5 | 268.1 | 234.2 | |||||||||||||||||||
Amortization, net of interest: (1) | ||||||||||||||||||||||||
Unlocking | 11.3 | 20.8 | (3.8 | ) | 6.1 | (10.2 | ) | |||||||||||||||||
Other amortization | (150.4 | ) | (110.5 | ) | (140.6 | ) | (128.6 | ) | (120.6 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
operating and acquisition expenses | 149.8 | 182.8 | 126.1 | 145.6 | 103.3 | |||||||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||||||
on available-for-sale securities and derivatives | (12.5 | ) | (2.4 | ) | 0.6 | 56.1 | 7.0 | |||||||||||||||||
Adjustment related to unrealized (gains) | ||||||||||||||||||||||||
losses on available-for-sale securities and derivatives | (0.9 | ) | 150.2 | 6.5 | (52.7 | ) | 151.0 | |||||||||||||||||
Balance at end-of-period | $ | 4,795.8 | $ | 5,126.4 | $ | 5,259.6 | $ | 5,408.7 | $ | 5,670.0 | ||||||||||||||
Roll Forward of Deferred Front-End Loads | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 449.5 | $ | 490.6 | $ | 569.0 | $ | 585.2 | $ | 648.7 | ||||||||||||||
Deferrals | 65.5 | 112.4 | 83.9 | 98.2 | 87.5 | |||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||
Unlocking | 2.5 | 7.1 | (27.0 | ) | 0.7 | (3.5 | ) | |||||||||||||||||
Other amortization | (26.9 | ) | (41.1 | ) | (40.7 | ) | (35.4 | ) | (36.0 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
expense assessments | 41.0 | 78.4 | 16.2 | 63.5 | 48.0 | |||||||||||||||||||
Balance at end-of-period | $ | 490.6 | $ | 569.0 | $ | 585.2 | $ | 648.7 | $ | 696.7 | ||||||||||||||
(1) In the second quarter of 2007, we recognized certain adjustments that reduced expense assessments by $26 million, reduced mortality assessments by $15 | ||||||||||||||||||||||||
million, increased insurance benefits by $3 million and reduced DAC amortization by $23 million. |
3/31/2008 | PAGE 13 | |||||||||||||||||||||||
Individual Markets - Individual Life Insurance | ||||||||||||||||||||||||
Operational Data | ||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Sales by Product (1) (in millions) | ||||||||||||||||||||||||
Universal Life | ||||||||||||||||||||||||
Excluding MoneyGuard® | $ | 166.1 | $ | 145.0 | $ | 143.9 | $ | 141.3 | $ | 113.7 | -31.5 | % | ||||||||||||
MoneyGuard® | 7.4 | 9.9 | 10.9 | 12.1 | 11.0 | 49.6 | % | |||||||||||||||||
Total | 173.5 | 154.9 | 154.8 | 153.3 | 124.8 | -28.1 | % | |||||||||||||||||
Variable Universal Life | 20.6 | 17.3 | 17.7 | 21.9 | 15.5 | -24.4 | % | |||||||||||||||||
Term/Whole Life | 9.4 | 7.9 | 7.5 | 6.9 | 5.1 | -45.4 | % | |||||||||||||||||
Total | $ | 203.5 | $ | 180.0 | $ | 179.9 | $ | 182.1 | $ | 145.4 | -28.5 | % | ||||||||||||
First-Year Paid Premiums (in millions) | ||||||||||||||||||||||||
Universal Life | ||||||||||||||||||||||||
Excluding MoneyGuard® | $ | 367.9 | $ | 315.7 | $ | 303.8 | $ | 304.6 | $ | 245.4 | -33.3 | % | ||||||||||||
MoneyGuard® | 49.2 | 65.9 | 72.4 | 80.4 | 73.6 | 49.6 | % | |||||||||||||||||
Total | 417.1 | 381.6 | 376.2 | 385.0 | 318.9 | -23.5 | % | |||||||||||||||||
Variable Universal Life | 52.5 | 47.8 | 46.4 | 48.9 | 37.0 | -29.5 | % | |||||||||||||||||
Term/Whole Life | 17.5 | 18.3 | 19.1 | 24.4 | 14.0 | -19.8 | % | |||||||||||||||||
Total | $ | 487.0 | $ | 447.7 | $ | 441.6 | $ | 458.2 | $ | 369.9 | -24.0 | % | ||||||||||||
Life Insurance In Force (in billions) | ||||||||||||||||||||||||
Universal Life and other | $ | 272.921 | $ | 276.040 | $ | 279.933 | $ | 284.305 | $ | 286.187 | 4.9 | % | ||||||||||||
Term insurance | 235.491 | 236.155 | 236.414 | 235.919 | 234.860 | -0.3 | % | |||||||||||||||||
Total Life Segment In Force | $ | 508.411 | $ | 512.195 | $ | 516.347 | $ | 520.224 | $ | 521.047 | 2.5 | % | ||||||||||||
(1) Sales for Individual Life Insurance consist of first year commissionable premiums for Universal Life ("UL"), including MoneyGuard®, plus 5% of excess | ||||||||||||||||||||||||
premiums received, including UL internal replacements, and first year paid premiums for Whole Life and Term products. |
3/31/2008 | PAGE 14 | |||||||||||||||||||||||
Individual Markets - Individual Life Insurance | ||||||||||||||||||||||||
Account Value Roll Forward | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Interest Sensitive Life - Balance at Beginning-of-Period | $ | 21.890 | $ | 22.228 | $ | 22.517 | $ | 22.818 | $ | 23.161 | 5.8 | % | ||||||||||||
Deposits | 0.882 | 0.864 | 0.842 | 0.935 | 0.824 | -6.6 | % | |||||||||||||||||
Withdrawals and deaths | (0.264 | ) | (0.311 | ) | (0.258 | ) | (0.262 | ) | (0.314 | ) | -18.9 | % | ||||||||||||
Net flows | 0.618 | 0.553 | 0.585 | 0.673 | 0.509 | -17.6 | % | |||||||||||||||||
Contract holder assessments (1) | (0.523 | ) | (0.507 | ) | (0.527 | ) | (0.575 | ) | (0.561 | ) | -7.3 | % | ||||||||||||
Interest credited | 0.243 | 0.243 | 0.243 | 0.246 | 0.246 | 1.2 | % | |||||||||||||||||
Interest Sensitive Life - Balance at End- of-Period (2) | $ | 22.228 | $ | 22.517 | $ | 22.818 | $ | 23.161 | $ | 23.355 | 5.1 | % | ||||||||||||
Variable Universal Life - Balance at Beginning-of-Period | $ | 4.600 | $ | 4.696 | $ | 4.948 | $ | 5.057 | $ | 4.961 | 7.8 | % | ||||||||||||
Deposits | 0.157 | 0.142 | 0.137 | 0.151 | 0.143 | -8.9 | % | |||||||||||||||||
Withdrawals and deaths | (0.077 | ) | (0.109 | ) | (0.087 | ) | (0.079 | ) | (0.073 | ) | 5.2 | % | ||||||||||||
Net flows | 0.080 | 0.033 | 0.050 | 0.072 | 0.070 | -12.5 | % | |||||||||||||||||
Contract holder assessments | (0.079 | ) | (0.080 | ) | (0.080 | ) | (0.082 | ) | (0.082 | ) | -3.8 | % | ||||||||||||
Investment income and change in market value | 0.095 | 0.299 | 0.139 | (0.087 | ) | (0.423 | ) | NM | ||||||||||||||||
Variable Universal Life - Balance at End- of-Period | $ | 4.696 | $ | 4.948 | $ | 5.057 | $ | 4.961 | $ | 4.526 | -3.6 | % | ||||||||||||
Total Segment - Life Insurance Account Value Roll Forward | ||||||||||||||||||||||||
Balance at Beginning-of-Period | $ | 26.490 | $ | 26.924 | $ | 27.465 | $ | 27.875 | $ | 28.122 | 6.2 | % | ||||||||||||
Deposits | 1.039 | 1.005 | 0.980 | 1.086 | 0.967 | -6.9 | % | |||||||||||||||||
Withdrawals and deaths | (0.341 | ) | (0.420 | ) | (0.345 | ) | (0.341 | ) | (0.387 | ) | -13.5 | % | ||||||||||||
Net flows | 0.698 | 0.586 | 0.635 | 0.745 | 0.579 | -17.0 | % | |||||||||||||||||
Contract holder assessments (1) | (0.602 | ) | (0.586 | ) | (0.607 | ) | (0.657 | ) | (0.643 | ) | -6.8 | % | ||||||||||||
Investment income and change in market value | 0.338 | 0.542 | 0.382 | 0.159 | (0.178 | ) | NM | |||||||||||||||||
Total Segment - Balance at End-of- Period | $ | 26.924 | $ | 27.465 | $ | 27.875 | $ | 28.122 | $ | 27.881 | 3.6 | % | ||||||||||||
Life Product Spread Information (3) | ||||||||||||||||||||||||
Change | ||||||||||||||||||||||||
Interest Sensitive Products | (Basis Points) | |||||||||||||||||||||||
Net investment income (4) (5) (6) | 6.48 | % | 6.99 | % | 6.09 | % | 6.30 | % | 6.04 | % | (44 | ) | ||||||||||||
Interest credited to contract holders | 4.46 | % | 4.45 | % | 4.41 | % | 4.41 | % | 4.34 | % | (12 | ) | ||||||||||||
Spread (4) (5) (6) | 2.02 | % | 2.54 | % | 1.68 | % | 1.89 | % | 1.70 | % | (32 | ) | ||||||||||||
Traditional Products | ||||||||||||||||||||||||
Net investment income (4) | 6.41 | % | 6.48 | % | 6.18 | % | 6.23 | % | 6.21 | % | (20 | ) | ||||||||||||
(1) Interest sensitive contract holder assessments in the second quarter of 2007 includes +.017 related to certain adjustments. | ||||||||||||||||||||||||
(2) Includes universal life, interest sensitive whole life and the fixed investment option of VUL products. | ||||||||||||||||||||||||
(3) Interest Sensitive Products - For the 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. Traditional 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, 2008, interest sensitive products represented approximately 81% of total interest sensitive and traditional earning assets. |
(4) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread for interest sensitive products was 4 bps in the 1st quarter of 2008, 16 bps in the 4th quarter of 2007, 9 bps in the 3rd quarter of 2007, 22 bps in the 2nd quarter of 2007 and 21 bps in the 1st quarter of 2007. There was an impact on traditional products of 15 bps in the 1st quarter of 2008, 2 bps in the 4th quarter of 2007, 9 bps in the 3rd quarter of 2007, 14 bps in the 2nd quarter of 2007 and 2 bps in the 1st quarter of 2007. |
(5) The net investment income and spread above include earnings from alternative investments, such as limited partnerships. The impact of these investments on investment income yields for interest sensitive products was (8) bps in the 1st quarter of 2008, 5 bps in the 4th quarter of 2007, (4) bps in the 3rd quarter of 2007, 70 bps in the 2nd quarter of 2007 and 14 bps in the 1st quarter of 2007. The impact of these investments on traditional products was (3) bps in the 1st quarter of 2008, (1) bp in the 4th quarter of 2007 and (6) bps in the 3rd quarter of 2007. | ||||||||||||||||||||||||
(6) The net investment income and spread above is partially offset by amortization associated with prepayment fee income. The impact of this offset to interest sensitive products was -0- bps in the 1st quarter of 2008, 1 bp in the 4th quarter of 2007, -0- bps in the 3rd quarter of 2007 and 8 bps in the 2nd quarter of 2007. There was an impact on traditional products of 4 bps in the 1st quarter of 2008. |
3/31/2008 | PAGE 15 | |||||||||||||||||||||||
Individual Markets - Individual Annuities | ||||||||||||||||||||||||
Income Statements & Operational Data | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Insurance premiums | $ | 12.8 | $ | 16.6 | $ | 42.6 | $ | 46.5 | $ | 31.6 | 146.0 | % | ||||||||||||
Surrender charges | 9.7 | 10.1 | 9.8 | 9.1 | 9.6 | -0.9 | % | |||||||||||||||||
Expense assessments | 210.9 | 233.9 | 249.4 | 265.2 | 236.0 | 11.9 | % | |||||||||||||||||
Net investment income | 265.3 | 265.3 | 249.4 | 251.8 | 247.8 | -6.6 | % | |||||||||||||||||
Operating realized gain (loss) (1) | 1.3 | 1.3 | 0.9 | 2.2 | 10.2 | NM | ||||||||||||||||||
Other revenues and fees (2) | 90.4 | 96.4 | 94.9 | 97.6 | 87.4 | -3.3 | % | |||||||||||||||||
Total Operating Revenues | 590.4 | 623.7 | 647.0 | 672.3 | 622.6 | 5.5 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Insurance benefits | 25.4 | 26.6 | 56.3 | 62.0 | 51.3 | 105.3 | % | |||||||||||||||||
Interest credited to contract holder funds | 161.1 | 165.1 | 165.3 | 167.9 | 163.2 | 1.3 | % | |||||||||||||||||
Operating and acquisition expenses | 250.0 | 267.0 | 255.4 | 287.3 | 251.7 | 0.7 | % | |||||||||||||||||
Total Operating Expenses | 436.6 | 458.8 | 477.0 | 517.2 | 466.3 | 7.0 | % | |||||||||||||||||
Income from operations before federal income taxes | 153.8 | 164.9 | 170.0 | 155.1 | 156.3 | 1.1 | % | |||||||||||||||||
Federal income taxes | 37.2 | 41.5 | 44.1 | 36.2 | 38.5 | 2.9 | % | |||||||||||||||||
Income from Operations | $ | 116.6 | $ | 123.4 | $ | 125.9 | $ | 118.9 | $ | 117.8 | 0.5 | % | ||||||||||||
Effective tax rate | 24.2 | % | 25.2 | % | 25.9 | % | 23.4 | % | 24.7 | % | ||||||||||||||
Average equity | $ | 3,446.7 | $ | 3,491.1 | $ | 3,537.8 | $ | 3,549.1 | $ | 3,561.6 | ||||||||||||||
Return on average equity | 13.5 | % | 14.1 | % | 14.2 | % | 13.4 | % | 13.2 | % | ||||||||||||||
Income from Operations - basis points on | ||||||||||||||||||||||||
average account values | 69 | 69 | 68 | 62 | 64 | |||||||||||||||||||
Operating Realized Gain (Loss) (1) | ||||||||||||||||||||||||
Indexed annuity net derivatives results (3) | $ | 0.9 | $ | 1.2 | $ | 0.2 | $ | (0.1 | ) | $ | (1.4 | ) | NM | |||||||||||
Guaranteed living benefits risk and profit charges (4) | 0.8 | 1.4 | 1.6 | 1.8 | 5.8 | NM | ||||||||||||||||||
Guaranteed death benefits hedging offset (5) | (0.4 | ) | (1.3 | ) | (0.8 | ) | 0.5 | 5.9 | NM | |||||||||||||||
Total Operating Realized Gain (Loss) | $ | 1.3 | $ | 1.3 | $ | 0.9 | $ | 2.2 | $ | 10.2 | NM | |||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||
Commissions | $ | 152.1 | $ | 178.8 | $ | 188.9 | $ | 212.3 | $ | 165.6 | 8.9 | % | ||||||||||||
General and administrative expenses | 69.2 | 82.2 | 80.9 | 96.7 | 80.2 | 15.9 | % | |||||||||||||||||
Broker-dealer commissions and general and | ||||||||||||||||||||||||
administrative expenses | 87.2 | 92.8 | 91.8 | 100.5 | 89.2 | 2.3 | % | |||||||||||||||||
Taxes, licenses and fees | 8.9 | 5.7 | 6.0 | 6.1 | 10.4 | 17.2 | % | |||||||||||||||||
Total commissions and expenses incurred | 317.4 | 359.6 | 367.6 | 415.6 | 345.4 | 8.8 | % | |||||||||||||||||
Less: commissions and expenses capitalized | (157.6 | ) | (189.3 | ) | (196.1 | ) | (230.5 | ) | (172.8 | ) | -9.6 | % | ||||||||||||
Amortization of DAC and VOBA, net of interest | 90.2 | 96.8 | 83.9 | 102.3 | 79.1 | -12.3 | % | |||||||||||||||||
Net Operating and Acquisition Expenses | $ | 250.0 | $ | 267.0 | $ | 255.4 | $ | 287.3 | $ | 251.7 | 0.7 | % | ||||||||||||
General and administrative expenses - basis | ||||||||||||||||||||||||
points on gross account values - Annualized (6) | 41 | 46 | 44 | 51 | 44 | 3 |
(1) The portion of the FAS 157 Attributed Fee included in income from Operations. See notes on page 18 for additional details. |
(2) Primarily broker-dealer revenues. |
(3) Changes 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 Annuities products excluding the indexed annuity forward-starting option. |
(4) The portion of the rider fee revenue for GLB calculated as the attributed fee in excess of net valuation premium. |
(5) Change in the fair value of the derivatives that offsets the benefit ratio unlocking of our SOP 03-1 reserves on our GMDB riders, including our expected cost of the hedging instruments. |
(6) Includes distribution costs. |
3/31/2008 | PAGE 16 | |||||||||||||||||||
Individual Markets - Individual Annuities | ||||||||||||||||||||
Roll Forwards of DAC, VOBA, DFEL and DSI | ||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||
Roll Forward of DAC & VOBA | ||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||
March | June | Sept. | Dec. | March | ||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | ||||||||||||||||
Balance at beginning-of-period | $ | 2,050.4 | $ | 2,082.0 | $ | 2,236.8 | $ | 2,347.4 | $ | 2,477.0 | ||||||||||
Cumulative effect of adoption of SOP 05-1 | (27.2 | ) | - | - | - | - | ||||||||||||||
Inter-segment transfer | - | - | - | - | (6.9 | ) | ||||||||||||||
Deferrals | 157.6 | 189.3 | 196.1 | 230.5 | 172.8 | |||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||
Unlocking | 5.7 | 8.8 | 19.0 | 10.7 | (0.6 | ) | ||||||||||||||
Other amortization | (95.9 | ) | (105.6 | ) | (102.9 | ) | (112.9 | ) | (78.5 | ) | ||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||
operating and acquisition expenses | 67.4 | 92.6 | 112.2 | 128.2 | 93.7 | |||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||
on available-for-sale securities and derivatives | (8.5 | ) | (10.2 | ) | 21.1 | 34.8 | (10.5 | ) | ||||||||||||
Adjustment related to unrealized (gains) losses | ||||||||||||||||||||
on available-for-sale securities and derivatives | (14.0 | ) | 72.4 | (22.8 | ) | (33.5 | ) | 17.5 | ||||||||||||
Business acquired | 14.0 | - | - | - | - | |||||||||||||||
Balance at end-of-period | $ | 2,082.0 | $ | 2,236.8 | $ | 2,347.4 | $ | 2,477.0 | $ | 2,570.8 | ||||||||||
Roll Forward of DFEL | ||||||||||||||||||||
Balance at beginning-of-period | $ | 100.9 | $ | 104.6 | $ | 111.9 | $ | 122.0 | $ | 130.9 | ||||||||||
(2.0 | ) | - | - | - | - | |||||||||||||||
Deferrals | 9.8 | 11.8 | 11.5 | 11.9 | 11.9 | |||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||
Unlocking | 0.5 | 0.2 | 1.4 | (0.4 | ) | 0.7 | ||||||||||||||
Other amortization | (3.4 | ) | (4.5 | ) | (4.1 | ) | (4.6 | ) | (2.7 | ) | ||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||
expense assessments | 6.9 | 7.5 | 8.9 | 6.9 | 9.9 | |||||||||||||||
Adjustment related to realized losses | ||||||||||||||||||||
on available-for-sale securities and derivatives | (1.0 | ) | (0.2 | ) | 1.2 | 1.9 | 0.8 | |||||||||||||
Balance at end-of-period | $ | 104.6 | $ | 111.9 | $ | 122.0 | $ | 130.9 | $ | 141.6 | ||||||||||
Roll Forward of DSI | ||||||||||||||||||||
Balance at beginning-of-period | $ | 193.7 | $ | 206.2 | $ | 224.7 | $ | 248.7 | $ | 278.8 | ||||||||||
Cumulative effect of adoption of SOP 05-1 | (2.8 | ) | - | - | - | - | ||||||||||||||
Inter-segment transfer | - | - | - | - | (1.3 | ) | ||||||||||||||
Deferrals | 23.7 | 27.3 | 29.7 | 35.5 | 25.8 | |||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||
Unlocking | 1.5 | 0.9 | 0.6 | (0.9 | ) | 0.5 | ||||||||||||||
Other amortization | (7.3 | ) | (8.6 | ) | (9.1 | ) | (10.1 | ) | (6.2 | ) | ||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||
insurance benefits or interest credited | 17.9 | 19.5 | 21.2 | 24.5 | 20.2 | |||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||
on available-for-sale securities | (2.6 | ) | (1.0 | ) | 2.8 | 5.6 | (1.9 | ) | ||||||||||||
Balance at end-of-period | $ | 206.2 | $ | 224.7 | $ | 248.7 | $ | 278.8 | $ | 295.7 |
3/31/2008 | PAGE 17 | |||||||||||||||||||||||
Individual Markets - Individual Annuities | ||||||||||||||||||||||||
Account Value Roll Forward | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Fixed Annuities - Balance at Beginning-of-Period | $ | 18.545 | $ | 18.139 | $ | 17.867 | $ | 17.813 | $ | 17.822 | -3.9 | % | ||||||||||||
Business acquired | 0.040 | - | - | - | - | -100.0 | % | |||||||||||||||||
Inter-segment transfer | - | - | - | - | (0.089 | ) | NM | |||||||||||||||||
Gross deposits | 0.821 | 0.982 | 1.231 | 1.288 | 1.160 | 41.3 | % | |||||||||||||||||
Withdrawals and deaths | (0.887 | ) | (0.893 | ) | (0.891 | ) | (0.706 | ) | (0.585 | ) | 34.0 | % | ||||||||||||
Net flows | (0.066 | ) | 0.089 | 0.340 | 0.582 | 0.575 | NM | |||||||||||||||||
Transfer from (to) variable annuities | (0.557 | ) | (0.560 | ) | (0.589 | ) | (0.734 | ) | (0.680 | ) | -22.1 | % | ||||||||||||
Interest credited | 0.153 | 0.172 | 0.166 | 0.125 | 0.048 | -68.6 | % | |||||||||||||||||
Sales inducements deferred | 0.024 | 0.027 | 0.030 | 0.035 | 0.026 | 8.3 | % | |||||||||||||||||
Fixed Annuities - Gross | 18.139 | 17.867 | 17.813 | 17.822 | 17.701 | -2.4 | % | |||||||||||||||||
Reinsurance ceded | (1.689 | ) | (1.598 | ) | (1.430 | ) | (1.352 | ) | (1.306 | ) | 22.7 | % | ||||||||||||
Fixed Annuities (Net of Ceded) - Balance at End-of-Period (1) | $ | 16.449 | $ | 16.270 | $ | 16.383 | $ | 16.470 | $ | 16.395 | -0.3 | % | ||||||||||||
Variable Annuities - Balance at Beginning-of-Period | $ | 48.169 | $ | 50.300 | $ | 55.171 | $ | 58.293 | $ | 58.643 | 21.7 | % | ||||||||||||
Inter-segment transfer | - | - | - | - | (0.206 | ) | NM | |||||||||||||||||
Gross deposits | 2.000 | 2.295 | 2.247 | 2.593 | 1.865 | -6.8 | % | |||||||||||||||||
Withdrawals and deaths | (1.179 | ) | (1.247 | ) | (1.296 | ) | (1.367 | ) | (1.259 | ) | -6.8 | % | ||||||||||||
Net flows | 0.821 | 1.048 | 0.951 | 1.226 | 0.607 | -26.1 | % | |||||||||||||||||
Transfer from (to) fixed annuities | 0.556 | 0.560 | 0.589 | 0.734 | 0.680 | 22.3 | % | |||||||||||||||||
Investment increase and change in market value | 0.754 | 3.263 | 1.582 | (1.611 | ) | (4.758 | ) | NM | ||||||||||||||||
Variable Annuities - Balance at End-of-Period (2) | $ | 50.300 | $ | 55.171 | $ | 58.293 | $ | 58.643 | $ | 54.966 | 9.3 | % | ||||||||||||
Total Annuities - Balance at Beginning-of-Period | $ | 66.714 | $ | 68.438 | $ | 73.038 | $ | 76.106 | $ | 76.464 | 14.6 | % | ||||||||||||
Business acquired | 0.040 | - | - | - | - | -100.0 | % | |||||||||||||||||
Inter-segment transfer | - | - | - | - | (0.295 | ) | NM | |||||||||||||||||
Gross deposits | 2.821 | 3.277 | 3.478 | 3.880 | 3.025 | 7.2 | % | |||||||||||||||||
Withdrawals and deaths | (2.067 | ) | (2.140 | ) | (2.187 | ) | (2.072 | ) | (1.844 | ) | 10.8 | % | ||||||||||||
Net flows | 0.754 | 1.138 | 1.291 | 1.808 | 1.181 | 56.6 | % | |||||||||||||||||
Transfers | (0.001 | ) | - | - | - | (0.001 | ) | - | ||||||||||||||||
Interest credited and change in market value | 0.907 | 3.435 | 1.748 | (1.485 | ) | (4.710 | ) | NM | ||||||||||||||||
Sales inducements deferred | 0.024 | 0.027 | 0.030 | 0.035 | 0.026 | 8.3 | % | |||||||||||||||||
Total Annuities - Gross | 68.438 | 73.038 | 76.106 | 76.464 | 72.666 | 6.2 | % | |||||||||||||||||
Reinsurance ceded | (1.689 | ) | (1.598 | ) | (1.430 | ) | (1.352 | ) | (1.306 | ) | 22.7 | % | ||||||||||||
Total Annuities (Net of Ceded) - Balance at End-of-Period | $ | 66.749 | $ | 71.441 | $ | 74.676 | $ | 75.113 | $ | 71.361 | 6.9 | % | ||||||||||||
Variable Annuities Under Agreement - Included Above | $ | 0.163 | $ | 0.164 | $ | 0.161 | $ | 0.149 | $ | 0.128 | -21.5 | % | ||||||||||||
Incremental Deposits: (3) | ||||||||||||||||||||||||
Fixed annuities | $ | 0.815 | $ | 0.976 | $ | 1.224 | $ | 1.282 | $ | 1.157 | 42.0 | % | ||||||||||||
Variable annuities | 1.979 | 2.265 | 2.217 | 2.558 | 1.838 | -7.1 | % | |||||||||||||||||
Total Incremental Deposits | $ | 2.794 | $ | 3.241 | $ | 3.441 | $ | 3.840 | $ | 2.994 | 7.2 | % | ||||||||||||
(1) Includes fixed portion of variable annuities. | ||||||||||||||||||||||||
(2) Excludes the fixed portion of variable annuities. | ||||||||||||||||||||||||
(3) Incremental deposits represent gross deposits reduced by transfers from other Lincoln products. |
3/31/2008 | PAGE 18 | |||||||||||||||||||||||
Individual Markets - Individual Annuities | ||||||||||||||||||||||||
Account Values, Spread Information, GLB Expense Assessments, | ||||||||||||||||||||||||
GLB Attributed Fee and GLB Account Values by Type | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Fixed Annuities - Excluding Fixed Portion of Variable Contracts | ||||||||||||||||||||||||
Deposits | $ | 0.126 | $ | 0.129 | $ | 0.286 | $ | 0.231 | $ | 0.086 | -31.7 | % | ||||||||||||
Withdrawals and deaths | (0.674 | ) | (0.677 | ) | (0.651 | ) | (0.486 | ) | (0.378 | ) | 43.9 | % | ||||||||||||
Net flows | $ | (0.548 | ) | $ | (0.548 | ) | $ | (0.365 | ) | $ | (0.255 | ) | $ | (0.292 | ) | 46.7 | % | |||||||
Gross fixed contract account values | $ | 10.818 | $ | 10.377 | $ | 10.115 | $ | 9.960 | $ | 9.767 | -9.7 | % | ||||||||||||
Reinsurance ceded | (1.689 | ) | (1.598 | ) | (1.430 | ) | (1.352 | ) | (1.306 | ) | 22.7 | % | ||||||||||||
Net fixed contract account values | $ | 9.129 | $ | 8.779 | $ | 8.684 | $ | 8.609 | $ | 8.462 | -7.3 | % | ||||||||||||
$ | 0.000 | $ | 0.000 | $ | - | $ | - | $ | - | |||||||||||||||
Indexed Annuities | ||||||||||||||||||||||||
Deposits | $ | 0.160 | $ | 0.191 | $ | 0.199 | $ | 0.204 | $ | 0.218 | 36.3 | % | ||||||||||||
Withdrawals and deaths | (0.063 | ) | (0.061 | ) | (0.059 | ) | (0.062 | ) | (0.083 | ) | -31.7 | % | ||||||||||||
Net flows | $ | 0.098 | $ | 0.130 | $ | 0.140 | $ | 0.143 | $ | 0.135 | 37.8 | % | ||||||||||||
Indexed Annuity Account Values | $ | 3.844 | $ | 4.033 | $ | 4.228 | $ | 4.392 | $ | 4.465 | 16.2 | % | ||||||||||||
Fixed Portion of Variable Contracts | ||||||||||||||||||||||||
Deposits | $ | 0.535 | $ | 0.662 | $ | 0.746 | $ | 0.853 | $ | 0.856 | 60.0 | % | ||||||||||||
Withdrawals and deaths | (0.151 | ) | (0.155 | ) | (0.181 | ) | (0.158 | ) | (0.124 | ) | 17.9 | % | ||||||||||||
Net flows | $ | 0.384 | $ | 0.507 | $ | 0.564 | $ | 0.695 | $ | 0.732 | 90.6 | % | ||||||||||||
Fixed Portion of Variable Contract Account Values | $ | 3.476 | $ | 3.458 | $ | 3.470 | $ | 3.470 | $ | 3.469 | -0.2 | % | ||||||||||||
Variable Annuities - Including Fixed Portion of Variable Contracts | ||||||||||||||||||||||||
Deposits | $ | 2.535 | $ | 2.957 | $ | 2.993 | $ | 3.445 | $ | 2.721 | 7.3 | % | ||||||||||||
Withdrawals and deaths | (1.330 | ) | (1.402 | ) | (1.477 | ) | (1.525 | ) | (1.383 | ) | -4.0 | % | ||||||||||||
Net Flows | $ | 1.205 | $ | 1.555 | $ | 1.516 | $ | 1.921 | $ | 1.338 | 11.0 | % | ||||||||||||
- | - | - | - | - | ||||||||||||||||||||
Variable Contract Account Values | $ | 53.776 | $ | 58.629 | $ | 61.764 | $ | 62.112 | $ | 58.435 | 8.7 | % | ||||||||||||
Average Daily Variable Annuity Separate Account Values | $ | 49.284 | $ | 53.465 | $ | 55.827 | $ | 58.628 | $ | 55.318 | 12.2 | % | ||||||||||||
Change | ||||||||||||||||||||||||
Individual Product Spread Information | (Basis Point) | |||||||||||||||||||||||
Net investment income (1) (2) (3) | 5.94 | % | 5.92 | % | 5.84 | % | 5.93 | % | 5.87 | % | (7 | ) | ||||||||||||
Interest credited to contract holders (4) | 3.63 | % | 3.74 | % | 3.76 | % | 3.77 | % | 3.81 | % | 18 | |||||||||||||
Spread (1) (2) (3) | 2.31 | % | 2.18 | % | 2.08 | % | 2.16 | % | 2.06 | % | (25 | ) | ||||||||||||
Variable Annuity Expense Assessments (in millions) (5) | 189.4 | 207.1 | 219.6 | 234.2 | 206.4 | 8.9 | % | |||||||||||||||||
GLB Expense Assessments (in millions) (6) | 24.3 | 27.2 | 31.7 | 37.1 | 39.6 | 63.0 | % | |||||||||||||||||
Components of Attributed Fees on GLB (in millions) | ||||||||||||||||||||||||
Attributed fee included in operating revenue and income from operations (7) | $ | 3.2 | $ | 3.5 | $ | 3.8 | $ | 4.4 | $ | 15.9 | NM | |||||||||||||
Attributed fee excluded from operating revenue and income from operations (8) | 10.9 | 12.3 | 14.0 | 17.0 | 19.7 | 80.5 | % | |||||||||||||||||
Total attributed fees on GLB | $ | 14.1 | $ | 15.8 | $ | 17.8 | $ | 21.4 | $ | 35.6 | 152.6 | % | ||||||||||||
GLB Account Values by Type (in billions) | ||||||||||||||||||||||||
Guaranteed withdrawal benefits (9) | $ | 14.919 | $ | 16.311 | $ | 17.723 | $ | 18.695 | $ | 19.264 | 29.1 | % | ||||||||||||
Guaranteed income benefits (10) | 4.899 | 6.184 | 7.319 | 8.372 | 8.678 | 77.1 | % | |||||||||||||||||
Total GLB account values | $ | 19.818 | $ | 22.495 | $ | 25.042 | $ | 27.067 | $ | 27.942 | 41.0 | % | ||||||||||||
(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 earning | ||||||||||||||||||||||||
assets. 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 on annuity products 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) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of | ||||||||||||||||||||||||
these premiums on investment income and spread was 5 bps in the 1st quarter of 2008, 11 bps in the 4th quarter of 2007, 4 bps in the 3rd quarter of 2007, 11 bps in | ||||||||||||||||||||||||
the 2nd quarter of 2007 and 5 bps in the 1st quarter of 2007. | ||||||||||||||||||||||||
(3) In the first quarter of 2008, we updated previously reported historical net investment income yields and interest rate spreads to conform to the presentation in the first | ||||||||||||||||||||||||
quarter of 2008, which is excluding hedge derivatives and collateral from average earning assets. The impact of the changes on spreads range from 6 bps - 8 bps per quarter. | ||||||||||||||||||||||||
(4) The 2007 spreads reflect a correction (a decrease) to interest credited to contract holders related to a correction to the opening balance sheet of JP that was finalized | ||||||||||||||||||||||||
in the first quarter of 2007. The impact of this correction was 9 bps in the first quarter of 2007. | ||||||||||||||||||||||||
(5) Comprised of the variable annuity expense assessments included in the expense assessments line item on page 15 and the amounts presented in the components of | ||||||||||||||||||||||||
attributed fees on GLB as described in footnotes 7 and 8 and disclosed above. | ||||||||||||||||||||||||
(6) Comprised of the GLB expense assessments included in the expense assessments line item on page 15 and the amounts presented in the components of | ||||||||||||||||||||||||
attributed fees on GLB as described in footnotes 7 and 8 and disclosed above. | ||||||||||||||||||||||||
(7) The portion of the GLB rider fees calculated as the attributed fees in excess of the net valuation premium. The attributed fees are the fees used in the calculation of the | ||||||||||||||||||||||||
embedded derivative. The net valuation premium represents the rider fees equal to the net present value of future benefit costs. This portion of the attributed fee is reported in | ||||||||||||||||||||||||
realized gains and losses and included in income from operations and operating revenue. | ||||||||||||||||||||||||
(8) Represents the portion of rider fee revenue for GLB required to fund the net valuation premium. This portion of the attributed fee is reported in realized gains and losses and | ||||||||||||||||||||||||
excluded in income from operations and operating revenue. | ||||||||||||||||||||||||
(9) 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. | ||||||||||||||||||||||||
(10) 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 holder to access the account value for transfers, additional withdrawals, and other service features like portfolio rebalancing. |
3/31/2008 | PAGE 19 |
Employer Markets - Defined Contribution | ||||||||||||||||||||||||
Income Statements & Operational Data | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Surrender charges | $ | 2.0 | $ | 2.2 | $ | 1.8 | $ | 1.8 | $ | 1.9 | -6.9 | % | ||||||||||||
Expense assessments | 59.8 | 63.0 | 63.5 | 64.7 | 59.3 | -0.8 | % | |||||||||||||||||
Net investment income | 180.3 | 182.2 | 172.9 | 173.3 | 171.7 | -4.8 | % | |||||||||||||||||
Other revenues and fees | 4.7 | 4.6 | 5.2 | 3.6 | 4.8 | 3.6 | % | |||||||||||||||||
Total Operating Revenues | 246.7 | 252.0 | 243.4 | 243.3 | 237.7 | -3.7 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Interest credited to contract holder funds | 104.3 | 104.6 | 104.6 | 104.8 | 105.9 | 1.5 | % | |||||||||||||||||
Operating and acquisition expenses | 71.6 | 80.6 | 84.7 | 77.3 | 76.6 | 6.9 | % | |||||||||||||||||
Total Operating Expenses | 176.0 | 185.2 | 189.3 | 182.1 | 182.2 | 3.3 | % | |||||||||||||||||
Income from operations before federal income taxes | 70.8 | 66.8 | 54.1 | 61.2 | 55.5 | -20.9 | % | |||||||||||||||||
Federal income taxes | 21.1 | 19.5 | 12.9 | 18.1 | 15.1 | -26.3 | % | |||||||||||||||||
Income from Operations | $ | 49.7 | $ | 47.3 | $ | 41.2 | $ | 43.1 | $ | 40.4 | -18.7 | % | ||||||||||||
Effective tax rate | 29.8 | % | 29.2 | % | 23.8 | % | 29.6 | % | 27.2 | % | ||||||||||||||
Average equity | $ | 936.0 | $ | 906.6 | $ | 901.4 | $ | 902.7 | $ | 906.4 | ||||||||||||||
Return on average equity | 21.2 | % | 20.9 | % | 18.3 | % | 19.1 | % | 17.8 | % | ||||||||||||||
Income from Operations - basis points on | ||||||||||||||||||||||||
average account values | 58 | 53 | 46 | 47 | 46 | |||||||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||
Commissions | $ | 19.3 | $ | 21.3 | $ | 19.9 | $ | 20.3 | $ | 19.6 | 1.7 | % | ||||||||||||
General and administrative expenses | 49.9 | 54.9 | 59.8 | 53.7 | 51.9 | 4.1 | % | |||||||||||||||||
Taxes, licenses and fees | 5.1 | 4.4 | 2.2 | 2.1 | 4.4 | -13.6 | % | |||||||||||||||||
Total commissions and expenses incurred | 74.2 | 80.6 | 81.9 | 76.1 | 75.9 | 2.3 | % | |||||||||||||||||
Less: commissions and expenses capitalized | (22.2 | ) | (22.5 | ) | (23.7 | ) | (23.7 | ) | (23.6 | ) | -6.2 | % | ||||||||||||
Amortization of DAC and VOBA, net of interest | 19.6 | 22.5 | 26.5 | 24.9 | 24.2 | 23.8 | % | |||||||||||||||||
Net Operating and Acquisition Expenses | $ | 71.6 | $ | 80.6 | $ | 84.7 | $ | 77.3 | $ | 76.6 | 6.9 | % | ||||||||||||
General and administrative expenses - basis | ||||||||||||||||||||||||
points on account values - Annualized (1) | 59 | 62 | 67 | 59 | 59 | 1 | ||||||||||||||||||
(1) Includes distribution costs. |
3/31/2008 | PAGE 20 |
Employer Markets - Defined Contribution | ||||||||||||||||||||
Roll Forwards of DAC, VOBA and DSI | ||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||
Roll Forward of DAC & VOBA | ||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||
March | June | Sept. | Dec. | March | ||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | ||||||||||||||||
Balance at beginning-of-period | $ | 497.6 | $ | 489.4 | $ | 541.9 | $ | 531.8 | $ | 513.8 | ||||||||||
Cumulative effect of adoption of SOP 05-1 | (1.4 | ) | - | - | - | - | ||||||||||||||
Inter-segment transfer | - | - | - | - | 6.9 | |||||||||||||||
Deferrals | 22.2 | 22.5 | 23.7 | 23.7 | 23.6 | |||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||
Unlocking | (0.5 | ) | (2.0 | ) | (5.0 | ) | (1.2 | ) | (2.5 | ) | ||||||||||
Other amortization | (19.0 | ) | (20.5 | ) | (21.5 | ) | (23.7 | ) | (21.4 | ) | ||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||
operating and acquisition expenses | 2.6 | (0.0 | ) | (2.8 | ) | (1.2 | ) | (0.4 | ) | |||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||
on available-for-sale securities | (2.1 | ) | (0.8 | ) | (0.6 | ) | 3.4 | 0.6 | ||||||||||||
Adjustment related to unrealized (gains) losses | ||||||||||||||||||||
on available-for-sale securities | (7.2 | ) | 53.3 | (6.8 | ) | (20.2 | ) | 43.2 | ||||||||||||
Balance at end-of-period | $ | 489.4 | $ | 541.9 | $ | 531.8 | $ | 513.8 | $ | 564.2 | ||||||||||
Roll Forward of DSI | ||||||||||||||||||||
Balance at beginning-of-period | $ | 0.1 | $ | 0.2 | $ | 0.3 | $ | 0.4 | $ | 0.4 | ||||||||||
Inter-segment transfer | - | - | - | - | 1.3 | |||||||||||||||
Deferrals | 0.1 | 0.1 | 0.1 | 0.0 | 0.2 | |||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||
Unlocking | (0.0 | ) | 0.0 | (0.0 | ) | (0.0 | ) | (0.1 | ) | |||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||
insurance benefits or interest credited | 0.1 | 0.1 | 0.1 | 0.0 | 0.1 | |||||||||||||||
Balance at end-of-period | $ | 0.2 | $ | 0.3 | $ | 0.4 | $ | 0.4 | $ | 1.9 |
3/31/2008 | PAGE 21 |
Employer Markets - Defined Contribution | ||||||||||||||||||||||||
Account Value Roll Forward | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Fixed Annuities - Balance at Beginning-of-Period | $ | 11.006 | $ | 10.993 | $ | 10.940 | $ | 10.891 | $ | 10.889 | -1.1 | % | ||||||||||||
Inter-segment transfer | - | - | - | - | 0.089 | NM | ||||||||||||||||||
Gross deposits | 0.299 | 0.233 | 0.305 | 0.268 | 0.332 | 11.0 | % | |||||||||||||||||
Withdrawals and deaths | (0.399 | ) | (0.376 | ) | (0.450 | ) | (0.411 | ) | (0.370 | ) | 7.3 | % | ||||||||||||
Net flows | (0.101 | ) | (0.143 | ) | (0.144 | ) | (0.143 | ) | (0.038 | ) | 62.4 | % | ||||||||||||
Transfer from (to) variable annuities | (0.017 | ) | (0.012 | ) | (0.011 | ) | 0.031 | 0.172 | NM | |||||||||||||||
Interest credited | 0.104 | 0.102 | 0.106 | 0.111 | 0.105 | 1.0 | % | |||||||||||||||||
Fixed Annuities - Balance at End-of-Period (1) | $ | 10.993 | $ | 10.940 | $ | 10.891 | $ | 10.889 | $ | 11.217 | 2.0 | % | ||||||||||||
Variable Annuities - Balance at Beginning-of-Period | $ | 17.475 | $ | 17.676 | $ | 18.480 | $ | 18.581 | $ | 17.876 | 2.3 | % | ||||||||||||
Inter-segment transfer | - | - | - | - | 0.206 | NM | ||||||||||||||||||
Gross deposits | 0.655 | 0.577 | 0.564 | 0.560 | 0.674 | 2.9 | % | |||||||||||||||||
Withdrawals and deaths | (0.813 | ) | (0.747 | ) | (0.810 | ) | (0.842 | ) | (0.833 | ) | -2.5 | % | ||||||||||||
Net flows | (0.158 | ) | (0.170 | ) | (0.247 | ) | (0.283 | ) | (0.158 | ) | - | |||||||||||||
Transfer from (to) fixed annuities | 0.004 | 0.007 | (0.028 | ) | (0.012 | ) | (0.143 | ) | NM | |||||||||||||||
Investment increase and change in market value | 0.354 | 0.968 | 0.375 | (0.410 | ) | (1.488 | ) | NM | ||||||||||||||||
Variable Annuities - Balance at End-of-Period (2) | $ | 17.676 | $ | 18.480 | $ | 18.581 | $ | 17.876 | $ | 16.292 | -7.8 | % | ||||||||||||
Total Annuities - Balance at Beginning-of-Period | $ | 28.482 | $ | 28.669 | $ | 29.421 | $ | 29.471 | $ | 28.765 | 1.0 | % | ||||||||||||
Inter-segment transfer | - | - | - | - | 0.295 | NM | ||||||||||||||||||
Gross deposits | 0.953 | 0.809 | 0.869 | 0.828 | 1.007 | 5.7 | % | |||||||||||||||||
Withdrawals and deaths | (1.212 | ) | (1.122 | ) | (1.260 | ) | (1.253 | ) | (1.203 | ) | 0.7 | % | ||||||||||||
Net flows | (0.259 | ) | (0.313 | ) | (0.391 | ) | (0.426 | ) | (0.196 | ) | 24.3 | % | ||||||||||||
Transfers | (0.012 | ) | (0.005 | ) | (0.039 | ) | 0.019 | 0.028 | NM | |||||||||||||||
Interest credited and change in market value | 0.458 | 1.070 | 0.481 | (0.300 | ) | (1.383 | ) | NM | ||||||||||||||||
Total Annuities - Balance at End-of-Period | $ | 28.669 | $ | 29.421 | $ | 29.471 | $ | 28.765 | $ | 27.509 | -4.0 | % | ||||||||||||
Alliance and Smart Future Mutual Funds - Balance at Beginning-of-Period | $ | 5.175 | $ | 5.807 | $ | 6.543 | $ | 7.165 | $ | 7.293 | 40.9 | % | ||||||||||||
Plan/Participant Rollovers | 0.279 | 0.217 | 0.411 | 0.168 | 0.221 | -20.8 | % | |||||||||||||||||
Additional contributions | 0.254 | 0.247 | 0.245 | 0.269 | 0.324 | 27.6 | % | |||||||||||||||||
Gross deposits | 0.533 | 0.464 | 0.656 | 0.437 | 0.545 | 2.3 | % | |||||||||||||||||
Withdrawals and deaths | (0.054 | ) | (0.077 | ) | (0.132 | ) | (0.102 | ) | (0.069 | ) | -27.8 | % | ||||||||||||
Net flows | 0.480 | 0.387 | 0.524 | 0.335 | 0.477 | -0.6 | % | |||||||||||||||||
Transfers | 0.005 | 0.040 | (0.013 | ) | (0.023 | ) | (0.070 | ) | NM | |||||||||||||||
Interest credited and change in market value | 0.147 | 0.310 | 0.111 | (0.184 | ) | (0.445 | ) | NM | ||||||||||||||||
Total Alliance and Smart Future Mutual Funds - | ||||||||||||||||||||||||
Balance at End-of-Period (3) | $ | 5.807 | $ | 6.543 | $ | 7.165 | $ | 7.293 | $ | 7.254 | 24.9 | % | ||||||||||||
Total Defined Contribution Segment Account Values - | ||||||||||||||||||||||||
including Alliance and Smart Future Mutual Funds - | ||||||||||||||||||||||||
Balance at Beginning-of-Period | $ | 33.656 | $ | 34.475 | $ | 35.964 | $ | 36.636 | $ | 36.058 | 7.1 | % | ||||||||||||
Inter-segment transfer | - | - | - | - | 0.295 | NM | ||||||||||||||||||
Gross deposits | 1.487 | 1.273 | 1.525 | 1.265 | 1.552 | 4.4 | % | |||||||||||||||||
Withdrawals and deaths | (1.266 | ) | (1.199 | ) | (1.392 | ) | (1.356 | ) | (1.271 | ) | -0.4 | % | ||||||||||||
Net flows | 0.221 | 0.074 | 0.133 | (0.091 | ) | 0.281 | 27.1 | % | ||||||||||||||||
Transfers | (0.007 | ) | 0.035 | (0.052 | ) | (0.004 | ) | (0.042 | ) | NM | ||||||||||||||
Interest credited and change in market value | 0.606 | 1.379 | 0.592 | (0.484 | ) | (1.828 | ) | NM | ||||||||||||||||
Total Defined Contribution Segment Account Values - | ||||||||||||||||||||||||
Balance at End-of-Period | $ | 34.475 | $ | 35.964 | $ | 36.636 | $ | 36.058 | $ | 34.763 | 0.8 | % | ||||||||||||
Variable Annuities Under Agreement - Included Above | 0.016 | 0.017 | 0.018 | 0.017 | 0.015 | -6.3 | % | |||||||||||||||||
Incremental Deposits: (4) | ||||||||||||||||||||||||
Fixed annuities | $ | 0.282 | $ | 0.224 | $ | 0.220 | $ | 0.197 | $ | 0.285 | 1.1 | % | ||||||||||||
Variable annuities | 0.581 | 0.631 | 0.556 | 0.551 | 0.667 | 14.8 | % | |||||||||||||||||
Total annuities incremental deposits | 0.862 | 0.855 | 0.776 | 0.747 | 0.953 | 10.6 | % | |||||||||||||||||
Total Alliance mutual funds incremental deposits | 0.533 | 0.464 | 0.656 | 0.437 | 0.545 | 2.3 | % | |||||||||||||||||
Total Defined Contribution Incremental Deposits | $ | 1.396 | $ | 1.318 | $ | 1.431 | $ | 1.185 | $ | 1.498 | 7.3 | % | ||||||||||||
(1) Includes fixed annuity products offered under the Alliance Program and the fixed portion of variable annuities. |
(2) Excludes the fixed portion of variable annuities. |
(3) Represents amounts attributable to Alliance and Smart Future mutual fund net flows. Alliance and Smart Future mutual fund account values are not included in the separate |
accounts reported on our Consolidated Balance Sheets. |
(4) Incremental deposits represent gross deposits reduced by transfers from other Lincoln products. |
3/31/2008 | PAGE 22 |
Employer Markets - Defined Contribution | ||||||||||||||||||||||||
Account Value Roll Forward - By Product | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Total Micro - Small Segment - Balance at Beginning-of- Period | $ | 7.535 | $ | 7.689 | $ | 8.012 | $ | 8.077 | $ | 7.798 | 3.5 | % | ||||||||||||
Gross deposits | 0.460 | 0.377 | 0.391 | 0.365 | 0.499 | 8.5 | % | |||||||||||||||||
Withdrawals and deaths | (0.451 | ) | (0.434 | ) | (0.481 | ) | (0.565 | ) | (0.569 | ) | -26.2 | % | ||||||||||||
Net flows | 0.009 | (0.056 | ) | (0.090 | ) | (0.201 | ) | (0.070 | ) | NM | ||||||||||||||
Transfers | (0.005 | ) | (0.000 | ) | 0.000 | 0.000 | (0.012 | ) | NM | |||||||||||||||
Investment increase and change in market value | 0.150 | 0.379 | 0.155 | (0.079 | ) | (0.497 | ) | NM | ||||||||||||||||
Total Micro - Small Segment - Balance at End-of-Period | $ | 7.689 | $ | 8.012 | $ | 8.077 | $ | 7.798 | $ | 7.218 | -6.1 | % | ||||||||||||
Total Mid - Large Segment - Balance at Beginning-of-Period | $ | 6.975 | $ | 7.734 | $ | 8.555 | $ | 9.232 | $ | 9.463 | 35.7 | % | ||||||||||||
Gross deposits | 0.711 | 0.590 | 0.861 | 0.610 | 0.769 | 8.2 | % | |||||||||||||||||
Withdrawals and deaths | (0.118 | ) | (0.132 | ) | (0.263 | ) | (0.212 | ) | (0.159 | ) | -34.7 | % | ||||||||||||
Net flows | 0.593 | 0.458 | 0.598 | 0.398 | 0.610 | 2.9 | % | |||||||||||||||||
Transfers | 0.002 | 0.036 | (0.051 | ) | (0.003 | ) | (0.029 | ) | NM | |||||||||||||||
Investment increase and change in market value | 0.164 | 0.328 | 0.130 | (0.163 | ) | (0.423 | ) | NM | ||||||||||||||||
Total Mid - Large Segment - Balance at End-of-Period | $ | 7.734 | $ | 8.555 | $ | 9.232 | $ | 9.463 | $ | 9.621 | 24.4 | % | ||||||||||||
Total Multi Fund and Other Variable Annuities - | ||||||||||||||||||||||||
Balance at Beginning-of-Period | $ | 19.146 | $ | 19.053 | $ | 19.397 | $ | 19.327 | $ | 18.797 | -1.8 | % | ||||||||||||
Inter-segment transfer | - | - | - | - | 0.295 | NM | ||||||||||||||||||
Gross deposits | 0.316 | 0.306 | 0.273 | 0.290 | 0.284 | -10.1 | % | |||||||||||||||||
Withdrawals and deaths | (0.697 | ) | (0.633 | ) | (0.649 | ) | (0.578 | ) | (0.543 | ) | 22.1 | % | ||||||||||||
Net flows | (0.381 | ) | (0.327 | ) | (0.376 | ) | (0.288 | ) | (0.259 | ) | 32.0 | % | ||||||||||||
Transfers | (0.004 | ) | (0.000 | ) | (0.001 | ) | (0.000 | ) | (0.001 | ) | 75.0 | % | ||||||||||||
Investment increase and change in market value | 0.292 | 0.672 | 0.306 | (0.241 | ) | (0.908 | ) | NM | ||||||||||||||||
Total Multi Fund and Other Variable Annuities - | ||||||||||||||||||||||||
Balance at End-of-Period | $ | 19.053 | $ | 19.397 | $ | 19.327 | $ | 18.797 | $ | 17.924 | -5.9 | % | ||||||||||||
Total Defined Contribution Account Values - | ||||||||||||||||||||||||
Including Alliance and Smart Future Mutual Funds - | ||||||||||||||||||||||||
Balance at Beginning-of-Period | $ | 33.656 | $ | 34.475 | $ | 35.964 | $ | 36.636 | $ | 36.058 | 7.1 | % | ||||||||||||
Inter-segment transfer | - | - | - | - | 0.295 | NM | ||||||||||||||||||
Gross deposits | 1.487 | 1.273 | 1.525 | 1.265 | 1.552 | 4.4 | % | |||||||||||||||||
Withdrawals and deaths | (1.266 | ) | (1.199 | ) | (1.392 | ) | (1.356 | ) | (1.271 | ) | -0.4 | % | ||||||||||||
Net flows | 0.221 | 0.074 | 0.133 | (0.091 | ) | 0.281 | 27.1 | % | ||||||||||||||||
Transfers | (0.007 | ) | 0.035 | (0.052 | ) | (0.004 | ) | (0.042 | ) | NM | ||||||||||||||
Investment increase and change in market value | 0.606 | 1.379 | 0.592 | (0.484 | ) | (1.828 | ) | NM | ||||||||||||||||
Total Defined Contribution Segment Account Values - | ||||||||||||||||||||||||
Balance at End-of-Period (1) | $ | 34.475 | $ | 35.964 | $ | 36.636 | $ | 36.058 | $ | 34.763 | 0.8 | % | ||||||||||||
(1) Balance at end of period includes Alliance and Smart Future mutual fund account values. Alliance and Smart Future Mutual funds are not included in the separate accounts | ||||||||||||||||||||||||
reported on our Consolidated Balance Sheets. |
3/31/2008 | PAGE 23 | |||||||||||||||||||||||
Employer Markets - Defined Contribution | ||||||||||||||||||||||||
Supplemental Data | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Fixed Annuities - Excluding Fixed Portion of Variable Contracts | ||||||||||||||||||||||||
Deposits | $ | 0.198 | $ | 0.146 | $ | 0.221 | $ | 0.189 | $ | 0.240 | 21.2 | % | ||||||||||||
Withdrawals and deaths | (0.166 | ) | (0.140 | ) | (0.215 | ) | (0.203 | ) | (0.160 | ) | 3.6 | % | ||||||||||||
Net flows | $ | 0.032 | $ | 0.006 | $ | 0.006 | $ | (0.014 | ) | $ | 0.080 | 150.0 | % | |||||||||||
Fixed Contract Account Values | $ | 4.870 | $ | 4.917 | $ | 4.943 | $ | 4.996 | $ | 5.166 | 6.1 | % | ||||||||||||
Fixed Portion of Variable Contracts | ||||||||||||||||||||||||
Deposits | $ | 0.100 | $ | 0.087 | $ | 0.084 | $ | 0.079 | $ | 0.093 | -7.0 | % | ||||||||||||
Withdrawals and deaths | (0.233 | ) | (0.236 | ) | (0.235 | ) | (0.208 | ) | (0.210 | ) | 9.9 | % | ||||||||||||
Net flows | $ | (0.133 | ) | $ | (0.149 | ) | $ | (0.150 | ) | $ | (0.129 | ) | $ | (0.117 | ) | 12.0 | % | |||||||
Fixed Portion of Variable Contract Account Values | $ | 6.123 | $ | 6.023 | $ | 5.948 | $ | 5.893 | $ | 6.051 | -1.2 | % | ||||||||||||
Variable Annuities - Including Fixed Portion of Variable Contracts | ||||||||||||||||||||||||
Deposits | $ | 0.755 | $ | 0.664 | $ | 0.648 | $ | 0.639 | $ | 0.767 | 1.6 | % | ||||||||||||
Withdrawals and deaths | (1.046 | ) | (0.982 | ) | (1.045 | ) | (1.050 | ) | (1.043 | ) | 0.3 | % | ||||||||||||
Net flows | $ | (0.291 | ) | $ | (0.319 | ) | $ | (0.397 | ) | $ | (0.411 | ) | $ | (0.276 | ) | 5.2 | % | |||||||
Variable Contract Account Values | $ | 23.799 | $ | 24.504 | $ | 24.528 | $ | 23.769 | $ | 22.343 | -6.1 | % | ||||||||||||
Average Daily Variable Annuity Account Values | $ | 17.582 | $ | 18.377 | $ | 18.162 | $ | 18.235 | $ | 16.640 | -5.4 | % | ||||||||||||
Total Annuity Based Retirement Plan Product Spread Information (1) | Change (Basis Point) | |||||||||||||||||||||||
Net investment income (2) (3) | 6.20 | % | 6.13 | % | 6.00 | % | 6.05 | % | 5.92 | % | (28 | ) | ||||||||||||
Interest credited to contract holders | 3.81 | % | 3.82 | % | 3.84 | % | 3.85 | % | 3.81 | % | - | |||||||||||||
Spread (2) (3) | 2.39 | % | 2.31 | % | 2.16 | % | 2.20 | % | 2.11 | % | (28 | ) | ||||||||||||
(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 |
earning assets. We exclude net investment income earned on investments supporting statutory surplus from our spread calculations. The average crediting rate is |
calculated using interest credited on annuity products less amortization related to DSI interest, divided by average fixed account values. |
(2) The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact |
of these premiums on investment income and spread was 2 bps in the 1st quarter of 2008, 5 bps in the 4th quarter of 2007, 7 bps in the 3rd quarter of 2007, 9 bps |
in the 2nd quarter of 2007 and 3 bps in the 1st quarter of 2007. |
(3) The net investment income and spread reported above include earnings from alternative investments, such as limited partnerships and hedge funds. The impact on |
investment income yields from these investments was (6) bps in the 1st quarter of 2008, (2) bps in the 4th quarter of 2007, (11) bps in the 3rd quarter of 2007, 11 bps |
in the 2nd quarter of 2007 and 7 bps in the 1st quarter of 2007. |
3/31/2008 | PAGE 24 |
Employer Markets - Executive Benefits | ||||||||||||||||||||||||
Income Statements & Operational Data | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Insurance premiums | $ | 0.1 | $ | 0.1 | $ | 0.1 | $ | 0.0 | $ | 0.1 | 17.5 | % | ||||||||||||
Surrender charges | (0.0 | ) | 0.0 | 0.0 | 0.1 | (0.0 | ) | NM | ||||||||||||||||
Mortality assessments | 8.9 | 8.2 | 8.4 | 9.0 | 9.1 | 1.9 | % | |||||||||||||||||
Expense assessments | 4.6 | 4.7 | 4.0 | 4.7 | 4.6 | 1.0 | % | |||||||||||||||||
Net investment income | 55.8 | 53.1 | 51.8 | 52.3 | 51.9 | -7.0 | % | |||||||||||||||||
Other revenues and fees | (0.1 | ) | 0.0 | (0.1 | ) | (0.0 | ) | (0.1 | ) | 22.9 | % | |||||||||||||
Total Operating Revenues | 69.2 | 66.1 | 64.2 | 66.1 | 65.6 | -5.3 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Insurance benefits | 2.8 | 2.7 | 5.1 | 6.3 | 2.5 | -9.8 | % | |||||||||||||||||
Interest credited to contract holder funds | 38.2 | 38.1 | 37.8 | 38.0 | 38.4 | 0.5 | % | |||||||||||||||||
Operating and acquisition expenses | 10.2 | 8.8 | 8.7 | 3.7 | 6.7 | -34.1 | % | |||||||||||||||||
Total Operating Expenses | 51.1 | 49.7 | 51.6 | 48.0 | 47.6 | -6.9 | % | |||||||||||||||||
Income from operations before federal income taxes | 18.2 | 16.5 | 12.7 | 18.1 | 18.0 | -0.8 | % | |||||||||||||||||
Federal income taxes | 6.2 | 5.6 | 3.8 | 6.2 | 6.1 | -2.1 | % | |||||||||||||||||
Income from Operations | $ | 11.9 | $ | 10.8 | $ | 8.9 | $ | 11.9 | $ | 11.9 | -0.1 | % | ||||||||||||
Effective tax rate | 34.4 | % | 34.3 | % | 30.0 | % | 34.4 | % | 33.9 | % | ||||||||||||||
Average equity | $ | 357.1 | $ | 345.5 | $ | 336.5 | $ | 346.3 | $ | 358.1 | ||||||||||||||
Return on average equity | 13.3 | % | 12.5 | % | 10.5 | % | 13.7 | % | 13.3 | % | ||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||
Commissions | $ | 6.5 | $ | 6.8 | $ | 6.4 | $ | 14.0 | $ | 11.9 | 82.8 | % | ||||||||||||
General and administrative expenses | 1.7 | 1.9 | 3.0 | 2.3 | 2.7 | 61.5 | % | |||||||||||||||||
Taxes, licenses and fees | 1.2 | 1.0 | 1.0 | 1.5 | 2.0 | 70.0 | % | |||||||||||||||||
Total commissions and expenses incurred | 9.4 | 9.7 | 10.4 | 17.8 | 16.6 | 77.4 | % | |||||||||||||||||
Less: commissions and expenses capitalized | (6.9 | ) | (6.7 | ) | (6.6 | ) | (14.1 | ) | (11.6 | ) | -67.5 | % | ||||||||||||
Amortization of DAC and VOBA, net of interest | 7.7 | 5.8 | 4.8 | 0.0 | 1.7 | -77.7 | % | |||||||||||||||||
Net Operating and Acquisition Expenses | $ | 10.2 | $ | 8.8 | $ | 8.7 | $ | 3.7 | $ | 6.7 | -34.1 | % | ||||||||||||
- | - | - | - | - | ||||||||||||||||||||
General and administrative expenses - basis | ||||||||||||||||||||||||
points on account values - Annualized (1) | 16 | 18 | 27 | 21 | 24 | 8 | ||||||||||||||||||
Roll Forward of DAC & VOBA | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 265.3 | $ | 260.5 | $ | 276.2 | $ | 273.2 | $ | 283.0 | ||||||||||||||
Deferrals | 6.9 | 6.7 | 6.6 | 14.1 | 11.6 | |||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||
Unlocking | (2.7 | ) | (2.3 | ) | (1.5 | ) | 2.3 | 1.1 | ||||||||||||||||
Other amortization | (5.1 | ) | (3.4 | ) | (3.4 | ) | (2.3 | ) | (2.8 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
operating and acquisition expenses | (0.8 | ) | 0.9 | 1.8 | 14.1 | 9.9 | ||||||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||||||
on available-for-sale securities | (0.5 | ) | (0.1 | ) | 0.1 | 0.6 | 0.2 | |||||||||||||||||
Adjustment related to unrealized (gains) losses | ||||||||||||||||||||||||
on available-for-sale securities | (3.4 | ) | 14.9 | (4.8 | ) | (4.9 | ) | 4.9 | ||||||||||||||||
Balance at end-of-period | $ | 260.5 | $ | 276.2 | $ | 273.2 | $ | 283.0 | $ | 298.1 | ||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 21.7 | $ | 22.0 | $ | 21.9 | $ | 22.4 | $ | 23.8 | ||||||||||||||
Deferrals | 1.1 | 0.9 | 0.7 | 1.4 | 1.7 | |||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||
Unlocking | (0.3 | ) | (0.6 | ) | 0.1 | 0.3 | 0.1 | |||||||||||||||||
Other amortization | (0.4 | ) | (0.3 | ) | (0.3 | ) | (0.3 | ) | (0.2 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
expense assessments | 0.3 | (0.1 | ) | 0.5 | 1.4 | 1.6 | ||||||||||||||||||
Balance at end-of-period | $ | 22.0 | $ | 21.9 | $ | 22.4 | $ | 23.8 | $ | 25.5 | ||||||||||||||
(1) Includes distribution costs. |
3/31/2008 | PAGE 25 |
Employer Markets - Executive Benefits | ||||||||||||||||||||||||
Account Value Roll Forward & Supplemental Data | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
COLI/BOLI - Balance at Beginning-of-Period | $ | 4.305 | $ | 4.264 | $ | 4.353 | $ | 4.391 | $ | 4.436 | 3.0 | % | ||||||||||||
Deposits (1) | 0.065 | 0.079 | 0.052 | 0.107 | 0.165 | 153.8 | % | |||||||||||||||||
Withdrawals and deaths (1) | (0.140 | ) | (0.053 | ) | (0.057 | ) | (0.070 | ) | (0.094 | ) | 32.9 | % | ||||||||||||
Net flows | (0.075 | ) | 0.026 | (0.005 | ) | 0.037 | 0.071 | 194.7 | % | |||||||||||||||
Contract holder assessments | (0.018 | ) | (0.017 | ) | (0.017 | ) | (0.019 | ) | (0.020 | ) | -11.1 | % | ||||||||||||
Interest credited and change in market value | 0.052 | 0.080 | 0.060 | 0.027 | (0.026 | ) | NM | |||||||||||||||||
COLI/BOLI - Balance at End-of-Period | $ | 4.264 | $ | 4.353 | $ | 4.391 | $ | 4.436 | $ | 4.460 | 4.6 | % | ||||||||||||
COLI/BOLI In Force | $ | 14.747 | $ | 14.809 | $ | 14.900 | $ | 15.292 | $ | 15.826 | 7.3 | % | ||||||||||||
(1) 1st quarter 2008 Deposits include $0.044 billion and Withdrawals and deaths include $(0.044) billion related to the exchange of legacy Jefferson-Pilot products |
with new Lincoln products. |
3/31/2008 | PAGE 26 |
Employer Markets - Group Protection | ||||||||||||||||||||||||
Income Statements & Operational Data | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Insurance premiums | $ | 331.3 | $ | 361.3 | $ | 336.8 | $ | 349.7 | $ | 370.4 | 11.8 | % | ||||||||||||
Net investment income | 27.9 | 28.5 | 29.5 | 29.5 | 27.7 | -0.6 | % | |||||||||||||||||
Other revenues and fees | 1.1 | 1.2 | 1.3 | 1.4 | 1.2 | 9.6 | % | |||||||||||||||||
Total Operating Revenues | 360.4 | 391.0 | 367.5 | 380.6 | 399.4 | 10.8 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Insurance benefits | 246.6 | 265.7 | 235.0 | 252.1 | 269.2 | 9.2 | % | |||||||||||||||||
Operating and acquisition expenses | 78.3 | 80.7 | 81.4 | 85.1 | 89.6 | 14.5 | % | |||||||||||||||||
Total Operating Expenses | 324.9 | 346.3 | 316.4 | 337.2 | 358.8 | 10.5 | % | |||||||||||||||||
Income from operations before federal income taxes | 35.5 | 44.7 | 51.2 | 43.4 | 40.6 | 14.1 | % | |||||||||||||||||
Federal income taxes | 12.4 | 15.7 | 17.9 | 15.2 | 14.2 | 14.4 | % | |||||||||||||||||
Income from Operations | $ | 23.1 | $ | 29.0 | $ | 33.2 | $ | 28.2 | $ | 26.3 | 14.0 | % | ||||||||||||
�� | ||||||||||||||||||||||||
Effective tax rate | 35.0 | % | 35.1 | % | 35.1 | % | 35.1 | % | 35.1 | % | ||||||||||||||
Average equity | $ | 915.1 | $ | 917.5 | $ | 936.2 | $ | 956.4 | $ | 975.8 | ||||||||||||||
Return on average equity | 10.1 | % | 12.6 | % | 14.2 | % | 11.8 | % | 10.8 | % | ||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||
Commissions | $ | 39.4 | $ | 41.4 | $ | 40.3 | $ | 43.1 | $ | 43.5 | 10.5 | % | ||||||||||||
General and administrative expenses | 32.7 | 37.5 | 37.9 | 42.8 | 41.7 | 27.6 | % | |||||||||||||||||
Taxes, licenses and fees | 9.7 | 9.5 | 8.1 | 6.2 | 10.0 | 3.2 | % | |||||||||||||||||
Total commissions and expenses incurred | 81.8 | 88.4 | 86.3 | 92.1 | 95.3 | 16.5 | % | |||||||||||||||||
Less: commissions and expenses capitalized | (11.2 | ) | (13.5 | ) | (13.0 | ) | (16.7 | ) | (13.8 | ) | -23.4 | % | ||||||||||||
Amortization of DAC and VOBA, net of interest | 7.6 | 5.8 | 8.1 | 9.7 | 8.1 | 6.6 | % | |||||||||||||||||
Net Operating and Acquisition Expenses | $ | 78.3 | $ | 80.7 | $ | 81.4 | $ | 85.1 | $ | 89.6 | 14.5 | % | ||||||||||||
General and administrative expenses as a | ||||||||||||||||||||||||
percentage of premiums | 9.9 | % | 10.4 | % | 11.2 | % | 12.2 | % | 11.3 | % | 14.14 | % | ||||||||||||
Roll Forward of DAC & VOBA | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 137.6 | $ | 103.7 | $ | 111.4 | $ | 116.4 | $ | 123.4 | ||||||||||||||
Cumulative effect of adoption of SOP 05-1 | (37.5 | ) | - | - | - | - | ||||||||||||||||||
Deferrals | 11.2 | 13.5 | 13.0 | 16.7 | 13.8 | |||||||||||||||||||
Amortization, net of interest | (7.6 | ) | (5.8 | ) | (8.1 | ) | (9.7 | ) | (8.1 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
operating and acquisition expenses | 3.5 | 7.8 | 5.0 | 7.0 | 5.7 | |||||||||||||||||||
Balance at end-of-period | $ | 103.7 | $ | 111.4 | $ | 116.4 | $ | 123.4 | $ | 129.0 |
3/31/2008 | PAGE 27 |
Employer Markets - Group Protection | ||||||||||||||||||||||||
Supplemental Data | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Annualized Sales | ||||||||||||||||||||||||
Life | $ | 22.5 | $ | 23.8 | $ | 22.0 | $ | 53.9 | $ | 21.3 | -5.6 | % | ||||||||||||
Disability | 28.6 | 28.9 | 30.5 | 72.1 | 24.9 | -12.9 | % | |||||||||||||||||
Dental | 9.4 | 9.5 | 8.3 | 16.6 | 7.9 | -16.3 | % | |||||||||||||||||
Premiums | ||||||||||||||||||||||||
Life | $ | 118.6 | $ | 125.0 | $ | 123.4 | $ | 126.5 | $ | 132.9 | 12.0 | % | ||||||||||||
Disability | 144.8 | 150.4 | 151.1 | 155.2 | 163.2 | 12.7 | % | |||||||||||||||||
Dental | 32.9 | 33.5 | 34.1 | 35.2 | 36.5 | 10.9 | % | |||||||||||||||||
Other | 35.0 | 52.5 | 28.3 | 32.8 | 37.8 | 8.1 | % | |||||||||||||||||
Total | $ | 331.3 | $ | 361.3 | $ | 336.8 | $ | 349.7 | $ | 370.4 | 11.8 | % | ||||||||||||
Product Line Results | ||||||||||||||||||||||||
Life | $ | 8.6 | $ | 10.0 | $ | 11.0 | $ | 11.2 | $ | 10.1 | 17.2 | % | ||||||||||||
Disability | 13.3 | 18.1 | 18.8 | 13.7 | 15.4 | 15.2 | % | |||||||||||||||||
Dental | 0.2 | (0.1 | ) | 1.3 | 2.1 | (0.3 | ) | NM | ||||||||||||||||
Other | 0.9 | 1.0 | 2.2 | 1.2 | 1.2 | 27.6 | % | |||||||||||||||||
Total | $ | 23.1 | $ | 29.0 | $ | 33.2 | $ | 28.2 | $ | 26.3 | 14.0 | % | ||||||||||||
Loss Ratios | ||||||||||||||||||||||||
Life | 75.0 | % | 73.9 | % | 71.2 | % | 72.1 | % | 71.9 | % | -4.1 | % | ||||||||||||
Disability | 69.5 | % | 66.4 | % | 65.0 | % | 69.1 | % | 68.1 | % | -2.0 | % | ||||||||||||
Dental | 79.2 | % | 79.3 | % | 74.9 | % | 73.1 | % | 80.8 | % | 2.0 | % | ||||||||||||
Combined loss ratios | 72.7 | % | 70.8 | % | 68.6 | % | 70.7 | % | 71.0 | % | -2.3 | % |
3/31/2008 | PAGE 28 |
Investment Management | ||||||||||||||||||||||||
Income Statements | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Investment advisory fees - external | $ | 89.2 | $ | 90.8 | $ | 91.5 | $ | 88.2 | $ | 76.2 | -14.5 | % | ||||||||||||
Investment advisory fees - inter-segment | 25.7 | 21.5 | 20.1 | 19.8 | 20.0 | -22.1 | % | |||||||||||||||||
Other revenues and fees | 35.3 | 38.7 | 38.5 | 31.0 | 24.1 | -31.8 | % | |||||||||||||||||
Total Operating Revenues | 150.2 | 151.0 | 150.1 | 139.0 | 120.3 | -19.9 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Operating and administrative expenses | 124.6 | 133.1 | 116.0 | 96.8 | 101.1 | -18.9 | % | |||||||||||||||||
Total Operating Expenses | 124.6 | 133.1 | 116.0 | 96.8 | 101.1 | -18.9 | % | |||||||||||||||||
Income from operations before federal income taxes | 25.6 | 17.9 | 34.1 | 42.2 | 19.2 | -24.8 | % | |||||||||||||||||
Federal income taxes | 9.3 | 6.6 | 12.3 | 15.2 | 7.1 | -24.1 | % | |||||||||||||||||
Income from Operations | $ | 16.2 | $ | 11.3 | $ | 21.8 | $ | 27.0 | $ | 12.1 | -25.3 | % | ||||||||||||
Effective tax rate | 36.4 | % | 36.8 | % | 36.1 | % | 35.9 | % | 36.8 | % | ||||||||||||||
Pre-Tax Operating Margin | 17.0 | % | 11.8 | % | 22.7 | % | 30.3 | % | 16.0 | % | ||||||||||||||
After-Tax Operating Margin | 10.8 | % | 7.5 | % | 14.5 | % | 19.4 | % | 10.1 | % | ||||||||||||||
Operating and Administrative Expenses | ||||||||||||||||||||||||
General and administrative expenses | $ | 106.5 | $ | 116.7 | $ | 100.5 | $ | 81.0 | $ | 87.5 | -17.8 | % | ||||||||||||
Depreciation and amortization | 2.6 | 2.5 | 2.5 | 2.3 | 2.2 | -15.6 | % | |||||||||||||||||
Sub-advisory fees | 10.0 | 8.4 | 7.7 | 8.1 | 7.2 | -27.6 | % | |||||||||||||||||
Total general and administrative expenses | 119.1 | 127.7 | 110.7 | 91.4 | 97.0 | -18.6 | % | |||||||||||||||||
Taxes, licenses and fees | 4.1 | 4.0 | 3.9 | 4.0 | 3.6 | -11.2 | % | |||||||||||||||||
Amortization of intangibles | 1.4 | 1.4 | 1.4 | 1.4 | 0.5 | -67.8 | % | |||||||||||||||||
Total Operating and Administrative Expenses | $ | 124.6 | $ | 133.1 | $ | 116.0 | $ | 96.8 | $ | 101.1 | -18.9 | % |
3/31/2008 | PAGE 29 |
Investment Management | ||||||||||||||||||||||||
Assets Under Management Roll Forward | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Retail Fixed - Balance at Beginning-of-Period | $ | 10.993 | $ | 11.644 | $ | 12.303 | $ | 13.014 | $ | 13.463 | 22.5 | % | ||||||||||||
Sales (1) | 1.365 | 1.494 | 1.467 | 1.635 | 1.981 | 45.1 | % | |||||||||||||||||
Redemptions (2) | (0.910 | ) | (1.062 | ) | (1.060 | ) | (1.330 | ) | (1.395 | ) | -53.3 | % | ||||||||||||
Transfers | 0.014 | (0.005 | ) | 0.027 | 0.017 | 0.054 | 285.7 | % | ||||||||||||||||
Net flows | 0.470 | 0.428 | 0.434 | 0.321 | 0.640 | 36.2 | % | |||||||||||||||||
Net investment gains and change in market value | 0.181 | 0.119 | 0.278 | 0.145 | 0.065 | -64.1 | % | |||||||||||||||||
Transfer of assets to third-party (2) | - | (0.055 | ) | - | (0.018 | ) | - | NM | ||||||||||||||||
Transfer of assets to an intercompany manager (3) | - | 0.166 | - | - | - | NM | ||||||||||||||||||
Retail Fixed - Balance at End-of-Period (4) | $ | 11.644 | $ | 12.303 | $ | 13.014 | $ | 13.463 | $ | 14.168 | 21.7 | % | ||||||||||||
Retail Equity - Balance at Beginning-of-Period | $ | 39.627 | $ | 40.250 | $ | 38.586 | $ | 38.166 | $ | 36.250 | -8.5 | % | ||||||||||||
Sales (1) | 2.238 | 1.778 | 1.344 | 1.957 | 1.514 | -32.4 | % | |||||||||||||||||
Redemptions (2) | (2.455 | ) | (2.487 | ) | (2.084 | ) | (2.903 | ) | (2.752 | ) | -12.1 | % | ||||||||||||
Transfers | (0.020 | ) | 0.004 | (0.029 | ) | (0.025 | ) | (0.057 | ) | NM | ||||||||||||||
Net flows | (0.237 | ) | (0.704 | ) | (0.768 | ) | (0.970 | ) | (1.295 | ) | NM | |||||||||||||
Net investment gains and change in market value | 0.861 | 2.190 | 0.348 | (0.915 | ) | (3.492 | ) | NM | ||||||||||||||||
Transfer of assets to third-party (2) | - | (0.099 | ) | - | (0.030 | ) | - | NM | ||||||||||||||||
Transfer of assets to an intercompany manager (3) | - | (3.051 | ) | - | - | - | NM | |||||||||||||||||
Retail Equity - Balance at End-of-Period (4) | $ | 40.250 | $ | 38.586 | $ | 38.166 | $ | 36.250 | $ | 31.463 | -21.8 | % | ||||||||||||
Total Retail - Balance at Beginning-of-Period | $ | 50.620 | $ | 51.895 | $ | 50.889 | $ | 51.180 | $ | 49.713 | -1.8 | % | ||||||||||||
Retail sales - annuities | 1.300 | 0.902 | 0.891 | 0.954 | 1.562 | 20.2 | % | |||||||||||||||||
Retail sales - mutual funds | 1.753 | 1.896 | 1.543 | 2.241 | 1.592 | -9.2 | % | |||||||||||||||||
Retail sales - managed accounts and other | 0.550 | 0.474 | 0.377 | 0.398 | 0.341 | -38.0 | % | |||||||||||||||||
Total retail sales (1) | 3.603 | 3.273 | 2.811 | 3.592 | 3.495 | -3.0 | % | |||||||||||||||||
Redemptions (2) | (3.365 | ) | (3.548 | ) | (3.144 | ) | (4.233 | ) | (4.147 | ) | -23.2 | % | ||||||||||||
Transfers | (0.005 | ) | (0.001 | ) | (0.001 | ) | (0.008 | ) | (0.003 | ) | 40.0 | % | ||||||||||||
Net flows | 0.233 | (0.277 | ) | (0.334 | ) | (0.649 | ) | (0.655 | ) | NM | ||||||||||||||
Net investment gains and change in market value | 1.041 | 2.309 | 0.626 | (0.770 | ) | (3.427 | ) | NM | ||||||||||||||||
Transfer of assets to third-party (2) | - | (0.153 | ) | - | (0.048 | ) | - | NM | ||||||||||||||||
Transfer of assets to an intercompany manager (3) | - | (2.885 | ) | - | - | - | NM | |||||||||||||||||
Total Retail - Balance at End-of-Period (4) | $ | 51.895 | $ | 50.889 | $ | 51.180 | $ | 49.713 | $ | 45.631 | -12.1 | % | ||||||||||||
Institutional Fixed - Balance at Beginning-of-Period | $ | 22.841 | $ | 23.469 | $ | 23.565 | $ | 24.837 | $ | 12.746 | -44.2 | % | ||||||||||||
Inflows (1) | 1.560 | 1.514 | 2.233 | 0.577 | 0.243 | -84.4 | % | |||||||||||||||||
Withdrawals/terminations | (0.480 | ) | (1.271 | ) | (1.306 | ) | (0.673 | ) | (0.638 | ) | -32.9 | % | ||||||||||||
Transfers | 0.000 | (0.000 | ) | (0.001 | ) | 0.138 | 0.002 | NM | ||||||||||||||||
Net flows | 1.081 | 0.242 | 0.927 | 0.041 | (0.394 | ) | NM | |||||||||||||||||
Net investment gains and change in market value | 0.328 | (0.146 | ) | 0.345 | 0.180 | 0.057 | -82.6 | % | ||||||||||||||||
Transfer of assets to third-party (5) | - | - | - | (12.313 | ) | - | NM | |||||||||||||||||
Transfer of assets to an intercompany manager (3) | (0.780 | ) | - | - | - | - | 100.0 | % | ||||||||||||||||
Institutional Fixed - Balance at End-of-Period (4) | $ | 23.469 | $ | 23.565 | $ | 24.837 | $ | 12.746 | $ | 12.409 | -47.1 | % | ||||||||||||
Institutional Equity - Balance at Beginning-of-Period | $ | 23.845 | $ | 22.782 | $ | 23.271 | $ | 23.699 | $ | 22.898 | -4.0 | % | ||||||||||||
Inflows (1) | 0.870 | 1.363 | 0.701 | 1.653 | 0.986 | 13.3 | % | |||||||||||||||||
Withdrawals/terminations | (2.273 | ) | (1.753 | ) | (1.202 | ) | (1.996 | ) | (1.100 | ) | 51.6 | % | ||||||||||||
Transfers | 0.000 | (0.000 | ) | (0.001 | ) | (0.001 | ) | (0.002 | ) | NM | ||||||||||||||
Net flows | (1.402 | ) | (0.390 | ) | (0.501 | ) | (0.343 | ) | (0.117 | ) | 91.7 | % | ||||||||||||
Net investment gains and change in market value | 0.339 | 1.242 | 0.929 | (0.457 | ) | (2.284 | ) | NM | ||||||||||||||||
Transfer of assets to an intercompany manager (3) | - | (0.363 | ) | - | - | - | NM | |||||||||||||||||
Institutional Equity - Balance at End-of-Period (4) | $ | 22.782 | $ | 23.271 | $ | 23.699 | $ | 22.898 | $ | 20.498 | -10.0 | % | ||||||||||||
Total Institutional - Balance at Beginning-of-Period | $ | 46.686 | $ | 46.251 | $ | 46.836 | $ | 48.536 | $ | 35.644 | -23.7 | % | ||||||||||||
Inflows (1) | 2.431 | 2.877 | 2.934 | 2.230 | 1.229 | -49.4 | % | |||||||||||||||||
Withdrawals/terminations | (2.753 | ) | (3.025 | ) | (2.508 | ) | (2.669 | ) | (1.739 | ) | 36.8 | % | ||||||||||||
Transfers | 0.001 | (0.001 | ) | (0.001 | ) | 0.137 | (0.000 | ) | NM | |||||||||||||||
Net flows | (0.321 | ) | (0.148 | ) | 0.425 | (0.302 | ) | (0.510 | ) | -58.9 | % | |||||||||||||
Net investment gains and change in market value | 0.667 | 1.096 | 1.274 | (0.277 | ) | (2.227 | ) | NM | ||||||||||||||||
Transfer of assets to third-party (5) | - | - | - | (12.313 | ) | - | NM | |||||||||||||||||
Transfer of assets to an intercompany manager (3) | (0.780 | ) | (0.363 | ) | - | - | - | 100.0 | % | |||||||||||||||
Total Institutional - Balance at End-of-Period (4) | $ | 46.251 | $ | 46.836 | $ | 48.536 | $ | 35.644 | $ | 32.907 | -28.9 | % | ||||||||||||
Total Retail and Institutional - At End-of-Period (4) | $ | 98.146 | $ | 97.725 | $ | 99.716 | $ | 85.357 | $ | 78.537 | -20.0 | % | ||||||||||||
General Account Assets - At End-of-Period (6) | $ | 67.658 | $ | 66.423 | $ | 67.324 | $ | 67.416 | $ | 67.340 | -0.5 | % | ||||||||||||
Total Assets Under Management | ||||||||||||||||||||||||
At End-of-Period | $ | 165.804 | $ | 164.148 | $ | 167.040 | $ | 152.774 | $ | 145.877 | -12.0 | % | ||||||||||||
Total Retail and Institutional - Net Flows (2) | $ | (0.088 | ) | $ | (0.425 | ) | $ | 0.091 | $ | (0.950 | ) | $ | (1.166 | ) | NM | |||||||||
Sub-Advised Assets, Included in Assets | ||||||||||||||||||||||||
Under Management Above | ||||||||||||||||||||||||
Retail | $ | 18.466 | $ | 16.329 | $ | 16.380 | $ | 16.219 | $ | 14.212 | -23.0 | % | ||||||||||||
Institutional | 4.645 | 4.594 | 4.734 | 4.570 | 4.071 | -12.4 | % | |||||||||||||||||
Total Sub-Advised Assets | $ | 23.111 | $ | 20.922 | $ | 21.114 | $ | 20.789 | $ | 18.283 | -20.9 | % | ||||||||||||
(1) Sales and in-flows include dividend reinvestments. |
(2) Reflects assets transferred to a third-party manager (Upromise) as a result of Delaware's decision to exit the 529 Plan business. 529 Plan assets |
which transferred in 2Q07 and 4Q07 are reflected in Transfer of assets to third-party. |
(3) Reflects assets that were transferred to an intercompany manager which did not impact Lincoln's consolidated assets under management. |
(4) Includes inter-segment and external assets under management. |
(5) Reflects the sale of a portion of our institutional fixed-income business to an unaffiliated investment management company in 4Q07. |
(6) The 1Q07 balance has been restated to reflect adjustments made to Jefferson Pilot separate accounts. The impact of this change was $366 million. |
3/31/2008 | PAGE 29(B) |
Investment Management | ||||||||||||||||||||||||
Assets Under Management Roll Forward (Continued) (1) | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Total Separate Account Assets - | ||||||||||||||||||||||||
Balance at Beginning-of-Period | $ | 13.729 | $ | 12.982 | $ | 10.226 | $ | 10.175 | $ | 9.672 | -29.6 | % | ||||||||||||
Sales/inflows | 0.501 | 0.707 | 0.545 | 0.742 | 0.719 | 43.5 | % | |||||||||||||||||
Redemptions/withdrawals/terminations | (0.735 | ) | (0.766 | ) | (0.754 | ) | (1.148 | ) | (0.679 | ) | 7.6 | % | ||||||||||||
Transfers | - | 0.000 | (0.000 | ) | 0.133 | - | NM | |||||||||||||||||
Net flows | (0.233 | ) | (0.059 | ) | (0.209 | ) | (0.273 | ) | 0.040 | 117.2 | % | |||||||||||||
Net investment gains and change in market value | 0.266 | 0.550 | 0.159 | (0.231 | ) | (0.520 | ) | NM | ||||||||||||||||
Transfer of assets to an intercompany manager | (0.780 | ) | (3.248 | ) | - | - | - | 100.0 | % | |||||||||||||||
Total Separate Account Assets - | ||||||||||||||||||||||||
Balance at End-of-Period | $ | 12.982 | $ | 10.226 | $ | 10.175 | $ | 9.672 | $ | 9.191 | -29.2 | % | ||||||||||||
- | ||||||||||||||||||||||||
General Account Assets At End-of-Period | $ | 67.658 | $ | 66.423 | $ | 67.324 | $ | 67.416 | $ | 67.340 | -0.5 | % | ||||||||||||
Total Inter-Segment Assets At End-of-Period | $ | 80.640 | $ | 76.648 | $ | 77.499 | $ | 77.088 | $ | 76.531 | -5.1 | % | ||||||||||||
Total External - Balance at Beginning-of-Period (2) | $ | 83.577 | $ | 85.164 | $ | 87.499 | $ | 89.541 | $ | 75.686 | -9.4 | % | ||||||||||||
Sales/inflows | 5.533 | 5.443 | 5.201 | 5.080 | 4.005 | -27.6 | % | |||||||||||||||||
Redemptions/withdrawals/terminations | (5.384 | ) | (5.807 | ) | (4.898 | ) | (5.754 | ) | (5.207 | ) | 3.3 | % | ||||||||||||
Transfers | (0.005 | ) | (0.001 | ) | (0.003 | ) | (0.004 | ) | (0.003 | ) | 40.0 | % | ||||||||||||
Net flows | 0.145 | (0.366 | ) | 0.300 | (0.677 | ) | (1.205 | ) | NM | |||||||||||||||
Net investment gains and change in market value | 1.442 | 2.854 | 1.741 | (0.817 | ) | (5.134 | ) | NM | ||||||||||||||||
Transfer of assets to third-party | - | (0.153 | ) | - | (12.361 | ) | - | NM | ||||||||||||||||
Total External - Balance at End-of-Period | $ | 85.164 | $ | 87.499 | $ | 89.541 | $ | 75.686 | $ | 69.346 | -18.6 | % | ||||||||||||
(1) This roll forward breaks out total assets under management by inter-segment and external balances which include both retail and institutional assets under |
management. |
(2) Includes Delaware's VIP funds. Lincoln Financial insurance subsidiaries as well as unaffiliated insurers participate in these funds. |
3/31/2008 | PAGE 30 |
Lincoln UK | ||||||||||||||||||||||||
Income Statements | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Insurance premiums | $ | 24.2 | $ | 24.3 | $ | 25.6 | $ | 21.2 | $ | 19.1 | -21.3 | % | ||||||||||||
Mortality assessments | 10.0 | 8.9 | 9.2 | 9.1 | 9.1 | -9.1 | % | |||||||||||||||||
Expense assessments | 37.1 | 39.9 | 33.0 | 46.6 | 37.1 | -0.1 | % | |||||||||||||||||
Net investment income | 19.3 | 19.4 | 20.9 | 21.5 | 20.3 | 5.3 | % | |||||||||||||||||
Other revenues and fees | 0.1 | - | - | - | 0.1 | - | ||||||||||||||||||
Total Operating Revenues | 90.7 | 92.5 | 88.7 | 98.3 | 85.6 | -5.6 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Insurance benefits | 36.0 | 34.4 | 30.2 | 36.9 | 30.7 | -14.8 | % | |||||||||||||||||
Operating and acquisition expenses | 38.0 | 40.2 | 42.5 | 41.9 | 38.5 | 1.4 | % | |||||||||||||||||
Total Operating Expenses | 74.0 | 74.6 | 72.7 | 78.8 | 69.2 | -6.5 | % | |||||||||||||||||
Income from operations before federal income taxes | 16.7 | 18.0 | 15.9 | 19.5 | 16.4 | -1.9 | % | |||||||||||||||||
Federal income taxes | 5.9 | 6.3 | 5.6 | 6.8 | 5.7 | -1.9 | % | |||||||||||||||||
Income from Operations | $ | 10.9 | $ | 11.7 | $ | 10.3 | $ | 12.7 | $ | 10.7 | -1.9 | % | ||||||||||||
Effective tax rate | 35.3 | % | 35.0 | % | 35.2 | % | 34.9 | % | 34.8 | % | ||||||||||||||
Average equity | $ | 387.6 | $ | 384.9 | $ | 379.1 | $ | 368.5 | $ | 375.7 | ||||||||||||||
Return on average equity | 11.2 | % | 12.1 | % | 10.9 | % | 13.8 | % | 11.4 | % | ||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||
Commissions | $ | 1.0 | $ | 1.0 | $ | 1.3 | $ | 1.5 | $ | 1.0 | 1.0 | % | ||||||||||||
General and administrative expenses | 26.5 | 26.7 | 26.9 | 28.1 | 26.6 | 0.3 | % | |||||||||||||||||
Total commissions and expenses incurred | 27.6 | 27.8 | 28.2 | 29.6 | 27.7 | 0.4 | % | |||||||||||||||||
Less: commissions and expenses capitalized | (0.6 | ) | (0.6 | ) | (1.5 | ) | (1.4 | ) | (0.6 | ) | -9.6 | % | ||||||||||||
Amortization of DAC and VOBA, net of interest | 11.0 | 13.0 | 15.8 | 13.7 | 11.5 | 4.6 | % | |||||||||||||||||
Net Operating and Acquisition Expenses | $ | 38.0 | $ | 40.2 | $ | 42.5 | $ | 41.9 | $ | 38.5 | 1.4 | % | ||||||||||||
Roll Forward of DAC & VOBA | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 809.0 | $ | 802.6 | $ | 806.5 | $ | 807.3 | $ | 772.1 | ||||||||||||||
Deferrals | 0.6 | 0.6 | 1.5 | 1.4 | 0.6 | |||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||
Unlocking | 0.7 | (0.1 | ) | (0.9 | ) | (0.9 | ) | 1.3 | ||||||||||||||||
Other amortization | (11.7 | ) | (12.9 | ) | (14.9 | ) | (12.8 | ) | (12.8 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
operating and acquisition expenses | (10.4 | ) | (12.4 | ) | (14.3 | ) | (12.3 | ) | (10.8 | ) | ||||||||||||||
Foreign currency translation adjustment | 4.1 | 16.3 | 15.1 | (22.9 | ) | (0.9 | ) | |||||||||||||||||
Balance at end-of-period | $ | 802.6 | $ | 806.5 | $ | 807.3 | $ | 772.1 | $ | 760.4 | ||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||
Balance at beginning-of-period | $ | 404.5 | $ | 400.4 | $ | 402.6 | $ | 398.2 | $ | 379.3 | ||||||||||||||
Deferrals | 0.9 | 0.7 | 0.8 | 0.9 | 0.9 | |||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||
Unlocking | (1.0 | ) | 0.1 | (5.3 | ) | (1.0 | ) | (0.5 | ) | |||||||||||||||
Other amortization | (6.0 | ) | (6.7 | ) | (7.4 | ) | (7.5 | ) | (7.7 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||
expense assessments | (6.1 | ) | (5.9 | ) | (11.9 | ) | (7.7 | ) | (7.3 | ) | ||||||||||||||
Foreign currency translation adjustment | 2.0 | 8.1 | 7.5 | (11.2 | ) | (0.4 | ) | |||||||||||||||||
Balance at end-of-period | $ | 400.4 | $ | 402.6 | $ | 398.2 | $ | 379.3 | $ | 371.5 |
3/31/2008 | PAGE 31 |
Lincoln UK | ||||||||||||||||||||||||
Operational Data | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Unit Linked Assets | ||||||||||||||||||||||||
Balance at Beginning-of-Period | $ | 8.757 | $ | 8.906 | $ | 9.168 | $ | 9.192 | $ | 8.850 | 1.1 | % | ||||||||||||
Deposits | 0.068 | 0.100 | 0.079 | 0.075 | 0.060 | -11.8 | % | |||||||||||||||||
Withdrawals (including charges) and deaths | (0.240 | ) | (0.251 | ) | (0.251 | ) | (0.227 | ) | (0.213 | ) | 11.3 | % | ||||||||||||
Net flows | (0.172 | ) | (0.151 | ) | (0.172 | ) | (0.152 | ) | (0.153 | ) | 11.0 | % | ||||||||||||
Investment income and change in market value | 0.277 | 0.229 | 0.025 | 0.070 | (0.608 | ) | NM | |||||||||||||||||
Foreign currency adjustment | 0.045 | 0.183 | 0.171 | (0.259 | ) | (0.010 | ) | NM | ||||||||||||||||
Unit Linked Assets - Balance at End-of-Period | $ | 8.906 | $ | 9.168 | $ | 9.192 | $ | 8.850 | $ | 8.079 | -9.3 | % | ||||||||||||
Individual Life In Force | $ | 19.307 | $ | 19.605 | $ | 19.757 | $ | 19.022 | $ | 18.283 | -5.3 | % | ||||||||||||
Exchange Rate - Dollars to Pounds | ||||||||||||||||||||||||
For-the-Period | 1.964 | 1.989 | 2.025 | 2.051 | 1.987 | 1.2 | % | |||||||||||||||||
End-of-Period | 1.968 | 2.008 | 2.046 | 1.987 | 1.985 | 0.9 | % |
3/31/2008 | PAGE 32 |
Other Operations (1) | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||
Insurance premiums | $ | 2.7 | $ | (1.2 | ) | $ | 1.3 | $ | 0.7 | $ | 1.4 | -48.8 | % | |||||||||||
Net investment income | 87.2 | 91.4 | 92.6 | 101.3 | 98.6 | 13.2 | % | |||||||||||||||||
Amortization of deferred gain on business sold through | ||||||||||||||||||||||||
reinsurance (2) | 18.6 | 18.6 | 18.6 | 18.6 | 18.5 | -0.7 | % | |||||||||||||||||
Other revenues and fees | 0.0 | 5.6 | (3.7 | ) | 1.2 | (2.2 | ) | NM | ||||||||||||||||
Communications revenues | 24.8 | 28.8 | 26.6 | 26.5 | 21.7 | -12.6 | % | |||||||||||||||||
Inter-segment elimination of investment advisory fees | (24.5 | ) | (19.6 | ) | (22.6 | ) | (20.3 | ) | (20.0 | ) | 18.5 | % | ||||||||||||
Total Operating Revenues | 108.8 | 123.6 | 112.9 | 127.9 | 118.0 | 8.4 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||
Insurance benefits | 36.0 | 38.3 | 35.7 | 36.4 | 27.8 | -23.0 | % | |||||||||||||||||
Interest credited to contract holder funds | 43.8 | 44.4 | 48.4 | 47.8 | 45.8 | 4.6 | % | |||||||||||||||||
Operating and acquisition expenses | 21.5 | 38.5 | 48.2 | 55.2 | 34.9 | 62.3 | % | |||||||||||||||||
Taxes, licenses and fees | 3.4 | 0.5 | 3.9 | 5.1 | 2.1 | -37.4 | % | |||||||||||||||||
Interest and debt expenses | 62.4 | 73.1 | 68.2 | 80.3 | 75.4 | 21.0 | % | |||||||||||||||||
Communications expenses | 14.7 | 15.2 | 13.2 | 13.5 | 15.5 | 5.9 | % | |||||||||||||||||
Inter-segment elimination of investment advisory fees | (24.5 | ) | (19.6 | ) | (22.6 | ) | (20.3 | ) | (20.0 | ) | 18.5 | % | ||||||||||||
Total Operating Expenses | 157.2 | 190.3 | 195.1 | 218.0 | 181.6 | 15.5 | % | |||||||||||||||||
Loss from operations before federal income taxes | (48.3 | ) | (66.7 | ) | (82.2 | ) | (90.1 | ) | (63.6 | ) | -31.5 | % | ||||||||||||
Federal income taxes | (20.3 | ) | (30.6 | ) | (32.4 | ) | (30.8 | ) | (21.2 | ) | -4.7 | % | ||||||||||||
Loss from Operations | $ | (28.0 | ) | $ | (36.2 | ) | $ | (49.8 | ) | $ | (59.2 | ) | $ | (42.3 | ) | -50.9 | % | |||||||
Run Off Institutional Pensions Account Values - | ||||||||||||||||||||||||
Balance at End-of-Period | $ | 2.734 | $ | 2.729 | $ | 2.720 | $ | 2.094 | $ | 2.074 | -24.1 | % | ||||||||||||
Discontinued Operations | ||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Discontinued Operations Before Disposal | ||||||||||||||||||||||||
Income from discontinued operations before federal income taxes | $ | 11.9 | $ | 9.6 | $ | 10.2 | $ | 13.9 | $ | 7.4 | -37.8 | % | ||||||||||||
Federal income taxes | 4.2 | 3.4 | 3.6 | 4.8 | 2.6 | -38.0 | % | |||||||||||||||||
Income From Discontinued Operations Before Disposal | 7.7 | 6.3 | 6.6 | 9.1 | 4.8 | -37.6 | % | |||||||||||||||||
Disposal | ||||||||||||||||||||||||
Gain (loss) on disposal before federal income taxes | - | - | - | 57.1 | (12.3 | ) | NM | |||||||||||||||||
Federal income taxes | - | - | - | 193.0 | (3.3 | ) | NM | |||||||||||||||||
Loss on Disposal | - | - | - | (135.9 | ) | (9.0 | ) | NM | ||||||||||||||||
Income (Loss) From Discontinued Operations | $ | 7.7 | $ | 6.3 | $ | 6.6 | $ | (126.8 | ) | $ | (4.2 | ) | NM | |||||||||||
(1) Includes inter-segment eliminations of transactions. |
(2) Represents the amortization of deferred gain recognized on the business sold through indemnity reinsurance to Swiss Re. |
3/31/2008 | PAGE 33 |
Consolidated Domestic Deposits/Account Balances | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Deposits - For the Period | ||||||||||||||||||||||||
Individual Markets - fixed annuities (1) | $ | 0.821 | $ | 0.982 | $ | 1.231 | $ | 1.288 | $ | 1.160 | 41.3 | % | ||||||||||||
Individual Markets - variable annuities | 2.000 | 2.295 | 2.247 | 2.593 | 1.865 | -6.8 | % | |||||||||||||||||
Individual Markets - Life Insurance | 1.039 | 1.005 | 0.980 | 1.086 | 0.967 | -6.9 | % | |||||||||||||||||
Employer Markets - fixed annuities | 0.299 | 0.233 | 0.305 | 0.268 | 0.332 | 11.0 | % | |||||||||||||||||
Employer Markets - variable products (2) | 1.188 | 1.041 | 1.219 | 0.997 | 1.220 | 2.7 | % | |||||||||||||||||
Employer Markets - Executive Benefits | 0.065 | 0.079 | 0.052 | 0.107 | 0.165 | 153.8 | % | |||||||||||||||||
Investment Management - annuities | 1.300 | 0.902 | 0.891 | 0.954 | 1.562 | 20.2 | % | |||||||||||||||||
Investment Management - mutual funds | 1.753 | 1.896 | 1.543 | 2.241 | 1.592 | -9.2 | % | |||||||||||||||||
Investment Management - managed account and other | 0.550 | 0.474 | 0.377 | 0.398 | 0.341 | -38.0 | % | |||||||||||||||||
Consolidating adjustments | (0.799 | ) | (0.890 | ) | (0.878 | ) | (0.926 | ) | (1.494 | ) | -87.0 | % | ||||||||||||
Total Gross Retail Deposits | 8.217 | 8.016 | 7.968 | 9.005 | 7.710 | -6.2 | % | |||||||||||||||||
Investment Management - institutional | 2.431 | 2.877 | 2.934 | 2.230 | 1.229 | -49.4 | % | |||||||||||||||||
Consolidating adjustments | (0.112 | ) | (0.188 | ) | (0.030 | ) | (0.192 | ) | (0.092 | ) | 17.9 | % | ||||||||||||
Total Gross Deposits | $ | 10.536 | $ | 10.706 | $ | 10.873 | $ | 11.043 | $ | 8.846 | -16.0 | % | ||||||||||||
Account Balances - End of Period | ||||||||||||||||||||||||
Individual Markets - fixed annuities (1) | $ | 16.449 | $ | 16.270 | $ | 16.383 | $ | 16.470 | $ | 16.395 | -0.3 | % | ||||||||||||
Individual Markets - variable annuities | 50.300 | 55.171 | 58.293 | 58.643 | 54.966 | 9.3 | % | |||||||||||||||||
Individual Markets - Life Insurance | 26.924 | 27.465 | 27.875 | 28.122 | 27.881 | 3.6 | % | |||||||||||||||||
Employer Markets - fixed annuities | 10.993 | 10.940 | 10.891 | 10.889 | 11.217 | 2.0 | % | |||||||||||||||||
Employer Markets - variable products (2) | 23.482 | 25.024 | 25.745 | 25.168 | 23.546 | 0.3 | % | |||||||||||||||||
Employer Markets - Executive Benefits | 4.264 | 4.353 | 4.391 | 4.436 | 4.460 | 4.6 | % | |||||||||||||||||
Investment Management - annuities | 15.467 | 12.780 | 12.814 | 12.282 | 11.697 | -24.4 | % | |||||||||||||||||
Investment Management - mutual funds | 18.747 | 19.894 | 20.274 | 19.793 | 18.690 | -0.3 | % | |||||||||||||||||
Investment Management - managed account and other | 17.681 | 18.215 | 18.092 | 17.638 | 15.244 | -13.8 | % | |||||||||||||||||
Consolidating adjustments | (15.025 | ) | (12.240 | ) | (12.300 | ) | (11.798 | ) | (11.264 | ) | 25.0 | % | ||||||||||||
Total Retail Account Balances | 169.282 | 177.871 | 182.458 | 181.644 | 172.831 | 2.1 | % | |||||||||||||||||
Investment Management - institutional | 46.251 | 46.836 | 48.536 | 35.644 | 32.907 | -28.9 | % | |||||||||||||||||
Consolidating adjustments | (2.829 | ) | (2.604 | ) | (2.529 | ) | (2.357 | ) | (2.208 | ) | 22.0 | % | ||||||||||||
Total Account Balances | $ | 212.704 | $ | 222.103 | $ | 228.465 | $ | 214.931 | $ | 203.529 | -4.3 | % | ||||||||||||
Total Domestic Net Flows | ||||||||||||||||||||||||
Unaudited (in billions) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Retail Net Flows | ||||||||||||||||||||||||
Individual Markets - Life Insurance | $ | 0.698 | $ | 0.586 | $ | 0.635 | $ | 0.745 | $ | 0.579 | -17.0 | % | ||||||||||||
Individual Markets - Annuities | 0.754 | 1.138 | 1.291 | 1.808 | 1.181 | 56.6 | % | |||||||||||||||||
Employer Markets - Defined Contribution | 0.221 | 0.074 | 0.133 | (0.091 | ) | 0.281 | 27.1 | % | ||||||||||||||||
Employer Markets - Executive Benefits | (0.075 | ) | 0.026 | (0.005 | ) | 0.037 | 0.071 | 194.7 | % | |||||||||||||||
Investment Management - retail | 0.233 | (0.277 | ) | (0.334 | ) | (0.649 | ) | (0.655 | ) | NM | ||||||||||||||
Consolidating adjustments | (0.004 | ) | 0.330 | 0.071 | 0.140 | (0.098 | ) | NM | ||||||||||||||||
Total Retail Net Flows | 1.827 | 1.876 | 1.790 | 1.991 | 1.359 | -25.6 | % | |||||||||||||||||
Investment Management - institutional | (0.321 | ) | (0.148 | ) | 0.425 | (0.302 | ) | (0.510 | ) | -58.9 | % | |||||||||||||
Consolidating adjustments | 0.048 | (0.026 | ) | 0.128 | 0.132 | 0.030 | -37.5 | % | ||||||||||||||||
Total Net Flows | $ | 1.554 | $ | 1.702 | $ | 2.343 | $ | 1.821 | $ | 0.878 | -43.5 | % | ||||||||||||
(1) Includes fixed portion of variable annuities. |
(2) Includes amounts attributable to Alliance and Smart Future mutual fund net flows. Alliance and Smart Future mutual fund account values are not |
included in the separate accounts reported on our Consolidated Balance Sheets. |
3/31/2008 | PAGE 34 |
Consolidated Investment Data - Assets Managed | ||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||
As of | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Assets Managed by Source | ||||||||||||||||||||||||
LNC's investments and cash: | ||||||||||||||||||||||||
Fixed maturity securities - available for sale | $ | 56.256 | $ | 55.447 | $ | 56.086 | $ | 56.276 | $ | 55.624 | -1.1 | % | ||||||||||||
Equity securities - available for sale | 0.714 | 0.687 | 0.670 | 0.518 | 0.474 | -33.6 | % | |||||||||||||||||
Trading securities | 2.910 | 2.818 | 2.717 | 2.730 | 2.714 | -6.7 | % | |||||||||||||||||
Other investments | 11.934 | 11.880 | 12.040 | 12.398 | 12.743 | 6.8 | % | |||||||||||||||||
Total LNC investments | 71.814 | 70.832 | 71.513 | 71.922 | 71.555 | -0.4 | % | |||||||||||||||||
Separate accounts | 83.147 | 89.497 | 92.903 | 91.113 | 84.703 | 1.9 | % | |||||||||||||||||
Cash and invested cash | 0.905 | 0.989 | 1.328 | 1.665 | 2.447 | 170.4 | % | |||||||||||||||||
Total LNC | 155.866 | 161.319 | 165.744 | 164.700 | 158.705 | 1.8 | % | |||||||||||||||||
Non-affiliate assets managed | 81.134 | 83.709 | 85.684 | 71.975 | 66.020 | -18.6 | % | |||||||||||||||||
Total Assets Managed | $ | 237.000 | $ | 245.028 | $ | 251.427 | $ | 236.675 | $ | 224.725 | -5.2 | % | ||||||||||||
Assets Managed by Advisor | ||||||||||||||||||||||||
Investment Management segment | ||||||||||||||||||||||||
(See page 24 for additional detail) | $ | 98.146 | $ | 97.725 | $ | 99.716 | $ | 85.357 | $ | 78.537 | -20.0 | % | ||||||||||||
DLIA-Corp (Assets managed internally-see page 24) | 67.658 | 66.423 | 67.324 | 67.416 | 67.340 | -0.5 | % | |||||||||||||||||
Lincoln UK | 10.255 | 10.536 | 10.589 | 10.247 | 9.445 | -7.9 | % | |||||||||||||||||
Domestic policy loans (excluding Lincoln UK) | 2.763 | 2.783 | 2.786 | 2.831 | 2.801 | 1.4 | % | |||||||||||||||||
Non-LNC affiliates | 58.178 | 67.562 | 71.012 | 70.824 | 66.602 | 14.5 | % | |||||||||||||||||
Total Assets Managed | $ | 237.000 | $ | 245.028 | $ | 251.427 | $ | 236.675 | $ | 224.725 | -5.2 | % |
3/31/2008 | PAGE 35 | |||||||||||||||||||||||
Consolidated Investment Data - Other Investment Data | ||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||
Available-for-sale fixed maturity securities | $ | 844.0 | $ | 845.4 | $ | 854.0 | $ | 868.0 | $ | 858.2 | 1.7 | % | ||||||||||||
Available-for-sale equity securities | 8.6 | 11.8 | 10.4 | 10.4 | 9.1 | 5.7 | % | |||||||||||||||||
Trading securities | 45.4 | 44.4 | 44.0 | 42.4 | 42.5 | -6.4 | % | |||||||||||||||||
Mortgage loans on real estate | 130.6 | 131.8 | 123.0 | 122.0 | 121.6 | -6.9 | % | |||||||||||||||||
Real estate | 15.2 | 12.5 | 15.5 | 13.3 | 8.0 | -47.4 | % | |||||||||||||||||
Policy loans | 42.6 | 44.3 | 43.0 | 44.6 | 44.6 | 4.6 | % | |||||||||||||||||
Invested cash | 18.9 | 16.7 | 16.2 | 20.9 | 18.8 | -0.6 | % | |||||||||||||||||
Other investments | 29.2 | 73.0 | 4.3 | 17.4 | (2.9 | ) | NM | |||||||||||||||||
Investment income | 1,134.6 | 1,179.7 | 1,110.4 | 1,138.9 | 1,099.8 | -3.1 | % | |||||||||||||||||
Investment expense | (44.8 | ) | (46.5 | ) | (48.8 | ) | (45.2 | ) | (34.4 | ) | 23.2 | % | ||||||||||||
Net Investment Income | $ | 1,089.7 | $ | 1,133.2 | $ | 1,061.6 | $ | 1,093.7 | $ | 1,065.4 | -2.2 | % | ||||||||||||
Mean Invested Assets (Amortized Cost) | $ | 69,905.7 | $ | 70,062.2 | $ | 70,535.5 | $ | 70,718.2 | $ | 70,941.2 | ||||||||||||||
Ratio of Net Investment Income Over Mean Invested Assets | 6.24 | % | 6.47 | % | 6.02 | % | 6.19 | % | 6.01 | % | ||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Realized Gain (Loss) Related to Investments | ||||||||||||||||||||||||
Fixed maturity securities available-for-sale | ||||||||||||||||||||||||
Gross gains | $ | 54.9 | $ | 26.6 | $ | 26.4 | $ | 16.7 | $ | 9.1 | -83.3 | % | ||||||||||||
Gross losses | (6.8 | ) | (46.3 | ) | (44.2 | ) | (87.7 | ) | (100.0 | ) | NM | |||||||||||||
Equity securities | ||||||||||||||||||||||||
Gross gains | 2.3 | 4.0 | 1.2 | 0.3 | 2.8 | 23.5 | % | |||||||||||||||||
Gross losses | (0.0 | ) | (0.4 | ) | (0.0 | ) | (110.9 | ) | - | 100.0 | % | |||||||||||||
Gain (loss) on other investments | (4.2 | ) | 5.3 | 5.9 | 11.5 | 25.1 | NM | |||||||||||||||||
Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds | (19.9 | ) | (1.7 | ) | (14.3 | ) | 65.2 | 25.1 | 226.2 | % | ||||||||||||||
Total realized gain (loss) on investments, excluding trading securities | 26.3 | (12.6 | ) | (25.0 | ) | (104.9 | ) | (37.9 | ) | NM | ||||||||||||||
Loss on certain derivative instruments | 0.2 | 4.0 | (10.9 | ) | (4.1 | ) | (3.1 | ) | NM | |||||||||||||||
Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds | (0.0 | ) | (0.0 | ) | 0.5 | 0.2 | (0.0 | ) | NM | |||||||||||||||
Total, pre-tax | 26.4 | (8.6 | ) | (35.4 | ) | (108.9 | ) | (41.0 | ) | NM | ||||||||||||||
Income taxes | 9.3 | (3.8 | ) | (12.2 | ) | (37.4 | ) | (14.0 | ) | NM | ||||||||||||||
Total, After-Tax | $ | 17.1 | $ | (4.9 | ) | $ | (23.2 | ) | $ | (71.4 | ) | $ | (27.1 | ) | NM | |||||||||
As of March 31, 2008 | As of December 31, 2007 | |||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||||||||||
Available-for-Sale and Trading Securities | ||||||||||||||||||||||||
Fixed maturity securities (fair value) | $ | 58,335.5 | 99.2 | % | $ | 59,003.8 | 99.1 | % | ||||||||||||||||
Fixed maturity security (amortized cost) | 58,952.5 | 99.1 | % | 58,578.9 | 99.1 | % | ||||||||||||||||||
Equity securities (fair value) | 476.5 | 0.8 | % | 520.0 | 0.9 | % | ||||||||||||||||||
Equity securities (amortized cost) | 558.3 | 0.9 | % | 549.9 | 0.9 | % | ||||||||||||||||||
% of Available-for-Sale Fixed Maturity Securities (Based on Fair Value) | ||||||||||||||||||||||||
Treasuries and AAA | 23.4 | % | 23.1 | % | ||||||||||||||||||||
AA or better | 32.3 | % | 32.9 | % | ||||||||||||||||||||
BB or less | 5.2 | % | 5.1 | % | ||||||||||||||||||||
General Account Investments | As of March 31, 2008 | As of December 31, 2007 | ||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||||||||||
Fixed Maturities - Security Sector: | ||||||||||||||||||||||||
Corporate bonds | $ | 43,535.4 | 78.2 | % | $ | 44,147.9 | 78.5 | % | ||||||||||||||||
U.S. Government bonds | 231.9 | 0.4 | % | 222.0 | 0.4 | % | ||||||||||||||||||
Foreign government bonds | 1,037.4 | 1.9 | % | 1,037.5 | 1.8 | % | ||||||||||||||||||
Mortgage-backed securities | 10,568.8 | 19.0 | % | 10,604.6 | 18.8 | % | ||||||||||||||||||
State and municipal bonds | 153.0 | 0.3 | % | 153.1 | 0.3 | % | ||||||||||||||||||
Preferred stocks - redeemable | 97.5 | 0.2 | % | 110.7 | 0.2 | % | ||||||||||||||||||
Total | $ | 55,624.0 | 100.0 | % | $ | 56,275.7 | 100.0 | % | ||||||||||||||||
As of | ||||||||||||||||||||||||
March | June | Sept. | Dec. | March | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2007 | 2008 | Change | |||||||||||||||||||
Composition of Investment Portfolio: | ||||||||||||||||||||||||
Securities available-for-sale, at fair value: | ||||||||||||||||||||||||
Fixed maturity | $ | 56,255.6 | $ | 55,447.0 | $ | 56,086.1 | $ | 56,275.7 | $ | 55,624.0 | -1.1 | % | ||||||||||||
Equity | 713.9 | 686.8 | 670.3 | 518.0 | 474.4 | -33.5 | % | |||||||||||||||||
Trading securities | 2,909.7 | 2,818.3 | 2,716.6 | 2,730.2 | 2,713.6 | -6.7 | % | |||||||||||||||||
Mortgage loans on real estate and real estate | 7,822.2 | 7,698.4 | 7,665.7 | 7,681.0 | 7,707.2 | -1.5 | % | |||||||||||||||||
Policy loans | 2,766.8 | 2,787.0 | 2,790.2 | 2,834.7 | 2,804.0 | 1.3 | % | |||||||||||||||||
Derivative investments | 412.6 | 375.9 | 554.1 | 807.1 | 1,091.1 | 164.5 | % | |||||||||||||||||
Other investments | 932.9 | 1,019.1 | 1,030.0 | 1,075.0 | 1,140.9 | 22.3 | % | |||||||||||||||||
Total | $ | 71,813.6 | $ | 70,832.5 | $ | 71,512.9 | $ | 71,921.6 | $ | 71,555.3 | -0.4 | % |