Exhibit 99.2
Lincoln Statistical Report | ||||||||||
second Q U A R T E R | ||||||||||
![]() | 2 0 0 8 | |||||||||
The financial data in this document is dated July 29, 2008 and has not been updated since that date. LNC does not intend to update this document. | ||||||||||
Lincoln Financial Group | ||||||||
Statistical Report | ||||||||
Second Quarter | ||||||||
2008 | ||||||||
Table of Contents | ||||||||
LFG Analyst Coverage | ||||||||
Notes | ||||||||
Financial Highlights | 1 - 3 | |||||||
Consolidated Operating Expense Detail | 4 | |||||||
Operating Results Summary | 5 | |||||||
Details Underlying Realized Gain (Loss), After-DAC | 6 | |||||||
Consolidated Statements of Income | 7 | |||||||
Consolidating Statements of Income from Operations - Current Year - Quarter | 8 | |||||||
Consolidating Statements of Income from Operations - Prior Year - Quarter | 8(B) | |||||||
Consolidating Statements of Income from Operations - Current Year - Year to Date | 9 | |||||||
Consolidating Statements of Income from Operations - Prior Year- Year to Date | 9(B) | |||||||
Consolidated Balance Sheets | 10 | |||||||
Balance Sheet Data - Segment Highlights | 11 | |||||||
Individual Markets | ||||||||
Life Insurance | ||||||||
Income Statements and Operational Data | 12 | |||||||
Operational Data and Account Value Roll Forward | 13 | |||||||
Annuities | ||||||||
Income Statements and Operational Data | 14 | |||||||
Roll Forwards of DAC, VOBA, DFEL and DSI | 15 | |||||||
Account Value Roll Forward | 16 | |||||||
Account Values, Spread Information, GLB Expense Assessments, | ||||||||
GLB Attributed Fee and GLB Account Values by Type | 17 | |||||||
Employer Markets | ||||||||
Defined Contribution | ||||||||
Income Statements and Operational Data | 18 | |||||||
Account Value Roll Forward | 19 | |||||||
Account Value Roll Forward - By Product and Supplemental Data | 20 | |||||||
Executive Benefits | ||||||||
Income Statements and Operational Data | 21 | |||||||
Account Value Roll Forward and Supplemental Data | 22 | |||||||
Group Protection | ||||||||
Income Statements and Operational Data | 23 | |||||||
Investment Management | ||||||||
Income Statements | 24 | |||||||
Assets Under Management Roll Forward | 25 | |||||||
Assets Under Management Roll Forward (Continued) | 25(B) | |||||||
Lincoln UK | ||||||||
Income Statements | 26 | |||||||
Operational Data | 27 | |||||||
Other Operations | 28 | |||||||
Discontinued Operations | 28 | |||||||
Domestic Deposits / Account Balances / Net Flows | 29 | |||||||
Consolidated Investment Data | ||||||||
Assets Managed | 30 | |||||||
Other Investment Data | 31 |
LFG Analyst Coverage
Second Quarter, 2008
FIRM | ANALYST | PHONE NUMBER |
Banc of America Securities | Tamara Kravec | 646-855-5212 |
Sanford C. 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 | 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 | Steven Schwartz | 312-612-7686 |
UBS | Andrew Kligerman | 212-713-2492 |
Wachovia Securities | 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.
6/30/2008 | 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 gain (loss)"); | |||
* 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 | |||
("GLB Net Derivatives Results"); | |||
* 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 Net Derivative Results"); and | |||
* Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to | |||
hedge contract holder index allocations applicable to future reset periods for our indexed annuity products 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; | |||
* Income (loss) from discontinued operations; and | |||
* Losses from the impairment of intangible assets. | |||
* | Operating Revenues represent GAAP revenues excluding the following, as applicable: | ||
* Excluded realized gain (loss); | |||
* 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 our use of 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 our consolidated results. | |||
Income from Operations, Operating Revenues and Return on Capital are internal measures used by LNC in the management of our operations. | |||
Management believes that these performance measures explain the results of our ongoing operations in a manner that allows for a better | |||
understanding of the underlying trends in our 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 our | ||
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; | |||
* Annuities - 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 (loss) from discontinued | |||
operations for all periods presented on the Financial Highlights, Operating Results Summary and Consolidated Statements of Income pages. | |||
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 net 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), 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. | |||
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. |
6/30/2008 | PAGE 1 | |||||||||
Financial Highlights | ||||||||||
Unaudited (in millions, except per share data) |
For the Quarters Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
2008 | 2007 | Amount | % | 2008 | 2007 | Amount | % | |||||||||||||||||||||||||
Income from Operations - By Segment | ||||||||||||||||||||||||||||||||
Individual Life Insurance | $ | 152.6 | $ | 176.4 | $ | (23.8 | ) | -13.5 | % | $ | 298.1 | $ | 343.0 | $ | (44.9 | ) | -13.1 | % | ||||||||||||||
Individual Annuities | 116.2 | 123.4 | (7.2 | ) | -5.8 | % | 234.0 | 240.0 | (6.0 | ) | -2.5 | % | ||||||||||||||||||||
Total Individual Markets | 268.8 | 299.8 | (31.0 | ) | -10.3 | % | 532.1 | 583.0 | (50.9 | ) | -8.7 | % | ||||||||||||||||||||
Defined Contribution | 41.2 | 47.3 | (6.1 | ) | -12.9 | % | 81.6 | 97.0 | (15.4 | ) | -15.9 | % | ||||||||||||||||||||
Executive Benefits | 11.0 | 10.8 | 0.2 | 1.9 | % | 22.9 | 22.7 | 0.2 | 0.9 | % | ||||||||||||||||||||||
Group Protection | 32.2 | 29.0 | 3.2 | 11.0 | % | 58.5 | 52.1 | 6.4 | 12.3 | % | ||||||||||||||||||||||
Total Employer Markets | 84.4 | 87.1 | (2.7 | ) | -3.1 | % | 163.0 | 171.8 | (8.8 | ) | -5.1 | % | ||||||||||||||||||||
Investment Management | 15.0 | 11.3 | 3.7 | 32.7 | % | 27.1 | 27.5 | (0.4 | ) | -1.5 | % | |||||||||||||||||||||
Lincoln UK | 18.0 | 11.7 | 6.3 | 53.8 | % | 28.6 | 22.5 | 6.1 | 27.1 | % | ||||||||||||||||||||||
Other Operations | (44.4 | ) | (36.2 | ) | (8.2 | ) | -22.7 | % | (86.6 | ) | (64.1 | ) | (22.5 | ) | -35.1 | % | ||||||||||||||||
Total Income From Operations (1) | 341.8 | 373.7 | (31.9 | ) | -8.5 | % | 664.2 | 740.7 | (76.5 | ) | -10.3 | % | ||||||||||||||||||||
Excluded realized gain (loss), after-tax (2) | (78.2 | ) | 3.9 | (82.1 | ) | NM | (107.7 | ) | 25.5 | (133.2 | ) | NM | ||||||||||||||||||||
Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance, after-tax | 0.4 | (7.9 | ) | 8.3 | 105.1 | % | 0.8 | (7.8 | ) | 8.6 | 110.3 | % | ||||||||||||||||||||
Impairment of intangibles, after-tax (3) | (139.0 | ) | - | (139.0 | ) | NM | (139.0 | ) | - | (139.0 | ) | NM | ||||||||||||||||||||
Income (loss) from discontinued operations, after-tax (4) | (0.3 | ) | 6.3 | (6.6 | ) | NM | (4.5 | ) | 14.0 | (18.5 | ) | NM | ||||||||||||||||||||
Net Income | $ | 124.7 | $ | 376.0 | $ | (251.3 | ) | -66.8 | % | $ | 413.8 | $ | 772.4 | $ | (358.6 | ) | -46.4 | % | ||||||||||||||
Earnings Per Share (Diluted) (5) | ||||||||||||||||||||||||||||||||
Income from operations (1) | $ | 1.32 | $ | 1.36 | $ | (0.04 | ) | -2.9 | % | $ | 2.54 | $ | 2.67 | $ | (0.13 | ) | -4.9 | % | ||||||||||||||
Excluded realized gain (loss), after-tax (2) | �� | (0.30 | ) | 0.02 | (0.32 | ) | NM | (0.41 | ) | 0.10 | (0.51 | ) | NM | |||||||||||||||||||
Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance, after-tax | - | (0.03 | ) | 0.03 | 100.0 | % | - | (0.03 | ) | 0.03 | 100.0 | % | ||||||||||||||||||||
Impairment of intangibles, after-tax (3) | (0.54 | ) | - | (0.54 | ) | NM | (0.53 | ) | - | (0.53 | ) | NM | ||||||||||||||||||||
Income (loss) from discontinued operations, after-tax (4) | - | 0.02 | (0.02 | ) | -100.0 | % | (0.02 | ) | 0.05 | (0.07 | ) | NM | ||||||||||||||||||||
Net Income | $ | 0.48 | $ | 1.37 | $ | (0.89 | ) | -65.0 | % | $ | 1.58 | $ | 2.79 | $ | (1.21 | ) | -43.4 | % | ||||||||||||||
Operating Revenues - By Segment | ||||||||||||||||||||||||||||||||
Individual Life Insurance | $ | 1,020.7 | $ | 957.4 | $ | 63.3 | 6.6 | % | $ | 2,008.2 | $ | 1,928.9 | $ | 79.3 | 4.1 | % | ||||||||||||||||
Individual Annuities | 618.7 | 623.7 | (5.0 | ) | -0.8 | % | 1,241.3 | 1,214.0 | 27.3 | 2.2 | % | |||||||||||||||||||||
Total Individual Markets | 1,639.4 | 1,581.1 | 58.3 | 3.7 | % | 3,249.5 | 3,142.9 | 106.6 | 3.4 | % | ||||||||||||||||||||||
Defined Contribution | 239.4 | 252.0 | (12.6 | ) | -5.0 | % | 477.1 | 498.8 | (21.7 | ) | -4.4 | % | ||||||||||||||||||||
Executive Benefits | 65.4 | 66.1 | (0.7 | ) | -1.1 | % | 131.0 | 135.4 | (4.4 | ) | -3.2 | % | ||||||||||||||||||||
Group Protection | 424.9 | 391.0 | 33.9 | 8.7 | % | 824.3 | 751.4 | 72.9 | 9.7 | % | ||||||||||||||||||||||
Total Employer Markets | 729.7 | 709.1 | 20.6 | 2.9 | % | 1,432.4 | 1,385.6 | 46.8 | 3.4 | % | ||||||||||||||||||||||
Investment Management | 124.3 | 151.0 | (26.7 | ) | -17.7 | % | 244.6 | 301.1 | (56.5 | ) | -18.8 | % | ||||||||||||||||||||
Lincoln UK | 97.9 | 92.6 | 5.3 | 5.7 | % | 183.5 | 183.3 | 0.2 | 0.1 | % | ||||||||||||||||||||||
Other Operations | 110.0 | 123.6 | (13.6 | ) | -11.0 | % | 227.9 | 232.3 | (4.4 | ) | -1.9 | % | ||||||||||||||||||||
Total Operating Revenues | 2,701.3 | 2,657.4 | 43.9 | 1.7 | % | 5,337.9 | 5,245.2 | 92.7 | 1.8 | % | ||||||||||||||||||||||
Excluded realized gain (loss), pre-tax (2) | (120.3 | ) | 5.7 | (126.0 | ) | NM | (165.6 | ) | 38.7 | (204.3 | ) | NM | ||||||||||||||||||||
Amortization of deferred gains arising from reserve changes on business sold through reinsurance, pre-tax | 0.7 | 7.8 | (7.1 | ) | -91.0 | % | 1.4 | 8.2 | (6.8 | ) | -82.9 | % | ||||||||||||||||||||
Total Revenues | $ | 2,581.7 | $ | 2,670.9 | $ | (89.2 | ) | -3.3 | % | $ | 5,173.7 | $ | 5,292.1 | $ | (118.4 | ) | -2.2 | % |
(1) Income from operations includes restructuring charges, after-tax, of $0.8 million, or -0- cents per share, and $4.0 million, or 1 cent per share, for the quarters ended June 30, 2008 and 2007, respectively. | |
(2) See page 6 for detail. | |
(3) We recorded goodwill impairment of $83.0 million and impairment of our FCC license intangible assets of $86.6 million, pre-tax, and $56.0 million, after-tax, on our remaining radio clusters. These impairments were attributable primarily to declines in advertising revenues for the entire radio market, which resulted in declines in current and forecasted broadcast cash flows. Therefore, we updated our impairment review, outside of our annual process normally completed as of October 1 each year, as of April 1, 2008. | |
(4) Includes discontinued operations and the loss on disposal. See Discontinued Operations on page 28 for details. | |
(5) The income used in the calculation of our diluted earnings per share is reduced by minority interest adjustments related to outstanding stock options under the Delaware Investments U.S., Inc stock option incentive plan. See page 5 for detail of minority interest. |
6/30/2008 | PAGE 2 | |||||||||||||||||||||||||||||||
Financial Highlights | ||||||||||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||||||||||
Operational Data by Segment | For the Quarters Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
2008 | 2007 | Amount | % | 2008 | 2007 | Amount | % | |||||||||||||||||||||||||
Individual Markets - Life Insurance | ||||||||||||||||||||||||||||||||
Sales (in millions) (1) | 152.9 | 180.0 | (27.1 | ) | -15.1 | % | 298.3 | 383.5 | (85.2 | ) | -22.2 | % | ||||||||||||||||||||
Life insurance in force | 522.777 | 512.195 | 10.582 | 2.1 | % | 522.777 | 512.195 | 10.582 | 2.1 | % | ||||||||||||||||||||||
Account values | 28.077 | 27.465 | 0.612 | 2.2 | % | 28.077 | 27.465 | 0.612 | 2.2 | % | ||||||||||||||||||||||
Individual Markets - Annuities | ||||||||||||||||||||||||||||||||
Gross deposits | $ | 3.436 | $ | 3.277 | $ | 0.159 | 4.9 | % | $ | 6.462 | $ | 6.098 | $ | 0.364 | 6.0 | % | ||||||||||||||||
Net flows | 1.589 | 1.137 | 0.452 | 39.8 | % | 2.770 | 1.892 | 0.878 | 46.4 | % | ||||||||||||||||||||||
Account values (gross) | 73.653 | 73.038 | 0.615 | 0.8 | % | 73.653 | 73.038 | 0.615 | 0.8 | % | ||||||||||||||||||||||
Account values (net of reinsurance) | 72.398 | 71.440 | 0.958 | 1.3 | % | 72.398 | 71.440 | 0.958 | 1.3 | % | ||||||||||||||||||||||
Employer Markets - Defined Contribution | ||||||||||||||||||||||||||||||||
Gross deposits (2) | $ | 1.421 | $ | 1.273 | $ | 0.148 | 11.6 | % | $ | 2.972 | $ | 2.760 | $ | 0.212 | 7.7 | % | ||||||||||||||||
Net flows | 0.237 | 0.073 | 0.164 | 224.7 | % | 0.517 | 0.294 | 0.223 | 75.9 | % | ||||||||||||||||||||||
Account values - annuities | 27.489 | 29.420 | (1.931 | ) | -6.6 | % | 27.489 | 29.420 | (1.931 | ) | -6.6 | % | ||||||||||||||||||||
Alliance and Smart Future Mutual Funds | 7.553 | 6.543 | 1.010 | 15.4 | % | 7.553 | 6.543 | 1.010 | 15.4 | % | ||||||||||||||||||||||
Account values including Alliance and Smart Future Mutual Funds | 35.042 | 35.963 | (0.921 | ) | -2.6 | % | 35.042 | 35.963 | (0.921 | ) | -2.6 | % | ||||||||||||||||||||
Employer Markets - Executive Benefits | ||||||||||||||||||||||||||||||||
COLI/BOLI sales (in millions) | 12.9 | 13.6 | (0.7 | ) | -5.1 | % | 41.1 | 34.0 | 7.1 | 20.9 | % | |||||||||||||||||||||
Life insurance in force | 14.939 | 14.809 | 0.130 | 0.9 | % | 14.939 | 14.809 | 0.130 | 0.9 | % | ||||||||||||||||||||||
Account values | 4.526 | 4.353 | 0.173 | 4.0 | % | 4.526 | 4.353 | 0.173 | 4.0 | % | ||||||||||||||||||||||
Employer Markets - Group Protection | ||||||||||||||||||||||||||||||||
Annualized sales (in millions) | 64.6 | 62.2 | 2.4 | 3.9 | % | 118.7 | 122.8 | (4.1 | ) | -3.3 | % | |||||||||||||||||||||
Loss ratio (3) | 70.2 | % | 70.8 | % | NM | NM | 70.6 | % | 71.8 | % | NM | NM | ||||||||||||||||||||
Investment Management | ||||||||||||||||||||||||||||||||
Retail sales | $ | 2.596 | $ | 3.275 | $ | (0.679 | ) | -20.7 | % | $ | 6.091 | $ | 6.877 | $ | (0.786 | ) | -11.4 | % | ||||||||||||||
Retail net flows | (0.937 | ) | (0.275 | ) | (0.662 | ) | NM | (1.592 | ) | (0.042 | ) | (1.550 | ) | NM | ||||||||||||||||||
Institutional inflows | 0.910 | 2.876 | (1.966 | ) | -68.4 | % | 2.140 | 5.307 | (3.167 | ) | -59.7 | % | ||||||||||||||||||||
Institutional net flows | (0.535 | ) | (0.148 | ) | (0.387 | ) | NM | (1.045 | ) | (0.470 | ) | (0.575 | ) | NM | ||||||||||||||||||
Total sales and inflows | 3.506 | 6.151 | (2.645 | ) | -43.0 | % | 8.231 | 12.184 | (3.953 | ) | -32.4 | % | ||||||||||||||||||||
Total net flows | (1.472 | ) | (0.423 | ) | (1.049 | ) | NM | (2.637 | ) | (0.512 | ) | (2.125 | ) | NM | ||||||||||||||||||
Assets under management - retail and institutional | 75.691 | 97.725 | (22.034 | ) | -22.5 | % | 75.691 | 97.725 | (22.034 | ) | -22.5 | % | ||||||||||||||||||||
Assets under management - general account | 65.997 | 66.423 | (0.426 | ) | -0.6 | % | 65.997 | �� | 66.423 | (0.426 | ) | -0.6 | % | |||||||||||||||||||
Assets under management - total segment | 141.688 | 164.148 | (22.460 | ) | -13.7 | % | 141.688 | 164.148 | (22.460 | ) | -13.7 | % | ||||||||||||||||||||
Consolidated | ||||||||||||||||||||||||||||||||
Domestic retail deposits | $ | 7.739 | $ | 8.019 | $ | (0.280 | ) | -3.5 | % | $ | 15.449 | $ | 16.234 | $ | (0.785 | ) | -4.8 | % | ||||||||||||||
Domestic retail account balances | 172.925 | 177.870 | (4.945 | ) | -2.8 | % | 172.925 | 177.870 | (4.945 | ) | -2.8 | % | ||||||||||||||||||||
Domestic retail net flows | 1.491 | 1.876 | (0.385 | ) | -20.5 | % | 2.850 | 3.704 | (0.854 | ) | -23.1 | % | ||||||||||||||||||||
Domestic deposits | 8.615 | 10.707 | (2.092 | ) | -19.5 | % | 17.463 | 21.242 | (3.779 | ) | -17.8 | % | ||||||||||||||||||||
Domestic net flows | 1.008 | 1.702 | (0.694 | ) | -40.8 | % | 1.887 | 3.256 | (1.369 | ) | -42.0 | % | ||||||||||||||||||||
Assets under management | 220.615 | 245.028 | (24.413 | ) | -10.0 | % | 220.615 | 245.028 | (24.413 | ) | -10.0 | % |
(1) Sales for Individual Life Insurance consist of first year commissionable premiums for 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 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 businesses. |
6/30/2008 | PAGE 3 | |||||
Financial Highlights | ||||||
Unaudited (millions of dollars) |
For the Quarters Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||
2008 | 2007 | Amount | % | 2008 | 2007 | Amount | % | |||||||||||||||||||||||||
Balance Sheet Assets - End-of-Period | $ | 184,281.2 | $ | 187,650.1 | $ | (3,368.9 | ) | -1.8 | % | $ | 184,281.2 | $ | 187,650.1 | $ | (3,368.9 | ) | -1.8 | % | ||||||||||||||
Stockholders' Equity | ||||||||||||||||||||||||||||||||
Beginning-of-period (including AOCI) | $ | 11,086.3 | $ | 12,032.2 | $ | (945.9 | ) | $ | 11,718.4 | $ | 12,201.0 | $ | (482.6 | ) | ||||||||||||||||||
End-of-period (including AOCI) | 10,497.7 | 11,835.7 | (1,338.0 | ) | 10,497.7 | 11,835.7 | (1,338.0 | ) | ||||||||||||||||||||||||
End-of-period (excluding AOCI) | 11,306.0 | 11,686.4 | (380.4 | ) | 11,306.0 | 11,686.4 | (380.4 | ) | ||||||||||||||||||||||||
Average equity (excluding AOCI) | 11,357.0 | 11,529.4 | (172.4 | ) | 11,403.8 | 11,504.8 | (101.0 | ) | ||||||||||||||||||||||||
Return on Equity | ||||||||||||||||||||||||||||||||
Net income/average equity (excluding AOCI) | 4.4 | % | 13.0 | % | 7.3 | % | 13.4 | % | ||||||||||||||||||||||||
Income from operations/average equity (excluding AOCI) | 12.0 | % | 13.0 | % | 11.6 | % | 12.9 | % | ||||||||||||||||||||||||
Return on Capital | ||||||||||||||||||||||||||||||||
Income from operations/average capital | 9.4 | % | 10.5 | % | 9.2 | % | 10.4 | % | ||||||||||||||||||||||||
Common Stock Outstanding | ||||||||||||||||||||||||||||||||
Average for the period - diluted | 259.6 | 274.4 | (14.8 | ) | -5.4 | % | 261.2 | 276.9 | (15.7 | ) | -5.7 | % | ||||||||||||||||||||
End-of-period - assuming conversion of preferreds | 257.0 | 271.6 | (14.6 | ) | -5.4 | % | 257.0 | 271.6 | (14.6 | ) | -5.4 | % | ||||||||||||||||||||
End-of-period - diluted | 257.8 | 274.5 | (16.7 | ) | -6.1 | % | 257.8 | 274.5 | (16.7 | ) | -6.1 | % | ||||||||||||||||||||
Book value (including AOCI) | $ | 40.85 | $ | 43.58 | $ | (2.73 | ) | -6.3 | % | $ | 40.85 | $ | 43.58 | $ | (2.73 | ) | -6.3 | % | ||||||||||||||
Book value (excluding AOCI) | 43.99 | 43.03 | 0.96 | 2.2 | % | 43.99 | 43.03 | $ | 0.96 | 2.2 | % | |||||||||||||||||||||
Cash Returned to Shareholders | ||||||||||||||||||||||||||||||||
Share repurchase - dollar amount (1) | $ | 139.8 | $ | - | $ | 139.8 | $ | 425.5 | $ | 511.7 | $ | (86.2 | ) | |||||||||||||||||||
Dividends declared | 106.6 | 107.6 | (1.0 | ) | 214.2 | 214.3 | (0.1 | ) | ||||||||||||||||||||||||
Total Cash Returned to Shareholders | $ | 246.4 | $ | 107.6 | $ | 138.8 | $ | 639.7 | $ | 726.0 | $ | (86.3 | ) | |||||||||||||||||||
Share repurchase - number of shares | 2.63 | - | 2.63 | NM | 8.08 | 7.22 | 0.87 | 12.0 | % | |||||||||||||||||||||||
Dividend declared on common stock - per share | $ | 0.415 | $ | 0.395 | $ | 0.020 | 5.1 | % | $ | 0.830 | $ | 0.790 | $ | 0.040 | 5.1 | % | ||||||||||||||||
Dividend payout ratio (2) | 86.5 | % | 28.8 | % | 52.5 | % | 28.3 | % | ||||||||||||||||||||||||
Annualized yield (3) | 3.7 | % | 2.2 | % | 3.7 | % | 2.2 | % |
Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||
Net income | $ | 124.7 | $ | 376.0 | $ | 413.8 | $ | 772.4 | ||||||||||||||||||||||||
Net unrealized loss on available-for-sale securities | (487.2 | ) | (511.5 | ) | (1,025.3 | ) | (464.6 | ) | ||||||||||||||||||||||||
Losses on derivatives | (2.6 | ) | (11.4 | ) | (10.9 | ) | (15.3 | ) | ||||||||||||||||||||||||
Foreign currency translation | 2.8 | 13.0 | 1.6 | 16.2 | ||||||||||||||||||||||||||||
Funded status of employee benefit plans | 0.4 | (0.5 | ) | 1.0 | (0.2 | ) | ||||||||||||||||||||||||||
Comprehensive Income (Loss) | $ | (361.9 | ) | $ | (134.4 | ) | $ | (619.8 | ) | $ | 308.5 | |||||||||||||||||||||
Ratios | ||||||||||||||||||||||||||||||||
Debt to total capitalization (4) | 21.7 | % | 19.7 | % | 21.7 | % | 19.7 | % | ||||||||||||||||||||||||
Debt to equity (4) | 27.6 | % | 24.6 | % | 27.6 | % | 24.6 | % | ||||||||||||||||||||||||
Ratings as of July 29, 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) Includes cash repurchases that were not settled as of June 30, 2008 of $25.0 million for both the three and six months ended June 30, 2008. | ||||||||||||||||||||||||||||||||
(2) Indicated dividend divided by net income. | ||||||||||||||||||||||||||||||||
(3) Indicated dividend divided by the closing price. | ||||||||||||||||||||||||||||||||
(4) 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. |
6/30/2008 | PAGE 4 | |||||||
Consolidated Operating Expense Detail | ||||||||
Unaudited (in millions) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Commissions | �� | $ | 462.9 | $ | 470.9 | $ | 501.9 | $ | 426.7 | $ | 434.3 | -6.2 | % | $ | 909.5 | $ | 861.0 | -5.3 | % | |||||||||||||||||
General and Administrative Expenses | ||||||||||||||||||||||||||||||||||||
General and administrative expenses | 432.4 | 418.2 | 432.7 | 400.6 | 401.1 | -7.2 | % | 823.3 | 801.7 | -2.6 | % | |||||||||||||||||||||||||
Merger-related expenses | 23.8 | 21.9 | 23.6 | 13.8 | 14.9 | -37.4 | % | 33.9 | 28.7 | -15.3 | % | |||||||||||||||||||||||||
Total General and Administrative Expenses Excluding Broker-Dealer | 456.2 | 440.1 | 456.3 | 414.4 | 416.0 | -8.8 | % | 857.2 | 830.4 | -3.1 | % | |||||||||||||||||||||||||
Communications expenses | 15.2 | 13.2 | 13.5 | 15.5 | 15.4 | 1.3 | % | 29.8 | 30.9 | 3.7 | % | |||||||||||||||||||||||||
Restructuring charges | 6.2 | 7.4 | 2.9 | 0.9 | 1.2 | -80.6 | % | 10.0 | 2.1 | -79.0 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 51.8 | 52.4 | 48.6 | 62.3 | 52.3 | 1.0 | % | 117.1 | 114.6 | -2.1 | % | |||||||||||||||||||||||||
Interest and debt expense | 73.1 | 68.2 | 80.3 | 75.4 | 64.8 | -11.4 | % | 135.5 | 140.2 | 3.5 | % | |||||||||||||||||||||||||
Total Commissions and Expenses Incurred | 1,065.4 | 1,052.2 | 1,103.5 | 995.2 | 984.0 | -7.6 | % | 2,059.1 | 1,979.2 | -3.9 | % | |||||||||||||||||||||||||
Less: Commissions and Expenses Capitalized | (505.0 | ) | (511.5 | ) | (554.4 | ) | (456.5 | ) | (464.9 | ) | 7.9 | % | (992.4 | ) | (921.4 | ) | 7.2 | % | ||||||||||||||||||
Amortization | ||||||||||||||||||||||||||||||||||||
Amortization of DAC and VOBA, net of interest (1) | 233.4 | 283.4 | 273.0 | 255.2 | 309.0 | 32.4 | % | 508.6 | 564.2 | 10.9 | % | |||||||||||||||||||||||||
Amortization of intangibles | 2.5 | 2.6 | 2.5 | 1.5 | 1.7 | -32.0 | % | 5.1 | 3.2 | -37.3 | % | |||||||||||||||||||||||||
Total Amortization | 235.9 | 286.0 | 275.5 | 256.7 | 310.7 | 31.7 | % | 513.7 | 567.4 | 10.5 | % | |||||||||||||||||||||||||
Broker-Dealer Commissions and G&A | 92.8 | 91.8 | 100.5 | 89.2 | 85.1 | -8.3 | % | 180.0 | 174.3 | -3.2 | % | |||||||||||||||||||||||||
Total | $ | 889.1 | $ | 918.5 | $ | 925.1 | $ | 884.6 | $ | 914.9 | 2.9 | % | $ | 1,760.4 | $ | 1,799.5 | 2.2 | % | ||||||||||||||||||
Merger-Related Expenses (2) | ||||||||||||||||||||||||||||||||||||
Severance and employee-related charges | $ | 6.6 | $ | 5.6 | $ | 6.2 | $ | 3.1 | $ | 2.5 | -62.1 | % | $ | 9.6 | $ | 5.6 | -41.7 | % | ||||||||||||||||||
Systems integration and related expenses | 17.7 | 17.9 | 15.1 | 9.3 | 12.0 | -32.2 | % | 23.3 | 21.3 | -8.6 | % | |||||||||||||||||||||||||
Other expenses | 5.7 | 5.8 | 6.6 | 2.3 | 1.6 | -71.9 | % | 11.1 | 3.9 | -64.9 | % | |||||||||||||||||||||||||
Total Merger-Related Expenses | $ | 30.0 | $ | 29.3 | $ | 27.9 | $ | 14.7 | $ | 16.1 | -46.3 | % | $ | 44.0 | $ | 30.8 | -30.0 | % | ||||||||||||||||||
(1) In the second quarter of 2007, we recognized certain adjustments that reduced DAC amortization by $23 million. | ||||||||||||||||||||||||||||||||||||
(2) Represents merger-related expenses included in general and administrative expenses and restructuring charges. |
6/30/2008 | PAGE 5 | |||||||
Operating Results Summary | ||||||||
Unaudited (millions of dollars) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Individual Life Insurance (1) | $ | 957.4 | $ | 992.2 | $ | 1,002.1 | $ | 987.5 | $ | 1,020.7 | 6.6 | % | $ | 1,928.9 | $ | 2,008.2 | 4.1 | % | ||||||||||||||||||
Individual Annuities | 623.7 | 647.0 | 672.3 | 622.6 | 618.7 | -0.8 | % | 1,214.0 | 1,241.3 | 2.2 | % | |||||||||||||||||||||||||
Individual Markets | 1,581.1 | 1,639.2 | 1,674.4 | 1,610.1 | 1,639.4 | 3.7 | % | 3,142.9 | 3,249.5 | 3.4 | % | |||||||||||||||||||||||||
Defined Contribution | 252.0 | 243.4 | 243.3 | 237.7 | 239.4 | -5.0 | % | 498.8 | 477.1 | -4.4 | % | |||||||||||||||||||||||||
Executive Benefits | 66.1 | 64.2 | 66.1 | 65.6 | 65.4 | -1.1 | % | 135.4 | 131.0 | -3.2 | % | |||||||||||||||||||||||||
Group Protection | 391.0 | 367.5 | 380.6 | 399.4 | 424.9 | 8.7 | % | 751.4 | 824.3 | 9.7 | % | |||||||||||||||||||||||||
Employer Markets | 709.1 | 675.1 | 690.0 | 702.7 | 729.7 | 2.9 | % | 1,385.6 | 1,432.4 | 3.4 | % | |||||||||||||||||||||||||
Investment Management | 151.0 | 150.1 | 139.0 | 120.3 | 124.3 | -17.7 | % | 301.1 | 244.6 | -18.8 | % | |||||||||||||||||||||||||
Lincoln UK | 92.6 | 88.6 | 98.3 | 85.6 | 97.9 | 5.7 | % | 183.3 | 183.5 | 0.1 | % | |||||||||||||||||||||||||
Other Operations | 123.6 | 112.9 | 128.0 | 117.9 | 110.0 | -11.0 | % | 232.3 | 227.9 | -1.9 | % | |||||||||||||||||||||||||
Total Operating Revenues | 2,657.4 | 2,665.9 | 2,729.7 | 2,636.6 | 2,701.3 | 1.7 | % | 5,245.2 | 5,337.9 | 1.8 | % | |||||||||||||||||||||||||
Excluded realized gain (loss), pre-tax (2) | 5.7 | (65.7 | ) | (147.9 | ) | (45.3 | ) | (120.3 | ) | NM | 38.7 | (165.6 | ) | NM | ||||||||||||||||||||||
Amortization of deferred gains arising from reserve changes on business sold through reinsurance, pre-tax | 7.8 | 0.6 | 0.7 | 0.7 | 0.7 | -91.0 | % | 8.2 | 1.4 | -82.9 | % | |||||||||||||||||||||||||
Total Revenues | $ | 2,670.9 | $ | 2,600.8 | $ | 2,582.5 | $ | 2,592.0 | $ | 2,581.7 | -3.3 | % | $ | 5,292.1 | $ | 5,173.7 | -2.2 | % | ||||||||||||||||||
Income from Operations (3) | ||||||||||||||||||||||||||||||||||||
Individual Life Insurance | $ | 176.4 | $ | 173.6 | $ | 158.8 | $ | 145.5 | $ | 152.6 | -13.5 | % | $ | 343.0 | $ | 298.1 | -13.1 | % | ||||||||||||||||||
Individual Annuities | 123.4 | 125.9 | 118.9 | 117.8 | 116.2 | -5.8 | % | 240.0 | 234.0 | -2.5 | % | |||||||||||||||||||||||||
Individual Markets | 299.8 | 299.5 | 277.7 | 263.3 | 268.8 | -10.3 | % | 583.0 | 532.1 | -8.7 | % | |||||||||||||||||||||||||
Defined Contribution | 47.3 | 41.2 | 43.1 | 40.4 | 41.2 | -12.9 | % | 97.0 | 81.6 | -15.9 | % | |||||||||||||||||||||||||
Executive Benefits | 10.8 | 8.9 | 11.9 | 11.9 | 11.0 | 1.9 | % | 22.7 | 22.9 | 0.9 | % | |||||||||||||||||||||||||
Group Protection | 29.0 | 33.2 | 28.2 | 26.3 | 32.2 | 11.0 | % | 52.1 | 58.5 | 12.3 | % | |||||||||||||||||||||||||
Employer Markets | 87.1 | 83.3 | 83.2 | 78.6 | 84.4 | -3.1 | % | 171.8 | 163.0 | -5.1 | % | |||||||||||||||||||||||||
Investment Management | 11.3 | 21.8 | 27.0 | 12.1 | 15.0 | 32.7 | % | 27.5 | 27.1 | -1.5 | % | |||||||||||||||||||||||||
Lincoln UK | 11.7 | 10.3 | 12.7 | 10.7 | 18.0 | 53.8 | % | 22.5 | 28.6 | 27.1 | % | |||||||||||||||||||||||||
Other Operations | (36.2 | ) | (49.6 | ) | (59.4 | ) | (42.3 | ) | (44.4 | ) | -22.7 | % | (64.1 | ) | (86.6 | ) | -35.1 | % | ||||||||||||||||||
Income from Operations (3) | 373.7 | 365.3 | 341.2 | 322.4 | 341.8 | -8.5 | % | 740.7 | 664.2 | -10.3 | % | |||||||||||||||||||||||||
Excluded realized gain (loss), after-tax (2) | 3.9 | (42.7 | ) | (102.3 | ) | (29.5 | ) | (78.2 | ) | NM | 25.5 | (107.7 | ) | NM | ||||||||||||||||||||||
Income (loss) from reserve changes (net of related amortization) on business sold through reinsurance, after-tax | (7.9 | ) | 0.4 | 0.4 | 0.4 | 0.4 | 105.1 | % | (7.8 | ) | 0.8 | 110.3 | % | |||||||||||||||||||||||
Impairment of intangibles, after-tax (4) | - | - | - | - | (139.0 | ) | NM | - | (139.0 | ) | NM | |||||||||||||||||||||||||
Income (loss) from discontinued operations, after-tax (5) | 6.3 | 6.6 | (126.8 | ) | (4.2 | ) | (0.3 | ) | NM | 14.0 | (4.5 | ) | NM | |||||||||||||||||||||||
Net Income | $ | 376.0 | $ | 329.6 | $ | 112.5 | $ | 289.1 | $ | 124.7 | -66.8 | % | $ | 772.4 | $ | 413.8 | -46.4 | % |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | June | June | ||||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | 2007 | 2008 | ||||||||||||||||||||||||||||||
Stockholders' Equity | ||||||||||||||||||||||||||||||||||||
Beginning-of-period (including AOCI) | $ | 12,032.2 | $ | 11,835.7 | $ | 11,962.9 | $ | 11,718.4 | $ | 11,086.3 | $ | 12,201.0 | $ | 11,718.4 | ||||||||||||||||||||||
End-of-period (including AOCI) | 11,835.7 | 11,962.9 | 11,718.4 | 11,086.3 | 10,497.7 | 11,835.7 | 10,497.7 | |||||||||||||||||||||||||||||
End-of-period (excluding AOCI) | 11,686.4 | 11,766.0 | 11,493.1 | 11,408.0 | 11,306.0 | 11,686.4 | 11,306.0 | |||||||||||||||||||||||||||||
Average equity (excluding AOCI) | 11,529.4 | 11,726.3 | 11,629.6 | 11,450.5 | 11,357.0 | 11,504.8 | 11,403.8 | |||||||||||||||||||||||||||||
Minority Interest | $ | 0.3 | $ | 0.2 | $ | 1.0 | $ | 0.3 | $ | 0.2 | $ | 0.7 | $ | 0.5 | ||||||||||||||||||||||
Common Shares Outstanding | ||||||||||||||||||||||||||||||||||||
Average for the period - diluted | 274.4 | 272.5 | 269.4 | 262.8 | 259.6 | 276.9 | 261.2 | |||||||||||||||||||||||||||||
End-of-period - diluted | 274.5 | 271.7 | 266.2 | 260.5 | 257.8 | 274.5 | 257.8 | |||||||||||||||||||||||||||||
Per Share Data (Diluted) (6) | ||||||||||||||||||||||||||||||||||||
Net income | $ | 1.37 | $ | 1.21 | $ | 0.41 | $ | 1.10 | $ | 0.48 | $ | 2.79 | $ | 1.58 | ||||||||||||||||||||||
Income from operations (3) | 1.36 | 1.34 | 1.26 | 1.23 | 1.32 | 2.67 | 2.54 | |||||||||||||||||||||||||||||
Stockholders' Equity Per Share | ||||||||||||||||||||||||||||||||||||
Stockholders' equity (including AOCI) | $ | 43.58 | $ | 44.41 | $ | 44.32 | $ | 42.74 | $ | 40.85 | $ | 43.58 | $ | 40.85 | ||||||||||||||||||||||
Stockholders' equity (excluding AOCI) | 43.03 | 43.67 | 43.47 | 43.98 | 43.99 | 43.03 | 43.99 | |||||||||||||||||||||||||||||
Dividends declared (common stock) | 0.395 | 0.395 | 0.415 | 0.415 | 0.415 | 0.790 | 0.830 | |||||||||||||||||||||||||||||
Return on Equity | ||||||||||||||||||||||||||||||||||||
Net income/average equity | 13.0 | % | 11.2 | % | 3.9 | % | 10.1 | % | 4.4 | % | 13.4 | % | 7.3 | % | ||||||||||||||||||||||
Income from operations/average equity | 13.0 | % | 12.5 | % | 11.7 | % | 11.3 | % | 12.0 | % | 12.9 | % | 11.6 | % | ||||||||||||||||||||||
Market Value of Common Stock | ||||||||||||||||||||||||||||||||||||
Highest price | $ | 74.72 | $ | 72.28 | $ | 70.66 | $ | 58.11 | $ | 56.80 | $ | 74.72 | $ | 58.11 | ||||||||||||||||||||||
Lowest price | 66.90 | 54.40 | 55.84 | 45.50 | 45.18 | 64.29 | 45.18 | |||||||||||||||||||||||||||||
Closing price | 70.95 | 65.97 | 58.22 | 52.00 | 45.32 | 70.95 | 45.32 | |||||||||||||||||||||||||||||
(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 $0.8 million, or -0- cents per share, for the second quarter of 2008, $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 and $4.0 million, or 1 cent per share, for the second quarter of 2007. | ||||||||||||||||||||||||||||||||||||
(4) See page 1 for detail. | ||||||||||||||||||||||||||||||||||||
(5) Includes discontinued operations and the loss on disposition. See Discontinued Operations on page 28 for details. | ||||||||||||||||||||||||||||||||||||
(6) The income used in the calculation of our diluted earnings per share is reduced by minority interest adjustments related to outstanding stock options under the Delaware Investments U.S., Inc stock option incentive plan. |
6/30/2008 | PAGE 6 | ||||||||||
Details Underlying Realized Gain (Loss), After-DAC (1) | |||||||||||
Unaudited (millions of dollars) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Pre-Tax | ||||||||||||||||||||||||||||||||||||
Operating realized gain (2): | ||||||||||||||||||||||||||||||||||||
Indexed annuity net derivatives results (3) | $ | 1.2 | $ | 0.2 | $ | (0.1 | ) | $ | (1.4 | ) | $ | (0.6 | ) | NM | $ | 2.2 | $ | (2.0 | ) | NM | ||||||||||||||||
GLB (4) | 1.4 | 1.6 | 1.8 | 5.8 | 10.4 | NM | 2.2 | 16.2 | NM | |||||||||||||||||||||||||||
GDB hedge cost (5) | (1.3 | ) | (0.8 | ) | 0.5 | 5.9 | 2.6 | 300.0 | % | (1.7 | ) | 8.5 | NM | |||||||||||||||||||||||
Total operating realized gain | 1.3 | 1.0 | 2.2 | 10.3 | 12.4 | NM | 2.7 | 22.7 | NM | |||||||||||||||||||||||||||
Realized gain (loss) related to investments (6) | (8.7 | ) | (35.4 | ) | (108.8 | ) | (41.1 | ) | (124.6 | ) | NM | 17.8 | (165.7 | ) | NM | |||||||||||||||||||||
Gain (loss) on certain reinsurance derivative/trading securities (7) | 4.0 | (1.1 | ) | (0.8 | ) | 0.4 | 1.5 | -62.5 | % | 3.8 | 1.9 | -50.0 | % | |||||||||||||||||||||||
GLB net derivatives results (8) | 4.8 | (23.1 | ) | (37.4 | ) | (6.7 | ) | 1.4 | -70.8 | % | 13.2 | (5.3 | ) | NM | ||||||||||||||||||||||
Indexed annuity forward-starting option (9) | 4.9 | (6.2 | ) | (6.9 | ) | 4.8 | 2.1 | -57.1 | % | 3.0 | 6.9 | 130.0 | % | |||||||||||||||||||||||
GDB net derivative results (5) | 0.7 | 0.1 | (0.2 | ) | (5.2 | ) | (2.5 | ) | NM | 0.9 | (7.7 | ) | NM | |||||||||||||||||||||||
Gain on sale of subsidiaries/businesses | - | - | 6.2 | 2.5 | 1.8 | NM | - | 4.3 | NM | |||||||||||||||||||||||||||
Total excluded realized gain (loss) | 5.7 | (65.7 | ) | (147.9 | ) | (45.3 | ) | (120.3 | ) | NM | 38.7 | (165.6 | ) | NM | ||||||||||||||||||||||
Total realized gain (loss) | $ | 7.0 | $ | (64.7 | ) | $ | (145.7 | ) | $ | (35.0 | ) | $ | (107.9 | ) | NM | $ | 41.4 | $ | (142.9 | ) | NM | |||||||||||||||
After-Tax | ||||||||||||||||||||||||||||||||||||
Operating realized gain (2): | ||||||||||||||||||||||||||||||||||||
Indexed annuity net derivatives results (3) | $ | 0.8 | $ | 0.1 | $ | (0.1 | ) | $ | (0.9 | ) | $ | (0.4 | ) | NM | $ | 1.4 | $ | (1.3 | ) | NM | ||||||||||||||||
GLB (4) | 0.9 | 1.0 | 1.2 | 3.8 | 6.8 | NM | 1.4 | 10.5 | NM | |||||||||||||||||||||||||||
GDB hedge cost (5) | (0.8 | ) | (0.5 | ) | 0.3 | 3.8 | 1.7 | NM | (1.1 | ) | 5.5 | NM | ||||||||||||||||||||||||
Total operating realized gain | 0.9 | 0.6 | 1.4 | 6.7 | 8.1 | NM | 1.7 | 14.7 | NM | |||||||||||||||||||||||||||
Realized gain (loss) related to investments (6) | (4.9 | ) | (23.2 | ) | (71.4 | ) | (27.1 | ) | (80.6 | ) | NM | 12.3 | (107.7 | ) | NM | |||||||||||||||||||||
Gain (loss) on certain reinsurance derivative/trading securities (7) | 2.1 | (0.5 | ) | (0.3 | ) | 0.6 | 0.6 | -71.4 | % | 2.1 | 1.2 | -42.9 | % | |||||||||||||||||||||||
GLB net derivatives results (8) | 3.1 | (15.1 | ) | (24.2 | ) | (4.2 | ) | 0.9 | -71.0 | % | 8.5 | (3.3 | ) | NM | ||||||||||||||||||||||
Indexed annuity forward-starting option (9) | 3.2 | (4.0 | ) | (4.5 | ) | 3.1 | 1.4 | -56.3 | % | 2.0 | 4.5 | 125.0 | % | |||||||||||||||||||||||
GDB net derivative results (5) | 0.4 | 0.1 | (0.1 | ) | (3.4 | ) | (1.6 | ) | NM | 0.6 | (5.0 | ) | NM | |||||||||||||||||||||||
Gain on sale of subsidiaries/businesses | - | - | (1.8 | ) | 1.5 | 1.1 | NM | - | 2.6 | NM | ||||||||||||||||||||||||||
Total excluded realized gain (loss) | 3.9 | (42.7 | ) | (102.3 | ) | (29.5 | ) | (78.2 | ) | NM | 25.5 | (107.7 | ) | NM | ||||||||||||||||||||||
Total realized gain (loss) | $ | 4.8 | $ | (42.1 | ) | $ | (100.9 | ) | $ | (22.8 | ) | $ | (70.1 | ) | NM | $ | 27.2 | $ | (93.0 | ) | 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 the 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 31 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. Losses from the impact of the initial adoption of SFAS 157 were $33.5 million, pre-tax, and $21.8 million, after-tax, in the first quarter of 2008. Our hedge performance after-DAC and after-tax, excluding DAC unlocking and changes in the non-performance risk factor, was an estimated $11 million and $4 million for the three months ended March 31, 2008 and June 30, 2008 respectively. | |||||||||||
(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. |
6/30/2008 | PAGE 7 | ||||||||||
Consolidated Statements of Income | |||||||||||
Unaudited (in millions) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 488.9 | $ | 491.1 | $ | 508.2 | $ | 508.8 | $ | 529.7 | 8.3 | % | $ | 947.8 | $ | 1,038.5 | 9.6 | % | ||||||||||||||||||
Surrender charges | 28.1 | 25.6 | 25.1 | 27.2 | 25.6 | -8.9 | % | 55.0 | 52.9 | -3.8 | % | |||||||||||||||||||||||||
Mortality assessments (1) | 299.6 | 320.7 | 328.4 | 330.8 | 337.3 | 12.6 | % | 610.8 | 668.1 | 9.4 | % | |||||||||||||||||||||||||
Expense assessments (1) | 413.9 | 489.6 | 495.1 | 454.1 | 479.4 | 15.8 | % | 839.8 | 933.5 | 11.2 | % | |||||||||||||||||||||||||
Investment advisory fees | 92.7 | 89.0 | 87.7 | 76.2 | 75.8 | -18.2 | % | 183.0 | 152.0 | -16.9 | % | |||||||||||||||||||||||||
Net investment income | 1,133.2 | 1,061.6 | 1,093.7 | 1,065.4 | 1,076.8 | -5.0 | % | 2,223.0 | 2,142.2 | -3.6 | % | |||||||||||||||||||||||||
Realized gain (loss) (2) | 7.0 | (64.7 | ) | (145.7 | ) | (35.0 | ) | (107.9 | ) | NM | 41.4 | (142.9 | ) | NM | ||||||||||||||||||||||
Amortization of deferred gains on business sold through reinsurance | 26.4 | 19.3 | 19.3 | 19.1 | 19.1 | -27.7 | % | 45.3 | 38.2 | -15.7 | % | |||||||||||||||||||||||||
Other revenues and fees | 181.1 | 168.6 | 170.7 | 145.3 | 145.9 | -19.4 | % | 346.0 | 291.2 | -15.8 | % | |||||||||||||||||||||||||
Total Revenues | 2,670.9 | 2,600.8 | 2,582.5 | 2,592.0 | 2,581.7 | -3.3 | % | 5,292.1 | 5,173.7 | -2.2 | % | |||||||||||||||||||||||||
Benefits and Expenses | ||||||||||||||||||||||||||||||||||||
Benefits (1) | 650.7 | 622.7 | 696.2 | 677.5 | 684.6 | 5.2 | % | 1,243.4 | 1,362.1 | 9.5 | % | |||||||||||||||||||||||||
Interest credited to contract holder funds | 606.2 | 611.3 | 618.7 | 611.7 | 612.7 | 1.1 | % | 1,205.4 | 1,224.4 | 1.6 | % | |||||||||||||||||||||||||
Operating and acquisition expenses | 764.2 | 797.9 | 796.2 | 746.8 | 797.9 | 4.4 | % | 1,507.8 | 1,544.7 | 2.4 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 51.8 | 52.4 | 48.6 | 62.3 | 52.3 | 1.0 | % | 117.1 | 114.6 | -2.1 | % | |||||||||||||||||||||||||
Interest and debt expense | 73.1 | 68.2 | 80.3 | 75.4 | 64.8 | -11.4 | % | 135.5 | 140.2 | 3.5 | % | |||||||||||||||||||||||||
Impairment of intangibles (3) | - | - | - | - | 169.6 | NM | - | 169.6 | NM | |||||||||||||||||||||||||||
Total Benefits and Expenses | 2,146.1 | 2,152.6 | 2,240.0 | 2,173.7 | 2,381.9 | 11.0 | % | 4,209.2 | 4,555.6 | 8.2 | % | |||||||||||||||||||||||||
Income from continuing operations before taxes | 524.8 | 448.2 | 342.5 | 418.3 | 199.8 | -61.9 | % | 1,082.9 | 618.1 | -42.9 | % | |||||||||||||||||||||||||
Federal income taxes | 155.1 | 125.2 | 103.2 | 125.0 | 74.8 | -51.8 | % | 324.4 | 199.8 | -38.4 | % | |||||||||||||||||||||||||
Income From Continuing Operations | 369.7 | 323.0 | 239.3 | 293.3 | 125.0 | -66.2 | % | 758.5 | 418.3 | -44.9 | % | |||||||||||||||||||||||||
Income (loss) from discontinued operations, net of federal income taxes (4) | 6.3 | 6.6 | (126.8 | ) | (4.2 | ) | (0.3 | ) | NM | 13.9 | (4.5 | ) | NM | |||||||||||||||||||||||
Net Income | $ | 376.0 | $ | 329.6 | $ | 112.5 | $ | 289.1 | $ | 124.7 | -66.8 | % | $ | 772.4 | $ | 413.8 | -46.4 | % | ||||||||||||||||||
Earnings Per Share (Diluted) (5) | ||||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 1.35 | $ | 1.19 | $ | 0.89 | $ | 1.12 | $ | 0.48 | -64.4 | % | $ | 2.74 | $ | 1.60 | -41.6 | % | ||||||||||||||||||
Income (loss) from discontinued operations, net of federal income taxes (4) | 0.02 | 0.02 | (0.47 | ) | (0.02 | ) | - | -100.0 | % | 0.05 | (0.02 | ) | NM | |||||||||||||||||||||||
Net Income | $ | 1.37 | $ | 1.21 | $ | 0.42 | $ | 1.10 | $ | 0.48 | -65.0 | % | $ | 2.79 | $ | 1.58 | -43.4 | % |
Roll Forward of DAC and VOBA | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 8,534.7 | $ | 9,100.6 | $ | 9,337.0 | $ | 9,579.8 | $ | 9,995.5 | $ | 8,420.4 | $ | 9,579.8 | ||||||||||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (66.1 | ) | - | ||||||||||||||||||||||||||||
Deferrals | 505.0 | 511.5 | 554.4 | 456.5 | 464.9 | 992.4 | 921.4 | |||||||||||||||||||||||||||||
Amortization, net of interest: (1) | ||||||||||||||||||||||||||||||||||||
Unlocking | 25.2 | 7.8 | 17.0 | (10.9 | ) | (17.5 | ) | 39.7 | (28.4 | ) | ||||||||||||||||||||||||||
Other amortization | (258.6 | ) | (291.2 | ) | (290.0 | ) | (244.3 | ) | (291.5 | ) | (548.3 | ) | (535.8 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in operating and acquisition expenses | 271.6 | 228.1 | 281.4 | 201.3 | 155.9 | 483.8 | 357.2 | |||||||||||||||||||||||||||||
Adjustment related to realized (gains) losses on available-for-sale securities and derivatives | (12.8 | ) | 21.1 | 95.6 | (1.4 | ) | 4.8 | (37.1 | ) | 3.3 | ||||||||||||||||||||||||||
Adjustment related to unrealized (gains) losses on available-for-sale securities and derivatives | 290.8 | (27.9 | ) | (111.3 | ) | 216.6 | 449.3 | 265.3 | 666.0 | |||||||||||||||||||||||||||
Foreign currency translation adjustment | 16.3 | 15.1 | (22.9 | ) | (0.8 | ) | 2.6 | 20.3 | 1.8 | |||||||||||||||||||||||||||
Business acquired | - | - | - | - | - | 14.0 | - | |||||||||||||||||||||||||||||
Balance at End-of-Period | $ | 9,100.6 | $ | 9,337.0 | $ | 9,579.8 | $ | 9,995.5 | $ | 10,608.1 | $ | 9,100.6 | $ | 10,608.1 | ||||||||||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 1,017.9 | $ | 1,105.8 | $ | 1,128.1 | $ | 1,183.1 | $ | 1,235.6 | $ | 976.9 | $ | 1,183.1 | ||||||||||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (2.0 | ) | - | ||||||||||||||||||||||||||||
Deferrals | 125.9 | 96.9 | 112.5 | 102.0 | 104.1 | 203.1 | 206.1 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | 6.8 | (30.8 | ) | (0.4 | ) | (3.2 | ) | (10.4 | ) | 8.5 | (13.6 | ) | ||||||||||||||||||||||||
Other amortization | (52.7 | ) | (52.5 | ) | (47.8 | ) | (46.6 | ) | (48.7 | ) | (89.4 | ) | (95.3 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in expense assessments | 80.0 | 13.6 | 64.3 | 52.2 | 45.0 | 122.2 | 97.2 | |||||||||||||||||||||||||||||
Adjustment related to realized (gains) losses on available-for-sale securities and derivatives | (0.2 | ) | 1.2 | 2.0 | 0.8 | (0.5 | ) | (1.4 | ) | 0.3 | ||||||||||||||||||||||||||
Foreign currency translation adjustment | 8.1 | 7.5 | (11.3 | ) | (0.5 | ) | 1.4 | 10.1 | 0.9 | |||||||||||||||||||||||||||
Balance at End-of-Period | $ | 1,105.8 | $ | 1,128.1 | $ | 1,183.1 | $ | 1,235.6 | $ | 1,281.5 | $ | 1,105.8 | $ | 1,281.5 | ||||||||||||||||||||||
Roll Forward of DSI | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 206.4 | $ | 225.0 | $ | 249.1 | $ | 279.2 | $ | 297.6 | $ | 193.8 | $ | 279.2 | ||||||||||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (2.8 | ) | - | ||||||||||||||||||||||||||||
Deferrals | 27.4 | 29.8 | 35.5 | 26.0 | 26.4 | 51.1 | 52.4 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | 0.9 | 0.6 | (0.9 | ) | 0.5 | (0.2 | ) | 2.4 | 0.3 | |||||||||||||||||||||||||||
Other amortization | (8.7 | ) | (9.1 | ) | (10.1 | ) | (6.2 | ) | (8.6 | ) | (15.9 | ) | (14.8 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in insurance benefits or interest credited | 19.6 | 21.3 | 24.5 | 20.3 | 17.6 | 37.6 | 37.9 | |||||||||||||||||||||||||||||
Adjustment related to realized (gains) losses on available-for-sale securities and derivatives | (1.0 | ) | 2.8 | 5.6 | (1.9 | ) | (1.0 | ) | (3.6 | ) | (2.9 | ) | ||||||||||||||||||||||||
Balance at End-of-Period | $ | 225.0 | $ | 249.1 | $ | 279.2 | $ | 297.6 | $ | 314.2 | $ | 225.0 | $ | 314.2 |
(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 benefits by $3 million and reduced DAC amortization by $23 million. |
(2) See page 6 for detail. |
(3) See page 1 for detail. |
(4) Contains discontinued operations and the loss on disposition. See Discontinued Operations on page 28 for additional details. |
(5) The income used in the calculation of our diluted earnings per share is reduced by minority interest adjustments related to outstanding stock options under the Delaware Investments U.S., Inc stock option incentive plan. See page 5 for detail of minority interest. |
6/30/2008 | PAGE 8 | |||||||||||||||||||||||||||||||||||
Consolidating Statements of Income From Operations | ||||||||||||||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||||||||||||||
For the Quarter Ended June 30, 2008 | ||||||||||||||||||||||||||||||||||||
Individual Markets | Employer Markets | |||||||||||||||||||||||||||||||||||
Defined | Executive | Group | Investment | Lincoln | Other Opera- | |||||||||||||||||||||||||||||||
Life | Annuities | Contribution | Benefits | Protection | Management | UK | tions (1) | Consolidated | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 89.4 | $ | 19.0 | $ | - | $ | 0.1 | $ | 393.0 | $ | - | $ | 26.4 | $ | 1.6 | $ | 529.5 | ||||||||||||||||||
Surrender charges | 14.5 | 9.6 | 1.5 | - | - | - | - | - | 25.6 | |||||||||||||||||||||||||||
Mortality assessments | 320.5 | - | - | 7.6 | - | - | 9.1 | - | 337.2 | |||||||||||||||||||||||||||
Expense assessments | 124.6 | 247.6 | 59.3 | 5.0 | - | - | 42.6 | - | 479.1 | |||||||||||||||||||||||||||
Investment advisory fees - external | - | - | - | - | - | 75.8 | - | - | 75.8 | |||||||||||||||||||||||||||
Investment advisory fees - inter-segment | - | - | - | - | - | 20.6 | - | (20.6 | ) | - | ||||||||||||||||||||||||||
Net investment income | 466.8 | 245.3 | 174.8 | 52.5 | 30.5 | - | 19.8 | 87.1 | 1,076.8 | |||||||||||||||||||||||||||
Operating realized gain (loss) (2) | - | 12.4 | 0.1 | - | - | - | - | - | 12.5 | |||||||||||||||||||||||||||
Amortization of deferred gain on business sold | ||||||||||||||||||||||||||||||||||||
through reinsurance | - | - | - | - | - | - | - | 18.4 | 18.4 | |||||||||||||||||||||||||||
Other revenues and fees | 4.9 | 84.8 | 3.7 | 0.2 | 1.4 | 27.9 | - | 23.5 | 146.4 | |||||||||||||||||||||||||||
Total Operating Revenues | 1,020.7 | 618.7 | 239.4 | 65.4 | 424.9 | 124.3 | 97.9 | 110.0 | 2,701.3 | |||||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 300.3 | 35.2 | 0.1 | 3.8 | 285.7 | - | 30.2 | 28.9 | 684.2 | |||||||||||||||||||||||||||
Interest credited to contract holder funds | 262.1 | 163.0 | 107.0 | 38.6 | 0.3 | - | - | 41.8 | 612.8 | |||||||||||||||||||||||||||
Operating and acquisition expenses | 202.0 | 260.5 | 72.4 | 5.4 | 80.3 | 75.3 | 40.0 | 62.1 | 798.0 | |||||||||||||||||||||||||||
Operating and acquisition expenses for investment | ||||||||||||||||||||||||||||||||||||
advisory fees - inter-segment | - | - | - | - | - | 20.6 | - | (20.6 | ) | - | ||||||||||||||||||||||||||
Taxes, licenses and fees | 25.6 | 7.7 | 3.0 | 1.0 | 9.0 | 4.9 | - | 1.1 | 52.3 | |||||||||||||||||||||||||||
Interest and debt expense | - | - | - | - | - | - | - | 64.8 | 64.8 | |||||||||||||||||||||||||||
Total Operating Expenses | 790.0 | 466.4 | 182.5 | 48.8 | 375.3 | 100.8 | 70.2 | 178.1 | 2,212.1 | |||||||||||||||||||||||||||
Income (loss) from operations before federal income taxes | 230.7 | 152.3 | 56.9 | 16.6 | 49.6 | 23.5 | 27.7 | (68.1 | ) | 489.2 | ||||||||||||||||||||||||||
Federal income taxes | 78.1 | 36.1 | 15.7 | 5.6 | 17.4 | 8.5 | 9.7 | (23.7 | ) | 147.4 | ||||||||||||||||||||||||||
Income from Operations | $ | 152.6 | $ | 116.2 | $ | 41.2 | $ | 11.0 | $ | 32.2 | $ | 15.0 | $ | 18.0 | $ | (44.4 | ) | $ | 341.8 | |||||||||||||||||
(1) Includes consolidating adjustments. | |||||||||||||||||
(2) For detail, see pages 14 and 18. |
6/30/2008 | PAGE 8(B) | |||||||||||||||||||||||||||||||||||
Consolidating Statements of Income From Operations | ||||||||||||||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||||||||||||||
For the Quarter Ended June 30, 2007 | ||||||||||||||||||||||||||||||||||||
Individual Markets | Employer Markets | |||||||||||||||||||||||||||||||||||
Defined | Executive | Group | Investment | Lincoln | Other Opera- | |||||||||||||||||||||||||||||||
Life | Annuities | Contribution | Benefits | Protection | Management | UK | tions (1) | Consolidated | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 87.8 | $ | 16.6 | $ | - | $ | 0.1 | $ | 361.3 | $ | - | $ | 24.4 | (1.2 | ) | $ | 489.0 | ||||||||||||||||||
Surrender charges | 15.7 | 10.1 | 2.2 | - | - | - | - | - | 28.0 | |||||||||||||||||||||||||||
Mortality assessments | 282.4 | - | - | 8.2 | - | - | 8.9 | - | 299.5 | |||||||||||||||||||||||||||
Expense assessments | 69.9 | 233.9 | 63.0 | 4.7 | - | - | 39.9 | - | 411.4 | |||||||||||||||||||||||||||
Investment advisory fees - external | - | - | - | - | - | 92.7 | - | - | 92.7 | |||||||||||||||||||||||||||
Investment advisory fees - inter-segment | - | - | - | - | - | 19.6 | - | (19.6 | ) | - | ||||||||||||||||||||||||||
Net investment income | 493.3 | 265.3 | 182.2 | 53.1 | 28.5 | - | 19.4 | 91.4 | 1,133.2 | |||||||||||||||||||||||||||
Operating realized gain (loss) (2) | - | 1.3 | - | - | - | - | - | - | 1.3 | |||||||||||||||||||||||||||
Amortization of deferred gain on business sold | - | |||||||||||||||||||||||||||||||||||
through reinsurance | - | - | - | - | - | - | - | 18.6 | 18.6 | |||||||||||||||||||||||||||
Other revenues and fees | 8.3 | 96.5 | 4.6 | - | 1.2 | 38.7 | - | 34.4 | 183.7 | |||||||||||||||||||||||||||
Total Operating Revenues | 957.4 | 623.7 | 252.0 | 66.1 | 391.0 | 151.0 | 92.6 | 123.6 | 2,657.4 | |||||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 263.0 | 26.7 | - | 2.8 | 265.6 | - | 34.4 | 38.2 | 630.7 | |||||||||||||||||||||||||||
Interest credited to contract holder funds | 254.0 | 165.1 | 104.6 | 38.1 | - | - | - | 44.5 | 606.3 | |||||||||||||||||||||||||||
Operating and acquisition expenses | 144.4 | 261.3 | 76.2 | 7.8 | 71.2 | 109.5 | 40.2 | 53.7 | 764.3 | |||||||||||||||||||||||||||
Operating and acquisition expenses for investment | ||||||||||||||||||||||||||||||||||||
advisory fees - inter-segment | - | - | - | - | - | 19.6 | - | (19.6 | ) | - | ||||||||||||||||||||||||||
Taxes, licenses and fees | 26.6 | 5.7 | 4.4 | 1.0 | 9.5 | 4.0 | - | 0.5 | 51.7 | |||||||||||||||||||||||||||
Interest and debt expense | - | - | - | - | - | - | - | 73.1 | 73.1 | |||||||||||||||||||||||||||
Total Operating Expenses | 688.0 | 458.8 | 185.2 | 49.7 | 346.3 | 133.1 | 74.6 | 190.4 | 2,126.1 | |||||||||||||||||||||||||||
Income (loss) from operations before federal income taxes | 269.4 | 164.9 | 66.8 | 16.4 | 44.7 | 17.9 | 18.0 | (66.8 | ) | 531.3 | ||||||||||||||||||||||||||
Federal income taxes | 93.0 | 41.5 | 19.5 | 5.6 | 15.7 | 6.6 | 6.3 | (30.6 | ) | 157.6 | ||||||||||||||||||||||||||
Income from Operations | $ | 176.4 | $ | 123.4 | $ | 47.3 | $ | 10.8 | $ | 29.0 | $ | 11.3 | $ | 11.7 | $ | (36.2 | ) | $ | 373.7 | |||||||||||||||||
(1) Includes consolidating adjustments. | ||
(2) For detail, see page 14. |
6/30/2008 | PAGE 9 | |||||||||||||||||||||||||||||||||||
Consolidating Statements of Income From Operations | ||||||||||||||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2008 | ||||||||||||||||||||||||||||||||||||
Individual Markets | Employer Markets | |||||||||||||||||||||||||||||||||||
Defined | Executive | Group | Investment | Lincoln | Other Opera- | |||||||||||||||||||||||||||||||
Life | Annuities | Contribution | Benefits | Protection | Management | UK | tions (1) | Consolidated | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 175.7 | $ | 50.6 | $ | - | $ | 0.2 | $ | 763.4 | $ | - | $ | 45.4 | $ | 3.0 | $ | 1,038.3 | ||||||||||||||||||
Surrender charges | 30.3 | 19.2 | 3.4 | - | - | - | - | - | 52.9 | |||||||||||||||||||||||||||
Mortality assessments | 633.1 | - | - | 16.7 | - | - | 18.2 | - | 668.0 | |||||||||||||||||||||||||||
Expense assessments | 241.3 | 483.6 | 118.6 | 9.6 | - | - | 79.7 | 932.8 | ||||||||||||||||||||||||||||
Investment advisory fees - external | - | - | - | - | - | 152.0 | - | - | 152.0 | |||||||||||||||||||||||||||
Investment advisory fees - inter-segment | - | - | - | - | - | 40.6 | - | (40.6 | ) | - | ||||||||||||||||||||||||||
Net investment income | 914.2 | 493.1 | 346.5 | 104.4 | 58.2 | - | 40.1 | 185.7 | 2,142.2 | |||||||||||||||||||||||||||
Operating realized gain (loss) (2) | - | 22.6 | 0.1 | - | - | - | - | - | 22.7 | |||||||||||||||||||||||||||
Amortization of deferred gain on business sold | - | |||||||||||||||||||||||||||||||||||
through reinsurance | - | - | - | - | - | - | - | 36.9 | 36.9 | |||||||||||||||||||||||||||
Other revenues and fees | 13.6 | 172.2 | 8.5 | 0.1 | 2.7 | 52.0 | 0.1 | 42.9 | 292.1 | |||||||||||||||||||||||||||
Total Operating Revenues | 2,008.2 | 1,241.3 | 477.1 | 131.0 | 824.3 | 244.6 | 183.5 | 227.9 | 5,337.9 | |||||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 596.3 | 86.6 | 0.1 | 6.3 | 554.8 | - | 60.9 | 56.9 | 1,361.9 | |||||||||||||||||||||||||||
Interest credited to contract holder funds | 520.3 | 326.2 | 212.9 | 77.0 | 0.5 | - | - | 87.6 | 1,224.5 | |||||||||||||||||||||||||||
Operating and acquisition expenses | 385.1 | 501.8 | 144.3 | 10.1 | 159.9 | 152.8 | 78.5 | 112.5 | 1,545.0 | |||||||||||||||||||||||||||
Operating and acquisition expenses for investment | ||||||||||||||||||||||||||||||||||||
advisory fees - inter-segment | - | - | - | - | - | 40.6 | - | (40.6 | ) | - | ||||||||||||||||||||||||||
Taxes, licenses and fees | 55.3 | 18.1 | 7.4 | 3.0 | 19.0 | 8.5 | - | 3.2 | 114.5 | |||||||||||||||||||||||||||
Interest and debt expense | - | - | - | - | - | - | - | 140.2 | 140.2 | |||||||||||||||||||||||||||
Total Operating Expenses | 1,557.0 | 932.7 | 364.7 | 96.4 | 734.2 | 201.9 | 139.4 | 359.8 | 4,386.1 | |||||||||||||||||||||||||||
Income (loss) from operations before federal income taxes | 451.2 | 308.6 | 112.4 | 34.6 | 90.1 | 42.7 | 44.1 | (131.9 | ) | 951.8 | ||||||||||||||||||||||||||
Federal income taxes | 153.1 | 74.6 | 30.8 | 11.7 | 31.6 | 15.6 | 15.5 | (45.3 | ) | 287.6 | ||||||||||||||||||||||||||
Income from Operations | $ | 298.1 | $ | 234.0 | $ | 81.6 | $ | 22.9 | $ | 58.5 | $ | 27.1 | $ | 28.6 | $ | (86.6 | ) | $ | 664.2 | |||||||||||||||||
(1) Includes consolidating adjustments. | ||||||||||||||||||||||||||||||||||||
(2) For detail, see pages 14 and 18. |
6/30/2008 | PAGE 9(B) | |||||||||||||||||||||||||||||||||||
Consolidating Statements of Income From Operations | ||||||||||||||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2007 | ||||||||||||||||||||||||||||||||||||
Individual Markets | Employer Markets | |||||||||||||||||||||||||||||||||||
Defined | Executive | Group | Investment | Lincoln | Other Opera- | |||||||||||||||||||||||||||||||
Life | Annuities | Contribution | Benefits | Protection | Management | UK | tions (1) | Consolidated | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 175.6 | $ | 29.4 | $ | - | $ | 0.2 | $ | 692.7 | $ | - | $ | 48.5 | 1.5 | $ | 947.9 | |||||||||||||||||||
Surrender charges | 30.9 | 19.8 | 4.3 | - | - | - | - | - | 55.0 | |||||||||||||||||||||||||||
Mortality assessments | 574.7 | - | - | 17.1 | - | - | 18.9 | - | 610.7 | |||||||||||||||||||||||||||
Expense assessments | 181.8 | 444.8 | 122.7 | 9.3 | - | - | 77.1 | - | 835.7 | |||||||||||||||||||||||||||
Investment advisory fees - external | - | - | - | - | - | 183.0 | - | - | 183.0 | |||||||||||||||||||||||||||
Investment advisory fees - inter-segment | - | - | - | - | - | 44.1 | - | (44.1 | ) | - | ||||||||||||||||||||||||||
Net investment income | 947.3 | 530.6 | 362.5 | 108.9 | 56.4 | - | 38.7 | 178.6 | 2,223.0 | |||||||||||||||||||||||||||
Operating realized gain (loss) (2) | - | 2.6 | - | - | - | - | - | - | 2.6 | |||||||||||||||||||||||||||
Amortization of deferred gain on business sold | ||||||||||||||||||||||||||||||||||||
through reinsurance | - | - | - | - | - | - | - | 37.2 | 37.2 | |||||||||||||||||||||||||||
Other revenues and fees | 18.6 | 186.8 | 9.3 | (0.1 | ) | 2.3 | 74.0 | 0.1 | 59.1 | 350.1 | ||||||||||||||||||||||||||
Total Operating Revenues | 1,928.9 | 1,214.0 | 498.8 | 135.4 | 751.4 | 301.1 | 183.3 | 232.3 | 5,245.2 | |||||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 509.0 | 52.0 | - | 5.5 | 512.3 | - | 70.5 | 74.2 | 1,223.5 | |||||||||||||||||||||||||||
Interest credited to contract holder funds | 505.7 | 326.3 | 209.0 | 76.3 | - | - | - | 88.1 | 1,205.4 | |||||||||||||||||||||||||||
Operating and acquisition expenses | 332.8 | 502.4 | 142.7 | 16.8 | 139.7 | 205.5 | 78.1 | 89.8 | 1,507.8 | |||||||||||||||||||||||||||
Operating and acquisition expenses for investment | ||||||||||||||||||||||||||||||||||||
advisory fees - inter-segment | - | - | - | - | - | 44.1 | - | (44.1 | ) | - | ||||||||||||||||||||||||||
Taxes, licenses and fees | 59.5 | 14.6 | 9.5 | 2.2 | 19.2 | 8.1 | - | 3.9 | 117.0 | |||||||||||||||||||||||||||
Interest and debt expense | - | - | - | - | - | - | - | 135.5 | 135.5 | |||||||||||||||||||||||||||
Total Operating Expenses | 1,407.0 | 895.3 | 361.2 | 100.8 | 671.2 | 257.7 | 148.6 | 347.4 | 4,189.2 | |||||||||||||||||||||||||||
Income (loss) from operations before federal income taxes | 521.9 | 318.7 | 137.6 | 34.6 | 80.2 | 43.4 | 34.7 | (115.1 | ) | 1,056.0 | ||||||||||||||||||||||||||
Federal income taxes | 178.9 | 78.7 | 40.6 | 11.9 | 28.1 | 15.9 | 12.2 | (51.0 | ) | 315.3 | ||||||||||||||||||||||||||
Income from Operations | $ | 343.0 | $ | 240.0 | $ | 97.0 | $ | 22.7 | $ | 52.1 | $ | 27.5 | $ | 22.5 | $ | (64.1 | ) | $ | 740.7 | |||||||||||||||||
(1) Includes consolidating adjustments. |
(2) For detail, see page 14. |
6/30/2008 | PAGE 10 | |||||||||||||||||||
Consolidated Balance Sheets | ||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||
As of | ||||||||||||||||||||
Sept. | Dec. | March | June | |||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Investments: | ||||||||||||||||||||
Corporate bonds | $ | 44,023.4 | $ | 44,089.7 | $ | 44,147.9 | $ | 43,535.4 | $ | 42,618.0 | ||||||||||
U.S. Government bonds | 248.1 | 239.4 | 222.0 | 231.9 | 203.9 | |||||||||||||||
Foreign government bonds | 975.0 | 1,030.0 | 1,037.5 | 1,037.4 | 907.5 | |||||||||||||||
Asset and mortgage-backed securities | 9,946.2 | 10,479.7 | 10,604.6 | 10,568.8 | 10,547.7 | |||||||||||||||
State and municipal bonds | 158.7 | 152.1 | 153.1 | 153.0 | 141.7 | |||||||||||||||
Preferred stocks - redeemable | 95.5 | 95.3 | 110.7 | 97.5 | 98.8 | |||||||||||||||
Common stocks | 488.0 | 499.2 | 413.8 | 384.2 | 330.7 | |||||||||||||||
Preferred stocks - equity | 198.9 | 171.0 | 104.1 | 90.2 | 133.9 | |||||||||||||||
Total available-for-sale securities | 56,133.8 | 56,756.4 | 56,793.7 | 56,098.4 | 54,982.2 | |||||||||||||||
Trading securities | 2,818.3 | 2,716.6 | 2,730.2 | 2,713.6 | 2,550.5 | |||||||||||||||
Mortgage loans | 7,310.8 | 7,280.7 | 7,422.7 | 7,531.9 | 7,677.9 | |||||||||||||||
Real estate | 387.6 | 385.0 | 258.3 | 175.3 | 135.7 | |||||||||||||||
Policy loans | 2,787.0 | 2,790.2 | 2,834.7 | 2,804.0 | 2,801.8 | |||||||||||||||
Other long-term investments | 1,395.0 | 1,584.0 | 1,882.0 | 2,232.1 | 2,053.3 | |||||||||||||||
Total investments | 70,832.5 | 71,512.9 | 71,921.6 | 71,555.3 | 70,201.4 | |||||||||||||||
Cash and invested cash | 989.1 | 1,327.5 | 1,665.5 | 2,446.8 | 1,921.4 | |||||||||||||||
DAC and VOBA | 9,100.6 | 9,337.0 | 9,579.8 | 9,995.5 | 10,608.1 | |||||||||||||||
Premiums and fees receivable | 432.3 | 401.2 | 400.6 | 468.1 | 399.3 | |||||||||||||||
Accrued investment income | 861.0 | 916.5 | 843.3 | 917.3 | 875.9 | |||||||||||||||
Reinsurance recoverables | 8,179.1 | 8,226.7 | 8,237.4 | 8,407.2 | 8,219.6 | |||||||||||||||
Goodwill | 4,159.0 | 4,159.3 | 4,143.7 | 4,128.4 | 4,045.0 | |||||||||||||||
Other assets | 3,599.3 | 3,432.6 | 3,529.9 | 2,727.6 | 2,715.1 | |||||||||||||||
Separate account assets | 89,497.2 | 92,903.1 | 91,113.3 | 84,703.1 | 85,295.4 | |||||||||||||||
Total assets | $ | 187,650.1 | $ | 192,216.8 | $ | 191,435.1 | $ | 185,349.3 | $ | 184,281.2 | ||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||
Future contract benefits | $ | 15,041.8 | $ | 15,317.2 | $ | 16,006.3 | $ | 16,501.0 | $ | 16,218.1 | ||||||||||
Other contract holder funds | 59,408.2 | 59,572.7 | 59,640.6 | 60,175.8 | 60,362.5 | |||||||||||||||
Short-term debt | 231.0 | 327.1 | 550.2 | 410.6 | 900.0 | |||||||||||||||
Long-term debt | 4,107.8 | 4,408.0 | 4,618.3 | 4,627.0 | 4,101.8 | |||||||||||||||
Reinsurance related derivative liability | 157.5 | 191.5 | 219.5 | 205.2 | 112.5 | |||||||||||||||
Funds withheld reinsurance liabilities | 2,154.9 | 2,136.6 | 2,117.4 | 2,117.0 | 2,068.7 | |||||||||||||||
Deferred gain on indemnity reinsurance | 734.3 | 715.1 | 695.8 | 676.6 | 657.6 | |||||||||||||||
Payables for collateral under securities loaned and derivatives | 1,372.8 | 1,320.3 | 1,135.1 | 1,796.2 | 1,491.1 | |||||||||||||||
Other liabilities | 3,108.9 | 3,362.3 | 3,620.2 | 3,050.5 | 2,575.8 | |||||||||||||||
Separate account liabilities | 89,497.2 | 92,903.1 | 91,113.3 | 84,703.1 | 85,295.4 | |||||||||||||||
Total liabilities | 175,814.4 | 180,253.9 | 179,716.7 | 174,263.0 | 173,783.5 | |||||||||||||||
Stockholders' Equity | ||||||||||||||||||||
Preferred stock | 0.5 | 0.5 | 0.4 | 0.4 | 0.4 | |||||||||||||||
Common stock | 7,362.1 | 7,308.6 | 7,200.5 | 7,074.8 | 7,023.1 | |||||||||||||||
Retained earnings | 4,323.8 | 4,456.9 | 4,292.2 | 4,332.8 | 4,282.5 | |||||||||||||||
Accumulated other comprehensive income (loss): | ||||||||||||||||||||
Net unrealized gain (loss) on available-for-sale securities | 16.6 | 56.0 | 86.0 | (452.1 | ) | (939.4 | ) | |||||||||||||
Net unrealized gain on derivative instruments | 35.5 | 31.9 | 52.2 | 43.9 | 41.4 | |||||||||||||||
Foreign currency translation adjustment | 181.4 | 193.6 | 175.6 | 174.4 | 177.2 | |||||||||||||||
Funded status of employee benefit plans | (84.2 | ) | (84.6 | ) | (88.5 | ) | (87.9 | ) | (87.5 | ) | ||||||||||
Total accumulated other comprehensive income (loss) | 149.3 | 196.9 | 225.3 | (321.7 | ) | (808.3 | ) | |||||||||||||
Total stockholders' equity | 11,835.7 | 11,962.9 | 11,718.4 | 11,086.3 | 10,497.7 | |||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 187,650.1 | $ | 192,216.8 | $ | 191,435.1 | $ | 185,349.3 | $ | 184,281.2 | ||||||||||
Share Data | ||||||||||||||||||||
Stockholders' equity per share | $ | 43.58 | $ | 44.41 | $ | 44.32 | $ | 42.74 | $ | 40.85 | ||||||||||
Book value, excluding AOCI | $ | 43.03 | $ | 43.67 | $ | 43.47 | $ | 43.98 | $ | 43.99 | ||||||||||
Common shares outstanding - assuming conversion of | ||||||||||||||||||||
preferred shares (in millions) | 271.6 | 269.4 | 264.4 | 259.4 | 257.0 |
6/30/2008 | PAGE 11 | |||||||||||||||||||||||||||||||||||
Balance Sheet Data - Segment Highlights | ||||||||||||||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||||||||||||||
Individual Markets | Employer Markets | |||||||||||||||||||||||||||||||||||
As of June 30, 2008 | Life | Annuities | Defined Contribution | Executive Benefits | Group Protection | Investment Management | Lincoln UK | Other Opera- tions (1) | Consolidated | |||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Allocated investments and cash and invested cash (2) | $ | 29,629.1 | $ | 17,809.0 | $ | 11,354.2 | $ | 3,458.5 | $ | 2,002.3 | $ | 155.4 | $ | 1,347.0 | $ | 6,367.3 | $ | 72,122.8 | ||||||||||||||||||
DAC and VOBA | 5,913.4 | 2,855.5 | 629.7 | 321.6 | 133.2 | - | 749.9 | 4.8 | 10,608.1 | |||||||||||||||||||||||||||
Goodwill | 2,192.3 | 1,039.8 | 20.2 | - | 274.3 | 247.6 | 16.5 | 254.3 | 4,045.0 | |||||||||||||||||||||||||||
DSI and other intangibles | 91.0 | 312.1 | 5.0 | - | - | 5.0 | - | 296.3 | 709.4 | |||||||||||||||||||||||||||
Amounts recoverable from reinsurers | 1,924.8 | 689.7 | - | 5.0 | 31.0 | - | 72.8 | 5,496.3 | 8,219.6 | |||||||||||||||||||||||||||
Separate account assets | 4,174.4 | 55,734.9 | 16,181.1 | 1,130.0 | - | - | 7,832.7 | 242.3 | 85,295.4 | |||||||||||||||||||||||||||
Liabilities and Capital | ||||||||||||||||||||||||||||||||||||
Future contract benefits | 5,869.0 | 976.9 | 1.5 | 377.4 | 1,324.4 | - | 1,135.9 | 6,533.0 | 16,218.1 | |||||||||||||||||||||||||||
Other contract holder funds | 26,234.8 | 17,425.9 | 11,286.9 | 3,039.4 | 130.7 | - | 388.8 | 1,856.0 | 60,362.5 | |||||||||||||||||||||||||||
Allocated capital (3) | 7,734.3 | 3,467.8 | 953.2 | 361.1 | 987.2 | 359.0 | 379.6 | (2,936.2 | ) | 11,306.0 | ||||||||||||||||||||||||||
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 | $ | 7,575.6 | $ | 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 | - | 274.3 | 247.0 | 16.5 | 339.1 | 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 | 5,443.4 | 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 | 5,898.7 | 816.9 | - | 356.2 | 1,273.0 | - | 1,146.9 | 6,514.6 | 16,006.3 | |||||||||||||||||||||||||||
Other contract holder funds | 25,388.1 | 17,749.7 | 10,891.7 | 3,039.7 | 17.2 | - | 402.9 | 2,151.3 | 59,640.6 | |||||||||||||||||||||||||||
Allocated capital (3) | 7,835.8 | 3,552.7 | 898.7 | 353.9 | 968.3 | 348.5 | 361.8 | (2,826.6 | ) | 11,493.1 | ||||||||||||||||||||||||||
(1) Includes consolidating adjustments. | |||||||||||||||||
(2) Includes inter-segment cash management balances our segments utilize to borrow money to meet their short-term needs and also to invest short-term funds with other segments. These balances eliminate in consolidation. | |||||||||||||||||
(3) Allocated capital is based on internal economic capital models plus certain other items (principally intangibles, including DAC and VOBA, goodwill and other items). |
PAGE 12 | ||||||||||
Individual Markets - Life Insurance | ||||||||||
Income Statements and Operational Data | ||||||||||
Unaudited (millions of dollars) | ||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 87.8 | $ | 84.7 | $ | 90.0 | $ | 86.3 | $ | 89.4 | 1.8 | % | $ | 175.6 | $ | 175.7 | 0.1 | % | ||||||||||||||||||
Surrender charges | 15.7 | 14.0 | 14.1 | 15.8 | 14.5 | -7.6 | % | 30.9 | 30.3 | -1.9 | % | |||||||||||||||||||||||||
Mortality assessments (1) | 282.4 | 303.3 | 310.3 | 312.6 | 320.5 | 13.5 | % | 574.7 | 633.1 | 10.2 | % | |||||||||||||||||||||||||
Expense assessments (1) | 69.9 | 139.8 | 112.9 | 116.7 | 124.6 | 78.3 | % | 181.8 | 241.3 | 32.7 | % | |||||||||||||||||||||||||
Net investment income | 493.3 | 444.5 | 464.1 | 447.4 | 466.8 | -5.4 | % | 947.3 | 914.2 | -3.5 | % | |||||||||||||||||||||||||
Other revenues and fees | 8.3 | 5.9 | 10.7 | 8.7 | 4.9 | -41.0 | % | 18.6 | 13.6 | -26.9 | % | |||||||||||||||||||||||||
Total Operating Revenues | 957.4 | 992.2 | 1,002.1 | 987.5 | 1,020.7 | 6.6 | % | 1,928.9 | 2,008.2 | 4.1 | % | |||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits (1) | 263.0 | 260.5 | 302.6 | 296.0 | 300.3 | 14.2 | % | 509.0 | 596.3 | 17.2 | % | |||||||||||||||||||||||||
Interest credited to contract holder funds | 254.0 | 255.1 | 260.2 | 258.2 | 262.1 | 3.2 | % | 505.7 | 520.3 | 2.9 | % | |||||||||||||||||||||||||
Operating and acquisition expenses | 171.0 | 219.0 | 199.0 | 212.8 | 227.6 | 33.1 | % | 392.3 | 440.4 | 12.3 | % | |||||||||||||||||||||||||
Total Operating Expenses | 688.0 | 734.6 | 761.8 | 767.0 | 790.0 | 14.8 | % | 1,407.0 | 1,557.0 | 10.7 | % | |||||||||||||||||||||||||
Income from operations before federal income taxes | 269.4 | 257.6 | 240.3 | 220.5 | 230.7 | -14.4 | % | 521.9 | 451.2 | -13.5 | % | |||||||||||||||||||||||||
Federal income taxes | 93.0 | 84.0 | 81.5 | 75.0 | 78.1 | -16.0 | % | 178.9 | 153.1 | -14.4 | % | |||||||||||||||||||||||||
Income From Operations | $ | 176.4 | $ | 173.6 | $ | 158.8 | $ | 145.5 | $ | 152.6 | -13.5 | % | $ | 343.0 | $ | 298.1 | -13.1 | % | ||||||||||||||||||
Effective Tax Rate | 34.5 | % | 32.6 | % | 33.9 | % | 34.0 | % | 33.9 | % | 34.3 | % | 33.9 | % | ||||||||||||||||||||||
Average Equity | $ | 7,789.2 | $ | 7,911.1 | $ | 7,925.1 | $ | 7,784.3 | $ | 7,733.6 | $ | 7,679.9 | $ | 7,758.9 | ||||||||||||||||||||||
Return on Average Equity | 9.1 | % | 8.8 | % | 8.0 | % | 7.5 | % | 7.9 | % | 8.9 | % | 7.7 | % | ||||||||||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||||||||||||||
Commissions | $ | 211.6 | $ | 213.2 | $ | 211.9 | $ | 182.7 | $ | 174.1 | -17.7 | % | $ | 438.8 | $ | 356.8 | -18.7 | % | ||||||||||||||||||
General and administrative expenses | 114.6 | 103.6 | 108.3 | 102.7 | 98.2 | -14.3 | % | 224.6 | 200.9 | -10.6 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 26.6 | 27.3 | 23.5 | 29.7 | 25.6 | -3.8 | % | 59.5 | 55.3 | -7.1 | % | |||||||||||||||||||||||||
Amortization of sales force intangibles | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 0.0 | % | 2.0 | 2.0 | 0.0 | % | |||||||||||||||||||||||||
Total commissions and expenses incurred | 353.8 | 345.1 | 344.7 | 316.1 | 298.9 | -15.5 | % | 724.9 | 615.0 | -15.2 | % | |||||||||||||||||||||||||
Less: commissions and expenses capitalized | (272.4 | ) | (270.5 | ) | (268.2 | ) | (234.1 | ) | (231.1 | ) | 15.2 | % | (561.3 | ) | (465.3 | ) | 17.1 | % | ||||||||||||||||||
Amortization of DAC and VOBA, net of interest (1) | 89.6 | 144.4 | 122.5 | 130.8 | 159.8 | 78.3 | % | 228.7 | 290.7 | 27.1 | % | |||||||||||||||||||||||||
Net Operating and Acquisition Expenses | $ | 171.0 | $ | 219.0 | $ | 199.0 | $ | 212.8 | $ | 227.6 | 33.1 | % | $ | 392.3 | $ | 440.4 | 12.3 | % | ||||||||||||||||||
General and Administrative Expenses - Basis Points on Average Account Values - Annualized | 169 | 150 | 155 | 147 | 140 | (28 | ) | 167 | 144 | (23 | ) | |||||||||||||||||||||||||
Roll Forward of DAC and VOBA | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 4,795.8 | $ | 5,126.4 | $ | 5,259.6 | $ | 5,408.7 | $ | 5,670.0 | $ | 4,659.4 | $ | 5,408.7 | ||||||||||||||||||||||
Deferrals | 272.4 | 270.5 | 268.2 | 234.1 | 231.1 | 561.3 | 465.3 | |||||||||||||||||||||||||||||
Amortization, net of interest: (1) | ||||||||||||||||||||||||||||||||||||
Unlocking | 20.8 | (3.8 | ) | 6.1 | (10.2 | ) | (18.1 | ) | 32.1 | (28.3 | ) | |||||||||||||||||||||||||
Other amortization | (110.4 | ) | (140.6 | ) | (128.6 | ) | (120.6 | ) | (141.7 | ) | (260.8 | ) | (262.4 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in operating and acquisition expenses | 182.8 | 126.1 | 145.7 | 103.3 | 71.3 | 332.6 | 174.6 | |||||||||||||||||||||||||||||
Adjustment related to realized (gains) losses on available-for-sale securities and derivatives | (2.4 | ) | 0.6 | 56.1 | 7.0 | 9.6 | (14.9 | ) | 16.6 | |||||||||||||||||||||||||||
Adjustment related to unrealized (gains) losses on available-for-sale securities and derivatives | 150.2 | 6.5 | (52.7 | ) | 151.0 | 162.5 | 149.3 | 313.5 | ||||||||||||||||||||||||||||
Balance at End-of-Period | $ | 5,126.4 | $ | 5,259.6 | $ | 5,408.7 | $ | 5,670.0 | $ | 5,913.4 | $ | 5,126.4 | $ | 5,913.4 | ||||||||||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 490.6 | $ | 569.0 | $ | 585.2 | $ | 648.7 | $ | 696.7 | $ | 449.5 | $ | 648.7 | ||||||||||||||||||||||
Deferrals | 112.4 | 83.9 | 98.2 | 87.5 | 89.5 | 177.9 | 177.0 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | 7.1 | (27.0 | ) | 0.7 | (3.5 | ) | (11.0 | ) | 9.6 | (14.5 | ) | |||||||||||||||||||||||||
Other amortization | (41.1 | ) | (40.7 | ) | (35.4 | ) | (36.0 | ) | (37.7 | ) | (68.0 | ) | (73.7 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in expense assessments | 78.4 | 16.2 | 63.5 | 48.0 | 40.8 | 119.5 | 88.8 | |||||||||||||||||||||||||||||
Balance at End-of-Period | $ | 569.0 | $ | 585.2 | $ | 648.7 | $ | 696.7 | $ | 737.5 | $ | 569.0 | $ | 737.5 | ||||||||||||||||||||||
(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 benefits by $3 million and reduced DAC amortization by $23 million. |
PAGE 13 | ||||||||||||||||||||||||||||||||||||
Individual Markets - Life Insurance | ||||||||||||||||||||||||||||||||||||
Operational Data and Account Value Roll Forward | ||||||||||||||||||||||||||||||||||||
Unaudited (billions of dollars) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Sales by Product (1) (in millions) | ||||||||||||||||||||||||||||||||||||
UL | ||||||||||||||||||||||||||||||||||||
Excluding MoneyGuard® | $ | 144.9 | $ | 143.8 | $ | 141.2 | $ | 113.7 | $ | 123.7 | -14.6 | % | $ | 311.1 | $ | 237.4 | -23.7 | % | ||||||||||||||||||
MoneyGuard® | 9.9 | 10.9 | 12.1 | 11.0 | 12.4 | 25.3 | % | 17.3 | 23.4 | 35.3 | % | |||||||||||||||||||||||||
Total | 154.8 | 154.7 | 153.3 | 124.7 | 136.1 | -12.1 | % | 328.4 | 260.8 | -20.6 | % | |||||||||||||||||||||||||
Variable Universal Life | 17.3 | 17.7 | 21.9 | 15.6 | 11.4 | -34.1 | % | 37.8 | 27.0 | -28.6 | % | |||||||||||||||||||||||||
Term/Whole Life | 7.9 | 7.5 | 6.9 | 5.1 | 5.4 | -31.6 | % | 17.3 | 10.5 | -39.3 | % | |||||||||||||||||||||||||
Total | $ | 180.0 | $ | 179.9 | $ | 182.1 | $ | 145.4 | $ | 152.9 | -15.1 | % | $ | 383.5 | $ | 298.3 | -22.2 | % | ||||||||||||||||||
First-Year Paid Premiums (in millions) | ||||||||||||||||||||||||||||||||||||
UL | ||||||||||||||||||||||||||||||||||||
Excluding MoneyGuard® | $ | 315.7 | $ | 303.8 | $ | 304.6 | $ | 245.4 | $ | 254.3 | -19.4 | % | $ | 683.6 | $ | 499.7 | -26.9 | % | ||||||||||||||||||
MoneyGuard® | 65.9 | 72.4 | 80.4 | 73.6 | 82.5 | 25.2 | % | 115.0 | 156.1 | 35.7 | % | |||||||||||||||||||||||||
Total | 381.6 | 376.2 | 385.0 | 319.0 | 336.8 | -11.7 | % | 798.6 | 655.8 | -17.9 | % | |||||||||||||||||||||||||
Variable Universal Life | 47.8 | 46.4 | 48.9 | 37.0 | 28.8 | -39.7 | % | 100.2 | 65.8 | -34.3 | % | |||||||||||||||||||||||||
Term/Whole Life | 18.3 | 19.1 | 24.4 | 14.0 | 16.2 | -11.5 | % | 35.7 | 30.2 | -15.4 | % | |||||||||||||||||||||||||
Total | $ | 447.7 | $ | 441.7 | $ | 458.3 | $ | 370.0 | $ | 381.8 | -14.7 | % | $ | 934.5 | $ | 751.8 | -19.6 | % | ||||||||||||||||||
Life Insurance In Force | ||||||||||||||||||||||||||||||||||||
UL and other | $ | 276.040 | $ | 279.933 | $ | 284.305 | $ | 286.187 | $ | 288.668 | 4.6 | % | $ | 276.040 | $ | 288.668 | 4.6 | % | ||||||||||||||||||
Term insurance | 236.155 | 236.414 | 235.919 | 234.860 | 234.109 | -0.9 | % | 236.155 | 234.109 | -0.9 | % | |||||||||||||||||||||||||
Total | $ | 512.195 | $ | 516.347 | $ | 520.224 | $ | 521.047 | $ | 522.777 | 2.1 | % | $ | 512.195 | $ | 522.777 | 2.1 | % | ||||||||||||||||||
Interest-Sensitive Life | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 22.228 | $ | 22.517 | $ | 22.818 | $ | 23.161 | $ | 23.355 | 5.1 | % | $ | 21.890 | $ | 23.161 | 5.8 | % | ||||||||||||||||||
Deposits | 0.863 | 0.843 | 0.934 | 0.824 | 0.830 | -3.8 | % | 1.745 | 1.654 | -5.2 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.311 | ) | (0.258 | ) | (0.262 | ) | (0.314 | ) | (0.236 | ) | 24.1 | % | (0.575 | ) | (0.550 | ) | 4.3 | % | ||||||||||||||||||
Net flows | 0.552 | 0.585 | 0.672 | 0.510 | 0.594 | 7.6 | % | 1.170 | 1.104 | -5.6 | % | |||||||||||||||||||||||||
Contract holder assessments (2) | (0.506 | ) | (0.527 | ) | (0.575 | ) | (0.561 | ) | (0.594 | ) | -17.4 | % | (1.029 | ) | (1.155 | ) | -12.2 | % | ||||||||||||||||||
Interest credited | 0.243 | 0.243 | 0.246 | 0.245 | 0.249 | 2.5 | % | 0.486 | 0.494 | 1.6 | % | |||||||||||||||||||||||||
Balance at End-of-Period (3) | $ | 22.517 | $ | 22.818 | $ | 23.161 | $ | 23.355 | $ | 23.604 | 4.8 | % | $ | 22.517 | $ | 23.604 | 4.8 | % | ||||||||||||||||||
Variable Universal Life | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 4.696 | $ | 4.948 | $ | 5.057 | $ | 4.961 | $ | 4.526 | -3.6 | % | $ | 4.600 | $ | 4.961 | 7.8 | % | ||||||||||||||||||
Deposits | 0.142 | 0.137 | 0.152 | 0.143 | 0.122 | -14.1 | % | 0.299 | 0.265 | -11.4 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.109 | ) | (0.087 | ) | (0.079 | ) | (0.073 | ) | (0.089 | ) | 18.3 | % | (0.186 | ) | (0.162 | ) | 12.9 | % | ||||||||||||||||||
Net flows | 0.033 | 0.050 | 0.073 | 0.070 | 0.033 | 0.0 | % | 0.113 | 0.103 | -8.8 | % | |||||||||||||||||||||||||
Contract holder assessments | (0.080 | ) | (0.080 | ) | (0.082 | ) | (0.082 | ) | (0.081 | ) | -1.3 | % | (0.159 | ) | (0.163 | ) | -2.5 | % | ||||||||||||||||||
Investment income and change in market value | 0.299 | 0.139 | (0.087 | ) | (0.423 | ) | (0.005 | ) | NM | 0.394 | (0.428 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period | $ | 4.948 | $ | 5.057 | $ | 4.961 | $ | 4.526 | $ | 4.473 | -9.6 | % | $ | 4.948 | $ | 4.473 | -9.6 | % | ||||||||||||||||||
Total Life Insurance | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 26.924 | $ | 27.465 | $ | 27.875 | $ | 28.122 | $ | 27.881 | 3.6 | % | $ | 26.490 | $ | 28.122 | 6.2 | % | ||||||||||||||||||
Deposits | 1.005 | 0.980 | 1.086 | 0.967 | 0.952 | -5.3 | % | 2.044 | 1.919 | -6.1 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.420 | ) | (0.345 | ) | (0.341 | ) | (0.387 | ) | (0.325 | ) | 22.6 | % | (0.761 | ) | (0.712 | ) | 6.4 | % | ||||||||||||||||||
Net flows | 0.585 | 0.635 | 0.745 | 0.580 | 0.627 | 7.2 | % | 1.283 | 1.207 | -5.9 | % | |||||||||||||||||||||||||
Contract holder assessments (2) | (0.586 | ) | (0.607 | ) | (0.657 | ) | (0.643 | ) | (0.675 | ) | -15.2 | % | (1.188 | ) | (1.318 | ) | -10.9 | % | ||||||||||||||||||
Investment income and change in market value | 0.542 | 0.382 | 0.159 | (0.178 | ) | 0.244 | -55.0 | % | 0.880 | 0.066 | -92.5 | % | ||||||||||||||||||||||||
Balance at End-of-Period | $ | 27.465 | $ | 27.875 | $ | 28.122 | $ | 27.881 | $ | 28.077 | 2.2 | % | $ | 27.465 | $ | 28.077 | 2.2 | % | ||||||||||||||||||
Interest Rate Yields and Spread | ||||||||||||||||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||
Interest-Sensitive Products (4) | (Basis Points) | (Basis Points) | ||||||||||||||||||||||||||||||||||
Fixed maturity securities, mortgage loans on real | ||||||||||||||||||||||||||||||||||||
estate and other, net of investment expenses | 6.09 | % | 6.02 | % | 6.05 | % | 6.00 | % | 5.88 | % | (21 | ) | 6.13 | % | 5.95 | % | (18 | ) | ||||||||||||||||||
Commercial mortgage loan prepayment and bond makewhole premiums | 0.14 | % | 0.08 | % | 0.15 | % | 0.03 | % | 0.15 | % | 1 | 0.17 | % | 0.09 | % | (8 | ) | |||||||||||||||||||
Alternative investments | 0.75 | % | -0.01 | % | 0.10 | % | 0.01 | % | 0.24 | % | (51 | ) | 0.44 | % | 0.12 | % | (32 | ) | ||||||||||||||||||
Net investment income yield on reserves | 6.98 | % | 6.09 | % | 6.30 | % | 6.04 | % | 6.27 | % | (71 | ) | 6.74 | % | 6.16 | % | (58 | ) | ||||||||||||||||||
Interest rate credited to contract holders | 4.45 | % | 4.41 | % | 4.41 | % | 4.34 | % | 4.33 | % | (12 | ) | 4.46 | % | 4.33 | % | (13 | ) | ||||||||||||||||||
Interest rate spread | 2.53 | % | 1.68 | % | 1.89 | % | 1.70 | % | 1.94 | % | (59 | ) | 2.28 | % | 1.83 | % | (45 | ) | ||||||||||||||||||
Traditional Products (5) | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities, mortgage loans on real | ||||||||||||||||||||||||||||||||||||
estate and other, net of investment expenses | 6.29 | % | 6.15 | % | 6.21 | % | 6.12 | % | 6.23 | % | (6 | ) | 6.33 | % | 6.17 | % | (16 | ) | ||||||||||||||||||
Commercial mortgage loan prepayment and bond makewhole premiums | 0.14 | % | 0.09 | % | 0.02 | % | 0.11 | % | 0.00 | % | (14 | ) | 0.08 | % | 0.06 | % | (2 | ) | ||||||||||||||||||
Alternative investments | 0.05 | % | -0.06 | % | 0.00 | % | -0.02 | % | -0.02 | % | (7 | ) | 0.04 | % | -0.02 | % | (6 | ) | ||||||||||||||||||
Net investment income yield on reserves | 6.48 | % | 6.18 | % | 6.23 | % | 6.21 | % | 6.21 | % | (27 | ) | 6.45 | % | 6.21 | % | (24 | ) | ||||||||||||||||||
(1) Sales consist of first year commissionable premiums 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) Interest-sensitive contract holder assessments in the second quarter of 2007 includes +.017 related to certain adjustments. | |
(3) Includes UL, interest-sensitive whole life and the fixed investment option of variable universal life products. | |
(4) For the interest-sensitive life products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average earning assets. We exclude net investment income earned on investments supporting statutory surplus and reverse repurchase agreement interest expense from our yield and spread calculations. The average crediting rate is calculated using interest credited on life products divided by average fixed account values. | |
(5) For the traditional life products, the yield on earning assets is calculated as net investment income on traditional investment portfolios divided by average earning assets. As of June 30, 2008, interest-sensitive products represented approximately 82% of total interest-sensitive and traditional earning assets. | |
PAGE 14 | |||||||||||||||||||||||||||||||||||||
Individual Markets - Annuities | |||||||||||||||||||||||||||||||||||||
Income Statements and Operational Data | |||||||||||||||||||||||||||||||||||||
Unaudited (millions of dollars) | |||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 16.6 | $ | 42.6 | $ | 46.5 | $ | 31.6 | $ | 19.0 | 14.5 | % | $ | 29.4 | $ | 50.6 | 72.1 | % | |||||||||||||||||||
Surrender charges | 10.1 | 9.8 | 9.1 | 9.6 | 9.6 | -5.0 | % | 19.8 | 19.2 | -3.0 | % | ||||||||||||||||||||||||||
Expense assessments | 233.9 | 249.4 | 265.2 | 236.0 | 247.6 | 5.9 | % | 444.8 | 483.6 | 8.7 | % | ||||||||||||||||||||||||||
Net investment income | 265.3 | 249.4 | 251.8 | 247.8 | 245.3 | -7.5 | % | 530.6 | 493.1 | -7.1 | % | ||||||||||||||||||||||||||
Operating realized gain (1) | 1.3 | 0.9 | 2.2 | 10.2 | 12.4 | NM | 2.6 | 22.6 | NM | ||||||||||||||||||||||||||||
Other revenues and fees (2) | 96.5 | 94.9 | 97.5 | 87.4 | 84.8 | -12.1 | % | 186.8 | 172.2 | -7.8 | % | ||||||||||||||||||||||||||
Total Operating Revenues | 623.7 | 647.0 | 672.3 | 622.6 | 618.7 | -0.8 | % | 1,214.0 | 1,241.3 | 2.2 | % | ||||||||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||||||||||||||||
Benefits | 26.7 | 56.3 | 62.0 | 51.4 | 35.2 | 31.8 | % | 52.0 | 86.6 | 66.5 | % | ||||||||||||||||||||||||||
Interest credited to contract holder funds | 165.1 | 165.3 | 167.9 | 163.2 | 163.0 | -1.3 | % | 326.3 | 326.2 | 0.0 | % | ||||||||||||||||||||||||||
Operating and acquisition expenses | 267.0 | 255.4 | 287.3 | 251.7 | 268.2 | 0.4 | % | 517.0 | 519.9 | 0.6 | % | ||||||||||||||||||||||||||
Total Operating Expenses | 458.8 | 477.0 | 517.2 | 466.3 | 466.4 | 1.7 | % | 895.3 | 932.7 | 4.2 | % | ||||||||||||||||||||||||||
Income from operations before federal income taxes | 164.9 | 170.0 | 155.1 | 156.3 | 152.3 | -7.6 | % | 318.7 | 308.6 | -3.2 | % | ||||||||||||||||||||||||||
Federal income taxes | 41.5 | 44.1 | 36.2 | 38.5 | 36.1 | -13.0 | % | 78.7 | 74.6 | -5.2 | % | ||||||||||||||||||||||||||
Income From Operations | $ | 123.4 | $ | 125.9 | $ | 118.9 | $ | 117.8 | $ | 116.2 | -5.8 | % | $ | 240.0 | $ | 234.0 | -2.5 | % | |||||||||||||||||||
Effective Tax Rate | 25.2 | % | 25.9 | % | 23.3 | % | 24.6 | % | 23.7 | % | 24.7 | % | 24.2 | % | |||||||||||||||||||||||
Average Equity | $ | 3,491.1 | $ | 3,537.8 | $ | 3,549.1 | $ | 3,561.6 | $ | 3,519.2 | $ | 3,468.9 | $ | 3,540.4 | |||||||||||||||||||||||
Return on Average Equity | 14.1 | % | 14.2 | % | 13.4 | % | 13.2 | % | 13.2 | % | 13.8 | % | 13.2 | % | |||||||||||||||||||||||
Income from Operations - Basis Points on Average Account Values - Annualized | 69 | 68 | 62 | 64 | 62 | (8 | ) | 69 | 63 | (6 | ) | ||||||||||||||||||||||||||
Operating Realized Gain (1) | |||||||||||||||||||||||||||||||||||||
Indexed annuity net derivatives results (3) | $ | 1.2 | $ | 0.2 | $ | (0.1 | ) | $ | (1.4 | ) | $ | (0.6 | ) | NM | $ | 2.1 | $ | (2.0 | ) | NM | |||||||||||||||||
Guaranteed living benefits risk and profit charges (4) | 1.4 | 1.6 | 1.8 | 5.8 | 10.3 | NM | 2.2 | 16.1 | NM | ||||||||||||||||||||||||||||
Guaranteed death benefits hedging offset (5) | (1.3 | ) | (0.9 | ) | 0.5 | 5.8 | 2.7 | NM | (1.7 | ) | 8.5 | NM | |||||||||||||||||||||||||
Total Operating Realized Gain | $ | 1.3 | $ | 0.9 | $ | 2.2 | $ | 10.2 | $ | 12.4 | NM | $ | 2.6 | $ | 22.6 | NM | |||||||||||||||||||||
Operating and Acquisition Expenses | |||||||||||||||||||||||||||||||||||||
Commissions | $ | 178.9 | $ | 189.0 | $ | 212.3 | $ | 165.6 | $ | 186.4 | 4.2 | % | $ | 330.9 | $ | 352.0 | 6.4 | % | |||||||||||||||||||
General and administrative expenses | 82.2 | 80.9 | 96.7 | 80.2 | 79.9 | -2.8 | % | 151.4 | 160.1 | 5.7 | % | ||||||||||||||||||||||||||
Broker-dealer commissions and general and administrative expenses | 92.8 | 91.8 | 100.5 | 89.2 | 85.1 | -8.3 | % | 180.0 | 174.3 | -3.2 | % | ||||||||||||||||||||||||||
Taxes, licenses and fees | 5.7 | 6.0 | 6.1 | 10.4 | 7.7 | 35.1 | % | 14.6 | 18.1 | 24.0 | % | ||||||||||||||||||||||||||
Total commissions and expenses incurred | 359.6 | 367.7 | 415.6 | 345.4 | 359.1 | -0.1 | % | 676.9 | 704.5 | 4.1 | % | ||||||||||||||||||||||||||
Less: commissions and expenses capitalized | (189.4 | ) | (196.2 | ) | (230.6 | ) | (172.8 | ) | (191.7 | ) | -1.2 | % | (346.9 | ) | (364.5 | ) | -5.1 | % | |||||||||||||||||||
Amortization of DAC and VOBA, net of interest | 96.8 | 83.9 | 102.3 | 79.1 | 100.8 | 4.1 | % | 187.0 | 179.9 | -3.8 | % | ||||||||||||||||||||||||||
Net Operating and Acquisition Expenses | $ | 267.0 | $ | 255.4 | $ | 287.3 | $ | 251.7 | $ | 268.2 | 0.4 | % | $ | 517.0 | $ | 519.9 | 0.6 | % | |||||||||||||||||||
General and Administrative Expenses - Basis Points on Average Account Values - Annualized (6) | 46 | 44 | 51 | 44 | 42 | (4 | ) | 44 | 43 | (1 | ) | ||||||||||||||||||||||||||
(1) Included in income from operations. | ||
(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. See page 17 for additional details. | ||
(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. |
PAGE 15 | ||||||||||||||||||||||||||||
Individual Markets - Annuities | ||||||||||||||||||||||||||||
Roll Forwards of DAC, VOBA, DFEL and DSI | ||||||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | June | June | ||||||||||||||||||||||
Roll Forward of DAC and VOBA | 2007 | 2007 | 2007 | 2008 | 2008 | 2007 | 2008 | |||||||||||||||||||||
Balance at beginning-of-period | $ | 2,082.0 | $ | 2,236.8 | $ | 2,347.4 | $ | 2,477.0 | $ | 2,570.8 | $ | 2,050.4 | $ | 2,477.0 | ||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (27.2 | ) | - | ||||||||||||||||||||
Inter-segment transfer | - | - | - | (6.9 | ) | - | - | (6.9 | ) | |||||||||||||||||||
Deferrals | 189.4 | 196.2 | 230.6 | 172.8 | 191.7 | 346.9 | 364.5 | |||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||
Unlocking | 8.8 | 19.0 | 10.7 | (0.6 | ) | 0.4 | 14.5 | (0.2 | ) | |||||||||||||||||||
Other amortization | (105.6 | ) | (102.9 | ) | (113.0 | ) | (78.5 | ) | (101.2 | ) | (201.5 | ) | (179.7 | ) | ||||||||||||||
Deferrals, net of amortization included in operating and acquisition expenses | 92.6 | 112.3 | 128.3 | 93.7 | 90.9 | 159.9 | 184.6 | |||||||||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||||||||||
on available-for-sale securities and derivatives | (10.2 | ) | 21.1 | 34.8 | (10.5 | ) | (7.3 | ) | (18.7 | ) | (17.8 | ) | ||||||||||||||||
Adjustment related to unrealized (gains) losses | ||||||||||||||||||||||||||||
on available-for-sale securities and derivatives | 72.4 | (22.8 | ) | (33.5 | ) | 17.5 | 201.1 | 58.4 | 218.6 | |||||||||||||||||||
Business acquired | - | - | - | - | - | 14.0 | - | |||||||||||||||||||||
Balance at End-of-Period | $ | 2,236.8 | $ | 2,347.4 | $ | 2,477.0 | $ | 2,570.8 | $ | 2,855.5 | $ | 2,236.8 | $ | 2,855.5 | ||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 104.6 | $ | 111.9 | $ | 122.0 | $ | 130.9 | $ | 141.6 | $ | 100.9 | $ | 130.9 | ||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (2.0 | ) | - | ||||||||||||||||||||
Deferrals | 11.8 | 11.5 | 11.9 | 11.9 | 13.4 | 21.6 | 25.3 | |||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||
Unlocking | 0.2 | 1.4 | (0.4 | ) | 0.7 | (0.5 | ) | 0.7 | 0.2 | |||||||||||||||||||
Other amortization | (4.5 | ) | (4.0 | ) | (4.6 | ) | (2.7 | ) | (3.0 | ) | (7.9 | ) | (5.7 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||||||
expense assessments | 7.5 | 8.9 | 6.9 | 9.9 | 9.9 | 14.4 | 19.8 | |||||||||||||||||||||
Adjustment related to realized gains (losses) | ||||||||||||||||||||||||||||
on available-for-sale securities and derivatives | (0.2 | ) | 1.2 | 2.0 | 0.8 | (0.5 | ) | (1.4 | ) | 0.3 | ||||||||||||||||||
Balance at End-of-Period | $ | 111.9 | $ | 122.0 | $ | 130.9 | $ | 141.6 | $ | 151.0 | $ | 111.9 | $ | 151.0 | ||||||||||||||
Roll Forward of DSI | ||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 206.2 | $ | 224.7 | $ | 248.7 | $ | 278.8 | $ | 295.7 | $ | 193.7 | $ | 278.8 | ||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (2.8 | ) | - | ||||||||||||||||||||
Inter-segment transfer | - | - | - | (1.3 | ) | - | - | (1.3 | ) | |||||||||||||||||||
Deferrals | 27.3 | 29.7 | 35.5 | 25.7 | 26.1 | 50.9 | 51.8 | |||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||
Unlocking | 0.9 | 0.6 | (0.9 | ) | 0.5 | (0.2 | ) | 2.4 | 0.3 | |||||||||||||||||||
Other amortization | (8.7 | ) | (9.1 | ) | (10.1 | ) | (6.1 | ) | (8.5 | ) | (15.9 | ) | (14.6 | ) | ||||||||||||||
Deferrals, net of amortization included in | ||||||||||||||||||||||||||||
interest credited | 19.5 | 21.2 | 24.5 | 20.1 | 17.4 | 37.4 | 37.5 | |||||||||||||||||||||
Adjustment related to realized (gains) losses | ||||||||||||||||||||||||||||
on available-for-sale securities | (1.0 | ) | 2.8 | 5.6 | (1.9 | ) | (1.0 | ) | (3.6 | ) | (2.9 | ) | ||||||||||||||||
Balance at End-of-Period | $ | 224.7 | $ | 248.7 | $ | 278.8 | $ | 295.7 | $ | 312.1 | $ | 224.7 | $ | 312.1 | ||||||||||||||
PAGE 16 | ||||||||||||||||||||||||||||||||||||
Individual Markets - Annuities | ||||||||||||||||||||||||||||||||||||
Account Value Roll Forward | ||||||||||||||||||||||||||||||||||||
Unaudited (in billions) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Fixed Annuities | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 18.139 | $ | 17.867 | $ | 17.813 | $ | 17.822 | $ | 17.701 | -2.4 | % | $ | 18.545 | $ | 17.822 | -3.9 | % | ||||||||||||||||||
Business acquired | - | - | - | - | - | NM | 0.040 | - | -100.0 | % | ||||||||||||||||||||||||||
Gross deposits | 0.982 | 1.231 | 1.288 | 1.160 | 1.371 | 39.6 | % | 1.803 | 2.531 | 40.4 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.893 | ) | (0.891 | ) | (0.706 | ) | (0.586 | ) | (0.618 | ) | 30.8 | % | (1.780 | ) | (1.204 | ) | 32.4 | % | ||||||||||||||||||
Net flows | 0.089 | 0.340 | 0.582 | 0.574 | 0.753 | NM | 0.023 | 1.327 | NM | |||||||||||||||||||||||||||
Transfer from (to) variable annuities | (0.560 | ) | (0.589 | ) | (0.734 | ) | (0.680 | ) | (0.797 | ) | -42.3 | % | (1.117 | ) | (1.477 | ) | -32.2 | % | ||||||||||||||||||
Inter-segment transfer | - | - | - | (0.089 | ) | - | NM | - | (0.089 | ) | NM | |||||||||||||||||||||||||
Interest credited | 0.172 | 0.165 | 0.126 | 0.048 | 0.116 | -32.6 | % | 0.325 | 0.164 | -49.5 | % | |||||||||||||||||||||||||
Sales inducements deferred | 0.027 | 0.030 | 0.035 | 0.026 | 0.026 | -3.7 | % | 0.051 | 0.052 | 2.0 | % | |||||||||||||||||||||||||
Balance at End-of-Period (Gross) | 17.867 | 17.813 | 17.822 | 17.701 | 17.799 | -0.4 | % | 17.867 | 17.799 | -0.4 | % | |||||||||||||||||||||||||
Reinsurance ceded | (1.598 | ) | (1.430 | ) | (1.352 | ) | (1.306 | ) | (1.255 | ) | 21.5 | % | (1.598 | ) | (1.255 | ) | 21.5 | % | ||||||||||||||||||
Balance at End-of-Period (Net of Ceded) (1) | $ | 16.269 | $ | 16.383 | $ | 16.470 | $ | 16.395 | $ | 16.544 | 1.7 | % | $ | 16.269 | $ | 16.544 | 1.7 | % | ||||||||||||||||||
Variable Annuities | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 50.300 | $ | 55.171 | $ | 58.293 | $ | 58.643 | $ | 54.966 | 9.3 | % | $ | 48.169 | $ | 58.643 | 21.7 | % | ||||||||||||||||||
Gross deposits | 2.295 | 2.247 | 2.594 | 1.866 | 2.065 | -10.0 | % | 4.295 | 3.931 | -8.5 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (1.247 | ) | (1.296 | ) | (1.367 | ) | (1.259 | ) | (1.229 | ) | 1.4 | % | (2.426 | ) | (2.488 | ) | -2.6 | % | ||||||||||||||||||
Net flows | 1.048 | 0.951 | 1.227 | 0.607 | 0.836 | -20.2 | % | 1.869 | 1.443 | -22.8 | % | |||||||||||||||||||||||||
Transfer from (to) fixed annuities | 0.560 | 0.589 | 0.734 | 0.680 | 0.796 | 42.1 | % | 1.117 | 1.476 | 32.1 | % | |||||||||||||||||||||||||
Inter-segment transfer | - | - | - | (0.206 | ) | - | NM | - | (0.206 | ) | NM | |||||||||||||||||||||||||
Investment increase and change in market value | 3.263 | 1.582 | (1.611 | ) | (4.758 | ) | (0.744 | ) | NM | 4.016 | (5.502 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period (2) | $ | 55.171 | $ | 58.293 | $ | 58.643 | $ | 54.966 | $ | 55.854 | 1.2 | % | $ | 55.171 | $ | 55.854 | 1.2 | % | ||||||||||||||||||
Total Annuities | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 68.439 | $ | 73.038 | $ | 76.106 | $ | 76.465 | $ | 72.667 | 6.2 | % | $ | 66.714 | $ | 76.465 | 14.6 | % | ||||||||||||||||||
Business acquired | - | - | - | - | - | NM | 0.040 | - | -100.0 | % | ||||||||||||||||||||||||||
Gross deposits | 3.277 | 3.478 | 3.882 | 3.026 | 3.436 | 4.9 | % | 6.098 | 6.462 | 6.0 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (2.140 | ) | (2.187 | ) | (2.073 | ) | (1.845 | ) | (1.847 | ) | 13.7 | % | (4.206 | ) | (3.692 | ) | 12.2 | % | ||||||||||||||||||
Net flows | 1.137 | 1.291 | 1.809 | 1.181 | 1.589 | 39.8 | % | 1.892 | 2.770 | 46.4 | % | |||||||||||||||||||||||||
Transfers between fixed and variable accounts | - | - | - | - | (0.001 | ) | NM | - | (0.001 | ) | NM | |||||||||||||||||||||||||
Inter-segment transfer | - | - | - | (0.295 | ) | - | NM | - | (0.295 | ) | NM | |||||||||||||||||||||||||
Interest credited and change in market value | 3.435 | 1.747 | (1.485 | ) | (4.710 | ) | (0.628 | ) | NM | 4.341 | (5.338 | ) | NM | |||||||||||||||||||||||
Sales inducements deferred | 0.027 | 0.030 | 0.035 | 0.026 | 0.026 | -3.7 | % | 0.051 | 0.052 | 2.0 | % | |||||||||||||||||||||||||
Balance at End-of-Period (Gross) | 73.038 | 76.106 | 76.465 | 72.667 | 73.653 | 0.8 | % | 73.038 | 73.653 | 0.8 | % | |||||||||||||||||||||||||
Reinsurance ceded | (1.598 | ) | (1.430 | ) | (1.352 | ) | (1.306 | ) | (1.255 | ) | 21.5 | % | (1.598 | ) | (1.255 | ) | 21.5 | % | ||||||||||||||||||
Balance at End-of-Period (Net of Ceded) | $ | 71.440 | $ | 74.676 | $ | 75.113 | $ | 71.361 | $ | 72.398 | 1.3 | % | $ | 71.440 | $ | 72.398 | 1.3 | % | ||||||||||||||||||
Variable Annuities Under Agreement - Included Above | $ | 0.164 | $ | 0.161 | $ | 0.149 | $ | 0.128 | $ | 0.120 | -26.8 | % | $ | 0.164 | $ | 0.120 | -26.8 | % | ||||||||||||||||||
Incremental Deposits: (3) | ||||||||||||||||||||||||||||||||||||
Fixed annuities | $ | 0.976 | $ | 1.224 | $ | 1.282 | $ | 1.156 | $ | 1.365 | 39.9 | % | $ | 1.791 | $ | 2.521 | 40.8 | % | ||||||||||||||||||
Variable annuities | 2.265 | 2.217 | 2.558 | 1.838 | 2.043 | -9.8 | % | 4.244 | 3.881 | -8.6 | % | |||||||||||||||||||||||||
Total Incremental Deposits | $ | 3.241 | $ | 3.441 | $ | 3.840 | $ | 2.994 | $ | 3.408 | 5.2 | % | $ | 6.035 | $ | 6.402 | 6.1 | % |
(1) Includes the fixed portion of variable annuities. |
(2) Excludes the fixed portion of variable annuities. |
(3) Represents gross deposits reduced by transfers from other Lincoln products. |
PAGE 17 | ||||||||||||||||||||||||||||||||||||
Individual Markets - 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 | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Fixed Annuities - Excluding Fixed Portion of Variable Contracts | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 0.129 | $ | 0.286 | $ | 0.231 | $ | 0.086 | $ | 0.137 | 6.2 | % | $ | 0.255 | $ | 0.223 | -12.5 | % | ||||||||||||||||||
Withdrawals and deaths | (0.677 | ) | (0.651 | ) | (0.486 | ) | (0.378 | ) | (0.406 | ) | 40.0 | % | (1.351 | ) | (0.784 | ) | 42.0 | % | ||||||||||||||||||
Net flows | $ | (0.548 | ) | $ | (0.365 | ) | $ | (0.255 | ) | $ | (0.292 | ) | $ | (0.269 | ) | 50.9 | % | $ | (1.096 | ) | $ | (0.561 | ) | 48.8 | % | |||||||||||
Gross fixed contract account values | $ | 10.377 | $ | 10.115 | $ | 9.960 | $ | 9.767 | $ | 9.595 | -7.5 | % | $ | 10.377 | $ | 9.595 | -7.5 | % | ||||||||||||||||||
Reinsurance ceded | (1.598 | ) | (1.430 | ) | (1.352 | ) | (1.306 | ) | (1.255 | ) | 21.5 | % | (1.598 | ) | (1.255 | ) | 21.5 | % | ||||||||||||||||||
Net fixed contract account values | $ | 8.779 | $ | 8.685 | $ | 8.608 | $ | 8.461 | $ | 8.340 | -5.0 | % | $ | 8.779 | $ | 8.340 | -5.0 | % | ||||||||||||||||||
- | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Indexed Annuities | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 0.191 | $ | 0.199 | $ | 0.204 | $ | 0.218 | $ | 0.356 | 86.4 | % | $ | 0.352 | $ | 0.574 | 63.1 | % | ||||||||||||||||||
Withdrawals and deaths | (0.061 | ) | (0.059 | ) | (0.062 | ) | (0.083 | ) | (0.102 | ) | -67.2 | % | (0.123 | ) | (0.185 | ) | -50.4 | % | ||||||||||||||||||
Net flows | $ | 0.130 | $ | 0.140 | $ | 0.142 | $ | 0.135 | $ | 0.254 | 95.4 | % | $ | 0.229 | $ | 0.389 | 69.9 | % | ||||||||||||||||||
Indexed Annuity Account Values | $ | 4.033 | $ | 4.228 | $ | 4.392 | $ | 4.465 | $ | 4.726 | 17.2 | % | $ | 4.033 | $ | 4.726 | 17.2 | % | ||||||||||||||||||
Fixed Portion of Variable Contracts | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 0.662 | $ | 0.746 | $ | 0.853 | $ | 0.856 | $ | 0.879 | 32.8 | % | $ | 1.197 | $ | 1.735 | 44.9 | % | ||||||||||||||||||
Withdrawals and deaths | (0.155 | ) | (0.181 | ) | (0.158 | ) | (0.124 | ) | (0.110 | ) | 29.0 | % | (0.306 | ) | (0.234 | ) | 23.5 | % | ||||||||||||||||||
Net flows | $ | 0.507 | $ | 0.565 | $ | 0.695 | $ | 0.732 | $ | 0.769 | 51.7 | % | $ | 0.891 | $ | 1.501 | 68.5 | % | ||||||||||||||||||
Fixed Portion of Variable Contract Account Values | $ | 3.458 | $ | 3.470 | $ | 3.470 | $ | 3.469 | $ | 3.478 | 0.6 | % | $ | 3.458 | $ | 3.478 | 0.6 | % | ||||||||||||||||||
Variable Annuities - Including Fixed Portion of Variable Contracts | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 2.957 | $ | 2.993 | $ | 3.445 | $ | 2.721 | $ | 2.944 | -0.4 | % | $ | 5.492 | $ | 5.665 | 3.2 | % | ||||||||||||||||||
Withdrawals and deaths | (1.402 | ) | (1.477 | ) | (1.525 | ) | (1.383 | ) | (1.339 | ) | 4.5 | % | (2.732 | ) | (2.722 | ) | 0.4 | % | ||||||||||||||||||
Net flows | $ | 1.555 | $ | 1.516 | $ | 1.920 | $ | 1.338 | $ | 1.605 | 3.2 | % | $ | 2.760 | $ | 2.943 | 6.6 | % | ||||||||||||||||||
- | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Variable Contract Account Values | $ | 58.629 | $ | 61.764 | $ | 62.112 | $ | 58.435 | $ | 59.333 | 1.2 | % | $ | 58.629 | $ | 59.333 | 1.2 | % | ||||||||||||||||||
Average Daily Variable Annuity Separate Account Values | $ | 53.465 | $ | 55.827 | $ | 58.628 | $ | 55.318 | $ | 57.763 | 8.0 | % | $ | 51.327 | $ | 56.541 | 10.2 | % |
Change | Change | |||||||||||||||||||||||||||||||||||
Interest Rate Spread (1) | (Basis Points) | (Basis Points) | ||||||||||||||||||||||||||||||||||
Fixed maturity securities, mortgage loans on real estate and other, net of investment expenses | 5.82 | % | 5.82 | % | 5.85 | % | 5.85 | % | 5.88 | % | 6 | 5.84 | % | 5.86 | % | 2 | ||||||||||||||||||||
Commercial mortgage loan prepayment and bond make whole premiums | 0.08 | % | 0.05 | % | 0.08 | % | 0.03 | % | 0.00 | % | (8 | ) | 0.06 | % | 0.02 | % | (4 | ) | ||||||||||||||||||
Alternative investments | 0.02 | % | -0.03 | % | 0.00 | % | -0.01 | % | -0.01 | % | (3 | ) | 0.02 | % | -0.01 | % | (3 | ) | ||||||||||||||||||
Net investment income yield on reserves | 5.92 | % | 5.84 | % | 5.93 | % | 5.87 | % | 5.87 | % | (5 | ) | 5.92 | % | 5.87 | % | (5 | ) | ||||||||||||||||||
Interest rate credited to contract holders | 3.73 | % | 3.77 | % | 3.76 | % | 3.81 | % | 3.73 | % | - | 3.68 | % | 3.77 | % | 9 | ||||||||||||||||||||
Interest rate spread | 2.19 | % | 2.07 | % | 2.17 | % | 2.06 | % | 2.14 | % | (5 | ) | 2.24 | % | 2.10 | % | (14 | ) | ||||||||||||||||||
Variable Annuity Expense Assessments (in millions) (2) | $ | 249.7 | $ | 267.2 | $ | 286.6 | $ | 271.4 | $ | 287.0 | 14.9 | % | $ | 474.6 | $ | 558.4 | 17.7 | % | ||||||||||||||||||
GLB Expense Assessments (in millions) (3) | $ | 27.2 | $ | 31.7 | $ | 37.1 | $ | 39.6 | $ | 42.7 | 57.0 | % | $ | 51.5 | $ | 82.3 | 59.8 | % | ||||||||||||||||||
Components of Attributed Fees on GLB (in millions) | ||||||||||||||||||||||||||||||||||||
Attributed fee included in operating revenues and income from operations (4) | $ | 3.5 | $ | 3.8 | $ | 4.4 | $ | 15.8 | $ | 17.0 | NM | $ | 6.7 | $ | 32.8 | NM | ||||||||||||||||||||
Attributed fee excluded from operating revenues and income from operations (5) | 12.3 | 14.0 | 17.0 | 19.6 | 22.5 | 82.9 | % | 23.2 | 42.1 | 81.5 | % | |||||||||||||||||||||||||
Total Attributed Fees on GLB | $ | 15.8 | $ | 17.8 | $ | 21.4 | $ | 35.4 | $ | 39.5 | 150.0 | % | $ | 29.9 | $ | 74.9 | 150.5 | % | ||||||||||||||||||
GLB Account Values by Type | ||||||||||||||||||||||||||||||||||||
Guaranteed withdrawal benefits (6) | $ | 16.851 | $ | 18.364 | $ | 18.935 | $ | 18.255 | $ | 19.301 | 14.5 | % | $ | 16.851 | $ | 19.301 | 14.5 | % | ||||||||||||||||||
Guaranteed income benefits (7) | 6.184 | 7.319 | 8.372 | 8.632 | 9.370 | 51.5 | % | 6.184 | 9.370 | 51.5 | % | |||||||||||||||||||||||||
Total GLB Account Values | $ | 23.035 | $ | 25.683 | $ | 27.307 | $ | 26.887 | $ | 28.671 | 24.5 | % | $ | 23.035 | $ | 28.671 | 24.5 | % |
(1) For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average invested assets on reserves. We exclude net investment income earned on investments supporting statutory surplus, reverse repurchase agreement interest expense and inter-segment cash management account interest expense from our yield and spread calculations. The average crediting rate is calculated using interest credited before DSI amortization, plus the immediate annuity reserve change (included within benefits), divided by average fixed account values net of co-insured account values. Fixed account values reinsured under modified co-insurance agreements are included in account values for this calculation since assets (and therefore margin) are retained under these agreements. | |||||||||||
(2) Comprised of the variable annuity expense assessments included in the expense assessments line item on page 15 and the amounts presented in the components of attributed fees on GLB as described in footnotes 6 and 7 and disclosed above. | |||||||||||
(3) 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 6 and 7 and disclosed above. | |||||||||||
(4) 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 gain (loss) and is included in income from operations and operating revenues. | |||||||||||
(5) 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 gain (loss) and is excluded in income from operations and operating revenues. | |||||||||||
(6) Guaranteed withdrawal benefits include features that offer the contract holder a guarantee equal to the initial deposit (or contract value, if elected after issue), adjusted for any subsequent purchase payments or withdrawals. | |||||||||||
(7) For our guaranteed income benefits, we offer other product riders allowing variable annuity contract holders access and control during the income distribution phase of their contract. This added flexibility allows the contract holder to access the account value for transfers, additional withdrawals and other service features, such as portfolio rebalancing. |
PAGE 18 | ||||||||||||||||||||||||||||||||||||
Employer Markets - Defined Contribution | ||||||||||||||||||||||||||||||||||||
Income Statements and Operational Data | ||||||||||||||||||||||||||||||||||||
Unaudited (millions of dollars) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Surrender charges | $ | 2.2 | $ | 1.8 | $ | 1.8 | $ | 1.9 | $ | 1.5 | -31.8 | % | $ | 4.3 | $ | 3.4 | -20.9 | % | ||||||||||||||||||
Expense assessments | 63.0 | 63.5 | 64.7 | 59.3 | 59.3 | -5.9 | % | 122.7 | 118.6 | -3.3 | % | |||||||||||||||||||||||||
Net investment income | 182.2 | 172.9 | 173.3 | 171.7 | 174.8 | -4.1 | % | 362.5 | 346.5 | -4.4 | % | |||||||||||||||||||||||||
Operating realized gain (1) | - | - | - | - | 0.1 | NM | - | 0.1 | NM | |||||||||||||||||||||||||||
Other revenues and fees | 4.6 | 5.2 | 3.5 | 4.8 | 3.7 | -19.6 | % | 9.3 | 8.5 | -8.6 | % | |||||||||||||||||||||||||
Total Operating Revenues | 252.0 | 243.4 | 243.3 | 237.7 | 239.4 | -5.0 | % | 498.8 | 477.1 | -4.4 | % | |||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | - | - | - | - | 0.1 | NM | - | 0.1 | NM | |||||||||||||||||||||||||||
Interest credited to contract holder funds | 104.6 | 104.6 | 104.8 | 105.9 | 107.0 | 2.3 | % | 209.0 | 212.9 | 1.9 | % | |||||||||||||||||||||||||
Operating and acquisition expenses | 80.6 | 84.7 | 77.3 | 76.3 | 75.4 | -6.5 | % | 152.2 | 151.7 | -0.3 | % | |||||||||||||||||||||||||
Total Operating Expenses | 185.2 | 189.3 | 182.1 | 182.2 | 182.5 | -1.5 | % | 361.2 | 364.7 | 1.0 | % | |||||||||||||||||||||||||
Income from operations before federal income taxes | 66.8 | 54.1 | 61.2 | 55.5 | 56.9 | -14.8 | % | 137.6 | 112.4 | -18.3 | % | |||||||||||||||||||||||||
- | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Federal income taxes | 19.5 | 12.9 | 18.1 | 15.1 | 15.7 | -19.5 | % | 40.6 | 30.8 | -24.1 | % | |||||||||||||||||||||||||
Income From Operations | $ | 47.3 | $ | 41.2 | $ | 43.1 | $ | 40.4 | $ | 41.2 | -12.9 | % | $ | 97.0 | $ | 81.6 | -15.9 | % | ||||||||||||||||||
Effective Tax Rate | 29.2 | % | 23.8 | % | 29.6 | % | 27.2 | % | 27.6 | % | 29.5 | % | 27.4 | % | ||||||||||||||||||||||
Average Equity | $ | 906.6 | $ | 901.4 | $ | 902.7 | $ | 906.4 | $ | 933.7 | $ | 921.3 | $ | 920.0 | ||||||||||||||||||||||
Return on Average Equity | 20.9 | % | 18.3 | % | 19.1 | % | 17.8 | % | 17.7 | % | 21.1 | % | 17.7 | % | ||||||||||||||||||||||
Income From Operations - Basis Points on Average Account Values - Annualized | 53 | 46 | 47 | 46 | 46 | (7 | ) | 56 | 46 | (9 | ) | |||||||||||||||||||||||||
Operating Realized Gain (1) | ||||||||||||||||||||||||||||||||||||
Guaranteed living benefits risk and profit charges (2) | $ | - | $ | - | $ | - | $ | - | $ | 0.1 | NM | $ | - | $ | 0.1 | NM | ||||||||||||||||||||
Total Operating Realized Gain | $ | - | $ | - | $ | - | $ | - | $ | 0.1 | NM | $ | - | $ | 0.1 | NM | ||||||||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||||||||||||||
Commissions | $ | 21.3 | $ | 19.9 | $ | 20.3 | $ | 19.7 | $ | 19.4 | -8.9 | % | $ | 40.5 | $ | 39.1 | -3.5 | % | ||||||||||||||||||
General and administrative expenses | 54.9 | 59.8 | 53.7 | 51.9 | 52.0 | -5.3 | % | 104.7 | 103.9 | -0.8 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 4.4 | 2.2 | 2.1 | 4.4 | 3.0 | -31.8 | % | 9.5 | 7.4 | -22.1 | % | |||||||||||||||||||||||||
Total commissions and expenses incurred | 80.6 | 81.9 | 76.1 | 76.0 | 74.4 | -7.7 | % | 154.7 | 150.4 | -2.8 | % | |||||||||||||||||||||||||
Less: commissions and expenses capitalized | (22.5 | ) | (23.7 | ) | (23.7 | ) | (23.6 | ) | (22.2 | ) | 1.3 | % | (44.6 | ) | (45.8 | ) | -2.7 | % | ||||||||||||||||||
Amortization of DAC and VOBA, net of interest | 22.5 | 26.5 | 24.9 | 23.9 | 23.2 | 3.1 | % | 42.1 | 47.1 | 11.9 | % | |||||||||||||||||||||||||
Net Operating and Acquisition Expenses | $ | 80.6 | $ | 84.7 | $ | 77.3 | $ | 76.3 | $ | 75.4 | -6.5 | % | $ | 152.2 | $ | 151.7 | -0.3 | % | ||||||||||||||||||
General and Administrative Expenses - Basis Points on Average Account Values - Annualized (3) | 62 | 67 | 59 | 59 | 59 | (3 | ) | 60 | 59 | (1 | ) | |||||||||||||||||||||||||
Roll Forward of DAC and VOBA | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 489.4 | $ | 541.9 | $ | 531.8 | $ | 513.8 | $ | 564.2 | $ | 497.6 | $ | 513.8 | ||||||||||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (1.4 | ) | - | ||||||||||||||||||||||||||||
Inter-segment transfer | - | - | - | 6.9 | - | - | 6.9 | |||||||||||||||||||||||||||||
Deferrals | 22.5 | 23.7 | 23.7 | 23.6 | 22.2 | 44.6 | 45.8 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | (2.0 | ) | (5.0 | ) | (1.2 | ) | (2.5 | ) | 0.1 | (2.5 | ) | (2.4 | ) | |||||||||||||||||||||||
Other amortization | (20.5 | ) | (21.5 | ) | (23.7 | ) | (21.4 | ) | (23.3 | ) | (39.6 | ) | (44.7 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in operating and acquisition expenses | - | (2.8 | ) | (1.2 | ) | (0.3 | ) | (1.0 | ) | 2.5 | (1.3 | ) | ||||||||||||||||||||||||
Adjustment related to realized (gains) losses on available-for-sale securities | (0.8 | ) | (0.6 | ) | 3.4 | 0.6 | 1.0 | (2.9 | ) | 1.6 | ||||||||||||||||||||||||||
Adjustment related to unrealized (gains) losses on available-for-sale securities | 53.3 | (6.7 | ) | (20.2 | ) | 43.2 | 65.5 | 46.1 | 108.7 | |||||||||||||||||||||||||||
Balance at End-of-Period | $ | 541.9 | $ | 531.8 | $ | 513.8 | $ | 564.2 | $ | 629.7 | $ | 541.9 | $ | 629.7 | ||||||||||||||||||||||
Roll Forward of DSI | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 0.2 | $ | 0.3 | $ | 0.4 | $ | 0.4 | $ | 1.9 | $ | 0.1 | $ | 0.4 | ||||||||||||||||||||||
Inter-segment transfer | - | - | - | 1.3 | - | - | 1.3 | |||||||||||||||||||||||||||||
Deferrals | 0.1 | 0.1 | - | 0.2 | 0.2 | 0.2 | 0.4 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Other amortization | - | - | - | - | (0.1 | ) | - | (0.1 | ) | |||||||||||||||||||||||||||
Deferrals, net of amortization included in interest credited | 0.1 | 0.1 | - | 0.2 | 0.1 | 0.2 | 0.3 | |||||||||||||||||||||||||||||
Balance at End-of-Period | $ | 0.3 | $ | 0.4 | $ | 0.4 | $ | 1.9 | $ | 2.0 | $ | 0.3 | $ | 2.0 |
(1) Included in income from operations. |
(2) The portion of the rider fee revenue for GLB calculated as the attributed fee in excess of net valuation premium. |
(3) Includes distribution costs. |
PAGE 19 | ||||||||||||||||||||||||||||||||||||
Employer Markets - Defined Contribution | ||||||||||||||||||||||||||||||||||||
Account Value Roll Forward | ||||||||||||||||||||||||||||||||||||
Unaudited (in billions) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Fixed Annuities | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 10.993 | $ | 10.940 | $ | 10.891 | $ | 10.889 | $ | 11.217 | 2.0 | % | $ | 11.006 | $ | 10.889 | -1.1 | % | ||||||||||||||||||
Gross deposits | 0.233 | 0.305 | 0.267 | 0.332 | 0.280 | 20.2 | % | 0.531 | 0.612 | 15.3 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.376 | ) | (0.450 | ) | (0.411 | ) | (0.370 | ) | (0.380 | ) | -1.1 | % | (0.775 | ) | (0.750 | ) | 3.2 | % | ||||||||||||||||||
Net flows | (0.143 | ) | (0.145 | ) | (0.144 | ) | (0.038 | ) | (0.100 | ) | 30.1 | % | (0.244 | ) | (0.138 | ) | 43.4 | % | ||||||||||||||||||
Transfer from (to) variable annuities | (0.012 | ) | (0.011 | ) | 0.031 | 0.172 | 0.073 | NM | (0.028 | ) | 0.245 | NM | ||||||||||||||||||||||||
Inter-segment transfer | - | - | - | 0.089 | - | NM | - | 0.089 | NM | |||||||||||||||||||||||||||
Interest credited | 0.102 | 0.107 | 0.111 | 0.105 | 0.104 | 2.0 | % | 0.206 | 0.209 | 1.5 | % | |||||||||||||||||||||||||
Balance at End-of-Period (1) | $ | 10.940 | $ | 10.891 | $ | 10.889 | $ | 11.217 | $ | 11.294 | 3.2 | % | $ | 10.940 | $ | 11.294 | 3.2 | % | ||||||||||||||||||
Variable Annuities | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 17.676 | $ | 18.480 | $ | 18.581 | $ | 17.876 | $ | 16.292 | -7.8 | % | $ | 17.475 | $ | 17.876 | 2.3 | % | ||||||||||||||||||
Gross deposits | 0.577 | 0.564 | 0.560 | 0.674 | 0.561 | -2.8 | % | 1.232 | 1.235 | 0.2 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.747 | ) | (0.810 | ) | (0.842 | ) | (0.833 | ) | (0.646 | ) | 13.5 | % | (1.560 | ) | (1.479 | ) | 5.2 | % | ||||||||||||||||||
Net flows | (0.170 | ) | (0.246 | ) | (0.282 | ) | (0.159 | ) | (0.085 | ) | 50.0 | % | (0.328 | ) | (0.244 | ) | 25.6 | % | ||||||||||||||||||
Transfer from (to) fixed annuities | 0.007 | (0.028 | ) | (0.012 | ) | (0.143 | ) | (0.058 | ) | NM | 0.011 | (0.201 | ) | NM | ||||||||||||||||||||||
Inter-segment transfer | - | - | - | 0.206 | - | NM | - | 0.206 | NM | |||||||||||||||||||||||||||
Investment increase and change in market value | 0.967 | 0.375 | (0.411 | ) | (1.488 | ) | 0.046 | -95.2 | % | 1.322 | (1.442 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period (2) | $ | 18.480 | $ | 18.581 | $ | 17.876 | $ | 16.292 | $ | 16.195 | -12.4 | % | $ | 18.480 | $ | 16.195 | -12.4 | % | ||||||||||||||||||
Total Annuities | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 28.669 | $ | 29.420 | $ | 29.472 | $ | 28.765 | $ | 27.509 | -4.0 | % | $ | 28.481 | $ | 28.765 | 1.0 | % | ||||||||||||||||||
Gross deposits | 0.810 | 0.869 | 0.827 | 1.006 | 0.841 | 3.8 | % | 1.763 | 1.847 | 4.8 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (1.123 | ) | (1.260 | ) | (1.253 | ) | (1.203 | ) | (1.026 | ) | 8.6 | % | (2.335 | ) | (2.229 | ) | 4.5 | % | ||||||||||||||||||
Net flows | (0.313 | ) | (0.391 | ) | (0.426 | ) | (0.197 | ) | (0.185 | ) | 40.9 | % | (0.572 | ) | (0.382 | ) | 33.2 | % | ||||||||||||||||||
Transfers between fixed and variable accounts | (0.005 | ) | (0.039 | ) | 0.019 | 0.029 | 0.015 | NM | (0.017 | ) | 0.044 | NM | ||||||||||||||||||||||||
Inter-segment transfer | - | - | - | 0.295 | - | NM | - | 0.295 | NM | |||||||||||||||||||||||||||
Interest credited and change in market value | 1.069 | 0.482 | (0.300 | ) | (1.383 | ) | 0.150 | -86.0 | % | 1.528 | (1.233 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period | $ | 29.420 | $ | 29.472 | $ | 28.765 | $ | 27.509 | $ | 27.489 | -6.6 | % | $ | 29.420 | $ | 27.489 | -6.6 | % | ||||||||||||||||||
Alliance and Smart Future Mutual Funds | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 5.807 | $ | 6.543 | $ | 7.165 | $ | 7.293 | $ | 7.255 | 24.9 | % | $ | 5.175 | $ | 7.293 | 40.9 | % | ||||||||||||||||||
Plan/participant rollovers | 0.217 | 0.411 | 0.168 | 0.221 | 0.285 | 31.3 | % | 0.496 | 0.506 | 2.0 | % | |||||||||||||||||||||||||
Additional contributions | 0.246 | 0.245 | 0.269 | 0.324 | 0.295 | 19.9 | % | 0.501 | 0.619 | 23.6 | % | |||||||||||||||||||||||||
Gross deposits | 0.463 | 0.656 | 0.437 | 0.545 | 0.580 | 25.3 | % | 0.997 | 1.125 | 12.8 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.077 | ) | (0.132 | ) | (0.102 | ) | (0.068 | ) | (0.158 | ) | NM | (0.131 | ) | (0.226 | ) | -72.5 | % | |||||||||||||||||||
Net flows | 0.386 | 0.524 | 0.335 | 0.477 | 0.422 | 9.3 | % | 0.866 | 0.899 | 3.8 | % | |||||||||||||||||||||||||
Transfers | 0.040 | (0.013 | ) | (0.023 | ) | (0.070 | ) | (0.026 | ) | NM | 0.045 | (0.096 | ) | NM | ||||||||||||||||||||||
Interest credited and change in market value | 0.310 | 0.111 | (0.184 | ) | (0.445 | ) | (0.098 | ) | NM | 0.457 | (0.543 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period (3) | $ | 6.543 | $ | 7.165 | $ | 7.293 | $ | 7.255 | $ | 7.553 | 15.4 | % | $ | 6.543 | $ | 7.553 | 15.4 | % | ||||||||||||||||||
Total Annuities and Mutual Funds | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 34.476 | $ | 35.963 | $ | 36.637 | $ | 36.058 | $ | 34.764 | 0.8 | % | $ | 33.656 | $ | 36.058 | 7.1 | % | ||||||||||||||||||
Gross deposits | 1.273 | 1.525 | 1.264 | 1.551 | 1.421 | 11.6 | % | 2.760 | 2.972 | 7.7 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (1.200 | ) | (1.392 | ) | (1.355 | ) | (1.271 | ) | (1.184 | ) | 1.3 | % | (2.466 | ) | (2.455 | ) | 0.4 | % | ||||||||||||||||||
Net flows | 0.073 | 0.133 | (0.091 | ) | 0.280 | 0.237 | 224.7 | % | 0.294 | 0.517 | 75.9 | % | ||||||||||||||||||||||||
Transfers | 0.035 | (0.052 | ) | (0.004 | ) | (0.041 | ) | (0.011 | ) | NM | 0.028 | (0.052 | ) | NM | ||||||||||||||||||||||
Inter-segment transfer | - | - | - | 0.295 | - | NM | - | 0.295 | NM | |||||||||||||||||||||||||||
Interest credited and change in market value | 1.379 | 0.593 | (0.484 | ) | (1.828 | ) | 0.052 | -96.2 | % | 1.985 | (1.776 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period | $ | 35.963 | $ | 36.637 | $ | 36.058 | $ | 34.764 | $ | 35.042 | -2.6 | % | $ | 35.963 | $ | 35.042 | -2.6 | % | ||||||||||||||||||
Variable Annuities Under Agreement - Included Above | $ | 0.017 | $ | 0.018 | $ | 0.017 | $ | 0.015 | $ | 0.014 | -17.6 | % | $ | 0.017 | $ | 0.014 | -17.6 | % | ||||||||||||||||||
Incremental Deposits: (4) | ||||||||||||||||||||||||||||||||||||
Fixed annuities | $ | 0.224 | $ | 0.220 | $ | 0.197 | $ | 0.285 | $ | 0.258 | 15.2 | % | $ | 0.506 | $ | 0.543 | 7.3 | % | ||||||||||||||||||
Variable annuities | 0.631 | 0.556 | 0.551 | 0.667 | 0.553 | -12.4 | % | 1.211 | 1.220 | 0.7 | % | |||||||||||||||||||||||||
Total annuities incremental deposits | 0.855 | 0.776 | 0.748 | 0.952 | 0.811 | -5.1 | % | 1.717 | 1.763 | 2.7 | % | |||||||||||||||||||||||||
Total Alliance mutual funds incremental deposits | 0.464 | 0.656 | 0.437 | 0.545 | 0.580 | 25.0 | % | 0.997 | 1.125 | 12.8 | % | |||||||||||||||||||||||||
Total Incremental Deposits | $ | 1.319 | $ | 1.432 | $ | 1.185 | $ | 1.497 | $ | 1.391 | 5.5 | % | $ | 2.714 | $ | 2.888 | 6.4 | % |
(1) Includes fixed annuity products offered under our mutual fund products and the fixed portion of variable annuities. | |||||||||||
(2) Excludes the fixed portion of variable annuities. | |||||||||||
(3) Represents amounts attributable to mutual fund net flows. Mutual fund account values are not included in the separate accounts reported on our Consolidated Balance Sheets. | |||||||||||
(4) Represents gross deposits reduced by transfers from other Lincoln products. |
PAGE 20 | ||||||||||||||||||||||||||||||||||||
Employer Markets - Defined Contribution | ||||||||||||||||||||||||||||||||||||
Account Value Roll Forward - By Product and Supplemental Data | ||||||||||||||||||||||||||||||||||||
Unaudited (in billions) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Total Micro - Small Segment | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 7.689 | $ | 8.012 | $ | 8.077 | $ | 7.798 | $ | 7.218 | -6.1 | % | $ | 7.535 | $ | 7.798 | 3.5 | % | ||||||||||||||||||
Gross deposits | 0.378 | 0.391 | 0.365 | 0.498 | 0.389 | 2.9 | % | 0.838 | 0.887 | 5.8 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.434 | ) | (0.481 | ) | (0.565 | ) | (0.569 | ) | (0.395 | ) | 9.0 | % | (0.885 | ) | (0.964 | ) | -8.9 | % | ||||||||||||||||||
Net flows | (0.056 | ) | (0.090 | ) | (0.200 | ) | (0.071 | ) | (0.006 | ) | 89.3 | % | (0.047 | ) | (0.077 | ) | -63.8 | % | ||||||||||||||||||
Transfers between fixed and variable accounts | - | - | - | (0.012 | ) | - | NM | (0.005 | ) | (0.012 | ) | NM | ||||||||||||||||||||||||
Investment increase and change in market value | 0.379 | 0.155 | (0.079 | ) | (0.497 | ) | 0.074 | -80.5 | % | 0.529 | (0.423 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period | $ | 8.012 | $ | 8.077 | $ | 7.798 | $ | 7.218 | $ | 7.286 | -9.1 | % | $ | 8.012 | $ | 7.286 | -9.1 | % | ||||||||||||||||||
Total Mid - Large Segment | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 7.734 | $ | 8.555 | $ | 9.232 | $ | 9.463 | $ | 9.621 | 24.4 | % | $ | 6.975 | $ | 9.463 | 35.7 | % | ||||||||||||||||||
Gross deposits | 0.589 | 0.861 | 0.609 | 0.769 | 0.748 | 27.0 | % | 1.302 | 1.517 | 16.5 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.132 | ) | (0.263 | ) | (0.212 | ) | (0.159 | ) | (0.299 | ) | NM | (0.250 | ) | (0.458 | ) | -83.2 | % | |||||||||||||||||||
Net flows | 0.457 | 0.598 | 0.397 | 0.610 | 0.449 | -1.8 | % | 1.052 | 1.059 | 0.7 | % | |||||||||||||||||||||||||
Transfers between fixed and variable accounts | 0.036 | (0.051 | ) | (0.003 | ) | (0.029 | ) | (0.011 | ) | NM | 0.037 | (0.040 | ) | NM | ||||||||||||||||||||||
Investment increase and change in market value | 0.328 | 0.130 | (0.163 | ) | (0.423 | ) | (0.074 | ) | NM | 0.491 | (0.497 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period | $ | 8.555 | $ | 9.232 | $ | 9.463 | $ | 9.621 | $ | 9.985 | 16.7 | % | $ | 8.555 | $ | 9.985 | 16.7 | % | ||||||||||||||||||
Total Multi-Fund® and Other Variable Annuities | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 19.053 | $ | 19.396 | $ | 19.328 | $ | 18.797 | $ | 17.925 | -5.9 | % | $ | 19.146 | $ | 18.797 | -1.8 | % | ||||||||||||||||||
Gross deposits | 0.306 | 0.273 | 0.290 | 0.284 | 0.284 | -7.2 | % | 0.620 | 0.568 | -8.4 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (0.634 | ) | (0.648 | ) | (0.578 | ) | (0.543 | ) | (0.490 | ) | 22.7 | % | (1.331 | ) | (1.033 | ) | 22.4 | % | ||||||||||||||||||
Net flows | (0.328 | ) | (0.375 | ) | (0.288 | ) | (0.259 | ) | (0.206 | ) | 37.2 | % | (0.711 | ) | (0.465 | ) | 34.6 | % | ||||||||||||||||||
Transfers between fixed and variable accounts | (0.001 | ) | (0.001 | ) | (0.001 | ) | - | (0.000 | ) | 100.0 | % | (0.004 | ) | (0.000 | ) | 100.0 | % | |||||||||||||||||||
Inter-segment transfer | - | - | - | 0.295 | - | NM | - | 0.295 | NM | |||||||||||||||||||||||||||
Investment increase and change in market value | 0.672 | 0.308 | (0.242 | ) | (0.908 | ) | 0.052 | -92.3 | % | 0.965 | (0.856 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period | $ | 19.396 | $ | 19.328 | $ | 18.797 | $ | 17.925 | $ | 17.771 | -8.4 | % | $ | 19.396 | $ | 17.771 | -8.4 | % | ||||||||||||||||||
Total Annuities and Mutual Funds | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 34.476 | $ | 35.963 | $ | 36.637 | $ | 36.058 | $ | 34.764 | 0.8 | % | $ | 33.656 | $ | 36.058 | 7.1 | % | ||||||||||||||||||
Gross deposits | 1.273 | 1.525 | 1.264 | 1.551 | 1.421 | 11.6 | % | 2.760 | 2.972 | 7.7 | % | |||||||||||||||||||||||||
Withdrawals and deaths | (1.200 | ) | (1.392 | ) | (1.355 | ) | (1.271 | ) | (1.184 | ) | 1.3 | % | (2.466 | ) | (2.455 | ) | 0.4 | % | ||||||||||||||||||
Net flows | 0.073 | 0.133 | (0.091 | ) | 0.280 | 0.237 | 224.7 | % | 0.294 | 0.517 | 75.9 | % | ||||||||||||||||||||||||
Transfers between fixed and variable accounts | 0.035 | (0.052 | ) | (0.004 | ) | (0.041 | ) | (0.011 | ) | NM | 0.028 | (0.052 | ) | NM | ||||||||||||||||||||||
Inter-segment transfer | - | - | - | 0.295 | - | NM | - | 0.295 | NM | |||||||||||||||||||||||||||
Investment increase and change in market value | 1.379 | 0.593 | (0.484 | ) | (1.828 | ) | 0.052 | -96.2 | % | 1.985 | (1.776 | ) | NM | |||||||||||||||||||||||
Balance at End-of-Period (1) | $ | 35.963 | $ | 36.637 | $ | 36.058 | $ | 34.764 | $ | 35.042 | -2.6 | % | $ | 35.963 | $ | 35.042 | -2.6 | % | ||||||||||||||||||
Fixed Annuities - Excluding Fixed Portion of Variable Contracts | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 0.1 | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 0.2 | 28.1 | % | $ | 0.3 | $ | 0.4 | 24.1 | % | ||||||||||||||||||
Withdrawals and deaths | (0.140 | ) | (0.215 | ) | (0.203 | ) | (0.160 | ) | (0.198 | ) | -41.4 | % | (0.305 | ) | (0.358 | ) | -17.4 | % | ||||||||||||||||||
Net flows | $ | 0.006 | $ | 0.006 | $ | (0.014 | ) | $ | 0.080 | $ | (0.011 | ) | NM | $ | 0.039 | $ | 0.069 | 76.9 | % | |||||||||||||||||
Fixed Contract Account Values | $ | 4.917 | $ | 4.943 | $ | 4.996 | $ | 5.166 | $ | 5.221 | 6.2 | % | $ | 4.917 | $ | 5.221 | 6.2 | % | ||||||||||||||||||
Fixed Portion of Variable Contracts | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 0.087 | $ | 0.084 | $ | 0.079 | $ | 0.093 | $ | 0.092 | 5.7 | % | $ | 0.187 | $ | 0.185 | -1.1 | % | ||||||||||||||||||
Withdrawals and deaths | (0.236 | ) | (0.235 | ) | (0.208 | ) | (0.210 | ) | (0.182 | ) | 22.9 | % | (0.469 | ) | (0.392 | ) | 16.4 | % | ||||||||||||||||||
Net flows | $ | (0.149 | ) | $ | (0.151 | ) | $ | (0.129 | ) | $ | (0.117 | ) | $ | (0.090 | ) | 39.6 | % | $ | (0.282 | ) | $ | (0.207 | ) | 26.6 | % | |||||||||||
Fixed Portion of Variable Contract Account Values | $ | 6.023 | $ | 5.948 | $ | 5.893 | $ | 6.051 | $ | 6.073 | 0.8 | % | $ | 6.023 | $ | 6.073 | 0.8 | % | ||||||||||||||||||
Variable Annuities - Including Fixed Portion of Variable Contracts | ||||||||||||||||||||||||||||||||||||
Deposits | $ | 0.664 | $ | 0.648 | $ | 0.639 | $ | 0.767 | $ | 0.653 | -1.7 | % | $ | 1.419 | $ | 1.420 | 0.1 | % | ||||||||||||||||||
Withdrawals and deaths | (0.982 | ) | (1.045 | ) | (1.050 | ) | (1.043 | ) | (0.828 | ) | 15.7 | % | (2.029 | ) | (1.871 | ) | 7.8 | % | ||||||||||||||||||
Net flows | $ | (0.318 | ) | $ | (0.397 | ) | $ | (0.411 | ) | $ | (0.276 | ) | $ | (0.175 | ) | 45.0 | % | $ | (0.610 | ) | $ | (0.451 | ) | 26.1 | % | |||||||||||
Variable Contract Account Values | $ | 24.504 | $ | 24.528 | $ | 23.769 | $ | 22.343 | $ | 22.268 | -9.1 | % | $ | 24.504 | $ | 22.268 | -9.1 | % | ||||||||||||||||||
Average Daily Variable Annuity Account Values | $ | 18.377 | $ | 18.162 | $ | 18.235 | $ | 16.640 | $ | 16.892 | -8.1 | % | $ | 17.982 | $ | 16.766 | -6.8 | % | ||||||||||||||||||
Change | Change | |||||||||||||||||||||||||||||||||||
Interest Rate Spread (2) | (Basis Points) | (Basis Points) | ||||||||||||||||||||||||||||||||||
Fixed maturity securities, mortgage loans on real estate and other, net of investment expenses | 5.95 | % | 6.04 | % | 6.00 | % | 5.93 | % | 5.89 | % | (6 | ) | 6.03 | % | 5.90 | % | (13 | ) | ||||||||||||||||||
Commercial mortgage loan prepayment and bond makewhole premiums | 0.09 | % | 0.07 | % | 0.05 | % | 0.02 | % | 0.05 | % | (4 | ) | 0.06 | % | 0.04 | % | (2 | ) | ||||||||||||||||||
Alternative investments | 0.10 | % | -0.10 | % | 0.00 | % | -0.03 | % | -0.03 | % | (13 | ) | 0.09 | % | -0.03 | % | (12 | ) | ||||||||||||||||||
Net investment income yield on reserves | 6.14 | % | 6.01 | % | 6.05 | % | 5.92 | % | 5.91 | % | (23 | ) | 6.18 | % | 5.91 | % | (27 | ) | ||||||||||||||||||
Interest rate credited to contract holders | 3.82 | % | 3.84 | % | 3.84 | % | 3.81 | % | 3.80 | % | (2 | ) | 3.81 | % | 3.80 | % | (1 | ) | ||||||||||||||||||
Interest rate spread | 2.32 | % | 2.17 | % | 2.21 | % | 2.11 | % | 2.11 | % | (21 | ) | 2.37 | % | 2.11 | % | (26 | ) |
(1) Includes mutual fund account values. Mutual funds are not included in the separate accounts reported on our Consolidated Balance Sheets. | |||||||||||
(2) For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average invested assets on reserves. We exclude net investment income earned on investments supporting statutory surplus from our spread calculations. The average crediting rate is calculated as interest credited before DSI amortization, plus the immediate annuity reserve change (included within benefits), divided by the average fixed account values, including the fixed portion of variable annuities. |
6/30/2008 | PAGE 21 | |||
Employer Markets - Executive Benefits | ||||
Income Statements and Operational Data | ||||
Unaudited (millions of dollars) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 0.1 | $ | 0.1 | $ | - | $ | 0.1 | $ | 0.1 | 0.0 | % | $ | 0.2 | $ | 0.2 | 0.0 | % | ||||||||||||||||||
Surrender charges | - | - | 0.1 | - | - | NM | - | - | NM | |||||||||||||||||||||||||||
Mortality assessments | 8.2 | 8.4 | 9.0 | 9.1 | 7.6 | -7.3 | % | 17.1 | 16.7 | -2.3 | % | |||||||||||||||||||||||||
Expense assessments | 4.7 | 4.0 | 4.7 | 4.6 | 5.0 | 6.4 | % | 9.3 | 9.6 | 3.2 | % | |||||||||||||||||||||||||
Net investment income | 53.1 | 51.8 | 52.3 | 51.9 | 52.5 | -1.1 | % | 108.9 | 104.4 | -4.1 | % | |||||||||||||||||||||||||
Other revenues and fees | - | (0.1 | ) | - | (0.1 | ) | 0.2 | NM | (0.1 | ) | 0.1 | 200.0 | % | |||||||||||||||||||||||
Total Operating Revenues | 66.1 | 64.2 | 66.1 | 65.6 | 65.4 | -1.1 | % | 135.4 | 131.0 | -3.2 | % | |||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 2.8 | 5.0 | 6.3 | 2.5 | 3.8 | 35.7 | % | 5.5 | 6.3 | 14.5 | % | |||||||||||||||||||||||||
Interest credited to contract holder funds | 38.1 | 37.8 | 38.0 | 38.4 | 38.6 | 1.3 | % | 76.3 | 77.0 | 0.9 | % | |||||||||||||||||||||||||
Operating and acquisition expenses | 8.8 | 8.7 | 3.7 | 6.7 | 6.4 | -27.3 | % | 19.0 | 13.1 | -31.1 | % | |||||||||||||||||||||||||
Total Operating Expenses | 49.7 | 51.5 | 48.0 | 47.6 | 48.8 | -1.8 | % | 100.8 | 96.4 | -4.4 | % | |||||||||||||||||||||||||
Income from operations before federal income taxes | 16.4 | 12.7 | 18.1 | 18.0 | 16.6 | 1.2 | % | 34.6 | 34.6 | 0.0 | % | |||||||||||||||||||||||||
Federal income taxes | 5.6 | 3.8 | 6.2 | 6.1 | 5.6 | 0.0 | % | 11.9 | 11.7 | -1.7 | % | |||||||||||||||||||||||||
Income From Operations | $ | 10.8 | $ | 8.9 | $ | 11.9 | $ | 11.9 | $ | 11.0 | 1.9 | % | $ | 22.7 | $ | 22.9 | 0.9 | % | ||||||||||||||||||
Effective Tax Rate | 34.1 | % | 29.9 | % | 34.3 | % | 33.9 | % | 33.7 | % | 34.4 | % | 33.8 | % | ||||||||||||||||||||||
Average Equity | $ | 345.5 | $ | 336.5 | $ | 346.3 | $ | 358.1 | $ | 361.8 | $ | 351.3 | $ | 360.0 | ||||||||||||||||||||||
Return on Average Equity | 12.5 | % | 10.6 | % | 13.7 | % | 13.3 | % | 12.2 | % | 12.9 | % | 12.7 | % | ||||||||||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||||||||||||||
Commissions | $ | 6.8 | $ | 6.5 | $ | 14.0 | $ | 11.9 | $ | 6.4 | -5.9 | % | $ | 13.3 | $ | 18.3 | 37.6 | % | ||||||||||||||||||
General and administrative expenses | 1.9 | 3.0 | 2.3 | 2.7 | 2.6 | 36.8 | % | 3.6 | 5.3 | 47.2 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 1.0 | 1.0 | 1.5 | 2.0 | 1.0 | 0.0 | % | 2.2 | 3.0 | 36.4 | % | |||||||||||||||||||||||||
Total commissions and expenses incurred | 9.7 | 10.5 | 17.8 | 16.6 | 10.0 | 3.1 | % | 19.1 | 26.6 | 39.3 | % | |||||||||||||||||||||||||
Less: commissions and expenses capitalized | (6.7 | ) | (6.6 | ) | (14.1 | ) | (11.6 | ) | (6.1 | ) | 9.0 | % | (13.6 | ) | (17.7 | ) | -30.1 | % | ||||||||||||||||||
Amortization of DAC and VOBA, net of interest | 5.8 | 4.8 | - | 1.7 | 2.5 | -56.9 | % | 13.5 | 4.2 | -68.9 | % | |||||||||||||||||||||||||
Net Operating and Acquisition Expenses | $ | 8.8 | $ | 8.7 | $ | 3.7 | $ | 6.7 | $ | 6.4 | -27.3 | % | $ | 19.0 | $ | 13.1 | -31.1 | % | ||||||||||||||||||
General and Administrative Expenses - Basis Points on Average Account Values - Annualized (1) | 18 | 27 | 21 | 24 | 23 | 5 | 17 | 24 | 7 | |||||||||||||||||||||||||||
Roll Forward of DAC and VOBA | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 260.5 | $ | 276.2 | $ | 273.2 | $ | 283.0 | $ | 298.1 | $ | 265.3 | $ | 283.0 | ||||||||||||||||||||||
Deferrals | 6.7 | 6.6 | 14.1 | 11.6 | 6.1 | 13.6 | 17.7 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | (2.3 | ) | (1.5 | ) | 2.3 | 1.1 | 0.4 | (5.0 | ) | 1.5 | ||||||||||||||||||||||||||
Other amortization | (3.5 | ) | (3.3 | ) | (2.3 | ) | (2.8 | ) | (2.9 | ) | (8.5 | ) | (5.7 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in operating and acquisition expenses | 0.9 | 1.8 | 14.1 | 9.9 | 3.6 | 0.1 | 13.5 | |||||||||||||||||||||||||||||
Adjustment related to realized (gains) losses on available-for-sale securities | (0.1 | ) | 0.1 | 0.6 | 0.2 | (0.2 | ) | (0.6 | ) | - | ||||||||||||||||||||||||||
Adjustment related to unrealized (gains) losses on available-for-sale securities | 14.9 | (4.9 | ) | (4.9 | ) | 5.0 | 20.1 | 11.4 | 25.1 | |||||||||||||||||||||||||||
Balance at End-of-Period | $ | 276.2 | $ | 273.2 | $ | 283.0 | $ | 298.1 | $ | 321.6 | $ | 276.2 | $ | 321.6 | ||||||||||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 22.0 | $ | 21.9 | $ | 22.4 | $ | 23.8 | $ | 25.5 | $ | 21.7 | $ | 23.8 | ||||||||||||||||||||||
Deferrals | 0.8 | 0.7 | 1.4 | 1.8 | 0.6 | 1.9 | 2.4 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | (0.6 | ) | 0.1 | 0.3 | 0.1 | (0.1 | ) | (0.9 | ) | - | ||||||||||||||||||||||||||
Other amortization | (0.3 | ) | (0.3 | ) | (0.3 | ) | (0.2 | ) | (0.1 | ) | (0.8 | ) | (0.3 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in expense assessments | (0.1 | ) | 0.5 | 1.4 | 1.7 | 0.4 | 0.2 | 2.1 | ||||||||||||||||||||||||||||
Balance at End-of-Period | $ | 21.9 | $ | 22.4 | $ | 23.8 | $ | 25.5 | $ | 25.9 | $ | 21.9 | $ | 25.9 | ||||||||||||||||||||||
(1) Includes distribution costs. |
PAGE 22 | |||
Employer Markets - Executive Benefits | |||
Account Value Roll Forward and Supplemental Data | |||
Unaudited (in billions) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
COLI/BOLI | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 4.264 | $ | 4.353 | $ | 4.391 | $ | 4.436 | $ | 4.460 | 4.6 | % | $ | 4.305 | $ | 4.436 | 3.0 | % | ||||||||||||||||||
Deposits (1) | 0.079 | 0.052 | 0.107 | 0.165 | 0.110 | 39.2 | % | 0.144 | 0.275 | 91.0 | % | |||||||||||||||||||||||||
Withdrawals and deaths (1) | (0.053 | ) | (0.057 | ) | (0.070 | ) | (0.094 | ) | (0.060 | ) | -13.2 | % | (0.193 | ) | (0.154 | ) | 20.2 | % | ||||||||||||||||||
Net flows | 0.026 | (0.005 | ) | 0.037 | 0.071 | 0.050 | 92.3 | % | (0.049 | ) | 0.121 | NM | ||||||||||||||||||||||||
Contract holder assessments | (0.017 | ) | (0.017 | ) | (0.019 | ) | (0.020 | ) | (0.017 | ) | 0.0 | % | (0.035 | ) | (0.037 | ) | -5.7 | % | ||||||||||||||||||
Interest credited and change in market value | 0.080 | 0.060 | 0.027 | (0.027 | ) | 0.033 | -58.8 | % | 0.132 | 0.006 | -95.5 | % | ||||||||||||||||||||||||
Balance at End-of-Period | $ | 4.353 | $ | 4.391 | $ | 4.436 | $ | 4.460 | $ | 4.526 | 4.0 | % | $ | 4.353 | $ | 4.526 | 4.0 | % | ||||||||||||||||||
COLI/BOLI In Force | $ | 14.809 | $ | 14.900 | $ | 15.292 | $ | 15.826 | $ | 14.939 | 0.9 | % | $ | 14.809 | $ | 14.939 | 0.9 | % |
(1) Deposits include $0.044 billion and $0.023 billion and withdrawals and deaths include $(0.044) billion and $(0.023) billion for the first and second quarters of 2008, respectively, related to the exchange of legacy Jefferson-Pilot products with new Lincoln products. |
6/30/2008 | PAGE 23 | ||||
Employer Markets - Group Protection | |||||
Income Statements and Operational Data | |||||
Unaudited (millions of dollars) | |||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 361.3 | $ | 336.8 | $ | 349.7 | $ | 370.4 | $ | 393.0 | 8.8 | % | $ | 692.7 | $ | 763.4 | 10.2 | % | ||||||||||||||||||
Net investment income | 28.5 | 29.5 | 29.5 | 27.7 | 30.5 | 7.0 | % | 56.4 | 58.2 | 3.2 | % | |||||||||||||||||||||||||
Other revenues and fees | 1.2 | 1.2 | 1.4 | 1.3 | 1.4 | 16.7 | % | 2.3 | 2.7 | 17.4 | % | |||||||||||||||||||||||||
Total Operating Revenues | 391.0 | 367.5 | 380.6 | 399.4 | 424.9 | 8.7 | % | 751.4 | 824.3 | 9.7 | % | |||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 265.6 | 234.9 | 252.1 | 269.1 | 285.7 | 7.6 | % | 512.3 | 554.8 | 8.3 | % | |||||||||||||||||||||||||
Interest credited to contract holder funds | - | 0.1 | - | 0.2 | 0.3 | NM | - | 0.5 | NM | |||||||||||||||||||||||||||
Operating and acquisition expenses | 80.7 | 81.4 | 85.1 | 89.6 | 89.3 | 10.7 | % | 158.9 | 178.9 | 12.6 | % | |||||||||||||||||||||||||
Total Operating Expenses | 346.3 | 316.4 | 337.2 | 358.9 | 375.3 | 8.4 | % | 671.2 | 734.2 | 9.4 | % | |||||||||||||||||||||||||
Income from operations before federal income taxes | 44.7 | 51.1 | 43.4 | 40.5 | 49.6 | 11.0 | % | 80.2 | 90.1 | 12.3 | % | |||||||||||||||||||||||||
Federal income taxes | 15.7 | 17.9 | 15.2 | 14.2 | 17.4 | 10.8 | % | 28.1 | 31.6 | 12.5 | % | |||||||||||||||||||||||||
Income From Operations | $ | 29.0 | $ | 33.2 | $ | 28.2 | $ | 26.3 | $ | 32.2 | 11.0 | % | $ | 52.1 | $ | 58.5 | 12.3 | % | ||||||||||||||||||
Effective Tax Rate | 35.1 | % | 35.0 | % | 35.0 | % | 35.1 | % | 35.1 | % | 35.0 | % | 35.1 | % | ||||||||||||||||||||||
Average Equity | $ | 917.5 | $ | 936.2 | $ | 956.4 | $ | 975.8 | $ | 985.3 | $ | 916.3 | $ | 980.5 | ||||||||||||||||||||||
Return on Average Equity | 12.6 | % | 14.2 | % | 11.8 | % | 10.8 | % | 13.1 | % | 11.4 | % | 11.9 | % | ||||||||||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||||||||||||||
Commissions | $ | 41.4 | $ | 40.4 | $ | 43.1 | $ | 43.5 | $ | 43.7 | 5.6 | % | $ | 80.8 | $ | 87.2 | 7.9 | % | ||||||||||||||||||
General and administrative expenses | 37.5 | 37.9 | 42.8 | 41.7 | 40.8 | 8.8 | % | 70.2 | 82.5 | 17.5 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 9.5 | 8.1 | 6.2 | 10.0 | 9.0 | -5.3 | % | 19.2 | 19.0 | -1.0 | % | |||||||||||||||||||||||||
Total commissions and expenses incurred | 88.4 | 86.4 | 92.1 | 95.2 | 93.5 | 5.8 | % | 170.2 | 188.7 | 10.9 | % | |||||||||||||||||||||||||
Less: commissions and expenses capitalized | (13.5 | ) | (13.1 | ) | (16.7 | ) | (13.7 | ) | (13.0 | ) | 3.7 | % | (24.7 | ) | (26.7 | ) | -8.1 | % | ||||||||||||||||||
Amortization of DAC and VOBA, net of interest | 5.8 | 8.1 | 9.7 | 8.1 | 8.8 | 51.7 | % | 13.4 | 16.9 | 26.1 | % | |||||||||||||||||||||||||
Net Operating and Acquisition Expenses | $ | 80.7 | $ | 81.4 | $ | 85.1 | $ | 89.6 | $ | 89.3 | 10.7 | % | $ | 158.9 | $ | 178.9 | 12.6 | % | ||||||||||||||||||
General and Administrative Expenses as a Percentage of Premiums | 10.4 | % | 11.3 | % | 12.2 | % | 11.3 | % | 10.4 | % | 10.1 | % | 10.8 | % | ||||||||||||||||||||||
Roll Forward of DAC and VOBA | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 103.7 | $ | 111.4 | $ | 116.4 | $ | 123.4 | $ | 129.0 | $ | 137.6 | $ | 123.4 | ||||||||||||||||||||||
Cumulative effect of adoption of SOP 05-1 | - | - | - | - | - | (37.5 | ) | - | ||||||||||||||||||||||||||||
Deferrals | 13.5 | 13.1 | 16.7 | 13.7 | 13.0 | 24.7 | 26.7 | |||||||||||||||||||||||||||||
Amortization, net of interest | (5.8 | ) | (8.1 | ) | (9.7 | ) | (8.1 | ) | (8.8 | ) | (13.4 | ) | (16.9 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in operating and acquisition expenses | 7.7 | 5.0 | 7.0 | 5.6 | 4.2 | 11.3 | 9.8 | |||||||||||||||||||||||||||||
Balance at End-of-Period | $ | 111.4 | $ | 116.4 | $ | 123.4 | $ | 129.0 | $ | 133.2 | $ | 111.4 | $ | 133.2 | ||||||||||||||||||||||
Annualized Sales | ||||||||||||||||||||||||||||||||||||
Life | $ | 23.8 | $ | 22.0 | $ | 53.9 | $ | 21.3 | $ | 23.4 | -1.7 | % | $ | 46.3 | $ | 44.7 | -3.5 | % | ||||||||||||||||||
Disability | 28.9 | 30.5 | 72.1 | 24.9 | 29.9 | 3.5 | % | 57.5 | 54.8 | -4.7 | % | |||||||||||||||||||||||||
Dental | 9.5 | 8.3 | 16.6 | 7.9 | 11.3 | 18.9 | % | 19.0 | 19.2 | 1.1 | % | |||||||||||||||||||||||||
Premiums | ||||||||||||||||||||||||||||||||||||
Life | $ | 125.0 | $ | 123.4 | $ | 126.5 | $ | 132.9 | $ | 133.8 | 7.0 | % | $ | 243.6 | $ | 266.7 | 9.5 | % | ||||||||||||||||||
Disability | 150.4 | 151.1 | 155.2 | 163.2 | 167.0 | 11.0 | % | 295.2 | 330.2 | 11.9 | % | |||||||||||||||||||||||||
Dental | 33.5 | 34.1 | 35.2 | 36.5 | 37.4 | 11.6 | % | 66.5 | 73.9 | 11.1 | % | |||||||||||||||||||||||||
Other | 52.4 | 28.2 | 32.8 | 37.8 | 54.8 | 4.6 | % | 87.4 | 92.6 | 5.9 | % | |||||||||||||||||||||||||
Total | $ | 361.3 | $ | 336.8 | $ | 349.7 | $ | 370.4 | $ | 393.0 | 8.8 | % | $ | 692.7 | $ | 763.4 | 10.2 | % | ||||||||||||||||||
Product Line Results | ||||||||||||||||||||||||||||||||||||
Life | $ | 10.0 | $ | 11.0 | $ | 11.2 | $ | 10.1 | $ | 11.4 | 14.0 | % | $ | 18.6 | $ | 21.5 | 15.6 | % | ||||||||||||||||||
Disability | 18.1 | 18.8 | 13.7 | 15.4 | 19.9 | 9.9 | % | 31.4 | 35.3 | 12.4 | % | |||||||||||||||||||||||||
Dental | (0.1 | ) | 1.3 | 2.1 | (0.3 | ) | (0.4 | ) | NM | 0.1 | (0.7 | ) | NM | |||||||||||||||||||||||
Other | 1.0 | 2.1 | 1.2 | 1.1 | 1.3 | 30.0 | % | 2.0 | 2.4 | 20.0 | % | |||||||||||||||||||||||||
Total | $ | 29.0 | $ | 33.2 | $ | 28.2 | $ | 26.3 | $ | 32.2 | 11.0 | % | $ | 52.1 | $ | 58.5 | 12.3 | % | ||||||||||||||||||
Loss Ratios | ||||||||||||||||||||||||||||||||||||
Life | 73.9 | % | 71.2 | % | 72.1 | % | 71.9 | % | 72.3 | % | -2.2 | % | 74.5 | % | 72.1 | % | -3.2 | % | ||||||||||||||||||
Disability | 66.4 | % | 65.0 | % | 69.1 | % | 68.1 | % | 66.1 | % | -0.5 | % | 67.9 | % | 67.1 | % | -1.2 | % | ||||||||||||||||||
Dental | 79.3 | % | 74.9 | % | 73.1 | % | 80.8 | % | 81.1 | % | 2.3 | % | 79.2 | % | 81.0 | % | 2.3 | % | ||||||||||||||||||
Combined Loss Ratios | 70.8 | % | 68.6 | % | 70.7 | % | 71.0 | % | 70.2 | % | -0.8 | % | 71.8 | % | 70.6 | % | -1.7 | % |
6/30/2008 | PAGE 24 | |||||||
Investment Management | ||||||||
Income Statements | ||||||||
Unaudited (millions of dollars) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Investment advisory fees - external | $ | 92.7 | $ | 89.0 | $ | 87.7 | $ | 76.2 | $ | 75.8 | -18.2 | % | $ | 183.0 | $ | 152.0 | -16.9 | % | ||||||||||||||||||
Investment advisory fees - inter-segment | 19.6 | 22.6 | 20.3 | 20.0 | 20.6 | 5.1 | % | 44.1 | 40.6 | -7.9 | % | |||||||||||||||||||||||||
Other revenues and fees | 38.7 | 38.5 | 31.0 | 24.1 | 27.9 | -27.9 | % | 74.0 | 52.0 | -29.7 | % | |||||||||||||||||||||||||
Total Operating Revenues | 151.0 | 150.1 | 139.0 | 120.3 | 124.3 | -17.7 | % | 301.1 | 244.6 | -18.8 | % | |||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Operating and administrative expenses | 133.1 | 116.0 | 96.8 | 101.1 | 100.8 | -24.3 | % | 257.7 | 201.9 | -21.7 | % | |||||||||||||||||||||||||
Total Operating Expenses | 133.1 | 116.0 | 96.8 | 101.1 | 100.8 | -24.3 | % | 257.7 | 201.9 | -21.7 | % | |||||||||||||||||||||||||
Income from operations before federal income taxes | 17.9 | 34.1 | 42.2 | 19.2 | 23.5 | 31.3 | % | 43.4 | 42.7 | -1.6 | % | |||||||||||||||||||||||||
Federal income taxes | 6.6 | 12.3 | 15.2 | 7.1 | 8.5 | 28.8 | % | 15.9 | 15.6 | -1.9 | % | |||||||||||||||||||||||||
Income From Operations | $ | 11.3 | $ | 21.8 | $ | 27.0 | $ | 12.1 | $ | 15.0 | 32.7 | % | $ | 27.5 | $ | 27.1 | -1.5 | % | ||||||||||||||||||
Effective Tax Rate | 36.9 | % | 36.1 | % | 36.0 | % | 37.0 | % | 36.2 | % | 36.6 | % | 36.5 | % | ||||||||||||||||||||||
Pre-Tax Operating Margin | 11.9 | % | 22.7 | % | 30.4 | % | 16.0 | % | 18.9 | % | 14.4 | % | 17.5 | % | ||||||||||||||||||||||
After-Tax Operating Margin | 7.5 | % | 14.5 | % | 19.4 | % | 10.1 | % | 12.1 | % | 9.1 | % | 11.1 | % | ||||||||||||||||||||||
Operating and Administrative Expenses | ||||||||||||||||||||||||||||||||||||
General and administrative expenses | $ | 116.8 | $ | 100.5 | $ | 81.0 | $ | 87.6 | $ | 85.9 | -26.5 | % | $ | 223.2 | $ | 173.5 | -22.3 | % | ||||||||||||||||||
Depreciation and amortization | 2.5 | 2.5 | 2.3 | 2.2 | 2.1 | -16.0 | % | 5.2 | 4.3 | -17.3 | % | |||||||||||||||||||||||||
Sub-advisory fees | 8.4 | 7.7 | 8.1 | 7.2 | 7.4 | -11.9 | % | 18.4 | 14.6 | -20.7 | % | |||||||||||||||||||||||||
Total general and administrative expenses | 127.7 | 110.7 | 91.4 | 97.0 | 95.4 | -25.3 | % | 246.8 | 192.4 | -22.0 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 4.0 | 3.9 | 4.0 | 3.6 | 4.9 | 22.5 | % | 8.1 | 8.5 | 4.9 | % | |||||||||||||||||||||||||
Amortization of intangibles | 1.4 | 1.4 | 1.4 | 0.5 | 0.5 | -64.3 | % | 2.8 | 1.0 | -64.3 | % | |||||||||||||||||||||||||
Total Operating and Administrative Expenses | $ | 133.1 | $ | 116.0 | $ | 96.8 | $ | 101.1 | $ | 100.8 | -24.3 | % | $ | 257.7 | $ | 201.9 | -21.7 | % |
PAGE 25 | |
Investment Management | |
Assets Under Management Roll Forward | |
Unaudited (in billions) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Retail Fixed | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 11.644 | $ | 12.303 | $ | 13.014 | $ | 13.463 | $ | 14.168 | 21.7 | % | $ | 10.993 | $ | 13.463 | 22.5 | % | ||||||||||||||||||
Sales (1) | 1.496 | 1.466 | 1.635 | 1.981 | 1.533 | 2.5 | % | 2.861 | 3.514 | 22.8 | % | |||||||||||||||||||||||||
Redemptions (2) | (1.062 | ) | (1.060 | ) | (1.330 | ) | (1.395 | ) | (1.238 | ) | -16.6 | % | (1.971 | ) | (2.633 | ) | -33.6 | % | ||||||||||||||||||
Exchanges | (0.005 | ) | 0.027 | 0.017 | 0.054 | 0.030 | NM | 0.009 | 0.084 | NM | ||||||||||||||||||||||||||
Net flows | 0.429 | 0.433 | 0.322 | 0.640 | 0.325 | -24.2 | % | 0.899 | 0.965 | 7.3 | % | |||||||||||||||||||||||||
Net investment gains and change in market value | 0.119 | 0.278 | 0.145 | 0.065 | (0.095 | ) | NM | 0.300 | (0.030 | ) | NM | |||||||||||||||||||||||||
Transfer of assets to third-party (2) | (0.055 | ) | - | (0.018 | ) | - | - | 100.0 | % | (0.055 | ) | - | 100.0 | % | ||||||||||||||||||||||
Transfer of assets to an intercompany manager (3) | 0.166 | - | - | - | - | -100.0 | % | 0.166 | - | -100.0 | % | |||||||||||||||||||||||||
Balance at End-of-Period (4) | $ | 12.303 | $ | 13.014 | $ | 13.463 | $ | 14.168 | $ | 14.398 | 17.0 | % | $ | 12.303 | $ | 14.398 | 17.0 | % | ||||||||||||||||||
Retail Equity | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 40.250 | $ | 38.586 | $ | 38.166 | $ | 36.250 | $ | 31.463 | -21.8 | % | $ | 39.627 | $ | 36.250 | -8.5 | % | ||||||||||||||||||
Sales (1) | 1.779 | 1.345 | 1.957 | 1.514 | 1.063 | -40.2 | % | 4.016 | 2.577 | -35.8 | % | |||||||||||||||||||||||||
Redemptions (2) | (2.487 | ) | (2.084 | ) | (2.903 | ) | (2.752 | ) | (2.292 | ) | 7.8 | % | (4.942 | ) | (5.044 | ) | -2.1 | % | ||||||||||||||||||
Exchanges | 0.004 | (0.029 | ) | (0.025 | ) | (0.057 | ) | (0.033 | ) | NM | (0.015 | ) | (0.090 | ) | NM | |||||||||||||||||||||
Net flows | (0.704 | ) | (0.768 | ) | (0.971 | ) | (1.295 | ) | (1.262 | ) | -79.3 | % | (0.941 | ) | (2.557 | ) | NM | |||||||||||||||||||
Net investment gains and change in market value | 2.190 | 0.348 | (0.915 | ) | (3.492 | ) | (0.431 | ) | NM | 3.050 | (3.923 | ) | NM | |||||||||||||||||||||||
Transfer of assets to third-party (2) | (0.099 | ) | - | (0.030 | ) | - | - | 100.0 | % | (0.099 | ) | - | 100.0 | % | ||||||||||||||||||||||
Transfer of assets to an intercompany manager (3) | (3.051 | ) | - | - | - | - | 100.0 | % | (3.051 | ) | - | 100.0 | % | |||||||||||||||||||||||
Balance at End-of-Period (4) | $ | 38.586 | $ | 38.166 | $ | 36.250 | $ | 31.463 | $ | 29.770 | -22.8 | % | $ | 38.586 | $ | 29.770 | -22.8 | % | ||||||||||||||||||
Total Retail | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 51.894 | $ | 50.889 | $ | 51.180 | $ | 49.713 | $ | 45.631 | -12.1 | % | $ | 50.620 | $ | 49.713 | -1.8 | % | ||||||||||||||||||
Retail sales - annuities | 0.903 | 0.891 | 0.953 | 1.562 | 0.786 | -13.0 | % | 2.203 | 2.348 | 6.6 | % | |||||||||||||||||||||||||
Retail sales - mutual funds | 1.897 | 1.543 | 2.241 | 1.592 | 1.407 | -25.8 | % | 3.649 | 2.999 | -17.8 | % | |||||||||||||||||||||||||
Retail sales - managed accounts and other | 0.475 | 0.377 | 0.398 | 0.341 | 0.403 | -15.2 | % | 1.025 | 0.744 | -27.4 | % | |||||||||||||||||||||||||
Total retail sales (1) | 3.275 | 2.811 | 3.592 | 3.495 | 2.596 | -20.7 | % | 6.877 | 6.091 | -11.4 | % | |||||||||||||||||||||||||
Redemptions (2) | (3.549 | ) | (3.144 | ) | (4.233 | ) | (4.147 | ) | (3.530 | ) | 0.5 | % | (6.913 | ) | (7.677 | ) | -11.1 | % | ||||||||||||||||||
Exchanges | (0.001 | ) | (0.002 | ) | (0.008 | ) | (0.003 | ) | (0.003 | ) | NM | (0.006 | ) | (0.006 | ) | 0.0 | % | |||||||||||||||||||
Net flows | (0.275 | ) | (0.335 | ) | (0.649 | ) | (0.655 | ) | (0.937 | ) | NM | (0.042 | ) | (1.592 | ) | NM | ||||||||||||||||||||
Net investment gains and change in market value | 2.309 | 0.626 | (0.770 | ) | (3.427 | ) | (0.526 | ) | NM | 3.350 | (3.953 | ) | NM | |||||||||||||||||||||||
Transfer of assets to third-party (2) | (0.154 | ) | - | (0.048 | ) | - | - | 100.0 | % | (0.154 | ) | - | 100.0 | % | ||||||||||||||||||||||
Transfer of assets to an intercompany manager (3) | (2.885 | ) | - | - | - | - | 100.0 | % | (2.885 | ) | - | 100.0 | % | |||||||||||||||||||||||
Balance at End-of-Period (4) | $ | 50.889 | $ | 51.180 | $ | 49.713 | $ | 45.631 | $ | 44.168 | -13.2 | % | $ | 50.889 | $ | 44.168 | -13.2 | % | ||||||||||||||||||
Institutional Fixed | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 23.469 | $ | 23.565 | $ | 24.837 | $ | 12.746 | $ | 12.409 | -47.1 | % | $ | 22.841 | $ | 12.746 | -44.2 | % | ||||||||||||||||||
Inflows (1) | 1.513 | 2.234 | 0.577 | 0.242 | 0.330 | -78.2 | % | 3.073 | 0.573 | -81.4 | % | |||||||||||||||||||||||||
Withdrawals/terminations | (1.271 | ) | (1.306 | ) | (0.673 | ) | (0.638 | ) | (0.556 | ) | 56.3 | % | (1.751 | ) | (1.195 | ) | 31.8 | % | ||||||||||||||||||
Exchanges | - | (0.001 | ) | 0.138 | 0.002 | - | NM | - | 0.002 | NM | ||||||||||||||||||||||||||
Net flows | 0.242 | 0.927 | 0.042 | (0.394 | ) | (0.226 | ) | NM | 1.322 | (0.620 | ) | NM | ||||||||||||||||||||||||
Net investment gains and change in market value | (0.146 | ) | 0.345 | 0.180 | 0.057 | (0.113 | ) | 22.6 | % | 0.182 | (0.056 | ) | NM | |||||||||||||||||||||||
Transfer of assets to third-party (5) | - | - | (12.313 | ) | - | - | NM | (0.780 | ) | - | 100.0 | % | ||||||||||||||||||||||||
Balance at End-of-Period (4) | $ | 23.565 | $ | 24.837 | $ | 12.746 | $ | 12.409 | $ | 12.070 | -48.8 | % | $ | 23.565 | $ | 12.070 | -48.8 | % | ||||||||||||||||||
- | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Institutional Equity | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 22.782 | $ | 23.271 | $ | 23.699 | $ | 22.898 | $ | 20.498 | -10.0 | % | $ | 23.845 | $ | 22.898 | -4.0 | % | ||||||||||||||||||
Inflows (1) | 1.363 | 0.702 | 1.653 | 0.986 | 0.580 | -57.4 | % | 2.234 | 1.567 | -29.9 | % | |||||||||||||||||||||||||
Withdrawals/terminations | (1.753 | ) | (1.202 | ) | (1.996 | ) | (1.100 | ) | (0.889 | ) | 49.3 | % | (4.026 | ) | (1.990 | ) | 50.6 | % | ||||||||||||||||||
Exchanges | - | (0.001 | ) | (0.001 | ) | (0.002 | ) | - | NM | - | (0.002 | ) | NM | |||||||||||||||||||||||
Net flows | (0.390 | ) | (0.501 | ) | (0.344 | ) | (0.116 | ) | (0.309 | ) | 20.8 | % | (1.792 | ) | (0.425 | ) | 76.3 | % | ||||||||||||||||||
Net investment gains and change in market value | 1.242 | 0.929 | (0.457 | ) | (2.284 | ) | (0.736 | ) | NM | 1.581 | (3.020 | ) | NM | |||||||||||||||||||||||
Transfer of assets to an intercompany manager (3) | (0.363 | ) | - | - | - | - | 100.0 | % | (0.363 | ) | - | 100.0 | % | |||||||||||||||||||||||
Balance at End-of-Period (4) | $ | 23.271 | $ | 23.699 | $ | 22.898 | $ | 20.498 | $ | 19.453 | -16.4 | % | $ | 23.271 | $ | 19.453 | -16.4 | % | ||||||||||||||||||
Total Institutional | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 46.251 | $ | 46.836 | $ | 48.536 | $ | 35.644 | $ | 32.907 | -28.9 | % | $ | 46.686 | $ | 35.644 | -23.7 | % | ||||||||||||||||||
Inflows (1) | 2.876 | 2.936 | 2.230 | 1.228 | 0.910 | -68.4 | % | 5.307 | 2.140 | -59.7 | % | |||||||||||||||||||||||||
Withdrawals/terminations | (3.024 | ) | (2.508 | ) | (2.669 | ) | (1.738 | ) | (1.445 | ) | 52.2 | % | (5.777 | ) | (3.185 | ) | 44.9 | % | ||||||||||||||||||
Exchanges | - | (0.002 | ) | 0.137 | - | - | NM | - | - | NM | ||||||||||||||||||||||||||
Net flows | (0.148 | ) | 0.426 | (0.302 | ) | (0.510 | ) | (0.535 | ) | NM | (0.470 | ) | (1.045 | ) | NM | |||||||||||||||||||||
Net investment gains and change in market value | 1.096 | 1.274 | (0.277 | ) | (2.227 | ) | (0.849 | ) | NM | 1.763 | (3.076 | ) | NM | |||||||||||||||||||||||
Transfer of assets to third-party (5) | - | - | (12.313 | ) | - | - | NM | (0.780 | ) | - | 100.0 | % | ||||||||||||||||||||||||
Transfer of assets to an intercompany manager (3) | (0.363 | ) | - | - | - | - | 100.0 | % | (0.363 | ) | - | 100.0 | % | |||||||||||||||||||||||
Balance at End-of-Period (4) | $ | 46.836 | $ | 48.536 | $ | 35.644 | $ | 32.907 | $ | 31.523 | -32.7 | % | $ | 46.836 | $ | 31.523 | -32.7 | % | ||||||||||||||||||
Total Retail and Institutional - At End-of-Period (4) | $ | 97.725 | $ | 99.716 | $ | 85.357 | $ | 78.538 | $ | 75.691 | -22.5 | % | $ | 97.725 | $ | 75.691 | -22.5 | % | ||||||||||||||||||
General Account Assets - At End-of-Period | $ | 66.423 | $ | 67.324 | $ | 67.417 | $ | 67.339 | $ | 65.997 | -0.6 | % | $ | 66.423 | $ | 65.997 | -0.6 | % | ||||||||||||||||||
Total Assets Under Management | ||||||||||||||||||||||||||||||||||||
at End-of-Period | $ | 164.148 | $ | 167.040 | $ | 152.774 | $ | 145.877 | $ | 141.688 | -13.7 | % | $ | 164.148 | $ | 141.688 | -13.7 | % | ||||||||||||||||||
Total Retail and Institutional - Net Flows (2) | $ | (0.423 | ) | $ | 0.091 | $ | (0.951 | ) | $ | (1.165 | ) | $ | (1.472 | ) | NM | $ | (0.512 | ) | $ | (2.637 | ) | NM | ||||||||||||||
Sub-Advised Assets, Included in Assets | �� | |||||||||||||||||||||||||||||||||||
Under Management Above | ||||||||||||||||||||||||||||||||||||
Retail | $ | 16.329 | $ | 16.380 | $ | 16.219 | $ | 14.212 | $ | 13.651 | -16.4 | % | $ | 16.329 | $ | 13.651 | -16.4 | % | ||||||||||||||||||
Institutional | 4.594 | 4.734 | 4.570 | 4.071 | 3.794 | -17.4 | % | 4.594 | 3.794 | -17.4 | % | |||||||||||||||||||||||||
Total Sub-Advised Assets | $ | 20.923 | $ | 21.114 | $ | 20.789 | $ | 18.283 | $ | 17.445 | -16.6 | % | $ | 20.923 | $ | 17.445 | -16.6 | % |
(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. |
6/30/2008 | PAGE 25(B) | ||||||||||
Investment Management | |||||||||||
Assets Under Management Roll Forward (Continued) (1) | |||||||||||
Unaudited (in billions) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Inter-Segment Assets - Retail and Institutional | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 12.982 | $ | 10.226 | $ | 10.175 | $ | 9.672 | $ | 9.191 | -29.2 | % | $ | 13.729 | $ | 9.672 | -29.6 | % | ||||||||||||||||||
Sales/inflows | 0.708 | 0.544 | 0.743 | 0.718 | 0.375 | -47.0 | % | 1.209 | 1.093 | -9.6 | % | |||||||||||||||||||||||||
Redemptions/withdrawals/terminations | (0.766 | ) | (0.754 | ) | (1.148 | ) | (0.679 | ) | (0.543 | ) | 29.1 | % | (1.500 | ) | (1.222 | ) | 18.5 | % | ||||||||||||||||||
Exchanges | - | - | 0.133 | - | - | NM | - | - | NM | |||||||||||||||||||||||||||
Net flows | (0.058 | ) | (0.210 | ) | (0.272 | ) | 0.039 | (0.168 | ) | NM | (0.291 | ) | (0.129 | ) | 55.7 | % | ||||||||||||||||||||
Net investment gains and change in market value | 0.550 | 0.159 | (0.231 | ) | (0.520 | ) | (0.028 | ) | NM | 0.817 | (0.548 | ) | NM | |||||||||||||||||||||||
Transfer of assets to an intercompany manager | (3.248 | ) | - | - | - | - | 100.0 | % | (4.029 | ) | - | 100.0 | % | |||||||||||||||||||||||
Balance at End-of-Period | $ | 10.226 | $ | 10.175 | $ | 9.672 | $ | 9.191 | $ | 8.995 | -12.0 | % | $ | 10.226 | $ | 8.995 | -12.0 | % | ||||||||||||||||||
Inter-Segment Assets - General Account at End-of-Period | $ | 66.423 | $ | 67.324 | $ | 67.417 | $ | 67.339 | $ | 65.997 | -0.6 | % | $ | 66.423 | $ | 65.997 | -0.6 | % | ||||||||||||||||||
Total Inter-Segment Assets at End-of-Period | $ | 76.649 | $ | 77.499 | $ | 77.089 | $ | 76.530 | $ | 74.992 | -2.2 | % | $ | 76.649 | $ | 74.992 | -2.2 | % | ||||||||||||||||||
Total External | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period (2) | $ | 85.164 | $ | 87.499 | $ | 89.541 | $ | 75.686 | $ | 69.346 | -18.6 | % | $ | 83.577 | $ | 75.686 | -9.4 | % | ||||||||||||||||||
Sales/inflows | 5.442 | 5.202 | 5.081 | 4.004 | 3.132 | -42.4 | % | 10.976 | 7.136 | -35.0 | % | |||||||||||||||||||||||||
Redemptions/withdrawals/terminations | (5.807 | ) | (4.898 | ) | (5.754 | ) | (5.207 | ) | (4.433 | ) | 23.7 | % | (11.191 | ) | (9.640 | ) | 13.9 | % | ||||||||||||||||||
Exchanges | (0.001 | ) | (0.003 | ) | (0.004 | ) | (0.003 | ) | (0.002 | ) | -100.0 | % | (0.006 | ) | (0.005 | ) | 16.7 | % | ||||||||||||||||||
Net flows | (0.366 | ) | 0.301 | (0.678 | ) | (1.205 | ) | (1.303 | ) | NM | (0.221 | ) | (2.509 | ) | NM | |||||||||||||||||||||
Net investment gains and change in market value | 2.854 | 1.741 | (0.817 | ) | (5.134 | ) | (1.347 | ) | NM | 4.296 | (6.481 | ) | NM | |||||||||||||||||||||||
Transfer of assets to third-party | (0.153 | ) | - | (12.361 | ) | - | - | 100.0 | % | (0.153 | ) | - | 100.0 | % | ||||||||||||||||||||||
Balance at End-of-Period | $ | 87.499 | $ | 89.541 | $ | 75.686 | $ | 69.346 | $ | 66.696 | -23.8 | % | $ | 87.499 | $ | 66.696 | -23.8 | % | ||||||||||||||||||
(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. |
6/30/2008 | PAGE 26 | ||||||||||
Lincoln UK | |||||||||||
Income Statements | |||||||||||
Unaudited (millions of dollars) | |||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | 24.4 | $ | 25.5 | $ | 21.2 | $ | 19.0 | $ | 26.4 | 8.2 | % | $ | 48.5 | $ | 45.4 | -6.4 | % | ||||||||||||||||||
Mortality assessments | 8.9 | 9.2 | 9.1 | 9.1 | 9.1 | 2.2 | % | 18.9 | 18.2 | -3.7 | % | |||||||||||||||||||||||||
Expense assessments | 39.9 | 33.0 | 46.5 | 37.1 | 42.6 | 6.8 | % | 77.1 | 79.7 | 3.4 | % | |||||||||||||||||||||||||
Net investment income | 19.4 | 20.9 | 21.5 | 20.3 | 19.8 | 2.1 | % | 38.7 | 40.1 | 3.6 | % | |||||||||||||||||||||||||
Other revenues and fees | - | - | - | 0.1 | - | NM | 0.1 | 0.1 | 0.0 | % | ||||||||||||||||||||||||||
Total Operating Revenues | 92.6 | 88.6 | 98.3 | 85.6 | 97.9 | 5.7 | % | 183.3 | 183.5 | 0.1 | % | |||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 34.4 | 30.2 | 36.9 | 30.7 | 30.2 | -12.2 | % | 70.5 | 60.9 | -13.6 | % | |||||||||||||||||||||||||
Operating and acquisition expenses | 40.2 | 42.5 | 41.9 | 38.5 | 40.0 | -0.5 | % | 78.1 | 78.5 | 0.5 | % | |||||||||||||||||||||||||
Total Operating Expenses | 74.6 | 72.7 | 78.8 | 69.2 | 70.2 | -5.9 | % | 148.6 | 139.4 | -6.2 | % | |||||||||||||||||||||||||
Income from operations before federal income taxes | 18.0 | 15.9 | 19.5 | 16.4 | 27.7 | 53.9 | % | 34.7 | 44.1 | 27.1 | % | |||||||||||||||||||||||||
Federal income taxes | 6.3 | 5.6 | 6.8 | 5.7 | 9.7 | 54.0 | % | 12.2 | 15.5 | 27.0 | % | |||||||||||||||||||||||||
Income From Operations | $ | 11.7 | $ | 10.3 | $ | 12.7 | $ | 10.7 | $ | 18.0 | 53.8 | % | $ | 22.5 | $ | 28.6 | 27.1 | % | ||||||||||||||||||
Effective Tax Rate | 35.0 | % | 35.2 | % | 34.9 | % | 34.8 | % | 35.0 | % | 35.2 | % | 35.1 | % | ||||||||||||||||||||||
Average Equity | $ | 384.9 | $ | 379.1 | $ | 368.5 | $ | 375.7 | $ | 384.6 | $ | 386.2 | $ | 380.2 | ||||||||||||||||||||||
Return on Average Equity | 12.2 | % | 10.9 | % | 13.8 | % | 11.4 | % | 18.7 | % | 11.7 | % | 15.0 | % | ||||||||||||||||||||||
Operating and Acquisition Expenses | ||||||||||||||||||||||||||||||||||||
Commissions | $ | 1.0 | $ | 1.3 | $ | 1.5 | $ | 1.0 | $ | 1.0 | 0.0 | % | $ | 2.1 | $ | 2.0 | -4.8 | % | ||||||||||||||||||
General and administrative expenses | 26.8 | 26.9 | 28.1 | 26.6 | 25.9 | -3.4 | % | 53.2 | 52.5 | -1.3 | % | |||||||||||||||||||||||||
Total commissions and expenses incurred | 27.8 | 28.2 | 29.6 | 27.6 | 26.9 | -3.2 | % | 55.3 | 54.5 | -1.4 | % | |||||||||||||||||||||||||
Less: commissions and expenses capitalized | (0.6 | ) | (1.5 | ) | (1.4 | ) | (0.6 | ) | (0.7 | ) | -16.7 | % | (1.2 | ) | (1.3 | ) | -8.3 | % | ||||||||||||||||||
Amortization of DAC and VOBA, net of interest | 13.0 | 15.8 | 13.7 | 11.5 | 13.8 | 6.2 | % | 24.0 | 25.3 | 5.4 | % | |||||||||||||||||||||||||
Net Operating and Acquisition Expenses | $ | 40.2 | $ | 42.5 | $ | 41.9 | $ | 38.5 | $ | 40.0 | -0.5 | % | $ | 78.1 | $ | 78.5 | 0.5 | % | ||||||||||||||||||
Roll Forward of DAC and VOBA | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 802.6 | $ | 806.5 | $ | 807.3 | $ | 772.1 | $ | 760.4 | $ | 809.0 | $ | 772.1 | ||||||||||||||||||||||
Deferrals | 0.6 | 1.5 | 1.4 | 0.6 | 0.7 | 1.2 | 1.3 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | (0.1 | ) | (0.9 | ) | (0.9 | ) | 1.3 | (0.3 | ) | 0.6 | 1.0 | |||||||||||||||||||||||||
Other amortization | (12.9 | ) | (14.9 | ) | (12.8 | ) | (12.8 | ) | (13.5 | ) | (24.6 | ) | (26.3 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in operating and acquisition expenses | (12.4 | ) | (14.3 | ) | (12.3 | ) | (10.9 | ) | (13.1 | ) | (22.8 | ) | (24.0 | ) | ||||||||||||||||||||||
Foreign currency translation adjustment | 16.3 | 15.1 | (22.9 | ) | (0.8 | ) | 2.6 | 20.3 | 1.8 | |||||||||||||||||||||||||||
Balance at End-of-Period | $ | 806.5 | $ | 807.3 | $ | 772.1 | $ | 760.4 | $ | 749.9 | $ | 806.5 | $ | 749.9 | ||||||||||||||||||||||
Roll Forward of DFEL | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 400.4 | $ | 402.6 | $ | 398.2 | $ | 379.3 | $ | 371.5 | $ | 404.5 | $ | 379.3 | ||||||||||||||||||||||
Deferrals | 0.7 | 0.8 | 0.9 | 0.9 | 0.6 | 1.6 | 1.5 | |||||||||||||||||||||||||||||
Amortization, net of interest: | ||||||||||||||||||||||||||||||||||||
Unlocking | 0.1 | (5.3 | ) | (1.0 | ) | (0.5 | ) | 1.2 | (0.9 | ) | 0.7 | |||||||||||||||||||||||||
Other amortization | (6.7 | ) | (7.4 | ) | (7.5 | ) | (7.7 | ) | (7.9 | ) | (12.7 | ) | (15.6 | ) | ||||||||||||||||||||||
Deferrals, net of amortization included in expense assessments | (5.9 | ) | (11.9 | ) | (7.6 | ) | (7.3 | ) | (6.1 | ) | (12.0 | ) | (13.4 | ) | ||||||||||||||||||||||
Foreign currency translation adjustment | 8.1 | 7.5 | (11.3 | ) | (0.5 | ) | 1.4 | 10.1 | 0.9 | |||||||||||||||||||||||||||
Balance at End-of-Period | $ | 402.6 | $ | 398.2 | $ | 379.3 | $ | 371.5 | $ | 366.8 | $ | 402.6 | $ | 366.8 |
6/30/2008 | PAGE 27 | |
Lincoln UK | ||
Operational Data | ||
Unaudited (billions of dollars) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Unit-Linked Assets | ||||||||||||||||||||||||||||||||||||
Balance at beginning-of-period | $ | 8.906 | $ | 9.168 | $ | 9.192 | $ | 8.850 | $ | 8.079 | -9.3 | % | $ | 8.757 | $ | 8.850 | 1.1 | % | ||||||||||||||||||
Deposits | 0.100 | 0.079 | 0.075 | 0.060 | 0.101 | 1.0 | % | 0.168 | 0.161 | -4.2 | % | |||||||||||||||||||||||||
Withdrawals (including charges) and deaths | (0.251 | ) | (0.251 | ) | (0.227 | ) | (0.213 | ) | (0.227 | ) | 9.6 | % | (0.491 | ) | (0.439 | ) | 10.6 | % | ||||||||||||||||||
Net flows | (0.151 | ) | (0.172 | ) | (0.152 | ) | (0.153 | ) | (0.126 | ) | 16.6 | % | (0.323 | ) | (0.278 | ) | 13.9 | % | ||||||||||||||||||
Investment income and change in market value | 0.229 | 0.025 | 0.070 | (0.608 | ) | (0.150 | ) | NM | 0.506 | (0.758 | ) | NM | ||||||||||||||||||||||||
Foreign currency adjustment | 0.184 | 0.171 | (0.260 | ) | (0.010 | ) | 0.030 | -83.7 | % | 0.228 | 0.019 | -91.7 | % | |||||||||||||||||||||||
Balance at End-of-Period | $ | 9.168 | $ | 9.192 | $ | 8.850 | $ | 8.079 | $ | 7.833 | -14.6 | % | $ | 9.168 | $ | 7.833 | -14.6 | % | ||||||||||||||||||
Individual Life In Force | $ | 19.605 | $ | 19.757 | $ | 19.022 | $ | 18.283 | $ | 18.009 | -8.1 | % | $ | 19.605 | $ | 18.009 | -8.1 | % | ||||||||||||||||||
Exchange Rate - Dollars to Pounds | ||||||||||||||||||||||||||||||||||||
For-the-period | 1.989 | 2.025 | 2.051 | 1.987 | 1.986 | -0.2 | % | 1.977 | 1.987 | 0.5 | % | |||||||||||||||||||||||||
End-of-period | 2.008 | 2.046 | 1.987 | 1.985 | 1.992 | -0.8 | % | 2.008 | 1.992 | -0.8 | % |
6/30/2008 | PAGE 28 |
Other Operations (1) | |
Unaudited (in millions) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||||||||||
Insurance premiums | $ | (1.2 | ) | $ | 1.3 | $ | 0.7 | $ | 1.4 | $ | 1.6 | 233.3 | % | $ | 1.5 | $ | 3.0 | 100.0 | % | |||||||||||||||||
Net investment income | 91.4 | 92.6 | 101.3 | 98.6 | 87.1 | -4.7 | % | 178.6 | 185.7 | 4.0 | % | |||||||||||||||||||||||||
Amortization of deferred gain on business sold through reinsurance (2) | 18.6 | 18.6 | 18.6 | 18.5 | 18.4 | -1.1 | % | 37.2 | 36.9 | -0.8 | % | |||||||||||||||||||||||||
Other revenues and fees | 5.6 | (3.6 | ) | 1.2 | (2.3 | ) | 0.6 | -89.3 | % | 5.4 | (1.7 | ) | NM | |||||||||||||||||||||||
Communications revenues | 28.8 | 26.6 | 26.5 | 21.7 | 22.9 | -20.5 | % | 53.7 | 44.6 | -16.9 | % | |||||||||||||||||||||||||
Inter-segment elimination of investment advisory fees | (19.6 | ) | (22.6 | ) | (20.3 | ) | (20.0 | ) | (20.6 | ) | -5.1 | % | (44.1 | ) | (40.6 | ) | 7.9 | % | ||||||||||||||||||
Total Operating Revenues | 123.6 | 112.9 | 128.0 | 117.9 | 110.0 | -11.0 | % | 232.3 | 227.9 | -1.9 | % | |||||||||||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||||||||||
Benefits | 38.2 | 35.6 | 36.4 | 27.8 | 28.9 | -24.3 | % | 74.2 | 56.9 | -23.3 | % | |||||||||||||||||||||||||
Interest credited to contract holder funds | 44.5 | 48.4 | 47.8 | 45.8 | 41.8 | -6.1 | % | 88.1 | 87.6 | -0.6 | % | |||||||||||||||||||||||||
Operating and acquisition expenses | 38.5 | 48.2 | 55.2 | 34.9 | 46.7 | 21.3 | % | 60.0 | 81.6 | 36.0 | % | |||||||||||||||||||||||||
Taxes, licenses and fees | 0.5 | 3.9 | 5.1 | 2.1 | 1.1 | 120.0 | % | 3.9 | 3.2 | -17.9 | % | |||||||||||||||||||||||||
Interest and debt expenses | 73.1 | 68.2 | 80.3 | 75.4 | 64.8 | -11.4 | % | 135.5 | 140.2 | 3.5 | % | |||||||||||||||||||||||||
Communications expenses | 15.2 | 13.2 | 13.5 | 15.5 | 15.4 | 1.3 | % | 29.8 | 30.9 | 3.7 | % | |||||||||||||||||||||||||
Inter-segment elimination of investment advisory fees | (19.6 | ) | (22.6 | ) | (20.3 | ) | (20.0 | ) | (20.6 | ) | -5.1 | % | (44.1 | ) | (40.6 | ) | 7.9 | % | ||||||||||||||||||
Total Operating Expenses | 190.4 | 194.9 | 218.0 | 181.5 | 178.1 | -6.5 | % | 347.4 | 359.8 | 3.6 | % | |||||||||||||||||||||||||
Loss from operations before federal income taxes | (66.8 | ) | (82.0 | ) | (90.0 | ) | (63.6 | ) | (68.1 | ) | -1.9 | % | (115.1 | ) | (131.9 | ) | -14.6 | % | ||||||||||||||||||
Federal income taxes | (30.6 | ) | (32.4 | ) | (30.6 | ) | (21.3 | ) | (23.7 | ) | 22.5 | % | (51.0 | ) | (45.3 | ) | 11.2 | % | ||||||||||||||||||
Loss From Operations | $ | (36.2 | ) | $ | (49.6 | ) | $ | (59.4 | ) | $ | (42.3 | ) | $ | (44.4 | ) | -22.7 | % | $ | (64.1 | ) | $ | (86.6 | ) | -35.1 | % | |||||||||||
Run Off Institutional Pensions Account Values - Balance at End-of-Period | $ | 2.729 | $ | 2.720 | $ | 2.094 | $ | 2.074 | $ | 2.051 | -24.8 | % | $ | 2.729 | $ | 2.051 | -24.8 | % | ||||||||||||||||||
Discontinued Operations | ||||||||||||||||||||||||||||||||||||
Unaudited (in millions) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Discontinued Operations Before Disposal | ||||||||||||||||||||||||||||||||||||
Income from discontinued operations before federal income taxes | $ | 9.7 | $ | 10.2 | $ | 13.9 | $ | 7.4 | $ | - | -100.0 | % | $ | 21.5 | $ | 7.4 | -65.6 | % | ||||||||||||||||||
Federal income taxes | 3.4 | 3.6 | 4.8 | 2.6 | - | -100.0 | % | 7.6 | 2.6 | -65.8 | % | |||||||||||||||||||||||||
Income From Discontinued Operations Before Disposal | 6.3 | 6.6 | 9.1 | 4.8 | - | -100.0 | % | 13.9 | 4.8 | -65.5 | % | |||||||||||||||||||||||||
Disposal | ||||||||||||||||||||||||||||||||||||
Gain (loss) on disposal before federal income taxes | - | - | 57.1 | (12.3 | ) | (0.4 | ) | NM | - | (12.7 | ) | NM | ||||||||||||||||||||||||
Federal income taxes | - | - | 193.0 | (3.3 | ) | (0.1 | ) | NM | - | (3.4 | ) | NM | ||||||||||||||||||||||||
Loss on Disposal | - | - | (135.9 | ) | (9.0 | ) | (0.3 | ) | NM | - | (9.3 | ) | NM | |||||||||||||||||||||||
Income (Loss) From Discontinued Operations | $ | 6.3 | $ | 6.6 | $ | (126.8 | ) | $ | (4.2 | ) | $ | (0.3 | ) | NM | $ | 13.9 | $ | (4.5 | ) | 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. |
6/30/2008 | PAGE 29 | ||||||||||
Consolidated Domestic Deposits/Account Balances | |||||||||||
Unaudited (in billions) | |||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Deposits - For the Period | ||||||||||||||||||||||||||||||||||||
Individual Markets - fixed annuities (1) | $ | 0.982 | $ | 1.231 | $ | 1.288 | $ | 1.160 | $ | 1.371 | 39.6 | % | $ | 1.803 | $ | 2.531 | 40.4 | % | ||||||||||||||||||
Individual Markets - variable annuities | 2.295 | 2.247 | 2.594 | 1.866 | 2.065 | -10.0 | % | 4.295 | 3.931 | -8.5 | % | |||||||||||||||||||||||||
Individual Markets - Life Insurance | 1.005 | 0.980 | 1.086 | 0.967 | 0.952 | -5.3 | % | 2.044 | 1.919 | -6.1 | % | |||||||||||||||||||||||||
Employer Markets - fixed annuities | 0.233 | 0.305 | 0.267 | 0.332 | 0.280 | 20.2 | % | 0.531 | 0.612 | 15.3 | % | |||||||||||||||||||||||||
Employer Markets - variable products (2) | 1.040 | 1.220 | 0.997 | 1.219 | 1.141 | 9.7 | % | 2.229 | 2.360 | 5.9 | % | |||||||||||||||||||||||||
Employer Markets - Executive Benefits | 0.079 | 0.052 | 0.107 | 0.165 | 0.110 | 39.2 | % | 0.144 | 0.275 | 91.0 | % | |||||||||||||||||||||||||
Investment Management - annuities | 0.903 | 0.891 | 0.953 | 1.562 | 0.786 | -13.0 | % | 2.203 | 2.348 | 6.6 | % | |||||||||||||||||||||||||
Investment Management - mutual funds | 1.897 | 1.543 | 2.241 | 1.592 | 1.407 | -25.8 | % | 3.649 | 2.999 | -17.8 | % | |||||||||||||||||||||||||
Investment Management - managed account and other | 0.475 | 0.377 | 0.398 | 0.341 | 0.403 | -15.2 | % | 1.025 | 0.744 | -27.4 | % | |||||||||||||||||||||||||
Consolidating adjustments | (0.890 | ) | (0.878 | ) | (0.926 | ) | (1.494 | ) | (0.776 | ) | 12.8 | % | (1.689 | ) | (2.270 | ) | -34.4 | % | ||||||||||||||||||
Total Gross Retail Deposits | 8.019 | 7.968 | 9.005 | 7.710 | 7.739 | -3.5 | % | 16.234 | 15.449 | -4.8 | % | |||||||||||||||||||||||||
Investment Management - institutional | 2.876 | 2.936 | 2.230 | 1.228 | 0.910 | -68.4 | % | 5.307 | 2.140 | -59.7 | % | |||||||||||||||||||||||||
Consolidating adjustments | (0.188 | ) | (0.030 | ) | (0.192 | ) | (0.092 | ) | (0.034 | ) | 81.9 | % | (0.299 | ) | (0.126 | ) | 57.9 | % | ||||||||||||||||||
Total Gross Deposits | $ | 10.707 | $ | 10.874 | $ | 11.043 | $ | 8.846 | $ | 8.615 | -19.5 | % | $ | 21.242 | $ | 17.463 | -17.8 | % | ||||||||||||||||||
Account Balances - End of Period | ||||||||||||||||||||||||||||||||||||
Individual Markets - fixed annuities (1) | $ | 16.269 | $ | 16.383 | $ | 16.470 | $ | 16.395 | $ | 16.544 | 1.7 | % | $ | 16.269 | $ | 16.544 | 1.7 | % | ||||||||||||||||||
Individual Markets - variable annuities | 55.171 | 58.293 | 58.643 | 54.966 | 55.854 | 1.2 | % | 55.171 | 55.854 | 1.2 | % | |||||||||||||||||||||||||
Individual Markets - Life Insurance | 27.465 | 27.875 | 28.122 | 27.881 | 28.077 | 2.2 | % | 27.465 | 28.077 | 2.2 | % | |||||||||||||||||||||||||
Employer Markets - fixed annuities | 10.940 | 10.891 | 10.889 | 11.217 | 11.294 | 3.2 | % | 10.940 | 11.294 | 3.2 | % | |||||||||||||||||||||||||
Employer Markets - variable products (2) | 25.023 | 25.746 | 25.169 | 23.547 | 23.748 | -5.1 | % | 25.023 | 23.748 | -5.1 | % | |||||||||||||||||||||||||
Employer Markets - Executive Benefits | 4.353 | 4.391 | 4.436 | 4.460 | 4.526 | 4.0 | % | 4.353 | 4.526 | 4.0 | % | |||||||||||||||||||||||||
Investment Management - annuities | 12.780 | 12.814 | 12.282 | 11.697 | 11.700 | -8.5 | % | 12.780 | 11.700 | -8.5 | % | |||||||||||||||||||||||||
Investment Management - mutual funds | 19.894 | 20.274 | 19.793 | 18.690 | 18.176 | -8.6 | % | 19.894 | 18.176 | -8.6 | % | |||||||||||||||||||||||||
Investment Management - managed account and other | 18.215 | 18.092 | 17.638 | 15.244 | 14.292 | -21.5 | % | 18.215 | 14.292 | -21.5 | % | |||||||||||||||||||||||||
Consolidating adjustments | (12.240 | ) | (12.300 | ) | (11.798 | ) | (11.264 | ) | (11.286 | ) | 7.8 | % | (12.240 | ) | (11.286 | ) | 7.8 | % | ||||||||||||||||||
Total Retail Account Balances | 177.870 | 182.459 | 181.644 | 172.833 | 172.925 | -2.8 | % | 177.870 | 172.925 | -2.8 | % | |||||||||||||||||||||||||
Investment Management - institutional | 46.836 | 48.536 | 35.644 | 32.907 | 31.523 | -32.7 | % | 46.836 | 31.523 | -32.7 | % | |||||||||||||||||||||||||
Consolidating adjustments | (2.604 | ) | (2.529 | ) | (2.357 | ) | (2.208 | ) | (2.124 | ) | 18.4 | % | (2.604 | ) | (2.124 | ) | 18.4 | % | ||||||||||||||||||
Total Account Balances | $ | 222.102 | $ | 228.466 | $ | 214.931 | $ | 203.532 | $ | 202.324 | -8.9 | % | $ | 222.102 | $ | 202.324 | -8.9 | % | ||||||||||||||||||
Total Domestic Net Flows | ||||||||||||||||||||||||||||||||||||
Unaudited (in billions) | ||||||||||||||||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | June | June | % | ||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Retail Net Flows | ||||||||||||||||||||||||||||||||||||
Individual Markets - Life Insurance | $ | 0.585 | $ | 0.635 | $ | 0.745 | $ | 0.580 | $ | 0.627 | 7.2 | % | $ | 1.283 | $ | 1.207 | -5.9 | % | ||||||||||||||||||
Individual Markets - Annuities | 1.137 | 1.291 | 1.809 | 1.181 | 1.589 | 39.8 | % | 1.892 | 2.770 | 46.4 | % | |||||||||||||||||||||||||
Employer Markets - Defined Contribution | 0.073 | 0.133 | (0.091 | ) | 0.280 | 0.237 | 224.7 | % | 0.294 | 0.517 | 75.9 | % | ||||||||||||||||||||||||
Employer Markets - Executive Benefits | 0.026 | (0.005 | ) | 0.037 | 0.071 | 0.050 | 92.3 | % | (0.049 | ) | 0.121 | NM | ||||||||||||||||||||||||
Investment Management - retail | (0.275 | ) | (0.335 | ) | (0.649 | ) | (0.655 | ) | (0.937 | ) | NM | (0.042 | ) | (1.592 | ) | NM | ||||||||||||||||||||
Consolidating adjustments | 0.330 | 0.071 | 0.140 | (0.098 | ) | (0.075 | ) | NM | 0.326 | (0.173 | ) | NM | ||||||||||||||||||||||||
Total Retail Net Flows | 1.876 | 1.790 | 1.991 | 1.359 | 1.491 | -20.5 | % | 3.704 | 2.850 | -23.1 | % | |||||||||||||||||||||||||
Investment Management - institutional | (0.148 | ) | 0.426 | (0.302 | ) | (0.510 | ) | (0.535 | ) | NM | (0.470 | ) | (1.045 | ) | NM | |||||||||||||||||||||
Consolidating adjustments | (0.026 | ) | 0.128 | 0.132 | 0.030 | 0.052 | 300.0 | % | 0.022 | 0.082 | 272.7 | % | ||||||||||||||||||||||||
Total Net Flows | $ | 1.702 | $ | 2.344 | $ | 1.821 | $ | 0.879 | $ | 1.008 | -40.8 | % | $ | 3.256 | $ | 1.887 | -42.0 | % |
(1) Includes fixed portion of variable annuities. |
(2) Includes amounts attributable to mutual fund net flows. Mutual fund account values are not included in the separate accounts reported |
on our Consolidated Balance Sheets. |
6/30/2008 | PAGE 30 | ||||||
Consolidated Investment Data - Assets Managed | |||||||
Unaudited (in billions) |
As of | ||||||||||||||||||||||||
June | Sept. | Dec. | March | June | % | |||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | |||||||||||||||||||
Assets Managed by Source | ||||||||||||||||||||||||
LNC's investments and cash: | �� | |||||||||||||||||||||||
Available-for-sale fixed maturity securities | $ | 55.447 | $ | 56.086 | $ | 56.276 | $ | 55.624 | $ | 54.518 | -1.7 | % | ||||||||||||
Available-for-sale equity securities | 0.687 | 0.670 | 0.518 | 0.474 | 0.465 | -32.3 | % | |||||||||||||||||
Trading securities | 2.818 | 2.717 | 2.730 | 2.714 | 2.551 | -9.5 | % | |||||||||||||||||
Other investments | 11.880 | 12.040 | 12.398 | 12.743 | 12.669 | 6.6 | % | |||||||||||||||||
Total LNC investments | 70.833 | 71.513 | 71.922 | 71.555 | 70.201 | -0.9 | % | |||||||||||||||||
Separate accounts | 89.497 | 92.903 | 91.113 | 84.703 | 85.295 | -4.7 | % | |||||||||||||||||
Cash and invested cash | 0.989 | 1.328 | 1.666 | 2.447 | 1.921 | 94.2 | % | |||||||||||||||||
Total LNC | 161.319 | 165.744 | 164.700 | 158.705 | 157.418 | -2.4 | % | |||||||||||||||||
Non-affiliate assets managed | 83.709 | 85.684 | 71.975 | 66.020 | 63.197 | -24.5 | % | |||||||||||||||||
Total Assets Managed | $ | 245.028 | $ | 251.428 | $ | 236.675 | $ | 224.725 | $ | 220.615 | -10.0 | % | ||||||||||||
- | ||||||||||||||||||||||||
Assets Managed by Advisor | ||||||||||||||||||||||||
Investment Management segment (1) | $ | 97.725 | $ | 99.716 | $ | 85.357 | $ | 78.538 | $ | 75.691 | -22.5 | % | ||||||||||||
DLIA-Corp (2) | 66.423 | 67.324 | 67.417 | 67.339 | 65.997 | -0.6 | % | |||||||||||||||||
Lincoln UK | 10.536 | 10.589 | 10.247 | 9.445 | 9.180 | -12.9 | % | |||||||||||||||||
Domestic policy loans (excluding Lincoln UK) | 2.783 | 2.786 | 2.831 | 2.801 | 2.799 | 0.6 | % | |||||||||||||||||
Non-LNC affiliates | 67.561 | 71.013 | 70.823 | 66.602 | 66.948 | -0.9 | % | |||||||||||||||||
Total Assets Managed | $ | 245.028 | $ | 251.428 | $ | 236.675 | $ | 224.725 | $ | 220.615 | -10.0 | % | ||||||||||||
(1) See page 25 for additional detail. | ||||||||||||||||||||||||
(2) Represents assets managed internally. See page 25 for additional detail. |
6/30/2008 | PAGE 31 | ||||
Consolidated Investment Data - Other Investment Data | |||||
Unaudited (millions of dollars) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||||||||||
Available-for-sale fixed maturity securities | $ | 845.4 | $ | 854.0 | $ | 868.0 | $ | 858.2 | $ | 855.3 | 1.2 | % | $ | 1,689.5 | $ | 1,713.5 | 1.4 | % | ||||||||||||||||||
Available-for-sale equity securities | 11.8 | 10.4 | 10.4 | 9.1 | 7.8 | -33.9 | % | 20.4 | 16.9 | -17.2 | % | |||||||||||||||||||||||||
Trading securities | 44.4 | 44.0 | 42.4 | 42.5 | 42.2 | -5.0 | % | 89.9 | 84.7 | -5.8 | % | |||||||||||||||||||||||||
Mortgage loans on real estate | 131.8 | 123.0 | 122.0 | 121.6 | 128.6 | -2.4 | % | 262.4 | 250.2 | -4.6 | % | |||||||||||||||||||||||||
Real estate | 12.5 | 15.5 | 13.3 | 8.0 | 6.4 | -48.8 | % | 27.7 | 14.4 | -48.0 | % | |||||||||||||||||||||||||
Policy loans | 44.3 | 43.0 | 44.6 | 44.6 | 43.2 | -2.5 | % | 86.9 | 87.8 | 1.0 | % | |||||||||||||||||||||||||
Invested cash | 16.7 | 16.2 | 20.9 | 18.8 | 15.3 | -8.4 | % | 35.7 | 34.1 | -4.5 | % | |||||||||||||||||||||||||
Other investments | 72.8 | 4.3 | 17.3 | (3.0 | ) | 9.3 | -87.2 | % | 101.7 | 6.3 | -93.8 | % | ||||||||||||||||||||||||
Investment income | 1,179.7 | 1,110.4 | 1,138.9 | 1,099.8 | 1,108.1 | -6.1 | % | 2,314.2 | 2,207.9 | -4.6 | % | |||||||||||||||||||||||||
Investment expense | (46.5 | ) | (48.8 | ) | (45.2 | ) | (34.4 | ) | (31.3 | ) | 32.7 | % | (91.2 | ) | (65.7 | ) | 28.0 | % | ||||||||||||||||||
Net Investment Income | $ | 1,133.2 | $ | 1,061.6 | $ | 1,093.7 | $ | 1,065.4 | $ | 1,076.8 | -5.0 | % | $ | 2,223.0 | $ | 2,142.2 | -3.6 | % | ||||||||||||||||||
Average Invested Assets (Amortized Cost) | $ | 70,273.1 | $ | 70,569.0 | $ | 70,734.4 | $ | 70,941.2 | $ | 71,267.4 | $ | 70,149.9 | $ | 71,104.3 | ||||||||||||||||||||||
Ratio of Net Investment Income Average Mean Invested Assets | 6.45 | % | 6.02 | % | 6.18 | % | 6.01 | % | 6.04 | % | 6.34 | % | 6.03 | % | ||||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | June | June | % | |||||||||||||||||||||||||||||
2007 | 2007 | 2007 | 2008 | 2008 | Change | 2007 | 2008 | Change | ||||||||||||||||||||||||||||
Realized Gain (Loss) Related to Investments | ||||||||||||||||||||||||||||||||||||
Available-for-sale fixed maturity securities | ||||||||||||||||||||||||||||||||||||
Gross gains | $ | 26.5 | $ | 26.4 | $ | 16.7 | $ | 9.1 | $ | 21.7 | -18.1 | % | $ | 81.4 | $ | 30.8 | -62.2 | % | ||||||||||||||||||
Gross losses | (46.3 | ) | (44.2 | ) | (87.7 | ) | (100.0 | ) | (137.8 | ) | NM | (53.1 | ) | (237.8 | ) | NM | ||||||||||||||||||||
Equity securities | ||||||||||||||||||||||||||||||||||||
Gross gains | 4.0 | 1.2 | 0.3 | 2.7 | 0.3 | -92.5 | % | 6.2 | 3.0 | -51.6 | % | |||||||||||||||||||||||||
Gross losses | (0.4 | ) | - | (110.9 | ) | - | (7.0 | ) | NM | (0.4 | ) | (7.0 | ) | NM | ||||||||||||||||||||||
Gain on other investments | 5.3 | 5.9 | 11.5 | 25.1 | 3.1 | -41.5 | % | 1.1 | 28.2 | NM | ||||||||||||||||||||||||||
Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds | (1.7 | ) | (14.3 | ) | 65.2 | 25.1 | 24.2 | NM | (21.6 | ) | 49.3 | NM | ||||||||||||||||||||||||
Total realized gain (loss) on investments, excluding trading securities | (12.6 | ) | (25.0 | ) | (104.9 | ) | (38.0 | ) | (95.5 | ) | NM | 13.6 | (133.5 | ) | NM | |||||||||||||||||||||
Gain (loss) on certain derivative instruments | 4.0 | (10.9 | ) | (4.1 | ) | (3.1 | ) | (29.1 | ) | NM | 4.2 | (32.2 | ) | NM | ||||||||||||||||||||||
Associated amortization of DAC, VOBA, DSI, DFEL and changes in other contract holder funds | (0.1 | ) | 0.5 | 0.2 | - | - | 100.0 | % | - | - | NM | |||||||||||||||||||||||||
Total, pre-tax | (8.7 | ) | (35.4 | ) | (108.8 | ) | (41.1 | ) | (124.6 | ) | NM | 17.8 | (165.7 | ) | NM | |||||||||||||||||||||
Income taxes | (3.8 | ) | (12.2 | ) | (37.4 | ) | (14.0 | ) | (44.0 | ) | NM | 5.5 | (58.0 | ) | NM | |||||||||||||||||||||
Total, After-Tax | $ | (4.9 | ) | $ | (23.2 | ) | $ | (71.4 | ) | $ | (27.1 | ) | $ | (80.6 | ) | NM | $ | 12.3 | $ | (107.7 | ) | NM | ||||||||||||||
As of June 30, 2008 | As of December 31, 2007 | |||||||||||||||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||||||||||||||||||||||
Available-for-Sale and Trading Securities | ||||||||||||||||||||||||||||||||||||
Fixed maturity securities (fair value) | $ | 57,065.9 | 99.2 | % | $ | 59,003.8 | 99.1 | % | ||||||||||||||||||||||||||||
Fixed maturity securities (amortized cost) | 58,973.9 | 99.0 | % | 58,578.9 | 99.1 | % | ||||||||||||||||||||||||||||||
Equity securities (fair value) | 466.8 | 0.8 | % | 520.0 | 0.9 | % | ||||||||||||||||||||||||||||||
Equity securities (amortized cost) | 619.0 | 1.0 | % | 549.9 | 0.9 | % | ||||||||||||||||||||||||||||||
% of Available-for-Sale Fixed Maturity Securities (Based on Fair Value) | ||||||||||||||||||||||||||||||||||||
Treasuries and AAA | 23.3 | % | 23.1 | % | ||||||||||||||||||||||||||||||||
AA or better | 32.2 | % | 32.9 | % | ||||||||||||||||||||||||||||||||
BB or less | 5.2 | % | 5.1 | % | ||||||||||||||||||||||||||||||||
General Account Investments | As of June 30, 2008 | As of December 31, 2007 | ||||||||||||||||||||||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||||||||||||||||||||||
Fixed Maturities - Security Sector: | ||||||||||||||||||||||||||||||||||||
Corporate bonds | $ | 42,618.0 | 78.1 | % | $ | 44,147.9 | 78.5 | % | ||||||||||||||||||||||||||||
U.S. Government bonds | 203.9 | 0.4 | % | 222.0 | 0.4 | % | ||||||||||||||||||||||||||||||
Foreign government bonds | 907.5 | 1.7 | % | 1,037.5 | 1.8 | % | ||||||||||||||||||||||||||||||
Mortgage-backed securities | 10,547.7 | 19.3 | % | 10,604.6 | 18.8 | % | ||||||||||||||||||||||||||||||
State and municipal bonds | 141.7 | 0.3 | % | 153.1 | 0.3 | % | ||||||||||||||||||||||||||||||
Preferred stocks - redeemable | 98.8 | 0.2 | % | 110.7 | 0.2 | % | ||||||||||||||||||||||||||||||
Total | $ | 54,517.6 | 100.0 | % | $ | 56,275.8 | 100.0 | % | ||||||||||||||||||||||||||||
As of | ||||||||||||||||||||||||||||||||||||
Sept. | Dec. | March | June | % | ||||||||||||||||||||||||||||||||
Composition of Investment Portfolio | 2007 | 2007 | 2007 | 2008 | 2008 | Change | ||||||||||||||||||||||||||||||
Available-for-sale securities, at fair value: | ||||||||||||||||||||||||||||||||||||
Fixed maturity | $ | 55,446.9 | $ | 56,086.2 | $ | 56,275.8 | $ | 55,624.0 | $ | 54,517.6 | -1.7 | % | ||||||||||||||||||||||||
Equity | 686.9 | 670.2 | 517.9 | 474.4 | 464.6 | -32.4 | % | |||||||||||||||||||||||||||||
Trading securities | 2,818.3 | 2,716.6 | 2,730.2 | 2,713.6 | 2,550.5 | -9.5 | % | |||||||||||||||||||||||||||||
Mortgage loans on real estate and real estate | 7,698.4 | 7,665.7 | 7,681.0 | 7,707.2 | 7,813.6 | 1.5 | % | |||||||||||||||||||||||||||||
Policy loans | 2,787.0 | 2,790.2 | 2,834.7 | 2,804.0 | 2,801.8 | 0.5 | % | |||||||||||||||||||||||||||||
Derivative investments | 375.9 | 554.1 | 807.1 | 1,091.1 | 889.9 | 136.7 | % | |||||||||||||||||||||||||||||
Other investments | 1,019.1 | 1,029.9 | 1,074.9 | 1,141.0 | 1,163.4 | 14.2 | % | |||||||||||||||||||||||||||||
Total | $ | 70,832.5 | $ | 71,512.9 | $ | 71,921.6 | $ | 71,555.3 | $ | 70,201.4 | -0.9 | % |