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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000 Commission File Number 1-6028
LINCOLN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1140070
(State of Incorporation) (I.R.S. Employer Identification No.)
1500 Market Street, Suite 3900, Philadelphia, Pennsylvania 19102-2112
(Address of principal executive offices)
Registrant's telephone number (215) 448-1400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Exchanges on which registered
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Common Stock New York, Chicago and Pacific
Common Share Purchase Rights New York, Chicago and Pacific
$3.00 Cumulative Convertible Preferred Stock, Series A New York and Chicago
8.75% Cumulative Quarterly Income Preferred Securities, Series A* New York
8.35% Trust Originated Preferred Securities, Series B* New York
7.40% Trust Originated Preferred Securities, Series C* New York
7.75% FELINE PRIDES, Series D* New York, Chicago and Pacific
* Issued by Lincoln National Capital I, Lincoln National Capital II,
Lincoln National Capital III and Lincoln National Capital IV,
respectively. Payments of distributions and payments on liquidation or
redemption are guaranteed by Lincoln National Corporation.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ x ]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ x ]
As of February 23, 2001, 190,643,593 shares of common stock were
outstanding. The aggregate market value of such shares (based upon the
closing price of these shares on the New York Stock Exchange) held by
non-affiliates was approximately $8,150,014,000.
Select information from the registrant's 2000 Annual Report to
Shareholders has been incorporated by reference into Part II of this
Form 10-K. Select materials from the Proxy Statement for the Annual
Meeting of Shareholders, scheduled for May 10, 2001 have been
incorporated by reference into Part III of this Form 10-K.
The exhibit index to this report is located on page 27.
Lincoln National Corporation
Table of Contents
Item Page
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PART I
1. Business
A. Business Overview 3
B. Description of Business Segments:
1. Annuities 5
2. Life Insurance 8
3. Reinsurance 9
4. Investment Management 10
5. Lincoln UK 11
C. Other Matters:
1. Regulatory 11
2. Miscellaneous 12
2. Properties 12
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 13
PART II
5. Market for Registrant's Common Equity and
Related Stockholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis 13
7A.Quantitative and Qualitative Disclosures About Market Risk 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 13
PART III
10. Directors and Executive Officers of the Registrant 13
11. Executive Compensation 14
12. Security Ownership of Certain Beneficial
Owners and Management 14
13. Certain Relationships and Related Transactions 14
PART IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 14
Index to Exhibits 27
Signatures 28
PART I
Item 1. Business
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A. Business Overview
Lincoln National Corporation ("LNC") is a holding company. Through
subsidiary companies, LNC operates multiple insurance and investment
management businesses. The collective group of companies uses "Lincoln
Financial Group" as its marketing identity. Based on assets, LNC is the
33rd largest U.S. Corporation (1999 Fortune 500, Largest U.S.
Corporations, April 2000). Operations are divided into five business
segments: 1) Annuities, 2) Life Insurance, 3) Reinsurance ("Lincoln
Re"), 4) Investment Management and 5) Lincoln UK. Over the past five
years, segments have been redefined as noted below. Prior to 1997, LNC
had a Property-Casualty segment. This segment was sold in 1997 and the
related segment information was reclassified to discontinued operations.
The Lincoln UK segment, which was added in 1997, was included in the
Life Insurance and Annuities segment prior to the adoption of Financial
Accounting Standard No. 131. During the first quarter of 2000, changes
to the structure of LNC's internal organization resulted in the creation
of a separate Annuities segment and a separate Life Insurance segment.
Revenues, pre-tax income and assets for LNC's major business segments
and other operations are shown in this Form 10-K report as part of the
consolidated financial statements (see Note 9 to the consolidated
financial statements as set forth in LNC's 2000 Annual Report to
Shareholders which is incorporated by reference to Item 8 of this Form
10-K). The LNC "Other Operations" category includes the financial data
for operations that are not directly related to the business segments,
unallocated corporate items (such as, corporate investment income and
interest expense on short-term and long-term borrowings) and the
operations of Lincoln Financial Advisors ("LFA").
Although one of the subsidiaries held by LNC was formed in 1905, LNC
itself was formed in 1968. LNC is an Indiana corporation that maintains
its principal offices at 1500 Market Street, Suite 3900, Philadelphia,
Pennsylvania 19102-2112. As of December 31, 2000, there were 64 persons
engaged in the governance of the LNC holding company. Total employment
of Lincoln National Corporation at December 31, 2000 on a consolidated
basis was 7,820. Of this total, approximately 1,840 employees are
included in "Other Operations" related primarily to the operation of
LFA.
The primary operating subsidiaries that comprise LNC are Lincoln
National Life Insurance Company ("LNL"); First Penn-Pacific Life
Insurance Company ("First Penn"); Lincoln Life & Annuity Company of New
York ("Lincoln Life New York"); LFA, Sagemark Consulting, Inc.
("Sagemark"), Lincoln National Reassurance Company ("LNRAC"); Lincoln
National Health & Casualty Insurance Company ("LNH&C"); Lincoln National
Reinsurance Company Ltd. (Bermuda); Old Fort Insurance Company Ltd.
(Bermuda); Lincoln National Reinsurance Company (Barbados), Lincoln
National (UK) plc; and Delaware Management Holdings, Inc. ("Delaware").
LNL is an Indiana corporation with its annuities and reinsurance
operations headquartered in Fort Wayne, Indiana and its life insurance
operations headquartered in Hartford, Connecticut. LNL is the 9th
largest U.S. stockholder-owned life insurance company, based on revenues
(1999 Fortune Rankings of Largest Life Insurance Companies by Revenues,
April 2000) and the 5th largest life insurer in the U.S. when measured
by total life insurance in-force (Best's Review, July 2000). The primary
operations of LNL are reported in the Annuities, Life Insurance and
Reinsurance segments. LNL also has operations that are reported in the
Investment Management segment.
First Penn is an Indiana corporation headquartered in Schaumburg,
Illinois. First Penn offers universal life, term life and deferred fixed
annuity products for distribution in most states of the United States.
The operations of First Penn are reported in the Life Insurance segment.
Beginning in the first quarter of 2001, the reporting for First Penn's
annuities business will be moved from the Life Insurance segment into
the Annuities segment.
Lincoln Life New York is a New York company headquartered in Syracuse,
New York. Lincoln Life New York offers fixed annuities, variable
annuities, universal life, variable universal life, term life and other
individual life insurance products within the state of New York
utilizing the distribution networks described below under Distribution.
The operations of Lincoln Life New York are reported in the Annuities
and Life Insurance segments.
Acquisitions, Divestitures and Discontinued Lines of Business
Over the last several years, LNC has undertaken a variety of
acquisitions and divestitures, and has exited certain businesses. These
actions have been conducted with the goal of strengthening shareholder
value by providing more consistent sources of earnings and by focusing
on financial products that have the potential for significantly growing
earnings. To this end, the following transactions have occurred during
the three years covered by this Form 10-K:
During 2000, LNC transferred Lincoln UK's sales force to Inter-Alliance
Group PLC. Concurrent with the announcement of this transfer, LNC also
ceased writing new business in the United Kingdom ("UK") through direct
distribution. These actions followed a strategic review of the Lincoln
UK segment in late 1999, where LNC concluded that trends in the UK
insurance market including the unfavorable regulatory environment raised
significant concerns regarding the ongoing fit of the Lincoln UK segment
within LNC's overall strategic plans.
During 1999, as a result of a comprehensive review of the group markets
business in the Reinsurance segment, LNC discontinued writing new HMO
excess-of-loss and group carrier medical reinsurance programs. LNC also
purchased Alden Risk Management Services, an employer stop-loss
business, for $41.5 million in cash. In another 1999 Reinsurance segment
transaction, LNC transferred a block of disability income business to
MetLife under an indemnity reinsurance agreement. LNC transferred $490.4
million of cash to Metlife representing the statutory reserves on the
block, net of $18.5 million of purchase price consideration. In
accordance with the accounting rules for indemnity reinsurance
transactions, a gain of $56.7 million on this transaction is being
recognized over the premium paying period of the business.
During 1998, LNC purchased a block of individual life insurance from
Aetna Inc. ("Aetna") for $1.0 billion. This transaction was accounted
for using purchase accounting. Funding for this transaction primarily
came from the proceeds of public securities offerings in 1998. During
1998, LNC also purchased a block of individual life insurance and
annuity business from CIGNA Corporation ("CIGNA") for $1.414 billion.
This transaction was also accounted for using purchase accounting.
Funding for the CIGNA acquisition came from the proceeds of the 1997
sale of LNC's 83.3% ownership interest in American States Financial
Corporation, a property-casualty business. The exit from the
property-casualty business and the expansion of LNC's life insurance
product and distribution capacities were major steps in LNC's evolution
from a multi-line insurance company to a leading, focused company
specializing in wealth protection and wealth accumulation products.
Distribution of Annuities, Life Insurance and Mutual Funds
LNC has an extensive distribution network for the sale of fixed
annuities, variable annuities, universal life insurance, variable
universal life insurance, term life insurance, other individual
insurance coverages, retail mutual funds, 401(k) products and separate
account wrap products. LNC's distribution strategy reflects a
marketplace where consumers increasingly want to do business on their
own terms. LNC's network consists of internally owned wholesaling and
retailing business units: Lincoln Financial Distributors ("LFD") and
LFA, respectively, as well as distribution for annuities through
alliances with third parties including American Funds Distributors
("AFD"), SEI and AnnuityNet.com. LFD consists of approximately 250
wholesalers organized to penetrate multiple channels including the
Wirehouse/Regional channel, the Independent Financial Planner channel,
the Marketing General Agent channel and the Financial Institutions
channel. Through its relationships with a large number of financial
intermediaries, LFD has access to 7,500 insurance brokers, 14,000 bank
agents, 50,000 stockbrokers and 53,000 financial planners including LFA.
LFD's operations and financial results are reported in the Annuities,
Life Insurance and Investment Management segments based on the product
being distributed. Beginning in the first quarter of 2001, LFD's
operations and financial results will be centralized and reported under
"Other Operations".
LFA is a retail broker dealer and financial planning firm that offers a
full range of financial and estate planning services. LFA and its
consolidated affiliate, Sagemark, offer access to annuities, 401(k)
plans, pensions, universal and variable universal life insurance and
other wealth accumulation and protection products and services, and is a
preferred distributor of LNC retail products. LFA and Sagemark are
headquartered in Hartford, Connecticut and consist of 2,086 planners in
39 offices across the United States. As part of LFA's commitment to
capitalize on opportunities in the employer-sponsored annuities market,
the Fringe Benefit Division was formed in 1999. This group consists of
250 financial planners from LFA and provides a specialized marketing
focus at a lower distribution cost; these are the two critical success
factors in this evolving market.
Distribution of Reinsurance and Institutional Investment Products
Lincoln Re's market positioning strategy is to distinguish itself from
competitors that pursue traditional risk-transfer commodity business
by providing innovative, tailored programs to its clients. To this end,
Lincoln Re uses a mass customization approach. This involves packaging
and distributing modular pricing, underwriting, systems, alliance
resources, marketing consultation, product development and claims
management components to meet the needs of client companies.
Lincoln Re's strategic approach also involves the capabilities of many
alliance partners. These include direct marketers, medical equipment
suppliers, electronic information providers, specialized legal firms,
accountants and variable life and annuity administrators, all ready to
form a "virtual organization" to help Lincoln Re's clients do business.
Institutional investment products managed in the Investment Management
segment including large case 401(k) plans are marketed by a separate
sales force in conjunction with pension consultants. These products are
offered to defined benefit and defined contribution plan sponsors,
endowments, foundations and insurance companies.
National Branding Campaign
During 2000, Lincoln Financial Group ("LFG"), the marketing name for LNC
and its affiliates, continued building its brand on a national basis
through an integrated package of national magazine, television and
Internet advertising, sponsorships of major sporting events, educational
partnerships, public relations and promotional events. LNC's branding
strategy is paying off. National studies conducted by LNC indicate
significant increases in consumer awareness of and familiarity with
Lincoln Financial Group. This is especially true among LNC's primary
target audience, the affluent, and an important sub-target, the
super-affluent. The affluent market is defined as U.S. households having
at least $500,000 of investable net worth, with the super affluent
having at least $1 million. As a measure of the overall progress of
LNC's branding campaign, the results of two full national awareness
tracking surveys conducted by LNC in May and November of 2000 yielded
statistically significant increases over the results of a prior year
survey in overall company awareness. Importantly, as the affluence of
the audience increased, LNC's awareness increased, indicating the
progress of the branding campaign.
B. Description of Business Segments
1. Annuities
The Annuities segment, headquartered in Fort Wayne, Indiana, provides
tax-deferred investment growth and lifetime income opportunities for its
clients through the manufacture and sale of fixed and variable
annuities. There are two lines of business within this segment,
individual annuities and employer-sponsored markets. Both lines of
business offer fixed annuity and variable annuity products.
The individual annuities line of business targets individuals to
purchase non-qualified and qualified fixed and variable annuities as
tax-deferred accumulation vehicles that can ultimately provide income
flow for life in retirement. Annuities are attractive, because they
provide tax-deferred growth in the underlying principal, thereby
deferring the tax consequences of the growth in value until withdrawals
are made from the accumulation values. In addition to favorable tax
treatment, annuities are unique in that retirees can select a variety of
payout alternatives to help provide an income flow during life. The
individual annuities market is a growth market that has seen an increase
in competition along with new product types and promotion.
The employer-sponsored line of business markets its fixed and variable
annuities to public sector employees including school teachers and
health care providers for use in retirement plans under Sections 403(b)
and 457 of the Internal Revenue Code (the "Code") and also markets to
private sector companies for use in retirement plans under Section
401(k) of the Code. The employer-sponsored market is a relatively mature
market in which LNC's primary competitors are mutual fund companies. Of
LNC's employer-sponsored market account values, 70% are made up of
public sector accounts.
Products
In general, an annuity is a contract between an insurance company and an
individual or group in which the insurance company, after receipt of one
or more contributions, agrees to pay an amount of money either in one
lump sum or on a periodic basis (i.e., annually, semi-annually,
quarterly or monthly), beginning on a certain date and continuing for a
period of time as specified in the contract. Such payments can begin the
month after the deposit is received (referred to as an immediate
annuity) or at a future date in time (referred to as a deferred
annuity). This retirement vehicle helps protect an individual from
outliving his money and it takes on two forms, a fixed annuity or a
variable annuity.
Fixed Annuity: A fixed deferred annuity preserves the principal value of
the contract while guaranteeing a minimum interest rate to be credited
to the accumulation value. LNC offers both single and flexible premium
fixed deferred annuities to the individual annuities market. Single
premium fixed deferred annuities are contracts that allow only a single
contribution to be made. Flexible premium fixed deferred annuities are
contracts that allow multiple contributions on either a scheduled or
non-scheduled basis. With fixed deferred annuities, the contractholder
has the right to surrender the contract and receive the current
accumulation value less any applicable surrender charge and, if
applicable, market value adjustment. Fixed annuity contributions are
invested in LNC's general account. LNC bears the investment risk for
fixed annuity contracts. To protect itself from premature withdrawals,
LNC imposes surrender charges. Surrender charges are typically
applicable during the early years of the annuity contract, with a
declining level of surrender charges over time. LNC expects to earn a
spread between what it earns on the underlying general account
investments supporting the fixed annuity product line and what it
credits to its fixed annuity contractholders' accounts.
As a result of the strong performance of equity markets and the low
interest rate environment experienced over the last several years, fixed
annuities have generally been replaced by variable annuities as the
annuity of choice for retirement planning. This trend may reverse itself
if there is a sustained downturn in the stock market or inflation
concerns cause interest rates to rise. LNC is currently marketing fixed
annuities through financial institutions, and is developing a fixed
Market Value Adjusted ("MVA") annuity for launch in 2001. The fixed MVA
annuity is expected to be more competitive in a volatile interest rate
environment. It has a feature that increases or decreases the cash
surrender value of the annuity based on a decrease or increase in
interest rates. Therefore, the contractholder would participate in gains
when the contract is surrendered in a falling interest rate market, and
LNC would be protected from losses when the contract is surrendered in a
rising interest rate market.
Variable Annuity: A variable annuity provides the contractholder the
ability to direct the investment of deposits into one or more
sub-accounts offered by the product. The value of the contractholder's
account varies with the performance of the underlying sub-account chosen
by the contractholder. The underlying assets of the sub-accounts of the
separate account are managed within a special insurance series of mutual
funds. Because the contractholder's return is tied to the performance of
the segregated assets underlying the variable annuity, the
contractholder bears the investment risk associated with these
investments. LNC charges the contractholder insurance and administrative
fees based upon the value of the variable contract.
The separate account choices for LNC's variable annuities cover diverse
asset classes with varying levels of risk and include both equity funds and
fixed income funds. The Individual and Group Multi-Fund [REGISTERED
TRADEMARK] Variable Annuity product line offers 27 fund choices from 12
well known advisors: Alliance Capital [REGISTERED TRADEMARK], American
Funds Insurance Series[SERVICE MARK], Baron Capital Funds, Delaware
Investments, Delaware Lincoln Investment Advisers, Deutsche Asset
Management, Fidelity Investments [REGISTERED TRADEMARK], Goldman Sachs,
Janus, Neuberger Berman Management Inc., Putnam Investments, Inc. and
Vantage Investment Advisers. LNC's Lincoln ChoicePlus[SERVICE MARK]
Variable Annuity, an individual multi-manager product line, has arguably
the best fund line up with 36 offerings from AIM [REGISTERED TRADEMARK],
Alliance Capital [REGISTERED TRADEMARK], American Funds Insurance Series
[SERVICE MARK], Delaware Investments, Deutsche Asset Management, Fidelity
Investments [REGISTERED TRADEMARK], Franklin [REGISTERED TRADEMARK]
Templeton [REGISTERED TRADEMARK], Liberty Funds Distributor, Inc., Delaware
Lincoln Investment Advisers, and MFS Investment Management [REGISTERED
TRADEMARK]. LNC's American Legacy Variable Annuity, a premier single
manager individual and group variable annuity product line, offers 11
mutual fund choices from American Funds Insurance Series[SERVICE MARK].
American Funds is the 3rd largest mutual fund company for 2000 based on
assets under management. LNC's newest alliance with SEI, the number one
provider of wrap accounts in America (Cerulli Associates), has yielded the
SEI Individual Variable Annuity product line, which offers 11 SEI mutual
funds as investment options. LNC's Alliance Program, which is for the
employer-sponsored market, has over 2000 mutual fund choices plus a fixed
account. This product is customized for each employer.
Most of LNC's variable annuity products also offer the choice of a fixed
annuity option that provides for guaranteed interest credited to the
account value. In addition, many of LNC's individual variable annuities
feature minimum guaranteed death benefits. These minimum guaranteed
death benefits include guaranteed return of premium, the highest account
value attained on any policy anniversary through attained age 80 (i.e.,
high water mark), or a 5% annual step up of the account value depending
on the specific terms of the contract.
LNC earns mortality assessments and expense assessments on variable
annuity accounts to cover insurance and administrative charges. These
expenses are deducted from the contractholder's account value. Some
products feature decreasing fee schedules based on account value break
points. The fees that LNC earns from these policies are classified as
insurance fees on the income statement. In addition, for some contracts,
LNC collects surrender charges when contractholders surrender their
contracts during the early years of a contract. For other contracts, LNC
collects surrender charges when contractholders surrender their
contracts during a number of years subsequent to each deposit. LNC's
individual variable annuity products have a maximum surrender period of
ten years. The assets that support variable annuities are included in
the assets held in separate accounts balance and the related liabilities
for the current account values are included in the liabilities related
to separate accounts balance.
LNC introduced more new variable annuity products in the year 2000 than
it did in the last five years. LNC now offers through its various
product lines, A-share, B-share, C-share and bonus variable annuities
(both C-share and bonus variable annuities were first offered in all
states except New York in the third quarter of 2000 and C-share
annuities were available in New York for the Lincoln Choice Plus and
American Legacy product lines in the first quarter of 2001). The
differences in A, B and C-shares relate to the sales charge and fee
structure associated with the contract. An A-share has a front-end sales
charge. A B-share has a contingent deferred sales charge that is only
paid if the account is surrendered or withdrawals are in excess of
contractual free withdrawals within the contract's specified surrender
charge period. A C-share has no front-end sales charge or back-end
surrender charge.
A bonus annuity is a variable annuity contract which offers a bonus
credit to a contract based on a specified percentage (typically ranging
from 2% to 5%) of each deposit. The SEC is examining bonus products of
some companies, due to concerns with whether the bonus product has been
properly designed and sold with the contractholders' interests in mind.
The SEC is concerned that the higher expenses and extended surrender
charge periods that are often associated with bonus annuities may not be
adequately understood by contractholders. In developing bonus annuity
products for its Lincoln ChoicePlus and American Legacy variable
annuities, LNC has attempted to address these concerns, while at the
same time designing products that are competitive in the marketplace.
Distribution
Fixed annuity products as well as the Lincoln ChoicePlus Variable
Annuity product line are distributed by LFD and LFA. LFA also
distributes the Multi-Fund(registered trademark) Variable Annuity
product line and Alliance Program. Two other manufactured variable
annuity product lines, the American Legacy Variable Annuity and SEI
Variable Annuity, are distributed by American Funds Distributors and
SEI, respectively.
Market Position
Capitalizing on a broad product portfolio and a strong and diverse
distribution network, LNC is a leader in both the individual and
employer-sponsored annuity markets. According to Variable Annuity and
Research Data Service ("VARDS"), LNC ranks 3rd in assets as of December
31, 2000 and 14th in variable annuity sales for the year ended December
31, 2000 in the United States.
LNC was an early entrant into the fixed and variable annuity business
and as such has a mature book of business with many contracts that are
out of the surrender charge period. As a result, over the last few
years, LNC, as well as other seasoned industry participants, have been
vulnerable to what are referred to as Section 1035 exchanges, named
after the Internal Revenue Code Section that governs these exchanges. In
1035 exchanges, contractholders surrender their LNC annuity and make a
non-taxable transfer to another insurance company's non-qualified
annuity. As noted above, in 2000, LNC has addressed the increase in 1035
exchanges, in part, by introducing more quality variable annuity
products in 2000 than it did in the last five years. In addition to
these product enhancements and additions, LNC has implemented a variety
of retention initiatives aimed at reducing contract lapses.
Approximately 1,520 employees are involved in this business segment.
2. Life Insurance
The Life Insurance business segment, headquartered in Hartford,
Connecticut, with additional operations in Schaumburg, Illinois (First
Penn), focuses on the creation and protection of wealth for its clients
through the manufacture and sale of life insurance products. The
Hartford operation offers both single and survivorship versions of
universal life ("UL"), variable universal life ("VUL"), and
interest-sensitive whole life ("ISWL"), as well as corporate owned life
insurance ("COLI") and term insurance. This operation targets the
affluent market, defined as households with at least $500,000 of
investable net worth. Two key measures of the effectiveness of meeting
the needs of this market include average face amount of policies sold,
which was in excess of $1 million for 2000, and average premiums paid
per policy sold, which exceeded $20,000 for 2000. Both measures were far
above industry averages and place LNC among the top in the industry.
Additional offerings through its First Penn operations include term
life, linked-benefit life, and universal life insurance and deferred
fixed annuity products. Since its entry into the term insurance market
in 1995, First Penn has emerged as a recognized leader in service and
product development. First Penn is also a leader in the linked benefit
product category. The linked-benefit product is a universal life
insurance policy linked with an accelerated benefits rider that provides
a benefit for long-term care needs.
LNC has become an industry leader in the development of competitive,
innovative products designed specifically for the affluent market
delivered with leading edge speed. An example of LNC's ability to
quickly meet the needs of the customer through its new product launches
include the success of a new version of its Survivorship VUL product
introduced in May, which doubled sales levels over the prior year.
In 2000, LNC was ranked 8th in the U.S. Life Insurance Industry as
measured by new annualized premiums for the year (Life Insurance
Marketing Resource Association). LNC's current market leadership
position is a result of the breadth and quality of its product portfolio
along with its commitment to exceptional customer service, its extensive
distribution network and the growth opportunity offered by its target
market, the affluent.
Products
The Life Insurance segment's book of business includes
interest/market-sensitive products (UL, VUL, ISWL, COLI) and traditional
life products (FPP term and mostly closed blocks of whole life and term
products). Profitability is driven by mortality margins (defined below),
investment margins (spreads/fees), expenses and surrender fees.
Mortality margins represent the difference between amounts charged the
customer to cover the mortality risk and the death benefits paid.
Mortality charges are either specifically deducted from the
contractholder's fund (i.e. cost of insurance assessments or "COIs") or
imbedded in the premiums charged to the customer. In either case, these
amounts are a function of the rates priced into the product and level of
insurance in-force (less reserves previously set aside to fund
benefits). Insurance in-force, in turn, is driven by sales, persistency
and mortality experience.
Another important source of earnings from life insurance contracts is
investment margins, described below under Fixed Life Insurance. Similar
to the annuity product classifications described above, life products
can be classified as "fixed" and "variable" contracts. This
classification describes whether the policyholder or LNC bears the
investment risk of the assets supporting the policy. This also
determines the manner in which LNC earns profits from these products,
either as investment spreads for fixed products or as fees charged for
variable products.
Fixed Life Insurance (primarily UL and ISWL): Premiums and deposits
received on fixed products are invested in LNC's general account
investment portfolio, so LNC bears the risk on investment performance.
LNC manages investment margins, (i.e. the difference between the rate
the portfolio earns compared to the rate that is credited to the
customer) by seeking to maximize current yields, in line with
asset/liability and risk management targets, while crediting a
competitive rate to the customer. Crediting rates are typically subject
to guaranteed minimums specified in the underlying life insurance
contract.
Variable Universal Life Insurance (VUL): Deposits received on VUL
products are invested in separate accounts which offer several
investment options for the customer's selection. The investment choices
are the same, in most cases, as the investment choices offered in LNC's
variable annuity contracts. In addition, VUL products offer a fixed
account option which is managed by LNC. Investment risk is borne by the
customer on all but the fixed account option. LNC charges fees for
mortality costs and administrative expenses, as well as investment
management fees.
Corporate Owned Life Insurance ("COLI"): COLI is typically purchased by
companies to provide life insurance benefits upon the death of certain
key employees and to fund non-qualified benefit plans. LNC's COLI
product line has been completely revamped over the last two years and
now includes UL and leading edge VUL products.
Term Life Insurance: Term life insurance provides a death benefit
without a cash accumulation balance. Policy premiums are generally paid
annually. There was a surge in term life policies written by First Penn
prior to January 1, 2000, the date on which the Valuation of Life
Insurance Model Regulation ("Regulation XXX") became effective.
Regulation XXX requires companies to carry increased reserves related to
certain term life policies sold on or after January 1, 2000 resulting in
an increase in premium to the policyholder.
Distribution
Distribution of the Life Insurance segment's products occurs through the
internally owned wholesaling arm, LFD, as well as the internally owned
retail sales arm, LFA. Both channels have an industry-wide reputation of
being highly skilled in the development of financial and estate planning
solutions for the affluent market.
Approximately 1,040 employees are involved in this business segment.
3. Reinsurance
Lincoln Re, headquartered in Fort Wayne, Indiana, was the top life
reinsurer in the United States in 1999 as measured by total in-force
(1999 SOA/Munich Re Survey). Lincoln Re manages a diversified portfolio
of risks in individual and group life, employer stop-loss, financial and
international reinsurance markets. Providing customized solutions has
been key to this segment's success, leveraging its expertise in risk
management, knowledge management, capital management and the capabilities
of alliance partners. The primary companies within this business segment
are Lincoln National Reassurance Company ("LNRAC"), Lincoln National
Health & Casualty Insurance Company ("LNH&C"), LNL, Lincoln National
Reinsurance Company Ltd (Bermuda), Old Fort Insurance Company Ltd
(Bermuda) and Lincoln National Reinsurance Company (Barbados).
LNRAC and LNL offer reinsurance programs for individual life, group
life, group medical and annuity products to U.S. and international
clients. LNH&C offers group medical products and services on both a
direct and reinsurance basis. The insurance companies in Bermuda and
Barbados offer specialized reinsurance programs for life, health and
annuity business. They also offer funded cover programs to
property-casualty carriers in the U.S. and select international markets.
Lincoln Re maintains offices in a number of U.S. cities and has offices
in Toronto, Brussels, Buenos Aires, Mexico City, Manila, and Tokyo. In
addition, Lincoln Re maintains representative offices in China (Beijing,
Shanghai and Guangzhou) and, in 1998, signed a letter of intent with
Ping An, the largest private insurance company in the People's Republic
of China with a national charter, to work towards creating a joint
venture that will sell reinsurance products and services.
Lincoln Re uses a knowledge-based approach to reinsurance that
distinguishes it as a leader in an increasingly competitive marketplace.
Systems developed by Lincoln Re are used throughout the insurance
industry. This approach to deploying Lincoln Re's intellectual capital
promotes customer retention and the development of new customer
relationships globally.
Foremost among Lincoln Re's proprietary systems is its patented Life
Underwriting System, a state-of- the-art risk management technology.
Direct life insurance companies who license the system represent a
significant portion of the total life insurance sold in the U.S. In 1998,
Lincoln Re was granted a second patent to protect its Lincoln Mortality
System[TM] and other automated decision-making systems. Other proprietary
systems assist health insurers, claims processors and agents.
Datalliance[TM], is an electronic data interchange that can link agents,
insurers, information sources, medical labs and reinsurers.
Other companies in this business segment include various general
business corporations that support the segment's sales, service and
administration efforts.
Approximately 910 employees are involved in this business segment.
4. Investment Management
The Investment Management segment, which is headquartered in
Philadelphia, Pennsylvania with offices in Fort Wayne, London, Denver,
Boston, New York, and Minneapolis, provides investment products and
services to both individual and institutional investors. The primary
companies within this business segment include Lincoln National
Investments, Inc. ("LNI"), Lincoln National Investment Companies, Inc.
("LNIC"), Delaware Management Holdings, Inc. ("Delaware") and until
December 31, 2000, Lincoln Investment Management. Subsequent to December
31, 2000, the investment management operations of Lincoln Investment
Management were combined into Delaware. During the first quarter of 2000,
all remaining operations of Lynch & Mayer, Inc. were merged with
Delaware, and Lynch & Mayer, Inc. was dissolved. During the second
quarter of 2000, the structured products group and back office operations
of Vantage Global Advisors, Inc. were combined with Delaware. LNI and
LNIC are intermediate level holding companies that own the operating
companies within this segment. The operating subsidiaries within Delaware
offer a broad line of mutual funds, retirement plan services and other
investment products including wrap accounts to their retail investors and
also offer investment advisory services to their institutional investors
which include pension funds, foundations, endowment funds and trusts.
These companies serve as investment advisor to 279 institutional accounts;
act as investment manager and/or shareholder services agent for 91 open-end
funds; and serve as investment manager for 10 closed-end funds. The
Investment Management segment also provides investment advisory services
for LNC's corporate portfolios.
In 1999, the Investment Management segment was reorganized as follows:
1) LNC's internal investment advisor, Lincoln Investment Management, was
moved from Other Operations to this segment and 2) Lincoln Life's 401(k)
business was moved from the former Life Insurance and Annuities segment
to this segment.
Products
The Investment Management segment provides an array of products for a
range of investors. Products include domestic and international equity
and fixed-income retail mutual funds, separate accounts, institutional
mutual funds, separate account wrap products, and retirement plans and
services as well as administration services for these products.
For the individual investor, Delaware offers various products including
mutual funds and separate account wrap products. Delaware also provides
investment management and account administration services for variable
annuity products. Delaware offers alternative pricing schemes for mutual
funds including traditional front-end load funds, back-end load funds,
and level-load funds. Variable annuity products provide the
contractholder the ability to direct the investment of deposits into one
or more funds offered by the product. The Institutional Class shares of
the mutual funds are also available to institutional clients and
retirement plan participants (such as defined contribution plans).
Delaware also provides investment services to high net worth and small
institutional investor markets through separate account wrap products. A
separate account wrap product is provided to individual investors
through relationships with broker-dealer sponsored programs.
Delaware offers various retirement plans and services, including 401(k)
plans. A 401(k) plan allows employees to divert a portion of their
salary to a company-sponsored tax-sheltered account, thus deferring
taxes until retirement. These plans offer several investing options such
as equity and fixed income products.
Delaware provides a broad range of institutional investment advisory
services to corporate and public retirement plans, endowments and
foundations, nuclear decommissioning trusts, socially responsible
investors, sub-advisory clients and Taft-Hartley plans, among others.
Most clients utilize individually managed separate accounts, which means
clients have the opportunity to customize the management of their
portfolio by including or excluding certain types of securities, sectors
or segments within a given asset class. Because of their individually
managed nature, these separate accounts are best suited for larger
investment mandates. Currently, Delaware's minimum account size is
typically $10 million for U.S. investments and $100 million for non-U.S.
investments.
The portfolios of the Delaware Pooled Trust products are no-load mutual
funds designed for the institutional investor and high net worth
individual. Delaware Pooled Trusts, includes registered SEC mutual funds
managed in styles that are similar to separate account offerings and
best suited for medium-sized institutional investment mandates.
Delaware's minimum account size for these vehicles is typically $1
million.
Market Position
Diversity of investment styles, as well as diversity of clients served,
are prudent ways to diversify risk in varying market environments.
Delaware, historically known primarily for a conservative, "value"
equity investment style, has now evolved into an investment manager with
strong and diversified offerings across multiple asset classes including
value and growth equity investment styles; high-grade, high-yield and
municipal fixed-income investment styles; balanced and quantitative
investment styles; and the international and global equity and fixed
income investment styles. LNC has initiated various actions focused on
improving investment performance across all of these asset classes which
should ultimately attract and retain assets under management. Actions
include hiring a new chief executive officer for the Investment
Management segment with substantial industry experience, overhauling the
investment process in the large cap value investment management area,
recruiting a team of 20 new fixed-income investment professionals,
creating a separate portfolio management group for the retail area,
adding in-house research resources across all asset classes and
enhancing sub-advisory relationships. Tangible results of these
initiatives began to develop in the year 2000 as investment performance
improved relative to benchmarks in many retail and institutional asset
classes.
Distribution
The businesses in the Investment Management segment deliver their broad
range of products through multiple distribution channels, enabling them
to reach an expanding community of retail and institutional investors.
Delaware distributes retail mutual funds, wrap products and retirement
products through the LFD distribution network, LFA, and Delaware's
direct retirements sales force. Institutional products are marketed
primarily by Delaware's institutional marketing group working through
pension consultants. These products are also offered to defined benefit
and defined contribution plan sponsors, endowments, foundations and
insurance companies.
Approximately 1,450 employees are involved in this business segment.
5. Lincoln UK
Lincoln UK is headquartered in Gloucester, England, and is licensed to
do business throughout the United Kingdom ("UK"). Although Lincoln UK
transferred its sales force to Inter-Alliance Group PLC in the third
quarter of 2000, it continues to manage, administer and accept new
deposits on its current block of business and, as required by UK
regulation, accept new business for certain products. Lincoln UK's
product portfolio principally consists of unit-linked life and pension
products, which are similar to U.S. produced variable life and annuity
products.
Approximately 1,000 employees are involved in this business segment.
Prior to the transfer of the sales force to Inter-Alliance Group PLC and
the consolidation of the Uxbridge home office with the Barnwood home
office, there were approximately 1,480 employees involved in this
business segment. Once the closure of the Uxbridge home office is
complete in 2001, it is estimated that there will be approximately 820
employees.
C. Other Matters
1. Regulatory
LNC's Annuities, Life Insurance, Lincoln UK and Reinsurance business
segments, in common with those of other insurance companies, are subject
to regulation and supervision by the states, territories and countries
in which they are licensed to do business. The laws of these
jurisdictions generally establish supervisory agencies with broad
administrative powers relative to granting and revoking licenses to
transact business, regulating trade practices, licensing agents,
prescribing and approving policy forms, regulating premium rates for
some lines of business, establishing reserve requirements, regulating
competitive matters, prescribing the form and content of financial
statements and reports, regulating the type and amount of investments
permitted and prescribing minimum levels of capital. The ability to
continue an insurance business is dependent upon the maintenance of the
licenses in the various jurisdictions.
LNC's Investment Management segment, in common with other investment
management groups, is subject to regulation and supervision by the
Securities and Exchange Commission, National Association of Securities
Dealers, the Investment Management Regulatory Organization ("IMRO"), the
Pennsylvania Department of Banking and jurisdictions of the states,
territories and foreign countries in which they are licensed to do
business.
2. Miscellaneous
LNC's insurance subsidiaries protect themselves against losses greater
than the amount they are willing to retain on any one risk or event by
purchasing reinsurance from unaffiliated insurance companies (see Note 7
to the consolidated financial statements as set forth in LNC's 2000
Annual Report to shareholders which is incorporated by reference to Item
8 of this Form 10-K).
All businesses LNC is involved in are highly competitive due to the
market structure and the large number of competitors. At the end of
1999, the latest year for which data is available, there were
approximately 1,500 life insurance companies in the United States. As
noted previously, Lincoln Life is the 9th largest stockholder-owned life
insurance company in the United States based on revenues (1999 Fortune
Ranking of Largest Life Insurance Companies by Revenues, April 2000).
LNC's investment management companies were the 44th largest U.S.
investment management group at the end of 1999 (1999 Institutional
Investor 300 Money Managers, July 2000). Also, many of the products
offered by LNC's operating companies are similar to products offered by
non-insurance financial services companies, such as banks. The Financial
Services Modernization Act was passed in November 1999 and repealed the
Glass-Steagall Act of 1933 and expands the Bank Holding Company Act of
1956. This act allows, among other things, cross-ownership by banks,
securities firms and insurance companies. In 2000, there were some
cross-ownership activities in the financial services industry, however,
there was minimal impact on LNC's operations.
Because of the nature of the insurance and investment management
businesses, there is no single customer or group of customers upon whom
the business is dependent. Although LNC does not have any significant
concentration of customers, LNC's Annuities segment has a long-standing
distribution relationship with American Funds Distributors that is
significant to this segment. In 2000, the American Legacy Variable
Annuity sold through American Funds Distributors accounted for about 44%
of LNC's total gross annuity deposits. The relationship with American
Funds Distributors is highly valued by LNC. Both LNC and American Funds
Distributors are continuously seeking ways to increase sales and retain
the existing business.
Factors such as backlog, raw materials, seasonality, patents (including
trademarks, licenses, franchises and any other concessions held) or
environmental impact do not have a material effect upon such businesses.
However, within LNC's Reinsurance segment, Lincoln National Risk
Management, Inc. does hold patents for "The Method and Apparatus for
Evaluating a Potentially Insurable Risk," and "Automated Decision-making
Arrangements."
LNC does not have a separate unit that conducts market research.
Research activities related to new products or services, or the
improvement of existing products or services, are conducted within the
business segments. Expenses related to such activities are not material.
Also, sales are not dependent upon select geographic areas. LNC has
foreign operations that are significant in relationship to the
consolidated group (see Note 9 to the consolidated financial statements
as set forth in LNC's 2000 Annual Report to Shareholders which is
incorporated by reference to Item 8 of this Form 10-K).
Item 2. Properties
- -------
LNC and the various operating businesses own or lease approximately 4.3
million square feet of office space. The governance group for LNC and
the Investment Management segment lease 0.6 million square feet of
office space in Philadelphia, Pennsylvania. The operating units in the
Fort Wayne, Indiana area own or lease 1.6 million square feet. Also,
businesses operating in suburban Chicago, Illinois; Hartford,
Connecticut and the United Kingdom own or lease another 1.0 million
square feet of office space. An additional 1.1 million square feet of
office space is owned or leased in other U.S. cities and foreign
countries for branch offices and other operations. As shown in the notes
to the consolidated financial statements (see Note 7 to the consolidated
financial statements as set forth in LNC's 2000 Annual Report to
Shareholders which is incorporated by reference to Item 8 of this Form
10-K), the rental expense on operating leases for office space and
equipment for continuing operations totaled $88.4 million for 2000.
Office space rent expense accounts for $68.7 million of this total. This
discussion regarding properties does not include information on
investment properties.
Item 3. Legal Proceedings
- -------
LNC and its subsidiaries are involved in various pending or threatened
legal proceedings, including purported class actions, arising from the
conduct of business. In some instances, these proceedings include claims
for unspecified or substantial punitive damages and similar types of
relief in addition to amounts for alleged contractual liability or
requests for equitable relief. After consultation with legal counsel and
a review of available facts, it is management's opinion that these
proceedings ultimately will be resolved without materially affecting the
consolidated financial position of LNC.
Item 4. Submission of Matters to a Vote of Security Holders
- -------
During the fourth quarter of 2000, no matters were submitted to security
holders for a vote.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
- ------- Matters
Information required by this item is set forth on page 121 of LNC's 2000
Annual Report to Shareholders and is incorporated herein by reference.
Item 6. Selected Financial Data
- -------
Information required by this item is set forth on page 33 of LNC's 2000
Annual Report to Shareholders and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis
- -------
Information required by this is set forth on pages 36 through 62 of
LNC's 2000 Annual Report to Shareholders and is incorporated herein by
reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------
Information required by this item is set forth on pages 62 through 69 of
LNC's 2000 Annual Report to Shareholders and is incorporated herein by
reference.
Item 8. Financial Statements and Supplementary Data
- -------
Information required by this item is set forth on page 33, pages 70
through 114 and page 116 of LNC's 2000 Annual Report to Shareholders and
is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- Financial Disclosures
There have been no disagreements with LNC's independent auditors which
are reportable pursuant to Item 304 of Regulation S-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
- --------
Information for this item relating to directors of LNC is incorporated
by reference to the sections captioned "NOMINEES FOR DIRECTOR",
"DIRECTORS CONTINUING IN OFFICE" and "COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES AND EXCHANGE ACT OF 1934", of LNC's Proxy Statement for
the Annual Meeting scheduled for May 10, 2001.
Executive Officers of the Registrant as of March 1, 2001 were as
follows:
Name Age** Position with LNC and Business Experience During the Past Five Years
- ----------------------------------------------------------------------------------------------------
Jon A. Boscia 49 President, Chief Executive Officer and Director, LNC (since 1998).
Chief Executive Officer, LNL* (1996-1998). President,
Chief Operating Officer, LNL* (1994-1996).
George E. Davis 58 Senior Vice President, LNC (since 1993).
John H. Gotta 51 Chief Executive Officer - Life Insurance, LNL* (since 1999).
Senior Vice President, LNL* (1998-1999).
Charles E. Haldeman 52 President, Chief Executive Officer and Director, LNIC and President
and Chief Executive Officer, Delaware (since 2000).
Jack D. Hunter 64 Executive Vice President, LNC (since 1986). General Counsel
(since 1971).
Barbara S. Kowalczyk 50 Senior Vice President, LNC (since 1994).
Lawrence T. Rowland 49 President and Chief Executive Officer, LNRAC and other Lincoln Re
affiliates* (since 1996). Senior Vice President, LNRAC (1995-1996).
Lorry J. Stensrud 52 Executive Vice President and Chief Executive Officer - Annuities,
LNL* (since 2000).
Michael Tallett-Williams 47 Managing Director, Lincoln National (UK)* (since 2000).
Finance Director, Lincoln National (UK)* (1995-2000).
Casey J. Trumble 47 Senior Vice President and Chief Accounting Officer, LNC (since 1998).
Vice President, LNC (1994-1998).
Richard C. Vaughan 51 Executive Vice President (since 1995) and Chief Financial Officer,
LNC (since 1992).
* Denotes a subsidiary of LNC.
** Age shown is based on nearest birthdate to March 1, 2001.
There is no family relationship between any of the foregoing executive
officers, all of whom are elected annually.
Item 11. Executive Compensation
- --------
Information for this item is incorporated by reference to the section
captioned "EXECUTIVE COMPENSATION" of LNC's Proxy Statement for the
Annual Meeting scheduled for May 10, 2001.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- --------
Information for this item is incorporated by reference to the sections
captioned "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" and
"SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS" of
LNC's Proxy Statement for the Annual Meeting scheduled for May 10, 2001.
Item 13. Certain Relationships and Related Transactions
- --------
Information for this item is incorporated by reference to the section
captioned "TERMINATION OF EMPLOYMENT ARRANGEMENT" of LNC's Proxy
Statement for the Annual Meeting scheduled for May 10, 2001.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- --------
Item 14(a)(1) Financial Statements
- -------------
The following consolidated financial statements of Lincoln National
Corporation are included in LNC's 2000 Annual Report to Shareholders and
are incorporated by reference to Item 8 of this Form 10-K:
Consolidated Balance Sheets - December 31, 2000 and 1999
Consolidated Statements of Income - Years ended December 31, 2000, 1999
and 1998
Consolidated Statements of Shareholders' Equity - Years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 2000,
1999 and 1998
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
Item 14(a)(2) Financial Statement Schedules
- -------------
The following consolidated financial statement schedules of Lincoln
National Corporation are included in Item 14(d):
I - Summary of Investments - Other than Investments in Related Parties
II - Condensed Financial Information of Registrant
III - Supplementary Insurance Information
IV - Reinsurance
V - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the
required information is included in the consolidated financial
statements, and therefore omitted.
Item 14(a)(3) Listing of Exhibits
- -------------
The following exhibits of Lincoln National Corporation are included in
Item 14 - (Note: The numbers preceding the exhibits correspond to the
specific numbers within Item 601 of Regulation S-K.):
3(a) The Articles of Incorporation of LNC as last amended effective May
12, 1994 is incorporated by reference to Exhibit 3(a) of LNC's Form
10-K for the year ended December 31, 1998, filed with the Commission
on March 11, 1999.
3(b) The Bylaws of LNC as last amended January 13, 2000 is incorporated
by reference to Exhibit 3(b) of LNC's Form 10-K for the year ended
December 31, 2000, filed with the Commission on March 11, 2000.
4(a) Indenture of LNC dated as of January 15, 1987 is incorporated by
reference to Exhibit 4(a) of LNC's Form 10-K for the year ended
December 31, 1994, filed with the Commission March 27, 1995.
4(b) First Supplemental Indenture dated as of July 1, 1992, to Indenture
of LNC dated as of January 15, 1987 is incorporated by reference to
Exhibit 4(b) of LNC's Form 10-K for the year ended December 31,
1996, filed with the Commission on March 13, 1997.
4(c) Specimen Notes for 7 1/8% Notes due July 15, 1999 and for 7 5/8%
Notes due July 15, 2002 are incorporated by reference to Exhibit
4(c) of LNC's Form 10-K for the year ended December 31, 1996, filed
with the Commission on March 13, 1997.
4(d) Rights Agreement of LNC as last amended November 14, 1996 is
incorporated by reference to LNC's Form 8-K filed with the
Commission on November 22, 1996.
4(e) Indenture of LNC dated as of September 15, 1994, between LNC and
The Bank of New York, as Trustee is incorporated by reference to
Exhibit 4(e) of LNC's Form 10-K for the year ended December 31,
1998, filed with the Commission on March 11, 1999.
4(f) Form of Note is incorporated by reference to Exhibit 4(d) to LNC's
Registration Statement on Form S-3/A (Commission File No. 33-55379),
filed with the Commission on September 15, 1994.
4(g) Form of Zero Coupon Security is incorporated by reference to
Exhibit 4(d) to LNC's Registration Statement on Form S-3/A
(Commission File No. 33-55379), filed with the Commission on
September 15, 1994.
4(h) Specimen of LNC's 9 1/8% Debentures due October 1, 2024 is
incorporated by reference to Schedule I of LNC's Form 8-K filed with
the Commission on September 29, 1994.
4(i) Specimen of LNC's 7 1/4% Debenture due May 15, 2005 is incorporated
by reference to Schedule III of LNC's Form 8-K filed with the
Commission on May 17, 1995.
4(j) Junior Subordinated Indenture dated as of May 1, 1996 between LNC
and The First National Bank of Chicago is incorporated by reference
to Exhibit 4(j) of LNC's Form 10-K for the year ended December 31,
1996, filed with the Commission on March 13, 1997.
4(k) Guarantee Agreement for Lincoln National Capital I is incorporated
by reference to Exhibit 4(k) of LNC's Form 10-K for the year ended
December 31, 1996, filed with the Commission on March 13, 1997.
4(l) Guarantee Agreement for Lincoln National Capital II is incorporated
by reference to Exhibit 4(l) of LNC's form 10-K for the year ended
December 31, 1996, filed with the Commission on March 13, 1997.
4(m) Form of Lincoln National Capital I 8.75% Cumulative Quarterly
Income Preferred Securities, Series A (Commission File No.
333-04133) is incorporated by reference to Exhibit 4(m) to LNC's
Form 10-K for the year ended December 31, 1996, filed with the
Commission on March 13, 1997.
4(n) Form of Lincoln National Capital II 8.35% Trust Originated
Preferred Securities, Series B (Commission File No. 333-04133) is
incorporated by reference to Exhibit 4(n) to LNC's Form 10-K for the
year ended December 31, 1996, filed with the Commission on March 13,
1997.
4(o) Form of Amended and Restated Declaration of Trust for Lincoln
National Capital I and Lincoln National Capital II between LNC, as
depositor, The First National Bank of Chicago, as property trustee,
First Chicago Delaware, Inc., as Delaware trustee, and certain
administrative trustees is incorporated by reference to Exhibit 4(o)
of LNC's Registration Statement (Commission File No. 333-4133) filed
with the commission on May 21, 1996.
4(p) Specimen of 6 1/2% Notes due March 15, 2008 incorporated by
reference to Exhibit 4.1 LNC's Form 8-K filed with the commission on
March 24, 1998.
4(q) Specimen of 7% Notes due March 15, 2018 incorporated by reference
to Exhibit 4.2 of LNC's Form 8-K filed with the Commission on March
24, 1998.
4(r) Amended and Restated Trust Agreement for Lincoln National Capital
III between LNC, as depositor, The First National Bank of Chicago,
as property trustee, First Chicago Delaware, Inc. as Delaware
trustee, and the administrative trustees is incorporated by
reference to Exhibit 4.1 of LNC's Form 8-K filed with the
Commission on July 30, 1998.
4(s) Form of 7.40% Trust Originated Preferred Securities, Series C, of
Lincoln National Capital III is incorporated by reference to Exhibit
4.2 of LNC's Form 8-K filed with the Commission on July 30, 1998.
4(t) Guarantee Agreement for Lincoln National Capital III is
incorporated by reference to Exhibit 4.4 of LNC's Form 8-K filed
with the Commission on July 30, 1998.
4(u) Amended and Restated Trust Agreement for Lincoln National Capital
IV between LNC, as depositor, The First National Bank of Chicago, a
property trustee, First Chicago Delaware Inc., as Delaware trustee,
and the administrative trustees is incorporated by reference to
Exhibit 4.1 of LNC's Form 8-K filed with the Commission on August
27, 1998.
4(v) Form of Income Prides Certificate of Lincoln National Capital IV is
incorporated by reference to Exhibit 4.7 of LNC's Form 8-K filed
with the Commission on August 27, 1998.
4(w) Form of Growth Prides Certificates of Lincoln National Capital IV
is incorporated by reference to Exhibit 4.8 of LNC's Form 8-K filed
with the Commission on August 27, 1998.
4(x) Guarantee Agreement for Lincoln National Capital IV is incorporated
by reference to Exhibit 4.5 of LNC's Form 8-K filed with the
Commission on August 27, 1998.
4(y) Purchase Contract Agreement between LNC and The First National Bank
of Chicago, as Purchase Contract Agent, relating to Lincoln National
Capital IV is incorporated by reference to Exhibit 4.6 of LNC's Form
8-K filed with the Commission on August 27, 1998.
4(z) Pledge Agreement among LNC, The Chase Manhattan Bank, as agent, and
The First National Bank of Chicago, as Purchase Agent, relating to
Lincoln National Capital IV is incorporated by reference to Exhibit
4.9 of LNC's Form 8-K filed with the Commission on August 27, 1998.
10(a)* The Lincoln National Corporation 1986 Stock Option Incentive Plan
is incorporated by reference to Exhibit 10(a) of LNC's Form 10-K for
the year ended December 31, 1998, filed with the Commission on March
11, 1999.
10(b)* The Lincoln National Corporation Executives' Salary Continuation
Plan as last amended January 1, 1992 is incorporated by reference to
Exhibit 10(c) LNC's Form 10-K for the year ended December 31, 1997,
filed with the Commission on March 18, 1998.
10(c)* The Lincoln National Corporation Executive Value Sharing Plan as
Amended and Restated effective January 1, 1994 is incorporated by
reference to Exhibit 10(c) of LNC's Form 10-K for the year ended
December 31, 1998, filed with the Commission on March 11, 1999.
10(d)* Lincoln National Corporation Executives' Severance Benefit Plan
as Amended and Restated effective November 9, 1995 is incorporated
by reference to Exhibit 10(e) of LNC's Form 10-K for the year ended
December 31, 1995, filed with the Commission on March 27, 1996.
10(e)* The Lincoln National Corporation Outside Directors Retirement
Plan as last amended effective March 15, 1990 is incorporated by
reference to Exhibit 10(f) of LNC's Form 10-K for the year ended
December 31, 1995, filed with the Commission on March 27, 1996.
10(f)* The Lincoln National Corporation Outside Directors Benefits Plan
is incorporated by reference to Exhibit 10(g) of LNC's Form 10-K for
the year ended December 31, 1997, filed with the Commission on March
18, 1998.
10(g)* Lincoln National Corporation Directors' Value Sharing Plan as
last amended effective May 14, 1998 is incorporated by reference to
Exhibit 10(a) of LNC's Form 10-Q for the quarter ended September 30,
1999, filed with the Commission on November 3, 1999.
10(h)* Lincoln National Corporation Executive Deferred Compensation Plan
for Employees (Commission File No. 33-51721) as last amended
effective February 16, 1998 is incorporated by reference to Exhibit
10(i) of LNC's Form 10-K for the year ended December 31, 1997, filed
with the Commission on March 18, 1998.
10(i)* Lincoln National Corporation 1993 Stock Plan for Non-Employee
Directors (Commission File No. 33-58113) as last amended effective
November 11, 1998 is incorporated by reference to Exhibit 10(i) of
LNC's Form 10-K for the year ended December 31, 1998, filed with the
Commission on March 11, 1999.
10(j)* Lincoln National Corporation Executives' Excess Compensation
Benefit Plan is incorporated by reference to Exhibit 10(j) of LNC's
Form 10-K for the year ended December 31, 1998, filed with the
Commission on March 11, 1999.
10(k)* First Amendment to Lincoln National Corporation Executives' Excess
Compensation Benefit Plan effective December 22, 1999 is
incorporated by reference to Exhibit 10(k) of LNC's Form 10-K for
the year ended December 31, 2000, filed with the Commission on March
11, 2000.
10(l)* Lincoln National Corporation 1997 Incentive Compensation Plan as
last amended effective May 13, 1999 is incorporated by reference to
Exhibit 10(a) of LNC's Form 10-Q for the quarter ended June 30,
1999, filed with the Commission on August 4, 1999.
10(m)* Descriptions of compensation arrangements with Executive Officers
- Agreement, Waiver and General Release - Gabriel L. Shaheen dated
December 15, 1999 is incorporated by reference to Exhibit 10(m) of
LNC's Form 10-K for the year ended December 31, 2000, filed with the
Commission on March 11, 2000.
10(n) Lease and Agreement dated August 1, 1984, with respect to LNL's
Home Office property located at Magnavox Way, Fort Wayne, Indiana
are incorporated by reference to Exhibit 10(m) of LNC's Form 10-K
for the year ended December 31, 1995, filed with the Commission on
March 27, 1996.
10(o) Lease and Agreement dated August 1, 1984, with respect to LNL's
Home Office properties located at Clinton Street and Harrison
Street, Fort Wayne, Indiana are incorporated by reference to Exhibit
10(n) of LNC's Form 10-K for the year ended December 31, 1995, filed
with the Commission on March 27, 1996.
10(p) Form of Lease and Agreement dated March 1, 1999, with respect to
LNC's Corporate Office located at Centre Square West, 1500 Market
Street, Suite 3900, Philadelphia, Pennsylvania is incorporated by
reference to Exhibit 10(p) of LNC's Form 10-K for the year ended
December 31, 2000, filed with the Commission on March 11, 2000.
10(q) Agreement of Lease dated February 17, 1998, with respect to
Lincoln Life's life products headquarters located at 350 Church
Street, Hartford, Connecticut is incorporated by reference to
Exhibit 10(q) of LNC's Form 10-K for the year ended December 31,
1997, filed with the Commission on March 18, 1998.
10(r) Lease and Agreement dated December 10, 1999 with respect to
Delaware Management Holdings, Inc. for Home Office property located
at One Commerce Square, Philadelphia, Pennsylvania is incorporated
by reference to Exhibit 10(r) of LNC's Form 10-K for the year ended
December 31, 2000, filed with the Commission on March 11, 2000.
10(s) Sublease and Agreement dated December 10, 1999 by and between
Delaware Management Holdings, Inc. and New York Central Lines LLC
for property located at Two Commerce Square, Philadelphia,
Pennsylvania is incorporated by reference to Exhibit 10(s) of LNC's
Form 10-K for the year ended December 31, 2000, filed with the
Commission on March 11, 2000.
10(t) Consent to Sublease dated December 10, 1999 with respect to
Delaware Management Holdings, Inc. for property located at Two
Commerce Square and Philadelphia Plaza Phase II, Philadelphia,
Pennsylvania is incorporated by reference to Exhibit 10(t) of LNC's
Form 10-K for the year ended December 31, 2000, filed with the
Commission on March 11, 2000.
* This exhibit is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this form pursuant
to Item 14 of this report.
12 Historical Ratio of Earnings to Fixed Charges.
13 Portions of LNC's Annual Report to Shareholders that are expressly
incorporated by reference in this Form 10-K. Other sections of the
Annual Report furnished for the information of the Commission are
not deemed "filed" as part of this Form 10-K.
21 List of Subsidiaries of LNC.
23 Consent of Ernst & Young LLP, Independent Auditors.
27 Financial Data Schedule.
Item 14(b)
- ----------
Financial Report for the quarter ended September 30, 2000, as filed with
the Securities and Exchange Commission on Form 8-K on October 25, 2000.
Financial Report for the quarter ended September 30, 2000, as filed with
the Securities and Exchange Commission on Form 8-K on November 6, 2000.
Item 14(c)
- ----------
The exhibits of Lincoln National Corporation are listed in Item 14(a)(3)
above.
Item 14(d)
- ----------
The financial statement schedules for Lincoln National Corporation
follow on pages 19 through 26.
LINCOLN NATIONAL CORPORATION
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN
RELATED PARTIES
December 31 (000s omitted)
- -------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D
- -------- -------- -------- --------
Amount
at Which
Shown in the
Type of Investment Cost Value Balance Sheet
- ------------------------ ---- ----- -------------
Fixed maturity securities available-for-sale:
Bonds:
United States government and government
agencies and authorities $ 479,899 $ 542,886 $ 542,886
States, municipalities and political subdivisions 14,607 14,571 14,571
Asset/Mortgage-backed securities 4,087,343 4,160,362 4,160,362
Foreign governments 1,263,913 1,321,082 1,321,082
Public utilities 2,643,824 2,647,127 2,647,127
Convertibles and bonds with warrants attached 17,752 17,243 17,243
All other corporate bonds 18,707,986 18,585,309 18,585,309
Redeemable preferred stocks 161,741 161,193 161,193
---------------- ---------------- ----------------
Total 27,377,065 27,449,773 27,449,773
Equity securities available-for-sale:
Common stocks:
Public Utilities 2,280 2,703 2,703
Banks, trusts and insurance companies 22,075 26,127 26,127
Industrial, miscellaneous and all other 321,204 407,802 407,802
Nonredeemable preferred stocks 117,254 113,077 113,077
---------------- ---------------- ----------------
Total Equity Securities 462,813 549,709 549,709
Mortgage loans on Real Estate: 4,667,903 4,662,983(1)
Real Estate:
Investment properties 276,726 276,726
Acquired in satisfaction of debt 5,288 5,288
Policy Loans 1,960,899 1,960,899
Other investments 463,270 463,270
---------------- ----------------
Total Investments $35,213,964 $35,368,648
(1) Investments deemed to have declines in value that are other than
temporary are written down or reserved for to reduce the carrying value
to their estimated realizable value.
LINCOLN NATIONAL CORPORATION
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
Lincoln National Corporation (Parent Company Only)
December 31 (000's omitted) 2000 1999
- -------------------------------------------------------------------------------------------------------------
Assets:
Investments in subsidiaries * $5,198,438 $5,062,686
Investments 81,175 134,444
Investment in unconsolidated affiliate -- 25,824
Cash and invested cash ** 342,945 349,477
Property and equipment 2,696 2,928
Accrued investment income 649 1,020
Receivable from subsidiaries * 197,500 223,000
Dividends receivable from subsidiaries -- 20,500
Loans to subsidiaries * 1,489,413 1,405,533
Goodwill -- 62,447
Federal income taxes recoverable 61,925 82,311
Other assets 64,155 77,732
-------------- -------------
Total Assets $7,438,896 $7,447,902
Liabilities and Shareholders' Equity
Liabilities:
Cash collateral on loaned securities $148,421 $186,447
Dividends payable 57,914 56,157
Short-term debt 150,000 272,451
Long-term debt 712,207 711,939
Loans from subsidiaries * 1,265,778 1,318,867
Accrued expenses and other liabilities 153,889 160,814
-------------- -------------
Total Liabilities 2,488,209 2,706,675
Shareholders' Equity
Series A preferred stock 857 948
Common stock 1,003,651 1,007,099
Retained earnings 3,915,598 3,691,470
Foreign currency translation adjustment 21,930 30,049
Net unrealized gain on securities available-for-sale
[excluding unrealized gain (loss) of subsidiaries: 2000 - $3,397;
1999 - $(477,359)] 8,651 11,661
-------------- -------------
Total Shareholders' Equity 4,950,687 4,741,227
-------------- -------------
Total Liabilities and Shareholders' Equity $7,438,896 $7,447,902
* Eliminated in consolidation.
** Includes short-term funds invested on behalf of LNC's subsidiaries.
These condensed financial statements should be read in conjunction with
the consolidated financial statements and accompanying footnotes of LNC
on pages 70 through 114 of LNC's 2000 Annual Report to Shareholders
which are incorporated by reference to Item 8 of this Form 10-K.
LINCOLN NATIONAL CORPORATION
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
STATEMENTS OF INCOME
Lincoln National Corporation (Parent Company Only)
Year Ended December 31 (000s omitted) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
Revenue:
Dividends from subsidiaries* $490,318 $584,226 $268,454
Interest from subsidiaries* 90,988 80,395 44,068
Equity in earnings of unconsolidated affiliate -- 3,807 1,636
Net investment income 38,715 28,689 48,597
Realized gain (loss) on investments 20,898 13,311 1,001
Other 11,312 5,760 2,202
------------ ------------ ----------------
Total Revenue 652,231 716,188 365,958
Expenses:
Operating and administrative 7,743 15,090 41,922
Interest-subsidiaries* 31,804 23,820 32,251
Interest-other 130,817 117,941 106,059
------------ ------------ ----------------
Total Expenses 170,364 156,851 180,232
------------ ------------ ----------------
Income before Federal Income Tax Benefit,
Equity in Income of Subsidiaries, Less Dividends 481,867 559,337 185,726
Federal income tax benefit 19,853 16,899 28,891
------------ ------------ ----------------
Income Before Equity in Income of Subsidiaries,
Less Dividends 501,720 576,236 214,617
Equity in income of subsidiaries,
less dividends 119,673 (115,882) 295,158
------------ ------------ ----------------
Net Income $621,393 $460,354 $509,775
* Eliminated in consolidation.
These condensed financial statements should be read in conjunction with
the consolidated financial statements and accompanying footnotes of LNC
on pages 70 through 114 of LNC's 2000 Annual Report to Shareholders
which are incorporated by reference to Item 8 of this Form 10-K.
LINCOLN NATIONAL CORPORATION
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
STATEMENTS OF CASH FLOWS
Lincoln National Corporation (Parent Company Only)
Year Ended December 31 (000s omitted) 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net Income $621,393 $460,354 $509,775
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in income of subsidiaries less than
(greater than) distributions* (115,173) 103,060 (288,784)
Equity in undistributed earnings of
unconsolidated affiliates -- (3,807) (1,636)
Realized (gain) loss on investments (20,898) 13,311 (1,001)
Other (27,420) (3,381) (66,445)
------------ ------------- -------------
Net Adjustments (163,491) 109,183 (357,866)
------------ ------------- -------------
Net Cash Provided by Operating Activities 457,902 569,537 151,909
Cash Flows from Investing Activities:
Net sales (purchases) of investments 69,442 (113,449) 188,938
Cash collateral on loaned securities 148,421 135,822 (73,063)
Increase in investment in subsidiaries* (20,364) (75,242) (159,458)
Sale of (investment in) unconsolidated affiliate 3,517 (7,013) --
Sale of discontinued operations -- -- (124,151)
Net (purchase) sale of property and equipment 225 1,620 (256)
Other (31,814) (88,714) (36,831)
------------ ------------- -------------
Net Cash Provided by (Used in)
Investing Activities 169,427 (146,976) (204,821)
Cash Flows from Financing Activities:
Decrease in long-term debt (includes payments and
transfers to short-term debt) -- -- (99,737)
Issuance of long-term debt -- -- 299,198
Net increase (decrease) in short-term debt (122,451) 122,495 67,189
Increase in loans from subsidiaries* (53,089) 27,153 251,283
Decrease (increase) in loans to subsidiaries* (83,880) (100,505) (1,272,729)
Decrease (increase) in receivables from subsidiaries 25,500 (69,700) 280,280
Common stock issued for benefit plans 32,741 48,015 48,747
Retirement of Common Stock (210,021) (377,719) (46,871)
Dividends paid to shareholders (222,661) (218,435) (209,016)
------------ ------------- -------------
Net Cash Used in Financing Activities (633,861) (568,696) (681,656)
------------ ------------- -------------
Net Decrease in Cash (6,532) (146,135) (734,568)
Cash and Invested Cash at Beginning of the Year 349,477 495,612 1,230,180
------------ ------------- -------------
Cash and Invested Cash at End-of-Year $342,945 $349,477 $495,612
* Eliminated in consolidation.
These condensed financial statements should be read in conjunction with
the consolidated financial statements and accompanying footnotes of LNC
on pages 70 through 114 of LNC's 2000 Annual Report to Shareholders
which are incorporated by reference to Item 8 of this Form 10-K.
LINCOLN NATIONAL CORPORATION
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
Column A Column B Column C Column D Column E Column F
- -------- ------------ ------------ -------------- ------------ --------------
Insurance Other Policy
Deferred Policy and Claims and
Acquisition Claim Unearned Benefits Premium
Segment Costs Reserves Premiums Payable Revenue (1)
- ------- ------------ ------------ -------------- ------------ --------------
Year Ended December 31, 2000
Annuities $ 794,132 $ 2,576,919 $-- $-- $ 730,890
Life Insurance 1,097,666 13,008,690 -- -- 954,228
Reinsurance 459,639 4,587,810 -- -- 1,376,820
Investment Management -- -- -- -- --
Lincoln UK 635,002 1,626,453 -- -- 357,798
Other (incl. consol. adj's.) 84,068 (71,774) -- -- 54,817
------------ ------------ -------------- ------------ --------------
Total $3,070,507 $21,728,098 $-- $-- $3,474,553
Year Ended December 31, 1999
Annuities $ 810,999 $ 2,515,166 $-- $-- $ 636,042
Life Insurance 901,435 12,474,245 -- -- 915,877
Reinsurance 331,268 4,392,121 -- -- 1,439,177
Investment Management -- -- -- -- --
Lincoln UK 679,709 1,642,891 -- -- 354,525
Other (incl. consol. adj's.) 76,879 (99,655) -- -- 73,499
------------ ------------ -------------- ------------ --------------
Total $2,800,290 $20,924,768 $-- $-- $3,419,120
Year Ended December 31, 1998
Annuities $ 507,126 $ 2,656,174 $-- $-- $ 543,490
Life Insurance 450,690 11,835,017 -- -- 738,107
Reinsurance 315,477 4,238,609 -- -- 1,224,887
Investment Management -- -- -- -- --
Lincoln UK 636,254 1,498,821 -- -- 339,518
Other (incl. consol. adj's.) 54,819 (88,639) -- -- 49,196
------------ ------------ -------------- ------------ --------------
Total $1,964,366 $20,139,982 $-- $-- $2,895,198
(1) Includes insurance fees on universal life and other
interest-sensitive products.
LINCOLN NATIONAL CORPORATION
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION (Continued)
Column G Column H Column I Column J Column K Column L
- -------- -------------- ------------- ---------------- -------------- --------------
Amortization of
Net Deferred Policy Other
Investment Acquisition Operating Premiums
Segment Income (2) Benefits Costs Expenses (2) Written
- ------- -------------- ------------- ---------------- -------------- --------------
Year Ended December 31, 2000
Annuities $1,247,117 $1,016,059 $ 87,962 $ 464,401 $--
Life Insurance 1,042,325 1,122,549 121,583 320,603 --
Reinsurance 321,663 1,199,802 50,912 340,836 --
Investment Management 58,644 -- -- 445,786 --
Lincoln UK 70,258 178,545 70,336 213,100 --
Other (incl. consol. adj's.) 7,111 40,205 9,312 333,225 --
-------------- ------------- ---------------- -------------- --------------
Total $2,747,118 $3,557,160 $340,105 $2,117,951 $--
Year Ended December 31, 1999
Annuities $1,325,359 $1,078,511 $ 87,477 $ 443,533 $--
Life Insurance 1,016,041 1,111,586 97,232 367,574 --
Reinsurance 318,609 1,231,327 35,732 501,736 --
Investment Management 57,914 -- -- 421,979 --
Lincoln UK 75,257 306,221 73,316 167,136 --
Other (incl. consol. adj's.) 14,332 77,379 8,292 224,705 --
-------------- ------------- ---------------- -------------- --------------
Total $2,807,512 $3,805,024 $302,049 $2,126,663 $--
Year Ended December 31, 1998
Annuities $1,349,778 $1,119,355 $104,266 $ 376,303 $--
Life Insurance 818,600 942,592 92,663 277,981 --
Reinsurance 316,224 1,059,796 64,863 295,027 --
Investment Management 66,832 -- -- 429,694 --
Lincoln UK 87,930 150,963 130,815 51,087 --
Other (incl. consol. adj's.) 42,042 56,159 11,271 226,830 --
-------------- ------------- ---------------- -------------- --------------
Total $2,681,406 $3,328,865 $403,878 $1,656,922 $--
(2) The allocation of expenses between investments and other operations
are based on a number of assumptions and estimates. Results would change
if different methods were applied.
LINCOLN NATIONAL CORPORATION
SCHEDULE IV - REINSURANCE
Column A Column B Column C Column D Column E Column F
- -------- -------------- ------------- ---------------- -------------- --------------
Percentage
Ceded Assumed of Amount
Gross to Other from Other Assumed
Description Amount Companies Companies Net Amount to Net
- ----------- -------------- ------------- ---------------- -------------- --------------
(000s omitted)
------------------------------------------------------------------------------------------
Year Ended December 31, 2000
Individual life insurance
in-force $241,000,000 $191,500,000 $396,100,000 $445,600,000 88.9%
Premiums:
Life insurance and annuities (1) $ 2,583,403 $ 453,537 $ 934,913 $ 3,064,779 30.5%
Health insurance 151,204 106,328 364,898 409,774 89.0%
-------------- --------------- --------------- ---------------
Total $ 2,734,607 $ 559,865 $ 1,299,811 $ 3,474,553
Year Ended December 31, 1999
Individual life insurance
in-force $221,300,000 $171,100,000 $295,300,000 $345,500,000 85.5%
Premiums:
Life insurance and annuities (1) $ 2,363,373 $ 458,798 $ 816,046 $ 2,720,621 30.0%
Health insurance 167,489 162,202 693,212 698,499 99.2%
-------------- --------------- --------------- ---------------
Total $ 2,530,862 $ 621,000 $ 1,509,258 $ 3,419,120
Year Ended December 31, 1998
Individual life insurance
in-force $197,900,000 $108,100,000 $203,700,000 $293,500,000 69.4%
Premiums:
Life insurance and annuities (1) $ 2,182,847 $ 573,532 $ 650,807 $ 2,260,122 28.8%
Health insurance 147,940 121,848 608,984 635,076 95.9%
-------------- --------------- --------------- ---------------
Total $ 2,330,787 $ 695,380 $ 1,259,791 $ 2,895,198
(1) Includes insurance fees on universal life and other
interest-sensitive products.
LINCOLN NATIONAL CORPORATION
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
- -------- ------------- ----------------------------------- -------------- -------------
Additions
Charged to
Balance at Charged to Other Balance
Beginning Costs Accounts- Deductions- at End
Description of Period Expenses (1) Describe Describe (2) of Period
- -------------- ------------ ---------------- ------------ ------------- -------------
(000s omitted)
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 2000
Deducted from Asset Accounts:
Reserve for Mortgage Loans
on real estate $4,691 $1,830 $-- $(1,614) $4,907
Reserve for Real Estate -- -- -- -- --
Included in Other Liabilities:
Investment Guarantees 323 -- -- -- 323
Year Ended December 31, 1999
Deducted from Asset Accounts:
Reserve for Mortgage Loans
on real estate $4,794 $ 807 $-- $ (910) $4,691
Reserve for Real Estate -- -- -- -- --
Included in Other Liabilities:
Investment Guarantees 323 -- -- -- 323
Year Ended December 31, 1998
Deducted from Asset Accounts:
Reserve for Mortgage Loans
on real estate $5,019 $ 675 $-- $ (900) $4,794
Reserve for Real Estate 1,500 -- -- (1,500) --
Included in Other Liabilities:
Investment Guarantees 790 -- -- (467) 323
(1) Excludes charges for the direct write-off of assets.
(2) Deductions reflect sales or foreclosures of the underlying holdings.
LINCOLN NATIONAL CORPORATION
EXHIBIT INDEX FOR THE ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2000
Exhibit
Number Page
- ------- ------
3(a) Articles of Incorporation dated as of May 12, 1994.*
3(b) Bylaws of LNC as last amended January 13, 2000.*
4(a) Indenture of LNC dated as of January 15, 1987.*
4(b) LNC First Supplemental Indenture dated July 1, 1992, to
Indenture of LNC dated as of January 15, 1987.*
4(c) Specimen Notes for 7 1/8% Notes due July 15, 1999 and 7 5/8% Notes due July 15, 2002.*
4(d) Rights Agreement dated November 14, 1996.*
4(e) Indenture of LNC dated as of September 15, 1994.*
4(f) Form of Note dated as of September 15, 1994.*
4(g) Form of Zero Coupon Security dated as of September 15, 1994.*
4(h) Specimen Debenture for 9 1/8% Notes due October 1, 2024.*
4(i) Specimen of 7 1/4% Debenture due May 15, 2005.*
4(j) Junior Subordinated Indenture of LNC as of May 1, 1996.*
4(k) Guarantee Agreement for Lincoln National Capital I.*
4(l) Guarantee Agreement for Lincoln National Capital II.*
4(m) Form of Lincoln National Capital i Preferred Securities, Series A.*
4(n) Form of Lincoln National Capital II Preferred Securities, Series B.*
4(o) Declaration of Trust for Lincoln National Capital I.*
4(p) Specimen Notes for 6 1/2% Notes due March 15, 2008.*
4(q) Specimen Notes for 7% Notes due March 15, 2018.*
4(r) Trust Agreement for Lincoln National Capital III.*
4(s) Form of Lincoln National Capital III Preferred Securities, Series C.*
4(t) Guarantee Agreement for Lincoln National Capital III.*
4(u) Trust Agreement for Lincoln National Capital IV.*
4(v) Form of Lincoln National Capital IV Income Prides Certificates.*
4(w) Form of Lincoln National Capital IV Growth Pride Certificates.*
4(x) Guarantee Agreement for Lincoln National Capital IV.*
4(y) Purchase Contract Agreement for Lincoln National Capital IV.*
4(z) Pledge Agreement for Lincoln National Capital IV.*
10(a) LNC 1986 Stock Option Plan.*
10(b) The LNC Executives' Salary Continuation Plan.*
10(c) LNC Executive Value Sharing Plan*
10(d) LNC Executives' Severance Benefit Plan.*
10(e) The LNC Outside Directors Retirement Plan.*
10(f) The LNC Outside Directors Benefits Plan.*
10(g) LNC Directors' Value Sharing Plan.*
10(h) The LNC Executive Deferred Compensation Plan for Employees.*
10(i) LNC 1993 Stock Plan for Non-Employee Directors.*
10(j) LNC Executives' Excess Compensation Benefit Plan.*
10(k) First Amendment to LNC Executives' Excess Compensation Benefit Plan dated December 22, 1999.*
10(l) LNC 1997 Incentive Compensation Plan.*
10(m) Description of compensation arrangements with Executive Officers.*
10(n) Lease and Agreement-Lincoln Life's home office property.*
10(o) Lease and Agreement-additional Lincoln Life home office property.*
10(p) Form of Lease-LNC's Corporate Offices dated March 14, 1999.*
10(q) Lease and Agreement-additional Lincoln Life headquarter property.*
10(r) Form of Delaware's Lease and Agreement for One Commerce Square Property.*
10(s) Form of Delaware's Sublease for Two Commerce Square Property.*
10(t) Form of Delaware's Consent to Sublease for Philadelphia Plaza II Property.*
12 Historical Ratio of Earnings to Fixed Charges 29
13 Portions of LNC's Annual Report to Shareholders that are expressly incorporated
by reference in this Form 10-K. Other sections of the Annual Report furnished 30
for the information of the Commission are not deemed "filed" as part of this Form 10-K.
21 List of Subsidiaries of LNC. 112
23 Consent of Ernst & Young LLP, Independent Auditors. 132
27 Financial Data Schedule. 133
*Incorporated by Reference
Signature Page
LINCOLN NATIONAL CORPORATION
Pursuant to the requirements
of Section 13 or 15(d) of
the Securities Exchange Act of By /s/ Jon A. Boscia March 8, 2001
1934, LNC has duly caused -------------------------------------------
this report to be signed on Jon A. Boscia
its behalf by the under- (President, Chief Executive Officer
signed, thereunto duly and Director)
authorized.
By /s/ Richard C. Vaughan March 8, 2001
-------------------------------------------
Richard C. Vaughan
(Executive Vice President and Chief
Financial Officer)
By /s/ Casey J. Trumble March 8, 2001
-------------------------------------------
Casey J. Trumble
(Senior Vice President and Chief
Accounting Officer)
Pursuant to the requirements By /s/ J. Patrick Barrett March 8, 2001
of the Securities Exchange -------------------------------------------
Act of 1934, this report J. Patrick Barrett
has been signed below by
the following Directors By /s/ Thomas D. Bell, Jr. March 8, 2001
of LNC on the date indicated. -------------------------------------------
Thomas D. Bell, Jr
By /s/ John G. Drosdick March 8, 2001
-------------------------------------------
John G. Drosdick
By /s/ Eric G. Johnson March 8, 2001
-------------------------------------------
Eric G. Johnson
By /s/ M. Leanne Lachman March 8, 2001
-------------------------------------------
M. Leanne Lachman
By /s/ John M. Pietruski March 8, 2001
-------------------------------------------
John M. Pietruski
By /s/ Ron J. Ponder March 8, 2001
-------------------------------------------
Ron J. Ponder
By /s/ Jill S. Ruckelshaus March 8, 2001
-------------------------------------------
Jill S. Ruckelshaus
By /s/ Gilbert R. Whitaker, Jr. March 8, 2001
-------------------------------------------
Gilbert R. Whitaker, Jr.