EX-99.2 3 ex99_2complete.htm EXHIBIT 99.2 Unassociated Document
 

 
 
Lincoln Financial Group
Statistical Report
Third Quarter
2006

Table of Contents
 
 
 
LFG Analyst Coverage
 
 
 
Notes
 
 
 
Financial Highlights
1 - 4
 
 
Consolidated Expense Detail
5
Operating Results Summary
6
Consolidated Statements of Income
7
 
 
Consolidating Statements of Income from Operations
8-11
Consolidated Balance Sheet
12
Balance Sheet Data - Segment Highlights
13
 
 
Individual Markets
 
Individual Life Insurance
 
Income Statements & Operational Data
14
Operational Data
15
Account Value Roll Forward
16
Individual Annuities
 
Income Statements & Operational Data
17
Account Value Roll Forward
18
Account Values
19
 
 
Employer Markets
 
Defined Contribution
 
Income Statements & Operational Data
20
Account Value Roll Forward
21
Supplemental Data
22
Executive Benefits
 
Income Statements & Operational Data
23
Account Value Roll Forward and Supplemental Data
24
Group Protection
 
Income Statements & Operational Data
25
Supplemental Data
26
 
 
Investment Management
 
Income Statements
27
Assets Under Management Roll Forward
28
 
 
Lincoln UK
 
Income Statements
29
Operational Data
30
 
 
Lincoln Financial Media
31
 
 
Other Operations
31
 
 
Domestic Deposits / Account Balances / Net Flows
32
 
 
Investment Data
 
Assets Managed
33
Other Investment Data
34
 
 
9/30/2006
ii
 
NOTES

On April 3, 2006, LNC completed its previously announced merger with Jefferson Pilot Corporation ("JP"). Beginning with the second quarter of 2006, we are reporting results through the following segments: Individual Markets - Annuities, Individual Markets - Life Insurance, Employer Markets - Retirement Products & Other, Employer Markets - Group Protection, Investment Management, Lincoln UK and Lincoln Financial Media. Historical information presented in this report has been restated to reflect the new organizational structure. As described below, certain reclassifications have been made to historically reported items to reflect the new reporting practices of LNC.

Definitions and Presentation

"Income from Operations," "Operating Revenue," "Return on Capital," and "Station Operating Income" are non-GAAP financial measures and do not replace GAAP revenue and net income (loss). Detailed reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measure are included in this statistical supplement.

 
*
We exclude the after-tax effects of the following items from GAAP net income to arrive at income from operations:
 
*
Realized gains and losses on investments and derivatives,
 
*
Gains and losses related to reinsurance embedded derivatives/trading account securities,
 
*
The cumulative effect of accounting changes,
 
*
Reserve changes on business sold through reinsurance net of related deferred gain amortization,
 
*
Gains and losses on the sale of subsidiaries and blocks of business, and
 
*
Loss on early retirement of debt, including subordinated debt

NOTE: Income from operations is lower than previously reported as it now includes restructuring charges previously excluded in the determination of income from operations

 
*
Operating revenue represents revenue excluding the following, as applicable:
 
*
Realized gains or losses on investments and derivatives,
 
*
Gains and losses related to reinsurance embedded derivatives/trading account securities,
 
*
Gains and losses on the sale of subsidiaries and blocks of business, and
 
*
Deferred gain amortization related to reserve changes on business sold through reinsurance

 
*
Return on capital measures the effectiveness of LNC's use of its total capital, which includes equity (excluding accumulated other comprehensive income), debt, capital securities and junior subordinated debentures issued to affiliated trusts. Return on capital is calculated by dividing annualized income from operations (after adding back interest expense) by average capital. The difference between return on capital and return on shareholders' equity represents the effect of leveraging on LNC's consolidated results.

 
*
Station operating income is calculated as communications revenues less operating costs and expenses before depreciation and amortization.

Income from operations, operating revenue, return on capital, and station operating income are internal measures used by LNC in the management of its operations. Management believes that these performance measures explain the results of operations of LNC's ongoing operations in a manner that allows for a better understanding of the underlying trends in LNC's current business because the excluded items are either unpredictable and/or not related to decisions regarding the underlying businesses.

 
*
Certain operating and statistical measures are included in this report to provide supplemental data regarding the performance of LNC’s current business. These measures include deposits, sales, net flows, first year premium, inforce, spreads, and assets under management.

 
*
Sales as reported consist of the following:
 
*
Universal life ("UL"), including Moneyguard, and COLI - first year commissionable premium plus 5% of excess premium received, including UL internal replacements
 
*
Whole life and term - first year paid premium
 
*
Annuity - deposits from new and existing customers
 
*
Group Protection - annualized first year premium from new policies
 
*
Investment Management Retail Sales and Institutional Inflows - contributions, transfer in kind purchases, and reinvested dividends for new and existing accounts.

Reclassifications

Certain reclassifications have been made in the historical presentation of certain revenue and expense items. The principal reclassifications consist of the following:

 
*
Deferred Front End Loads ("DFEL") - capitalization and amortization of DFEL is reported as a component of expense assessments revenue. Depending on the segment, these had previously been reported as a component of either other revenue, benefits expense or DAC amortization.

 
*
Investment Management Advisory Fees and General and Administrative Expenses - certain reclassifications have been made between revenue and expenses for such items as distribution fees and management fee waivers to conform to current industry practices.

 
9/30/2006
PAGE 1
 
Financial Highlights
Unaudited [Millions of Dollars, except Common Share Data]
 
   
For the Quarter Ended September 30
  
For the Nine Months Ended September 30
  
   
2006
  
2005
          
2006
  
2005
          
   
Amount
  
Amount
  
Change
  
% Change
  
Amount
  
Amount
  
Change
  
% Change
  
Income from Operations - By Segment
                                  
Individual Life Insurance
  
$
122.8
  
$
64.9
  
$
57.9
    
89.2
%
$
339.0
  
$
185.7
  
$
153.3
    
82.6
%
Individual Annuities
    
129.4
   
79.0
   
50.4
   
63.8
%
  
284.8
   
181.1
   
103.7
   
57.3
%
Individual Markets
    
252.2
   
144.0
   
108.2
   
75.1
%
  
623.8
   
366.8
   
257.0
   
70.1
%
Defined Contribution
    
52.5
   
53.4
   
(0.9
)
  
-1.7
%
  
159.3
   
141.9
   
17.4
   
12.3
%
Executive Benefits
   
12.8
   
2.5
   
10.3
   
NM
    
36.5
   
10.1
   
26.4
   
261.4
%
Group Protection
    
28.8
   
-
   
28.8
   
NM
    
65.8
   
-
   
65.8
   
NM
  
Employer Markets
    
94.0
   
55.9
   
38.1
   
68.2
%
  
261.6
   
152.0
   
109.6
   
72.1
%
Investment Management
    
13.4
   
4.8
   
8.6
   
179.2
%
  
40.8
   
7.9
   
32.9
   
NM
  
Lincoln UK
    
8.3
   
9.6
   
(1.3
)
  
-13.5
%
  
28.9
   
29.7
   
(0.8
)
  
-2.7
%
Lincoln Financial Media
    
14.6
   
-
   
14.6
   
NM
    
26.5
   
-
   
26.5
   
NM
  
Other Operations
    
(11.5
)
  
12.2
   
(23.7
)
  
NM
    
(37.4
)
  
44.7
   
(82.1
)
  
NM
  
Total Income from Operations (1)
    
371.1
   
226.3
   
144.8
   
64.0
%
  
944.1
   
601.2
   
342.9
   
57.0
%
           
 
                      
 
 
            
Realized losses
    
(5.0
)
  
(1.1
)
  
(3.9
)
  
NM
    
(13.2
)
  
(8.5
)
  
(4.7
)
  
-55.3
%
Net gain (loss) on reinsurance
                                                 
derivative/trading account securities
    
(2.2
)
  
3.5
   
(5.7
)
  
NM
    
2.8
   
3.0
   
(0.2
)
  
-6.7
%
Gain on sale of subsidiaries/ businesses
    
-
   
-
   
-
   
NM
    
-
   
9.3
   
(9.3
)
  
-100.0
%
Reserve development/ amortization of
related deferred gain
    
0.2
   
0.2
   
-
   
-
   
0.6
   
0.6
   
-
   
-
 
Net Income
  
$
364.1
  
$
228.8
  
$
135.3
    
59.1
%
$
934.3
  
$
605.6
  
$
328.7
    
54.3
%
     
 
    
 
              
 
                  
Earnings per share (diluted)
                                                  
                                                   
Income from Operations (1)
  
$
1.31
  
$
1.29
  
$
0.02
    
1.6
%
$
3.80
  
$
3.42
  
$
0.38
    
11.1
%
Realized losses
    
(0.02
)
  
(0.01
)
  
(0.01
)
  
-100.0
%
  
(0.05
)
  
(0.05
)
  
-
   
-
 
Net gain (loss) on reinsurance
                                                 
derivative/trading account securities
    
(0.01
)
  
0.02
   
(0.03
)
  
NM
    
0.01
   
0.02
   
(0.01
)
  
-50.0
%
Gain on sale of subsidiaries/ businesses
    
-
   
-
   
-
   
NM
    
-
   
0.05
   
(0.05
)
  
-100.0
%
Reserve development/ amortization of
related deferred gain
    
-
   
-
   
-
   
NM
    
-
   
-
   
-
   
NM
  
Net Income
  
$
1.29
  
$
1.30
  
$
(0.01
)
  
-0.8
%
$
3.76
  
$
3.44
  
$
0.32
    
9.3
%
     
 
 
  
 
                
 
    
 
              
                                                   
Operating Revenue- By Segment
                                                  
Individual Life Insurance
  
$
895.3
  
$
458.5
  
$
436.8
    
95.3
%
$
2,297.4
  
$
1,409.4
  
$
888.0
    
63.0
%
Individual Annuities
    
596.5
   
362.4
   
234.1
   
64.6
%
  
1,523.9
   
1,050.4
   
473.5
   
45.1
%
Individual Markets
    
1,491.8
   
820.9
   
670.9
   
81.7
%
  
3,821.2
   
2,459.8
   
1,361.4
   
55.3
%
Defined Contribution
    
245.1
   
238.7
   
6.4
   
2.7
%
  
743.2
   
706.3
   
36.9
   
5.2
%
Executive Benefits
   
104.3
   
59.4
   
44.9
   
75.6
%
  
262.7
   
165.8
   
96.9
   
58.4
%
Group Protection
    
332.1
   
-
   
332.1
   
NM
    
687.0
   
-
   
687.0
   
NM
  
Employer Markets
    
681.5
   
298.1
   
383.4
   
128.6
%
  
1,692.9
   
872.1
   
820.8
   
94.1
%
Investment Management
    
140.4
   
123.2
   
17.2
   
14.0
%
  
414.6
   
347.4
   
67.2
   
19.3
%
Lincoln UK
    
72.3
   
102.9
   
(30.6
)
  
-29.7
%
  
223.2
   
255.8
   
(32.6
)
  
-12.7
%
Lincoln Financial Media
    
60.0
   
-
   
60.0
   
NM
    
117.7
   
-
   
117.7
   
NM
  
Other Operations
    
51.4
   
45.9
   
5.5
   
12.0
%
  
150.7
   
146.3
   
4.4
   
3.0
%
Total Operating Revenue
    
2,497.4
   
1,391.0
   
1,106.4
   
79.5
%
  
6,420.3
   
4,081.5
   
2,338.8
   
57.3
%
 
          
 
              
 
    
 
            
Realized losses
    
(6.7
)
  
(1.6
)
  
(5.1
)
  
NM
    
(20.3
)
  
(12.8
)
  
(7.5
)
  
-58.6
%
Gain (loss) on reinsurance
                                                 
derivative/trading account securities
    
(3.8
)
  
5.3
   
(9.1
)
  
NM
    
3.9
   
4.6
   
(0.7
)
  
-15.2
%
Gain on sale of subsidiaries/ businesses
    
-
   
-
   
-
   
NM
    
-
   
14.2
   
(14.2
)
  
-100.0
%
Amortization of deferred gain-reserve
development
    
0.3
   
0.3
   
-
   
-
   
1.0
   
0.9
   
0.1
   
11.1
%
Total Revenue
  
$
2,487.2
  
$
1,395.0
  
$
1,092.2
    
78.3
%
$
6,404.6
  
$
4,088.4
  
$
2,316.2
    
56.7
%
   
 
(1)
Income from operations includes after-tax restructuring charges of $0.6 million, or 0 cents per share, and $1.8 million, or 1 cent per share, for the quarters ended September 30, 2006 and 2005, respectively, and $7.1 million, or 3 cents per share, and $18.1 million, or 10 cents per share, for the nine months ended September 30, 2006 and 2005, respectively.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 2
 
Financial Highlights
Unaudited [in Billions]

Operational Data by Segment
 
For the Quarter Ended September 30
  
For the Nine Months Ended September 30
  
   
2006
  
2005
          
2006
  
2005
          
   
Amount
  
Amount
  
Change
  
% Change
  
Amount
  
Amount
  
Change
  
% Change
  
                                   
Individual Markets
                                  
Individual Annuities
                                  
Gross deposits
  
$
2.720
  
$
1.904
  
$
0.816
    
42.9
%
$
7.596
  
$
5.527
  
$
2.069
    
37.4
%
Net flows
    
0.304
   
0.717
   
(0.413
)
  
-57.6
%
  
1.773
   
2.109
   
(0.336
)
  
-15.9
%
Account values (gross)
    
62.916
   
46.651
   
16.266
   
34.9
%
  
62.916
   
46.651
   
16.266
   
34.9
%
Account values (net of reinsurance)
    
60.872
   
44.393
   
16.478
   
37.1
%
  
60.872
   
44.393
   
16.478
   
37.1
%
                                                   
Individual Life Insurance
                                                
Sales (in millions) (1)
    
152.5
   
72.9
   
79.6
   
109.2
%
  
352.8
   
212.6
   
140.2
   
65.9
%
Life insurance in-force
    
495.699
   
311.310
   
184.388
   
59.2
%
  
495.699
   
311.310
   
184.388
   
59.2
%
Account values
    
25.821
   
13.745
   
12.076
   
87.9
%
  
25.821
   
13.745
   
12.076
   
87.9
%
Employer Markets
                                                  
Defined Contribution
                                                  
Gross deposits (2)
  
$
1.086
  
$
1.012
  
$
0.074
    
7.3
%
$
3.486
  
$
3.324
  
$
0.161
    
4.8
%
Net flows
    
0.037
   
0.028
   
0.009
   
32.1
%
  
0.331
   
0.445
   
(0.114
)
  
-25.6
%
Account values - annuities
    
27.591
   
25.979
   
1.612
   
6.2
%
  
27.591
   
25.979
   
1.612
   
6.2
%
Alliance Mutual Funds
    
4.636
   
3.672
   
0.964
   
26.3
%
  
4.636
   
3.672
   
0.964
   
26.3
%
Account values including Alliance
Mutual Funds
    
32.227
   
29.651
   
2.576
   
8.7
%
  
32.227
   
29.651
   
2.576
   
8.7
%
Executive Benefits
                                                  
COLI/BOLI sales (in millions)
    
16.3
   
16.1
   
0.2
   
1.2
%
  
50.4
   
38.8
   
11.6
   
29.9
%
Life insurance in-force
    
15.342
   
7.506
   
7.836
   
104.4
%
  
15.342
   
7.506
   
7.836
   
104.4
%
Account values
    
4.252
   
1.256
   
2.996
   
238.5
%
  
4.252
   
1.256
   
2.996
   
238.5
%
Group Protection
                                                  
Annualized sales (in millions)
    
50.2
   
-
   
50.2
   
NM
    
95.6
   
-
   
95.6
   
NM
  
Loss ratio (3)
    
68.4
%
  
-
   
NM
    
NM
    
66.6
%
  
-
   
NM
    
NM
  
Investment Management Segment
                                             
Retail deposits
  
$
2.497
  
$
3.572
  
$
(1.075
)
  
-30.1
%
$
9.799
  
$
11.472
  
$
(1.673
)
  
-14.6
%
Retail net flows
    
(0.300
)
  
1.720
   
(2.021
)
  
NM
    
1.327
   
5.294
   
(3.967
)
  
-74.9
%
Institutional in-flows
    
2.406
   
3.166
   
(0.760
)
  
-24.0
%
  
10.214
   
11.469
   
(1.255
)
  
-10.9
%
Institutional net flows
    
1.046
   
1.825
   
(0.780
)
  
-42.7
%
  
5.324
   
7.045
   
(1.721
)
  
-24.4
%
Total Deposits and In-flows
    
4.904
   
6.738
   
(1.835
)
  
-27.2
%
  
20.013
   
22.941
   
(2.928
)
  
-12.8
%
Total Net Flows
    
0.745
   
3.546
   
(2.800
)
  
-79.0
%
  
6.651
   
12.339
   
(5.688
)
  
-46.1
%
Assets Under Management- Retail and
Institutional
    
89.511
   
73.274
   
16.237
   
22.2
%
  
89.511
   
73.274
   
16.237
   
22.2
%
Assets Under Management - General
Account
    
67.410
   
43.095
   
24.314
   
56.4
%
  
67.410
   
43.095
   
24.314
   
56.4
%
Assets Under Management - Total
Segment
    
156.921
   
116.369
   
40.552
   
34.8
%
  
156.921
   
116.369
   
40.552
   
34.8
%
Consolidated
                                                 
Domestic Retail Deposits
 
$
6.297
  
$
6.417
  
$
(0.120
)
  
-1.9
%
$
21.255
  
$
20.098
  
$
1.157
    
5.8
%
Domestic Retail Account Balances
   
156.998
   
117.175
   
39.823
   
34.0
%
  
156.998
   
117.175
   
39.823
   
34.0
%
Domestic Retail Net Flows 
    
0.532
   
2.749
   
(2.217
)
  
-80.6
%
  
4.876
   
8.790
   
(3.914
)
  
-44.5
%
Domestic Deposits 
    
8.501
   
9.366
   
(0.865
)
  
-9.2
%
  
30.645
   
30.802
   
(0.158
)
  
-0.5
%
Domestic Net Flows
   
1.717
   
4.524
   
(2.807
)
  
-62.0
%
  
10.254
   
15.760
   
(5.506
)
  
-34.9
%
Assets Under Management
   
220.300
   
164.944
   
55.356
   
33.6
%
  
220.300
   
164.944
   
55.356
   
33.6
%
 
(1)
Sales for Individual Life Insurance consist of first year commissionable premium for Universal life ("UL"), including Moneyguard, and COLI plus 5% of excess premium received, including UL internal replacements, and first year paid premiums for Whole life and Term products
(2)
Includes deposits for Alliance Mutual Funds which are not included in separate account liabilities on our balance sheet.
(3)
Represents combined loss ratio for Life, Disability and Dental business.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 3
 
Financial Highlights
Unaudited [Millions of Dollars, except Common Share Data]
 
   
For the Quarter Ended September 30
  
For the Nine Months Ended September 30
  
   
2006
Amount
  
2005
Amount
  
Change
  
% Change
  
2006
Amount
  
2005
Amount
  
Change
  
% Change
  
                                   
Balance Sheet Assets - End of Period
  
$
171,726.6
  
$
122,170.2
  
$
49,556.4
    
40.6
%
$
171,726.6
  
$
122,170.2
  
$
49,556.4
    
40.6
%
                                                   
Shareholders' Equity
                                                  
Beg of period (including AOCI)
  
$
11,404.8
  
$
6,363.5
  
$
5,041.3
        
$
6,384.4
  
$
6,175.6
  
$
208.8
        
End of period (including AOCI)
    
12,043.2
   
6,284.4
   
5,758.7
         
12,043.2
   
6,284.4
   
5,758.7
       
End of period (excluding AOCI)
    
11,436.0
   
5,663.6
   
5,772.4
         
11,436.0
   
5,663.6
   
5,772.4
       
Average equity (excluding AOCI)
    
11,437.9
   
5,555.9
   
5,882.0
         
9,568.0
   
5,422.8
   
4,145.2
       
                                                   
Return on Equity
                                                 
Net income/average equity (excluding
AOCI)
    
12.7
%
  
16.5
%
              
13.0
%
  
14.9
%
            
Inc from operations/average equity
(excluding AOCI)
    
13.0
%
  
16.3
%
              
13.2
%
  
14.8
%
            
                                                   
Return on Capital
                                                  
Inc from operations/average capital
    
10.5
%
  
13.6
%
              
10.8
%
  
12.3
%
            
                                                   
Common Stock Outstanding
                                                  
Average for the period - diluted
    
282.4
   
175.8
   
106.6
   
60.6
%
  
248.0
   
176.0
   
72.0
   
40.9
%
End of period - assuming conv of
preferreds
    
277.6
   
173.5
   
104.1
   
60.0
%
  
277.6
   
173.5
   
104.1
   
60.0
%
End of period - diluted
    
281.3
   
176.3
   
105.1
   
59.6
%
  
281.3
   
176.3
   
105.1
   
59.6
%
                                                   
Book value (including AOCI)
  
$
43.39
  
$
36.23
  
$
7.16
    
19.8
%
$
43.39
  
$
36.23
  
$
7.16
    
19.8
%
Book value (excluding AOCI)
  
$
41.20
  
$
32.65
  
$
8.55
    
26.2
%
$
41.20
  
$
32.65
  
$
8.55
    
26.2
%
                                                   
Cash Returned to Shareholders
                                                  
Share repurchase - dollar amount
  
$
350.3
  
$
-
  
$
350.3
        
$
855.6
  
$
103.6
  
$
752.0
        
Dividends declared to shareholders
    
104.8
   
63.8
   
41.0
         
319.7
   
191.1
   
128.6
       
Total Cash Returned to Shareholders
  
$
455.0
  
$
63.8
  
$
391.3
        
$
1,175.3
  
$
294.7
  
$
880.6
        
                                                   
Share repurchase - number of shares
    
6.314
   
-
   
6.314
         
14.374
   
2.331
   
12.043
       
Dividend declared on common stock - per
share
  
$
0.380
  
$
0.365
  
$
0.015
    
4.1
%
$
1.140
  
$
1.095
  
$
0.045
    
4.1
%
Dividend payout ratio (1)
    
29.5
%
  
28.1
%
              
30.3
%
  
31.8
%
            
Annualized yield (2)
    
2.4
%
  
2.8
%
              
1.8
%
  
2.1
%
            
                                                   
Comprehensive Income (Loss)
                                                  
Net income
  
$
364.1
  
$
228.8
              
$
934.3
  
$
605.6
              
Net unrealized gains (losses) on securities
    
629.5
   
(282.2
)
              
(18.5
)
  
(253.8
)
            
Gains (losses) on derivatives
    
4.3
   
(3.0
)
              
48.5
   
(5.1
)
            
Foreign currency translation
    
8.0
   
(9.8
)
              
53.1
   
(54.8
)
            
Minimum pension liability adjustment
    
0.4
   
0.7
               
(3.7
)
  
3.9
             
Comprehensive Income
 
$
1,006.3
  
$
(65.5
)
            
$
1,013.6
  
$
295.8
              
                                                   
Ratios:
                                                  
Debt to total capitalization (3)
    
22.2
%
  
20.9
%
              
22.2
%
  
20.9
%
            
Debt to equity (3)
    
28.5
%
  
26.5
%
              
28.5
%
  
26.5
%
            
                                                   
                                                   
Ratings as of October 30, 2006:
                                                  
 
    
A.M. Best 
    
Fitch
    
Moody's
    
Standard & Poors
                          
                                                   
Senior Debt Ratings:
    
a
    
A
    
A3
    
A+
                          
     
 
    
 
    
 
                                
Financial Strength Ratings:
    
 
    
 
    
 
    
 
                          
Lincoln National Life Insurance Company
    
A+
    
AA
    
Aa3
    
AA
                          
First Penn-Pacific Life Insurance
Company
    
A+
    
AA
    
A1
    
AA-
                          
Lincoln Life & Annuity Company of
New York
    
A+
    
AA
    
Aa3
    
AA
                          
Jefferson-Pilot Life Insurance Company
    
A+
    
AA
    
Aa3
    
AA
                          
Jefferson Pilot Financial Insurance
Company
   
A+
    
AA
    
Aa3
    
AA
                          
Jefferson Pilot LifeAmerica Insurance
Company
    
A+
    
AA
    
N/R
    
AA
                          
 
[1]
Indicated dividend divided by net income
[2]
Indicated dividend divided by the closing price
[3]
Equity used in calculation excludes accumulated other comprehensive income (loss). Capital securities are considered 25% debt and 75% equity. The calculation for the second quarter of 2006 includes adjustments to beginning equity for stock issued in connection with the April 3, 2006 merger with Jefferson-Pilot Corporation ("JP") and the accelerated stock repurchase transaction.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 4
 
Combined Production Data (1)
Unaudited [in Billions]
 
   
Three Months Ended
    
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
%
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Individual Markets
                                      
Individual Life Insurance
                                      
Sales by Product (millions)
                                      
Universal Life
                                     
Excluding MoneyGuard
  
$
118.8
  
$
117.2
  
$
83.4
  
$
97.5
  
$
119.9
    
0.9
%
$
305.7
  
$
300.7
    
-1.6
%
MoneyGuard
    
9.1
   
9.4
   
7.7
   
7.5
   
8.3
   
-8.8
%
  
24.5
   
23.5
   
-4.1
%
Total
    
127.9
   
126.5
   
91.1
   
105.0
   
128.2
   
0.2
%
  
330.2
   
324.2
   
-1.8
%
Variable universal life
    
14.5
   
20.6
   
16.4
   
15.7
   
13.0
   
-10.3
%
  
49.8
   
45.1
   
-9.4
%
Whole life
    
0.8
   
0.9
   
1.2
   
0.4
   
0.7
   
-12.5
%
  
2.9
   
2.3
   
-20.7
%
Term
    
10.0
   
10.7
   
11.2
   
11.3
   
10.7
   
7.0
%
  
30.8
   
33.1
   
7.5
%
Total Sales by Product
  
$
153.2
  
$
158.7
  
$
120.0
  
$
132.3
  
$
152.5
    
-0.5
%
$
413.7
  
$
404.8
    
-2.2
%
                                                       
Individual Annuity Deposits
                                                        
Fixed
  
$
0.600
  
$
0.567
  
$
0.560
  
$
0.644
  
$
0.818
    
36.3
%
$
1.778
  
$
2.022
    
13.7
%
Variable
    
1.424
   
1.533
   
1.680
   
1.877
   
1.648
   
15.7
%
  
4.063
   
5.206
   
28.1
%
Indexed annuities
    
0.197
   
0.178
   
0.173
   
0.228
   
0.244
   
23.9
%
  
0.610
   
0.645
   
5.7
%
Total Individual Annuities
  
$
2.221
  
$
2.278
  
$
2.413
  
$
2.750
  
$
2.710
    
22.0
%
$
6.450
  
$
7.873
    
22.1
%
                                                       
Employer Markets
                                                        
Defined Contribution
                                                        
Fixed
  
$
0.259
  
$
0.240
  
$
0.253
  
$
0.242
  
$
0.268
    
3.5
%
$
0.843
  
$
0.763
    
-9.5
%
Variable
    
0.553
   
0.616
   
0.669
   
0.714
   
0.583
   
5.4
%
  
1.638
   
1.966
   
20.0
%
     
0.812
   
0.856
   
0.923
   
0.955
   
0.851
   
4.8
%
  
2.481
   
2.729
   
10.0
%
Alliance Mutual Funds Deposits
    
0.200
   
0.223
   
0.318
   
0.204
   
0.235
   
17.5
%
  
0.843
   
0.757
   
-10.2
%
Total Annuity and Alliance Mutual Funds
$
1.012
  
$
1.078
  
$
1.241
  
$
1.159
  
$
1.086
    
7.3
%
$
3.325
  
$
3.486
    
4.8
%
                                                         
Executive Benefits
                                                        
COLI/BOLI sales (millions)
  
$
16.4
  
$
12.7
  
$
17.5
  
$
17.2
  
$
16.3
    
-0.6
%
$
39.6
  
$
51.0
    
28.8
%
                                                         
Group Protection
                                                        
Annualized Sales (millions)
                                                        
Life
  
$
19.3
  
$
29.4
  
$
23.6
  
$
15.3
  
$
19.4
    
0.5
%
$
57.3
  
$
58.3
    
1.7
%
Disability
    
30.5
   
44.5
   
34.2
   
22.9
   
24.7
   
-19.0
%
  
96.5
   
81.8
   
-15.2
%
Dental
    
8.0
   
6.9
   
6.2
   
7.1
   
6.1
   
-23.8
%
  
26.8
   
19.4
   
-27.6
%
                                                         
Investment Management
                                                        
Sales and Inflows
                                                        
Retail
                                                        
Annuities
  
$
0.642
  
$
0.713
  
$
0.885
  
$
0.869
  
$
0.960
    
49.5
%
$
2.056
  
$
2.715
    
32.1
%
Mutual funds
    
1.331
   
1.657
   
1.329
   
1.370
   
1.151
   
-13.5
%
  
4.338
   
3.849
   
-11.3
%
Managed accounts & other
    
1.599
   
1.260
   
1.806
   
1.043
   
0.386
   
-75.9
%
  
5.079
   
3.235
   
-36.3
%
     
3.572
   
3.629
   
4.019
   
3.282
   
2.497
   
-30.1
%
  
11.472
   
9.799
   
-14.6
%
Institutional
    
3.166
   
4.833
   
5.044
   
2.764
   
2.406
   
-24.0
%
  
11.469
   
10.214
   
-10.9
%
Total Sales and Inflows
  
$
6.738
  
$
8.462
  
$
9.063
  
$
6.046
  
$
4.904
    
-27.2
%
$
22.941
  
$
20.013
    
-12.8
%
 

Total Annuity & Alliance
                                      
Mutual Fund Deposits
                                      
Fixed Annuities
                                      
Individual
  
$
0.797
  
$
0.745
  
$
0.733
  
$
0.872
  
$
1.062
    
33.2
%
$
2.387
  
$
2.667
    
11.7
%
Employer Markets
    
0.259
   
0.240
   
0.253
   
0.242
   
0.268
   
3.5
%
  
0.843
   
0.763
   
-9.5
%
     
1.057
   
0.985
   
0.986
   
1.114
   
1.330
   
25.8
%
  
3.230
   
3.430
   
6.2
%
Variable Annuities
                                                        
Individual
    
1.424
   
1.533
   
1.680
   
1.877
   
1.648
   
15.7
%
  
4.063
   
5.206
   
28.1
%
Employer Markets
    
0.553
   
0.616
   
0.669
   
0.714
   
0.583
   
5.4
%
  
1.638
   
1.966
   
20.0
%
     
1.976
   
2.148
   
2.349
   
2.591
   
2.231
   
12.9
%
  
5.701
   
7.172
   
25.8
%
Total Annuities
    
3.033
   
3.134
   
3.336
   
3.705
   
3.561
   
17.4
%
  
8.931
   
10.602
   
18.7
%
Alliance Mutual Funds
    
0.200
   
0.223
   
0.318
   
0.204
   
0.235
   
17.5
%
  
0.843
   
0.757
   
-10.2
%
Total Annuity and Alliance Mutual Funds
  
$
3.233
  
$
3.356
  
$
3.654
  
$
3.909
  
$
3.796
    
17.4
%
$
9.774
  
$
11.359
    
16.2
%
 
(1)
This schedule combines the previously reported data for LNC and JP and does not reflect any adjustments that may have resulted had the merger been completed prior to the periods presented.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
 
9/30/2006
PAGE 5

Consolidated Expense Detail
Unaudited (In Millions)
 
   
Three Months Ended
      
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Commissions
  
$
182.2
  
$
183.3
  
$
186.9
  
$
344.2
  
$
362.4
    
98.9
%
$
498.9
  
$
893.5
    
79.1
%
                                                         
General and administrative expenses:
                                                        
General and administrative expenses
    
363.4
   
346.9
   
314.1
   
392.9
   
420.8
   
15.8
%
  
1,011.9
   
1,127.8
   
11.5
%
Merger-related expenses
    
-
   
-
   
-
   
7.4
   
12.1
   
NM
    
-
   
19.5
   
NM
  
Total general and administrative expenses
excluding Broker/Dealer
    
363.4
   
346.9
   
314.1
   
400.3
   
432.9
   
19.1
%
  
1,011.9
   
1,147.3
   
13.4
%
                                                         
Restructuring charges
    
2.7
   
1.5
   
0.3
   
9.6
   
1.0
   
-63.0
%
  
27.8
   
10.9
   
-60.8
%
Taxes, licenses and fees
    
21.4
   
17.3
   
33.3
   
47.3
   
50.3
   
135.0
%
  
78.2
   
131.0
   
67.5
%
Interest
    
21.4
   
21.8
   
21.5
   
65.0
   
67.3
   
214.5
%
  
65.4
   
153.8
   
135.2
%
Total commissions and expenses incurred
   
591.1
   
570.8
   
556.1
   
866.4
   
914.0
   
54.6
%
  
1,720.2
   
2,336.5
   
35.8
%
                                                         
Less: commissions and expenses capitalized
    
(239.3
)
  
(263.0
)
  
(244.5
)
  
(391.6
)
  
(424.3
)
  
-77.3
%
  
(674.6
)
  
(1,060.4
)
  
-57.2
%
                                                         
Amortization:
                                                        
DAC/VOBA Amortization
    
99.1
   
144.8
   
165.0
   
222.2
   
225.9
   
128.0
%
  
396.0
   
613.1
   
54.8
%
Amortization of intangibles
    
2.0
   
2.0
   
2.0
   
5.6
   
3.1
   
55.0
%
  
5.8
   
10.6
   
82.8
%
Total amortization
    
101.1
   
146.8
   
167.0
   
227.7
   
229.0
   
126.5
%
  
401.8
   
623.7
   
55.2
%
                                                         
Broker/Dealer commissions
and G & A
    
49.8
   
54.2
   
46.6
   
79.3
   
76.6
   
53.8
%
  
150.0
   
202.5
   
35.0
%
                                                         
Total
  
$
502.8
  
$
508.8
  
$
525.1
  
$
781.9
  
$
795.3
    
58.2
%
$
1,559.3
  
$
2,102.3
    
34.8
%
     
 
    
 
 
  
 
    
 
    
 
          
 
    
 
        
General & administrative expenses - basis
                                                        
points on assets - Annualized
    
127
   
120
   
105
   
102
   
101
   
(26
)
  
113
   
102
   
(12
)
                                                         
Merger-related expenses: (1)
                                                        
Severance and employee-related charges
  
$
-
  
$
-
  
$
-
  
$
12.8
  
$
8.4
    
NM
  
$
-
  
$
21.2
    
NM
  
Systems integration and related expenses
    
-
   
-
   
-
   
0.8
   
1.5
   
NM
    
-
   
2.3
   
NM
  
Other expenses
    
-
   
-
   
-
   
3.1
   
3.2
   
NM
    
-
   
6.3
   
NM
  
Total merger-related expenses
  
$
-
  
$
-
  
$
-
  
$
16.7
  
$
13.1
    
NM
  
$
-
  
$
29.8
    
NM
  
 
(1)
Represents merger-related expenses included in general and administrative expenses and restructuring charges.

This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 6
 
Operating Results Summary
Unaudited [Millions of Dollars, except Common Share Data]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
   %   
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Individual Life Insurance
  
$
458.5
  
$
501.1
  
$
500.6
  
$
901.4
  
$
895.3
    
95.3
%
$
1,409.4
  
$
2,297.4
    
63.0
%
Individual Annuities
    
362.4
   
372.1
   
374.8
   
552.6
   
596.5
   
64.6
%
  
1,050.4
   
1,523.9
   
45.1
%
Individual Markets
    
820.9
   
873.2
   
875.4
   
1,454.0
   
1,491.8
   
81.7
%
  
2,459.8
   
3,821.2
   
55.3
%
Defined Contribution
    
238.7
   
241.2
   
249.2
   
248.9
   
245.1
   
2.7
%
  
706.3
   
743.2
   
5.2
%
Executive Benefits
   
59.4
   
61.6
   
57.2
   
101.2
   
104.3
   
75.6
%
  
165.8
   
262.7
   
58.4
%
Group Protection
    
-
   
-
   
-
   
354.9
   
332.1
   
NM
    
-
   
687.0
   
NM
  
Employer Markets
    
298.1
   
302.8
   
306.4
   
704.9
   
681.5
   
128.6
%
  
872.1
   
1,692.9
   
94.1
%
Investment Management
    
123.2
   
127.9
   
139.6
   
134.7
   
140.4
   
14.0
%
  
347.4
   
414.6
   
19.3
%
Lincoln UK
    
102.9
   
62.6
   
69.5
   
81.4
   
72.3
   
-29.7
%
  
255.8
   
223.2
   
-12.7
%
Lincoln Financial Media
    
-
   
-
   
-
   
57.7
   
60.0
   
NM
    
-
   
117.7
   
NM
  
Other Operations
    
45.9
   
28.9
   
31.7
   
67.6
   
51.4
   
12.0
%
  
146.3
   
150.7
   
3.0
%
Total Operating Revenue
    
1,391.0
   
1,395.4
   
1,422.6
   
2,500.3
   
2,497.4
   
79.5
%
  
4,081.5
   
6,420.3
   
57.3
%
 
                                        
-
   
-
       
Realized gains (losses) on investments and
derivatives
    
(1.6
)
  
(9.3
)
  
(6.9
)
  
(6.7
)
  
(6.7
)
  
NM
    
(12.8
)
  
(20.3
)
  
-58.6
%
Net gain (loss) on reinsurance
                                                       
derivative/trading account securities
    
5.3
   
-
   
5.9
   
1.8
   
(3.8
)
  
NM
    
4.6
   
3.9
   
-15.2
%
Gain on sale of subsidiaries/ businesses
    
-
   
-
   
-
   
-
   
-
   
NM
    
14.2
   
-
   
NM
  
Amortization of deferred gain-reserve
development
    
0.3
   
0.3
   
0.3
   
0.3
   
0.3
         
0.9
   
1.0
   
11.1
%
Total Revenue
  
$
1,395.0
  
$
1,386.4
  
$
1,421.8
  
$
2,495.6
  
$
2,487.2
    
78.3
%
$
4,088.4
  
$
6,404.6
    
56.7
%
     
 
    
 
 
  
 
    
 
    
 
          
 
 
            
Income from Operations (1)
                                                        
Individual Life Insurance
  
$
64.9
  
$
73.8
  
$
69.0
  
$
147.1
  
$
122.8
    
89.2
%
$
185.7
  
$
339.0
    
82.6
%
Individual Annuities
    
79.0
   
70.9
   
66.4
   
89.0
   
129.4
   
63.8
%
  
181.1
   
284.8
   
57.3
%
Individual Markets
    
144.0
   
144.7
   
135.4
   
236.1
   
252.2
   
75.1
%
  
366.8
   
623.8
   
70.1
%
Defined Contribution
    
53.4
   
45.2
   
52.5
   
54.3
   
52.5
   
-1.7
%
  
141.9
   
159.3
   
12.3
%
Executive Benefits
   
2.5
   
9.5
   
7.5
   
16.2
   
12.8
   
NM
    
10.1
   
36.5
   
261.4
%
Group Protection
    
-
   
-
   
-
   
37.0
   
28.8
   
NM
    
-
   
65.8
   
NM
  
Employer Markets
    
55.9
   
54.7
   
60.0
   
107.6
   
94.0
   
68.2
%
  
152.0
   
261.6
   
72.1
%
Investment Management
    
4.8
   
8.9
   
15.3
   
12.0
   
13.4
   
179.2
%
  
7.9
   
40.8
   
NM
  
Lincoln UK
    
9.6
   
13.6
   
10.7
   
9.9
   
8.3
   
-13.5
%
  
29.7
   
28.9
   
-2.7
%
Lincoln Financial Media
    
-
   
-
   
-
   
11.9
   
14.6
   
NM
    
-
   
26.5
   
NM
  
Other Operations
    
12.2
   
9.6
   
0.1
   
(26.1
)
  
(11.5
)
  
NM
    
44.7
   
(37.4
)
  
NM
  
Income from Operations (1)
    
226.3
   
231.4
   
221.6
   
351.4
   
371.1
   
64.0
%
  
601.2
   
944.1
   
57.0
%
                                                         
Realized gains (losses) on investments and
derivatives
    
(1.1
)
  
(6.1
)
  
(4.4
)
  
(3.8
)
  
(5.0
)
  
NM
    
(8.5
)
  
(13.2
)
  
-55.3
%
Net gain (loss) on reinsurance
                                                       
derivative/trading account securities
    
3.5
   
-
   
3.8
   
1.2
   
(2.2
)
  
NM
    
3.0
   
2.8
   
-6.7
%
Gain on sale of subsidiaries/ businesses
    
-
   
-
   
-
   
-
   
-
   
NM
    
9.3
   
-
   
-100.0
%
Reserve development/ amortization of related
deferred gain
    
0.2
   
0.2
   
0.2
   
0.2
   
0.2
         
0.6
   
0.6
       
Loss on early retirement of debt
    
-
   
-
   
-
   
-
   
-
   
NM
    
-
   
-
   
NM
  
Net Income
  
$
228.8
  
$
225.4
  
$
221.2
  
$
349.0
  
$
364.1
    
59.1
%
$
605.6
  
$
934.3
    
54.3
%
 
OTHER DATA
 
   
Three Months Ended
      
Nine Months Ended
      
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
      
Sept.
  
Sept.
      
   
2005
  
2005
  
2006
  
2006
  
2006
      
2005
  
2006
      
Shareholders' Equity
                                      
Beg of period (including AOCI)
  
$
6,363.5
  
$
6,284.4
  
$
6,384.4
  
$
6,338.2
  
$
11,404.8
      
$
6,175.6
  
$
6,384.4
      
End of period (including AOCI)
    
6,284.4
   
6,384.4
   
6,338.2
   
11,404.8
   
12,043.2
         
6,284.4
   
12,043.2
       
End of period (excluding AOCI)
    
5,663.5
   
5,856.6
   
6,053.2
   
11,439.8
   
11,436.0
         
5,663.5
   
11,436.0
       
Average equity (excluding AOCI) (2)
    
5,555.9
   
5,760.0
   
5,954.9
   
11,311.3
   
11,437.9
         
5,422.8
   
9,568.0
       
                                                         
Common Shares Outstanding
                                                        
Average for the period - diluted
    
175.8
   
176.6
   
177.9
   
282.6
   
282.4
         
175.8
   
248.0
       
End of period - diluted
    
176.3
   
176.9
   
178.5
   
285.0
   
281.3
         
176.3
   
281.3
       
                                                         
Per Share Data (Diluted)
                                                        
Net Income
  
$
1.30
  
$
1.28
  
$
1.24
  
$
1.23
  
$
1.29
        
$
3.44
  
$
3.76
        
Income from Operations (1)
    
1.29
   
1.31
   
1.25
   
1.24
   
1.31
         
3.42
   
3.80
       
                                                         
Shareholders' Equity Per Share
                                                        
Shareholders' Equity (including AOCI)
  
$
36.23
  
$
36.69
  
$
35.99
  
$
40.48
  
$
43.39
        
$
36.23
  
$
43.39
        
Shareholders' Equity (excluding AOCI)
    
32.65
   
33.66
   
34.37
   
40.60
   
41.20
         
32.65
   
41.20
       
Dividends declared (Common Stock)
    
0.365
   
0.380
   
0.380
   
0.380
   
0.380
         
1.095
   
1.140
       
                                                         
Return on Equity
                                                        
Net Income/Average Equity
    
16.5
%
  
15.7
%
  
14.9
%
  
12.3
%
  
12.7
%
        
14.9
%
  
13.0
%
      
Inc from Operations/Average Equity
    
16.3
%
  
16.1
%
  
14.9
%
  
12.4
%
  
13.0
%
        
14.8
%
  
13.2
%
      
                                                         
Market Value of Common Stock
                                                        
Highest price
  
$
52.42
  
$
54.41
  
$
57.97
  
$
60.52
  
$
63.47
        
$
52.42
  
$
63.47
        
Lowest price
    
46.59
   
46.94
   
52.00
   
54.30
   
53.94
         
41.59
   
52.00
       
Closing price
  
$
52.02
  
$
53.03
  
$
54.59
  
$
56.44
  
$
62.08
        
$
52.02
  
$
62.08
        
 
(1)
Income from operations includes after-tax restructuring charges of $1.3 million, or 1 cent per share, for the first quarter of 2005; $15.0 million, or 9 cents per share, for the second quarter of 2005; $1.8 million, or 1 cent per share, for the third quarter of 2005; $1.1 million, or 1 cent per share, for the fourth quarter of 2005; $0.2 million, or -0- cents per share, for the first quarter of 2006, $6.2 million, or 2 cents per share, for the second quarter of 2006, and $0.6 million, or -0- cents per share, for the third quarter of 2006.
(2)
Average equity was adjusted to reflect the merger with Jefferson-Pilot effective April 3, 2006.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 7
 
Consolidated Statements of Income
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
   %   
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Revenue
                                      
Premiums
  
$
83.1
  
$
82.4
  
$
78.4
  
$
454.3
  
$
425.7
    
NM
  
$
226.0
  
$
958.4
    
NM
  
Surrender charges
    
18.6
   
18.0
   
18.7
   
27.3
   
26.6
   
43.0
%
  
55.3
   
72.6
   
31.3
%
Mortality assessments
    
138.8
   
145.1
   
146.2
   
294.7
   
294.9
   
112.5
%
  
423.2
   
735.8
   
73.9
%
Expense assessments
    
290.8
   
294.1
   
309.5
   
367.6
   
355.3
   
22.2
%
  
815.9
   
1,032.4
   
26.5
%
Investment advisory fees
    
67.9
   
70.9
   
77.8
   
81.2
   
82.9
   
22.1
%
  
184.9
   
241.8
   
30.8
%
Communications revenue
    
-
   
-
   
-
   
57.5
   
59.8
   
NM
    
-
   
117.3
   
NM
  
Net investment income
    
670.9
   
668.2
   
678.4
   
1,068.2
   
1,107.9
   
65.1
%
  
2,034.4
   
2,854.5
   
40.3
%
Other revenue and fees
    
101.8
   
97.6
   
94.8
   
130.7
   
125.6
   
23.4
%
  
285.0
   
351.0
   
23.2
%
Amortization of deferred gain
    
18.9
   
18.9
   
18.8
   
18.8
   
18.8
   
-0.5
%
  
56.8
   
56.3
   
-0.9
%
Amortization of deferred gain-reserve
development
    
0.3
   
0.3
   
0.3
   
0.3
   
0.3
         
0.9
   
1.0
   
11.1
%
Realized gains (losses)
    
3.7
   
(9.3
)
  
(1.0
)
  
(5.0
)
  
(10.5
)
  
NM
    
6.0
   
(16.5
)
  
NM
  
Total Revenue
    
1,395.0
   
1,386.3
   
1,421.8
   
2,495.6
   
2,487.2
   
78.3
%
  
4,088.4
   
6,404.6
   
56.7
%
                       
 
 
  
 
                          
Benefits and Expenses
                                                        
Insurance benefits
    
206.7
   
198.0
   
200.4
   
589.3
   
566.2
   
173.9
%
  
607.5
   
1,356.0
   
123.2
%
Interest credited to contractholder funds
    
382.6
   
383.4
   
381.3
   
589.3
   
634.4
   
65.8
%
  
1,142.8
   
1,605.0
   
40.4
%
Communications expenses
    
-
   
-
   
-
   
29.8
   
31.4
   
NM
    
-
   
61.2
   
NM
  
Operating and acquisition expenses
    
460.0
   
469.7
   
470.3
   
669.5
   
677.6
   
47.3
%
  
1,415.8
   
1,817.5
   
28.4
%
Taxes, licenses and fees
    
21.4
   
17.3
   
33.3
   
47.3
   
50.3
   
135.0
%
  
78.2
   
131.0
   
67.5
%
Interest and debt expense
    
21.4
   
21.8
   
21.5
   
65.0
   
67.3
   
214.5
%
  
65.4
   
153.8
   
135.2
%
Total Benefits and Expenses
    
1,092.1
   
1,090.2
   
1,106.8
   
1,990.3
   
2,027.3
   
85.6
%
  
3,309.8
   
5,124.4
   
54.8
%
                       
 
 
  
 
                          
                                                         
Income Before Federal Income Tax
   
302.8
   
296.1
   
315.0
   
505.3
   
459.9
   
51.9
%
  
778.5
   
1,280.2
   
64.4
%
                                                         
Federal income taxes
    
74.0
   
70.6
   
93.9
   
156.3
   
95.8
   
29.5
%
  
173.0
   
346.0
   
100.0
%
Net Income
  
$
228.8
  
$
225.4
  
$
221.2
  
$
349.0
  
$
364.1
    
59.1
%
$
605.6
  
$
934.2
    
54.3
%
 

Roll Forward of Deferred Acquisition Costs
  
Three Months Ended
      
Nine Months Ended
      
& Value of Business Acquired
  
Sept.
  
Dec.
  
March
  
June
  
Sept.
      
Sept.
  
Sept.
      
   
2005
  
2005
  
2006
  
2006
  
2006
      
2005
  
2006
      
Balance at beginning of period
  
$
4,657.4
  
$
4,989.1
  
$
5,163.3
  
$
5,433.8
  
$
8,328.4
      
$
4,590.3
  
$
5,163.3
      
Deferral
    
239.3
   
263.0
   
244.5
   
391.6
   
424.3
         
674.6
   
1,060.4
       
Amortization
    
(99.1
)
  
(144.8
)
  
(165.0
)
  
(222.2
)
  
(225.9
)
        
(396.0
)
  
(613.1
)
      
Included in Total Benefits and Expenses
    
140.1
   
118.2
   
79.6
   
169.4
   
198.4
         
278.7
   
447.4
       
Adjustment related to realized (gains) losses
                                                        
on available-for-sale securities
    
(13.8
)
  
(8.7
)
  
(10.9
)
  
(18.9
)
  
(8.9
)
        
(39.8
)
  
(38.7
)
      
Adjustment related to unrealized (gains) losses
                                                    
on available-for-sale securities
    
217.4
   
84.7
   
194.2
   
221.5
   
(359.8
)
        
228.4
   
55.8
       
Foreign currency translation adjustment
    
(12.1
)
  
(20.0
)
  
7.7
   
48.3
   
9.7
         
(68.5
)
  
65.8
       
Business acquired
    
-
   
-
   
-
   
2,474.2
   
3.8
         
-
   
2,478.0
       
Balance at end of period
  
$
4,989.1
  
$
5,163.3
  
$
5,433.8
  
$
8,328.4
  
$
8,171.6
        
$
4,989.1
  
$
8,171.6
        
                       
 
  
 
 
              
 
 
      
Roll Forward of Deferred Front-End Load
                                                        
                                                         
Balance at beginning of period
  
$
792.5
  
$
786.9
  
$
795.7
  
$
805.8
  
$
833.3
        
$
814.2
  
$
795.7
        
Deferral
    
30.2
   
33.2
   
31.1
   
69.1
   
71.0
         
91.7
   
171.2
       
Amortization
    
(29.8
)
  
(15.0
)
  
(24.7
)
  
(37.4
)
  
(12.7
)
        
(84.5
)
  
(74.7
)
      
Included in Expense Assessments
    
0.4
   
18.2
   
6.4
   
31.8
   
58.3
         
7.1
   
96.4
       
Adjustment related to realized (gains) losses
                                                        
on available-for-sale securities
    
-
   
-
   
-
   
-
   
(0.1
)
        
-
   
(0.1
)
      
Foreign currency translation adjustment
    
(5.9
)
  
(9.5
)
  
3.8
   
23.6
   
4.7
         
(34.4
)
  
32.0
       
Balance at end of period
  
$
786.9
  
$
795.7
  
$
805.8
  
$
861.0
  
$
923.9
        
$
786.9
  
$
923.9
        
                       
 
    
 
 
              
 
        
Roll Forward of Deferred Sales Inducements
                                                
                                                         
Balance at beginning of period
  
$
106.6
  
$
118.1
  
$
129.4
  
$
139.9
  
$
154.6
        
$
85.5
  
$
129.4
        
Deferral
    
15.1
   
15.6
   
15.7
   
19.9
   
22.2
         
43.9
   
57.8
       
Amortization
    
(3.6
)
  
(4.4
)
  
(5.2
)
  
(5.2
)
  
(3.3
)
        
(11.3
)
  
(13.7
)
      
Included in Income from Operations
    
11.5
   
11.3
   
10.5
   
14.7
   
18.9
         
32.6
   
44.1
       
Adjustment related to realized (gains) losses
                                                        
on available-for-sale securities
    
-
   
-
   
-
   
-
   
(0.1
)
        
-
   
(0.1
)
      
Balance at end of period
  
$
118.1
  
$
129.4
  
$
139.9
  
$
154.6
  
$
173.4
        
$
118.1
  
$
173.4
        
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 8

Consolidating Statements of Income from Operations
Unaudited [Millions of Dollars]
For the Quarter Ended September 30, 2006
 
   
Individual Markets
  
Employer Markets
                          
   
Life
  
Annuities
  
Defined
Contribution
  
Executive
Benefits
  
Group
Protection
  
Investment
Management
  
Lincoln
UK
  
Lincoln
Financial
Media
  
Other
Operations
  
Consolidating
Adjustments
  
Consolidated
  
 
                                              
Operating Revenue
                                              
Premiums
  
$
87.0
  
$
12.3
  
$
-
  
$
0.3
  
$
304.1
  
$
-
  
$
21.1
  
$
-
  
$
0.9
  
$
-
  
$
425.7
  
Surrender charges
    
18.3
   
6.6
   
1.7
   
0.0
   
-
   
-
   
-
   
-
   
-
   
-
   
26.6
 
Mortality assessments
    
278.9
   
-
   
-
   
7.2
   
-
   
-
   
8.7
   
-
   
-
   
-
   
294.9
 
Expense assessments
    
83.6
   
189.3
   
54.0
   
4.5
   
-
   
-
   
23.9
   
-
   
(0.0
)
  
-
   
355.3
 
Investment advisory fees
    
-
   
-
   
-
   
-
   
-
   
106.1
   
-
   
-
   
-
   
(23.3
)
  
82.9
 
Communications revenue
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
59.8
   
-
   
-
   
59.8
 
Net investment income
    
414.4
   
312.7
   
184.6
   
91.0
   
27.1
   
-
   
18.6
   
0.1
   
60.3
   
(0.7
)
  
1,107.9
 
Amortization of deferred gain
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
18.8
   
-
   
18.8
 
Other revenue and fees
    
13.1
   
75.7
   
4.9
   
1.3
   
0.9
   
34.3
   
0.0
   
-
   
5.8
   
(10.3
)
  
125.6
 
Total Operating Revenue
    
895.3
   
596.5
   
245.1
   
104.3
   
332.1
   
140.4
   
72.3
   
60.0
   
85.7
   
(34.3
)
  
2,497.4
 
 
          
 
 
  
 
    
 
    
 
 
  
 
    
 
    
 
    
 
    
 
    
 
  
Operating Expenses
                                                                    
Insurance benefits
    
261.1
   
27.4
   
-
   
35.6
   
213.3
   
-
   
25.0
   
-
   
3.9
   
-
   
566.2
 
Interest credited to
contractholder funds
    
247.1
   
208.2
   
103.1
   
39.9
   
-
   
-
   
-
   
-
   
36.1
   
-
   
634.4
 
Communications expenses
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
31.4
   
-
   
-
   
31.4
 
Operating and acquisition expenses
    
179.3
   
222.4
   
73.2
   
10.3
   
66.8
   
117.6
   
34.5
   
4.1
   
3.3
   
(33.8
)
  
677.6
 
Taxes, licenses and fees
    
28.3
   
4.8
   
1.3
   
1.4
   
7.8
   
2.7
   
-
   
1.5
   
2.6
   
(0.0
)
  
50.3
 
Interest
    
-
   
0.1
   
-
   
-
   
-
   
-
   
-
   
0.4
   
67.2
   
(0.5
)
  
67.3
 
Total Operating Expenses
    
715.7
   
462.9
   
177.6
   
87.2
   
287.9
   
120.3
   
59.5
   
37.4
   
113.1
   
(34.3
)
  
2,027.3
 
 
          
 
    
 
 
  
 
    
 
 
  
 
    
 
    
 
    
 
    
 
    
 
  
Income (Loss) from Operations
before Federal income taxes
179.6
   
133.6
   
67.5
   
17.1
   
44.2
   
20.1
   
12.8
   
22.6
   
(27.4
)
  
-
   
470.1
 
 
                
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
 
  
 
  
Federal income taxes
    
56.8
   
4.2
   
15.0
   
4.3
   
15.5
   
6.7
   
4.5
   
8.0
   
(15.9
)
  
-
   
99.0
 
                                                                     
Income from Operations
  
$
122.8
  
$
129.4
  
$
52.5
  
$
12.8
  
$
28.8
  
$
13.4
  
$
8.3
  
$
14.6
  
$
(11.5
)
$
-
  
$
371.1
  
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 9
 
Consolidating Statements of Income from Operations
Unaudited [Millions of Dollars]
For the Quarter Ended September 30, 2005

   
Individual Markets
  
Employer Markets
                          
   
Life
  
Annuities
  
Defined
Contribution
  
Executive
Benefits
  
Group
Protection
  
Investment
Management
  
Lincoln
UK
  
Lincoln
Financial
Media
  
Other
Operations
  
Consolidating
Adjustments
  
Consolidated
  
 
                                              
Operating Revenue
                                              
Premiums
  
$
47.4
  
$
10.7
  
$
-
  
$
7.4
  
$
-
  
$
-
  
$
16.9
  
$
-
  
$
0.6
  
$
-
  
$
83.1
  
Surrender charges
    
10.9
   
5.0
   
2.8
   
(0.1
)
  
-
   
-
   
-
   
-
   
-
   
-
   
18.6
 
Mortality assessments
    
127.7
   
-
   
-
   
2.0
   
-
   
-
   
9.0
   
-
   
-
   
-
   
138.8
 
Expense assessments
    
31.7
   
147.7
   
51.8
   
3.7
   
-
   
-
   
56.0
   
-
   
-
   
-
   
290.8
 
Investment advisory fees
    
-
   
-
   
-
   
-
   
-
   
92.8
   
-
   
-
   
-
   
(24.9
)
  
67.9
 
Communications revenue
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Net investment income
    
229.5
   
151.7
   
177.5
   
45.1
   
-
   
-
   
20.9
   
-
   
47.1
   
(0.9
)
  
670.9
 
Amortization of deferred gain
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
18.9
   
-
   
18.9
 
Other revenue and fees
    
11.2
   
47.3
   
6.6
   
1.3
   
-
   
30.4
   
-
   
-
   
1.2
   
3.9
   
101.8
 
Total Operating Revenue
    
458.5
   
362.4
   
238.7
   
59.4
   
-
   
123.2
   
102.9
   
-
   
67.9
   
(22.0
)
  
1,391.0
 
 
          
 
    
 
    
 
    
-
   
 
 
  
 
    
 
    
 
    
 
    
 
 
Operating Expenses
                                                                    
Insurance benefits
    
109.9
   
20.5
   
-
   
39.9
   
-
   
-
   
35.5
   
-
   
0.8
   
-
   
206.7
 
Interest credited to
contractholder funds
    
140.9
   
97.3
   
100.7
   
10.4
   
-
   
-
   
-
   
-
   
33.3
   
-
   
382.6
 
Communications expenses
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Operating and acquisition expenses
98.5
   
134.7
   
63.0
   
4.9
   
-
   
112.5
   
52.7
   
-
   
15.0
   
(21.3
)
  
460.0
 
Taxes, licenses and fees
    
12.4
   
5.0
   
(0.8
)
  
1.5
   
-
   
2.5
   
-
   
-
   
0.7
   
-
   
21.4
 
Interest
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
22.1
   
(0.7
)
  
21.4
 
Total Operating Expenses
    
361.8
   
257.6
   
162.9
   
56.8
   
-
   
115.0
   
88.2
   
-
   
71.9
   
(22.0
)
  
1,092.1
 
 
          
 
    
 
 
  
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
 
Income (Loss) from Operations
before Federal income taxes
    
96.7
   
104.8
   
75.8
   
2.7
   
-
   
8.2
   
14.7
   
-
   
(4.0
)
  
-
   
298.8
 
 
          
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
  
Federal income taxes
    
31.8
   
25.8
   
22.4
   
0.2
   
-
   
3.4
   
5.1
   
-
   
(16.3
)
  
-
   
72.4
 
                                                                     
Income from Operations
  
$
64.9
  
$
79.0
  
$
53.4
  
$
2.5
  
$
-
  
$
4.8
  
$
9.6
  
$
-
  
$
12.2
  
$
-
  
$
226.3
  
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 10
 
Consolidating Statements of Income from Operations
Unaudited [Millions of Dollars]
Nine Months Ended September 30, 2006
 
   
Individual Markets
  
Employer Markets
                          
   
Life
  
Annuities
  
Defined
Contribution
  
Executive
Benefits
  
Group
Protection
  
Investment
Management
  
Lincoln
UK
  
Lincoln
Financial
Media
  
Other
Operations
  
Consolidating
Adjustments
  
Consolidated
  
 
                                              
Operating Revenue
                                              
Premiums
  
$
228.0
  
$
36.8
  
$
-
  
$
1.4
  
$
633.1
  
$
-
  
$
57.6
  
$
-
  
$
1.6
  
$
-
  
$
958.4
  
Surrender charges
    
44.2
   
22.4
   
6.1
   
0.0
   
-
   
-
   
-
   
-
   
-
   
-
   
72.6
 
Mortality assessments
    
691.9
   
-
   
-
   
18.5
   
-
   
-
   
25.4
   
-
   
(0.0
)
  
-
   
735.8
 
Expense assessments
    
228.5
   
540.0
   
164.3
   
12.6
   
-
   
-
   
86.7
   
-
   
0.3
   
-
   
1,032.4
 
Investment advisory fees
    
-
   
-
   
-
   
-
   
-
   
313.6
   
-
   
-
   
-
   
(71.8
)
  
241.8
 
Communications revenue
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
117.3
   
-
   
-
   
117.3
 
Net investment income
    
1,069.8
   
723.8
   
557.8
   
226.1
   
52.2
   
-
   
53.4
   
0.3
   
173.3
   
(2.4
)
  
2,854.5
 
Amortization of deferred gain
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
56.3
   
-
   
56.3
 
Other revenue and fees
    
35.0
   
200.8
   
15.1
   
4.0
   
1.7
   
101.0
   
0.1
   
-
   
12.1
   
(18.7
)
  
351.0
 
Total Operating Revenue
    
2,297.4
   
1,523.9
   
743.2
   
262.7
   
687.0
   
414.6
   
223.2
   
117.7
   
243.5
   
(92.9
)
  
6,420.3
 
 
          
 
    
 
    
 
    
 
 
  
 
    
 
    
 
    
 
    
 
    
 
 
Operating Expenses
                                                                    
Insurance benefits
    
637.3
   
93.1
   
0.0
   
98.8
   
439.3
   
-
   
77.8
   
-
   
9.6
   
-
   
1,356.0
 
Interest credited to
contractholder funds
    
630.8
   
472.1
   
306.2
   
89.4
   
-
   
-
   
-
   
-
   
106.6
   
-
   
1,605.0
 
Communications expenses
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
61.2
   
-
   
-
   
61.2
 
Operating and acquisition expenses
    
451.2
   
601.6
   
210.2
   
19.7
   
130.8
   
342.9
   
100.9
   
11.9
   
39.6
   
(91.2
)
  
1,817.5
 
Taxes, licenses and fees
    
72.1
   
14.9
   
7.1
   
3.7
   
15.8
   
9.9
   
-
   
1.5
   
6.0
   
0.0
   
131.0
 
Interest
    
0.0
   
0.3
   
0.0
   
-
   
-
   
-
   
-
   
0.9
   
154.2
   
(1.7
)
  
153.8
 
Total Operating Expenses
    
1,791.4
   
1,182.0
   
523.5
   
211.5
   
585.9
   
352.7
   
178.8
   
75.5
   
316.0
   
(92.9
)
  
5,124.4
 
 
          
 
    
 
    
 
    
 
 
  
 
    
 
    
 
    
 
    
 
    
 
  
Income (Loss) from Operations
before Federal income taxes
    
505.9
   
341.8
   
219.7
   
51.1
   
101.2
   
61.9
   
44.4
   
42.2
   
(72.4
)
  
-
   
1,295.8
 
 
          
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
 
  
 
  
Federal income taxes
    
167.0
   
57.0
   
60.4
   
14.6
   
35.4
   
21.2
   
15.5
   
15.7
   
(35.0
)
  
-
   
351.8
 
                                                                     
Income from Operations
  
$
339.0
  
$
284.8
  
$
159.3
  
$
36.5
  
$
65.8
  
$
40.8
  
$
28.9
  
$
26.5
  
$
(37.4
)
$
-
  
$
944.1
  
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 11
 
Consolidating Statements of Income from Operations
Unaudited [Millions of Dollars]
Nine Months Ended September 30, 2005
 
   
Individual Markets
 
Employer Markets
                          
   
Life
  
Annuities
  
Defined
Contribution
  
Executive
Benefits
  
Group
Protection
  
Investment
Management
  
Lincoln
UK
  
Lincoln
Financial
Media
  
Other
Operations
  
Consolidating
Adjustments
  
Consolidated
  
 
                                              
Operating Revenue
                                              
Premiums
  
$
140.7
  
$
28.6
  
$
-
  
$
7.9
  
$
-
  
$
-
  
$
47.9
  
$
-
  
$
0.9
  
$
-
  
$
226.0
  
Surrender charges
    
32.3
   
15.5
   
7.9
   
(0.4
)
  
-
   
-
   
-
   
-
   
-
   
-
   
55.3
 
Mortality assessments
    
389.4
   
-
   
-
   
6.3
   
-
   
-
   
27.4
   
-
   
-
   
-
   
423.2
 
Expense assessments
    
130.9
   
403.9
   
148.9
   
12.5
   
-
   
-
   
119.6
   
-
   
-
   
-
   
815.9
 
Investment advisory fees
    
-
   
-
   
-
   
-
   
-
   
259.2
   
-
   
-
   
-
   
(74.3
)
  
184.9
 
Communications revenue
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Net investment income
    
681.2
   
463.4
   
530.2
   
135.7
   
-
   
-
   
60.8
   
-
   
166.0
   
(3.0
)
  
2,034.4
 
Amortization of deferred gain
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
56.8
   
-
   
56.8
 
Other revenue and fees
    
34.9
   
139.0
   
19.3
   
3.8
   
-
   
88.1
   
0.1
   
-
   
3.6
   
(3.6
)
  
285.0
 
Total Operating Revenue
    
1,409.4
   
1,050.4
   
706.3
   
165.8
   
-
   
347.4
   
255.8
   
-
   
227.3
   
(80.9
)
  
4,081.5
 
 
          
 
    
 
    
 
    
 
    
 
 
  
 
    
 
    
 
    
 
    
 
  
Operating Expenses
                                                                    
Insurance benefits
    
342.8
   
73.1
   
-
   
102.5
   
-
   
-
   
88.5
   
-
   
0.6
   
-
   
607.5
 
Interest credited to
contractholder funds
    
417.8
   
296.4
   
300.7
   
29.4
   
-
   
-
   
-
   
-
   
98.6
   
-
   
1,142.8
 
Communications expenses
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Operating and acquisition expenses
    
331.2
   
434.4
   
200.8
   
18.4
   
-
   
326.8
   
121.4
   
-
   
61.6
   
(78.7
)
  
1,415.8
 
Taxes, licenses and fees
    
41.8
   
15.2
   
6.5
   
3.4
   
-
   
7.8
   
-
   
-
   
3.3
   
-
   
78.2
 
Interest
    
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
67.6
   
(2.2
)
  
65.4
 
Total Operating Expenses
    
1,133.6
   
819.1
   
508.0
   
153.7
   
-
   
334.6
   
210.0
   
-
   
231.7
   
(80.9
)
  
3,309.8
 
 
          
 
    
 
    
 
    
 
    
 
    
 
 
  
 
    
-
   
 
    
 
 
Income (Loss) from Operations
before Federal income taxes
    
275.9
   
231.3
   
198.3
   
12.1
   
-
   
12.8
   
45.9
   
-
   
(4.4
)
  
-
   
771.7
 
 
          
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
 
  
 
  
Federal income taxes
    
90.2
   
50.1
   
56.4
   
2.0
   
-
   
4.9
   
16.1
   
-
   
(49.2
)
  
-
   
170.5
 
                                                                     
Income from Operations
  
$
185.7
  
$
181.1
  
$
141.9
  
$
10.1
  
$
-
  
$
7.9
  
$
29.7
  
$
-
  
$
44.7
  
$
-
  
$
601.2
  
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 12
 
Consolidated Balance Sheet
Unaudited [Millions of Dollars, except Common Share Data]

   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
ASSETS
                      
                       
Investments
                      
Corporate bonds
  
$
26,453.6
  
$
25,860.7
  
$
25,418.0
  
$
43,881.6
  
$
45,345.3
  
U.S. government bonds
    
158.3
   
161.8
   
173.4
   
287.6
   
291.6
 
Foreign government bonds
    
1,195.0
   
1,203.3
   
1,169.7
   
1,188.0
   
1,144.4
 
Mortgage backed securities
    
6,237.1
   
5,951.2
   
5,868.8
   
8,370.3
   
8,765.1
 
State and municipal bonds
    
157.9
   
128.8
   
126.0
   
166.5
   
160.7
 
Preferred stocks - redeemable
    
123.0
   
137.4
   
136.9
   
130.1
   
117.8
 
Common stocks
    
62.2
   
55.9
   
61.0
   
458.8
   
506.3
 
Preferred stocks-equity
    
89.4
   
88.8
   
115.0
   
119.7
   
155.7
 
Total AFS Securities
    
34,476.5
   
33,587.9
   
33,068.8
   
54,602.6
   
56,486.9
 
Trading securities
    
3,287.0
   
3,246.0
   
3,190.1
   
3,109.0
   
3,172.5
 
Mortgage loans
    
3,696.2
   
3,662.6
   
3,586.2
   
7,741.2
   
7,580.5
 
Real estate
    
196.6
   
182.7
   
180.4
   
428.6
   
424.0
 
Policy loans
    
1,856.4
   
1,862.2
   
1,860.4
   
2,716.4
   
2,724.9
 
Other long-term investments
    
572.3
   
626.9
   
687.5
   
1,116.6
   
1,218.7
 
Total Investments
    
44,085.0
   
43,168.4
   
42,573.2
   
69,714.4
   
71,607.5
 
                       
 
    
 
  
Cash and invested cash
    
1,601.9
   
2,311.7
   
1,974.0
   
1,499.8
   
1,108.3
 
Premiums and fees receivable
    
332.6
   
343.2
   
363.2
   
343.9
   
345.6
 
Accrued investment income
    
565.2
   
526.4
   
532.1
   
879.0
   
928.2
 
Amount recoverable from reinsurers
    
7,211.0
   
6,926.3
   
6,899.4
   
7,967.2
   
8,007.3
 
Deferred acquisition costs and VOBA
    
4,989.0
   
5,163.2
   
5,433.7
   
8,328.4
   
8,171.6
 
Goodwill
    
1,194.6
   
1,194.2
   
1,194.4
   
4,502.6
   
4,498.0
 
Other
    
1,379.5
   
1,479.3
   
1,517.7
   
3,049.6
   
2,703.1
 
Assets held in separate accounts
    
60,811.5
   
63,746.8
   
67,984.2
   
71,095.2
   
74,357.1
 
Total Assets
  
$
122,170.2
  
$
124,859.6
  
$
128,472.0
  
$
167,380.0
  
$
171,726.6
  
                       
 
 
  
 
 
LIABILITIES and SHAREHOLDERS' EQUITY
                                
                                 
Liabilities
                                
Insurance and Investment Contract Liabilities:
                                
Reserves
  
$
10,981.4
  
$
10,659.7
  
$
10,657.2
  
$
13,512.1
  
$
13,513.4
  
Unpaid claims
    
1,038.9
   
1,042.9
   
981.3
   
1,211.7
   
1,206.9
 
Premium deposit funds
    
21,932.7
   
21,713.3
   
21,448.6
   
21,198.4
   
20,708.6
 
Policyholders' funds
    
13,637.9
   
13,878.8
   
13,991.5
   
37,430.3
   
37,808.3
 
Total Insurance and Investment Contract Liabilities
    
47,590.9
   
47,294.8
   
47,078.6
   
73,352.5
   
73,237.2
 
 
                            
 
  
Short-term debt
    
165.1
   
119.9
   
10.6
   
561.0
   
559.2
 
Long-term debt - senior notes
    
999.5
   
999.0
   
998.5
   
2,329.1
   
2,330.4
 
Long-term debt - subordinated
                                
Capital securities
    
-
   
-
   
-
   
1,071.8
   
1,071.9
 
Junior subordinated debentures issued to
                               
affiliated trusts
    
335.9
   
334.0
   
332.3
   
330.5
   
332.5
 
Embedded derivative - modco
    
314.1
   
292.2
   
192.0
   
126.7
   
232.5
 
Deferred gain on indemnity reinsurance
    
855.2
   
836.0
   
816.9
   
797.8
   
778.7
 
Federal income taxes
    
31.5
   
19.8
   
-
   
563.8
   
911.1
 
Other liabilities
    
4,782.1
   
4,832.8
   
4,720.7
   
5,746.7
   
5,872.8
 
Liabilities related to separate accounts
    
60,811.5
   
63,746.8
   
67,984.2
   
71,095.2
   
74,357.1
 
Total Liabilities
    
115,885.8
   
118,475.2
   
122,133.8
   
155,975.2
   
159,683.5
 
                       
 
 
  
 
  
Preferred Stock
    
0.5
   
0.5
   
0.5
   
0.5
   
0.5
 
Capital stock
    
1,740.2
   
1,774.6
   
1,817.5
   
7,425.7
   
7,448.7
 
Retained earnings
    
3,922.8
   
4,081.5
   
4,235.2
   
4,013.7
   
3,986.7
 
Unrealized gains on investments
    
569.0
   
496.6
   
220.2
   
(151.5
)
  
478.0
 
Gains - derivatives
    
8.9
   
7.3
   
35.2
   
51.5
   
55.9
 
Foreign currency
    
99.6
   
83.4
   
89.7
   
128.5
   
136.5
 
Minimum pension liability
    
(56.6
)
  
(59.5
)
  
(60.1
)
  
(63.6
)
  
(63.2
)
Total Shareholders' Equity
    
6,284.4
   
6,384.4
   
6,338.2
   
11,404.8
   
12,043.2
 
                       
 
    
 
  
Total Liabilities and Shareholders' Equity
  
$
122,170.2
  
$
124,859.6
  
$
128,472.0
  
$
167,380.0
  
$
171,726.6
  
                       
 
 
  
 
 
Shareholders' Equity Per Share
  
$
36.23
  
$
36.69
  
$
35.99
  
$
40.48
  
$
43.39
  
                                 
Book Value, Excluding AOCI
  
$
32.65
  
$
33.66
  
$
34.37
  
$
40.60
  
$
41.20
  
Common shares outstanding (in millions)
    
173.5
   
174.0
   
176.1
   
281.8
   
277.6
 
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 13
 
Balance Sheet Data - Segment Highlights
Unaudited [Millions of Dollars]

   
Individual
  
Employer
                      
   
Markets
  
Markets
                      
As of September 30, 2006
  
Annuities
  
Life
  
Defined Contribution
  
Executive Benefits
  
Group Protection
  
Investment Management
  
Lincoln UK
  
Lincoln Financial Media
  
Other Operations (1)
  
Consolidated
  
                                           
Assets
                                          
Allocated Investments
  
$
19,004.9
  
$
27,376.5
  
$
11,900.1
  
$
5,723.8
  
$
1,804.6
  
$
-
  
$
1,070.6
  
$
-
  
$
4,727.1
  
$
71,607.5
  
DAC and VOBA
    
1,974.1
   
4,524.7
   
503.8
   
258.0
   
126.1
   
-
   
783.4
   
-
   
1.5
   
8,171.6
 
Goodwill
    
1,031.6
   
2,181.3
   
20.2
   
-
   
281.0
   
260.8
   
15.5
   
707.6
   
-
   
4,498.0
 
Other intangibles
    
173.4
   
98.0
   
-
   
-
   
-
   
9.0
   
-
   
665.0
   
-
   
945.3
 
Amounts recoverable from reinsurers
    
928.0
   
1,759.5
   
-
   
4.4
   
28.7
   
-
   
67.3
   
-
   
5,219.5
   
8,007.3
 
Assets held in separate accounts
    
43,823.8
   
4,678.1
   
16,514.7
   
807.4
   
-
   
-
   
8,118.1
   
-
   
415.1
   
74,357.1
 
                                                               
Liabilities and Capital
                                                              
Insurance and Investment Contract Liabilities:
                                                      
Insurance policy & claim reserves
    
473.0
   
5,606.4
   
0.0
   
1,777.9
   
1,164.4
   
-
   
1,073.1
   
-
   
4,625.6
   
14,720.3
 
Contractholder funds
    
18,660.9
   
23,002.5
   
11,040.9
   
3,666.7
   
16.6
   
-
   
424.7
   
-
   
1,704.6
   
58,516.9
 
Total Insurance and Inv Contract Liabilities
    
19,133.9
   
28,608.9
   
11,040.9
   
5,444.6
   
1,181.0
   
-
   
1,497.8
   
-
   
6,330.2
   
73,237.2
 
 
          
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
    
 
  
Allocated capital (2)
  
$
3,334.8
  
$
7,214.7
  
$
954.7
  
$
524.7
    
903.8
   
327.8
   
399.7
   
874.9
   
(3,099.1
)
$
11,436.0
  
                                                               
                                                               
As of December 31, 2005
                                                              
                                                               
Assets
                                                              
Allocated Investments
  
$
8,104.7
  
$
14,990.3
  
$
13,666.6
  
$
2,879.4
  
$
-
  
$
-
  
$
996.6
  
$
-
  
$
2,530.8
  
$
43,168.4
  
DAC and VOBA
    
1,559.3
   
2,543.9
   
151.6
   
113.6
   
-
   
-
   
743.4
   
-
   
51.4
   
5,163.2
 
Goodwill
    
43.9
   
855.1
   
20.2
   
-
   
-
   
260.8
   
14.3
   
-
   
-
   
1,194.2
 
Other intangibles
    
129.4
   
-
   
-
   
-
   
-
   
13.9
   
-
   
-
   
-
   
143.3
 
Amounts recoverable from reinsurers
    
1,085.9
   
1,270.2
   
-
   
2.8
   
-
   
-
   
59.9
   
-
   
4,507.5
   
6,926.3
 
Assets held in separate accounts
    
37,903.9
   
2,482.7
   
15,243.9
   
796.7
   
-
   
-
   
7,319.6
   
-
   
-
   
63,746.8
 
                                                               
Liabilities and Capital
                                                              
Insurance and Investment Contract Liabilities:
                                                
Insurance policy & claim reserves
    
439.6
   
3,561.2
   
-
   
1,914.9
   
-
   
-
   
1,013.7
   
-
   
4,773.2
   
11,702.7
 
Contractholder funds
    
8,619.8
   
12,868.0
   
11,033.4
   
752.4
   
-
   
-
   
396.4
   
-
   
1,922.1
   
35,592.1
 
Total Insurance and Inv Contract Liabilities
    
9,059.4
   
16,429.2
   
11,033.4
   
2,667.3
   
-
   
-
   
1,410.1
   
-
   
6,633.0
   
47,232.4
 
                                                               
Allocated capital (2)
    
1,785.0
   
3,231.9
   
978.7
   
346.0
   
-
   
360.0
   
430.6
   
-
   
(1,275.6
)
$
5,856.6
  
 
(1)
Includes consolidating adjustments.
(2)
Allocated capital is based on internal economic capital models plus certain other items (principally intangibles including DAC and VOBA, goodwill and other items).
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 14
 
Individual Markets - Individual Life Insurance
Income Statements & Operational Data

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Premiums
  
$
47.4
  
$
57.7
  
$
51.1
  
$
89.9
  
$
87.0
    
83.5
%
$
140.7
  
$
228.0
    
62.0
%
Surrender charges
    
10.9
   
11.6
   
10.3
   
15.5
   
18.3
   
67.9
%
  
32.3
   
44.2
   
36.8
%
Mortality assessments
    
127.7
   
135.3
   
135.6
   
277.3
   
278.9
   
118.4
%
  
389.4
   
691.9
   
77.7
%
Expense assessments
    
31.7
   
58.8
   
54.3
   
90.6
   
83.6
   
163.7
%
  
130.9
   
228.5
   
74.6
%
Net investment income
    
229.5
   
227.5
   
239.5
   
415.9
   
414.4
   
80.6
%
  
681.2
   
1,069.8
   
57.0
%
Other revenue and fees
    
11.2
   
10.3
   
9.7
   
12.2
   
13.1
   
17.0
%
  
34.9
   
35.0
   
0.3
%
Total Operating Revenue
    
458.5
   
501.1
   
500.6
   
901.4
   
895.3
   
95.3
%
  
1,409.4
   
2,297.4
   
63.0
%
 
                                        
 
    
 
        
Operating Expenses
                                                        
Insurance benefits
    
109.9
   
118.6
   
120.2
   
256.0
   
261.1
   
137.6
%
  
342.8
   
637.3
   
85.9
%
Interest credited to contractholder funds
    
140.9
   
142.1
   
142.2
   
241.5
   
247.1
   
75.4
%
  
417.8
   
630.8
   
51.0
%
Operating and acquisition expenses
    
110.9
   
130.1
   
132.8
   
182.9
   
207.6
   
87.2
%
  
373.0
   
523.3
   
40.3
%
Total Operating Expenses
    
361.8
   
390.8
   
395.3
   
680.4
   
715.7
   
97.8
%
  
1,133.6
   
1,791.4
   
58.0
%
 
                                              
 
        
Income from operations before Federal
income taxes
    
96.7
   
110.4
   
105.3
   
221.0
   
179.6
   
85.7
%
  
275.9
   
505.9
   
83.4
%
Federal income taxes
    
31.8
   
36.5
   
36.3
   
73.9
   
56.8
   
78.6
%
  
90.2
   
167.0
   
85.1
%
                                                         
Income from Operations
  
$
64.9
  
$
73.8
  
$
69.0
  
$
147.1
  
$
122.8
    
89.2
%
$
185.7
  
$
339.0
    
82.6
%
 
                                        
 
    
 
        
Effective tax rate
    
32.8
%
  
33.1
%
  
34.5
%
  
33.4
%
  
31.6
%
        
32.7
%
  
33.0
%
      
                                                         
Average equity
  
$
3,212.8
  
$
3,278.0
  
$
3,266.0
  
$
7,051.8
  
$
7,223.9
        
$
3,182.7
  
$
5,847.2
        
Return on average equity
    
8.1
%
  
9.0
%
  
8.5
%
  
8.3
%
  
6.8
%
        
7.8
%
  
7.7
%
      
                                                         
Operating and Acquisition Expenses
                                                        
Commissions
  
$
43.4
  
$
50.3
  
$
44.2
  
$
125.4
  
$
141.4
    
226.1
%
$
116.2
  
$
311.0
    
167.6
%
General and administrative expenses
    
105.3
   
105.6
   
88.9
   
123.0
   
148.2
   
40.7
%
  
291.6
   
360.1
   
23.5
%
Taxes, licenses and fees
    
12.4
   
12.9
   
16.3
   
27.5
   
28.3
   
127.5
%
  
41.8
   
72.1
   
72.5
%
Total commissions and expenses incurred
   
161.1
   
168.7
   
149.4
   
275.9
   
317.9
   
97.3
%
  
449.6
   
743.2
   
65.3
%
Less: commissions and expenses capitalized
    
(94.7
)
  
(113.8
)
  
(90.1
)
  
(199.8
)
  
(226.6
)
  
NM
    
(260.0
)
  
(516.5
)
  
-98.7
%
Amortization of DAC and VOBA
    
44.6
   
75.2
   
73.6
   
106.7
   
116.3
   
161.1
%
  
183.5
   
296.6
   
61.6
%
Net Operating and Acquisition Expenses
  
$
110.9
  
$
130.1
  
$
132.8
  
$
182.9
  
$
207.6
    
87.1
%
$
373.0
  
$
523.3
    
40.3
%
 
          
 
    
 
    
 
    
 
 
        
 
    
 
        
General and administrative expenses -
                                                       
basis points on account values - Annualized
    
309
   
304
   
251
   
194
   
231
   
(78
)
  
288
   
221
   
(67
)
                                                         
                                                         
Roll Forward of Deferred Acquisition Costs & Value of Business Acquired
                                
                                                         
Balance at beginning of period
  
$
2,350.0
  
$
2,479.9
  
$
2,543.9
  
$
2,643.8
  
$
4,592.2
        
$
2,359.0
  
$
2,543.9
        
Deferral
    
94.7
   
113.8
   
90.1
   
199.8
   
226.6
         
260.0
   
516.5
       
Amortization
    
(44.6
)
  
(75.2
)
  
(73.6
)
  
(106.7
)
  
(116.3
)
        
(183.5
)
  
(296.6
)
      
Included in Total Operating Expenses
    
50.1
   
38.6
   
16.6
   
93.0
   
110.3
         
76.4
   
219.9
       
Adjustment related to realized (gains) losses
                                                        
on available-for-sale securities
    
(6.1
)
  
(1.2
)
  
(3.4
)
  
(7.9
)
  
(3.8
)
        
(14.2
)
  
(15.1
)
      
Adjustment related to unrealized (gains) losses
                                                        
on available-for-sale securities
    
85.9
   
26.5
   
86.7
   
96.7
   
(174.0
)
        
58.5
   
9.4
       
Business acquired
                      
1,766.6
   
-
         
-
   
1,766.6
       
Other
    
-
    
0.1
   
-
    
-
   
-
         
0.1
   
-
        
Balance at end of period
  
$
2,479.9
  
$
2,543.9
  
$
2,643.8
  
$
4,592.2
  
$
4,524.7
        
$
2,479.9
  
$
4,524.7
        
     
 
 
  
 
 
  
 
 
  
 
    
 
 
        
 
 
  
 
        
Roll Forward of Deferred Front-End Loads
                                                        
                                                         
Balance at beginning of period
  
$
315.9
  
$
338.5
  
$
342.6
  
$
344.3
  
$
375.3
        
$
311.1
  
$
342.6
        
Deferral
    
19.0
   
21.8
   
19.7
   
57.8
   
58.9
         
59.2
   
136.4
       
Amortization
    
3.6
   
(17.6
)
  
(18.0
)
  
(26.8
)
  
(18.3
)
        
(31.9
)
  
(63.1
)
      
Included in Expense Assessments
    
22.6
   
4.2
   
1.7
   
31.0
   
40.6
         
27.3
   
73.3
       
Balance at end of period
  
$
338.5
  
$
342.6
  
$
344.3
  
$
375.3
  
$
415.9
        
$
338.5
  
$
415.9
        
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 15
 
Individual Markets- Individual Life Insurance
Operational Data
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Sales by Product(Millions)(1)
                                      
Universal Life
                                     
Excluding MoneyGuard
  
$
46.3
  
$
59.6
  
$
41.3
  
$
97.5
  
$
119.9
    
159.0
%
$
132.1
  
$
258.6
    
95.8
%
MoneyGuard
    
9.1
   
9.4
   
7.7
   
7.5
   
8.3
   
-8.8
%
  
24.5
   
23.5
   
-4.1
%
Total
    
55.4
   
69.0
   
49.0
   
105.0
   
128.2
   
131.4
%
  
156.6
   
282.1
   
80.1
%
Variable universal life
    
9.1
   
13.4
   
10.0
   
15.7
   
13.0
   
42.9
%
  
28.8
   
38.7
   
34.4
%
Whole life
    
0.4
   
0.4
   
0.7
   
0.4
   
0.7
   
75.0
%
  
1.4
   
1.7
   
21.4
%
Term
    
8.1
   
7.9
   
8.2
   
11.3
   
10.7
   
32.1
%
  
25.8
   
30.2
   
17.1
%
Total
 
$
72.9
  
$
90.7
  
$
67.9
  
$
132.3
  
$
152.5
    
109.2
%
$
212.6
  
$
352.8
    
65.9
%
                                                         
                                                         
                                                         
First-Year Paid Premiums (Millions)
                                                        
Universal Life
                                                       
Excluding MoneyGuard
  
$
102.3
  
$
144.0
  
$
108.2
  
$
261.2
  
$
269.0
    
163.0
%
$
292.3
  
$
638.5
    
118.4
%
MoneyGuard
    
60.8
   
62.5
   
51.5
   
50.0
   
54.8
   
-9.9
%
  
163.6
   
156.4
   
-4.4
%
Total
    
163.1
   
206.5
   
159.7
   
311.2
   
323.9
   
98.6
%
  
455.9
   
794.8
   
74.3
%
Variable universal life
    
23.4
   
33.4
   
27.1
   
40.5
   
34.4
   
47.0
%
  
73.1
   
102.0
   
39.5
%
Whole life
    
10.2
   
14.4
   
8.3
   
9.5
   
12.0
   
17.6
%
  
26.3
   
29.8
   
13.3
%
Term
    
8.6
   
8.4
   
8.6
   
11.5
   
10.4
   
20.9
%
  
27.5
   
30.4
   
10.5
%
Total
 
$
205.3
  
$
262.7
  
$
203.7
  
$
372.7
  
$
380.6
    
85.4
%
$
582.8
  
$
957.0
    
64.2
%
                                                         
                                                         
                                                         
Life Insurance In-Force (Billions)
                                                        
Universal life & other
  
$
126.976
  
$
128.791
  
$
129.584
  
$
260.945
  
$
263.485
    
107.5
%
$
126.976
  
$
263.485
    
107.5
%
Term insurance
    
184.334
   
187.850
   
191.825
   
229.082
   
232.214
   
26.0
%
  
184.334
   
232.214
   
26.0
%
Total Life Segment In-Force
  
$
311.310
  
$
316.641
  
$
321.409
  
$
490.027
  
$
495.699
    
59.2
%
$
311.310
  
$
495.699
    
59.2
%

(1)
Sales for Individual Life Insurance consist of first year commissionable premium for Universal life ("UL"), including Moneyguard, including UL internal replacements, and first year paid premiums for Whole life and Term products.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 

9/30/2006
PAGE 16

Individual Markets - Individual Life Insurance
Account Value Roll Forward
Unaudited [Billions of Dollars]
 
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Interest Sensitive Life-Balance
Beginning-of-Period 
  
$
11.443
  
$
11.591
  
$
11.809
  
$
11.913
  
$
21.285
    
86.0
%
$
11.232
  
$
11.809
    
5.1
%
Business acquired
    
-
   
-
   
-
   
9.150
   
-
   
NM
    
-
   
9.150
   
NM
  
Deposits
    
0.415
   
0.499
   
0.401
   
0.799
   
0.717
   
72.8
%
  
1.186
   
1.917
   
61.6
%
Withdrawals & deaths
    
(0.161
)
  
(0.160
)
  
(0.182
)
  
(0.317
)
  
(0.275
)
  
-70.8
%
  
(0.515
)
  
(0.775
)
  
-50.5
%
Net flows
   
0.253
   
0.339
    
0.219
   
0.482
   
0.442
   
74.7
%
  
0.670
   
1.143
   
70.6
%
Policyholder assessments
    
(0.242
)
  
(0.257
)
  
(0.250
)
  
(0.493
)
  
(0.451
)
  
-86.4
%
  
(0.719
)
  
(1.194
)
  
-66.1
%
Interest credited
    
0.136
   
0.136
   
0.135
   
0.233
   
0.241
   
77.2
%
  
0.408
   
0.609
   
49.3
%
Interest Sensitive Life-Balance
End-of-Period (1)
  
$
11.591
  
$
11.809
  
$
11.913
  
$
21.285
  
$
21.516
    
85.6
%
$
11.591
  
$
21.516
    
85.6
%
 
          
 
    
 
    
 
    
 
          
 
    
 
        
Variable Universal Life-Balance
Beginning of Period
 
$
2.053
  
$
2.154
  
$
2.242
  
$
2.355
  
$
4.194
    
104.3
%
$
2.028
  
$
2.242
    
10.6
%
Business acquired
    
-
   
-
   
-
   
1.918
   
-
   
NM
    
-
   
1.918
   
NM
  
Deposits
    
0.082
   
0.097
   
0.087
   
0.224
   
0.036
   
-56.1
%
  
0.249
   
0.346
   
39.0
%
Withdrawals & deaths
    
(0.041
)
  
(0.036
)
  
(0.049
)
  
(0.158
)
  
0.013
   
NM
 
  
(0.125
)
  
(0.194
)
  
-55.2
%
Net flows
   
0.041
   
0.061
   
0.038
   
0.066
   
0.049
   
19.5
%
  
0.124
   
0.153
   
23.4
%
Policyholder assessments
    
(0.043
)
  
(0.044
)
  
(0.044
)
  
(0.077
)
  
(0.076
)
  
-76.7
%
  
(0.126
)
  
(0.197
)
  
-56.3
%
Investment income and change in market value
    
0.103
   
0.071
   
0.119
   
(0.068
)
  
0.137
   
33.0
%
  
0.129
   
0.189
   
46.5
%
Variable Universal Life -Balance
End-of-Period
  
$
2.154
  
$
2.242
  
$
2.355
  
$
4.194
  
$
4.305
    
99.9
%
$
2.154
  
$
4.305
    
99.9
%
 
          
 
    
 
    
 
 
  
 
          
 
    
 
 
      
Total Segment- Life Insurance Account Value
Roll Forward
                                                        
Balance Beginning-of-Period
 
$
13.496
  
$
13.745
  
$
14.051
  
$
14.268
  
$
25.479
    
88.8
%
$
13.259
  
$
14.051
    
6.0
%
Business acquired
    
-
   
-
   
-
   
11.068
   
-
   
NM
    
-
   
11.068
   
NM
  
Deposits
    
0.497
   
0.596
   
0.488
   
1.023
   
0.753
   
51.5
%
  
1.435
   
2.264
   
57.8
%
Withdrawals & deaths
    
(0.202
)
  
(0.196
)
  
(0.231
)
  
(0.476
)
  
(0.262
)
  
-29.7
%
  
(0.640
)
  
(0.968
)
  
-51.3
%
Net flows
   
0.295
   
0.400
   
0.257
   
0.548
   
0.491
   
66.4
%
  
0.794
   
1.296
   
63.2
%
Policyholder assessments
    
(0.285
)
  
(0.301
)
  
(0.294
)
  
(0.571
)
  
(0.526
)
  
-84.6
%
  
(0.846
)
  
(1.391
)
  
-64.4
%
Investment income and change in market value
    
0.239
   
0.206
   
0.254
   
0.165
   
0.379
   
58.6
%
  
0.537
   
0.798
   
48.6
%
Total Segment -Balance End-of-Period
  
$
13.745
  
$
14.051
  
$
14.268
  
$
25.479
  
$
25.821
    
87.9
%
$
13.745
  
$
25.821
    
87.9
%
 
          
 
    
 
    
 
    
 
          
 
    
 
        
Life Product Spread Information (2)
                                                        
 
                                  
Change
                
Change
  
Interest Sensitive Products
                                  
(Basis Points)
 
              
(Basis Points)
 
Net investment income (3) (4)
    
6.35
%
  
6.26
%
  
6.48
%
  
6.22
%
  
6.08
%
  
(27
)
  
6.35
%
  
6.23
%
  
(12
)
Interest credited to policyholders
    
4.70
%
  
4.66
%
  
4.60
%
  
4.46
%
  
4.52
%
  
(18
)
  
4.69
%
  
4.51
%
  
(18
)
Spread (3)(4)
    
1.65
%
  
1.60
%
  
1.88
%
  
1.76
%
  
1.57
%
  
(8
)
  
1.66
%
  
1.72
%
  
6
 
                                                         
Traditional Products
                                                        
Net investment income (3)
    
6.62
%
  
6.42
%
  
6.72
%
  
6.59
%
  
6.60
%
  
(2
)
  
6.59
%
  
6.63
%
  
4
 
 
(1)
Includes universal life, interest sensitive life, and the fixed investment option of VUL products.
(2)
Interest Sensitive Products - For the life products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited on life products divided by average fixed account values. Traditional Products - the yield on earning assets is calculated as net investment income on traditional investment portfolios divided by average earning assets. As of September 30, 2006, interest sensitive products represented approximately 81% of total interest sensitive and traditional earning assets.
(3)
The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread for interest sensitive products was 20 bps in the 3rd quarter of 2006, 13 bps in the 2nd quarter of 2006, 7 bps in the 1st quarter of 2006, 8 bps in the 4th quarter of 2005 and 4 bps in the 3rd quarter of 2005. The impact was 15 basis points for the first nine months of 2006 and 5 basis points for the first nine months of 2005. There was an impact on traditional products of 15 bps in the 3rd quarter of 2006, 14 bps in the 2nd quarter of 2006, 15 bps in the 1st quarter of 2006, 0 bps in the 4th quarter of 2005 and 20 bps in the 3rd quarter of 2005. The impact was 15 basis points for the first nine months of 2006 and 14 basis points for the first nine months of 2005.
(4)
The net investment income and spread for the first, second and third quarters of 2006 include 17 basis points, 2 basis points and -22 basis points, respectively, of incremental yield from special investments. The impact was -5 basis points for the first nine months of 2006 and 3 basis points for the first nine months of 2005.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 17

Individual Markets - Individual Annuities
Income Statements & Operational Data
Unaudited [Millions of Dollars]
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Premiums
  
$
10.7
  
$
8.5
  
$
9.3
  
$
15.3
  
$
12.3
    
15.0
%
$
28.6
  
$
36.8
    
28.6
%
Surrender charges
    
5.0
   
4.4
   
6.2
   
9.6
   
6.6
   
32.0
%
  
15.5
   
22.4
   
44.4
%
Expense assessments
    
147.7
   
155.5
   
168.0
   
182.7
   
189.3
   
28.2
%
  
403.9
   
540.0
   
33.7
%
Net investment income
    
151.7
   
150.4
   
148.0
   
263.2
   
312.7
   
106.1
%
  
463.4
   
723.8
   
56.2
%
Other revenue and fees (1)
    
47.3
   
53.3
   
43.4
   
81.8
   
75.7
   
60.0
%
  
139.0
   
200.8
   
44.4
%
Total Operating Revenue
    
362.4
   
372.1
   
374.8
   
552.6
   
596.5
   
64.6
%
  
1,050.4
   
1,523.9
   
45.1
%
                             
 
 
        
 
    
 
        
Operating Expenses
                                                        
Insurance benefits
    
20.5
   
21.2
   
20.4
   
45.3
   
27.4
   
33.7
%
  
73.1
   
93.1
   
27.3
%
Interest credited to contractholder funds
    
97.3
   
96.3
   
95.1
   
168.8
   
208.2
   
114.0
%
  
296.4
   
472.1
   
59.3
%
Operating and acquisition expenses
    
139.8
   
164.7
   
172.6
   
216.9
   
227.3
   
62.6
%
  
449.6
   
616.8
   
37.2
%
Total Operating Expenses
    
257.6
   
282.2
   
288.1
   
431.0
   
462.9
   
79.7
%
  
819.1
   
1,182.0
   
44.3
%
 
          
 
    
 
    
 
    
 
          
 
    
 
        
Income from operations before Federal
income taxes
    
104.8
   
89.9
   
86.7
   
121.5
   
133.6
   
27.5
%
  
231.3
   
341.8
   
47.8
%
 
                            
 
          
 
    
 
        
Federal income taxes
    
25.8
   
19.0
   
20.3
   
32.5
   
4.2
   
-83.7
%
  
50.1
   
57.0
   
13.7
%
                                                         
Income from Operations
  
$
79.0
  
$
70.9
  
$
66.4
  
$
89.0
  
$
129.4
    
63.8
%
$
181.1
  
$
284.8
    
57.2
%
                             
 
          
 
    
 
        
Effective tax rate
    
24.6
%
  
21.1
%
  
23.4
%
  
26.7
%
  
3.1
%
        
21.7
%
  
16.7
%
      
                                                         
Average equity
  
$
1,713.7
  
$
1,773.7
  
$
1,744.1
  
$
3,269.2
  
$
3,310.4
        
$
1,694.2
  
$
2,774.6
        
Return on average equity
    
18.5
%
  
16.0
%
  
15.2
%
  
10.9
%
  
15.6
%
        
14.3
%
  
13.7
%
      
Basis points on average account values
    
69
   
60
   
52
   
58
   
84
         
55
   
66
       
                                                         
Operating and Acquisition Expenses
                                                        
Commissions
  
$
101.8
  
$
100.4
  
$
111.2
  
$
141.0
  
$
146.1
    
43.5
%
$
283.6
  
$
398.3
    
40.4
%
General and administrative expenses
    
68.4
   
70.9
   
66.2
   
69.3
   
81.9
   
19.7
%
  
200.6
   
217.4
   
8.4
%
Broker-dealer commissions and
general and administrative
expenses
    
49.8
   
54.2
   
46.6
   
79.3
   
76.6
   
53.8
%
  
150.0
   
202.5
   
35.0
%
Taxes, licenses and fees
    
5.0
   
(1.4
)
  
5.4
   
4.6
   
4.8
   
-4.0
%
  
15.2
   
14.9
   
-2.4
%
Total commissions and expenses incurred
   
225.0
   
224.1
   
229.5
   
294.2
   
309.4
   
37.5
%
  
649.4
   
833.0
   
28.3
%
Less: commissions and expenses capitalized
    
(112.1
)
  
(118.9
)
  
(122.7
)
  
(150.0
)
  
(157.6
)
  
-40.6
%
  
(323.0
)
  
(430.3
)
  
-33.2
%
Amortization of DAC and VOBA
    
26.8
   
59.5
   
65.8
   
72.7
   
75.6
   
182.1
%
  
123.2
   
214.0
   
73.8
%
                                                         
Net Operating and Acquisition Expenses
  
$
139.8
  
$
164.7
  
$
172.6
  
$
216.9
  
$
227.3
    
62.6
%
$
449.6
  
$
616.8
    
37.2
%
           
 
                
 
          
 
    
 
        
General and administrative expenses -
basis points on gross account values - Annualized(2)
    
60
   
60
   
52
   
45
   
53
   
(7
)
  
61
   
50
   
(11
)
                                                         
                                                         
Roll Forward of Deferred Acquisition Costs & Value of Business Acquired
                        
                                                         
Balance at beginning of period
  
$
1,118.5
  
$
1,250.6
  
$
1,328.0
  
$
1,414.9
  
$
1,994.4
        
$
999.4
  
$
1,328.0
        
Deferral
    
112.1
   
118.9
   
122.7
   
150.0
   
157.6
         
323.0
   
430.3
       
Amortization
    
(26.8
)
  
(59.5
)
  
(65.8
)
  
(72.7
)
  
(75.6
)
        
(123.2
)
  
(214.0
)
      
Included in Total Operating Expenses
    
85.2
   
59.4
   
56.9
   
77.3
   
82.0
         
199.8
   
216.3
       
Adjustment related to realized (gains) losses
                                                    
on available-for-sale securities
    
(4.7
)
  
(3.5
)
  
(2.7
)
  
(4.1
)
  
(2.4
)
        
(13.6
)
  
(9.2
)
      
Adjustment related to unrealized (gains) losses
                                                  
on available-for-sale securities
    
51.7
   
21.5
   
32.7
   
57.3
   
(103.6
)
        
65.0
   
(13.6
)
      
Business acquired
    
-
   
-
   
-
   
448.9
   
3.8
         
-
   
452.7
       
Balance at end of period
  
$
1,250.6
  
$
1,328.0
  
$
1,414.9
  
$
1,994.4
  
$
1,974.1
        
$
1,250.6
  
$
1,974.1
        
     
 
 
  
 
    
 
    
 
 
  
 
 
        
 
    
 
 
      
Roll Forward of Deferred Front-End Loads
                                                        
                                                         
Balance at beginning of period
  
$
61.1
  
$
65.6
  
$
72.0
  
$
78.1
  
$
84.8
        
$
50.1
  
$
72.0
        
Deferral
    
9.4
   
9.5
   
9.4
   
9.8
   
10.0
         
26.3
   
29.1
       
Amortization
    
(4.8
)
  
(3.1
)
  
(3.3
)
  
(3.0
)
  
(0.1
)
        
(10.7
)
  
(6.4
)
      
Included in Income from Operations
    
4.6
   
6.4
   
6.1
   
6.8
   
9.8
         
15.6
   
22.7
       
Adjustment related to realized (gains) losses
                                                        
on available-for-sale securities
    
-
   
-
   
-
   
-
   
(0.1
)
        
-
   
(0.1
)
      
Balance at end of period
  
$
65.6
  
$
72.0
  
$
78.1
  
$
84.8
  
$
94.6
        
$
65.6
  
$
94.6
        
 
          
 
    
 
    
 
    
 
 
        
 
    
 
        
Roll Forward of Deferred Sales Inducements
                                                
                                                         
Balance at beginning of period
  
$
106.6
  
$
118.1
  
$
129.4
  
$
139.9
  
$
154.6
        
$
85.5
  
$
129.4
        
Deferral
    
15.1
   
15.6
   
15.7
   
19.9
   
22.2
         
43.9
   
57.8
       
Amortization
    
(3.6
)
  
(4.4
)
  
(5.2
)
  
(5.2
)
  
(3.3
)
        
(11.3
)
  
(13.7
)
      
Included in Income from Operations
    
11.5
   
11.3
   
10.5
   
14.7
   
18.9
         
32.6
   
44.1
       
Adjustment related to realized (gains) losses
                                                    
on available-for-sale securities
    
-
   
-
   
-
   
-
   
(0.1
)
        
-
   
(0.1
)
      
Balance at end of period
  
$
118.1
  
$
129.4
  
$
139.9
  
$
154.6
  
$
173.4
        
$
118.1
  
$
173.4
        
 
(1)
Primarily broker-dealer revenue.
(2)
Includes distribution costs.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 18
 
Individual Markets - Individual Annuities
Account Value Roll Forward
Unaudited [Billions of Dollars]
 
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Fixed Annuities - Balance at Beginning
of Period
 
$
11.441
  
$
11.375
  
$
10.840
  
$
10.563
  
$
19.533
    
70.7
%
$
11.448
  
$
10.840
    
-5.3
%
                                                         
Business acquired
    
-
   
-
   
-
   
9.343
   
-
   
NM
    
-
   
9.343
   
NM
  
Gross deposits
    
0.494
   
0.486
   
0.471
   
0.872
   
1.062
   
115.0
%
  
1.501
   
2.405
   
60.2
%
Withdrawals & deaths
    
(0.340
)
  
(0.370
)
  
(0.408
)
  
(1.037
)
  
(1.405
)
  
NM
    
(1.040
)
  
(2.850
)
  
NM
  
Net flows
    
0.155
   
0.116
   
0.063
   
(0.164
)
  
(0.344
)
  
NM
    
0.461
   
(0.445
)
  
NM
  
Transfer from (to) variable annuities
    
(0.338
)
  
(0.766
)
  
(0.451
)
  
(0.395
)
  
(0.483
)
  
-42.9
%
  
(0.884
)
  
(1.330
)
  
-50.5
%
Interest credited
    
0.117
   
0.115
   
0.112
   
0.186
   
0.233
   
99.1
%
  
0.350
   
0.531
   
51.7
%
Fixed Annuities - Gross
    
11.375
   
10.840
   
10.563
   
19.533
   
18.939
   
66.5
%
  
11.375
   
18.939
   
66.5
%
Reinsurance ceded
    
(2.257
)
  
(2.233
)
  
(2.202
)
  
(2.149
)
  
(2.045
)
  
9.4
%
  
(2.257
)
  
(2.045
)
  
9.4
%
Fixed Annuities - Balance at End
of Period (1)
  
$
9.117
  
$
8.607
  
$
8.362
  
$
17.384
  
$
16.894
    
85.3
%
$
9.117
  
$
16.894
    
85.3
%
 
          
 
    
 
    
 
    
 
 
        
 
    
 
 
      
                                                         
Variable Annuities - Balance at Beginning
of Period  
  
$
32.801
  
$
35.276
  
$
37.655
  
$
40.495
  
$
41.537
    
26.6
%
$
30.684
  
$
37.655
    
22.7
%
                                                         
Business acquired
    
-
   
-
   
-
   
0.250
   
-
   
NM
    
-
   
0.250
   
NM
  
Gross deposits
    
1.410
   
1.513
   
1.665
   
1.867
   
1.658
   
17.6
%
  
4.026
   
5.191
   
28.9
%
Withdrawals & deaths
    
(0.847
)
  
(0.862
)
  
(0.959
)
  
(1.004
)
  
(1.011
)
  
-19.4
%
  
(2.378
)
  
(2.973
)
  
-25.0
%
Net flows
    
0.563
   
0.651
   
0.706
   
0.864
   
0.648
   
15.1
%
  
1.647
   
2.217
   
34.6
%
Transfer from (to) fixed annuities
    
0.418
   
0.462
   
0.451
   
0.395
   
0.483
   
15.6
%
  
1.187
   
1.330
   
12.0
%
Investment increase & change in market value
    
1.494
   
1.266
   
1.682
   
(0.467
)
  
1.309
   
-12.4
%
  
1.758
   
2.524
   
43.6
%
Variable Annuities - Balance at End
of Period (2)
  
$
35.276
  
$
37.655
  
$
40.495
  
$
41.537
  
$
43.977
    
24.7
%
$
35.276
  
$
43.977
    
24.7
%
 
          
 
    
 
    
 
    
 
 
        
 
    
 
 
      
                                                         
Total Annuities - Balance at Beginning
of Period
 
$
44.242
  
$
46.651
  
$
48.495
  
$
51.059
  
$
61.070
    
38.0
%
$
42.132
  
$
48.495
    
15.1
%
                                                         
Business acquired
    
-
   
-
   
-
   
9.593
   
-
   
NM
    
-
   
9.593
   
NM
  
Gross deposits
    
1.904
   
1.999
   
2.136
   
2.740
   
2.720
   
42.9
%
  
5.527
   
7.596
   
37.4
%
Withdrawals & deaths
    
(1.187
)
  
(1.232
)
  
(1.366
)
  
(2.040
)
  
(2.416
)
  
NM
    
(3.418
)
  
(5.823
)
  
-70.4
%
Net flows
    
0.717
   
0.767
   
0.770
   
0.699
   
0.304
   
-57.6
%
  
2.109
   
1.773
   
-15.9
%
Transfers
    
0.080
   
(0.304
)
  
-
   
0.000
   
0.000
   
-100.0
%
  
0.302
   
0.000
   
-100.0
%
Interest credited & change in market value
    
1.611
   
1.381
   
1.794
   
(0.281
)
  
1.542
   
-4.3
%
  
2.108
   
3.055
   
44.9
%
Total Annuities - Gross
    
46.651
   
48.495
   
51.059
   
61.070
   
62.916
   
34.9
%
  
46.651
   
62.916
   
34.9
%
Reinsurance ceded
    
(2.257
)
  
(2.233
)
  
(2.202
)
  
(2.149
)
  
(2.045
)
  
9.4
%
  
(2.257
)
  
(2.045
)
  
9.4
%
Total Annuities (Net of Ceded) - Balance
at End of Period
  
$
44.393
  
$
46.262
  
$
48.857
  
$
58.921
  
$
60.872
    
37.1
%
$
44.393
  
$
60.872
    
37.1
%
 
          
 
    
 
    
 
    
 
 
        
 
    
 
 
      
                                                         
Variable Annuities Under Agreement -
Included above
  
$
0.226
  
$
0.197
  
$
0.190
  
$
0.173
  
$
0.169
    
-25.2
%
$
0.226
  
$
0.169
    
-25.2
%
                                                         
Incremental Deposits (3):
                                                        
Fixed annuities
  
$
0.481
  
$
0.472
  
$
0.461
  
$
0.861
  
$
1.058
    
120.0
%
$
1.459
  
$
2.381
    
63.2
%
Variable annuities
    
1.383
   
1.481
   
1.650
   
1.850
   
1.623
   
17.4
%
  
3.934
   
5.123
   
30.2
%
Total Incremental Deposits
  
$
1.864
  
$
1.953
  
$
2.111
  
$
2.711
  
$
2.681
    
43.8
%
$
5.393
  
$
7.504
    
39.1
%
 
 
Note: Certain reclassifications have been made to properly distinguish between fixed and variable products.
 
(1)
Includes fixed portion of variable annuities.
(2)
Excludes the fixed portion of variable annuities.
(3)
Incremental Deposits represent gross deposits reduced by transfers from other Lincoln products.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 19
 
Individual Markets - Individual Annuities
Account Values
Unaudited [Billions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Fixed Annuities - excluding fixed portion
of variable contracts
                                      
Deposits
  
$
0.018
  
$
0.006
  
$
0.021
  
$
0.137
  
$
0.258
    
NM
  
$
0.111
  
$
0.417
    
275.7
%
Withdrawals
    
(0.151
)
  
(0.183
)
  
(0.243
)
  
(0.805
)
  
(1.148
)
  
NM
    
(0.594
)
  
(2.196
)
  
NM
  
Net flows
  
$
(0.133
)
$
(0.177
)
$
(0.222
)
$
(0.668
)
$
(0.890
)
  
NM
  
$
(0.483
)
$
(1.780
)
  
NM
  
 
                                                        
Gross fixed contract account values
  
$
7.101
  
$
6.918
  
$
6.745
  
$
12.190
  
$
11.766
    
65.7
%
$
7.101
  
$
11.766
    
65.7
%
Reinsurance ceded
    
(2.257
)
  
(2.233
)
  
(2.202
)
  
(2.149
)
  
(2.045
)
  
9.4
%
  
(2.257
)
  
(2.045
)
  
9.4
%
Net Fixed Contract Account Values
  
$
4.844
  
$
4.685
  
$
4.543
  
$
10.041
  
$
9.721
    
100.7
%
$
4.844
  
$
9.721
    
100.7
%
 
        
 
 
  
 
 
                                      
Indexed Annuities
                                                        
Deposits
  
$
-
  
$
-
  
$
-
  
$
0.228
  
$
0.244
    
NM
  
$
-
  
$
0.472
    
NM
  
Withdrawals
    
-
   
-
   
-
   
(0.047
)
  
(0.068
)
  
NM
    
-
   
(0.114
)
  
NM
  
Net flows
  
$
-
  
$
-
  
$
-
  
$
0.181
  
$
0.177
    
NM
  
$
-
  
$
0.358
    
NM
  
                                                         
Equity-indexed Contract Account Values
  
$
-
  
$
-
  
$
-
  
$
3.210
  
$
3.454
    
NM
  
$
-
  
$
3.454
    
NM
  
                                                         
Fixed Portion of Variable Contracts
                                                        
Deposits
  
$
0.476
  
$
0.480
  
$
0.449
  
$
0.507
  
$
0.559
    
17.4
%
$
1.390
  
$
1.516
    
9.1
%
Withdrawals
    
(0.188
)
  
(0.187
)
  
(0.164
)
  
(0.185
)
  
(0.190
)
  
-1.1
%
  
(0.445
)
  
(0.539
)
  
-21.1
%
Net flows
  
$
0.288
  
$
0.293
  
$
0.285
  
$
0.322
  
$
0.370
    
28.5
%
$
0.944
  
$
0.977
    
3.5
%
                                                         
Fixed Portion of Variable Contract Account Values
  
$
4.274
  
$
3.922
  
$
3.819
  
$
4.132
  
$
3.719
    
-13.0
%
$
4.274
  
$
3.719
    
-13.0
%
                                                         
Variable Annuities - including fixed
portion of variable contracts
                                                        
Deposits
  
$
1.886
  
$
1.993
  
$
2.114
  
$
2.374
  
$
2.218
    
17.6
%
$
5.416
  
$
6.707
    
23.8
%
Withdrawals
    
(1.035
)
  
(1.049
)
  
(1.123
)
  
(1.188
)
  
(1.200
)
  
-15.9
%
  
(2.824
)
  
(3.512
)
  
-24.4
%
Net Flows
  
$
0.850
  
$
0.945
  
$
0.991
  
$
1.186
  
$
1.017
    
19.6
%
$
2.592
  
$
3.195
    
23.3
%
                                                         
Variable Contract Account Values
  
$
39.550
  
$
41.577
  
$
44.314
  
$
45.669
  
$
47.697
    
20.6
%
$
39.550
  
$
47.697
    
20.6
%
                                                         
Average Daily Variable Annuity
Account Values
  
$
34.367
  
$
36.089
  
$
39.947
  
$
41.214
  
$
42.118
    
22.6
%
$
32.310
  
$
41.093
    
27.2
%
                                                         
Individual Annuity Product Spread Information 
                    
Change
                
Change
  
 
                                  
(Basis Point)
                
(Basis Point)
 
Net investment income (1) (2)
   
5.68
%
  
5.73
%
  
5.84
%
  
5.67
%
  
5.98
%
  
30
   
5.71
%
  
5.76
%
  
5
  
Interest credited to policyholders
    
3.93
%
  
3.92
%
  
3.93
%
  
3.81
%
  
3.87
%
  
(6
)
  
3.93
%
  
3.86
%
  
(7
 )
Spread (1) (2)
    
1.75
%
  
1.81
%
  
1.91
%
  
1.86
%
  
2.11
%
  
36
   
1.78
%
  
1.90
%
  
12
 
 
Note: Certain reclassifications have been made to properly distinguish between fixed and variable products.
 
(1)
For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited on annuity products less bonus credits and excess DCA interest, divided by average fixed account values net of co-insured account values. Fixed account values reinsured under modified co-insurance agreements are included in account values for this calculation since assets (and therefore margin) are retained under these agreements.
(2)
The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread was 5 bps in the third quarter of 2006, 2 bps in the second quarter of 2006, 9 bps in the first quarter of 2006, 6 bps in the fourth quarter of 2005 and 1 bp in the third quarter of 2005. The impact was 6 bps in the first nine months of 2006 and 3 bps in the first nine months of 2005.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 20
 
Employer Markets - Defined Contribution
Income Statements & Operational Data
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Surrender charges
  
$
2.8
  
$
2.0
  
$
2.3
  
$
2.1
  
$
1.7
    
-39.3
%
$
7.9
  
$
6.1
    
-22.8
%
Expense assessments
    
51.8
   
51.7
   
55.6
   
54.7
   
54.0
   
4.2
%
  
148.9
   
164.3
   
10.3
%
Net investment income
    
177.5
   
181.3
   
185.7
   
187.5
   
184.6
   
4.0
%
  
530.2
   
557.8
   
5.2
%
Other revenue and fees
    
6.6
   
6.2
   
5.6
   
4.6
   
4.9
   
-25.8
%
  
19.3
   
15.1
   
-21.8
%
Total Operating Revenue
    
238.7
   
241.2
   
249.2
   
248.9
   
245.1
   
2.7
%
  
706.3
   
743.2
   
5.2
%
 
                            
 
          
 
    
 
 
      
Operating Expenses
                                                        
Interest credited to contractholder funds
    
100.7
   
101.1
   
100.7
   
102.4
   
103.1
   
2.4
%
  
300.7
   
306.2
   
1.8
%
Operating and acquisition expenses
    
62.2
   
77.2
   
73.3
   
69.5
   
74.5
   
19.8
%
  
207.3
   
217.3
   
4.8
%
Total Operating Expenses
    
162.9
   
178.3
   
174.0
   
171.9
   
177.6
   
9.0
%
  
508.0
   
523.5
   
3.1
%
 
                            
 
 
        
 
    
 
        
Income from operations before Federal
income taxes
    
75.8
   
62.9
   
75.2
   
77.0
   
67.5
   
-10.9
%
  
198.3
   
219.7
   
10.8
%
Federal income taxes
    
22.4
   
17.7
   
22.7
   
22.7
   
15.0
   
-33.0
%
  
56.4
   
60.4
   
7.1
%
                                                         
Income from Operations
  
$
53.4
  
$
45.2
  
$
52.5
  
$
54.3
  
$
52.5
    
-1.7
%
$
141.9
  
$
159.3
    
12.3
%
                       
 
    
 
          
 
    
 
 
      
Effective tax rate
    
29.5
%
  
28.2
%
  
30.2
%
  
29.4
%
  
22.3
%
        
28.4
%
  
27.5
%
      
                                                         
Average equity
  
$
909.9
  
$
939.1
  
$
1,006.4
  
$
985.3
  
$
945.7
        
$
894.3
  
$
979.1
        
Return on average equity
    
23.5
%
  
19.3
%
  
20.9
%
  
22.0
%
  
22.2
%
        
21.2
%
  
21.7
%
      
Basis points on average account values
    
73
   
60
   
67
   
69
   
66
         
66
   
67
       
                                                         
Operating and Acquisition Expenses
                                                        
Commissions
  
$
26.4
  
$
25.1
  
$
26.2
  
$
22.2
  
$
23.4
    
-11.4
%
$
77.8
  
$
71.8
    
-7.7
%
General and administrative expenses
    
60.6
   
57.4
   
49.7
   
47.2
   
56.4
   
-6.9
%
  
158.2
   
153.3
   
-3.1
%
Taxes, licenses and fees
    
(0.8
)
  
1.2
   
2.9
   
2.8
   
1.3
   
NM
 
  
6.5
   
7.1
   
9.2
%
Total commissions and expenses incurred
   
86.2
   
83.7
   
78.8
   
72.3
   
81.1
   
-5.9
%
  
242.5
   
232.2
   
-4.2
%
Less: commissions and expenses capitalized
    
(24.5
)
  
(24.4
)
  
(25.5
)
  
(22.6
)
  
(21.5
)
  
12.2
%
  
(72.9
)
  
(69.6
)
  
4.5
%
Amortization of DAC and VOBA
    
0.5
   
17.9
   
20.0
   
19.8
   
14.9
   
NM
    
37.7
   
54.7
   
45.1
%
                                                         
Net Operating and Acquisition Expenses
  
$
62.2
  
$
77.2
  
$
73.3
  
$
69.5
  
$
74.5
    
19.8
%
$
207.3
  
$
217.3
    
4.8
%
 
          
 
    
 
 
 
    
 
          
 
    
 
        
General and administrative expenses - basis
                                                  
points on account values - Annualized (1)
    
83
   
77
   
64
   
60
   
71
   
(11
)
  
74
   
65
   
(9
)
                                                         
                                                         
Roll Forward of Deferred Acquisition Costs & Value of Business Acquired
                          
                                                         
Balance at beginning of period
  
$
332.0
  
$
420.1
  
$
454.9
  
$
517.2
  
$
564.0
        
$
304.1
  
$
454.9
        
Deferral
    
24.5
   
24.4
   
25.5
   
22.6
   
21.5
         
72.9
   
69.6
       
Amortization
    
(0.5
)
  
(17.9
)
  
(20.0
)
  
(19.8
)
  
(14.9
)
        
(37.7
)
  
(54.8
)
      
Included in Total Operating Expenses
    
24.1
   
6.6
   
5.5
   
2.7
   
6.6
         
35.2
   
14.8
       
Adjustment related to realized (gains) losses
                                                        
on available-for-sale securities
    
(3.7
)
  
(3.9
)
  
(4.4
)
  
(6.1
)
  
(2.0
)
        
(12.9
)
  
(12.6
)
      
Adjustment related to unrealized (gains) losses
                                                      
on available-for-sale securities
    
67.7
   
32.1
   
61.2
   
50.2
   
(64.8
)
        
93.7
   
46.7
       
Business acquired
    
-
   
-
   
-
   
-
   
-
         
-
   
-
       
Other
    
-
   
-
   
-
   
-
   
-
         
-
   
-
       
Balance at end of period
  
$
420.1
  
$
454.9
  
$
517.2
  
$
564.0
  
$
503.8
        
$
420.1
  
$
503.8
        
 
(1)
Includes distribution costs.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
 
9/30/2006
PAGE 21
 
Employer Markets - Defined Contribution
Account Value Roll Forward
Unaudited [Billions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Fixed Annuities - Balance at Beginning
of Period
  
$
10.710
  
$
10.686
  
$
11.009
  
$
11.033
  
$
11.050
    
3.2
%
$
10.837
  
$
11.009
    
1.6
%
Gross deposits (1)
    
0.259
   
0.240
   
0.253
   
0.242
   
0.268
   
3.5
%
  
0.843
   
0.763
   
-9.6
%
Withdrawals & deaths
    
(0.330
)
  
(0.342
)
  
(0.328
)
  
(0.345
)
  
(0.426
)
  
-29.1
%
  
(1.120
)
  
(1.100
)
  
1.9
%
Net flows
    
(0.071
)
  
(0.103
)
  
(0.075
)
  
(0.103
)
  
(0.159
)
  
NM
    
(0.277
)
  
(0.337
)
  
-21.6
%
Transfer from (to) variable annuities
    
(0.055
)
  
0.318
   
0.014
   
0.030
   
0.049
   
NM
 
  
(0.174
)
  
0.093
   
NM
  
Interest credited
    
0.102
   
0.108
   
0.085
   
0.090
   
0.121
   
18.6
%
  
0.300
   
0.296
   
NM
 
Fixed Annuities - Balance at End
of Period (2)
  
$
10.686
  
$
11.009
  
$
11.033
  
$
11.050
  
$
11.061
    
3.5
%
$
10.686
  
$
11.061
    
3.5
%
 
          
 
    
 
    
 
    
 
          
 
    
 
        
                                                         
Variable Annuities - Balance at Beginning
of Period
  
$
14.648
  
$
15.293
  
$
15.692
  
$
16.454
  
$
16.144
    
10.2
%
$
14.576
  
$
15.692
    
7.7
%
Gross deposits (1)
    
0.553
   
0.616
   
0.669
   
0.714
   
0.583
   
5.4
%
  
1.638
   
1.966
   
20.1
%
Withdrawals & deaths
    
(0.548
)
  
(0.553
)
  
(0.676
)
  
(0.647
)
  
(0.565
)
  
-3.1
%
  
(1.557
)
  
(1.888
)
  
-21.2
%
Net flows
    
0.005
   
0.062
   
(0.006
)
  
0.067
   
0.018
   
260.0
%
  
0.081
   
0.079
   
-2.9
%
Transfer from (to) fixed annuities
    
(0.025
)
  
(0.011
)
  
(0.015
)
  
(0.032
)
  
(0.046
)
  
-84.0
%
  
(0.121
)
  
(0.093
)
  
23.2
%
Investment increase & change in market value
    
0.665
   
0.348
   
0.783
   
(0.345
)
  
0.414
   
-37.7
%
  
0.757
   
0.852
   
12.6
%
Variable Annuities - Balance at End
of Period (3)
  
$
15.293
  
$
15.692
  
$
16.454
  
$
16.144
  
$
16.530
    
8.1
%
$
15.293
  
$
16.530
    
8.1
%
 
          
 
    
 
    
 
    
 
 
        
 
    
 
 
      
Total Annuities - Balance at Beginning
of Period
  
$
25.358
  
$
25.979
  
$
26.701
  
$
27.487
  
$
27.194
    
7.2
%
$
25.413
  
$
26.701
    
5.1
%
Gross Deposits (1)
    
0.812
   
0.856
   
0.923
   
0.955
   
0.851
   
4.8
%
  
2.481
   
2.729
   
10.0
%
Withdrawals & deaths
    
(0.878
)
  
(0.896
)
  
(1.004
)
  
(0.992
)
  
(0.992
)
  
-13.0
%
  
(2.677
)
  
(2.987
)
  
-11.6
%
Net flows
    
(0.066
)
  
(0.040
)
  
(0.081
)
  
(0.036
)
  
(0.141
)
  
NM
    
(0.196
)
  
(0.258
)
  
-31.7
%
Transfers
    
(0.080
)
  
0.306
   
(0.001
)
  
(0.002
)
  
0.003
   
NM
    
(0.295
)
  
0.001
   
NM
  
Interest credited & change in market value
    
0.766
   
0.456
   
0.867
   
(0.255
)
  
0.535
   
-30.2
%
  
1.057
   
1.147
   
8.6
%
Total Annuities - Balance at End
of Period
  
$
25.979
  
$
26.701
  
$
27.487
  
$
27.194
  
$
27.591
    
6.2
%
$
25.979
  
$
27.591
    
6.2
%
 
          
 
    
 
    
 
    
 
 
        
 
    
 
 
      
Alliance Mutual Funds - Balance at
Beginning of Period
  
$
3.432
  
$
3.672
  
$
3.772
  
$
4.248
  
$
4.330
    
26.2
%
$
2.861
  
$
3.772
    
31.8
%
Plan/Participant Rollovers
    
0.036
   
0.063
   
0.125
   
0.021
   
0.021
   
-41.7
%
  
0.359
   
0.167
   
-53.6
%
Additional contributions
    
0.164
   
0.160
   
0.193
   
0.183
   
0.214
   
30.5
%
  
0.484
   
0.590
   
21.9
%
Gross deposits
    
0.200
   
0.223
   
0.318
   
0.204
   
0.235
   
17.5
%
  
0.843
   
0.757
   
-10.3
%
Withdrawals & deaths
    
(0.107
)
  
(0.208
)
  
(0.056
)
  
(0.054
)
  
(0.057
)
  
46.7
%
  
(0.202
)
  
(0.167
)
  
17.1
%
Net flows
    
0.093
   
0.014
   
0.262
   
0.150
   
0.178
   
91.4
%
  
0.641
   
0.589
   
-8.1
%
Transfers
    
(0.000
)
  
(0.003
)
  
0.005
   
-
   
(0.015
)
  
NM
    
(0.004
)
  
(0.009
)
  
NM
  
Interest credited & change in market value
    
0.147
   
0.088
   
0.209
   
(0.068
)
  
0.143
   
-2.7
%
  
0.174
   
0.284
   
63.1
%
Total Alliance Mutual Funds -
Balance at End of Period (4)
  
$
3.672
  
$
3.772
  
$
4.248
  
$
4.330
  
$
4.636
    
26.3
%
$
3.672
  
$
4.636
    
26.2
%
 
          
 
    
 
    
 
    
 
          
 
    
 
 
      
 
          
 
    
 
    
 
    
 
                          
Total Retirement Products Segment Account Values-
                                                
including Alliance Mutual Funds
                                                        
Balance at Beginning of Period
  
$
28.790
  
$
29.651
  
$
30.473
  
$
31.735
  
$
31.524
    
9.5
%
$
28.274
  
$
30.473
    
7.8
%
Gross deposits (1)
    
1.012
   
1.078
   
1.241
   
1.159
   
1.086
   
7.3
%
  
3.324
   
3.486
   
4.9
%
Withdrawals & deaths
    
(0.984
)
  
(1.104
)
  
(1.060
)
  
(1.045
)
  
(1.049
)
  
-6.6
%
  
(2.879
)
  
(3.155
)
  
-9.6
%
Net flows
    
0.028
   
(0.026
)
  
0.181
   
0.114
   
0.037
   
32.1
%
  
0.445
   
0.331
   
-25.6
%
Transfers
    
(0.080
)
  
0.304
   
0.005
   
(0.002
)
  
(0.012
)
  
85.0
%
  
(0.299
)
  
(0.009
)
  
NM
  
Interest credited & change in market value
    
0.914
   
0.544
   
1.077
   
(0.322
)
  
0.677
   
-25.9
%
  
1.231
   
1.431
   
16.3
%
Total Retirement Products
Segment Account Values-    
                                                   
Balance at End of Period
  
$
29.651
  
$
30.473
  
$
31.735
  
$
31.524
  
$
32.227
    
8.7
%
$
29.651
  
$
32.227
    
8.7
%
 
          
 
    
 
    
 
 
  
 
 
        
 
    
 
 
      
Variable Annuities Under Agreement -
Included above
    
0.019
   
0.019
   
0.018
   
0.017
   
0.017
   
-10.5
%
  
0.019
   
0.017
   
-10.5
%
                                                         
Incremental Deposits (5) :
                                                        
Fixed Annuities
  
$
0.243
  
$
0.200
  
$
0.254
  
$
0.226
  
$
0.253
    
4.1
%
$
0.821
  
$
0.733
    
-10.7
%
Variable Annuities
    
0.553
   
0.614
   
0.654
   
0.709
   
0.576
   
4.2
%
  
1.631
   
1.939
   
18.9
%
Total Annuities Incremental Deposits
    
0.796
   
0.814
   
0.908
   
0.935
   
0.829
   
4.1
%
  
2.452
   
2.672
   
9.0
%
Total Alliance Mutual Funds Incremental Deposits
    
0.200
   
0.223
   
0.318
   
0.204
   
0.235
   
17.5
%
  
0.843
   
0.757
   
-10.2
%
Total Retirement Products Incremental
Deposits
  
$
0.996
  
$
1.036
  
$
1.226
  
$
1.139
  
$
1.064
    
6.8
%
$
3.295
  
$
3.429
    
4.1
%
 
Note: Certain reclassifications have been made to properly distinguish between fixed and variable products.
 
(1)
Gross deposits for the second quarter and first nine months of 2006 include approximately $20 million and $110 million of fixed and variable annuity deposits, respectively, resulting from JP employee plan deposits into the LNC employee plan as a result of the merger.
(2)
Includes Fixed Annuity products offered under the Alliance mutual funds and the fixed portion of variable annuities.
(3)
Excludes the fixed portion of variable annuities.
(4)
Represents amounts attributable to Alliance mutual fund net flows. Alliance mutual fund account values are not included in the separate accounts reported on our balance sheet.
(5)
Incremental Deposits represent gross deposits reduced by transfers from other Lincoln products.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 22
 
Employer Markets - Defined Contribution
Supplemental Data
Unaudited [Billions of Dollars]
 
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Fixed Annuities - excluding fixed portion
of variable contracts
                                
Deposits (1)
  
$
0.126
  
$
0.152
  
$
0.135
  
$
0.121
  
$
0.157
    
24.6
%
$
0.412
  
$
0.413
    
0.2
%
Withdrawals
    
(0.175
)
  
(0.190
)
  
(0.108
)
  
(0.114
)
  
(0.162
)
  
7.4
%
  
(0.489
)
  
(0.383
)
  
21.7
%
Net Flows
  
$
(0.048
)
$
(0.039
)
$
0.027
  
$
0.008
  
$
(0.005
)
  
89.6
%
$
(0.077
)
$
0.030
    
NM
 
 
                                        
 
    
 
        
Fixed Contract Account Values
  
$
4.758
  
$
4.654
  
$
4.690
  
$
4.717
  
$
4.758
    
-
 
$
4.758
  
$
4.758
    
-
 
                                                         
Fixed Portion of Variable Contracts
                                                        
Deposits
  
$
0.133
  
$
0.088
  
$
0.118
  
$
0.120
  
$
0.111
    
-16.5
%
$
0.432
  
$
0.350
    
-19.0
%
Withdrawals
    
(0.155
)
  
(0.152
)
  
(0.220
)
  
(0.231
)
  
(0.265
)
  
-71.0
%
  
(0.632
)
  
(0.716
)
  
-13.3
%
Net Flows
  
$
(0.022
)
$
(0.064
)
$
(0.102
)
$
(0.111
)
$
(0.154
)
  
NM
  
$
(0.200
)
$
(0.366
)
  
-83.0
%
                                                         
Fixed Portion of Variable Contract Account Values
  
$
5.928
  
$
6.355
  
$
6.343
  
$
6.333
  
$
6.303
    
6.3
%
$
5.928
  
$
6.303
    
6.3
%
                                                         
Variable Annuities - including fixed
portion of variable contracts
                                                        
Deposits (1)
  
$
0.685
  
$
0.704
  
$
0.788
  
$
0.834
  
$
0.694
    
1.3
%
$
2.070
  
$
2.316
    
11.9
%
Withdrawals
    
(0.703
)
  
(0.705
)
  
(0.896
)
  
(0.878
)
  
(0.830
)
  
-18.1
%
  
(2.189
)
  
(2.604
)
  
-19.0
%
Net Flows
  
$
(0.017
)
$
(0.002
)
$
(0.108
)
$
(0.044
)
$
(0.136
)
  
NM
  
$
(0.119
)
$
(0.288
)
  
NM
  
 
                                                        
Variable Contract Account Values
  
$
21.221
  
$
22.047
  
$
22.797
  
$
22.477
  
$
22.833
    
7.6
%
$
21.221
  
$
22.833
    
7.6
%
                                                         
Average Daily Variable Annuity Account
Values
  
$
15.087
  
$
15.323
  
$
16.177
  
$
16.270
  
$
16.116
    
6.8
%
$
14.601
  
$
16.188
    
10.9
%
                                                         
Total Annuity based Retirement Plan
Product Spread Information (2)
                                  
Change
                
Change
  
 
                                  
(Basis Point)
                
(Basis Point)
 
Net investment income (3)
    
6.25
%
  
6.36
%
  
6.34
%
  
6.31
%
  
6.36
%
  
11
   
6.26
%
  
6.34
%
  
8
 
Interest credited to policyholders
    
3.67
%
  
3.67
%
  
3.66
%
  
3.73
%
  
3.74
%
  
7
   
3.68
%
  
3.71
%
  
3
 
Spread (3)
    
2.58
%
  
2.69
%
  
2.68
%
  
2.58
%
  
2.62
%
  
4
   
2.58
%
  
2.63
%
  
5
 
 
Note: Certain reclassifications have been made to properly distinguish between fixed and variable products.
 
(1)
Gross deposits for the second quarter and first nine months of 2006 include approximately $20 million and $110 million of fixed and variable annuity deposits, respectively, resulting from JP employee plan deposits into the LNC employee plan as a result of the merger.
(2)
For the annuity products spread, the yield on earning assets is calculated as net investment income on fixed product investment portfolios divided by average earning assets. The average crediting rate is calculated using interest credited on annuity products less bonus credits and excess DCA interest, divided by average fixed account values.
(3)
The net investment income and spread reported above includes earnings from commercial mortgage loan prepayment and bond make-whole premiums. The impact of these premiums on investment income and spread was 14 bps in the 3rd quarter of 2006, 12 bps in the 2nd quarter of 2006, 15 bps in the 1st quarter of 2006, 17 bps in the 4th quarter of 2005 and 7 bps in the 3rd quarter of 2005.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 23
 
Employer Markets - Executive Benefits
Income Statements & Operational Data
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
 
 
Sept.
 
Dec.
 
March
 
June
 
Sept.
 
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Premiums
  
$
7.4
  
$
0.7
  
$
1.1
  
$
0.0
  
$
0.3
    
-95.9
%
$
7.9
  
$
1.4
    
-82.3
%
Surrender charges
    
(0.1
)
  
0.0
   
0.0
   
0.0
   
0.0
   
NM
    
(0.4
)
  
0.0
   
NM
  
Mortality assessments
    
2.0
   
2.5
   
2.8
   
8.5
   
7.2
   
260.0
%
  
6.3
   
18.5
   
193.7
%
Expense assessments
    
3.7
   
6.1
   
3.3
   
4.9
   
4.5
   
21.6
%
  
12.5
   
12.6
   
0.8
%
Net investment income
    
45.1
   
51.0
   
48.7
   
86.5
   
91.0
   
101.8
%
  
135.7
   
226.1
   
66.6
%
Other revenue and fees
    
1.3
   
1.3
   
1.4
   
1.3
   
1.3
         
3.8
   
4.0
   
5.3
%
Total Operating Revenue
    
59.4
   
61.6
   
57.2
   
101.2
   
104.3
   
75.6
%
  
165.8
   
262.7
   
58.4
%
 
                            
 
          
 
    
 
        
Operating Expenses
                                                        
Insurance benefits
    
39.9
   
31.2
   
32.8
   
30.4
   
35.6
   
-10.8
%
  
102.5
   
98.8
   
-3.6
%
Interest credited to contractholder funds
    
10.4
   
9.5
   
9.3
   
40.2
   
39.9
   
283.7
%
  
29.4
   
89.4
   
204.1
%
Operating and acquisition expenses
    
6.4
   
7.3
   
4.6
   
7.2
   
11.7
   
82.8
%
  
21.9
   
23.4
   
6.8
%
Total Operating Expenses
    
56.8
   
48.0
   
46.7
   
77.7
   
87.2
   
53.5
%
  
153.7
   
211.5
   
37.6
%
 
                            
 
          
 
    
 
        
Income from operations before Federal income taxes
    
2.7
   
13.6
   
10.5
   
23.5
   
17.1
   
NM
    
12.1
   
51.1
   
NM
  
 
                            
 
          
 
    
 
        
Federal income taxes
    
0.2
   
4.1
   
3.0
   
7.3
   
4.3
   
NM
    
2.0
   
14.6
   
NM
  
                                                         
Income from Operations
  
$
2.5
  
$
9.5
  
$
7.5
  
$
16.2
  
$
12.8
    
NM
  
$
10.1
  
$
36.5
    
261.4
%
 
                            
 
          
 
    
 
        
Effective tax rate
    
7.6
%
  
30.0
%
  
28.5
%
  
31.0
%
  
25.2
%
        
16.3
%
  
28.5
%
      
                                                         
Average equity
  
$
283.1
  
$
321.8
  
$
334.5
  
$
524.8
  
$
519.8
        
$
289.6
  
$
459.7
        
Return on average equity
    
3.5
%
  
11.8
%
  
9.0
%
  
12.4
%
  
9.8
%
        
4.7
%
  
10.6
%
      
                                                         
Operating and Acquisition Expenses
                                                        
Commissions
  
$
6.7
  
$
5.1
  
$
5.1
  
$
8.1
  
$
7.1
    
6.0
%
$
16.9
  
$
20.3
    
20.1
%
General and administrative expenses
    
5.8
   
5.0
   
3.7
   
2.8
   
6.2
   
6.9
%
  
14.0
   
12.6
   
-10.0
%
Taxes, licenses and fees
    
1.5
   
1.0
   
1.1
   
1.3
   
1.4
   
-6.7
%
  
3.4
   
3.7
   
8.8
%
Total commissions and expenses incurred
14.0
   
11.1
   
9.9
   
12.2
   
14.6
   
4.3
%
  
34.3
   
36.7
   
7.0
%
Less: commissions and expenses capitalized
    
(7.3
)
  
(5.1
)
  
(5.7
)
  
(8.0
)
  
(6.7
)
  
8.2
%
  
(18.0
)
  
(20.4
)
  
-13.3
%
Amortization of DAC and VOBA
    
(0.3
)
  
1.3
   
0.3
   
2.9
   
3.8
   
NM
    
5.6
   
7.0
   
25.0
%
                                                         
Net Operating and Acquisition Expenses
  
$
6.4
  
$
7.3
  
$
4.5
  
$
7.2
  
$
11.7
    
82.8
%
$
21.9
  
$
23.3
    
6.4
%
 
          
 
    
 
    
 
    
 
          
 
    
 
        
General and administrative expenses - basis
                                                
points on account values - Annualized (1)
    
189
   
155
   
109
   
26
   
58
   
(131
)
  
156
   
52
   
(104
)
                                                         
                                                         
Roll Forward of Deferred Acquisition Costs & Value of Business Acquired
                          
                                                         
Balance at beginning of period
  
$
102.2
  
$
109.8
  
$
113.6
  
$
119.0
  
$
274.1
        
$
97.3
  
$
113.6
        
Deferral
    
7.3
   
5.1
   
5.7
   
8.0
   
6.7
         
18.0
   
20.4
       
Amortization
    
0.3
   
(1.3
)
  
(0.3
)
  
(2.9
)
  
(3.8
)
        
(5.6
)
  
(7.0
)
      
Included in Total Operating Expenses
    
7.6
   
3.8
   
5.4
   
5.1
   
2.9
         
12.5
   
13.4
       
Adjustment related to realized (gains) losses
                                                  
on available-for-sale securities
    
-
   
-
   
-
   
-
   
(0.7
)
        
-
   
(0.7
)
      
Adjustment related to unrealized (gains)
                                                     
losses on available-for-sale securities
    
-
   
-
   
-
   
7.6
   
(18.3
)
        
0.0
   
(10.8
)
      
Business acquired
    
-
   
-
   
-
   
142.5
   
-
         
-
   
142.5
       
Other
    
(0.0
)
  
(0.0
)
  
0.0
   
-
   
-
         
(0.0
)
  
0.0
       
Balance at end of period
  
$
109.8
  
$
113.6
  
$
119.0
  
$
274.1
  
$
258.0
        
$
109.8
  
$
258.0
        
     
 
    
 
    
 
    
 
    
 
          
 
    
 
 
      
Roll Forward of Deferred Front-End Loads
                                                        
                                                         
Balance at beginning of period
  
$
15.6
  
$
16.9
  
$
17.9
  
$
18.9
  
$
19.7
        
$
15.5
  
$
17.9
        
Deferral
    
1.0
   
1.2
   
1.0
   
1.0
   
0.9
         
2.7
   
2.9
       
Amortization
    
0.4
   
(0.3
)
  
(0.0
)
  
(0.2
)
  
(0.3
)
        
(1.3
)
  
(0.5
)
      
Included in Income from Operations
    
1.3
   
0.9
   
1.0
   
0.8
   
0.6
         
1.4
   
2.4
       
Balance at end of period
  
$
16.9
  
$
17.9
  
$
18.9
  
$
19.7
  
$
20.3
        
$
16.9
  
$
20.3
        
 
(1)
Includes distribution costs.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 24
 
Employer Markets - Executive Benefits
Account Value Roll Forward and Supplemental Data
Unaudited [Billions of Dollars]
 

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
COLI/BOLI- Balance Beginning-of-Period
 
$ 1.194
 
$ 1.256
 
$ 1.318
 
$ 1.387
 
$ 4.228
 
254.1%
  
$ 1.122
 
$ 1.318
 
17.5%
  
Business acquired
    
-
   
-
   
-
   
2.795
   
-
   
NM
    
-
   
2.795
   
NM
  
Deposits
    
0.057
   
0.052
   
0.047
   
0.077
   
0.058
   
1.8
%
  
0.158
   
0.182
   
15.2
%
Withdrawals & deaths
    
(0.015
)
  
(0.002
)
  
(0.007
)
  
(0.042
)
  
(0.069
)
  
NM
    
(0.046
)
  
(0.118
)
  
NM
  
Net flows
   
0.042
   
0.049
   
0.039
   
0.035
   
(0.011
)
  
NM
    
0.112
   
0.064
   
-42.9
%
Policyholder assessments
    
(0.008
)
  
(0.011
)
  
(0.009
)
  
(0.017
)
  
(0.016
)
  
-100.0
%
  
(0.025
)
  
(0.041
)
  
-64.0
%
Interest credited and change in market value
    
0.028
   
0.023
   
0.038
   
0.028
   
0.051
   
82.1
%
  
0.046
   
0.117
   
154.3
%
COLI/BOLI-Balance End-of-Period
 
$
1.256
  
$
1.318
  
$
1.387
  
$
4.228
  
$
4.252
    
238.5
%
$
1.256
  
$
4.252
    
238.5
%
                                                         
COLI/BOLI In-Force
  
$
7.506
  
$
7.729
  
$
7.979
  
$
15.373
  
$
15.342
    
104.4
%
$
7.506
  
$
15.342
    
104.4
%
                                                         
Run Off Institutional Pensions Account Values -
                                                    
Balance at End of Period
  
$
2.877
  
$
2.737
  
$
2.753
  
$
2.707
  
$
2.711
    
-5.8
%
$
2.877
  
$
2.711
    
-5.8
%
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 25
 
Employer Markets - Group Protection
Income Statements & Operational Data
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Premiums
  
$
-
  
$
-
  
$
-
  
$
328.9
  
$
304.1
    
NM
  
$
-
  
$
633.1
    
NM
  
Net investment income
    
-
   
-
   
-
   
25.1
   
27.1
   
NM
   
-
   
52.2
   
NM
 
Other revenue and fees
    
-
   
-
   
-
   
0.8
   
0.9
   
NM
   
-
   
1.7
   
NM
 
Total Operating Revenue
    
-
   
-
   
-
   
354.9
   
332.1
   
NM
   
-
   
687.0
   
NM
 
                       
 
 
  
 
 
                        
Operating Expenses
                                                        
Insurance benefits
    
-
   
-
   
-
   
226.0
   
213.3
   
NM
   
-
   
439.3
   
NM
 
Operating and acquisition expenses
    
-
   
-
   
-
   
72.0
   
74.6
   
NM
   
-
   
146.6
   
NM
 
Total Operating Expenses
    
-
   
-
   
-
   
297.9
   
287.9
   
NM
   
-
   
585.9
   
NM
 
 
                            
 
 
                        
Income from operations before Federal
income taxes
    
-
   
-
   
-
   
56.9
   
44.2
   
NM
   
-
   
101.2
   
NM
 
 
                            
 
                          
Federal income taxes
    
-
   
-
   
-
   
19.9
   
15.5
   
NM
   
-
   
35.4
   
NM
 
                                                         
Income from Operations
  
$
-
  
$
-
  
$
-
  
$
37.0
  
$
28.8
    
NM
 
$
-
  
$
65.8
    
NM
 
 
                                                        
Effective tax rate
                      
35.0
%
  
35.0
%
              
35.0
%
      
                                                         
Average equity
                    
$
861.0
  
$
896.8
              
$
878.9
        
Return on average equity
                      
17.2
%
  
12.8
%
              
15.0
%
      
                                                         
Operating and Acquisition Expenses
                                                        
Commissions
  
$
-
  
$
-
  
$
-
  
$
37.3
  
$
36.0
    
NM
 
$
-
  
$
73.3
    
NM
 
General and administrative expenses
    
-
   
-
   
-
   
31.9
   
35.5
   
NM
   
-
   
67.4
   
NM
 
Taxes, licenses and fees
    
-
   
-
   
-
   
8.0
   
7.8
   
NM
   
-
   
15.8
   
NM
 
Total commissions and expenses incurred
   
-
   
-
   
-
   
77.1
   
79.3
   
NM
   
-
   
156.4
   
NM
 
Less commissions and expenses capitalized
    
-
   
-
   
-
   
(11.2
)
  
(11.3
)
  
NM
   
-
   
(22.5
)
  
NM
 
Amortization of DAC and VOBA
    
-
   
-
   
-
   
6.0
   
6.6
   
NM
   
-
   
12.6
   
NM
 
                                                         
Net Operating and Acquisition Expenses
  
$
-
  
$
-
  
$
-
  
$
72.0
  
$
74.6
    
NM
 
$
-
  
$
146.6
    
NM
 
 
                                                        
General and administrative expenses as a
                                                        
percentage of premiums
    
-
   
-
   
-
   
9.7
%
  
11.7
%
  
NM
    
-
   
10.6
%
  
NM
  
                                                         
                                                         
Roll Forward of Deferred Acquisition Costs & Value of Business Acquired
                          
                                                         
Balance at beginning of period
  
$
-
  
$
-
  
$
-
  
$
-
  
$
121.4
        
$
-
  
$
-
        
Deferral
    
-
   
-
   
-
   
11.2
   
11.3
         
-
   
22.5
       
Amortization
    
-
   
-
   
-
   
(6.0
)
  
(6.6
)
        
-
   
(12.6
)
      
Included in Total Operating Expenses
    
-
   
-
   
-
   
5.2
   
4.7
         
-
   
9.9
       
Adjustment related to realized (gains) losses
                                                  
on available-for-sale securities
    
-
   
-
   
-
   
-
   
-
         
-
   
-
       
Adjustment related to unrealized (gains) losses
                                                  
on available-for-sale securities
    
-
   
-
   
-
   
-
   
-
         
-
   
-
       
Business acquired
    
-
   
-
   
-
   
116.2
   
-
         
-
   
116.2
       
Other
    
-
   
-
   
-
   
-
   
-
         
-
   
-
       
Balance at end of period
  
$
-
  
$
-
  
$
-
  
$
121.4
  
$
126.1
        
$
-
  
$
126.1
        
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 26
 
Employer Markets - Group Protection
Supplemental Data
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
%
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Annualized Sales
                                      
Life
  
$
-
  
$
-
  
$
-
  
$
15.3
  
$
19.4
    
NM
 
$
-
  
$
34.7
    
NM
 
Disability
    
-
   
-
   
-
   
22.9
   
24.7
   
NM
   
-
   
47.6
   
NM
 
Dental
    
-
   
-
   
-
   
7.1
   
6.1
   
NM
   
-
   
13.2
   
NM
 
                                                         
Premiums:
                                                        
Life
  
$
-
  
$
-
  
$
-
  
$
111.6
  
$
109.9
    
NM
 
$
-
  
$
221.5
    
NM
 
Disability
    
-
   
-
   
-
   
134.0
   
134.8
   
NM
   
-
   
268.8
   
NM
 
Dental
    
-
   
-
   
-
   
31.4
   
31.7
   
NM
   
-
   
63.1
   
NM
 
Other
    
-
   
-
   
-
   
51.9
   
27.8
   
NM
   
-
   
79.7
   
NM
 
                                                         
Total
  
$
-
  
$
-
  
$
-
  
$
328.9
  
$
304.1
    
NM
 
$
-
  
$
633.0
    
NM
 
                                                         
Product Line Results:
                                                        
Life
  
$
-
  
$
-
  
$
-
  
$
13.5
  
$
9.8
    
NM
 
$
-
  
$
23.3
    
NM
 
Disability
    
-
   
-
   
-
   
21.1
   
16.1
   
NM
   
-
   
37.2
   
NM
 
Dental
    
-
   
-
   
-
   
1.4
   
2.2
   
NM
   
-
   
3.6
   
NM
 
Other
    
-
   
-
   
-
   
1.0
   
0.7
   
NM
   
-
   
1.7
   
NM
 
                                                         
Total
  
$
-
  
$
-
  
$
-
  
$
37.0
  
$
28.8
    
NM
 
$
-
  
$
65.8
    
NM
 
                                                         
Loss Ratios:
                                                        
Life
    
-
   
-
   
-
   
67.8
%
  
72.3
%
  
NM
   
-
   
70.1
%
  
NM
 
Disability
    
-
   
-
   
-
   
59.4
%
  
64.5
%
  
NM
   
-
   
61.9
%
  
NM
 
Dental
    
-
   
-
   
-
   
76.3
%
  
71.7
%
  
NM
   
-
   
73.9
%
  
NM
 
                                                         
Combined loss ratios
    
-
   
-
   
-
   
64.7
%
  
68.4
%
  
NM
   
-
   
66.6
%
  
NM
 
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 27
 
Investment Management
Income Statements
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
%
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Investment advisory fees - External
  
$
67.9
  
$
70.9
  
$
77.8
  
$
81.2
  
$
82.4
    
21.4
%
$
184.9
  
$
241.4
    
30.6
%
Investment advisory fees - Insurance-related
    
24.9
   
24.5
   
25.1
   
23.5
   
23.7
   
-4.8
%
  
74.3
   
72.3
   
-2.7
%
Other revenue and fees
    
30.4
   
32.5
   
36.7
   
30.0
   
34.3
   
12.8
%
  
88.1
   
101.0
   
14.6
%
Operating Revenue
    
123.2
   
127.9
   
139.6
   
134.7
   
140.4
   
14.0
%
  
347.4
   
414.6
   
19.3
%
 
                            
 
          
 
 
  
 
        
Operating Expenses
                                                        
Operating and administrative expenses
    
115.0
   
114.4
   
116.1
   
116.4
   
120.3
   
4.6
%
  
334.6
   
352.7
   
5.4
%
Total Operating Expenses
    
115.0
   
114.4
   
116.1
   
116.4
   
120.3
   
4.6
%
  
334.6
   
352.7
   
5.4
%
 
                            
 
          
 
    
 
        
Income (Loss) from operations before Federal
income taxes
    
8.2
   
13.5
   
23.5
   
18.3
   
20.1
   
145.1
%
  
12.8
   
61.9
   
NM
  
                                                         
Federal income taxes
    
3.4
   
4.6
   
8.2
   
6.3
   
6.7
   
97.1
%
  
4.9
   
21.2
   
NM
  
                                                         
Income (Loss) from Operations
  
$
4.8
  
$
8.9
  
$
15.3
  
$
12.0
  
$
13.4
    
179.2
%
$
7.9
  
$
40.8
    
NM
  
 
                            
 
          
 
    
 
        
Effective tax rate
    
41.5
%
  
34.1
%
  
34.9
%
  
34.4
%
  
33.1
%
        
38.3
%
  
34.2
%
      
                                                         
Operating and Acquisition Expenses
                                                        
General and administrative expenses
  
$
99.0
  
$
97.8
  
$
96.1
  
$
99.4
  
$
104.2
    
5.3
%
$
287.1
  
$
299.7
    
4.4
%
Depreciation and amortization
    
1.7
   
2.0
   
2.2
   
2.4
   
2.2
   
29.4
%
  
6.7
   
6.8
   
1.5
%
Sub-advisory fees
    
9.8
   
10.1
   
11.0
   
10.6
   
9.8
         
27.1
   
31.4
   
15.9
%
Total general and administrative expenses
    
110.5
   
109.9
   
109.3
   
112.4
   
116.2
   
5.2
%
  
321.0
   
337.9
   
5.3
%
Taxes, licenses and fees
    
2.5
   
2.6
   
4.8
   
2.4
   
2.7
   
8.0
%
  
7.8
   
9.9
   
26.9
%
Amortization of intangibles
    
2.0
   
2.0
   
2.0
   
1.6
   
1.4
   
-30.0
%
  
5.8
   
5.0
   
-13.8
%
Total expenses incurred
  
$
115.0
  
$
114.4
  
$
116.1
  
$
116.4
  
$
120.3
    
4.6
%
$
334.6
  
$
352.7
    
5.4
%
 
          
 
    
 
    
 
    
 
                
 
        
General and administrative expenses -
    
 
    
 
    
 
    
 
    
 
                          
basis points on assets under
                                                       
management - Annualized (1)
    
35
   
33
   
31
   
28
   
27
   
(8
)
  
36
   
29
   
(7
)
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 28
 
Investment Management
Assets Under Management Roll Forward
Unaudited [Billions of Dollars]
 
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Retail Fixed - Balance-Beginning-of-Period
  
$
9.095
  
$
9.371
  
$
9.625
  
$
9.761
  
$
10.007
    
10.0
%
$
8.457
  
$
9.625
    
13.8
%
Sales (1)
    
0.942
   
0.965
   
0.951
   
1.034
   
0.981
   
4.1
%
  
2.753
   
2.965
   
7.7
%
Redemptions
    
(0.664
)
  
(0.779
)
  
(0.805
)
  
(0.824
)
  
(0.810
)
  
-22.0
%
  
(1.985
)
  
(2.440
)
  
-22.9
%
Transfers
    
0.023
   
0.026
   
(0.056
)
  
0.030
   
0.012
   
-47.8
  %  
(0.015
)
  
(0.014
)
  
6.7
%
Net Flows
    
0.301
   
0.212
   
0.089
   
0.240
   
0.183
   
-39.2
%
  
0.753
   
0.512
   
-32.0
%
Net investment gains and change in
market value
    
(0.025
)
  
0.043
   
0.046
   
0.007
   
0.332
   
NM
    
0.160
   
0.384
   
140.0
%
Balance at End-of-Period
  
$
9.371
  
$
9.625
  
$
9.761
  
$
10.007
  
$
10.522
    
12.3
%
$
9.371
  
$
10.522
    
12.3
%
     
 
    
 
    
 
 
        
 
          
 
 
  
 
 
      
Retail Equity - Balance-Beginning-of-Period
  
$
27.725
  
$
30.988
  
$
32.732
  
$
36.500
  
$
36.035
    
30.0
%
$
24.278
  
$
32.732
    
34.8
%
Sales (1)
    
2.630
   
2.664
   
3.069
   
2.249
   
1.516
   
-42.4
%
  
8.719
   
6.834
   
-21.6
%
Redemptions
    
(1.186
)
  
(1.700
)
  
(1.840
)
  
(2.134
)
  
(1.984
)
  
-67.3
%
  
(4.007
)
  
(5.958
)
  
-48.7
%
Transfers
    
(0.025
)
  
(0.027
)
  
(0.013
)
  
(0.032
)
  
(0.016
)
  
36.0
%
  
(0.171
)
  
(0.061
)
  
64.3
%
Net Flows
    
1.419
   
0.936
   
1.216
   
0.082
   
(0.483
)
  
NM
    
4.541
   
0.815
   
-82.1
%
Net investment gains and change in
market value
    
1.844
   
0.807
   
2.552
   
(0.547
)
  
1.402
   
-24.0
%
  
2.170
   
3.408
   
57.1
%
Balance at End-of-Period
  
$
30.988
  
$
32.732
  
$
36.500
  
$
36.035
  
$
36.954
    
19.3
%
$
30.988
  
$
36.954
    
19.3
%
     
 
    
 
 
  
 
 
        
 
          
 
    
 
 
      
Total Retail - Balance-Beginning-of-Period
  
$
36.820
  
$
40.359
  
$
42.357
  
$
46.261
  
$
46.042
    
25.0
%
$
32.735
  
$
42.357
    
29.4
%
Retail sales-Annuities
    
0.642
   
0.713
   
0.885
   
0.869
   
0.960
   
49.5
%
  
2.056
   
2.715
   
32.1
%
Retail sales-Mutual Funds
    
1.331
   
1.657
   
1.329
   
1.370
   
1.151
   
-13.5
%
  
4.338
   
3.849
   
-11.3
%
Retail sales-Managed Accounts & Other
    
1.599
   
1.260
   
1.806
   
1.043
   
0.386
   
-75.9
%
  
5.079
   
3.235
   
-36.3
%
Total Retail Sales
    
3.572
   
3.629
   
4.019
   
3.282
   
2.497
   
-30.1
%
  
11.472
   
9.799
   
-14.6
%
Redemptions
    
(1.850
)
  
(2.479
)
  
(2.645
)
  
(2.959
)
  
(2.794
)
  
-51.0
%
  
(5.993
)
  
(8.398
)
  
-40.1
%
Transfers
    
(0.002
)
  
(0.002
)
  
(0.069
)
  
(0.002
)
  
(0.003
)
  
-50.0
%
  
(0.186
)
  
(0.074
)
  
60.2
%
Net Flows
    
1.720
   
1.148
   
1.305
   
0.322
   
(0.300
)
  
NM
    
5.294
   
1.327
   
-74.9
%
Net investment gains and change in
market value
    
1.819
   
0.850
   
2.598
   
(0.540
)
  
1.733
   
-4.7
%
  
2.330
   
3.792
   
62.7
%
Balance at End-of-Period
  
$
40.359
  
$
42.357
  
$
46.261
  
$
46.042
  
$
47.476
    
17.6
%
$
40.359
  
$
47.476
    
17.6
%
     
 
    
 
 
  
 
 
        
 
          
 
    
 
 
      
 
                                              
 
        
Institutional Fixed - Balance-Beginning-of-Period
  
$
13.403
  
$
13.964
  
$
14.699
  
$
17.262
  
$
18.154
    
35.4
%
$
11.547
  
$
14.699
    
27.3
%
Inflows (1)
    
1.036
   
1.175
   
3.080
   
1.634
   
1.133
   
9.4
%
  
4.038
   
5.847
   
44.8
%
Withdrawals/terminations
    
(0.393
)
  
(0.483
)
  
(0.447
)
  
(0.750
)
  
(0.516
)
  
-31.3
%
  
(1.726
)
  
(1.713
)
  
0.8
%
Transfers
    
0.001
   
(0.001
)
  
0.002
   
0.008
   
(0.002
)
  
NM
    
(0.005
)
  
0.009
   
NM
  
Net Flows
    
0.643
   
0.691
   
2.636
   
0.892
   
0.615
   
-4.4
%
  
2.307
   
4.143
   
79.6
%
Net investment gains and change in
market value
    
(0.083
)
  
0.044
   
(0.074
)
  
0.001
   
0.618
   
NM
    
0.109
   
0.545
   
NM
  
Balance at End-of-Period
  
$
13.964
  
$
14.699
  
$
17.262
  
$
18.154
  
$
19.387
    
38.8
%
$
13.964
  
$
19.387
    
38.8
%
     
 
    
 
              
 
          
 
    
 
        
Institutional Equity - Balance-Beginning-of-Period
  
$
16.627
  
$
18.951
  
$
20.576
  
$
22.906
  
$
21.729
    
30.7
%
$
12.849
  
$
20.576
    
60.1
%
Inflows (1)
    
2.131
   
3.658
   
1.964
   
1.130
   
1.274
   
-40.2
%
  
7.431
   
4.367
   
-41.2
%
Withdrawals/terminations
    
(0.948
)
  
(2.617
)
  
(1.008
)
  
(1.327
)
  
(0.844
)
  
11.0
%
  
(2.550
)
  
(3.179
)
  
-24.7
%
Transfers
    
(0.000
)
  
0.001
   
0.000
   
(0.008
)
  
0.001
   
NM
    
(0.143
)
  
(0.007
)
  
95.1
%
Net Flows
    
1.182
   
1.041
   
0.956
   
(0.205
)
  
0.431
   
-63.5
%
  
4.738
   
1.182
   
-75.1
%
Net investment gains and change in
market value
    
1.141
   
0.584
   
1.373
   
(0.971
)
  
0.489
   
-57.1
%
  
1.364
   
0.890
   
-34.8
%
Balance at End-of-Period
  
$
18.951
  
$
20.576
  
$
22.906
  
$
21.729
  
$
22.649
    
19.5
%
$
18.951
  
$
22.649
    
19.5
%
     
 
    
 
 
  
 
 
  
 
 
  
 
          
 
    
 
 
      
Total Institutional - Balance-Beginning-of-Period
  
$
30.031
  
$
32.915
  
$
35.276
  
$
40.167
  
$
39.883
    
32.8
%
$
24.396
  
$
35.276
    
44.6
%
Inflows
    
3.166
   
4.833
   
5.044
   
2.764
   
2.406
   
-24.0
%
  
11.469
   
10.214
   
-10.9
%
Withdrawals/terminations
    
(1.342
)
  
(3.100
)
  
(1.454
)
  
(2.078
)
  
(1.360
)
  
-1.3
%
  
(4.276
)
  
(4.892
)
  
-14.4
%
Transfers
    
0.000
   
(0.001
)
  
0.003
   
0.000
   
(0.000
)
  
NM
    
(0.148
)
  
0.002
   
NM
  
Net Flows
    
1.825
   
1.733
   
3.592
   
0.687
   
1.046
   
-42.7
%
  
7.045
   
5.324
   
-24.4
%
Net investment gains and change in
market value
    
1.058
   
0.629
   
1.299
   
(0.971
)
  
1.107
   
4.6
%
  
1.473
   
1.435
   
-2.6
%
Balance at End-of-Period
  
$
32.915
  
$
35.276
  
$
40.167
  
$
39.883
  
$
42.035
    
27.7
%
$
32.915
  
$
42.035
    
27.7
%
     
 
    
 
 
  
 
    
 
 
  
 
          
 
    
 
        
Total Retail and Institutional - At End-of-Period
  
$
73.274
  
$
77.633
  
$
86.428
  
$
85.926
  
$
89.511
    
22.2
%
$
73.274
  
$
89.511
    
22.2
%
                                                         
General Account Assets-End-of-Period (2)
  
$
43.095
  
$
43.086
  
$
41.995
  
$
65.637
  
$
67.410
    
56.4
%
$
43.095
  
$
67.410
    
56.4
%
                                                         
Total Assets Under Management
                                                        
At End-of-Period
  
$
116.369
  
$
120.719
  
$
128.423
  
$
151.563
  
$
156.921
    
34.8
%
$
116.369
  
$
156.921
    
34.8
%
                                                         
Total Retail and Institutional - Net Flows
  
$
3.546
  
$
2.881
  
$
4.898
  
$
1.008
  
$
0.745
    
-79.0
%
$
12.339
  
$
6.651
    
-46.1
%
 
                                                        
Subadvised Assets, included in Assets
                                                        
Under Management above
                                                        
Retail
  
$
14.319
  
$
15.388
  
$
17.320
  
$
16.899
  
$
16.421
    
14.7
%
$
14.319
  
$
16.421
    
14.7
%
Institutional
    
4.986
   
5.114
   
5.608
   
4.593
   
4.560
   
-8.5
%
  
4.986
   
4.560
   
-8.5
%
Total Subadvised Assets
  
$
19.305
  
$
20.503
  
$
22.928
  
$
21.491
  
$
20.982
    
8.7
%
$
19.305
  
$
20.982
    
8.7
%
 
(1)
Sales and in-flows include dividend reinvestments.
(2)
Balance at June 30, 2006 includes $26.1 billion of assets acquired due to the merger with Jefferson Pilot.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 29

Lincoln UK
Income Statements
Unaudited [Millions of Dollars]
 
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
 %
  
Sept.
  
Sept.
  
%
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Revenue
                                      
Premiums
  
$
16.9
  
$
15.4
  
$
16.6
  
$
19.9
  
$
21.1
    
24.9
%
$
47.9
  
$
57.6
    
20.3
%
Mortality assessments
    
9.0
   
7.3
   
7.8
   
8.9
   
8.7
   
-3.3
%
  
27.4
   
25.4
   
-7.3
%
Expense assessments
    
56.0
   
22.0
   
28.0
   
34.7
   
23.9
   
-57.3
%
  
119.6
   
86.7
   
-27.5
%
Net investment income
    
20.9
   
17.8
   
17.0
   
17.8
   
18.6
   
-11.0
%
  
60.8
   
53.4
   
-12.2
%
Other revenue and fees
    
-
   
-
   
0.1
   
-
    
-
    
NM
    
0.1
   
0.1
       
Total Operating Revenue
    
102.9
   
62.6
   
69.5
   
81.4
   
72.3
   
-29.7
%
  
255.8
   
223.2
   
-12.7
%
 
                            
 
          
 
    
 
        
Operating Expenses
                                                        
Insurance benefits
    
35.5
   
27.5
   
25.4
   
27.5
   
25.0
   
-29.6
%
  
88.5
   
77.8
   
-12.1
%
Operating and acquisition expenses
    
52.7
   
14.3
   
27.6
   
38.9
   
34.5
   
-34.5
%
  
121.4
   
100.9
   
-16.9
%
Total Operating Expenses
    
88.2
   
41.8
   
53.0
   
66.3
   
59.5
   
-32.5
%
  
210.0
   
178.8
   
-14.9
%
 
                            
 
          
 
 
  
 
        
Income from operations before Federal
income taxes
    
14.7
   
20.8
   
16.5
   
15.1
   
12.8
   
-12.9
%
  
45.9
   
44.4
   
-3.3
%
 
                            
 
          
 
    
 
        
Federal income taxes
    
5.1
   
7.2
   
5.8
   
5.2
   
4.5
   
-11.8
%
  
16.1
   
15.5
   
-3.7
%
                                                         
Income from Operations
  
$
9.6
  
$
13.6
  
$
10.7
  
$
9.9
  
$
8.3
    
-13.5
%
$
29.7
  
$
28.9
    
-2.7
%
 
                            
 
          
 
    
 
        
Effective tax rate on
                                                        
Income from Operations
    
34.8
%
  
34.7
%
  
35.1
%
  
34.4
%
  
35.2
%
        
35.1
%
  
34.9
%
      
                                                         
Average equity
  
$
452.7
  
$
447.8
  
$
427.0
  
$
417.8
  
$
406.0
        
$
446.4
  
$
416.9
        
Return on average equity
    
8.4
%
  
12.1
%
  
10.0
%
  
9.5
%
  
8.2
%
        
8.9
%
  
9.3
%
      
                                                         
Operating and Acquisition Expenses
                                                        
                                                         
Commissions
  
$
0.9
  
$
0.1
  
$
0.9
  
$
1.1
  
$
1.4
    
55.6
%
$
2.2
  
$
3.4
    
54.5
%
General and administrative expenses
    
24.9
   
24.2
   
22.7
   
23.9
   
25.1
   
0.8
%
  
74.1
   
71.6
   
-3.4
%
Total commissions and expenses incurred
   
25.8
   
24.3
   
23.6
   
25.0
   
26.4
   
2.3
%
  
76.3
   
75.0
   
-1.7
%
Less: commissions and expenses capitalized
    
(0.7
)
  
(0.7
)
  
(0.5
)
  
(0.1
)
  
(0.6
)
  
14.3
%
  
(2.1
)
  
(1.2
)
  
42.9
%
Amortization of DAC and VOBA
    
27.5
   
(9.3
)
  
4.5
   
13.9
   
8.7
   
-68.4
%
  
47.2
   
27.1
   
-42.6
%
 
                                                     NM  
Net Operating and Acquisition Expenses
  
$
52.7
  
$
14.3
  
$
27.6
  
$
38.9
  
$
34.5
    
-34.5
%
$
121.4
  
$
100.9
    
-16.9
%
                                                         
                                                         
                                                         
Roll Forward of Deferred Acquisition Costs & Value of Business Acquired
                          
                                                         
Balance at beginning of period
  
$
792.4
  
$
753.5
  
$
743.4
  
$
747.2
  
$
781.7
        
$
867.0
  
$
743.4
        
Deferral
    
0.7
   
0.7
   
0.5
   
0.1
   
0.6
         
2.1
   
1.2
       
Amortization
    
(27.5
)
  
9.3
   
(4.5
)
  
(13.9
)
  
(8.7
)
        
(47.2
)
  
(27.1
)
      
Included in Total Benefits and Expenses
    
(26.8
)
  
10.0
   
(4.0
)
  
(13.8
)
  
(8.0
)
        
(45.1
)
  
(25.9
)
      
Foreign currency translation adjustment
    
(12.1
)
  
(20.0
)
  
7.7
   
48.3
   
9.7
         
(68.5
)
  
65.8
       
Balance at end of period
  
$
753.5
  
$
743.4
  
$
747.2
  
$
781.7
  
$
783.4
        
$
753.5
  
$
783.4
        
 
          
 
    
 
    
 
    
 
          
 
    
 
 
      
                                                         
Roll Forward of Deferred Front-End Load
                                                        
                                                         
Balance at beginning of period
  
$
399.8
  
$
365.8
  
$
363.1
  
$
364.5
  
$
381.2
        
$
437.5
  
$
363.1
        
Deferral
    
0.9
   
0.7
   
1.0
   
0.8
   
0.8
         
3.5
   
2.6
       
Amortization
    
(29.0
)
  
6.0
   
(3.4
)
  
(7.6
)
  
6.1
         
(40.8
)
  
(5.0
)
      
Included in Income from Operations
    
(28.1
)
  
6.7
   
(2.4
)
  
(6.9
)
  
6.9
         
(37.3
)
  
(2.3
)
      
Foreign currency translation adjustment
    
(5.9
)
  
(9.5
)
  
3.8
   
23.6
   
4.7
         
(34.4
)
  
32.0
       
Balance at end of period
  
$
365.8
  
$
363.1
  
$
364.5
  
$
381.2
  
$
392.8
        
$
365.8
  
$
392.8
        
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 30

Lincoln UK
Operational Data
Unaudited [Billions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Unit Linked Assets
                                      
Balance-Beg-of-Period
  
$
6.903
  
$
7.180
  
$
7.320
  
$
7.754
  
$
7.857
    
13.8
%
$
7.186
  
$
7.320
    
1.9
%
                                                         
Deposits
   
0.088
   
0.156
   
0.069
   
0.073
   
0.105
   
19.3
%
  
0.233
   
0.247
   
6.0
%
Withdrawals (including charges) and Deaths
    
(0.192
)
  
(0.178
)
  
(0.186
)
  
(0.201
)
  
(0.218
)
  
-13.5
%
  
(0.550
)
  
(0.606
)
  
-10.2
%
Net Flows
    
(0.104
)
  
(0.023
)
  
(0.118
)
  
(0.128
)
  
(0.113
)
  
-8.7
%
  
(0.316
)
  
(0.359
)
  
-13.6
%
Investment income and change in
market value
    
0.492
   
0.347
   
0.479
   
(0.267
)
  
0.275
   
-44.1
%
  
0.896
   
0.487
   
-45.6
%
Foreign Currency Adjustment
    
(0.111
)
  
(0.184
)
  
0.072
   
0.500
   
0.098
   
NM
 
  
(0.586
)
  
0.670
   
NM
 
Unit Linked Assets - End-of-Period
  
$
7.180
  
$
7.320
  
$
7.754
  
$
7.857
  
$
8.118
    
13.1
%
$
7.180
  
$
8.118
    
13.1
%
 
          
 
    
 
    
 
    
 
 
        
 
    
 
 
      
Individual Life In-force
 
$
18.175
  
$
17.521
  
$
17.744
  
$
18.289
  
$
18.464
    
1.6
%
$
18.175
  
$
18.464
    
1.6
%
                                                         
Exchange Rate - Dollars to Pounds
                                                        
For-the-Period
    
1.779
   
1.747
   
1.754
   
1.829
   
1.878
   
5.6
%
  
1.846
   
1.820
   
-1.4
%
End-of-Period
    
1.764
   
1.719
   
1.737
   
1.849
   
1.872
   
6.1
%
  
1.764
   
1.872
   
6.1
%
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 31

Lincoln Financial Media
Income Statements
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Operating Results
                                      
Communications revenues, net
  
$
-
  
$
-
  
$
-
  
$
57.5
  
$
59.8
    
NM
  
$
-
  
$
117.3
    
NM
  
Cost of sales
    
-
   
-
   
-
   
7.6
   
10.3
   
NM
    
-
   
17.9
   
NM
  
Operating expenses
    
-
   
-
   
-
   
22.2
   
21.0
   
NM
    
-
   
43.3
   
NM
  
Station operating income
    
-
   
-
   
-
   
27.7
   
28.5
   
NM
    
-
   
56.1
   
NM
  
Depreciation and amortization
    
-
   
-
   
-
   
6.0
   
2.7
   
NM
    
-
   
8.7
   
NM
  
General and administrative expenses
    
-
   
-
   
-
   
1.8
   
1.4
   
NM
    
-
   
3.2
   
NM
  
Taxes, licenses and fees
    
-
   
-
   
-
   
-
   
1.5
   
NM
    
-
   
1.5
   
NM
  
Net interest expense and other
    
-
   
-
   
-
   
0.3
   
0.3
   
NM
    
-
   
0.6
   
NM
  
                                                         
Income from operations before Federal
income taxes
    
-
   
-
   
-
   
19.6
   
22.6
   
NM
    
-
   
42.2
   
NM
  
 
                            
 
                          
Federal income taxes
    
-
   
-
   
-
   
7.7
   
8.0
   
NM
    
-
   
15.7
   
NM
  
                                                         
Income from Operations
  
$
-
  
$
-
  
$
-
  
$
11.9
  
$
14.6
    
NM
  
$
-
  
$
26.5
    
NM
  
 
                            
 
                          
Effective tax rate on
                                                        
Income from Operations
                      
39.3
%
  
35.4
%
              
37.2
%
      
 
 
 
Other Operations (1)
Unaudited [Millions of Dollars]

   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Operating Revenue
                                      
Earnings on investments & other income
  
$
27.0
  
$
10.0
  
$
12.9
  
$
48.8
  
$
32.7
    
21.1
%
$
89.5
  
$
94.4
    
5.5
%
Amortization of deferred gain on
                                                        
indemnity reinsurance (2)
    
18.9
   
18.9
   
18.8
   
18.8
   
18.8
   
-0.5
%
  
56.8
   
56.3
   
-0.9
%
Total Operating Revenue
    
45.9
   
28.9
   
31.7
   
67.6
   
51.4
   
12.0
%
  
146.3
   
150.7
   
3.0
%
 
                            
 
                
 
        
Operating Expenses
                                                        
Interest on debt
    
21.4
   
21.8
   
21.5
   
64.3
   
66.7
   
211.7
%
  
65.4
   
152.5
   
133.2
%
Operating expenses
    
28.5
   
12.8
   
12.2
   
46.3
   
12.1
   
-57.5
%
  
85.4
   
70.6
   
-17.3
%
Total Operating Expenses
    
49.9
   
34.6
   
33.7
   
110.6
   
78.8
   
57.9
%
  
150.8
   
223.1
   
47.9
%
 
                            
 
                
 
        
Income (loss) from operations before Federal
income taxes
    
(4.0
)
  
(5.7
)
  
(2.0
)
  
(43.1
)
  
(27.4
)
  
NM
    
(4.4
)
  
(72.4
)
  
NM
  
                       
 
    
 
 
              
 
 
      
Federal income taxes (3)
    
(16.3
)
  
(15.4
)
  
(2.2
)
  
(17.0
)
  
(15.9
)
  
2.5
%
  
(49.2
)
  
(35.0
)
  
28.9
%
                                                         
Income (loss) from Operations
  
$
12.2
  
$
9.6
  
$
0.1
  
$
(26.1
)
$
(11.5
)
  
NM
  
$
44.7
  
$
(37.4
)
  
NM
  
 
(1)
Includes eliminations of intercompany transactions.
(2)
Represents the amortization of deferred gain recognized on the business sold through indemnity reinsurance to Swiss Re.
(3)
Includes a reduction of the valuation allowance on the deferred tax asset of our foreign life reinsurance subsidiary of $5.7 million in the 1st quarter of 2005, $23.5 million in the 2nd quarter of 2005, $13.3 million in the 3rd quarter of 2005, $4.3 million in the 4th quarter of 2005, $46.8 million for the full year 2005
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 32
 
Consolidated Domestic Deposits/Account Balances
Unaudited [Billions of Dollars]
 
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
Sept.
  
Sept.
  
%
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
Deposits - For the Period
                                      
Individual Markets - Fixed Annuities
  
$
0.494
  
$
0.486
  
$
0.471
  
$
0.872
  
$
1.062
    
115.0
%
$
1.501
  
$
2.405
    
60.2
%
Individual Markets - Variable Annuities
    
1.410
   
1.513
   
1.665
   
1.867
   
1.658
   
17.6
%
  
4.026
   
5.191
   
28.9
%
Individual Markets - Life Insurance
    
0.497
   
0.596
   
0.488
   
1.023
   
0.753
   
51.5
%
  
1.435
   
2.264
   
57.8
%
Employer Markets - Fixed Annuities
    
0.259
   
0.240
   
0.253
   
0.242
   
0.268
   
3.5
%
  
0.843
   
0.763
   
-9.5
%
Employer Markets - Variable Products (1)
    
0.752
   
0.839
   
0.987
   
0.918
   
0.818
   
8.8
%
  
2.481
   
2.723
   
9.8
%
Employer Markets - Executive Benefits
    
0.057
   
0.052
   
0.047
   
0.077
   
0.058
   
1.8
%
  
0.158
   
0.182
   
15.2
%
Inv Mgmt - Annuities
    
0.642
   
0.713
   
0.885
   
0.869
   
0.960
   
49.5
%
  
2.056
   
2.715
   
32.1
%
Inv Mgmt - Mutual Funds
    
1.331
   
1.657
   
1.329
   
1.370
   
1.151
   
-13.5
%
  
4.338
   
3.849
   
-11.3
%
Inv Mgmt - Managed Acct. & Other
    
1.599
   
1.260
   
1.806
   
1.043
   
0.386
   
-75.9
%
  
5.079
   
3.235
   
-36.3
%
Consolidating Adjustments
    
(0.624
)
  
(0.617
)
  
(0.481
)
  
(0.773
)
  
(0.817
)
  
-30.9
%
  
(1.818
)
  
(2.071
)
  
-13.9
%
Total Gross Retail Deposits
   
6.417
   
6.737
   
7.449
   
7.509
   
6.297
   
-1.9
%
  
20.098
   
21.255
   
5.8
%
                                                         
Inv Mgmt - Institutional
    
3.166
   
4.833
   
5.044
   
2.764
   
2.406
   
-24.0
%
  
11.469
   
10.214
   
-10.9
%
Consolidating Adjustments
    
(0.217
)
  
(0.265
)
  
(0.257
)
  
(0.365
)
  
(0.202
)
  
6.9
%
  
(0.765
)
  
(0.824
)
  
-7.7
%
Total Gross Deposits
 
$
9.366
  
$
11.305
  
$
12.236
  
$
9.907
  
$
8.501
    
-9.2
%
$
30.802
  
$
30.645
    
-0.5
%
                                                         
Account Balances - End of Period
                                                        
Individual Markets - Fixed Annuities
  
$
9.117
  
$
8.607
  
$
8.362
  
$
17.384
  
$
16.894
    
85.3
%
$
9.117
  
$
16.894
    
85.3
%
Individual Markets - Variable Annuities
    
35.276
   
37.655
   
40.495
   
41.537
   
43.977
   
24.7
%
  
35.276
   
43.977
   
24.7
%
Individual Markets - Life Insurance
    
13.745
   
14.051
   
14.268
   
25.479
   
25.821
   
87.9
%
  
13.745
   
25.821
   
87.9
%
Employer Markets - Fixed Annuities
    
10.686
   
11.009
   
11.033
   
11.050
   
11.061
   
3.5
%
  
10.686
   
11.061
   
3.5
%
Employer Markets - Variable Products (1)
    
18.965
   
19.464
   
20.702
   
20.475
   
21.166
   
11.6
%
  
18.965
   
21.166
   
11.6
%
Employer Markets - Executive Benefits
    
1.256
   
1.318
   
1.387
   
4.228
   
4.252
   
238.5
%
  
1.256
   
4.252
   
238.5
%
Inv Mgmt - Annuities
    
13.022
   
13.287
   
13.998
   
13.577
   
14.129
   
8.5
%
  
13.022
   
14.129
   
8.5
%
Inv Mgmt - Mutual Funds
    
15.738
   
16.231
   
17.101
   
16.654
   
17.068
   
8.5
%
  
15.738
   
17.068
   
8.5
%
Inv Mgmt - Managed Acct. & Other
    
11.599
   
12.839
   
15.162
   
15.812
   
16.279
   
40.3
%
  
11.599
   
16.279
   
40.3
%
Consolidating Adjustments
    
(12.229
)
  
(12.602
)
  
(13.282
)
  
(13.057
)
  
(13.649
)
  
-11.6
%
  
(12.229
)
  
(13.649
)
  
-11.6
%
Total Retail Account Balances
   
117.175
   
121.858
   
129.225
   
153.137
   
156.998
   
34.0
%
  
117.175
   
156.998
   
34.0
%
                                                         
Inv Mgmt - Institutional
    
32.915
   
35.276
   
40.167
   
39.883
   
42.035
   
27.7
%
  
32.915
   
42.035
   
27.7
%
Consolidating Adjustments
    
(3.559
)
  
(3.422
)
  
(3.573
)
  
(3.557
)
  
(3.510
)
  
1.4
%
  
(3.559
)
  
(3.510
)
  
1.4
%
Total Account Balances
 
$
146.530
  
$
153.712
  
$
165.820
  
$
189.464
  
$
195.524
    
33.4
%
$
146.530
  
$
195.524
    
33.4
%
 
Total Domestic Net Flows
Unaudited [Billions of Dollars]
 
   
Three Months Ended
  
Nine Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
Sept.
  
Sept.
  
 %
  
For the Period Ended
  
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
2005
  
2006
  
Change
  
                                       
Individual Markets - Life
  
$
0.295
  
$
0.400
  
$
0.257
  
$
0.548
  
$
0.491
    
66.4
%
$
0.794
  
$
1.296
    
63.2
%
Individual Markets - Annuities
    
0.717
   
0.767
   
0.770
   
0.699
   
0.304
   
-57.6
%
  
2.109
   
1.773
   
-15.9
%
Employer Markets - Defined Contribution
    
0.028
   
(0.026
)
  
0.181
   
0.114
   
0.037
   
32.1
%
  
0.445
   
0.331
   
-25.6
%
Employer Markets - Executive Benefits
    
0.042
   
0.049
   
0.039
   
0.035
   
(0.011
)
  
NM
    
0.112
   
0.064
   
-42.9
%
Investment Management - Retail
    
1.720
   
1.148
   
1.305
   
0.322
   
(0.300
)
  
NM
    
5.294
   
1.327
   
-74.9
%
Consolidating Adjustments
    
(0.053
)
  
0.015
   
0.083
   
(0.009
)
  
0.012
   
NM
 
  
0.036
   
0.086
   
138.9
%
Total Retail Net Flows
    
2.749
   
2.354
   
2.635
   
1.709
   
0.532
   
-80.6
%
  
8.790
   
4.876
   
-44.5
%
                                                         
Investment Management - Institutional
    
1.825
   
1.733
   
3.592
   
0.687
   
1.046
   
-42.7
%
  
7.045
   
5.324
   
-24.4
%
Consolidating Adjustments
    
(0.050
)
  
0.198
   
(0.039
)
  
(0.047
)
  
0.139
   
NM
    
(0.075
)
  
0.053
   
NM
 
Total Net Flows
  
$
4.524
  
$
4.285
  
$
6.188
  
$
2.349
  
$
1.717
    
-62.0
%
$
15.760
  
$
10.254
    
-34.9
%
 
(1)
Includes amounts attributable to Alliance program mutual fund net flows.
Account values for the Alliance program are not included in the separate accounts reported on our balance sheet.
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 33
 
Consolidated Investment Data - Assets Managed
Unaudited [Billions of Dollars]
 
   
As of
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
%
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
Assets Managed by Source
                          
LNC's Investments and Cash:
                          
Fixed maturity securities -
                         
available for sale
  
$
34.325
  
$
33.443
  
$
32.893
  
$
54.024
  
$
55.825
    
62.6
%
Equity securities - available for sale
    
0.152
   
0.145
   
0.176
   
0.579
   
0.662
   
NM
  
Trading securities
    
3.287
   
3.246
   
3.190
   
3.109
   
3.172
   
-3.5
%
Other investments
    
6.322
   
6.334
   
6.314
   
12.003
   
11.948
   
89.0
%
Total LNC Investments
    
44.085
   
43.168
   
42.573
   
69.714
   
71.608
   
62.4
%
Separate accounts
    
60.812
   
63.747
   
67.984
   
71.095
   
74.357
   
22.3
%
Cash and invested cash
    
1.602
   
2.312
   
1.974
   
1.500
   
1.108
   
-30.8
%
Total LNC
    
106.498
   
109.227
   
112.531
   
142.309
   
147.073
   
38.1
%
 
                                      
Non-affiliate assets managed
    
58.446
   
62.528
   
70.464
   
70.185
   
73.227
   
25.3
%
                                       
Total Assets Managed
  
$
164.944
  
$
171.755
  
$
182.995
  
$
212.495
  
$
220.300
    
33.6
%
                                       
Assets Managed by Advisor
                                      
Investment Management segment
                                      
(See page 28 for additional detail)
  
$
73.274
  
$
77.633
  
$
86.428
  
$
85.926
  
$
89.511
    
22.2
%
DLIA-Corp
                                      
(Assets managed internally-see page 28)
    
43.095
   
43.086
   
41.995
   
65.637
   
67.410
   
56.4
%
Lincoln UK
    
8.518
   
8.562
   
8.986
   
9.171
   
9.440
   
10.8
%
Domestic Policy Loans (excluding Lincoln UK)
    
1.851
   
1.858
   
1.856
   
2.712
   
2.720
   
46.9
%
Non-LNC Affiliates
    
38.205
   
40.617
   
43.729
   
49.049
   
51.219
   
34.1
%
Total Assets Managed
  
$
164.944
  
$
171.755
  
$
182.995
  
$
212.495
  
$
220.300
    
33.6
%
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.
 
 
9/30/2006
PAGE 34
 
Consolidated Investment Data
Unaudited [Millions of Dollars]
 
   
Three Months Ended
  
   
Sept.
  
Dec.
  
March
  
June
  
Sept.
  
% 
  
   
2005
  
2005
  
2006
  
2006
  
2006
  
Change
  
                           
Net Investment Income
                         
                           
Fixed maturity AFS securities
  
$
505.7
  
$
509.7
  
$
513.7
  
$
829.0
  
$
824.8
    
63.1
%
Equity AFS securities
    
2.4
   
3.3
   
2.1
   
8.6
   
7.9
   
229.2
%
Trading securities
    
48.6
   
48.7
   
49.7
   
49.4
   
49.2
   
1.2
%
Mortgage loans on real estate
    
70.9
   
75.1
   
67.2
   
135.0
   
137.8
   
94.4
%
Real estate
    
8.5
   
5.6
   
9.1
   
13.2
   
13.3
   
56.5
%
Policy loans
    
29.8
   
29.2
   
29.7
   
42.5
   
43.0
   
44.3
%
Invested cash
    
17.0
   
19.2
   
22.8
   
22.2
   
33.0
   
94.1
%
Other investments
    
16.4
   
7.0
   
14.6
   
10.2
   
41.3
   
151.8
%
Investment revenue
    
699.3
   
697.9
   
708.8
   
1,110.1
   
1,150.3
   
64.5
%
Investment expense
    
(28.5
)
  
(29.8
)
  
(30.4
)
  
(41.9
)
  
(42.4
)
  
-48.8
%
                                       
Net Investment Income
  
$
670.8
  
$
668.1
  
$
678.3
  
$
1,068.2
  
$
1,107.9
    
65.2
%
                             
 
 
      
Mean Invested Assets (Amortized Cost)
  
$
44,040.1
  
$
44,035.2
  
$
44,363.6
  
$
70,933.3
  
$
70,646.9
        
                                       
Ratio of Net Invest Income Over Mean Invested Assets
    
6.09
%
  
6.07
%
  
6.12
%
  
6.02
%
  
6.27%
        
                                       
                                       
 
    
Three Months Ended
  
 
    
Sept.
    
Dec.
    
March
    
June
    
Sept.
 
  
%
  
     
2005
    
2005
    
2006
    
2006
    
2006
    
Change
  
Realized Investment Gains (Losses)
                                      
Fixed maturities
  
$
8.2
  
$
(5.6
)
$
4.3
  
$
8.2
  
$
5.8
    
-29.3
%
Equity securities
    
(0.6
)
  
2.2
   
0.3
   
(1.1
)
  
-
   
NM
 
Other gains (losses), net
    
5.4
   
6.3
   
(0.1
)
  
6.3
   
(5.5
)
  
NM
 
Policyholders' interest
    
0.7
   
(1.3
)
  
(1.8
)
  
(1.4
)
  
2.0
    
185.7
%
Capital gains expense
    
(2.4
)
  
(2.3
)
  
(2.4
)
  
-
   
-
   
NM
  
Sale of affiliate
    
-
   
-
   
-
   
-
   
-
    
NM
  
Total pretax gains (losses)
    
11.3
   
(0.8
)
  
0.3
   
12.0
   
2.2
    
-80.5
%
Amortization of DAC, VOBA and deferred
                                      
sales inducements
    
(14.0
)
  
(8.8
)
  
(10.8
)
  
(18.9
)
  
(8.9
) 
  
36.4
%
Income taxes
    
(0.7
)
  
(3.3
)
  
(3.3
)
  
(2.9
)
  
(1.7
)
  
NM
 
Realized investment gains (losses), net of taxes
  
$
(2.0
)
$
(6.2
)
$
(7.2
)
$
(4.0
)
$
(5.0
) 
  
NM
 
     
 
 
  
 
    
 
 
                  
                                       
 
          
As of September 30, 2006
          
As of December 31, 2005
  
 
          
Amount 
    
% of Total
          
Amount
    
% of Total
  
Available-for-Sale and Trading Securities [Millions of Dollars]
                              
Fixed Maturity Sec (Fair Value)
        
$
58,997.4
    
98.9
%
      
$
36,687.1
    
99.6
%
Fixed Maturity Sec (Amortized Cost)
        
 
57,855.6
    
98.9
%
        
35,347.6
   
99.6
%
                                       
Equity Securities (Fair Value)
        
$
662.0
    
1.1
%
        
146.9
   
0.4
%
Equity Securities (Amortized Cost)
          
619.6
    
1.1
%
        
139.0
   
0.4
%
                                       
% of Available-for-Sale Fixed Maturity Securities (Based on Fair Value)
                                      
Treasuries and AAA
                
19.6
%
              
23.4
%
AA or better
                
27.5
%
              
30.9
%
BB or less
                
6.4
%
              
7.4
%
                                       
                                       
General Account Investments
          
As of September 30, 2006
          
As of December 31, 2005
  
 
          
Amount
    
% of Total
          
Amount
    
% of Total
  
Fixed maturities- security sector:
                                      
Corporate bonds
        
$
45,345.3
    
81.3
%
      
$
25,860.7
    
77.3
%
U.S. government bonds
          
291.6
   
0.5
%
        
161.8
   
0.5
%
Foreign government bonds
          
1,144.4
   
2.0
%
        
1,203.3
   
3.6
%
Mortgage backed securities
          
8,765.1
   
15.7
%
        
5,951.2
   
17.8
%
State and municipal bonds
          
160.7
   
0.3
%
        
128.8
   
0.4
%
Preferred stocks - redeemable
          
117.8
   
0.2
%
        
137.4
   
0.4
%
Total
        
$
55,824.9
    
100.0
%
      
$
33,443.2
    
100.0
%
                           
 
 
        
                                       
 
    
As of
  
 
    
Sept.
    
Dec.
    
March
    
June
    
Sept.
 
  
%
  
     
2005
    
2005
    
2006
    
2006
    
2006
    
Change
  
Composition of Investment Portfolio:
                                      
Securities available-for-sale, at fair value:
                                      
Fixed Maturity
  
$
34,324.9
  
$
33,443.2
  
$
32,892.8
  
$
54,024.1
  
$
55,824.9
    
62.6
%
Equity
    
151.6
   
144.7
   
176.0
   
578.5
   
662.0
   
NM
  
Trading securities
    
3,287.0
   
3,246.0
   
3,190.1
   
3,109.0
   
3,172.5
   
-3.5
%
Mortgage loans on real estate & real estate
    
3,892.8
   
3,845.3
   
3,766.5
   
8,169.7
   
8,004.5
   
105.6
%
Policy loans
    
1,856.4
   
1,862.2
   
1,860.4
   
2,716.4
   
2,724.9
   
46.8
%
Derivative Investments
    
155.9
   
174.7
   
199.3
   
279.6
   
349.4
   
124.1
%
Other investments
    
416.4
   
452.2
   
488.2
   
837.0
   
869.3
   
108.8
%
Total
  
$
44,085.0
  
$
43,168.4
  
$
42,573.2
  
$
69,714.4
  
$
71,607.5
    
62.4
%
 
This is a dated document. It may not be accurate after such date and LNC does not undertake to update or keep it accurate after such date.