SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year ended December 31, 1997
LINCOLN NATIONAL CORPORATION
EMPLOYEES' SAVINGS AND PROFIT-SHARING PLAN
(Full Title of Plan)
[Current Reg. No. 33-52667]
LINCOLN NATIONAL CORPORATION
200 East Berry Street
Fort Wayne, Indiana 46802
(Name of Issuer and Principal Executive Office)
FORM 11-K
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
<PAGE>
TABLE OF CONTENTS
Facing Sheet
Financial Statements
Schedules
Signature
Exhibit 23--Consent of Ernst & Young LLP, Independent Auditors
<PAGE>
Financial Statements
and Schedules
Lincoln National Corporation
Employees' Savings
and Profit-Sharing Plan
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
<PAGE>-2
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Financial Statements
and Schedules
Years ended December 31, 1997 and 1996
Contents
Report of Independent Auditors............................................... 1
Audited Financial Statements
Statements of Net Assets Available for Plan Benefits ........................ 2
Statements of Changes in Net Assets Available for Plan Benefits.............. 3
Notes to Financial Statements ............................................... 4
Schedules
Schedule of Assets Held for Investment Purposes...............................13
Schedule of Loans or Fixed Income Obligations.................................14
Schedule of Reportable Transactions...........................................15
Signature.....................................................................16
Consent of Ernst & Young LLP, Independent Auditors............................17
<PAGE>-1
Report of Independent Auditors
Lincoln National Corporation Benefits Investment Committee
Lincoln National Corporation
We have audited the accompanying statements of net assets available for plan
benefits of the Lincoln National Corporation Employees' Savings and
Profit-Sharing Plan as of December 31, 1997 and 1996, and the related statements
of changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan at
December 31, 1997 and 1996, and the changes in its net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes and loans or fixed income obligations as of
December 31, 1997, and reportable transactions for the year then ended, are
presented for purposes of complying with the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, and are not a required part of the financial statements.
The supplemental schedules have been subjected to the auditing procedures
applied in our audits of the financial statements and, in our opinion, are
fairly stated in all material respects in relation to the financial statements
taken as a whole.
Ernst & Young LLP
Fort Wayne, Indiana
June 24, 1998
<PAGE>-2
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Statements of Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
December 31
1997 1996
<S> <C> <C>
Assets
Investments:
Common stock--Lincoln National Corporation........................... $155,505,156 $109,451,501
Norwest Bank Short-Term Investment Fund.............................. 5,105,624 --
Pooled separate accounts--The Lincoln National
Life Insurance Company ............................................. 105,386,059 72,586,832
Investment contract--The Lincoln National
Life Insurance Company............................................ 33,060,177 30,194,850
Participant loans.................................................... 12,300,926 8,740,008
---------- -----------
Total investments.............................................. 311,357,942 220,973,191
Cash .................................................................. 499,148 198,023
Accrued interest receivable............................................ 22,745 23,986
Other receivables...................................................... -- 1,319,840
Contributions receivable from Employer Companies....................... 9,971,336 8,849,872
------------ -------------
Total assets................................................... 321,851,171 231,364,912
Liability--miscellaneous payables...................................... -- 857,802
------------ --------------
Net assets available for plan benefits......................... $321,851,171 $230,507,110
</TABLE>
See accompanying notes.
<PAGE>-3
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Statements of Changes in Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
Year ended December 31
<S> <C> <C>
1997 1996
Additions:
Net realized and unrealized appreciation (depreciation)
in fair value of investments......................................... $ 68,923,702 $ (3,017,943)
Investment income:
Cash dividends--Lincoln National Corporation......................... 4,005,373 5,933,463
Interest:
The Lincoln National Life Insurance Company......................... 2,028,563 1,894,621
Other............................................................... 917,147 1,093,843
---------- ---------
Total investment income.......................................... 6,951,083 8,921,927
Contributions:
Participants......................................................... 14,633,661 18,237,161
Participating employers (net of
forfeitures: 1997--$55,161; 1996--$15,008).......................... 12,415,078 10,713,394
---------- ----------
Total contributions.............................................. 27,048,739 28,950,555
---------- ----------
Total additions......................................................... 102,923,524 34,854,539
Deductions:
Distributions to participants.......................................... (11,375,437) (21,915,376)
Transfer to American States Financial Corporation
Employees' Savings and Profit-Sharing Plan........................... -- (175,764,524)
Administrative expenses................................................ (204,026) (207,599)
----------- -------------
Total deductions....................................................... (11,579,463) (197,887,499)
----------- ------------
Net increase (decrease) in net assets available for plan benefits........ 91,344,061 (163,032,960)
Net assets available for plan benefits at beginning of the year.......... 230,507,110 393,540,070
----------- -----------
Net assets available for plan benefits at end of the year................ $321,851,171 $230,507,110
</TABLE>
See accompanying notes.
<PAGE>-4
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements
1. Significant Accounting Policies
Investments
The investment in Lincoln National Corporation ("LNC") common stock is valued at
the last reported sales price per the national securities exchange on the last
business day of the year.
The Norwest Bank Short-Term Investment Fund is valued at cost which approximates
fair value.
The fair value of the participation units owned by Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan ("Plan") in pooled separate accounts
is based on quoted redemption value on the last business day of the year.
The investment contract is valued at contract value as estimated by The Lincoln
National Life Insurance Company ("Lincoln Life"). Contract value represents net
contributions made plus interest at the contract rate. This contract is fully
benefit responsive.
Participant loans are valued at cost which approximates fair value.
The cost of investments sold, distributed or forfeited is determined using the
specific identification method. Investment purchases and sales are accounted for
on a trade date basis.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. Description of the Plan
The Plan is a contributory, defined contribution plan which covers eligible
employees of LNC and certain of its subsidiaries ("Employer Companies"). Through
July 31, 1997, any person 21 years of age or older who was an employee of the
Employer Companies was eligible to enroll in the Plan on the next Plan entry
date if the person had been employed by the Employer Companies for at least one
year. Effective August 1, 1997, the age and service requirements for eligibility
in the Plan were eliminated. A participant may make pretax contributions at a
rate of at least 1%, but not more than 15% of compensation, up to a maximum
annual amount as determined and adjusted annually by the Internal Revenue
Service ("IRS").
The participants are fully vested in their contributions and direct the Plan to
invest their contributions in any combination of the investment options as
described in Note 4. Participants can direct employer contributions, but only
after the contributions have been in the Plan for two full plan years following
the year for which they were contributed.
The Employer Companies contribute to the Plan an amount equal to a participant's
contributions, not to exceed 6%, multiplied by a percentage, ranging from 25% to
150%, which varies according to LNC's return on equity in relation to
pre-identified peer companies. The Employer Companies contributions are invested
in the LNC Common Stock Fund. The Employer Companies contributions vest based
upon years of service as defined in the Plan document as follows:
Years of Service Percent Vested
1 0%
2 50%
3 or more 100%
<PAGE>-5
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
The Employer Companies have the right in accordance with the Plan to discontinue
contributions at any time and terminate participation in the Plan. In the event
of termination of the Plan, all amounts allocated to participants' accounts
shall become vested.
The Plan allows loans to participants in amounts up to 50% of the vested account
value to a maximum of $50,000 but not more than the total value of the
participant's account excluding employer contributions that have not been in the
Plan for two full years, less the highest outstanding loan balance in the
previous twelve-month period. A participant may have a maximum of two loans
outstanding at any one-time.
Upon termination of service due to disability or retirement, a participant or
beneficiary, in case of the participant's death, may elect to receive either a
lump-sum amount equal to the value of the participant's vested interest in his
or her account, or annual installments over a five year period. For termination
of service due to other reasons, a participant may receive the value of the
vested interest in his or her account as a lump-sum distribution.
Each participant's account is credited with the participant's contribution and
the Employer Companies' matching contribution and allocations of Plan earnings,
and charged with an allocation of administrative expenses. Allocations are based
on participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account. Forfeited non-vested amounts are used to reduce
future Employer Companies' contributions.
3. Investments
Individual investments greater than 5% of Net Assets Available for Benefits at
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Shares/ Market Shares/ Market
Par Value Value Par Value Value
<S> <C> <C> <C> <C>
Common stock--Lincoln
National Corporation....................... 1,990,466 $155,505,156 2,084,790 $109,451,501
Pooled separate accounts--Lincoln Life
Core Equity Fund........................... 2,447,047.178 26,759,193 2,039,150.637 16,888,478
Medium Capitalization Equity Fund.......... 2,167,398.551 21,753,157 2,082,404.287 18,876,487
Large Capitalization Equity Fund........... 2,467,841.675 18,578,559 2,154,330.425 12,377,768
Investment contract with Lincoln Life....... $ 33,060,177 33,060,177 $ 30,194,850 30,194,850
</TABLE>
The investment contract earned an average interest rate of approximately 6.6%
and 6.8% in 1997 and 1996, respectively. The credited interest rates for new
contributions at December 31, 1997 and 1996 were 6.0% and 7.0%, respectively.
The rate on new contributions is guaranteed through the succeeding three
calendar year quarters. The credited interest rates for the remaining contract
value balance at December 31, 1997 and 1996 were 6.5% and 6.8%, respectively,
and were determined based upon the performance of Lincoln Life's general
account. The credited interest rates change at least quarterly. The minimum
guaranteed rate is 4.5% for the first 5 contract years, 4.0% for years 6-10 and
3.5% following year 10. The guarantee is based on Lincoln Life's ability to meet
its financial obligations out of its general assets. Restrictions may apply to
the aggregate movement of funds to other investment options. The fair value of
the investment contract approximates contract value. Participants are allocated
interest on the investment contract based on the average rate earned on all Plan
investments in the investment contract.
During 1997 and 1996, the Plan's investments (including investments bought, sold
as well as held during the year) appreciated (depreciated) in fair value as
follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Fair value as determined by quoted market price:
Common stock.............................................. $52,860,047 $(15,041,531)
Pooled Seperate accounts.................................. 16,063,655 12,023,588
---------- ----------
Total............................................. $68,923,702 $ (3,017,943)
</TABLE>
<PAGE>-6
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
4. Investment Options
The detail of net assets available for plan benefits by investment option is as
follows:
Investment Options
<TABLE>
<CAPTION>
December 31, 1997 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock $155,505,156 $155,505,156
Short-term investment fund 5,105,624 5,105,624
Pooled separate accounts 105,386,059 $4,880,053 $3,945,083 $5,581,674 $2,305,095
Investment contract 33,060,177 $33,060,177
Participant loans 12,300,926
----------- ----------- ---------- --------- --------- --------- ---------
Total investments 311,357,942 160,610,780 33,060,177 4,880,053 3,945,083 5,581,674 2,305,095
Cash 499,148 51,966 22,304 10,267 22,857 14,157
Accrued interest receivable 22,745 22,745
Contributions receivable from
Employer Companies 9,971,336 9,971,336
------------- ------------ ---------- --------- --------- --------- ----------
Total assets 321,851,171 170,604,861 33,112,143 4,902,357 3,955,350 5,604,531 2,319,252
------------- ------------ ---------- --------- --------- --------- ----------
Net assets available for plan
benefits $321,851,171 $170,604,861 $33,112,143 $4,902,357 $3,955,350 $5,604,531 $2,319,252
</TABLE>
Investment Options
<TABLE>
<CAPTION>
7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock
Short-term investment fund
Pooled separate accounts $3,646,261 $7,024,970 $26,759,193 $5,189,885 $21,753,157 $18,578,559 $5,722,129
Investment contract
Participant loans 12,300,926
---------- --------- ---------- --------- ---------- ---------- --------- -----------
Total investments 3,646,261 7,024,970 26,759,193 5,189,885 21,753,157 18,578,559 5,722,129 12,300,926
Cash 24,691 34,448 94,570 29,921 79,587 73,402 40,424 554
Accrued interest receivable
Contributions receivable from
Employer Companies
---------- --------- ---------- --------- ---------- ---------- --------- ----------
Total assets 3,670,952 7,059,418 26,853,763 5,219,806 21,832,744 18,651,961 5,762,553 12,301,480
Net assets available for plan ---------- --------- ---------- --------- ---------- --------- -------- ----------
benefits $3,670,952 $7,059,418 $26,853,763 $5,219,806 $21,832,744 $18,651,961 $5,762,553 $12,301,480
</TABLE>
<PAGE>-7
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
4. Investment Options (continued)
The detail of the changes in net assets available for plan benefits by
investment option is as follows:
Investment Options
<TABLE>
<CAPTION>
Year ended December 31, 1997
Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Additions:
Net realized and unrealized
appreciation (depreciation)
in fair value of investments $ 68,923,702 $ 52,860,047 $ 244,454 $ 278,038 $ 448,811 $ 174,224
Investment income:
Cash dividends 4,005,373 4,005,373
Interest 2,945,710 $2,028,563
--------- --------- ----------- -------- --------- -------- --------
Total investment income 6,951,083 4,005,373 2,028,563
Contributions:
Participants 14,633,661 2,793,201 1,528,782 211,355 229,083 547,558 317,155
Participating employers
(net of forfeitures) 12,415,078 12,415,078
------------ ---------- ---------- --------- --------- ------- --------
Total contributions 27,048,739 15,208,279 1,528,782 211,355 229,083 547,558 317,155
------------ ----------- ---------- -------- -------- -------- -------
Total additions 102,923,524 72,073,699 3,557,345 455,809 507,121 996,369 491,379
Deductions:
Distributions to participants(11,375,437) (5,116,488) (1,907,269) (724,366) (146,429) (174,822) (86,794)
Administrative expenses (204,026) (174,850) (9,604) (1,073) (1,674) (1,219) (1,212)
Net transfers -- (14,775,497) 1,092,693 1,213,797 (139,610) 125,866 925,892
------------ ------------ ---------- ---------- --------- ------- -------
Total deductions (11,579,463) (20,066,835) (824,180) 488,358 (287,713) (50,175) 837,886
------------ ------------ --------- -------- --------- -------- -------
Net increase in net assets
available for plan benefits 91,344,061 52,006,864 2,733,165 944,167 219,408 946,194 1,329,265
Net assets available for plan
benefits at beginning of the
year 230,507,110 118,597,997 30,378,978 3,958,190 3,735,942 4,658,337 989,987
----------- ------------ ----------- ---------- ---------- ---------- ----------
Net assets available for plan
benefits at end of the year $321,851,171 $170,604,861 $33,112,143 $4,902,357 $3,955,350 $5,604,531 $2,319,252
</TABLE>
Investment Options
<TABLE>
<CAPTION>
7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Net realized and unrealized
appreciation (depreciation)
in fair value of
investments $ 450,937 $1,297,501 $ 6,223,604 $ 784,488 $ 2,199,901 $ 4,265,917 $ (304,220)
Investment income:
Cash dividends
Interest $ 917,147
---------- ---------- ----------- --------- ---------- ---------- ---------- ---------
Total investment income 917,147
Contributions:
Participants 571,927 822,483 2,170,155 743,339 1,926,031 1,688,230 1,084,362
Participating employers
(net of forfeitures) ----------- ---------- --------- -------- --------- --------- ---------- -----------
Total contributions 571,927 822,483 2,170,155 743,339 1,926,031 1,688,230 1,084,362
---------- ----------- ---------- -------- ---------- ---------- --------- -----------
Total additions 1,022,864 2,119,984 8,393,759 1,527,827 4,125,932 5,954,147 780,142 917,147
Deductions:
Distributions to participants (187,747) (256,053) (688,981) (94,580) (831,861) (679,216) (219,023) (261,808)
Administrative expenses (904) (949) (4,595) (679) (3,391) (2,871) (1,005)
Net transfers 1,125,593 2,673,096 2,229,210 1,259,592 (387394) 972,956 801,659 2,882,147
---------- ---------- ---------- ---------- ---------- -------- -------- ---------
Total deductions 936,942 2,416,094 1.535,634 1,164,333 (1,222,646) 290,869 581,631 2,620,339
----------- ---------- ---------- ---------- ----------- -------- -------- ---------
Net increase in net assets
available for plan benefits 1,959,806 4,536,078 9,929,393 2,692,160 2,903,286 6,245,016 1,361,773 3,537,486
Net assets available for plan
benefits at beginning of the
year 1,711,146 2,523,340 16,924,370 2,527,646 18,929,458 12,406,945 4,400,780 8,763,994
-------------------- ----------- ---------- ----------- ----------- ---------- ---------
Net assets available for plan
benefits at end of the year $3,670,952 $7,059,418 $26,853,763 $5,219,806 $21,832,744 $18,651,961 $5,762,553 $12,301,480
</TABLE>
<PAGE>-8
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
4. Investment Options (continued)
The detail of net assets available for plan benefits by investment option is as
follows:
Investment Options
<TABLE>
<CAPTION>
December 31, 1996 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock $109,451,501 $109,451,501
Pooled separate accounts 72,586,832 $3,915,270 $3,732,897 $4,652,521 $989,778
Investment contract 30,194,850 $30,194,850
Participant loans 8,740,008
----------- ------------ ---------- --------- --------- --------- --------
Total investments 220,973,191 109,451,501 30,194,850 3,915,270 3,732,897 4,652,521 989,778
Cash 198,023 1,083,337 (300,713) (36,717) (6,823) (44,806) (24,569)
Accrued interest receivable 23,986
Other receivables 1,319,840 484,841 79,637 9,868 50,622 24,778
Contributions receivable from
Employer Companies 8,849,872 8,849,872
----------- ------------ ---------- --------- --------- --------- --------
Total assets 231,364,912 119,384,710 30,378,978 3,958,190 3,735,942 4,658,337 989,987
Liability--miscellaneous
payables 857,802 786,713
Net assets available for plan ----------- ----------- ---------- --------- --------- --------- --------
benefits $230,507,110 $118,597,997 $30,378,978 $3,958,190 $3,735,942 $4,658,337 $989,987
</TABLE>
Investment Options
<TABLE>
<CAPTION>
7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock
Pooled separate accounts $1,708,663 $2,521,725 $16,888,478 $2,526,822 $18,876,487 $12,377,768 $4,396,423
Investment contract
Participant loans $8,740,008
--------- --------- ---------- --------- ---------- ---------- ---------- ---------
Total investments 1,708,663 2,521,725 16,888,478 2,526,822 18,876,487 12,377,768 4,396,423 8,740,008
Cash (21,012) (80,832) (7,320) (20,832) (158,135) (175,836) (78,808) 71,089
Accrued interest receivable 23,986
Other receivables 23,495 82,447 43,212 21,656 211,106 205,013 83,165
Contributions receivable from
Employer Companies --------- --------- ---------- --------- ---------- ---------- --------- ---------
Total assets 1,711,146 2,523,340 16,924,370 2,527,646 18,929,458 12,406,945 4,400,780 8,835,083
Liability--miscellaneous
payables 71,089
Net assets available for plan --------- --------- ---------- --------- ---------- ---------- --------- ---------
benefits $1,711,146 $2,523,340 $16,924,370 $2,527,646 $18,929,458 $12,406,945 $4,400,780 $8,763,994
</TABLE>
<PAGE>-9
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
4. Investment Options (continued)
The detail of the changes in net assets available for plan benefits by
investment option is as follows:
Investment Options
<TABLE>
<CAPTION>
Year Ended December 31, 1996
Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Additions:
Net realized and unrealized
appreciation (depreciation)
in fair value of investments$ (3,017,943) $(15,041,531) $ 304,350 $ 143,367 $ 5,661 $ 88,081
Investment income:
Cash dividends 5,933,463 5,933,463
Interest 2,988,464 $ 1,894,621
--------- ---------- --------- --------- ------- ------- ------
Total investment income 8,921,927 5,933,463 1,894,621
Contributions:
Participants 18,237,161 3,860,254 3,160,217 296,439 422,316 759,809 274,330
Participating employers
(net of forfeitures) 10,713,394 10,713,394
---------- ---------- --------- ------- ------- ------- --------
Total contributions 28,950,555 14,573,648 3,160,217 296,439 422,316 759,809 274,330
----------- ----------- ---------- -------- -------- ------- -------
Total additions 34,854,539 5,465,580 5,054,838 600,789 565,683 765,470 362,411
Deductions:
Distributions to participants(21,915,376) (9,613,257) (5,663,295) (347,190) (477,478) (556,164) (38,304)
Transfer to American States
Financial Corporation
Employees'
Savings and Profit-Sharing
Plan (175,764,524) (76,082,981)(47,006,178) (4,703,573) (4,592,411) (2,976,419) (409,847)
Administrative expenses (207,599) (191,420) (6,744) (921) (823) (741) (124)
Net transfers -- (6,274,995) 891,546 (493,335) (383,734) (276,239) 305,505
------------ ----------- ------------ --------- --------- --------- -------
Total deductions (197,887,499) (92,162,653)(51,784,671) (5,545,019) (5,454,446) (3,809,563) (142,770)
------------- ----------- ------------ ----------- ----------- ----------- ---------
Net increase (decrease) in net
assets available for plan
benefits (163,032,960) (86,697,073)(46,729,833) (4,944,230) (4,888,763) (3,044,093) 219,641
Net assets available for plan
benefits at beginning of the
year 393,540,070 205,295,070 77,108,811 8,902,420 8,624,705 7,702,430 770,346
------------ ------------ ----------- ---------- ---------- ---------- -------
Net assets available for plan
benefits at end of the year $230,507,110 $118,597,997 $30,378,978 $3,958,190 $3,735,942 $4,658,337 $989,987
</TABLE>
Investment Options
<TABLE>
<CAPTION>
7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Net realized and unrealized
appreciation
(depreciation)
in fair value of
investments $ 175,374 $ 301,715 $ 3,768,123 $ 165,356$ 4,316,435 $ 2,374,239 $ 380,887
Investment income:
Cash dividends
Interest $ 1,093,843
-------- ------- --------- -------- --------- --------- --------- ---------
Total investment income 1,093,843
Contributions:
Participants 698,051 602,804 2,043,734 618,570 2,450,567 1,816,085 1,035,379 198,606
Participating employers
(net of forfeitures) -------- ------- --------- ------- --------- ---------- --------- ---------
Total contributions 698,051 602,804 2,043,734 618,570 2,450,567 1,816,085 1,035,379 198,606
-------- -------- ---------- -------- --------- ---------- ---------- --------
Total additions 873,425 904,519 5,811,857 783,926 6,767,002 4,190,324 1,416,266 1,292,449
Deductions:
Distributions to participants (281,324) (223,044) (1,434,977) (133,929) (1,370,504) (844,182) (368,132) (563,596)
Transfer to American States
Financial Corporation
Employees' Savings
and Profit-Sharing Plan (1,480,296) (950,784)(11,818,472) (882,793)(11,272,913) (4,699,957) (1,543,572) (7,344,328)
Administrative expenses (253) (264) (1,940) (315) (2,094) (1,386) (574)
Net transfers 865,363 934,249 1,447,772 731,383 1,035,000 793,079 927,806 (503,400)
-------- -------- ---------- -------- ---------- -------- ------- ---------
Total deductions (896,510) (239,843)(11,807,617) (285,654)(11,610,511) (4,752,446) (984,472) (8,411,324)
--------- --------- ----------- --------- ----------- ----------- --------- -----------
Net increase (decrease) in net
assets available for plan
benefits (23,085) 664,676 (5,995,760) 498,272 (4,843,509) (562,122) 431,794 (7,118,875)
Net assets available for plan
benefits at beginning of the
year 1,734,231 1,858,664 22,920,130 2,029,374 23,772,967 12,969,067 3,968,986 15,882,869
---------- ---------- ----------- ---------- ----------- ----------- ---------- ----------
Net assets available for plan
benefits at end of the year $1,711,146 $2,523,340 $16,924,370 $2,527,646 $18,929,458 $12,406,945 $4,400,780 $ 8,763,994
</TABLE>
<PAGE>-10
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
4. Investment Options (continued)
Information with respect to investment options is as follows:
Option Description of Investment Option
1 LNC Common Stock Fund, which invests in the stock of Lincoln National
Corporation. However, some funds may be invested in the Norwest Bank
Short-Term Investment Fund until the LNC stock can be purchased.
2 Guaranteed Fund, which invests primarily in investment contracts which
guarantee a rate of return and principal.
3 Short-Term Fund,which invests primarily in notes of government agencies
and private corporations.
4 Government Bond Fund, which invests primarily in bonds issued by the
United States government that have short maturities.
5 Government/Corporate Bond Fund, which invests primarily in corporate
and U.S. government bonds and mortgage-backed securities.
6 High Yield Bond Fund, which invests primarily in below-investment-grade
bonds providing higher rates of return to compensate higher risk.
7 Balanced Fund, which invests in three different asset classes; stock,
bonds and money market instruments, which provide growth through the
stock portion and reduced risk through the bond and money market
portion.
8 Value Equity Fund, which invests primarily in large capitalization
stocks, which are bought at low prices, of companies who have strong
earnings power and are industry leaders.
9 Core Equity Fund, which invests primarily in large capitalization stock
of established companies.
10 Small Capitalization Equity Fund, which invests primarily in the stock
of small companies with potential for rapid growth.
11 Medium Capitalization Equity Fund, which invests primarily in
medium-sized companies with potential for rapid growth.
12 Large Capitalization Equity Fund, which invests primarily in high-risk
common stocks which have the potential for a significant appreciation
in value over an 18 to 24 month period.
13 International Equity Fund, which invests primarily in stocks of
non-United States companies.
At December 31, 1997, the net assets in the LNC Common Stock Fund not subject to
participant direction was $27,556,041.
Investment options 3 through 13 are invested in pooled separate accounts of the
Company through a group annuity contract issued by the Company.
Interest charged on new loans to participants is established monthly based upon
the prime rate plus 1%. Loans may be repaid over any period selected by the
participant up to a maximum repayment period of 5 years except that the maximum
repayment period may be 20 years for the purchase of a principal residence.
<PAGE>-11
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
5. Income Tax Status
On June 20,1997, the IRS ruled that the Plan qualifies as defined by Section
401(a) of the Internal Revenue Code ("IRC") and, therefore, is not subject to
tax based on the present income tax laws. Further, the Plan is required to
operate in conformity with the IRC to maintain its qualification. The Plan's
administrator is not aware of any course of action or series of events that have
occurred that might adversely affect the Plan's qualified status.
6. Transactions With Parties-In-Interest
The Plan has investments in common stock of LNC, and in pooled seperate accounts
an investment contract with Lincoln Life of $155,505,156; $105,386,059 and
$33,060,177, respectively, at December 31, 1997 (48.3%; 32.7% and 10.3% of net
assets, respectively). LNC and Lincoln Life operate predominately in the
insurance and financial services industries.
LNC and Lincoln Life also provide certain administrative services at no charge
to the Plan. Trustee fees and additional expenses incurred solely for the LNC
Stock Fund are charged directly to the LNC Stock Fund. Audit fees are charged to
earnings of all investment funds based upon the market value of the respective
funds applicable to each investment option. These transactions are exempt.
7. Transfer of Assets
Effective May 28, 1996, LNC's principal subsidiary within its Property-Casualty
segment, American States Financial Corporation, closed an initial public
offering of 17% of its common stock. As a result, the subsidiary formed the
American States Financial Corporation Employees' Savings and Profit-Sharing Plan
("American States Plan") effective June 24, 1996. Assets transferred from the
Plan to the American States Plan attributed to employees of American States
Financial Corporation were $175,764,524 as of the effective date. LNC sold its
83% interest in American States Financial Corporation on October 1, 1997.
On October 1, 1997, LNC sold its 83% interest in American States Financial
Corporation.
8. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for plan benefits per
the financial statements to Form 5500:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net assets available for plan
benefits per the financial statements............................. $321,851,171 $230,507,110
Amounts allocated to withdrawing participants........................ -- (687,332)
------------ ------------
Net assets available for plan benefits per Form 5500................. $321,851,171 $229,819,778
</TABLE>
The following is a reconciliation of distributions to participants per the
financial statements to Form 5500:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Distributions to participants per the financial statements........... $11,375,437 $ 21,915,376
Add amounts allocated to withdrawing
participants at end of the year................................... -- 687,332
Deduct amounts allocated to withdrawing
participants at beginning of the year............................. (687,332) (1,273,955)
----------- ----------
Distributions to participants per Form 5500.......................... $10,688,105 $ 21,328,753
</TABLE>
Amounts allocated to withdrawing participants are recorded on Form 5500 for
distributions that have been processed and approved for payment prior to year
end but have not yet been paid.
<PAGE>-12
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
9. Recordkeeping for the Plan
Effective July 1, 1997, the recordkeeping for the Plan was transferred from LNC
to Norwest Bank, Minnesota. Also, effective July 1, 1997, the Plan began using
the daily valuation method.
10. Century Compliance (unaudited)
The year 2000 issue is pervasive and complex and affects virtually every aspect
of LNC's businesses. LNC's computer systems and interfaces with the computer
systems of vendors, suppliers, customers and business partners are particularly
vulnerable. The inability to properly recognize date sensitive electronic
information and transfer data between systems could cause errors or even a
complete systems failure which would result in a temporary inability to process
transactions correctly and engage in normal business activities for one or more
of LNC's businesses. LNC is redirecting a large portion of its internal
information technology efforts and contracting with outside consultants to
update its systems to accommodate the year 2000. Also, LNC has initiated formal
communications with critical parties that interface with LNC's systems to gain
an understanding of their progress in addressing year 2000 issues. While LNC is
making every effort to address its own systems and the systems with which it
interfaces, it is not possible to provide assurance that operational problems
will not occur. LNC presently believes that, with the modification of existing
computer systems, updates by vendors and conversion to new software and
hardware, the year 2000 issue will not pose significant operational problems for
its computer systems. In addition, LNC is developing contingency plans in the
event that, despite its best efforts, there are unresolved year 2000 problems.
If the remediation efforts noted above are not completed timely or properly, the
year 2000 issue could have a material adverse impact on the operation of LNC's
businesses.
During 1996 and 1997, LNC identified expenditures of approximately $11 million
($7 million after-tax) that it had spent to address this issue. LNC's financial
plans for 1998-2000 include expected expenditures of an additional $39 million
($25 million after-tax) on this issue. The cost of addressing year 2000 issues
and the timeliness of completion will be closely monitored by management and are
based on management's current best estimates which were derived utilizing
numerous assumptions of future events, including the continued availability of
certain resources, third party modification plans and other factors.
Nevertheless, there can be no guarantee that these estimated costs will be
achieved and actual results could differ significantly from those anticipated.
Specific factors that might cause such differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer problems, and other uncertainties.
11. Subsequent Events (unaudited)
On January 2, 1998, Lincoln Life completed the purchase of a block of individual
life insurance and annuity business from CIGNA Corporation. In connection with
this purchase, individuals who become employees of any of the Employer Companies
will be eligible to participate in the Plan in 1998.
On May 21, 1998, LNC announced its intent to acquire the domestic individual
life insurance business of Aetna Inc. This transaction is expected to close in
the fall of 1998 and in connection with this transaction, individuals who become
employees of any of the Employer Companies will be eligible to participate in
the Plan after the transaction is closed.
<PAGE>-13
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Plan Number: 005
EIN: 35-1140070
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
(c)
Description of Investment
(b) Including Maturity (e)
Identity of Issuer, Borrower Date, Rate of Interest, (d) Current
Lessor or Similar Party Par or Maturity Value Cost Value
<S> <C> <C> <C>
*Common Stock Fund:
Lincoln National Corporation common stock..... 1,990,466 shares $ 82,600,416 $155,505,156
Norwest Bank Short-Term Investment Fund....... 5,105,624 par value 5,105,624 5,105,624
----------- ------------
87,706,040 160,610,780
*Pooled separate accounts--The Lincoln
National Life Insurance Company:
Short-Term Fund........................... 1,679,250.300 participation units 4,226,752 4,880,053
Government Bond Fund...................... 2,438,291.700 participation units 2,988,064 3,945,083
Government/Corporate Bond Fund............ 1,040,989.990 participation units 4,167,521 5,581,674
High Yield Bond Fund...................... 993,879.490 participation units 2,010,612 2,305,095
Balanced Fund............................. 696,453.350 participation units 3,090,344 3,646,261
Value Equity Fund......................... 3,305,183.790 participation units 5,477,831 7,024,970
Core Equity Fund.......................... 2,435,393.640 participation units 14,685,801 26,759,193
Small Capitalization Equity Fund.......... 1,286,876.940 participation units 4,316,618 5,189,885
Medium Capitalization Equity Fund......... 2,158,755.910 participation units 13,383,867 21,753,157
Large Capitalization Equity Fund.......... 2,458,079.650 participation units 11,450,624 18,578,559
International Equity Fund................. 1,188,332.390 participation units 5,711,692 5,722,129
----------- ------------
71,509,726 105,386,059
*Investment contract--The Lincoln
National Life Insurance Company
(Guaranteed Fund) 6.5% Interest Rate 33,060,177 33,060,177
Participant loans Various loans at interest rates
varying from 6.50% to 11.50%
due from 1998 to 2017. -- 12,300,926
------------ ------------
$192,275,943 $311,357,942
</TABLE>
*Indicates party-in-interest to the plan.
<PAGE>-14
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Plan Number: 005
EIN: 35-1140070
Line 27b - Schedule of Loans or Fixed Income Obligations
December 31, 1997
<TABLE>
<CAPTION>
(b) (c) (d) (e) (f) (g) (h) (i)
Identity Original Amount received Unpaid
and amount during reporting balance at Description of loan Amount Overdue
address of of Loan year end of --------------------------------- ---------------
obligor* Principal Interest year Issued Maturity Int. Rate Principal Interest
- ---------- ------ -------- --------- ----------- ------ -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
1 $ 338 $ 215 $ 6 $ 69 09/01/94 10/24/97 5.01% $ 69 $ 13
2 500 3 2 497 07/12/97 07/12/02 10.50% 33 21
3 500 0 0 500 07/29/97 07/26/02 9.50% 33 20
4 12,000 1,470 213 3,816 12/04/93 12/04/98 8.00% 1,225 120
5 9,097 859 380 6,257 04/17/95 04/01/00 11.00% 1,379 479
6 40,000 6,858 642 5,098 10/01/92 10/01/97 8.00% 5,098 0
7 1,500 137 39 783 08/19/94 07/31/99 9.75% 160 36
8 28,286 0 0 28,286 10/15/91 10/01/96 10.50% 28,286 5,092
9 10,000 0 0 10,000 08/20/97 08/16/02 9.50% 545 326
10 8,026 128 418 7,270 12/27/91 08/01/01 10.50% 700 373
11 6,615 677 131 2,817 05/07/94 05/07/99 8.25% 761 110
12 1,872 0 0 1,872 10/01/93 10/01/98 8.00% 1,872 396
13 4,500 565 120 1,930 06/18/94 06/18/99 8.75% 406 65
14 4,840 547 268 3,544 01/26/96 01/26/01 10.50% 342 137
15 4,900 0 0 4,850 09/05/97 09/06/02 9.50% 241 139
16 4,394 417 76 1,830 04/09/94 04/09/99 8.00% 543 73
17 10,000 1,275 127 2,072 06/05/93 06/05/98 8.00% 1,063 59
18 13,000 2,563 425 13,000 08/19/97 10/21/16 9.50% 73 437
19 4,800 547 266 3,487 12/15/95 12/15/00 10.75% 340 138
20 5,500 290 50 2,195 10/15/93 10/15/98 8.00% 904 114
21 3,000 994 60 3,000 08/26/97 07/07/00 9.50% 318 94
22 4,500 326 206 4,174 03/22/97 03/22/02 10.25% 226 129
23 1,000 0 0 397 03/29/96 05/09/97 10.25% 397 9
24 15,000 2,077 878 6,989 03/09/95 03/09/00 11.00% 1,608 363
25 8,258 1,159 62 598 07/01/92 07/01/97 8.50% 598 13
26 1,500 0 0 636 10/01/93 10/01/98 8.00% 309 32
27 7,885 923 475 6,195 05/04/96 05/04/01 10.25% 487 212
28 15,000 701 300 14,299 12/10/93 10/01/98 8.00% 11,414 2,593
29 6,000 0 0 6,000 07/29/97 07/26/02 9.50% 401 239
30 15,000 4,218 467 14,420 04/11/97 02/23/02 10.50% 1,206 741
31 3,590 0 0 2,821 04/23/93 04/23/98 8.00% 2,821 459
32 1,286 0 0 614 07/26/91 10/01/95 12.00% 614 37
33 7,185 0 0 6,576 04/01/96 04/01/01 10.25% 1,039 479
34 28,000 0 0 28,000 09/11/92 09/11/97 8.00% 28,000 6,248
35 3,175 259 155 2,822 03/31/96 03/31/01 10.25% 559 268
</TABLE>
*All of the loans which are in default are loans made to participants in
accordance with IRC 72(p). Outstanding loans are collateralized by the vested
account balances of the participant receiving the loan. Since these
participants are employees of the company, as a consideration of their
privacy, the identity and address of each participant (obligor) has not been
disclosed in this schedule but is available upon request.
<PAGE>-15
Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan
Plan Number: 005
EIN: 35-1140070
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1997
<TABLE>
<CAPTION>
(h)
Current Value (I)
(a) (b) (c) (d) (g) of Assets on Net
Identity of Description Purchase Selling Cost of Transaction Gain
Party Involved of Assets Price Price Assets Date (Loss)
- -------------- ----------- ----- ----- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
Category (iii)---
Series of transactions
in excess of 5 percent
of plan assets.
Purchases and sales
are transacted on
the market--
Lincoln National
Corporation shares of
common stock: Purchases $21,586,488 $21,586,488 $21,586,488
Sales $23,218,046 12,835,222 23,218,046 $10,382,824
</TABLE>
Note: Columns (e) and (f), and categories (i), (ii) and (iv) are not
applicable.
<PAGE>-16
SIGNATURE
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Members of the Lincoln National Corporation Benefits Investment Committee
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
LINCOLN NATIONAL CORPORATION
EMPLOYEES' SAVINGS AND
PROFIT-SHARING PLAN
/S/ H. THOMAS MCMEEKIN
Date: 6/24/98 _____________________________
H. Thomas McMeekin, Chairman
Lincoln National Corporation
Benefits Investment Committee
<PAGE>-17
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-52667) pertaining to the Lincoln National Corporation Employees'
Savings and Profit-Sharing Plan of our report dated June 24, 1998 with respect
to the financial statements and schedules of the Lincoln National Corporation
Employees' Savings and Profit-Sharing Plan included in this Annual Report (Form
11-K) for the year-ended December 31, 1997.
/S/ ERNST & YOUNG L.L.P.
Fort Wayne, Indiana
June 24, 1998
219-455-1263
