SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
AGENTS' SAVINGS AND PROFIT-SHARING PLAN
(full title of the Plan)
[Current Reg. No. 33-04711]
Lincoln National Corporation
200 East Berry Street
Fort Wayne, Indiana 46802
(name of Issuer and principal executive office)
-i-
<PAGE>
Form 11-K
The Lincoln National Life Insurance Company
Agents' Savings and Profit Sharing Plan
TABLE OF CONTENTS
Facing Sheet
Financial Statements
Signature
-ii-
ANNUAL REPORT ON FORM 11-K
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
AGENTS' SAVINGS AND PROFIT-SHARING PLAN
FORT WAYNE, INDIANA
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Financial Statements
Years ended December 31, 1997, 1996 and 1995
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
<PAGE>
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 Life Insurance Company Agents' 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 each of the three years
in the period ended December 31, 1997. 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 each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
March 20, 1998
Fort Wayne, Indiana
<PAGE>
The Lincoln National Life Insurance Company
Agents' 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
(cost: 1997-$31,095,120; 1996-$31,457,823) $61,674,219 $45,079,808
Norwest Bank Short-Term Investment Fund 1,807,117 --
Pooled separate accounts--The Lincoln National
Life Insurance Company Separate Accounts
(cost: 1997-$33,536,806;1996--$24,356,726) 51,104,187 36,246,117
Investment contracts --
The Lincoln National Life Insurance Company 10,993,958 10,412,955
Participant loans 4,980,382 3,724,214
------------ -----------
130,559,863 95,463,094
Accrued interest receivable 7,758 10,212
Cash and invested cash 847 17,083
Other receivables -- 24,480
Contributions receivable:
Participants -- 161,828
The Lincoln National Life Insurance Company 4,318,154 3,203,212
------------ -----------
Total assets 134,886,622 98,879,909
Liabilities
Miscellaneous payables -- 134,520
----------- ------------
Net assets available for plan benefits $134,886,622 $98,745,389
</TABLE>
See accompanying notes.
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Statements of Changes in Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Investment income:
Cash dividends--Lincoln National Corporation $ 1,604,366 $ 1,552,560 $ 1,414,060
Interest:
The Lincoln National Life Insurance Company 690,992 577,671 841,750
Other 320,146 332,634 246,464
---------- --------- ----------
1,011,138 910,305 1,088,214
--------- --------- ---------
2,615,504 2,462,865 2,502,274
Net realized gain on sale, distribution and forfeitures of investments:
Common stock--Lincoln National Corporation 4,343,393 2,196,645 2,236,343
Pooled separate accounts--The Lincoln National
Life Insurance Company Separate Accounts 2,482,267 1,056,483 864,428
--------- ---------- ----------
6,825,660 3,253,128 3,100,771
Net unrealized appreciation of investments 22,635,104 301,572 18,165,654
Contributions:
Participants 4,839,046 4,604,114 4,724,597
The Lincoln National Life Insurance Company
(net of forfeitures: 1997--$12,050;
1996--$5,566; 1995--$6,078) 5,430,354 3,735,645 3,087,927
----------- --------- ---------
10,269,400 8,339,759 7,812,524
Distributions to participants (6,096,184) (5,476,308) (5,949,349)
Administrative expenses (108,251) (86,481) (79,139)
---------- ---------- ------------
Net increase in net assets available for plan benefits 36,141,233 8,794,535 25,552,735
Net assets available for plan benefits
at beginning of the year 98,745,389 89,950,854 64,398,119
----------- ----------- ----------
Net assets available for plan benefits
at end of the year $134,886,622 $98,745,389 $89,950,854
</TABLE>
See accompanying notes.
<PAGE>
The Lincoln National Life Insurance Company
Agents' 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 participation units in pooled separate accounts is based on
quoted redemption value on the last business day of the year.
The investment contracts are valued at contract value as estimated by The
Lincoln National Life Insurance Company ("Company"). Contract value represents
net contributions plus interest at the contract rate. The contracts are 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.
Use of Estimates
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 Agents' Savings and Profit-Sharing Plan ("Plan") is a contributory, defined
contribution plan which covers eligible agents of the Company. Any person 21
years of age or older who is a full-time agent of the Company is eligible to
enroll in the Plan if the agent has completed one eligibility year of service as
defined in the Plan agreement. A participant may make pre-tax contributions at a
rate of at least 1%, but not more than 15% of earned commissions, up to a
maximum annual amount as determined and adjusted annually by the Internal
Revenue Service ("IRS").
Participants 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 plan year for which they were contributed.
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
The Company's contributions to the Plan are based on an amount equal to a
participant's contributions, not to exceed 6% of eligible earnings, multiplied
by a percentage, ranging from 25% to 150%, which varies according to LNC's
return on equity in relation to similar companies in the insurance industry. The
Company's contributions are invested in the LNC Common Stock Fund. Agents are
fully vested in their contributions. The Company contributions vest based upon
years of service as defined in the Plan agreement as follows:
Years of Service Percent Vested
1 0%
2 50%
3 or more 100%
In early 1998, an amendment was adopted by the Board of Directors of the Company
approving certain provisions to the contribution formula which was effective for
the 1997 plan year. During 1995, the Board of Directors of the Company approved
certain revisions to the contribution formula which was effective for the 1996
plan year. In 1995, the Company used a transitional approach of the greater of
the old or new contribution formula which resulted in a contribution based on
the new formula.
The Company has the right to discontinue contributions at any time and terminate
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 accounts excluding employer contributions that haven't been in the
Plan for two full years, less the highest outstanding loan balance in the
previous twelve month period.
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 Company's 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 Company contributions.
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
3. Investments
The following is a summary of assets held for investment:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
Number of Market Number of Market
Shares/Units Value Shares/Units Value
<S> <C> <C> <C> <C>
Quoted Market Value:
Common stock--LNC 789,430 $61,674,219* 858,663 $45,079,808*
Pooled separate accounts--with the Company:
Government Bond Fund 261,930.867 423,797 319,334.099 480,701
Core Equity Fund 1,429,480.452 15,723,099* 1,295,357.182 10,726,542*
Medium Capitalization
Equity Fund 974,528.962 9,829,271* 991,548.636 8,988,074*
Short-Term Fund 904,830.388 2,629,519 485,933.152 1,340,243
Government/Corporate
Bond Fund 163,420.177 876,241 196,953.329 966,139
Large Capitalization
Equity Fund 1,212,360.575 9,168,971* 1,133,678.280 6,513,579*
Balanced Fund 132,931.628 695,965 91,023.162 401,269
High Yield Bond Fund 485,187.946 1,126,837 214,695.508 447,340
Small Capitalization
Equity Fund 810,613.569 3,270,682 500,743.628 1,629,157
Value Equity Fund 1,577,096.377 3,356,102 705,183.942 1,122,754
International Equity Fund 830,895.558 4,003,703 723,943.712 3,630,319
--------- ---------
Total pooled separate accounts 51,104,187 36,246,117
Par Par
Value Value
Contract Value:
Investment contracts
with the Company $10,993,958 10,993,958* $10,412,955 10,412,955*
Estimated Value:
Norwest Bank short-term
investment fund 1,807,117 1,807,117 -- --
Participant loans 4,980,382 4,980,382 3,724,214 3,724,214
------------- ---------
Total investments $130,559,863 $95,463,094
</TABLE>
* Investments that represent 5% or more of the fair value of net assets
available for benefits as of the indicated date.
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Net realized gain on sale, distribution and forfeitures of investments is
summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Common stock:
Proceeds from disposition of stock $11,100,882 $9,419,060 $10,013,495
Cost of stock disposed 6,757,489 7,222,415 7,777,152
----------- ----------- -----------
Net realized gain on sale, distribution and
forfeitures of common stock $ 4,343,393 $2,196,645 $2,236,343
Pooled separate accounts:
Proceeds from disposition of units $12,728,284 $4,948,738 $4,627,606
Cost of units disposed 10,246,017 3,892,255 3,763,178
---------- --------- ---------
Net realized gain on sale, distribution and
forfeitures of pooled separate accounts $ 2,482,267 $1,056,483 $864,428
</TABLE>
The net change in unrealized appreciation (depreciation) of investments in total
and by investment classification as determined by quoted market price is
summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Market value in excess of cost:
At beginning of the year $25,511,376 $25,209,804 $ 7,044,150
At end of the year 48,146,480 25,511,376 25,209,804
----------- ----------- ----------
Change in net unrealized appreciation
of investments $22,635,104 $ 301,572 $18,165,654
Common stock $16,957,113 $(2,990,993) $12,966,702
Pooled separate accounts 5,677,991 3,292,565 5,198,952
----------- --------- -----------
Change in net unrealized appreciation
of investments $22,635,104 $ 301,572 $18,165,654
</TABLE>
The investment contracts (Guaranteed Fund) earned an average interest rate of
approximately 6.60%, 6.82% and 6.75% in 1997, 1996 and 1995, respectively. The
credited interest rate for new contributions, which approximates the current
market rate, at December 31, 1997 and 1996, were 6.00 % and 7.00%, respectively
The rate on new contributions is guaranteed through the three succeeding
calendar year quarters. The credited interest rates for the remaining contract
value balance at December 31, 1997 and 1996 were 6.50% and 6.80%, respectively,
and are determined based upon the performance of the Company's general account.
The credited interest rates change at least quarterly. The minimum guaranteed
rate is 4.50% for the first 5 contract years, 4.00% for years 6-10 and 3.50%
following year 10. The guarantee is based on the Company's ability to meet its
financial obligations from the general assets of the Company. The fair value of
the investment contracts approximates contract value.
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
4. Investment Options
The detail of the net assets available for plan benefits by investment option is
as follows:
<TABLE>
<CAPTION>
Investment Options
December 31, 1997 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock $ 61,674,219 $61,674,219
Short-term investment fund 1,807,117 1,807,117
Pooled separate accounts 51,104,187 $ 423,797 $15,723,099 $ 9,829,271 $2,629,519
Investment contracts 10,993,958 $10,993,958
Participant loans 4,980,382
--------- ---------- ------- ---------- ---------- --------- ---------
Total investments 130,559,863 63,481,336 423,797 10,993,958 15,723,099 9,829,271 2,629,519
Accrued interest receivable 7,758 7,758
Cash and invested cash (deficit) 847 (122) (727) (1,217) (863) (227)
Contribution receivable--
The Lincoln National Life
Insurance Company 4,318,154 4,318,154
--------- --------- ------- --------- ---------- --------- ---------
Total assets 134,886,622 67,807,248 423,675 10,993,231 15,721,882 9,828,408 2,629,292
Net assets available for ---------- --------- ------- --------- ---------- --------- ---------
plan benefits $134,886,622 $67,807,248 $423,675 $10,993,231 $15,721,882 $9,828,408 $2,629,292
</TABLE>
<TABLE>
<CAPTION>
Investment Options
December 31, 1997 7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock
Pooled separate
accounts $876,241 $9,168,971 $695,965 $1,126,837 $3,270,682 $3,356,102 $4,003,703
Investment contracts
Participant loans $4,980,382
-------- --------- ------- --------- -------- -------- --------- ----------
Total investments 876,241 9,168,971 695,965 1,126,837 3,270,682 3,356,102 4,003,703 4,980,382
Accrued interest receivable
Cash and invested
cash (deficit) (170) (995) 21 (141) (24) (198) (490) 6,000
Contribution receivable--
The Lincoln National Life
Insurance Company
------- --------- ------- --------- --------- --------- --------- ---------
Total assets 876,071 9,167,976 695,986 1,126,696 3,270,658 3,355,904 4,003,213 4,986,382
Net assets available for ------ -------- ------- -------- --------- -------- -------- --------
plan benefits $876,071 $9,167,976 $695,986 $1,126,696 $3,270,658 $3,355,904 $4,003,213 $4,986,382
</TABLE>
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued
4. Investment Options (continued
The detail of the net assets available for plan benefits by investment option is
as follows:
<TABLE>
<CAPTION>
Investment Options
December 31, 1996 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock $45,079,808 $45,079,808
Pooled separate accounts 36,246,117 $480,701 $10,726,542 $8,988,074 $1,340,243
Investment contracts 10,412,955 $10,412,955
Participant loans 3,724,214
--------- -------- ------ ---------- -------- ------- -------
Total investments 95,463,094 45,079,808 480,701 10,412,955 10,726,542 8,988,074 1,340,243
Accrued interest receivable 10,212
Cash and invested cash (deficit) 17,083 49,125 (262) (820) (10,480) (11,943) 27,524
Other receivables 24,480 8 368 23,542
Contribution receivable--
Participant 161,828 28,231 964 10,661 23,501 25,348 627
The Lincoln National Life
Insurance Company 3,203,212 3,203,212
--------- --------- ------- --------- -------- -------- -------
Total assets 98,879,909 48,360,376 481,411 10,423,164 10,739,563 9,001,479 1,391,936
Miscellaneous payables 134,520 74,373 12,909 13,367
------- ------ ------- --------- ----------- -------- ----------
Net assets available for
plan benefits $98,745,389 $48,286,003 $481,411 $10,423,164 $10,726,654 $8,988,112 $1,391,936
</TABLE>
<TABLE>
<CAPTION>
Investment Options
December 31, 1996 7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock
Pooled separate accounts $966,139 $6,513,579 $401,269 $447,340 $1,629,157 $1,122,754 $3,630,319
Investment contracts
Participant loans $3,724,214
------- ------ ------- -------- -------- -------- --------- ---------
Total investments 966,139 6,513,579 401,269 447,340 1,629,157 1,122,754 3,630,319 3,724,214
Accrued interest receivable 10,212
Cash and invested
cash (deficit) (1,802) (9,317) (2,058) (1,933) (13,763) 1,438 (8,626)
Other receivables 7 555
Contribution receivable--
Participant 2,776 22,539 2,051 1,938 15,004 6,654 21,534
The Lincoln National Life
Insurance Company ------ ------- ------- ------- -------- -------- -------- --------
Total assets 967,113 6,526,801 401,269 447,900 1,630,398 1,130,846 3,643,227 3,734,426
Miscellaneous payables 974 12,305 720 7,496 12,376
-------- ------ ------- -------- ------- ------ ------ ------
Net assets available for
plan benefits $966,139 $6,514,496 $401,269 $447,900 $1,629,678 $1,123,350 $3,630,851 $3,734,426
</TABLE>
<PAGE>
The Lincoln National Life Insurance Company
Agents' 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:
<TABLE>
<CAPTION>
Investment Options
December 31, 1997 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Cash dividends $1,604,366 $1,604,366
Interest 1,011,138 $690,992
--------- --------- ------ -------- ------- ------ -------
Total investment income 2,615,504 1,604,366 690,992
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock 4,343,393 4,343,393
Pooled separate accounts 2,482,267 $38,502 $792,850 $704,233 $33,725
--------- -------- ------ -------- -------- ------- ------
Total realized gains 6,825,660 4,343,393 38,502 792,850 704,233 33,725
Net unrealized appreciation
(depreciation) of investments 22,635,104 16,957,113 (6,849) 2,912,192 303,028 63,418
Contributions:
Participant 4,839,046 804,479 13,642 225,243 796,555 745,763 143,661
The Lincoln National
Life Insurance Company 5,430,354 5,430,354
-------- -------- ------ ------- ------- ------- -------
Total contributions 10,269,400 6,234,833 13,642 225,243 796,555 745,763 143,661
Distributions to participants (6,096,184) (2,966,329) (24,350) (1,036,813) (355,330) (313,285) (443,836)
Administrative expenses (108,251) (73,950) (476) (5,364) (6,762) (4,220) (1,155)
Net transfers -- (6,578,182) (78,205) 696,009 855,723 (595,223) 1,441,543
Net increase (decrease) in net --------- --------- ------ -------- ------- ------- -------
assets available for plan
benefits 36,141,233 19,521,245 (57,736) 570,067 4,995,228 840,296 1,237,356
Net assets available for plan
benefits at beginning of
the year 98,745,389 48,286,003 481,411 10,423,164 10,726,654 8,988,112 1,391,936
----------- --------- -------- --------- --------- -------- ---------
Net assets available for plan
benefits at end of the year $134,886,622 $67,807,248 $423,675 $10,993,231 $15,721,882 $9,828,408 $2,629,292
</TABLE>
<TABLE>
<CAPTION>
Investment Options
December 31, 1997 7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Cash dividends
Interest $320,146
------ ------ ----- ------ ------ ------ ------ --------
Total investment income 320,146
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock
Pooled separate accounts $92,386 $ 545,130 $18,465 $19,644 $69,093 $63,683 $104,556
------- ------- ------- ------- ------ ------- ------ ------
Total realized gains 92,386 545,130 18,465 19,644 69,093 63,683 104,556
Net unrealized appreciation
(depreciation) of investments (12,556) 1,574,956 77,891 56,692 446,475 557,280 (294,536)
Contributions:
Participant 54,900 686,925 77,923 61,750 396,285 272,302 559,618
The Lincoln National Life
Insurance Company ------ ------- ------ ------ ------- ------- ------- -------
Total contributions 54,900 686,925 77,923 61,750 396,285 272,302 559,618
Distributions to participants (57,010) (429,179) (5,494) (35,262) (64,180) (26,482) (160,100) (178,534)
Administrative expenses (726) (3,794) (715) (815) (1,238) (1,455) (2,182) (5,400)
Net transfers (167,062) 279,442 126,647 576,787 794,545 1,367,226 165,006 1,115,744
Net increase (decrease) in net ------- ------- ------ ------- ------ ------- ------ --------
assets available for plan
benefits (90,068) 2,653,480 294,717 678,796 1,640,980 2,232,554 372,362 1,251,956
Net assets available for plan
benefits at beginning of the
year 966,139 6,514,496 401,269 447,900 1,629,678 1,123,350 3,630,851 3,734,426
-------- ---------- -------- -------- ----------- ---------- ---------- ---------
Net assets available for plan
benefits at end of the year $876,071 $9,167,976 $695,986 $1,126,696 $3,270,658 $3,355,904 $4,003,213 $4,986,382
</TABLE>
<PAGE>
The Lincoln National Life Insurance Company
Agents' 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:
<TABLE>
<CAPTION>
Investment Options
December 31, 1996 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Cash dividends $ 1,552,560 $ 1,552,560
Interest 910,305 $ 577,671
------- --------- ------- --------- ------- ------- -------
Total investment income 2,462,865 1,552,560 577,671
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock 2,196,645 2,196,645
Pooled separate accounts 1,056,483 $ 24,494 $ 376,640 $ 229,263 $ 66,209
--------- --------- ------- -------- -------- ---- --------
Total realized gains 3,253,128 2,196,645 24,494 376,640 229,263 66,209
Net unrealized appreciation
(depreciation) of investments 301,572 (2,990,993) (5,603) 1,328,719 840,656 (20,585)
Contributions:
Participant 4,604,114 928,146 18,739 280,525 648,453 757,878 24,023
The Lincoln National
Life Insurance Company 3,735,645 3,735,645
-------- ---------- ------ ------- ------ ------- -------
Total contributions 8,339,759 4,663,791 18,739 280,525 648,453 757,878 24,023
Distributions to participants (5,476,308) (2,519,969) (45,389) (1,825,737) (361,544) (162,972) (90,761)
Administrative expenses (86,481) (72,414) (182) (3,649) (3,152) (2,632) (368)
Net transfers -- (2,008,136) (73,352) 386,625 (47,693) 208,669 344,659
Net increase (decrease) in net --------- --------- ------ -------- -------- --------- ---------
assets available for plan
benefits 8,794,535 821,484 (81,293) (584,565) 1,941,423 1,870,862 323,177
Net assets available for plan
benefits at beginning of the
year 89,950,854 47,464,519 562,704 11,007,729 8,785,231 7,117,250 1,068,759
--------- ---------- ------- ----------- ------- ---------- ----------
Net assets available for plan
benefits at end of the year $98,745,389 $48,286,003 $481,411 $10,423,164 $10,726,654 $8,988,112 $1,391,936
</TABLE>
<TABLE>
<CAPTION>
Investment Options
December 31, 1996 7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Cash dividends
Interest $ 332,634
-------- ------- ------ ------- -------- ------ ------- ---------
Total investment income 332,634
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock
Pooled separate accounts $ 72,847 $ 210,364 $ 1,747 $ 5,366 $ 12,575 $ 18,728 $ 38,250
----------- ----------- --------- --------- ----------- ----------- ---------- ---------
Total realized gains 72,847 210,364 1,747 5,366 12,575 18,728 38,250
Net unrealized appreciation
(depreciation) of investments (53,517) 761,371 29,524 32,985 43,342 109,712 225,961
Contributions:
Participant 78,660 675,819 69,712 45,269 351,168 175,491 550,231
The Lincoln National Life
Insurance Company
------- ------- ------ ------ ------ ------- ------- ---------
Total contributions 78,660 675,819 69,712 45,269 351,168 175,491 550,231
Distributions to participants (31,195) (155,289) (4,176) (7,064) (19,452) (64,952) (73,291) (114,517)
Administrative expenses (378) (1,922) (106) (70) (373) (264) (971)
Net transfers (251,497) (102,851) 127,316 224,733 243,841 258,534 496,499 192,653
------- ------- ------ ------- ------ ------ ------ ------
Net increase (decrease) in net
assets available for plan
benefits (185,080) 1,387,492 224,017 301,219 631,101 497,249 1,236,679 410,770
Net assets available for plan
benefits at beginning of the
year 1,151,219 5,127,004 177,252 146,681 998,577 626,101 2,394,172 3,323,656
--------- --------- -------- -------- -------- -------- ---------- ---------
Net assets available for plan
benefits at end of the year $ 966,139 $6,514,496 $401,269 $447,900 $1,629,678 $1,123,350 $3,630,851 $3,734,426
</TABLE>
<PAGE>
The Lincoln National Life Insurance Company
Agents' 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:
<TABLE>
<CAPTION>
Investment Options
December 31, 1995 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Cash dividends $1,414,060 $ 1,414,060
Interest 1,088,214 $ 841,750
--------- ---------- ------- --------- ------- ------ -------
Total investment income 2,502,274 1,414,060 841,750
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock 2,236,343 2,236,343
Pooled separate accounts 864,428 $ 23,782 $ 254,878 $ 302,908 $ 38,216
-------- --------- ------- --------- ------- -------- ------
Total realized gains 3,100,771 2,236,343 23,782 254,878 302,908 38,216
Net unrealized appreciation
of investments 18,165,654 12,966,702 51,735 2,075,087 1,473,852 28,481
Contributions:
Participant 4,724,597 1.031,057 28,085 444,269 564,727 718,984 31,138
The Lincoln National
Life Insurance Company 3,087,927 3,087,927
--------- --------- ------- ------- ------- ------- -------
Total contributions 7,812,524 4,118,984 28,085 444,269 564,727 718,984 31,138
Distributions to participants (5,949,349) (3,084,570) (49,394) (1,235,196) (387,089) (431,930) (148,671)
Administrative expenses (79,139) (62,984) (310) (5,320) (3,289) (2,723) (599)
Net transfers -- (1,252,524) (94,878) (25,842) 113,416 242,249 998
Net increase (decrease) in net ---------- --------- ------ ------- ------ ------- --------
assets available for plan
benefits 25,552,735 16,336,011 (40,980) 19,661 2,617,730 2,303,340 (50,437)
Net assets available for plan
benefits at beginning of the
year 64,398,119 31,128,508 603,684 10,988,068 6,167,501 4,813,910 1,119,196
--------- ----------- -------- ----------- ---------- ---------- ---------
Net assets available for plan
benefits at end of the year $89,950,854 $47,464,519 $562,704 $11,007,729 $8,785,231 $7,117,250 $1,068,759
</TABLE>
<TABLE>
<CAPTION>
Investment Options
December 31, 1995 7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Cash dividends
Interest $ 246,464
------ -------- ----- ------ ------ ------- ------ ---------
Total investment income 246,464
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock
Pooled separate accounts $ 36,634 $ 166,663 $ 4,767 $ 1,322 $ 15,881 $ 7,592 $ 11,785
----------- ---------- -------- --------- -------- ------- -------- --------
Total realized gains 36,634 166,663 4,767 1,322 15,881 7,592 11,785
Net unrealized appreciation
of investments 140,554 1,009,582 28,318 11,398 83,069 109,101 187,775
Contributions:
Participant 91,685 650,298 50,131 32,280 326,608 193,369 561,966
The Lincoln National Life
Insurance Company ------ ------- ------ ------ ------- ------- ------- -------
Total contributions 91,685 650,298 50,131 32,280 326,608 193,369 561,966
Distributions to participants (36,650) (245,114) (23,412) (3,412) (42,492) (39,639) (91,402) (130,378)
Administrative expenses (454) (2,079) (68) (33) (289) (160) (831)
Net transfers 62,844 (167,526) (8,533) 23,953 214,639 126,808 372,323 392,073
Net increase (decrease) in net ------ ------ ------ ------ ------- ------ ------- -------
assets available for plan
benefits 294,613 1,411,824 51,203 65,508 597,416 397,071 1,041,616 508,159
Net assets available for plan
benefits at beginning of the
year 856,606 3,715,180 126,049 81,173 401,161 229,030 1,352,556 2,815,497
--------- ---------- -------- -------- -------- -------- ---------- ---------
Net assets available for plan
benefits at end of the year $1,151,219 $5,127,004 $177,252 $146,681 $998,577 $626,101 $2,394,172 $3,323,656
</TABLE>
<PAGE>
The Lincoln National Life Insurance Company
Agents' 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 exclusively 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 Government Bond Fund, which invests primarily in bonds backed by the
United States government that will mature in 3 to 5 years.
3 Guaranteed Fund, which invests primarily in contracts which guarantee a
rate of return and principal.
4 Core Equity Fund, which invests primarily in large capitalization
stocks of well-established companies.
5 Medium Capitalization Equity Fund, which invests primarily in
medium-sized companies.
6 Short-Term Fund, which invests in high quality money market securities
that include commercial paper, bankers acceptances, certificates of
deposit, loan participation and short-term U.S.
government debt.
7 Government/Corporate Bond Fund, which invests primarily in corporate
and U.S. government bonds and mortgage-backed securities.
8 Large Capitalization Equity Fund, which invests primarily in high-risk
common stocks which have the potential for a significant appreciation
in value within 18 months from the date of purchase.
9 Balanced Fund, which invests in three different asset classes: stocks,
bonds and money market instruments, which provides growth through the
stock portion and reduced risk through the bond and money market
portion.
10 High Yield Bond Fund, which invests primarily in below-investment-grade
bonds, providing higher rates of return to compensate higher risk.
11 Small Capitalization Equity Fund, which invests primarily in the stock
of new, rapid growth companies.
12 Value Equity Fund, which invests primarily in large capitalization
stocks of undervalued companies that are industry leaders.
13 International Equity Fund, which invests primarily in stocks of
non-United States companies.
At December 31, 1997, the fair value of LNC common stock in the LNC Common Stock
Fund not subject to agent direction was $6,786,236.
The information as to the number of participants selecting each investment
option is not readily available. Beginning January 1, 1994, the Plan began
offering investment options 9 through 13 noted above to participants. Investment
options 2 and 4 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>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
5. Income Tax Status
On February 9, 1995, 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. Tax Implications to Participating Agents
There are no income tax consequences to participating agents arising from their
pre-tax contributions, the Company's contributions and income earned in the Plan
until actual distribution or withdrawal from the Plan. The tax basis of
securities distributed to the participant is provided by the Lincoln National
Corporation Benefits Investment Committee.
7. Transactions with Parties-In-Interest
The Plan has investments in common stock of LNC, and in pooled separate accounts
and investment contracts with the Company. The Company charges the Plan for
certain administrative expenses including trustee and audit fees. Total
administrative expenses charged were $108,251, $86,481, and $79,139 in 1997,
1996, and 1995, respectively.
8. Concentrations of Credit Risks
The Plan has investments in common stock of LNC, and in pooled separate accounts
and unallocated investment contracts with the Company of $61,674,219,
$51,104,187 and $10,993,958 respectively, at December 31, 1997 (45.7%, 37.9% and
8.2% of net assets, respectively). LNC and the Company operate predominately in
the insurance and investment management industries.
<PAGE>
9. Reconciliation of Financial Statements to 1997 Form 5500
The following is a reconciliation of net assets available for plan benefits
per the financial statements to the 1997 Form 5500:
<TABLE>
<CAPTION>
December 31
1997 1996
<S> <C> <C>
Net assets available for plan benefits per the financial statements $134,886,622 $98,745,389
Amounts allocated to withdrawing participants -- (611,241)
----------- ----------
Net assets available for plan benefits per the 1997 Form 5500 $134,886,622 $98,134,148
</TABLE>
The following is a reconciliation of distributions to participants per the
financial statements to the 1997 Form 5500:
<TABLE>
<CAPTION>
Year ended
December 31,1997
<S> <C>
Distributions to participants per the financial statements $6,096,184
Add amounts allocated to withdrawing participants at December 31, 1997 --
Deduct amounts allocated to withdrawing participants at December 31, 1996 (611,241)
--------
Distributions to participants per the 1997 Form 5500 $5,484,943
</TABLE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
distributions that have been processed and approved for payment prior to
year-end but have not yet been paid.
Form 5500 net realized gain and net unrealized appreciation were computed in
accordance with the requirements of the Department of Labor. Such amounts differ
from amounts reported herein.
10. Recordkeeping for the Plan
Effective July 1, 1997, the recordkeeping for the Plan was transferred from the
Company to Norwest Bank, Minnesota. Also, effective July 1, 1997, the Plan began
using the daily valuation method.
11. Century Compliance (Unaudited)
The year 2000 issue is pervasive and complex and affects virtually every aspect
of The Lincoln National Life Insurance Company's ("LNL") businesses. LNL'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 LNL's businesses. LNL 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, LNL has initiated formal communications with critical parties
that interface with LNL's systems to gain an understanding of their progress in
addressing year 2000 issues. While LNL 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. LNL 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, LNL 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 LNL's businesses.
During 1996 and 1997, LNL identified expenditures of approximately $5.5 million
($3.58 million after-tax) that it had spent to address this issue. LNL's
financial plans for 1998-2000 include expected expenditures of an additional $20
million ($13.0 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.
12. Subsequent Event (Unaudited)
On January 2, 1998, the Company completed the purchase of a block of individual
life insurance and annuity business from CIGNA Corporation. In connection with
this purchase, individuals who became agents of the Company will be eligible to
participate in the Plan in 1998.
<PAGE>
SIGNATURE
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrator of the Plan has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
By /s/ George E. Davis March 30, 1998
------------------------------------------
George E. Davis,
Administrator
