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 teh fiscal year ended December 31, 1998
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 E. Berry Street
Fort Wayne, IN 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-11K
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
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, 1998, 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
<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 Life Insurance Company Agents' Savings and
Profit-Sharing Plan as of December 31, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the changes in its net assets available for plan
benefits for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
March 22, 1999
Fort Wayne, Indiana
<PAGE>-2-
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Statements of Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
December 31
1998 1997
---- ----
<S> <C> <C>
Assets
Investments:
Common stock--Lincoln National Corporation
(cost: 1998-$33,969,141; 1997-$31,095,120) $ 65,019,912 $ 61,674,219
Norwest Bank Short-Term Investment Fund 1,905,255 1,807,117
Pooled separate accounts--The Lincoln National
Life Insurance Company Separate Accounts
(cost: 1998-$40,946,428; 1997-$33,536,806) 67,032,542 51,104,187
Investment contracts --
The Lincoln National Life Insurance Company 12,081,039 10,993,958
Participant loans 5,207,903 4,980,382
----------- ----------
151,246,651 130,559,863
Accrued interest receivable 8,454 7,758
Cash and invested cash 92,786 847
Contributions receivable from Employer companies 4,103,596 4,318,154
----------- -----------
Net assets available for plan benefits $155,451,487 $134,886,622
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>-3-
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
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Investment income:
Cash dividends--Lincoln National Corporation $ 1,639,615 $ 1,604,366 $ 1,552,560
Interest:
The Lincoln National Life Insurance Company 653,432 690,992 577,671
Other 342,801 320,146 332,634
----------- ----------- -----------
996,233 1,011,138 910,305
----------- ---------- -----------
2,635,848 2,615,504 2,462,865
Net realized gain on sale, distribution and forfeitures of
investments:
Common stock--Lincoln National Corporation 2,636,667 4,343,393 2,196,645
Pooled separate accounts--The Lincoln National
Life Insurance Company Separate Accounts 2,122,479 2,482,267 1,056,483
----------- ----------- -----------
4,759,146 6,825,660 3,253,128
Net unrealized appreciation of investments 8,990,405 22,635,104 301,572
Contributions:
Participants 11,249,342 4,839,046 4,604,114
Employer companies
(net of forfeitures:; 1998--$18,660
1997--$12,050; 1996--$5,566;) 4,436,110 5,430,354 3,735,645
----------- ----------- -----------
15,685,452 10,269,400 8,339,759
Distributions to participants (11,405,338) (6,096,184) (5,476,308)
Administrative expenses (100,648) (108,251) (86,481)
----------- ---------- -----------
Net increase in net assets available for plan benefits 20,564,865 36,141,233 8,794,535
Net assets available for plan benefits
at beginning of the year 134,886,622 98,745,389 89,950,854
----------- ----------- -----------
Net assets available for plan benefits
at end of the year $155,451,487 $134,886,622 $98,745,389
=========== =========== ==========
</TABLE>
See accompanying notes.
<PAGE>-4-
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 ("Lincoln Life"). Contract value
represents net contributions plus interest at the contract rate. The contracts
are fully benefit responsive.
Participant loans are valued at their outstanding balances which approximate
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 Lincoln Life and agents and
employees of Sagemark Consulting, Inc. ("Sagemark"). Any person who is a
full-time agent of Lincoln Life or is an agent or employee of Sagemark is
eligible to enroll in the Plan. Lincoln Life and Sagemark are the employer
companies ("Employer") contributing to the Plan. A participant may make pre-tax
contributions at a rate of at least 1%, but not more than 15% of eligible
earnings, 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 the
investment of Employer contributions, but only after the contributions have been
in the Plan for two years following the date the last contribution for the plan
year was 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)
Employer 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. In
early 1998, the Board of Directors of Lincoln Life adopted an amendment
approving certain changes to the contribution formula that became effective
April 1, 1998. Under the new formula, Employer contributions to the Plan are
based on LNC's increase in operating income. The Employer match on eligible
participants' contributions during their first year of employment is limited to
a maximum of 25%. The maximum match for Sagemark agents is 50%.
Employer contributions are invested in the LNC Common Stock Fund. Participants'
contributions are fully vested. Employer 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%
Lincoln Life 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 contributions,
matching contributions from the Employer and allocations of Plan earnings, and
is charged with an allocation of administrative expenses. Allocations are based
on participant 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
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, 1998 December 31, 1997
Number of Number of
Shares, Units Market Shares, Units Market
or Par Value Value or Par Value Value
<S> <C> <C> <C> <C>
Quoted Market Values:
Common stock--LNC 794,743 $ 65,019,912* 789,430 $ 61,674,219*
Pooled separate account
investment contracts
underwritten by Lincoln Life:
Government Bond Fund 484,630.307 847,854 261,930.867 423,797
Core Equity Fund 1,403,540.627 18,309,961* 1,429,480.452 15,723,099*
Medium Capitalization
Equity Fund 930,687.431 11,504,791* 974,528.962 9,829,271*
Short-Term Fund 1,190,036.159 3,645,178 904,830.388 2,629,519
Government/Corporate
Bond Fund 205,814.429 1,211,364 163,420.177 876,241
Large Capitalization
Equity Fund 1,309,420.549 13,204,880* 1,212,360.575 9,168,971*
Balanced Fund 191,351.379 1,162,706 132,931.628 695,965
High Yield Bond Fund 515,601.420 1,280,241 485,187.946 1,126,837
Small Capitalization
Equity Fund 1,085,472.627 5,124,246 810,613.569 3,270,682
Value Equity Fund 2,231,259.184 5,484,306 1,577,096.377 3,356,102
International Equity Fund 974,670.259 5,257,015 830,895.558 4,003,703
------------- -------------
67,032,542 51,104,187
Contract Value:
Investment contracts
underwritten by Lincoln Life $12,081,039 12,081,039* $10,993,958 10,993,958*
Estimated Values:
Norwest Bank short-term
investment fund 1,905,255 1,905,255 1,807,117 1,807,117
Participant loans 5,207,903 5,207,903 4,980,382 4,980,382
------------- -------------
Total investments $151,246,651 $130,559,863
=========== ===========
</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
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Common stock:
Proceeds from disposition of stock $ 4,297,217 $ 11,100,882 $9,419,060
Cost of stock disposed 1,660,550 6,757,489 7,222,415
--------- ----------- ---------
Net realized gain on sale, distribution and
forfeitures of common stock $ 2,636,667 $ 4,343,393 $2,196,645
========= ========= =========
Pooled separate accounts:
Proceeds from disposition of units $ 28,814,807 $ 12,728,284 $4,948,738
Cost of units disposed 26,692,328 10,246,017 3,892,255
---------- ---------- ---------
Net realized gain on sale, distribution and
forfeitures of pooled separate accounts $ 2,122,479 $ 2,482,267 $1,056,483
========= ========= =========
</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
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Market value in excess of cost:
At beginning of the year $ 48,146,480 $25,511,376 $25,209,804
At end of the year 57,136,885 48,146,480 25,511,376
---------- ----------- ----------
Change in net unrealized appreciation
of investments $ 8,990,405 $22,635,104 $ 301,572
========= ========== =======
Common stock $ 471,672 $16,957,113 $(2,990,993)
Pooled separate accounts 8,518,733 5,677,991 3,292,565
--------- ----------- ---------
Change in net unrealized appreciation
of investments $ 8,990,405 $22,635,104 $ 301,572
========= ========== =======
</TABLE>
The investment contracts (Guaranteed Fund) earned an average interest rate of
approximately 6.45%, 6.60% and 6.82% in 1998, 1997 and 1996, respectively. The
credited interest rates for new contributions, which approximate the current
market rate, were 5.50% and 6.00% at December 31, 1998 and 1997, 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 were 6.40% and 6.50% at December 31, 1998 and 1997, 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 (continued)
The detail of the net assets available for plan benefits by investment option is
as follows:
<TABLE>
<CAPTION>
Investment Options
December 31, 1998 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock $ 65,019,912 $65,019,912
Short-term investment fund 1,905,255 1,905,255
Pooled separate accounts 67,032,542 $847,854 $18,309,961 $11,504,791 $3,645,178
Investment contracts 12,081,039 $12,081,039
Participant loans 5,207,903
---------- ----------- -------- --------- --------- ---------- ----------
Total investments 151,246,651 66,925,167 847,854 12,081,039 18,309,961 11,504,791 3,645,178
Accrued interest receivable 8,454 8,454
Cash and invested cash
(deficit) 92,786 93,986 (21,131) (298) (149)
Other receivables
Contributions receivable
from Employer companies 4,103,596 4,103,596
--------- -------- -------- --------- -------- --------- ----------
Net assets available for
plan benefits Total assets $155,451,487 $71,131,203 $826,723 $12,081,039 $18,309,663 $11,504,642 $3,645,178
=========== ========== ======= ========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Investment Options
December 31, 1998 7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Common stock
Pooled separate accounts $1,211,364 $13,204,880 $1,162,706 $1,280,241 $5,124,246 $5,484,306 $5,257,015
Investment contracts
Participant loans $5,207,903
---------- --------- -------- ---------- -------- ------- --------- ---------
Total investments 1,211,364 13,204,880 1,162,706 1,280,241 5,124,246 5,484,306 5,257,015 5,207,903
Accrued interest
receivable
Cash and invested
cash (deficit) 21,131 (407) 236,830 (14) (236,829) 4 (337)
Other receivables
Contributions receivable
from Employer companies
Net assets available for --------- --------- --------- --------- --------- --------- --------- ---------
plan benefits $1,232,495 $13,204,473 $1,399,536 $1,280,241 $5,124,232 $5,247,477 $5,257,019 $5,207,566
========= ========== ========= ========= ========= ========= ========= =========
</TABLE>
<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
------------ -------- ------- ---------- ---------- ------- --------
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
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 changes in net assets available for plan benefits by
investment option is as follows:
<TABLE>
<CAPTION>
Investment Options
December 31, 1998 Total 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Cash dividends $ 1,639,615 $ 1,639,615
Interest 996,233 126,274 653,432
---------- --------- ------- --------- --------- ------- --------
Total investment income 2,635,848 1,765,889 $ 653,432
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock 2,636,667 2,636,667
Pooled separate accounts 2,122,479 $ 49,765 $ 699,872 $ 367,765 $ 131,980
------------ --------- ------- ------- ----------- ------- ----------
Total realized gains 4,759,146 2,636,667 49,765 699,872 367,765 131,980
Net unrealized appreciation 8,990,405 471,672 14,412 2,231,163 1,741,637 (3,455)
of investments
Contributions:
Participant 11,249,342 1,774,165 52,317 351,590 1,648,079 1,268,764 372,083
Employer companies 4,436,110 4,436,110
----------- --------- -------- ---------- --------- -------- -------
Total contributions 15,685,452 6,210,275 52,317 351,590 1,648,079 1,268,764 372,083
Distributions to participants (11,405,338) (4,446,390) (9,056) (1,787,303) (1,490,497) (524,278) (448,308)
Administrative expenses (100,648) (55,518) (848) (7,090) (11,076) (5,520) (2,072)
Net transfers (3,258,640) 296,458 1,877,179 (489,760) (1,172,134) 965,658
----------- ---------- ------- ---------- ----------- ----------- ---------
Net increase (decrease) in
net assets available for
plan benefits 20,564,865 3,323,955 403,048 1,087,808 2,587,781 1,676,234 1,015,886
Net assets available for
plan benefits at beginning
of the year 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 at end of the year $155,451,487 $71,131,203 $826,723 $12,081,039 $18,309,663 $11,504,642 $3,645,178
=========== ========== ======= ========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Investment Options
December 31, 1998 7 8 9 10 11 12 13 Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Cash dividends
Interest $ 216,527
-------- --------- ---------- ------- ---------- ------- ---------- -------
Total investment income 216,527
Net realized gain on sale,
distribution and forfeitures
of investments:
Common stock
Pooled separate accounts $ 46,160 $ 584,743 $ 28,588 $ 39,390 $ 127,318 $ 152,507 $ (105,609)
-------- ---------- ---------- -------- --------- --------- --------- -------
Total realized gains 46,160 584,743 28,588 39,390 127,318 152,507 (105,609)
Net unrealized appreciation
of investments 51,305 1,540,806 313,928 410,896 1,072,488 1,089,923 1,157,610
Employer companies
-------- ---------- -------- ------- ---------- ------ -------- -------
Total contributions 196,693 1,540,806 313,928 410,896 1,072,488 1,089,923 1,157,610
Distributions to participants (214,675) (912,062) (101,930) (49,831) (147,455) (256,067) (255,782) (761,704)
Administrative expenses (1,053) (6,500) (1,116) (2,029) (2,283) (2,870) (2,673)
Net transfers 277,994 181,922 350,389 (278,899) 198,264 438,882 (153,674) 766,361
-------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Net increase (decrease) in
net assets available for
plan benefits 356,424 4,036,497 703,550 153,545 1,853,574 1,891,573 1,253,806 221,184
Net assets available for
plan benefits at beginning
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
---------- ---------- ---------- --------- ---------- --------- --------- ---------
Net assets available for
plan benefits at end of
the year $1,232,495 $13,204,473 $1,399,536 $1,280,241 $5,124,232 $5,247,477 $5,257,019 $5,207,566
========= ========== ========= ========= ========= ========= ========= =========
</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) (73,949) (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 $ 10,364 $ 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)
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, 1998, the fair value of LNC common stock in the LNC Common Stock
Fund not subject to agent direction was $5,438,893.
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 Lincoln
Life through a group annuity contract issued by Lincoln Life.
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 Participants
There are no income tax consequences to participants arising from their pre-tax
contributions, the Employer'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 Lincoln Life. Lincoln Life charges the Plan for
certain administrative expenses including trustee and audit fees. Total
administrative expenses charged were $100,648, $108,251, and $86,481 in 1998,
1997, and 1996, 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 Lincoln Life of $65,019,912,
$67,032,542 and $12,081,039 respectively, at December 31, 1998 (41.8%, 43.1% and
7.8% of net assets, respectively). LNC and Lincoln Life operate predominately in
the insurance and investment management industries.
9. Century Compliance (unaudited)
The year 2000 issue is pervasive and complex and affects virtually every aspect
of Lincoln Life's businesses. Lincoln Life's computer systems and interfaces
with the computer systems of vendors, suppliers, customers and business partners
are particularly vulnerable. Lincoln Life has been redirecting a large portion
of its internal Information Technology ("IT") efforts and contracting with
outside consultants to update its systems to address Year 2000 issues. Experts
have been engaged to assist in developing work plans and cost estimates and to
complete remediation activities.
For the year ended December 31, 1998, Lincoln Life identified expenditures of
$22.0 million ($14.3 million after-tax) to address this issue. This brings the
expenditures for 1996-98 to $27.6 million ($17.9 million after-tax). Lincoln
Life's financial plans for 1999-2000 include expected expenditures of an
additional $36.5 million ($23.7 million after-tax) bringing estimated overall
Year 2000 expenditures to $64.1 million ($41.6 million after-tax). Because
updating systems and procedures is an integral part of Lincoln Life's on-going
operations, approximately 50% of expenditures shown above are expected to
continue after all Year 2000 issues have been resolved. Actual Year 2000
expenditures through December 31, 1998 and future Year 2000 expenditures are
expected to be funded from operating cash flows. The anticipated cost of
addressing Year 2000 issues is 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. Such costs will be monitored closely by management.
Nevertheless, there can be no guarantee that actual costs will not be higher
than these estimated costs. 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.
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
The projects to address IT and non-It readiness have four major phases. Phase
one involves raising awareness and creating an inventory of all IT and non-IT
assets. The second phase consists of assessing all items inventoried to
initially determine whether they are affected by the Year 2000 issues and
preparing general plans and strategies. The third phase entails the detailed
planning and remediation of affected systems and equipment. The last phase
consists of testing to verify Year 2000 readiness.
Lincoln Life has completed these four phases for over two-thirds of its high
priority IT systems, including those provided by software vendors. While Lincoln
Life's Year 2000 program for nearly all high priority IT systems is expected to
be complete in the first quarter of 1999, phase four, for a small but important
subset of these systems, will continue through the end of the second quarter
1999. As of December 31, 1998, the status of projects addressing readiness of IT
assets is: 100% of IT assets have been inventoried (Phase 1) and assessed (Phase
2); 94% of IT projects have been through the remediation phase (Phase 3) with
the last project scheduled for completion by the end of March 1999; and 69% of
IT projects have completed the testing phase (Phase 4) with the last project
scheduled to finish testing by the end of June 1999. A portion of the effort
that extends into 1999 is dependent on outside third parties and is behind the
original schedule. Lincoln Life is working with these parties to modify the
completion schedule.
As of December 31, 1998, the status of projects that address readiness of high
priority non-IT assets is: 100% of non-IT assets have been inventoried (Phase 1)
and assessed (Phase 2); 79% of non-IT projects addressing remediation (Phase 3)
have been completed and 21% of non-IT projects have completed the testing phase
(Phase 4). Lincoln Life expects to have all phases related to high priority
non-IT projects completed by the end of October 1999.
Concurrent with the IT and non-IT projects, the readiness of key business
partners is being reviewed and Year 2000 contingency plans are being developed.
The most significant categories of key business partners are financial
institutions, software vendors, and utility providers (gas, electric and
telecommunications). Surveys have been mailed to these key business partners.
Based on responses received, current levels of readiness are being assessed,
follow-up contacts are underway, alternative strategies are being developed and
testing is being scheduled were feasible. This effort is expected to continue
well into 1999. As noted above, software vendor assessments are considered part
of the IT projects and, therefore, would follow the schedule shown above for
such projects.
While Lincoln Life is working to meet the schedules outlined above, some
uncertainty remains. Specific factors that give rise to this uncertainty include
a possible loss of technical resources to perform the work, failure to identify
all susceptible systems, non-compliance by third parties whose systems and
operations impact Lincoln Life and other similar uncertainties.
A worst case scenario might include Lincoln Life's inability to achieve Year
2000 readiness with respect to one or more of Lincoln Life's significant
policyholder systems, resulting in a material disruption to Lincoln Life's
operations. Specifically, Lincoln Life could experience an interruption in its
ability to collect and process premiums or deposits, process claim payments,
accurately maintain policyholder information, accurately maintain accounting
records, and/or perform adequate customer service. Should the worst case
scenario occur, it could, depending on its duration, have a material impact on
Lincoln Life's results of operations and financial position. Simple failures can
be repaired and returned to production within a matter of hours with no material
impact. Unanticipated failures with a longer service disruption period would
have a more serious impact. For this reason, Lincoln Life is placing significant
emphasis on risk management and Year 2000 contingency planning. Lincoln Life is
in the process of modifying its contingency plans to address potential Year 2000
issues. Where these efforts identify high risks due either to unacceptable work
around procedures or significant readiness risks, appropriate risk management
techniques are being defined. These techniques, such as resource shifting or use
of alternate providers, will be employed to provide stronger assurances of
readiness. Lincoln Life has gone through exercises to identify worst case
scenario failures. At this time, Lincoln Life believes its plans are sufficient
to mitigate identified worst case scenarios.
<PAGE>
The Lincoln National Life Insurance Company
Agents' Savings and Profit-Sharing Plan
Notes to Financial Statements (continued)
The record keeping for the Plan is currently done by Norwest Bank, Minnesota.
Record keeping consists of the day to day maintenance of the individual accounts
within the Plan. As a result of the arrangement with Norwest Bank, and as part
of Lincoln Life's century compliance efforts, Lincoln Life has surveyed, and
continues to survey, Norwest Bank with respect to Norwest Bank's Year 2000
readiness. In response to Lincoln Life's Year 2000 surveys, Norwest has
represented to Lincoln Life, that although there can be no guarantees that any
one product will not be affected in some way by a Year 2000 problem, Norwest has
dedicated sufficient resources to both address and minimize the impact of the
century date change. Separately, Norwest Bank has represented on its web site
that Norwest Bank has identified mission critical systems based on Federal
Institutions Examination Council (FIEC) guidelines, addressed all other systems,
largely completed remediation and testing of internal systems, and is currently
developing comprehensive contingency plans to address any Year 2000 problems
that may arise.
<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 29 , 1999
-------------------------------------------
George E. Davis,
Administrator
<PAGE>
