Full Description

Lincoln National Corporation (LNC) is a holding company, which operates multiple insurance and investment management businesses through subsidiary companies. Through its business segments, the Company sells a range of wealth protection, accumulation and retirement income products and solutions. These products include institutional and/or retail fixed and indexed annuities, variable annuities, universal life insurance (UL), variable universal life insurance (VUL), term life insurance, mutual funds and managed accounts. The Company provides products and services through four operating businesses: Individual Markets, which includes the Annuities and Life Insurance segments; Employer Markets, which includes the Retirement Products and Group Protection segments; Investment Management, which is an operating business and segment, and Lincoln UK, which is an operating business and segment. LNC also has Other Operations, which includes the financial data for operations that are not directly related to the business segments. The Company has realignment of its segments under the former Employer Markets and Individual Markets operating businesses into two new operating businesses, Retirement Solutions and Insurance Solutions. On January 15, 2009 the Company acquired Newton County Loan & Savings, FSB.

Individual Markets

The Individual Markets business provides its products through two segments: Annuities and Life Insurance. The Annuities segment provides tax-deferred growth and lifetime income opportunities for its clients by offering individual fixed annuities, including indexed annuities, and variable annuities. Its variable annuities are distributed by affiliated and unaffiliated broker-dealers. The Life Insurance segment offers wealth protection and transfer opportunities through both individual and survivorship versions of UL and VUL, as well as term insurance, and the MoneyGuard product,a linked-benefit product, which is a UL policy linked with riders that provide for long-term care costs. The Group Protection segment focuses on offering group term life, disability income and dental insurance primarily in the small to mid-sized employer marketplace for their eligible employees.

The Annuities segment has principal operations in Fort Wayne, Indiana, Hartford, Connecticut, and Greensboro, North Carolina, and additional operations in Concord, New Hampshire. The Individual Annuities segment offers non-qualified and qualified fixed and variable annuities to individuals. The Company offers A-share, B-share, C-share, L-share and bonus variable annuities, although not with every annuity product. Certain of LNC’s variable annuity products offer guaranteed benefit features, such as a guaranteed death benefit (GDB), a guaranteed withdrawal benefit (GWB), a guaranteed income benefit (GIB) and a combination of such benefits. Its variable annuity products also offer the choice of a fixed option that provides for guaranteed interest credited to the account value. Approximately 91% of variable annuity separate account values had a GMDB feature as of December 31, 2008.

The Lincoln SmartSecurity Advantage benefit is a GWB rider that offers the contract holder a guarantee equal to the initial deposit (or contract value, if elected after issue), adjusted for any subsequent purchase payments or withdrawals. Approximately 28% of variable annuity account values had a GWB rider as of December 31, 2008. The Company offers other product riders, including i4LIFE Advantage and 4LATER. The i4LIFE feature allows variable annuity contract holders access and control during the income distribution phase of their contract. In general, GIB is an optional feature available with i4LIFE Advantage that guarantees regular income payments will not fall below 75% of the highest income payment on a specified anniversary date (reduced for any subsequent withdrawals).

The Company offers single and flexible premium fixed deferred annuities to the individual annuities market. Its fixed annuities include both traditional fixed-rate and fixed indexed annuities. With fixed deferred annuities, the contract holder has the right to surrender the contract and receive the current accumulation value less any applicable surrender charge, and if applicable, a market value adjustment (MVA). Fixed indexed annuities allow the contract holder to elect an interest rate linked to the performance of the Standard & Poor’s (S&P) 500 Index. As of December 31, 2008, individual fixed annuity account values were $14 billion.

As of December 31, 2008, LNC’s fixed annuity product offerings consisted of traditional fixed-rate and fixed indexed deferred annuities. It also offers fixed-rate immediate annuities with various payment options, including lifetime incomes. In addition to traditional fixed-rate immediate annuities, LNC has Lincoln SmartIncome Inflation Annuity. This product provides lifetime income with annual adjustments to keep pace with inflation. The traditional fixed-rate deferred annuity products include the Lincoln Classic (single and flexible premium), Lincoln Select and Lincoln ChoicePlus Fixed annuities. The fixed indexed deferred annuity products include the Lincoln OptiPoint, Lincoln OptiChoice, Lincoln New Directions and Lincoln Future Point annuities. Available with certain of fixed indexed annuities, Lincoln Living Income Advantage provides the contract holder a guaranteed minimum lifetime withdrawal benefit. The Annuities segment distributes all its individual fixed and variable annuity products through Lincoln Financial Distributors (LFD), the Company’s wholesaling distribution organization. LFD’s distribution channels give the Annuities segment access to its target markets. LFD distributes the segment’s products to a number of financial intermediaries, including Lincoln Financial Network (LFN). The financial intermediaries include wire/regional firms, independent financial planners, financial institutions and managing general agents.

The Life Insurance segment, with principal operations in Greensboro, North Carolina, and Hartford, Connecticut and additional operations in Concord, New Hampshire and Fort Wayne, Indiana, focuses on the creation and protection of wealth for its clients through the manufacturing of life insurance products. The Life Insurance segment offers wealth protection and transfer opportunities through term insurance, a linked-benefit product (which is a universal life insurance policy linked with riders that provide for long-term care costs), and both single and survivorship versions of UL and VUL.

The Life Insurance segment sells primarily interest/market-sensitive products (UL and VUL), including corporate-owned life insurance (COLI) and bank-owned life insurance (BOLI) products, and term products. Under UL product category, the Company offers Excluding MoneyGuard and MoneyGuard. Under VUL product category, LNC’s offerings include VUL and term/whole life policies. The Company offers four categories of life insurance products consisting of interest-sensitive life insurance (primarily UL), linked-benefit life products, VUL and term life insurance. Interest-sensitive life insurance products provide life insurance with account (cash) values that earn rates of return based on company-declared interest rates. Some of the Company’s UL contracts include secondary guarantees. Its fixed indexed UL policy provides contract holders a choice of a fixed-rate account and several different indexed accounts. Linked-benefit products combine universal life insurance with long-term care insurance through the use of riders. The Company’s linked-benefit product is called MoneyGuard.

VUL products are UL products that provide a return on account values linked to an underlying investment portfolio of sub-accounts offered through the product. The value of the contract holder’s account varies with the performance of the sub-accounts chosen by the contract holder. The underlying assets of the sub-accounts are managed within a special insurance series of mutual funds. In addition, VUL products offer a fixed account option that is managed by LNC. Term life insurance provides a fixed death benefit for a scheduled period of time. It usually does not offer cash values. Scheduled policy premiums are required to be paid at least annually. Products offering a return of premium benefit payable at the end of a specified period are also available. The Life Insurance segment’s products are sold through LFD. LFD provides the Life Insurance segment with access to financial intermediaries in primary distribution channels, including wire/regional firms, independent planner firms (including LFN), financial institutions and managing general agents/independent marketing organizations.

Employer Markets

Lincoln Employer Markets offers and distributes a range of products focused on retirement income security through its Defined Contribution, Executive Benefits and Group Protection businesses. The Employer Markets business provides its products through two key segments: Retirement Products and Group Protection. The Retirement Products segment includes two major lines of business: the Defined Contribution business and the Executive Benefits business. The Defined Contribution business provides employer-sponsored fixed and variable annuities, and mutual fund-based programs in the 401(k), 403(b) and 457 plan marketplaces through a range of intermediaries, including advisors, consultants, brokers, banks, wire houses. The Executive Benefits business offers corporate-owned universal and variable universal life insurance (COLI), and bank-owned universal and variable universal life insurance (BOLI) to small to mid-sized banks and mid to large-sized corporations, mostly through executive benefit brokers. The Group Protection segment focuses on offering group term life, disability income and dental insurance primarily in the small to mid-sized employer marketplace for their eligible employees.

Under the Defined Contribution business, Employer Markets offers four primary products to the employer-sponsored market: Lincoln American Legacy Retirement, LINCOLN DIRECTOR, LINCOLN ALLIANCE, Lincoln SmartFuture and Multi-Fund. Lincoln American Legacy Retirement, LINCOLN DIRECTOR and Multi-Fund products are group variable annuities. LINCOLN ALLIANCE is a mutual fund-based product. The LINCOLN ALLIANCE program, with an open architecture platform, bundles the Company’s traditional fixed annuity products with the employer’s choice of retail mutual funds, along with recordkeeping and customized employee education components. Multi-Fund Variable Annuity is a defined contribution retirement plan solution with full-bundled administrative services, and is marketed to small to mid-sized healthcare, education, governmental and not-for-profit plans.

Through the Executive Benefits business, the Company offers COLI and BOLI products. COLI and BOLI are typically purchased by corporations and banks on the lives of their employees, with the corporation or bank or a trust sponsored by the corporation or bank named as a beneficiary under the policy, for the purpose of funding various employee benefit plans, including non-qualified deferred compensation plans. The Company offers a portfolio of both fixed UL and VUL COLI products sold primarily through specialty brokers. This block was in run-off as of December 31, 2008.

The Group Protection segment offers group non-medical insurance products, principally term life, disability and dental. The Company offers employer-sponsored group term life insurance products, including basic, optional and voluntary term life insurance to employees and their dependents. Additional benefits may be provided in the event of a covered individual’s accidental death or dismemberment. LNC offers short and long-term employer-sponsored group disability insurance, which protects an employee against loss of wages due to illness or injury. The Company offers employer-sponsored group dental insurance, which covers a portion of the cost of eligible dental procedures for employees and their dependents. Products offered include indemnity coverage, which does not distinguish benefits based on a dental provider’s participation in a network arrangement, and a Preferred Provider Organization (PPO) product that does reflect the dental provider’s participation in the PPO network arrangement, including agreement with network fee schedules.

Investment Management

The Investment Management segment, with principal operations in Philadelphia, Pennsylvania, provides investment products and services to both individual and institutional investors through Delaware Management Holdings, Inc. (Delaware Investments) and its affiliates. Delaware Investments offers a line of mutual funds and other investment products to retail investors (including managed accounts). Delaware Investments also offers investment advisory services and products to institutional clients, such as corporate and public retirement plans, endowments and foundations, nuclear decommissioning trusts, sub-advisory clients and Taft-Hartley plans, and includes mutual funds offered by non-Delaware Investments entities, for which Delaware Investments acts as a sub-advisor. As of December 31, 2008, Delaware Investments served as investment advisor to approximately 190 institutional accounts, acted as investment manager and performed additional services for approximately 81 open-end funds and for seven closed-end funds. The Investment Management segment also provides investment advisory services for LNC’s corporate and general insurance portfolios, including separate accounts and mutual funds, and acts as investment advisor to collateralized debt obligations (CDOs).

Investment Management products include United States and international equity and fixed-income retail mutual funds, institutional separate accounts, institutional mutual funds, managed accounts, as well as administration services for some of these products. The Investment Management segment offers various retail products, including mutual funds to individual investors, as well as investment services to high-net-worth and small institutional investors through managed accounts. Delaware Investments manages both open-end and closed-end funds. The Investment Management segment also provides investment advisory services to clients through separately managed accounts, commonly referred to as wrap accounts. These products are offered by a sponsor, typically a broker-dealer, to higher-net-worth individuals with a minimum investment of approximately $250,000.

For institutional clients, the Investment Management segment offers Delaware Pooled Trust and institutional separate accounts, and manages CDOs. Delaware Pooled Trust is an investment company, which offers a series of mutual funds managed in styles that are similar to institutional separate account offerings and are suitable for smaller to medium-sized institutional investment mandates. Delaware Pooled Trusts’ minimum initial investment is typically $1 million. The Investment Management segment also provides investment advisory services for CDOs. As of December 31, 2008, the Investment Management segment provided advisory services for $5 billion of CDOs.

Lincoln UK

Lincoln UK is headquartered in Barnwood, Gloucester, England, and is licensed to do business throughout the United Kingdom. Lincoln UK accepts new deposits on the existing block of business and markets a limited range of new products. Lincoln UK has introduced retirement income product solutions into the United Kingdom. Lincoln UK’s product portfolio principally consists of unit-linked life and pension products. These products have largely been issued to individuals, and benefits, premium levels and charges can often be varied within limits.