UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: March 31, 2001
LINCOLN NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 1-6028 35-1140070
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
1500 Market Street, Suite 3900, Centre Square West Tower, Philadelphia, PA 19102
(Address of principal executive offices)
Registrant's telephone number 215-448-1400
Item 9
Financial Report for the quarter ended March 31, 2001.
Lincoln
Quarterly
SHAREHOLDERnews
first quarter 2001 1
THIS issue:
"POWERED BY RESEARCH"
(bullet)
Income4Life SM
(bullet)
LINCOLN
UL-III LIFE PROTECTION
(bullet)
QUARTERLY
HIGHLIGHTS
[PHOTO OMITTED: JON A. BOSCIA]
TO OUR SHAREHOLDERS:
Despite the extreme market volatility that has hurt the overall industry,
Lincoln delivered solid results for the first quarter. We reported income
from operations of $178.6 million or $.92 per diluted share for the first
quarter 2001.
During the quarter, we continued to focus on the elements of our performance
that we could control - developing and delivering market-leading products,
aggressively supporting our partners and distribution teams and carefully
managing expenses.
Our Annuities segment reported earnings of $82.3 million for the quarter.
From both an annuity deposit and net cash flow perspective, this was our
best quarter in over a year. Our new products and wider distribution are
certainly having an impact. Annuity deposits reached $1.4 billion, an
increase of 9 percent over the fourth quarter. And, as we continued to
narrow the gap between deposits and redemptions, net cash flows improved
13.4 percent, or $91 million over the fourth quarter. The improvement in
net flows was due to an increase in sales. This is quite impressive given
the fact that most other annuity companies are seeing declining sales.
Life Insurance earnings were $68.6 million, an increase of $8.2 million
or 13.6 percent over last year's first quarter. This growth in earnings is
a result of continued solid growth in the block of business and expense
management. In-force grew to $219 billion, an 8.7 percent increase over
first quarter 2000 on the strength of sales and good persistency.
Income from operations for our Reinsurance segment was $46.8 million.
These strong results were due to the benefit from a change in estimate of
premiums receivable, partially offset by high mortality costs.
Our Investment Management segment reported income from operations of $2.4
million. The lower earnings were primarily affected by lower account values
stemming from equity market declines. Our relative investment performance
has improved in both the retail and institutional areas. This has resulted
in an improved level of negative net flows.
Lincoln UK reported income from operations of $14.4 million. As we previously
announced, we ceased writing new business in the UK.
The equity market's volatility has presented a challenging operating
environment for us. However, I believe Lincoln is proving that good
management of the controllable factors leads to good relative performance in
the long term.
Sincerely,
/S/ Jon A. Boscia
-----------------
Jon A. Boscia
Chairman and Chief Executive Officer
Lincoln Quarterly FIRST QUARTER 2001
overview
We're a multinational family of financial services.
Lincoln National Corporation holds a prominent position among financial
services companies with consolidated assets of $94 billion and annual
consolidated revenues of $6.9 billion. LNC has a reputation for financial
strength, a tradition of excellent service, an expertise for risk management
and the strategic focus to succeed in the future.
The company offers a broad range of financial services, including life
insurance, annuities, life-health reinsurance, mutual funds, retirement
plans, institutional investment management and financial and estate
planning.
FINANCIAL & ESTATE PLANNING
RETIREMENT PLANK PENSIONS
Financial
MUTUAL FUNDS Services ANNUITIES
REINSURANCE LIFE INSURANCE
Financial services
Family of companies
LINCOLN FINANCIAL GROUP
The marketing name for Lincoln National Corporation and affiliates.
LINCOLN NATIONAL CORPORATION
A prominent financial services holding company providing annuities,
insurance, life-health reinsurance, mutual funds, retirement plans,
institutional investment management and financial and estate planning
services through its affiliates.
LINCOLN LIFE
The eighth largest stock life insurance company in the U.S. offering
access to annuities, retirement plans and life insurance through a
diverse network of company-owned and independent distribution channels.
ANNUITIES
The Annuities segment ranks third in assets and 14th in variable annuity
sales in the United States.
LIFE INSURANCE
The Life Insurance segment ranks eighth in the industry, based on new
annualized premiums.
LINCOLN FINANCIAL ADVISORS
A premier financial planning organization offering a broad range of products
and services.
SAGEMARK CONSULTING
A premier financial and estate planning organization offering a broad range
of products and services.
LINCOLN FINANCIAL DISTRIBUTORS
A wholesaling distribution organization, which sells Lincoln-manufactured
annuities, life insurance and investment management products through
financial intermediaries.
FIRST PENN-PACIFIC
A life insurance company offering universal and term life insurance and
annuity products.
LINCOLN LIFE & ANNUITY OF NEW YORK
A life insurance company offering annuities, retirement and insurance
products in the state of New York.
LINCOLN RE
One of the largest writers of life-health reinsurance in the world.
DELAWARE INVESTMENTS
Serves individual investors through a broad line of mutual funds, retirement
plan services and other investment products; and institutional investors,
primarily private and public pension funds, foundations, endowments, banks
and insurance companies.
Financial planning services offered through Lincoln Financial Advisors Corp.
and Sagemark Consulting, a division of Lincoln Financial Advisors, a
registered investment advisor. Securities offered through Lincoln Financial
Advisors Corp., a broker/dealer. Insurance offered through Lincoln affiliates
and other fine companies.
FINANCIAL NEWS
FINANCIAL HIGHLIGHTS
First Quarter
(Millions of dollars, except ratios and per share data) 2001 2000 Change
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Income from Annuities** 82.3 88.5 (7.0%)
Operations* Life Insurance** 68.6 60.4 13.6%
Reinsurance 46.8 32.1 45.8%
Investment Management** 2.4 12.4 (80.6%)
Lincoln UK 14.4 15.7 (8.3%)
Corporate & Other** (35.9) (38.5)
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Total Income from Operations* 178.6 170.6 4.7%
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Net Income Net Income 160.2 170.2 (5.9%)
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Per Share Data Income from Operations* $0.92 $0.87 5.7%
Net Income $0.83 $0.87 (4.6%)
Shareholders' Equity (Book Value):
Securities at Market $27.09 $22.45 20.7%
Securities at Cost $25.96 $24.58 5.6%
Common Shares Outstanding (Diluted) (millions):
Average for the Period 193.7 195.8
End of Period 191.3 195.1
* "Income from Operations" is defined as "Net Income" less gain (loss) on investments and associated items,
gain (loss) on sale of subsidiaries (if applicable), cumulative effect of accounting changes and
restructuring charges, all net of taxes.
** 1st quarter 2000 was restated from the prior year due to the following changes which were effective on
January 1, 2001: 1) The management and reporting of First Penn-Pacific's annuity business moved from
the Life Insurance segment to the Annuities segment; 2) The reporting for LNC's wholesale distribution
system, Lincoln Financial Distributors ("LFD") was moved from Annuities, Life Insurance and the Investment
Management segments to "Other Operations"; 3) A change in the internal pricing for the management of general
account investments performed by the Investment Management segment to a "for profit" basis from the
previously reported "at cost" basis.
STOCK PRICES/DIVIDENDS DECLARED
The table below sets forth, by quarter, the range of high, low and quarter-end
closing sale prices for Lincoln National Corporation common stock and the cash
dividends declared per common share.
Cash
Dividends
2001 Quarter High Low Close Declared
First $48.250 $38.000 $42.470 $0.305
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Total $0.305
=======
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Cash
Dividends
2000 Quarter High Low Close Declared
First $41.375 $22.625 $33.500 $0.290
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Second $40.063 $29.000 $36.125 $0.290
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Third $56.375 $35.625 $48.125 $0.290
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Fourth $50.938 $40.875 $47.313 $0.305
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Total $1.175
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LINCOLN NATIONAL CORPORATION'S RATINGS
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Commercial Paper Debt
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Standard & Poor's A-2 (Satisfactory) A- (Strong)
Moody's P-2 (Strong) A3 (Upper medium grade)
Fitch F-1 (Very strong) A+ (Strong)
A.M. Best a (Strong)
LIFE INSURANCE COMPANY
FINANCIAL STRENGTH RATINGS
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Description A.M. Fitch Moody's Standard
Best & Poor's
Exceptional or Superior A++ AAA Aaa AAA
Negligible Risk Factors A+
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Excellent A* AA+ Aa1 AA+
Modest Risk A- AA* Aa2 AA
AA- Aa3* AA-*
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Very Good, Strong, or High B+ A+ A1 A+
Average Risk A A2 A
A- A3 A-
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Adequate B BBB+ Baa1 BBB+
Protection Factors are Average B- BBB Baa2 BBB
More Vulnerable to
Economic Conditions BBB- Baa3 BBB-
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Below Average C+ BB+ Ba1 BB+
Questionable or Uncertain Security BB Ba2 BB
BB- Ba3 BB-
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Poor C B+ B1 B+
Vulnerability is High C- B B2 B
Considered Financially Weak BB- B3 B-
Obligations May Not be Paid
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Very Poor CCC Caa CCC
May Not Meet Obligations CC Ca CC
May be in Default D C D
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Lincoln National Life Ratings are designated with an *.
A.M. BEST RATINGS FOR SELECTED AFFILIATES
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First Penn-Pacific Life Insurance Company A
Lincoln National Health and Casualty Company A
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
First Quarter
(Millions of dollars, except per share) 2001 2000
-----------------------------------------------------------------------------------------------------------------
Revenue Premiums and Fees 962.8 851.9
Net Investment Income 673.7 711.1
Realized Loss on Investments (20.7) (1.0)
Other 83.0 107.2
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Total Revenue 1,698.8 1,669.2
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Benefits and Benefits 906.7 866.0
Expenses Underwriting, Acquisition, Insurance and Other Expenses 571.0 572.2
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Total Benefits and Expenses 1,477.7 1,438.2
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Income Income before Federal Taxes, Cumulative Effect of
Accounting Change & Minority Interest 221.1 231.0
Federal Income Taxes 56.6 61.0
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Income before Cumulative Effect of
Accounting Change & Minority Interest 164.5 170.0
Cumulative Effect of Accounting Change (4.3) --
-----------------------------------------------------------------------------------------------------------------
Income before Minority Interest 160.2 170.0
Minority Interest -- (0.2)
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Net Income 160.2 170.2
========= =========
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Earnings Per Share Net Income 0.83 0.87
(Diluted) ========= =========
CONSOLIDATED CONDENSED BALANCE SHEETS
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March December 31 Increase
(Millions of dollars) 2001 2000 (Decrease)
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Assets
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Investments Securities Available-for-Sale
Fixed Maturities 27,811.3 27,449.8 361.5
Equities 559.6 549.7 9.9
Mortgage Loans on Real Estate 4,641.2 4,663.0 (21.8)
Real Estate 308.1 282.0 26.1
Policy Loans 1,946.9 1,960.9 (14.0)
Derivative Instruments 61.4 -- 61.4
Other Long-Term Investments 416.0 463.3 (47.3)
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Total Investments 35,744.5 35,368.7 375.8
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Other Assets Assets Held in Separate Accounts 44,506.2 50,579.9 (6,073.7)
Other Assets 13,871.7 13,895.5 (23.8)
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Total Assets 94,122.4 99,844.1 (5,721.7)
========= ========= =========
Liabilities and Shareholders' Equity
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Liabilities Liabilities for Insurance and Investment
Contracts 39,913.1 40,105.1 (192.0)
Liabilities Related to Separate Accounts 44,506.2 50,579.9 (6,073.7)
Other Liabilities 4,606.7 4,205.0 401.7
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Total Liabilities 89,026.0 94,890.0 (5,864.0)
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Shareholders' Preferred Stock 0.8 0.9 (0.1)
Equity Common Stock 993.4 1,003.7 (10.3)
Retained Earnings 3,884.3 3,915.6 (31.3)
Net Unrealized Gain on Securities
Available-for-Sale 190.4 12.0 178.4
Net Unrealized Gain on Derivatives 23.3 -- 23.3
Foreign Currency Translation Adjustment 4.2 21.9 (17.7)
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Shareholders' Equity 5,096.4 4,954.1 142.3
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Liabilities and Shareholders' Equity 94,122.4 99,844.1 (5,721.7)
========= ========= =========
FORM 10-Q DISCLOSURE STATEMENT
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The notes to these unaudited condensed interim financial statements have not been included in this report.
Those notes, along with more detailed financial information are, however, contained in the corporation's
quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Copies of the 10-Q are
available electronically at www.sec.gov or www.lfg.com or by writing to: Douglas N. Miller, LNC Controller,
1500 Market Street, Suite 3900, Philadelphia, PA 19102-2112. Requests may also be directed to 215-448-1430
or to dnmiller@lnc.com on the Internet.
Lincoln Quarterly FIRST QUARTER 2001
PRODUCT news
Income4LIFE SM Solution Offers Lifetime Income and Control
As more people are both planning for and beginning to retire, Lincoln Annuities
has chosen an opportune time to introduce the Income4LifeSM Solution.
With traditional retirement products, clients are faced with the choice of
either lifetime income, or access and control over their money. Now, Lincoln
Annuities' Income4Life Solution offers both access to retirement assets, along
with a lifetime income. However, the Income4Life Solution is not a new product;
it's an option that enhances strong and established annuity products offered
through The Lincoln National Life Insurance Company. With the Income4Life
Solution, clients stay in control of their money - choosing how it is invested,
deciding how often to receive income and reallocating investment options.
Additionally, unlike standard retirement products, the Income4Life Solution
provides account statements and daily unit values so clients always know
exactly where they stand.
The Income4Life Solution offers tax advantages, too. Other benefits include
a joint survivor feature and professional money managers.
"The Income4Life Solution provides a brand new way for retirees and others to
manage their money. In fact, this option is so pioneering that there are
patents pending on the concept," said Bill Boscow, senior vice president and
chief marketing officer for Lincoln Annuities.
Through the introduction of the Income4Life Solution, Lincoln Financial Group
distinguishes itself from its competitors by again demonstrating its
dedication to developing innovative features while maintaining a clear focus
on client needs.
Access to your retirement assets
and a lifetime income.
Lincoln Quarterly FIRST QUARTER 2001
FOCUSED feature
"Powered By Research": The Recreation of Delaware Investments
The Delaware Investments of today is considerably different from the Delaware
of 18 months ago. The firm's culture, branding and investment performance, all
have undergone radical change, spearheaded by President and CEO Ed Haldeman,
Jr.
Haldeman joined Delaware in January 2000, and immediately began focusing on
performance. While some investment portfolios were performing well, many were
not. The firm could not hope to change its fortunes without improving
performance. Delaware also needed to develop a cohesive corporate culture in
order to survive in the highly competitive financial services industry. In the
past, Delaware managers were encouraged to act as independent entrepreneurs to
service their clients' needs. However, this business model didn't work in
today's competitive environment. For this reason, Delaware moved to a corporate
model that requires business units to work together.
In the next nine months, a number of changes were orchestrated:
* In the value equities area, the investment management style was revamped and
modernized. Six new research analysts were added to the value team as well.
A significant improvement in performance has resulted.
* In growth equities, performance was excellent, but the firm wanted to offer
more growth products. Three new analysts were added to the firm's growth
team.
* In fixed income, Delaware hired 20 investment professionals. This team
includes 15 research analysts, and greatly expands the unit's capacity.
* The London-based team that specializes in international investments also
increased its research commitment with four new analysts.
Research is now a consistent theme throughout Delaware. That theme was
re-emphasized when the firm chose its new tagline, which will appear
in advertisements beginning in May. The tagline, "Powered by Research,"
refers to the firm's dedication to fundamental research in every asset class.
The increased emphasis on research is beginning to pay off where it counts:
with performance. In the trailing 12-month period ending March 31, 2001, 14 of
Delaware's 25 largest funds outperformed their Lipper averages.
At the same time, the firm is revamping its mutual fund lineup by merging
and/or eliminating 14 funds that had not gathered significant assets. The
marketing efforts will now focus on funds that have proven to be more popular.
Delaware also has begun to add new funds that are likely to attract assets,
starting with the Delaware American Services Fund. This fund invests in stocks
of U.S. companies in the financial, business and consumer services sectors.
Although the equity markets are currently volatile, Delaware takes a long-term
approach to investing. By conducting intensive investment research, its goal
is to find fundamentally sound investment opportunities in all market cycles.
The firm's institutional business has aligned its sales and marketing
organization to better serve its institutional clients. More significant sales
and servicing responsibilities have been established to support the investment
professionals in building the firm's relationships with its clients.
Delaware's retirement business is changing as well. In February, Rene M. Campis
was named executive vice president of the unit, and immediately rolled out
major initiatives to generate new business and retain existing clients. One of
the most significant initiatives is the alignment of all the retirement unit's
resources. This includes integrating some of Lincoln's 401(k) business into
the Delaware unit and increasing the new enrollment support group to boost
assets under management.
Delaware's focus has recently turned to devising ways to publicize all these
changes. As part of its corporate branding campaign, the "Powered By Research"
tagline has been incorporated in all sales literature.
In short, Delaware's employees are focused on common goals to a greater extent
than ever. Haldeman described his philosophy at a recent employee meeting.
"Regardless of what area you work in - customer service, sales, operations,"
he said, "every person contributes in some way or another to our main goal of
gaining and retaining clients. As we achieve that goal, Delaware will be a
success and each of you will be successful."
BRIEF notes
Quarterly Highlights
-----------------------------------------------------------------------------
(bullet) The Annual Meeting of Shareholders will be held at The Rittenhouse,
210 W. Rittenhouse Square, Philadelphia, PA 19103 at 10 a.m. (local
time) on Thursday, May 10, 2001.
(bullet) Jon A. Boscia was named chairman of the board of Lincoln National
Corporation on March 8, 2001. He will also continue to serve as
chief executive officer.
(bullet) On March 8, the board of directors of Lincoln National Corporation,
declared a quarterly cash dividend of 30.5 cents per share on the
corporation's common shares and 75 cents per share on preferred
shares. The dividend on the common stock was paid on May 1, 2001,
to shareholders of record on April 10, 2001. The dividend on the
corporation's $3 Cumulative Convertible Preferred Shares, Series A,
will be payable June 5, 2001, to shareholders of record on May 15,
2001.
(bullet) "Why Climb the Corporate Ladder When You Can Take the Elevator?"
mini book, sponsored by Lincoln Financial Group is available by
calling 877-ASK-LINCOLN (877-275-5462).
Transfer Agent & Registrar
-----------------------------------------------------------------------------
Equiserve
P.O. Box 2500
Jersey City, NJ 07303-2500
Web site: http://www.equiserve.com
Stock Listing
-----------------------------------------------------------------------------
The common stock of Lincoln National Corporation is traded on the New York,
Chicago and Pacific stock exchanges under the symbol LNC. In newspapers, stock
information is most frequently listed as LincNatCp.
[LOGO OMITTED: LNC AND NYSE]
[LOGO OMITTED: LINCOLN FINANCIAL GROUP]
PRESORTED
STANDARD
U.S. POSTAGE
PAID
NEW BRUNSWICK, NJ
PERMIT NO. 772
Lincoln National Corporation
Centre Square, West Tower
1500 Market Street, Suite 3900
Philadelphia, PA 19102-2112
(215) 448-1400
www.LFG.com
Contacts
Investor Relations
Priscilla S. Brown
Director, Investor Relations
(215) 448-1422
Shareholder Services
Fred Crawford
Treasurer
(800) 237-2920
Financial Communications
LaNella Hooper
Director, Financial Communications
(215) 448-1423
Media Relations
D'Arcy Foster Rudnay
Director, Media Relations
(215) 448-1454
Form 19725-1
NEW UL PRODUCT PROVIDES FLEXIBILITY
As our lives become increasingly hectic and demanding, flexibility plays an
essential role in providing peace of mind, especially when it comes to life
insurance. Lincoln Life's new universal life insurance product, Lincoln UL-III
Life Protection, is designed to provide flexibility and guaranteed death
benefit coverage through its innovative Lapse Protection Rider. The Rider is
automatically included on all policies at no additional charge. Unlike some
premium-based guarantees, Lincoln UL-III and the Lapse Protection Rider offer
policy owners the flexibility to adjust or skip planned premium payments,
borrow against or withdraw a portion of the policy's cash value, and make
other policy changes without totally forfeiting the death benefit guarantee.
"Based on input from our planners and clients, we designed a unique, flexible
and cost-effective guarantee-based product that fits the individual life
insurance needs of our target market, the super affluent. With the introduction
of the Lincoln UL-III Life Protection product, we have distinguished ourselves
in the industry," said Andrew Niedzielski, second vice president and business
leader for Lincoln Life's Fixed Product Line.
"The attractiveness of Lincoln UL-III lies in the broad flexibility of its
guarantees to adjust to life's changing (financial) circumstances," Niedzielski
noted. "Sophisticated clients are not interested in one-size-fits-all
insurance. Rather, they have specific life insurance needs - needs that change
with time."
By creating the Lincoln UL-III insurance product, Lincoln Life once again has
responded to the needs of the super affluent market, and provided another clear
solution in a
complex world.