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Indiana
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1-6028
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35-1140070
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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[
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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[
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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[
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Lincoln’s
investment in debt securities of Lehman Brothers Holdings Inc. (“Lehman”)
was approximately $100 million, at amortized cost, as of August 31,
2008.
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Lincoln
estimates that its exposure to counterparty risk on derivative instruments
with affiliates of Lehman was approximately $21 million, net of collateral
supporting the positions, as of August 31,
2008.
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As
of August 31, 2008, Lincoln’s exposure to the debt securities of American
International Group, Inc. (“AIG”) was at an amortized cost of
approximately $78 million. Lincoln also has exposures to the
debt securities of various AIG operating affiliates of approximately
$137 million, at amortized cost, as of August 31, 2008.
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Lincoln
has indirect exposure to Lehman and AIG through its investment in its
credit-linked notes.
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Lincoln
has repurchased 1,009,644 shares in the third
quarter for a total cost of approximately $50
million. Lincoln will provide updated share repurchase guidance
during its third quarter earnings call scheduled to take place at 11:00
a.m., Wednesday, October 29, 2008.
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Based
on market conditions at the time of this filing, Lincoln expects third
quarter gross realized losses, including impairments, to be elevated from
second quarter 2008 levels. However, Lincoln does not expect
third quarter gross realized losses, including impairments, to have a
material adverse effect on its financial condition or
liquidity.
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Legislative,
regulatory or tax changes, both domestic and foreign, that affect the cost
of, or demand for, our products, the required amount of reserves and/or
surplus, or otherwise affect our ability to conduct business, including
changes to statutory reserves and/or risk-based capital requirements
related to secondary guarantees under universal life and variable annuity
products such as Actuarial Guideline VACARVM; restrictions on revenue
sharing and 12b-1 payments; and the potential for U.S. Federal tax
reform;
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The
initiation of legal or regulatory proceedings against us or our
subsidiaries, and the outcome of any legal or regulatory proceedings, such
as: (a) adverse actions related to present or past business practices
common in businesses in which we and our subsidiaries compete; (b) adverse
decisions in significant actions including, but not limited to, actions
brought by federal and state authorities and extra-contractual and class
action damage cases; (c) new decisions that result in changes in law; and
(d) unexpected trial court rulings;
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Changes
in interest rates causing a reduction of investment income, the margins of
our fixed annuity and life insurance businesses and demand for our
products;
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A
decline in the equity markets causing a reduction in the sales of our
products, a reduction of asset-based fees that we charge on various
investment and insurance products, an acceleration of amortization of
deferred acquisition costs, value of business acquired, deferred sales
inducements and deferred front-end loads and an increase in liabilities
related to guaranteed benefit features of our variable annuity
products;
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Ineffectiveness
of our various hedging strategies used to offset the impact of changes in
the value of liabilities due to changes in the level and volatility of the
equity markets and interest rates;
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A
deviation in actual experience regarding future persistency, mortality,
morbidity, interest rates or equity market returns from our assumptions
used in pricing our products, in establishing related insurance reserves
and in the amortization of intangibles that may result in an increase in
reserves and a decrease in net income, including as a result of
investor-owned life insurance
business;
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Changes
in GAAP that may result in unanticipated changes to our net income,
including the impact of Statement of Financial Accounting Standards No.
157, "Fair Value Measurements," and SFAS No. 159, "The Fair Value Option
for Financial Assets and Financial
Liabilities;"
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Lowering
of one or more of our debt ratings issued by nationally recognized
statistical rating organizations and the adverse impact such action may
have on our ability to raise capital and on our liquidity and financial
condition;
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Lowering
of one or more of the insurer financial strength ratings of our insurance
subsidiaries and the adverse impact such action may have on the premium
writings, policy retention and profitability of our insurance
subsidiaries;
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Significant
credit, accounting, fraud or corporate governance issues that may
adversely affect the value of certain investments in our portfolios
requiring that we realize losses on such
investments;
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The
impact of acquisitions and divestitures, restructurings, product
withdrawals and other unusual items, including our ability to integrate
acquisitions and to obtain the anticipated results and synergies from
acquisitions, including our ability to successfully integrate
Jefferson-Pilot's businesses, to achieve the expected synergies from the
merger or to achieve such synergies within our expected
timeframe;
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The
adequacy and collectibility of reinsurance that we have
purchased;
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Acts
of terrorism, war or other man-made and natural catastrophes that may
adversely affect our businesses and the cost and availability of
reinsurance;
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Competitive
conditions, including pricing pressures, new product offerings and the
emergence of new competitors, that may affect the level of premiums and
fees that we can charge for our
products;
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The
unknown impact on our businesses resulting from changes in the
demographics of our client base, as aging baby-boomers move from the
asset-accumulation stage to the asset-distribution stage of
life;
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Loss
of key management, portfolio managers in the Investment Management
segment, financial planners or
wholesalers;
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Changes
in general economic or business conditions, both domestic and foreign,
that may be less favorable than expected and may affect foreign exchange
rates, premium levels, claims experience, the level of pension benefit
costs and funding and investment results;
and
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Continued
economic declines and credit market volatility that could cause us to
realize additional impairments on investments and certain intangible
assets and dampen future earnings.
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Lincoln
National Corporation
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By:
/s/ Frederick J.
Crawford
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Frederick
J. Crawford
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Senior
Vice President and
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Chief
Financial Officer
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