lincoln11k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSIOIN


Washington, D.C. 20549

FORM 11- K

FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILARY PLANS PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For  the fiscal year ended December 31, 2008

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ________

Commission File Number 1-6028

A.  
Full title of the plan and the address of the plan, if different from that of the issuer named below:

THE LINCOLN NATIONAL LIFE INSURANCE COMPANY AGENTS’
SAVINGS AND PROFIT-SHARING PLAN

B.  Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:


Lincoln National Corporation
150 N. Radnor Chester Road
Radnor, PA 19087
 


REQUIRED INFORMATION

Financial statements and schedule for The Lincoln National Life Insurance Company Agents’ Savings and Profit-Sharing Plan, prepared in accordance with the financial reporting requirements of the Employee Retirement Income Security Act of 1974, are contained in this Annual Report on Form 11-k.

 
 
 

 
































 
 Financial Statements and Supplemental Schedule
 
The Lincoln National Life Insurance Company Agents’
Savings and Profit-Sharing Plan
December 31, 2008 and 2007 and for the Three Years
Ended December 31, 2008, 2007, and 2006
with Report of Independent Registered Public Accounting
Firm





 

 

The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Financial Statements
and Supplemental Schedule

Years Ended December 31, 2008 and 2007 and for the
Three Years Ended December 31, 2008, 2007, and 2006




Contents

Report of Independent Registered Public Accounting Firm
1
   
Financial Statements
 
   
Statements of Net Assets Available for Benefits
2
Statements of Changes in Net Assets Available for Benefits
3
Notes to Financial Statements
4
   
Supplemental Schedule
 
   
Schedule H, Line 4 i – Schedule of Assets (Held at End of Year)
43


 

 



Report of Independent Registered Public Accounting Firm

Lincoln National Corporation Plan Administrator
Lincoln National Corporation

We have audited the accompanying statements of net assets available for benefits of The Lincoln National Life Insurance Company Agents’ Savings and Profit-Sharing Plan as of December 31, 2008 and 2007, and the related statements of changes in net assets available for benefits for each of the three years in the period ended December 31, 2008. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 benefits of the Plan at December 31, 2008 and 2007, and the changes in its net assets available for benefits for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States.
 
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2008, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
 

 
/s/ Ernst & Young LLP
 
Philadelphia, Pennsylvania
March 25, 2009

 

 
1

 
 

The Lincoln National Life Insurance Company
 
Agents’ Savings and Profit-Sharing Plan
 
   
Statements of Net Assets Available for Benefits
 
             
             
     
December 31
 
     
2008
 
2007
 
Assets
           
Investments:
           
Mutual funds (cost $62,557,165)
    $ 48,171,602   $  
Other collective investment trusts (cost – $26,174,352)
      23,063,386      
Common stock – Lincoln National Corporation
               
(cost: 2008 – $33,866,772; 2007 – $33,920,977)
      21,964,369     47,511,770  
Wilmington Trust money market fund
      1,003,490      
Wells Fargo Bank short-term investment account
          1,564,190  
Pooled separate accounts – The Lincoln National Life
               
Insurance Company Separate Accounts (cost: 2007 –
               
$91,414,277)
          133,100,849  
Investment contracts – The Lincoln National Life
               
Insurance Company
      29,623,868     14,604,738  
Participant loans
      3,572,337     3,996,682  
Total investments
      127,399,052     200,778,229  
                 
Accrued interest receivable
      118,613     54,904  
Cash
      14,689     (4,648 )
Contributions receivable from participant deferrals
      40,306      
Contributions receivable from Sponsor company
      1,161,189     2,212,179  
Total assets
      128,733,849     203,040,664  
                 
Liabilities
               
Due to broker
      12,670     214  
Total liabilities
      12,670     214  
Net assets available for benefits
    $ 128,721,179   $ 203,040,450  
                 
See accompanying notes to the financial statements.
               
                 


2

 

The Lincoln National Life Insurance Company
 
Agents’ Savings and Profit-Sharing Plan
   
Statements of Changes in Net Assets Available for Benefits
 
                   
                   
   
Year Ended December 31
 
   
2008
   
2007
   
2006
 
Investment income:
                 
Cash dividends
  $ 2,480,552     $ 1,336,688     $ 1,431,425  
Interest
    1,091,696       965,603       907,029  
      3,572,248       2,302,291       2,338,454  
                         
Net realized gain (loss) on sale and distributions
                       
of investments:
                       
Mutual funds
    (2,203,395 )            
Other collective investment trusts
    (760,263 )            
Common Stock – Lincoln National Corporation
    (3,553,903 )     3,844,371       5,504,007  
Pooled separate accounts – The Lincoln National Life
                       
Insurance Company separate accounts
    16,379,942       8,568,425       5,920,004  
      9,862,381       12,412,796       11,424,011  
                         
Net change in unrealized appreciation (depreciation)
                       
of investments
    (84,114,674 )     (8,070,015 )     14,925,196  
                         
Contributions:
                       
Participants
    7,988,435       8,793,200       7,889,483  
Sponsor company
    3,653,901       4,661,121       1,960,209  
      11,642,336       13,454,321       9,849,692  
                         
Transfers to (from) affiliated plans
    2,511,221       (36,541 )     (204,186 )
Deposit from Jefferson-Pilot 401(k) Plan
                14,357,318  
Distributions to participants
    (17,704,133 )     (26,167,088 )     (26,009,979 )
Administrative expenses
    (88,650 )     (152,742 )     (173,808 )
                         
Net increase (decrease) in net assets available for benefits
    (74,319,271 )     (6,256,978 )     26,506,698  
Net assets available for benefits at beginning of the year
    203,040,450       209,297,428       182,790,730  
Net assets available for benefits at end of the year
  $ 128,721,179     $ 203,040,450     $ 209,297,428  
                         
See accompanying notes to the financial statements.
                       
                         
                         

 
3

 


The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements

December 31, 2008

 
1. Description of the Plan
 
The following description of The Lincoln National Life Insurance Company Agents’ Savings and Profit-Sharing Plan (Plan) is a summary only and is qualified in its entirety by the terms and provisions of the Plan document.
 
The Plan is a contributory, defined contribution plan which covers eligible full-time agents of The Lincoln National Life Insurance Company (Lincoln Life), Lincoln Financial Advisors Corporation, and Lincoln Life & Annuity Company of New York. Lincoln Life is the Plan sponsor. Effective April 3, 2006, Lincoln National Corporation (LNC) acquired Jefferson-Pilot Corporation (Jefferson-Pilot). Jefferson-Pilot sponsored a 401(k) plan for their eligible agents. On May 31, 2006, formal approval was obtained for the transfer to this Plan of assets from the accounts of those agents in the legacy Jefferson-Pilot 401(k) plan. Effective June 1, 2006 the Plan was amended to make legacy Jefferson-Pilot agents eligible to participate in the Plan. This increased the net assets of the Plan by $14.4 million. Effective June 1, 2006, participants were permitted to make pre-tax contributions at a rate of at least 1% but not more than 50% (25% maximum for January 1, 2004 through May 31, 2006) of eligible earnings (9% for highly compensated agents, as defined in the Plan), up to a maximum annual amount as determined under applicable law. The maximum contribution rate for highly compensated agents was increased to 10% as of January 1, 2008. The Plan, although not subject to the Employee Retirement Income Security Act of 1974 (ERISA) is administered in accordance with the provisions of ERISA as a standard and in a manner of “best practices.”
 
In addition to each participant’s pre-tax contributions, Sponsor matching contributions are provided to the Plan. As of January 1, 2007, the Sponsor matching contribution for eligible participants is equal to 50% of each participant’s pre-tax contributions, not to exceed 6% of eligible earnings per pay period. Prior to January 1, 2007, the Sponsor matching contribution for eligible former Jefferson-Pilot agents was equal to 10% of each participant’s pre-tax contribution, not to exceed 6% of eligible compensation. The investment of these Sponsor matching contributions is directed by the participant. In addition, the Sponsor may contribute an additional discretionary match to eligible participants. The Sponsor discretionary match is an amount determined by the sole discretion of the LNC Board of Directors. One requirement for eligibility is that the participant must be employed on the last day of the year or have died or become disabled during the year. The amount of the Sponsor discretionary matching contribution varies according to whether Lincoln Financial Advisors Corporation has met certain performance-based criteria, as determined by the Compensation Committee of LNC’s Board of Directors.
 
4

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)

 
1. Description of the Plan (continued)
 
Participants’ pre-tax, other contributions and any earnings thereon are fully vested at all times. Sponsor contributions vest based upon years of service as defined in the Plan document as follows:
 
Years of Service
 
Percent Vested
     
1
 
0%
2
 
50%
3 or more
 
100%

Participants direct the Plan to invest their contributions, the basic Sponsor matching contributions, and the Sponsor discretionary matching contribution in any combination of the investment options offered under the Plan. For 2008 and 2007, Sponsor discretionary matching contributions are made in cash, and allocated to the investment funds in accordance with the participant’s elections. No discretionary matching contributions were made in 2006.
 
The Sponsor has the right to discontinue contributions at any time and terminate the Plan in accordance with the provisions of ERISA. In the event of Plan termination, all non-vested amounts allocated to participant accounts would become fully vested.
 
The Plan may make loans to participants in amounts up to 50% of the vested account value to a maximum of $50,000 reduced by the highest outstanding loan balance in the previous 12 month period. Interest charged on new loans to participants is established monthly based upon the prime rate plus 1%. Interest income credited was $284,652, $293,769, and $225,353 in 2008, 2007, and 2006, respectively. Loans may be repaid over any period selected by the participant up to a maximum repayment period of five years except that the maximum repayment period may be 20 years for the purchase of a principal residence.
 
Upon termination of service or disability, a participant may elect to receive either a lump-sum amount equal to the entire value of the participant’s account or an installment option if certain criteria are met; in cases of death, the participant’s beneficiary makes that election. Vested account balances less than $1,000 are immediately distributable under the terms of the Plan, without the participant’s consent, unless the participant has made a timely election of rollover to an Individual Retirement Account or other qualified arrangement.
 
5

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)

 
1. Description of the Plan (continued)
 
Each participant’s account is credited with the participant’s contributions, Sponsor contributions, and applicable investment earnings thereon, and is charged with an allocation of administrative expenses and applicable investment losses. Forfeited non-vested amounts are used to reduce future Sponsor contributions.
 
2. Significant Accounting Policies
 
Investments Valuation and Income Recognition
 
As of October 1, 2008, Wilmington Trust (the Trustee) became the new trustee for the Plan. In addition, Lincoln Alliance also assumed responsibility as the recordkeeper for the Plan as of October 1, 2008. Prior to this date Wells Fargo Bank acted as the Plan’s trustee and recordkeeper. As a result of this change, the funds the participants may invest in were changed. At December 31, 2008, the assets of the Plan consisted primarily of mutual funds, collective investment trust funds, investment contracts issued by Lincoln Life, LNC common stock and participant loans. Marketable securities are stated at fair value based on quoted market prices in an active market at the Plan’s year end. The investment in LNC common stock is valued at the closing sales price reported on the New York Stock Exchange Composite Listing on the last business day of the year. Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the plan year. The fair value of ownership interest of the collective investment trust funds is established by the trustee based on the quoted redemption values of the underlying investments on the last business day of the Plan year. A money market account is also utilized by the Trustee to hold money that has been removed from the participants’ funds and is waiting for distribution to the appropriate participants.
 
Prior to October 1, 2008, the Plan’s assets consisted of LNC common stock, pooled separate account investment contracts underwritten by Lincoln Life, investment contracts underwritten by Lincoln Life, Wells Fargo Bank short-term investment account and participant loans. The Wells Fargo Bank Short-term investment account, which is invested in the common stock fund, is valued at cost, which approximates fair value. The fair value of participation units in the pooled separate accounts estimated by Lincoln Life is based on quoted redemption value of the underlying investments on the last business day of the year. Total amount of assets transferred from Wells Fargo to Wilmington Trust was $162,671,965.
 
 
6

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)

 
2. Significant Accounting Policies (continued)
 
The investment contracts are valued at contract value as estimated by Lincoln Life. As described in Financial Accounting Standards Board (FASB) Staff Position, (FSP), FSP AAG INV-1 and Statement of Position (SOP), SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined-contribution plan are required to be reported at fair value. The Plan adopted FSP AAG INV-1 in 2006. The adoption did not have a material effect on the Plan’s financial statements as interest rates are adjusted to market quarterly. Accordingly, contract value, which represents net contributions plus interest at the contract rate, approximates fair value. 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. Investment purchases and sales are accounted for on a trade-date basis.
 
Interest and dividend income is recorded when earned.
 
Accounting Estimates and Assumptions
 
The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States that require management to make estimates and assumptions affecting the amounts reported in the financial statements and accompanying notes. Those estimates are inherently subject to change and actual results could differ from those estimates.
 
Adoption of New Accounting Standard
 
In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS 157) which defines fair value, establishes a framework for measuring fair value under current accounting pronouncements that require or permit fair value measurement and enhances disclosures about fair value measurements. Effective January 1, 2008, the Plan adopted SFAS 157. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction value hierarchy which requires an entity to maximize the use of observable inputs when measuring fair value. Adoption of SFAS 157 did not have a material impact on the Plan’s financial statements.
 
 
7

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan
 
Notes to Financial Statements (continued)
 
 
2. Significant Accounting Policies (continued)
 
The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1 – Inputs to the valuation methodology are quoted prices available in active markets for identical investments as of the reporting date;
 
Level 2 – Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value can be determined through the use of models or other valuation methodologies; and
 
Level 3 – Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.
 
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.
 
Mutual Funds
 
These investments are public investment vehicles valued using the Net Asset Value (NAV) provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is a quoted price in an active market and classified within level 1 of the valuation hierarchy.
 
Collective Investment Trust
 
These investments are public investment vehicles valued using the NAV provided by the administrator of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV is classified within level 2 of the valuation hierarchy because the NAV’s unit price is quoted on a private market that is not active; however, the unit price is based on underlying investments which are traded on an active market.
 
 
8

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)

 
2. Significant Accounting Policies (continued)
 
Lincoln National Corporation common stock
 
Lincoln National Corporation common stock is valued at the closing price reported on the New York Stock Exchange Composite Listing and is classified within level 1 of the valuation hierarchy.
 
Investment Contracts
 
These investments are made by the Plan in an Unallocated Group Fixed Annuity Contract which are invested in the general assets of Lincoln Life who guarantees a fixed interest rate. The NAV for the investment contract is $1. The investment contracts are classified within level 3 of the valuation hierarchy.
 
Money Market Funds
 
These investments are public investment vehicles valued using $1 for the NAV. The money market funds are classified within level 2 of the valuation hierarchy.
 
Loans to Participants
 
Loans to plan participants are valued at cost plus accrued interest, which approximates fair value and are classified within level 3 of the valuation hierarchy.
 
9

 
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:
 
   
December 31, 2008
   
December 31, 2007
 
   
Number of
Shares, Units
or Par Value
   
Net Asset
Value Per
Unit
   
Fair
Value
   
Number of
Shares, Units
or Par Value
   
Net Asset
Value Per
Unit
   
Fair
Value
 
Fair values
                                   
Mutual funds:
                                   
Columbia Acorn Z
    459,043.245     $ 17.710     $ 8,129,656 *         $     $  
Delaware Conservative Allocation I
    113,085.607       7.770       878,675                    
Delaware Moderate Allocation I
    302,589.806       8.010       2,423,744                    
Delaware Aggressive Allocation I
    199,207.873       7.000       1,394,455                    
Delaware Mid Cap Value I
    245,586.608       5.660       1,390,020                    
Dodge & Cox International Stock
    274,568.330       21.900       6,013,046                    
American Fund Growth Fund of
America R-5
    422,607.570       20.440       8,638,099 *                  
Harbor International Growth
Institutional
    890,942.000       8.110       7,225,540 *                  
Vanguard Institutional Index
    119,468.046       82.540       9,860,893 *                  
Vanguard Extended Market Index
Institutional
    92,317.823       24.020       2,217,474                    
Total mutual funds
                    48,171,602                          
                                                 
Other collective investment trusts
                                               
Delaware Large Cap Value Trust
    781,119.037       8.780       6,858,225 *                  
Delaware International Equity Trust
    10,413.875       5.460       56,860                    
Delaware Small Cap Growth Trust
    605,693.008       6.850       4,148,997                    
Delaware Diversified Income Trust
    773,847.545       10.550       8,164,092 *                  
Delaware Large Cap Growth Trust
    492,325.027       7.790       3,835,212                    
Total collective investment trust
funds
                    23,063,386                          
                                                 
Common Stock - LNC
    1,165,837.000     $ 18.840     $ 21,964,369 *     816,073     $ 58.220     $ 47,511,770 *

10

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)
 

 
3. Investments (continued)
 
 
   
December 31, 2008
   
December 31, 2007
 
     
Number of
Shares, Units
 or Par Value
     
Net Asset
Value Per
Unit
     
Fair
Value
     
Number of
Shares, Units or
 Par Value
     
Net Asset Value Per Unit
     
Fair
Value
 
                                     
Pooled separate accounts – The
Lincoln Life Insurance Company
Separate Accounts:
                                   
Core Equity Account
        $     $       603,408.454     $ 17.535     $ 10,580,767 *
Medium Capitalization Equity
Account
                      558,122.762       17.023       9,500,756  
Short-Term Account
                      2,707,860.831       4.142       11,214,877 *
Government/Corporate Bond
Account
                      502,647.363       9.843       4,947,357  
Large Capitalization Equity
Account
                      703,700.685       10.991       7,734,304  
Balanced Account
                      399,671.268       9.426       3,767,261  
High Yield Bond Account
                      842,282.306       4.488       3,780,163  
Small Capitalization Equity
Account
                      882,868.835       9.896       8,737,135  
Value Equity Account
                      1,922,453.540       3.122       6,001,708  
International Equity Account
                      941,916.059       12.562       11,832,632 *
Conservative Balanced Account
                      409,589.675       2.510       1,028,234  
Aggressive Balanced Account
                      608,494.129       2.988       1,817,998  
Delaware Growth and Income
Account
                      2,079,971.566       2.138       4,446,147  
Scudder VIT Equity 500 Index
Account
                      4,049,051.948       1.268       5,133,793  
Fidelity VIP Contrafund
                      6,414,875.498       1.906       12,229,960 *
Neuberger-Berman AMT Regency
Account
                      1,506,244.982       1.827       2,751,458  
Social Awareness Account
                      1,311,610.737       1.365       1,789,955  
American Funds Insurance Series
Global Growth
                      4,869,650.703       1.457       7,094,107  
Neuberger-Berman Mid-Cap
Growth Account
                      3,341,287.715       1.702       5,687,874  
Scudder VIT Small Cap Index
Account
                      1,781,845.843       1.859       3,313,342  
Black Rock Legacy
Account
                      407,813.986       1.899       774,601  
American Funds International Account
                      395,626.878       22.588       8,936,420  
Total pooled separate accounts
                                            133,100,849  
                                                 
Contract value (approximates fair value – See footnote 3)
                                 
Investment contracts – The Lincoln
National Life Insurance Company
    29,623,868       1       29,623,868 *     14,604,738.000             14,604,738 *
                                                 
Estimated value
                                               
Wilmington Trust Money market fund
    1,003,490       1       1,003,490                    
Wells Fargo Bank short-term
                                               
investment account
                      1,564,190.000             1,564,190  
Participants loans
    3,572,337             3,572,337       3,996,682.000             3,996,682  
Total investments
          $     $ 127,399,052             $     $ 200,778,229  

* Investments that represent 5% or more of the fair value of net assets available for benefits as of the end of the plan year.

 
11

 
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 (loss) and distribution of investments is summarized as follows:
 
 
   
Year Ended December 31
 
   
2008
   
2007
   
2006
 
Mutual fund accounts
                 
Proceeds from disposition of units
  $ 6,146,376     $     $  
Cost of units disposed
    8,349,771              
Net realized loss on sale and distribution of mutual
fund accounts
  $ (2,203,395 )   $     $  
                         
Collective investment trust funds
                       
Proceeds from disposition of units
  $ 3,682,194     $     $  
Cost of units disposed
    4,442,457              
Net realized loss on sale and distribution of
collective investment trust funds
  $ (760,263 )   $     $  
                         
Common stock
                       
Proceeds from disposition of stock
  $ 4,366,742     $ 7,729,845     $ 12,038,077  
Cost of stock disposed
    7,920,645       3,885,474       6,534,070  
Net realized gain (loss) on sale and distribution of
common stock
  $ (3,553,903 )   $ 3,844,371     $ 5,504,007  
                         
Pooled separate accounts
                       
Proceeds from disposition of units
  $ 135,008,487     $ 49,126,170     $ 43,764,916  
Cost of units disposed
    118,628,545       40,557,745       37,844,912  
Net realized gain on sale and distribution of pooled
separate accounts
  $ 16,379,942     $ 8,568,425     $ 5,920,004  
                         
Total net realized gain on sale and distribution of
investments
  $ 9,862,381     $ 12,412,796     $ 11,424,011  

12

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)
 

3. Investments (continued)
 
The net change in unrealized appreciation (depreciation) of investments in total and by investment classification as determined by fair value is summarized as follows:
 
   
Year Ended December 31
 
   
2008
   
2007
   
2006
 
Fair value in excess of (less than) cost:
                 
    At beginning of the year
  $ 55,277,366     $ 63,347,381     $ 48,422,185  
    At end of the year
    (28,837,308 )     55,277,366       63,347,381  
Change in net unrealized appreciation (depreciation) of investments
  $ (84,114,674 )   $ (8,070,015 )   $ 14,925,196  
                         
Mutual funds
  $ (14,385,805 )   $     $  
Other collective investment trusts
    (3,110,966 )            
Common stock – LNC
    (24,931,330 )     (10,211,687 )     7,023,661  
Pooled separate accounts – LNL
    (41,686,573 )     2,141,672       7,901,535  
Change in net unrealized appreciation
(depreciation) of investments
  $ (84,114,674 )   $ (8,070,015 )   $ 14,925,196  

The Plan holds investments in investment contracts. From October 1 to December 31, 2008, the Plan invested in Lincoln Stable Value Fund (Stable Value Fund) which earned an average interest rate of approximately 4.95% (annualized) in the fourth quarter of 2008. Interest is credited at the same rate for the entire contract value. The credited interest rate is based upon a three-year average of the Lehman rate plus 20 basis points (“bp”) and can be changed quarterly. Prior to October 1, 2008, the Plan invested in the Lincoln Life Guaranteed Account (Guaranteed Account) which earned an average interest rate of approximately 4.0% (annualized) in the first three quarter of 2008 and for all of 2007 and 2006. The credited interest rates for new contributions, which approximated the current market rate, were 4.0% (annualized) through September 30, 2008, and all of 2007 and 2006. The rate on new contributions was guaranteed through the three succeeding calendar year quarters. The credited interest rates for the remaining contract value balance, which approximated the current market rate, were 4.0% (annualized) at September 30, 2008 and December 31, 2007 and 2006, and were determined based upon the performance of Lincoln Life’s general account. The credited interest rates could be changed quarterly for both the Stable Value Fund and the Guaranteed Account. The minimum rate was 3.5% through September 30, 2008 and is currently 3.0%. The guarantee is based on Lincoln Life’s ability to meet its financial obligations from the general assets of Lincoln Life.
 
13

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)
 
 

3. Investments (continued)
 
For both the Stable Value Fund and the Guaranteed Account restrictions apply to the aggregate movement of funds to other investment options. The fair value of the investment contracts approximate contract value. Participants are allocated interest on the investment contracts based on the average rate earned on all Plan investments in the investment contracts.
 
4. Investment Options
 
The detail of the net assets available for benefits by investment option as of December 31, 2008 is as follows:
 
 
   
Investment Options
 
   
Total
   
1.A.
   
2.A.
   
3.A.
   
4.A.
   
5.A.
   
6.A.
 
                                           
Assets
                                         
Investments:                                          
Mutual funds
  $ 48,171,602     $ 8,129,656     $ 878,675     $ 2,423,744     $ 1,394,455     $ 1,390,020     $ 6,013,046  
Other collective investment trusts
    23,063,386                                      
Common stock – LNC
    21,964,369                                      
Wilmington Trust money market
fund
    1,003,490                                      
Investment contracts
    29,623,868                                      
Participant loans
    3,572,337                                      
Total investments
    127,399,052       8,129,656       878,675       2,423,744       1,394,455       1,390,020       6,013,046  
                                                         
Accrued interest receivable
    118,613                                      
Cash
    14,689                                      
Contributions receivable from
participant deferrals
    40,306       2,734             582       286       303       899  
Contributions receivable from
Sponsor company
    1,161,189       98,660       2,741       29,147       21,559       20,209       89,172  
Total assets
    128,733,849       8,231,050       881,416       2,453,473       1,416,300       1,410,532       6,103,117  
                                                         
Liabilities
                                                       
Due to (from) broker
    12,670       208                               337  
Total liabilities
    12,670       208                               337  
Net assets available for benefits
  $ 128,721,179     $ 8,230,842     $ 881,416     $ 2,453,473     $ 1,416,300     $ 1,410,532     $ 6,102,780  
                                                         
Number of participants selecting
investment options
            835       56       260       157       248       629  


 
14

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)
 
 
4. Investment Options (continued)
 
 
   
Investment Options
 
      7.A.       8.A.       9.A.       10.A.       11.A.       12.A.       13.A.  
                                                         
Assets                                                        
Investments:
                                                       
Mutual funds
  $ 8,638,099     $ 7,225,540     $ 9,860,893     $ 2,217,474     $     $     $  
Other collective investment trusts
                            6,858,225       56,860       4,148,997  
Common stock – LNC
                                         
Wilmington Trust money market
fund
                                         
Investment contracts
                                         
Participant loans
                                         
Total investments
    8,638,099       7,225,540       9,860,893       2,217,474       6,858,225       56,860       4,148,997  
                                                         
Accrued interest receivable
                                         
Cash
                                         
Contributions receivable from
participant deferrals
    5,988       6,001       2,336       1,998       2,042             642  
Contributions receivable from
Sponsor company
    130,639       150,527       92,285       35,847       84,594       1,084       50,441  
Total assets
    8,774,726       7,382,068       9,955,514       2,255,319       6,944,861       57,944       4,200,080  
                                                         
Liabilities
                                                       
Due to (from) broker
    (2,068 )     (3,447 )     (1,089 )           (1,883 )     208        
Total liabilities
    (2,068 )     (3,447 )     (1,089 )           (1,883 )     208        
Net assets available for benefits
  $ 8,776,794     $ 7,385,515     $ 9,956,603     $ 2,255,319     $ 6,946,744     $ 57,736     $ 4,200,080  
                                                         
Number of participants selecting
investment options
    724       793       725       374       654       17       532  


 
15

 
The Lincoln National Life Insurance Company
Agents’ Savings and Profit-Sharing Plan

Notes to Financial Statements (continued)
 

4. Investment Options (continued)
 
 
     
Investment Options 
 
     
14.A. 
     
15.A. 
     
16.A. 
     
17.A. 
     
Loans 
     
Short-term 
 
                                                 
Assets                                                
Investments:                                                
Mutual funds
  $     $     $     $     $     $  
Other collective investment trusts
    8,164,092       3,835,212                          
Common stock – LNC
                21,964,369                    
Wilmington Trust money market
fund
                561,866                   441,624  
Investment contracts
                      29,623,868              
Participant loans
                            3,572,337        
Total investments
    8,164,092       3,835,212       22,526,235       29,623,868       3,572,337       441,624  
 
                                               
Accrued interest receivable
                      118,613              
Cash