Lincoln National Corp--Form S-4/A--Amend. No. 1
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As filed with the Securities and Exchange Commission on February 9, 2006.

Registration No. 333-130226


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


AMENDMENT NO. 1

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933


LINCOLN NATIONAL CORPORATION

(Exact name of Registrant as specified in its Charter)


Indiana   6311   35-1140070

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

Centre Square West Tower

1500 Market Street, Suite 3900

Philadelphia, PA 19102

(215) 448-1400

(Address, including zip code, and telephone number, including

area code, of Registrant’s principal executive offices)


Dennis L. Schoff, Esq.

Senior Vice President & General Counsel

Lincoln National Corporation

Centre Square West Tower

1500 Market Street, Suite 3900

Philadelphia, PA 19102

(215) 448-1400

(Name, address, including zip code, and telephone number, including

area code, of agent for service)


With copies to:

Charles C. Cornelio, Esq.

Jefferson-Pilot Corporation

100 North Greene Street

Greensboro, NC 27401

(336) 691-3000

 

James R. Dwyer, Esq.

LeBoeuf, Lamb, Greene & MacRae LLP

125 West 55th Street

New York, NY 10019

(212) 424-8000

 

E. William Bates, II, Esq.

King & Spalding LLP

1185 Avenue of the Americas

New York, NY 10036

(212) 556-2100

Approximate date of commencement of proposed sale to public:    As soon as practicable following the effective date of this Registration Statement and the date on which all other conditions to the merger described herein have been satisfied or waived and the merger has been consummated.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨


The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 



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LOGO   LOGO

 

TO THE SHAREHOLDERS OF

LINCOLN NATIONAL CORPORATION AND JEFFERSON-PILOT CORPORATION

 

A MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

 

The boards of directors of Lincoln National Corporation, which is referred to as LNC, and Jefferson-Pilot Corporation, which is referred to as Jefferson-Pilot, have each unanimously approved a business combination of the two companies. Pursuant to the Agreement and Plan of Merger, dated as of October 9, 2005, as amended, by and among LNC, Lincoln JP Holdings, L.P., a wholly owned subsidiary of LNC formed for the purpose of completing the merger, which is referred to as Merger Sub, Quartz Corporation, a wholly owned subsidiary of LNC, and Jefferson-Pilot, Jefferson-Pilot will merge into Merger Sub.

 

If the merger is completed, Jefferson-Pilot shareholders will have the right to receive, subject to proration and adjustment (as provided in the merger agreement), 1.0906 shares of LNC common stock, no par value per share (and associated common share purchase right), or $55.96 in cash, in exchange for each share of Jefferson-Pilot common stock, par value $1.25 per share, that they hold. In exchange for their shares of Jefferson-Pilot common stock, Jefferson-Pilot shareholders may elect to receive cash, shares of LNC common stock or a combination of cash for some of their shares and LNC common stock for other of their shares. Regardless of a Jefferson-Pilot shareholder’s choice, however, elections will be limited by the requirement that the total amount of cash to be exchanged for Jefferson-Pilot common stock must equal $1.8 billion. Accordingly, elections to receive cash or LNC common stock may be scaled up or down pro rata depending on whether cash is under- or over-subscribed. The United States federal income tax consequences of the merger to Jefferson-Pilot shareholders will depend, among other things, on whether they receive cash, stock or a combination of cash and stock in exchange for their shares of Jefferson-Pilot common stock.

 

Upon completion of the merger, we estimate that Jefferson-Pilot’s former shareholders will own approximately 39% and LNC shareholders will own approximately 61% of the then outstanding shares of LNC common stock. Based upon the outstanding shares of Jefferson-Pilot common stock on February 3, 2006, LNC will be obligated to issue approximately 111,739,539 million shares of LNC common stock in the merger. In addition, LNC may issue up to approximately 11.1 million shares pursuant to Jefferson-Pilot options that will be converted into LNC options upon the completion of the merger. LNC’s shareholders, including holders of its $3.00 Cumulative Convertible Preferred Stock, Series A, which is referred to as the LNC Series A preferred stock, will continue to own their existing shares, which will not be affected by the merger.

 

Shares of LNC common stock are listed on the New York Stock Exchange, which is referred to as the NYSE, the Chicago Stock Exchange and the Pacific Stock Exchange under the trading symbol “LNC.” Upon completion of the merger, Jefferson-Pilot common stock, which is listed on the NYSE and the Chicago Stock Exchange under the trading symbol “JP,” will be delisted.

 

Your vote is very important. We cannot complete the merger unless the holders of Jefferson-Pilot common stock approve the merger agreement and the plan of merger contained therein and the holders of LNC common stock and LNC Series A preferred stock, voting together as a single class, approve the issuance of LNC common stock in connection with the merger. The completion of the merger is also subject to the satisfaction or waiver of several other conditions to the merger, including receiving approval from regulatory agencies. We are each holding a special meeting of shareholders in order to vote on these proposals. The places, dates and times of the special meetings are as follows:

 

For LNC shareholders:

 

For Jefferson-Pilot shareholders:

March 20, 2006

10:00 a.m., local time

 

March 20, 2006

10:00 a.m., local time

Second Floor Auditorium

Two Commerce Square

2001 Market Street

Philadelphia, Pennsylvania

 

Fourth Floor, Jefferson-Pilot Building

100 North Greene Street

Greensboro, North Carolina

 

Whether or not you plan to attend your company’s special meeting, please take the time to vote by following the instructions on your proxy/voting instruction card(s).

 

We urge you to read this joint proxy statement/prospectus, and the documents incorporated by reference into this joint proxy statement/prospectus, carefully and in their entirety. In particular, see “ Risk Factors” beginning on page 25.

 

We are very excited about the opportunities the proposed merger brings to both LNC and Jefferson-Pilot shareholders, and we thank you for your consideration and continued support.

 

LOGO

 

LOGO

Jon A. Boscia

 

David A. Stonecipher

Chairman and Chief Executive Officer

 

Chairman of the Board

Lincoln National Corporation

 

Jefferson-Pilot Corporation

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger or the securities to be issued in the merger, or passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

This joint proxy statement/prospectus is dated February 9, 2006, and is first being mailed to shareholders on or about February 14, 2006.


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REFERENCES TO ADDITIONAL INFORMATION

 

This joint proxy statement/prospectus incorporates important business and financial information about LNC and Jefferson-Pilot from documents that are not included in or delivered with this document. This information is available for you to review at the Securities and Exchange Commission’s public reference room located at 100 F Street, N.E., Room 1580, Washington, DC 20549, and through the SEC’s website, www.sec.gov. You can also obtain those documents incorporated by reference into this joint proxy statement/prospectus, without charge, by requesting them in writing or by telephone or email from the appropriate company at the following addresses, telephone numbers and email addresses or obtaining them from each company’s website listed below:

 

Lincoln National Corporation

Centre Square West Tower

1500 Market Street, Suite 3900

Philadelphia, PA 19102

Attention: Shareholder Services

(800) 237-2920

shareholderservices@lfg.com

www.lfg.com

 

Jefferson-Pilot Corporation

100 North Greene Street

Greensboro, NC 27401

Attention: Investor Relations

(336) 691-3379

investor.relations@jpfinancial.com

www.jpfinancial.com

 

Information contained on the LNC and Jefferson-Pilot websites is expressly not incorporated by reference into this joint proxy statement/prospectus.

 

You can also obtain documents incorporated by reference into this joint proxy statement/prospectus by requesting them in writing or by telephone from Georgeson Shareholder Communications, Inc., the proxy solicitor for both LNC and Jefferson-Pilot, at the following address and telephone numbers:

 

LOGO

 

17 State Street

New York, NY 10004

(212) 440-9800 (collect)

 

LNC shareholders:

(888) 666-2572 (toll free)

 

Jefferson-Pilot shareholders:

(888) 877-5366 (toll free)

 

If you would like to request documents, you must do so by March 13, 2006, so that you may receive them before the special meetings.

 

See “Where You Can Find More Information” beginning on page 146.


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LOGO

 

1500 MARKET STREET, SUITE 3900

CENTRE SQUARE WEST

PHILADELPHIA, PENNSYLVANIA 19102

 

February 9, 2006

 

NOTICE OF

SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON MARCH 20, 2006

 

To the Shareholders of Lincoln National Corporation:

 

A special meeting of Lincoln National Corporation shareholders will be held on March 20, 2006 at the offices of Delaware Investments, Inc., Second Floor Auditorium, Two Commerce Square, 2001 Market Street, Philadelphia, Pennsylvania, at 10:00 a.m., local time, unless adjourned to a later date. The special meeting is being held for the following purposes:

 

1. To consider and vote upon a proposal to issue shares of Lincoln National Corporation common stock pursuant to the Agreement and Plan of Merger, dated as of October 9, 2005, as amended, by and among Lincoln National Corporation (which is referred to as LNC), Lincoln JP Holdings, L.P., a wholly owned subsidiary of LNC, Quartz Corporation, a wholly owned subsidiary of LNC, and Jefferson-Pilot Corporation. A composite copy of the merger agreement is attached to the accompanying joint proxy statement/prospectus as Annex A.

 

2. To approve adjournments of the LNC special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal.

 

3. To consider and take action upon any other business that may properly come before the special meeting or any reconvened meeting following an adjournment of the special meeting.

 

These items are described in the accompanying joint proxy statement/prospectus and we urge you to read it carefully. Only shareholders who owned shares of LNC common stock or LNC Series A preferred stock at the close of business on February 3, 2006, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any adjournment of it.

 

LNC’s board of directors has unanimously approved the merger agreement, as amended, has approved the transactions contemplated by the merger agreement and has determined that the merger is in the best interests of LNC and its shareholders. LNC’s board of directors recommends that you vote FOR the issuance of LNC common stock pursuant to the merger agreement.

 

Under Indiana law, dissenters’ rights will not be available to LNC shareholders in connection with the merger.

 

Your vote is very important. To ensure that your shares of LNC common stock or LNC Series A preferred stock are represented at the special meeting, please complete, date, sign and return the enclosed proxy/voting instruction card(s) and mail it/them promptly in the envelope provided, or vote your shares by telephone or over the Internet as described in the accompanying joint proxy statement/prospectus. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote but will help to secure a quorum and avoid added solicitation costs. You may revoke your proxy at any time before it is voted. Any executed but unmarked proxy/voting instruction card(s) will be voted FOR the issuance of LNC common stock and FOR the other proposals properly brought before the special meeting.


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All LNC shareholders are cordially invited to attend this special meeting, although only those shareholders of record at the close of business on February 3, 2006 will be entitled to receive notice of, and to vote at, the LNC special meeting or any adjournment thereof. Your attention is directed to the joint proxy statement/prospectus accompanying this notice for a more complete statement regarding the matters proposed to be acted upon at the meeting.

 

You will need an admission ticket or proof of ownership of LNC common stock or LNC Series A preferred stock and a photo I.D. to enter the meeting. If you are a shareholder of record, you will find an admission ticket attached to the enclosed proxy form. If your shares are held in the name of a broker, bank or other holder of record, your admission ticket is the left side of your proxy form. If you do not bring your admission ticket, you will need proof of ownership to be admitted to the meeting and you will be admitted only if we can verify that you are an LNC shareholder. Your recent brokerage statement or letter from your bank or broker is an example of proof of ownership.

 

Our shareholders may revoke their proxy in the manner described in the accompanying joint proxy statement/prospectus before it has been voted at the special meeting.

 

Your vote is very important. Whether or not you plan to be present at the special meeting, please complete, sign, date and return the enclosed proxy/voting instruction card(s) or vote by telephone or Internet as provided on the proxy/voting instruction card(s).

 

For the Board of Directors,

LOGO

C. Suzanne Womack

Secretary

 

February 9, 2006


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LOGO

 

Jefferson-Pilot Corporation

 

100 North Greene Street

Greensboro, North Carolina 27401

 

February 9, 2006

 

NOTICE OF

SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON MARCH 20, 2006

 

To the Shareholders of Jefferson-Pilot Corporation:

 

A special meeting of Jefferson-Pilot Corporation shareholders will be held on March 20, 2006 at Jefferson-Pilot’s offices, Fourth Floor, Jefferson-Pilot Building, 100 North Greene Street, Greensboro, North Carolina, at 10:00 a.m., local time, unless adjourned to a later date. The special meeting is being held for the following purposes:

 

1. To consider and vote upon a proposal to approve the Agreement and Plan of Merger, dated as of October 9, 2005, as amended, by and among Lincoln National Corporation (which is referred to as LNC), Lincoln JP Holdings, L.P., a wholly owned subsidiary of LNC (which is referred to as Merger Sub), Quartz Corporation, a wholly owned subsidiary of LNC, and Jefferson-Pilot, and the plan of merger contained therein, pursuant to which (i) Jefferson-Pilot will merge into Merger Sub and (ii) each outstanding share of Jefferson-Pilot common stock will be converted into the right to receive 1.0906 shares of LNC common stock or $55.96 in cash (which will be at each shareholder’s election, but subject to proration and certain other restrictions contained in the merger agreement). A composite copy of the merger agreement is attached to the accompanying joint proxy statement/prospectus as Annex A.

 

2. To approve adjournments of the Jefferson-Pilot special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal.

 

3. To consider and take action upon any other business that may properly come before the special meeting or any reconvened meeting following an adjournment of the special meeting.

 

These items are described in the accompanying joint proxy statement/prospectus, and we urge you to read it carefully. Only shareholders who owned shares of Jefferson-Pilot common stock at the close of business on February 3, 2006, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any adjournment of it.

 

Jefferson-Pilot’s board of directors has unanimously adopted the merger agreement, as amended, and the plan of merger contained therein and has determined that the transactions contemplated by the merger agreement are advisable and in the best interests of Jefferson-Pilot and its shareholders. Jefferson-Pilot’s board of directors recommends that you vote FOR the approval of the merger agreement and the plan of merger contained therein.

 

Under North Carolina law, dissenters’ rights will not be available to Jefferson-Pilot shareholders in connection with the merger.


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Your vote is very important. To ensure that your shares of Jefferson-Pilot common stock are represented at the special meeting, please complete, date, sign and return the enclosed proxy/voting instruction card(s) and mail it/them promptly in the envelope provided, or vote your shares by telephone or over the Internet as described in the accompanying joint proxy statement/prospectus. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote but will help to secure a quorum and avoid additional solicitation costs. However, if you do not return or submit the proxy or vote in person at the special meeting, the effect will be the same as a vote against the proposal to approve the merger agreement and the plan of merger contained therein. You may revoke your proxy at any time before it is voted. Any executed but unmarked proxy/voting instruction card(s) will be voted FOR approval of the merger agreement and the plan of merger contained therein and FOR the other proposals properly brought before the special meeting.

 

All Jefferson-Pilot shareholders are cordially invited to attend this special meeting, although only those shareholders of record at the close of business on February 3, 2006 will be entitled to receive notice of, and to vote at, the Jefferson-Pilot special meeting or any adjournment thereof. Your attention is directed to the joint proxy statement/prospectus accompanying this notice for a more complete statement regarding the matters proposed to be acted upon at the meeting.

 

Your vote is very important. Whether or not you plan to be present at the special meeting, please complete, sign, date and return the enclosed proxy/voting instruction card(s) or vote by telephone or Internet as provided on the proxy/voting instruction card(s).

 

For the Board of Directors,

LOGO

Robert A. Reed

Vice President and Secretary

 

February 9, 2006


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TABLE OF CONTENTS

 

     Page

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE MERGER

   1

SUMMARY

   5

Information about LNC

   5

Information about Jefferson-Pilot

   5

Information about Merger Sub

   5

The Merger

   5

Opinions of Financial Advisors

   9

Record Date; Shares Entitled to Vote; Outstanding Shares

   10

Expected Completion of the Merger

   10

Stock Ownership of Directors and Executive Officers

   10

Ownership of LNC After the Merger

   11

LNC’s Board of Directors After the Merger

   11

LNC’s Executive Officers After the Merger

   11

Listing of LNC Common Stock and Delisting of Jefferson-Pilot Common Stock

   12

No Dissenters’ Rights

   12

Principal Conditions to Completion of the Merger

   12

Termination Events and Termination Fees

   13

No Solicitation by LNC and Jefferson-Pilot

   13

Material United States Federal Income Tax Considerations

   13

Accounting Treatment

   14

Risk Factors

   14

Comparison of Shareholder Rights and Corporate Governance Matters

   14

Regulatory Approvals

   15

Restrictions on the Ability to Sell LNC Common Stock

   15

Certain Litigation Relating to the Merger

   16

MARKET PRICE AND DIVIDEND INFORMATION

   17

Historical Market Price Data

   17

Dividend Information

   18

Recent Closing Prices and Comparative Market Price Information

   19

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

   20

Selected Historical Consolidated Financial Data of LNC

   20

Selected Historical Consolidated Financial Data of Jefferson-Pilot

   21

Selected Unaudited Pro Forma Condensed Combined Financial Information

   22

UNAUDITED COMPARATIVE PER SHARE DATA

   24

RISK FACTORS

   25

Risks Relating to the Merger

   25

Risks Related to the Resulting Company’s Operations After the Completion of the Merger

   28

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

   31

THE LNC SPECIAL MEETING

   33

General

   33

Date, Time and Place of the LNC Special Meeting

   33

Purposes of the LNC Special Meeting

   33

Record Date; Shares Entitled to Vote; Outstanding Shares

   33

Quorum and Voting Rights

   33

ITEM 1—The Issuance of Shares of LNC Common Stock Pursuant to the Merger Agreement

   34

 

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ITEM 2—Approve Adjournments of the Special Meeting, if necessary, to Permit Further Solicitation of Proxies

   34

Voting by LNC’s Directors and Executive Officers

   34

Voting; Proxies

   34

How to Vote

   36

Revoking Your Proxy

   36

Other Voting Matters

   36

Proxy Solicitations

   37

Adjournments

   37

Assistance

   37

THE JEFFERSON-PILOT SPECIAL MEETING

   38

General

   38

Date, Time and Place of the Jefferson-Pilot Special Meeting

   38

Purposes of the Jefferson-Pilot Special Meeting

   38

Record Date; Shares Entitled to Vote; Outstanding Shares

   38

Quorum and Voting Rights

   38

ITEM 1—The Merger

   39

ITEM 2—Approve Adjournments of the Special Meeting, if Necessary, to Permit Further Solicitation of Proxies

   39

Voting by Jefferson-Pilot’s Directors and Executive Officers

   39

Voting; Proxies

   39

How to Vote

   40

Revoking Your Proxy

   41

Other Voting Matters

   41

Proxy Solicitations

   41

Adjournments

   41

Assistance

   42

THE MERGER

   43

Structure of the Merger

   43

Background of the Merger

   43

LNC’s Reasons for the Merger and Recommendation of LNC’s Board of Directors

   50

Jefferson-Pilot’s Reasons for the Merger and Recommendation of Jefferson-Pilot’s Board of Directors

   53

Opinions of Financial Advisors

   58

Interests of Directors and Executive Officers in the Merger

   84

Accounting Treatment

   90

No Dissenters’ Rights

   90

Delisting and Deregistration of Jefferson-Pilot Common Stock

   90

Regulatory Approvals Required for the Merger

   91

Federal Securities Laws Consequences; Resale Restrictions

   92

Certain Litigation Relating to the Merger

   92

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

   93

United States Federal Income Tax Consequences to LNC Shareholders Who Do Not Hold Any Jefferson-Pilot Common Stock

   94

United States Federal Income Tax Consequences to Jefferson-Pilot Shareholders if the Merger is Consummated as Currently Anticipated

   94

Backup Withholding

   97

Reporting Requirements

   97

THE MERGER AGREEMENT

   98

Structure of the Merger

   98

Consideration To Be Received in the Merger

   99

Elections

   99

Exchange of Shares

   100

 

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Representations and Warranties

   101

Principal Covenants and Agreements

   103

Principal Conditions to Completion of the Merger

   108

Termination Events and Termination Fees

   109

Dividends

   110

Community Commitments

   110

Corporate Governance

   110

Alternate Transaction Structures

   111

Fees and Expenses

   111

Amendments; Waivers

   111

Governing Law

   111

INFORMATION ABOUT LNC

   111

Business

   111

INFORMATION ABOUT JEFFERSON-PILOT

   113

Business

   113

DESCRIPTION OF LNC CAPITAL STOCK

   115

Authorized and Outstanding Capital Stock

   115

Common Stock

   115

Shareholders Rights Plan

   115

Preferred Stock

   117

Anti-Takeover Considerations

   118

COMPARISON OF SHAREHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS

   119

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

   135

LEGAL MATTERS

   145

EXPERTS

   145

SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS

   145

LNC

   145

Jefferson-Pilot

   145

WHERE YOU CAN FIND MORE INFORMATION

   146

EXHIBIT INDEX

   II-6

 

Annex A

   Composite copy of Agreement and Plan of Merger, dated as of October 9, 2005, as amended as of January 26, 2006, among Lincoln National Corporation, Quartz Corporation, Lincoln JP Holdings, L.P. and Jefferson-Pilot Corporation

Annex B

   Amended and Restated Bylaws of Lincoln National Corporation

Annex C

   Opinion of Goldman, Sachs & Co.

Annex D

   Opinion of Lehman Brothers Inc.

Annex E

   Opinion of Lazard Frères & Co. LLC

Annex F

   Opinion of Morgan Stanley & Co. Incorporated

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE MERGER

 

The following questions and answers briefly address some commonly asked questions about the special meetings and the merger. They do not include all the information that may be important to you. LNC and Jefferson-Pilot urge you to read carefully this entire joint proxy statement/prospectus, including the annexes and the other documents referenced in this joint proxy statement/prospectus. Page references are included in certain parts of this summary to direct you to a more detailed description of topics presented elsewhere in this joint proxy statement/prospectus.

 

Q: Why am I receiving this joint proxy statement/prospectus?

 

A: LNC and Jefferson-Pilot have agreed to enter into a merger transaction whereby Jefferson-Pilot would be merged into a subsidiary of LNC with Jefferson-Pilot shareholders receiving cash and/or shares of LNC common stock in exchange for their shares in connection with the merger. The terms of the merger are set forth in a merger agreement, as amended, which is referred to as the merger agreement (any reference to the merger agreement also refers to the plan of merger contained therein), that is described in this joint proxy statement/prospectus. A composite copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.

 

  To complete the merger, LNC shareholders must vote to approve the issuance of shares of LNC common stock in the merger and Jefferson-Pilot shareholders must vote to approve the merger agreement and the plan of merger contained therein. LNC and Jefferson-Pilot will hold separate special meetings of their respective shareholders to obtain these approvals.

 

  This joint proxy statement/prospectus, which you should read carefully, contains important information about the merger, the merger agreement and the special meetings of the shareholders. The enclosed voting materials allow you to vote your shares without attending your company’s special meeting.

 

  Your vote is very important. We encourage you to vote as soon as possible.

 

Q: How do I vote?

 

A: You may vote before your special meeting in one of the following ways:

 

    use the toll-free number shown on your proxy/voting instruction card(s);

 

    visit the website shown on your proxy/voting instruction card(s) to vote via the Internet; or

 

    complete, sign, date and return the enclosed proxy/voting instruction card(s) in the enclosed postage-paid envelope.

 

Q: If my shares are held in “street name” by my broker, will my broker automatically vote my shares for me?

 

A: No. Your broker does not have authority to vote on the proposals in connection with the merger without instruction from you. Your broker will vote your shares held by it in “street name” only if you provide instructions to it on how to vote with respect to these matters. You should follow the directions your broker provides.

 

Q: What if I do not vote my shares on the matters relating to the merger?

 

A:

If you are an LNC shareholder and you fail to respond with a vote or instruct your broker how to vote, which is referred to as a broker non-vote, on the proposal to issue LNC common stock in connection with the merger, your vote will not be counted towards determining whether the required more-than-50% of the shares entitled to be cast on the proposal to issue LNC common stock in connection with the merger have been cast, and will not be counted for purposes of determining whether a majority of the votes actually cast on the proposal have been voted in favor of the proposal. If the required more-than-50% of the shares

 

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entitled to vote have voted, a non-vote will have no effect. If you respond and abstain from voting, your proxy will have the same effect as a vote against the proposal. If you respond but do not indicate how you want to vote on the proposal, your proxy will be counted as a vote in favor of the proposal.

 

  If you are a Jefferson-Pilot shareholder and you fail to respond with a vote or instruct your broker how to vote on the merger proposal, it will have the same effect as a vote against the proposal. If you respond and abstain from voting, your proxy will have the same effect as a vote against the proposal. If you respond but do not indicate how you want to vote on the proposal, your proxy will be counted as a vote in favor of the proposal.

 

Q. What if I participate in LNC’s Employees’ Savings and Profit Sharing Plan or The Lincoln National Life Insurance Company Agents’ Savings and Profit Sharing Plan or LNC’s Dividend Reinvestment Plan?

 

A: If you participate in LNC’s Employees’ Savings and Profit Sharing Plan or The Lincoln National Life Insurance Company Agents’ Savings and Profit Sharing Plan, your proxy/voting instruction card(s) will include the LNC common stock allocated to your accounts in that plan. To vote your shares in that plan, you must return your proxy/voting instruction card(s) or submit your voting instructions to the trustees of your plan by telephone or over the Internet as instructed on your proxy/voting instruction card(s) by 11:59 p.m. (E.S.T.) on March 17, 2006. If you participate in one of these plans and do not return your proxy/voting instruction card(s) or submit your voting instructions by telephone or over the Internet by 11:59 p.m. (E.S.T.) on March 17, 2006, the trustees of your plan will vote the shares in your account in the same proportion as they vote the shares for which they receive voting instructions from the other plan participants.

 

  If you participate in LNC’s Dividend Reinvestment Plan, your proxy/voting instruction card(s) will also include the LNC common stock allocated to your accounts in that plan. To vote your shares in that plan, you must return your proxy/voting instruction card(s) or submit your voting instructions by telephone or over the Internet as instructed on your proxy/voting instruction card(s).

 

Q. What if I participate in Jefferson-Pilot’s Dividend Reinvestment Plan, 401(k)/TeamShare Plan or Agents’ Retirement Plan?

 

A: If you participate in Jefferson-Pilot’s 401(k)/TeamShare Plan or Agents’ Retirement Plan, your proxy/voting instruction card(s) will include the Jefferson-Pilot common stock allocated to your accounts in that plan. To vote your shares in that plan, you must return your proxy/voting instruction card(s) or submit your voting instructions to the trustees of your plan by telephone or over the Internet as instructed on your proxy/voting instruction card(s) by 11:59 p.m. (E.S.T.) on March 17, 2006. If you participate in one of these plans and do not return your proxy/voting instruction card(s) or submit your voting instructions by telephone or over the Internet as instructed on your proxy/voting instruction card(s) by 11:59 p.m. (E.S.T.) on March 17, 2006, the trustees of your plan will vote the shares in your account in the same proportion as they vote the shares for which they receive voting instructions from the other plan participants.

 

  If you participate in Jefferson-Pilot’s Dividend Reinvestment Plan, your proxy/voting instruction card(s) will also include the Jefferson-Pilot common stock allocated to your accounts in that plan. To vote your shares in that plan, you must return your proxy/voting instruction card(s) or submit your voting instructions by telephone or over the Internet as instructed on your proxy/voting instruction card(s).

 

Q: When is the merger expected to be completed?

 

A: If the shareholders of LNC and Jefferson-Pilot both give their approval in connection with the merger, we expect to complete the merger as soon as practicable after the satisfaction of the other conditions to the merger, including the receipt of required regulatory approvals. There may be a substantial period of time between the approval of the proposals by shareholders at the LNC and Jefferson-Pilot special meetings and the effectiveness of the merger. We currently anticipate that the merger will be completed at the beginning of the second quarter of 2006.

 

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Q: What are the tax consequences of the merger to me?

 

A: The tax consequences of the merger to Jefferson-Pilot shareholders will depend upon the merger consideration that you receive in the merger. The tax consequences of the merger are complex and you are urged to consult with your tax advisor. You should also carefully read the more thorough tax discussion contained in the section entitled “Material United States Federal Income Tax Considerations” beginning on page 93.

 

Q: Who can answer questions about the merger?

 

A: If you have any questions about the merger or your special meeting, need assistance in voting your shares, or need additional copies of this joint proxy statement/prospectus or the enclosed proxy/voting instruction card(s):

 

  Both LNC and Jefferson-Pilot shareholders should contact:

 

Georgeson Shareholder Communications, Inc.

17 State Street

New York, New York 10004

(212) 440-9800 (collect)

 

LNC shareholders:

(888) 666-2572 (toll free)

 

Jefferson-Pilot shareholders:

(888) 877-5366 (toll free)

 

Q: What should I do now?

 

A: You should read this joint proxy statement/prospectus carefully, including the annexes. If you own common stock in your own name, return your completed, signed and dated proxy/voting instruction card(s) by mail in the enclosed postage-paid envelope or vote by telephone or over the Internet as soon as possible so that your shares will be represented and voted at your special meeting. If your shares are held in “street name” through a broker, bank or other nominee, please follow the voting instructions provided by your broker, bank or other nominee.

 

Q: Should I send in my Jefferson-Pilot stock certificates with my proxy/voting instruction card(s)?

 

A: No. Please DO NOT send your Jefferson-Pilot stock certificates with your proxy/voting instruction card(s). If you are a Jefferson-Pilot shareholder, you will have a separate opportunity to elect your preference as to receiving cash and/or LNC common stock pursuant to the merger agreement. The process for making this election is described in this joint proxy statement/prospectus and the form of election. The form of election will be separately mailed to Jefferson-Pilot shareholders at least 20 business days before the election deadline. You should carefully review and follow the instructions set forth in the form of election together with this joint proxy statement/prospectus.

 

Q: When must I elect whether I would prefer to receive cash and/or LNC common stock as merger consideration?

 

A. If you are a Jefferson-Pilot shareholder and wish to elect your preference to receive cash, LNC common stock or cash for some of your shares and LNC common stock for other of your shares, the election deadline is March 28, 2006, unless we extend it. After the form of election has been mailed, we will announce any extension to the election deadline by joint press release. The exchange agent must receive your form of election on or before the election deadline. If your shares are held in “street name,” your broker, bank or other nominee may have an earlier deadline.

 

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Q: If I am going to attend my special meeting, should I return my proxy/voting instruction card(s)?

 

A: Yes. Returning your signed and dated proxy/voting instruction card(s) or voting by telephone or over the Internet ensures that your shares will be represented and voted at your special meeting. See “The LNC Special Meeting — How to Vote” beginning on page 36 and “The Jefferson-Pilot Special Meeting — How to Vote” beginning on page 40.

 

Q: What does it mean if I receive multiple proxy/voting instruction card(s)?

 

A: Your shares may be registered in more than one account, such as a brokerage account and a 401(k) account. It is important that you complete, sign, date and return each proxy/voting instruction card you receive, or, if available, vote using the telephone or the Internet as described in the instructions included with your proxy/voting instruction card(s).

 

Q: Can I change my vote after I deliver my proxy?

 

A: Yes. You may change your vote at any time before the vote takes place at your special meeting. To change your vote, you may submit a new proxy/voting instruction card(s) by mail or submit a new proxy by telephone or over the Internet. An LNC shareholder of record may also send a signed written notice to LNC’s Corporate Secretary stating that he/she would like to revoke his/her proxy and a Jefferson-Pilot shareholder of record may send a signed written notice to Jefferson-Pilot’s Corporate Secretary stating that he/she would like to revoke his/her proxy. If your shares are held in a “street name” account, you must contact your broker, bank or other nominee to change your vote.

 

  You may also change your vote by attending your special meeting and voting in person. However, if you elect to vote in person at the special meeting and your shares are held by a broker, bank or other nominee, you must bring to the meeting a legal proxy from the broker, bank or other nominee authorizing you to vote the shares.

 

Q: Where can I find more information about LNC and Jefferson-Pilot?

 

A: You can find more information about LNC and Jefferson-Pilot from various sources described under “Where You Can Find More Information” beginning on page 146.

 

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SUMMARY

 

This summary highlights selected information contained in this joint proxy statement/prospectus and may not include all the information that is important to you. To understand fully the proposed merger, and for a more detailed description of the terms and conditions of the merger and certain other matters being considered at your special meeting, you should read this entire joint proxy statement/prospectus and the documents to which we have referred you. See “Where You Can Find More Information” beginning on page 146. We have included page references parenthetically in this summary to direct you to a more detailed description of each topic presented in this summary.

 

Information about LNC (beginning on page 111)

 

LNC, an Indiana corporation, is a holding company that operates multiple insurance and investment management businesses through its subsidiaries. Through its business segments, LNC sells a wide range of wealth protection and accumulation products. These products include fixed annuities, variable annuities, universal life insurance, variable universal life insurance, term life insurance, other individual insurance coverages, retail mutual funds, “529” college savings plans and managed accounts. LNC is headquartered in Philadelphia, Pennsylvania. At September 30, 2005, LNC had consolidated assets of $122.1 billion and consolidated shareholders’ equity of $6.3 billion.

 

Lincoln National Corporation

Centre Square West Tower

1500 Market Street, Suite 3900

Philadelphia, PA 19102

www.lfg.com

 

Information about Jefferson-Pilot (beginning on page 113)

 

Jefferson-Pilot, a North Carolina corporation, is a financial services and broadcasting holding company. Through its subsidiaries, Jefferson-Pilot provides products and services in four major businesses: (1) life insurance, (2) annuities and investment products, (3) group life, disability and dental insurance, and (4) broadcasting and sports programming production. Jefferson-Pilot is headquartered in Greensboro, North Carolina. At September 30, 2005, Jefferson-Pilot had consolidated assets of $35.8 billion and consolidated shareholders’ equity of $3.8 billion.

 

Jefferson-Pilot Corporation

100 North Greene Street

Greensboro, NC 27401

www.jpfinancial.com

 

Information about Merger Sub

 

Merger Sub is a wholly owned subsidiary of LNC, which was formed exclusively for the purpose of completing the merger. Merger Sub is an Indiana limited partnership whose general partner is an Indiana limited liability company wholly owned by LNC. LNC is the sole limited partner of Merger Sub.

 

The Merger (beginning on page 43)

 

General

 

The boards of directors of LNC and Jefferson-Pilot have each unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, and determined that the merger agreement is in the best interests of their respective companies and shareholders. The LNC board of

 

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directors unanimously recommends that the LNC shareholders vote FOR the proposal to issue shares of LNC common stock in connection with the merger at the LNC special meeting. The Jefferson-Pilot board of directors has unanimously adopted the merger agreement and the plan of merger contained therein and recommends that the Jefferson-Pilot shareholders vote FOR approval of the merger agreement and the plan of merger contained therein at the Jefferson-Pilot special meeting.

 

Upon completion of the merger, the separate corporate existence of Jefferson-Pilot will cease and Merger Sub will continue as the surviving entity and a wholly owned subsidiary of LNC.

 

The boards of directors of LNC and Jefferson-Pilot both believe that the merger will provide strategic and financial benefits to their respective shareholders by creating one of the largest life insurance companies in the United States. Both boards of directors believe that the merger will be in the best interests of their respective companies and shareholders. To review the reasons for the merger in greater detail, see “The Merger — LNC’s Reasons for the Merger and Recommendation of LNC’s Board of Directors” beginning on page 50 and “The Merger — Jefferson-Pilot’s Reasons for the Merger and Recommendation of Jefferson-Pilot’s Board of Directors” beginning on page 53.

 

We urge you to carefully read the entire merger agreement, a composite copy of which is attached to this joint proxy statement/prospectus as Annex A, because it sets forth the terms of and is the principal legal document governing the merger.

 

Required Votes to Effect the Merger

 

The issuance of shares of LNC common stock in connection with the merger requires the approval of a majority of the votes cast on the proposal by the holders of LNC common stock and LNC Series A preferred stock, voting together as a single class, provided that the total votes cast on the proposal represent more than 50% of all securities entitled to vote on the proposal. See “The LNC Special Meeting — Quorum and Voting Rights” beginning on page 33.

 

Holders of a majority of the outstanding shares of Jefferson-Pilot common stock entitled to vote at the Jefferson-Pilot special meeting must approve the merger agreement and the plan of merger contained therein. See “The Jefferson-Pilot Special Meeting — Quorum and Voting Rights” beginning on page 38.

 

Merger Consideration

 

Upon completion of the merger, holders of Jefferson-Pilot common stock will be entitled to receive, depending upon their election and subject to proration and adjustment, for each share of Jefferson-Pilot common stock either:

 

    $55.96 in cash, without interest, or

 

    1.0906 shares of LNC common stock.

 

In exchange for their shares of Jefferson-Pilot common stock, Jefferson-Pilot shareholders may elect to receive cash, shares of LNC common stock or a combination of cash for some of their shares and LNC common stock for other of their shares. Regardless of a Jefferson-Pilot shareholder’s choice, however, elections will be limited by the requirement that the total amount of cash to be exchanged for Jefferson-Pilot common stock must equal $1.8 billion. Accordingly, elections to receive cash or LNC common stock may be scaled up or down pro rata depending on whether cash is under- or over-subscribed.

 

For more details on the merger consideration, see “The Merger Agreement — Elections” beginning on page 99. The stock and cash consideration that LNC will pay to Jefferson-Pilot shareholders is referred to as the

 

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“merger consideration.” The exchange ratio is fixed and neither LNC nor Jefferson-Pilot has the right to terminate the merger agreement based solely on changes in either party’s stock price. The market value of LNC common stock that Jefferson-Pilot shareholders receive in the merger may fluctuate significantly from its current value.

 

LNC expects to fund the cash portion of the merger consideration from the issuance of long-term debt, preferred stock or other securities, including stock purchase units, or a combination of these. In addition, in the event that permanent financing cannot be completed before the effective time of the merger, LNC expects to put bridge financing in place.

 

Jefferson-Pilot shareholders will receive cash and/or LNC common stock based upon their elections, but subject to adjustment and proration. Regardless of the election made by the Jefferson-Pilot shareholders, Jefferson-Pilot shareholders may receive a mix of cash and LNC common stock.

 

Since the amount of cash exchanged for Jefferson-Pilot common stock, in the aggregate, must equal $1.8 billion, the total number of shares of Jefferson-Pilot common stock that will be exchanged for cash will total 32,165,832 shares (which is calculated by dividing $1.8 billion total cash by the cash exchange ratio of $55.96 cash per share).

 

Cash Election. If you are a Jefferson-Pilot shareholder and you elect to receive cash in exchange for your shares and the aggregate amount of cash elected by all Jefferson-Pilot shareholders is more than $1.8 billion, you will receive some of your merger consideration in the form of LNC common stock pro rata with other Jefferson-Pilot shareholders that chose to receive cash, based on each holder’s respective number of cash election shares.

 

Stock Election. If you are a Jefferson-Pilot shareholder and you elect to receive LNC common stock in exchange for your shares and the aggregate amount of cash elected or deemed elected by all Jefferson-Pilot shareholders is less than $1.8 billion, you will receive some of your merger consideration in the form of cash pro rata with other Jefferson-Pilot shareholders that chose to receive LNC common stock, based on each holder’s respective number of stock election shares.

 

The merger agreement describes the procedures to be followed in the event that Jefferson-Pilot shareholders elect to receive more or less than $1.8 billion of cash, in the aggregate, in exchange for their shares. See “The Merger Agreement — Elections” beginning on page 99.

 

Election of cash and/or stock by Jefferson-Pilot shareholders

 

If you are a Jefferson-Pilot shareholder of record and you wish to elect the type of merger consideration you prefer to receive in the merger, you should carefully review and follow the instructions set forth in the form(s) of election. These instructions require that you deliver your stock certificate(s), if any, together with a properly completed and signed form of election, to the exchange agent — Mellon Investor Services LLC. If your Jefferson-Pilot common stock is held in “street name” through a broker, bank or other nominee, you should follow the instructions from your broker, bank or other nominee on how to make your cash/stock election.

 

If you hold shares in any form other than in registered form, for example in “street name,” or through the Jefferson-Pilot Dividend Reinvestment Plan, 401(k)/TeamShare Plan or Agents’ Retirement Plan, you will receive multiple forms of election. Please read the instructions, complete each form of election and return each form of election to the exchange agent by the election deadline, unless an earlier election deadline is stated in the form of election.

 

The form(s) of election will be separately mailed to Jefferson-Pilot shareholders at least 20 business days before the election deadline. Jefferson-Pilot shareholders must deliver their form(s) of election and stock certificate(s), if any, to the exchange agent by the election deadline.

 

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The election deadline for the cash/stock election is March 28, 2006. However, if LNC and Jefferson-Pilot reasonably agree that the completion of the merger will not occur before April 4, 2006, then the election deadline may be extended to another date, which is referred to as an extended election deadline, that LNC and Jefferson-Pilot reasonably agree is the fourth business day before the expected completion of the merger. If an extended election deadline is determined after the forms of election have been mailed, we will announce any extended election deadline in a joint press release. You can change or revoke your election at any time on or before the election deadline. To change your election, you must submit a new properly completed form of election to the exchange agent. The exchange agent must receive this new form on or before the election deadline. You may revoke your election and receive your shares back by providing the exchange agent with a notice of revocation. If your Jefferson-Pilot common stock is held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee may have a deadline to make your original election of cash, stock or both or to change or revoke your election that is earlier than the election deadline.

 

Failure by Jefferson-Pilot shareholders to make a cash/stock election

 

Jefferson-Pilot shareholders who fail to submit a properly completed form of election and their stock certificate(s), if any, on or before the election deadline will have no choice regarding the form of merger consideration that they will receive. The merger consideration that a Jefferson-Pilot shareholder will receive will be based on the allocation procedures in the merger agreement, and Jefferson-Pilot shareholders could receive cash, LNC common stock or a combination of cash and LNC common stock. The exact allocation will depend in part on what other Jefferson-Pilot shareholders elect.

 

Jefferson-Pilot shareholders of record who do not submit a properly completed form of election and their stock certificate(s) will receive a letter of transmittal from the exchange agent explaining how to exchange their Jefferson-Pilot stock certificates for the shares of LNC common stock and/or cash that they are entitled to receive in the merger. A Jefferson-Pilot shareholder will not receive any merger consideration until the shareholder delivers its stock certificate(s) together with an appropriate form of election or letter of transmittal to the exchange agent.

 

If you do not make a valid election and your Jefferson-Pilot shares are held in book-entry form, such as in Jefferson-Pilot’s Dividend Reinvestment Plan, or held in Jefferson-Pilot’s 401(k)/Team Share Plan or Agents’ Retirement Plan, they will be automatically converted into the merger consideration payable to non-electing shareholders and you do not need to take any action. See “The Merger Agreement — Exchange of Shares” beginning on page 100.

 

Receipt of merger consideration

 

If you receive any of the merger consideration in cash, we will mail the cash payment to you at the address reflected in the records of Jefferson-Pilot’s transfer agent. If you receive any of the merger consideration in LNC common stock, we will issue your LNC shares in book-entry form with LNC’s transfer agent — Mellon Investor Services LLC. However, if you indicate on the form of election or letter of transmittal that you wish to receive a physical stock certificate or if you decide after the completion of the merger that you would like a stock certificate for your shares, you may request a certificate from LNC’s transfer agent.

 

If your Jefferson-Pilot common stock is held in “street name,” we will send your cash payment to, or issue your shares of LNC common stock and deliver them to, your broker, bank or other nominee.

 

You will not be able to sell any shares of Jefferson-Pilot common stock that you have delivered in connection with your election unless you revoke your election before the deadline by providing written notice to the exchange agent. If you do not revoke your election, you will not be able to liquidate your investment in Jefferson-Pilot common stock for any reason until you receive cash and/or LNC common stock in the merger. In

 

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the time between the delivery of your shares and your receipt of the merger consideration, the trading price of Jefferson-Pilot common stock or LNC common stock may decrease, and you might otherwise want to sell your shares to gain access to cash, make other investments or reduce the potential for a decrease in the value of your investment.

 

The date that you will receive your merger consideration depends on the completion date of the merger, which is expected to be at the beginning of the second quarter of 2006, but could be delayed. After the completion of the merger, it may take the exchange agent up to ten business days to process and distribute your merger consideration.

 

For more details about the cash/stock election and the merger consideration generally, see “The Merger Agreement — Elections” beginning on page 99.

 

Jefferson-Pilot option awards

 

Upon completion of the merger, options to purchase shares of Jefferson-Pilot common stock granted by Jefferson-Pilot to its directors, officers, employees and agents will be assumed by LNC and converted into options to purchase shares of LNC common stock. Unless LNC and Jefferson-Pilot otherwise agree, stock options so converted will remain subject to the same terms and conditions as were in effect with respect to the options immediately prior to the effective time of the merger, except that each of these stock options will be exercisable for LNC common stock equal to the number of shares of Jefferson-Pilot common stock subject to the option multiplied by 1.0906 (rounded down to the nearest whole share of LNC common stock), with the new exercise price determined by dividing the existing exercise price of the Jefferson-Pilot option by 1.0906 (rounded up to the sixth decimal place). Each unvested Jefferson-Pilot stock option granted prior to October 9, 2005 (which was the date the merger agreement was executed) that is outstanding under any Jefferson-Pilot stock option plan at the time of the merger (except stock options granted to agents) will become fully vested and exercisable in connection with the merger.

 

For a full description of the treatment of Jefferson-Pilot equity awards, see “The Merger — Interests of Directors and Executive Officers in the Merger — Effect of Merger on Option Awards” beginning on page 88.

 

Opinions of Financial Advisors (beginning on page 58)

 

Opinions of LNC’s Financial Advisors. Each of Goldman, Sachs & Co., which is referred to as Goldman Sachs, and Lehman Brothers Inc., which is referred to as Lehman Brothers, delivered its oral opinion, subsequently confirmed in writing, to LNC’s board of directors that, as of October 9, 2005 and based upon and subject to the factors and assumptions set forth in their respective opinions, the consideration to be paid by LNC pursuant to the merger agreement is fair from a financial point of view to LNC.

 

The full text of each of the written opinions of Goldman Sachs and Lehman Brothers, each dated October 9, 2005, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with their respective opinions, are attached to this joint proxy statement/prospectus as Annexes C and D, respectively. Summaries of the opinions of Goldman Sachs and Lehman Brothers are set forth in this joint proxy statement/prospectus and are qualified by reference to the full text of such opinions, which we urge you to read in their entirety. Goldman Sachs and Lehman Brothers provided their opinions for the information and assistance of LNC’s board of directors in connection with its consideration of the merger. The Goldman Sachs and Lehman Brothers opinions are not recommendations as to how LNC shareholders should vote with respect to the issuance of LNC common stock in connection with the merger.

 

Opinions of Jefferson-Pilot’s Financial Advisors. In deciding to approve the merger agreement and the plan of merger contained therein, the Jefferson-Pilot board of directors considered the opinions of its financial

 

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advisors, Lazard Frères & Co. LLC and Morgan Stanley & Co. Incorporated, which are referred to as Lazard and Morgan Stanley, respectively. The Jefferson-Pilot board of directors received written opinions from Lazard and Morgan Stanley to the effect that, as of October 9, 2005, and based upon and subject to the various assumptions made, matters considered and limitations described in their respective opinions, the consideration proposed to be received by holders of Jefferson-Pilot common stock under the merger agreement was fair from a financial point of view to such holders (other than LNC and its affiliates).

 

The full text of the written opinions of Lazard and Morgan Stanley, each dated October 9, 2005, which set forth the assumptions made, procedures followed, matters considered and limitations on the reviews undertaken in connection with the opinions, are attached to this joint proxy statement/prospectus as Annexes E and F, respectively. Summaries of the opinions of Lazard and Morgan Stanley are set forth in this joint proxy statement/prospectus and are qualified in their entirety by reference to the full text of such opinions, which we urge you to read in their entirety. Each of Lazard and Morgan Stanley provided its opinion for the information and assistance of Jefferson-Pilot’s board of directors in connection with its consideration of the proposed merger. The opinions of Lazard and Morgan Stanley are not recommendations as to how any shareholder should vote with respect to the merger agreement and do not address what election a shareholder should make with respect to the form of consideration.

 

Record Date; Shares Entitled to Vote; Outstanding Shares (beginning on page 33 for LNC and page 38 for Jefferson-Pilot)

 

LNC Shareholders. The record date for the LNC special meeting was February 3, 2006. This means that you must have been a shareholder of record of LNC common stock or LNC Series A preferred stock at the close of business on February 3, 2006 in order to vote at the special meeting. You are entitled to one vote for each share of LNC common stock or LNC Series A preferred stock you owned on the record date. On LNC’s record date, a total of 174,174,896 voting securities were outstanding, consisting of 174,159,561 shares of LNC common stock and 15,335 shares of LNC Series A preferred stock.

 

Jefferson-Pilot Shareholders. The record date for the Jefferson-Pilot special meeting was February 3, 2006. This means that you must have been a shareholder of record of Jefferson-Pilot’s common stock at the close of business on February 3, 2006, in order to vote at the special meeting. You are entitled to one vote for each share of Jefferson-Pilot common stock you owned on the record date. On Jefferson-Pilot’s record date, 134,622,773 shares of Jefferson-Pilot common stock were outstanding.

 

Expected Completion of the Merger

 

If the issuance of shares of LNC common stock in connection with the merger is approved at the LNC special meeting and the merger agreement and the plan of merger contained therein are approved at the Jefferson-Pilot special meeting, we expect to complete the merger as soon as practicable after the satisfaction of the other conditions to the merger, including the receipt of required regulatory approvals. There may be a substantial period of time between the approval of the proposals by shareholders at the LNC and Jefferson-Pilot special meetings and the effectiveness of the merger. We currently anticipate that the merger will be completed at the beginning of the second quarter of 2006.

 

Stock Ownership of Directors and Executive Officers

 

LNC. At the close of business on the record date for the LNC special meeting, directors and executive officers of LNC and their affiliates were entitled to vote approximately 455,387 shares of LNC common stock, collectively representing less than one percent of the shares of LNC common stock outstanding on that date. No LNC director or executive officer or their affiliates beneficially owned any shares of LNC Series A preferred stock at the close of business on the record date for the LNC special meeting.

 

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Jefferson-Pilot. At the close of business on the record date for the Jefferson-Pilot special meeting, directors and executive officers of Jefferson-Pilot and their affiliates were entitled to vote approximately 500,000 shares of Jefferson-Pilot common stock, collectively representing less than one percent of the shares of Jefferson-Pilot common stock outstanding on that date.

 

Ownership of LNC After the Merger

 

Based on the number of shares of LNC common stock and Jefferson-Pilot common stock outstanding on LNC’s and Jefferson-Pilot’s respective record dates, after completion of the merger, LNC expects to issue approximately 111,739,539 million shares of LNC common stock. Upon completion of the merger, we expect that former Jefferson-Pilot shareholders will own approximately 39% and LNC shareholders will own approximately 61% of the then outstanding shares of LNC common stock.

 

LNC’s Board of Directors After the Merger (beginning on page 84)

 

The size of the LNC board of directors is currently set at 12 members by LNC’s bylaws. Pursuant to the merger agreement, at the completion of the merger, the LNC bylaws will be amended to increase the size of the board of directors to 15 members. Eight members of the LNC board of directors who are in office immediately prior to the merger will remain as members of the resulting company’s board of directors after the completion of the merger. Seven members of the Jefferson-Pilot board of directors who are in office immediately prior to the merger will become members of the board of directors of the resulting company. Dennis R. Glass is expected to become a member of the board of directors of the resulting company and David A. Stonecipher, current Chairman of the Board of Jefferson-Pilot, is expected to become the lead director of the resulting company, unless Jefferson-Pilot designates alternate individuals satisfactory to LNC.

 

Pursuant to the merger agreement, the LNC bylaws will also be amended so that, among other things,

 

    Jefferson-Pilot board representatives will initially have equal representation on all board committees; and

 

    a supermajority board approval will be required for the resulting company to take certain actions with respect to corporate governance and/or to enter into certain extraordinary corporate transactions for 30 months following the effective time of the merger.

 

For a full description of the governance of the resulting company and the supermajority requirements of the resulting company’s board of directors, see “The Merger — Interests of Directors and Executive Officers in the Merger — LNC’s Board of Directors After the Merger” beginning on page 84. The form of LNC’s bylaws, which will become effective upon completion of the merger, is attached to this joint proxy statement/prospectus as Annex B.

 

LNC’s Executive Officers After the Merger (beginning on page 86)

 

We expect that the resulting company will have 14 executive officers. After the merger, Jon A. Boscia, LNC’s Chairman and Chief Executive Officer, will continue to serve as Chairman and Chief Executive Officer of LNC. Dennis R. Glass, President and Chief Executive Officer of Jefferson-Pilot, will serve in the newly created position of President and Chief Operating Officer of LNC after the merger.

 

In addition, upon the completion of the merger, Frederick J. Crawford will be Chief Financial Officer, Barbara S. Kowalczyk will lead Corporate Development, Elizabeth L. Reeves will lead Human Resources, Dennis L. Schoff will be General Counsel, Theresa M. Stone will lead the Communications Company and Michael Tallett-Williams will lead Lincoln National (UK) and each will report to Mr. Boscia. Charles C. Cornelio will lead Shared Services and become Chief Information Officer, Robert W. Dineen will lead Lincoln

 

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Financial Advisors, Jude T. Driscoll will lead Investment Management, Mark E. Konen will lead Retail Markets, Warren H. May will lead Lincoln Financial Distributors and Westley V. Thompson will lead Employer Markets and each will report to Mr. Glass.

 

Listing of LNC Common Stock and Delisting of Jefferson-Pilot Common Stock

 

LNC will apply to the NYSE to have the shares of LNC common stock issued in the merger approved for listing on the NYSE where LNC common stock currently is traded under the symbol “LNC.” If the merger is completed, Jefferson-Pilot common stock will no longer be listed on the NYSE and will be deregistered under the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act, and Jefferson-Pilot will no longer file periodic reports with the SEC. LNC also intends to list the shares of LNC common stock issued in the merger on the Chicago Stock Exchange and the Pacific Stock Exchange.

 

No Dissenters’ Rights

 

LNC. Under Indiana law, holders of LNC common stock or LNC Series A preferred stock are not entitled to dissenters’ rights in connection with the merger.

 

Jefferson-Pilot. Under North Carolina law, holders of Jefferson-Pilot common stock are not entitled to dissenters’ rights in connection with the merger.

 

Principal Conditions to Completion of the Merger (beginning on page 108)

 

We may not complete the merger unless the following conditions are satisfied or, where permitted, waived:

 

    the LNC shareholders must approve the issuance of LNC common stock in connection with the merger;

 

    the Jefferson-Pilot shareholders must approve the merger agreement and the plan of merger contained therein;

 

    the waiting period (and any extension thereof) applicable to the merger pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act, or any other applicable competition, merger, antitrust or similar law must have expired or been terminated;

 

    state insurance regulatory approvals and all other governmental authorizations, consents, orders, approvals, declarations or filings that are necessary to complete the merger must have been obtained and be in full force and effect;

 

    there must not be any order issued by any court of competent jurisdiction or legal restraint or prohibition issued by any governmental entity of competent jurisdiction in effect preventing the consummation of the merger;

 

    the shares of LNC common stock issuable to Jefferson-Pilot shareholders must have been approved for listing, subject to official notice of issuance, on the NYSE;

 

    the registration statement, of which this joint proxy statement/prospectus is a part, which has been declared effective by the Securities and Exchange Commission, which is referred to as the SEC, must not be the subject of any stop order or proceeding seeking a stop order;

 

   

there must not be any action taken, or any statute, rule, regulation, order or decree enacted or entered by any governmental entity, which in connection with any required approval, imposes any condition or restriction which could reasonably be expected to have a material adverse effect on the

 

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present or prospective financial condition, business or results of operation of LNC after the completion of the merger;

 

    each of LNC and Jefferson-Pilot must have received an opinion of its tax counsel that for United States federal income tax purposes the merger will qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended, which is referred to as the Code, and that each of LNC and Jefferson-Pilot will be a party to such merger as described in and pursuant to Section 368(b) of the Code;

 

    the respective representations and warranties of LNC and Jefferson-Pilot in the merger agreement must be true and correct, subject to exceptions that would not have a material adverse effect on LNC or Jefferson-Pilot, as the case might be, or on the resulting company following the completion of the merger; and

 

    each of LNC and Jefferson-Pilot must have performed in all material respects all of its respective obligations under the merger agreement.

 

Termination Events and Termination Fees (beginning on page 109)

 

Before the effective time of the merger, the merger agreement may be terminated by the mutual written consent of LNC and Jefferson-Pilot, or by either LNC or Jefferson-Pilot under certain specified circumstances, including uncured material breaches of the merger agreement. Upon the termination of the merger agreement under certain circumstances, LNC or Jefferson-Pilot may be required to pay a termination fee of up to $300 million to the other party.

 

No Solicitation by LNC and Jefferson-Pilot (beginning on page 106)

 

The merger agreement restricts the ability of LNC and Jefferson-Pilot to initiate, solicit or encourage or facilitate any discussions or negotiations with a third party regarding a proposal to acquire a significant interest in LNC or Jefferson-Pilot, respectively. However, if LNC or Jefferson-Pilot receives an acquisition proposal from a third party that its board of directors determines in good faith by majority vote of the board (after consultation with its outside legal and financial advisors) constitutes a superior proposal or is reasonably likely to be a superior proposal, and for which the failure to take such action would cause a violation of the board’s fiduciary duties, the party receiving the acquisition proposal may furnish nonpublic information to that third party and engage in negotiations regarding an acquisition proposal with that third party, subject to specified conditions described in the merger agreement.

 

Material United States Federal Income Tax Considerations (beginning on page 93)

 

LNC and Jefferson-Pilot intend that the merger, as currently contemplated, qualify as a reorganization within the meaning of Section 368(a) of the Code. LNC and Jefferson-Pilot will each obtain a legal opinion from their respective counsel that the merger will qualify as a reorganization pursuant to Section 368(a) of the Code and that each of LNC and Jefferson-Pilot will be a party to such merger as described in and pursuant to Section 368(b) of the Code; however, these opinions are not binding upon the Internal Revenue Service, which is referred to as the IRS.

 

Because holders of LNC common stock and LNC Series A preferred stock will retain their shares in the merger, holders of LNC common stock and LNC Series A preferred stock will not recognize gain or loss upon the merger.

 

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The United States federal income tax consequences of the transaction to Jefferson-Pilot shareholders will depend on whether a shareholder receives cash, stock or a combination of cash and stock in exchange for their shares of Jefferson-Pilot common stock, including to the extent they receive cash in lieu of fractional shares.

 

    If you receive all cash, the transaction will be taxable to you and you will have to pay United States federal income taxes in connection with the merger to the extent you recognize taxable gain.

 

    If you receive all LNC common stock and no cash (including no cash in exchange for fractional shares), you will not have to pay United States federal income taxes on the receipt of LNC common stock in connection with the merger.

 

    If you receive a combination of cash and LNC common stock (excluding cash in lieu of fractional shares), you may recognize gain, but not loss, to the extent of the amount of cash received (excluding cash for any fractional share of LNC common stock).

 

Provided you hold your Jefferson-Pilot common stock as a capital asset, you generally will recognize this gain as a capital gain, although in extraordinary cases you could recognize dividend income instead of capital gain. Any such capital gain may be long-term capital gain depending on whether you have held your applicable Jefferson-Pilot common stock for more than one year as of the effective time for United States federal income tax purposes.

 

If you receive cash in lieu of receiving fractional share of LNC common stock, you will generally recognize capital gain or loss as if you had received and then sold the fractional share for the amount of cash received, subject to the possibility of recognizing dividend income, as described above.

 

Tax matters relating to the merger are very complicated and a full discussion of all possible tax issues that may be applicable to each holder is beyond the scope of this joint proxy statement/prospectus. You should be aware that the tax consequences of the merger to you will depend upon your own situation. In addition, you may be subject to state, local or foreign tax laws that are not discussed in this joint proxy statement/prospectus. You should therefore consult with your own tax advisor for a full understanding of the tax consequences of the merger to you and further, you are encouraged to carefully read the more detailed discussion regarding the material United States federal income tax consequences resulting from the merger that is included in the section entitled “Material United States Federal Income Tax Considerations” beginning on page 93.

 

Accounting Treatment

 

The merger will be accounted for as a business combination using the purchase method of accounting. LNC will be the acquirer for financial accounting purposes.

 

Risk Factors (beginning on page 25)

 

In evaluating the merger, the merger agreement or the issuance of shares of LNC common stock in the merger, you should carefully read this joint proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors” beginning on page 25.

 

Comparison of Shareholder Rights and Corporate Governance Matters (beginning on page 119)

 

   

Jefferson-Pilot. As a result of the merger, the holders of Jefferson-Pilot common stock will become holders of LNC common stock. Following the merger, Jefferson-Pilot shareholders will have different rights as LNC shareholders than they had as Jefferson-Pilot shareholders due to differences between the laws of the states of incorporation and the articles of incorporation and bylaws of LNC and Jefferson-Pilot. Upon consummation of the merger, the LNC bylaws will also be amended so

 

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that the resulting company will be subject to certain restrictions with respect to corporate governance and supermajority approval of the resulting company’s board of directors. See “The Merger — Interests of Directors and Executive Officers in the Merger — LNC’s Board of Directors After the Merger” beginning on page 84.

 

    LNC. LNC shareholders will retain their shares of LNC common stock and/or LNC Series A preferred stock and their rights will continue to be governed by LNC’s articles of incorporation and bylaws and Indiana law. However, upon consummation of the merger, LNC shareholders will have different rights as shareholders than they had prior to the merger because, pursuant to the merger agreement, the LNC bylaws will be amended so that the resulting company will be subject to certain restrictions with respect to corporate governance and supermajority approval of the resulting company’s board of directors. See “The Merger — Interests of Directors and Executive Officers in the Merger — LNC’s Board of Directors After the Merger” beginning on page 84.

 

    For a copy of LNC’s or Jefferson-Pilot’s current articles of incorporation or bylaws, see “Where You Can Find More Information” beginning on page 146. A form of the amended and restated bylaws, which will become effective upon the completion of the merger, is attached to this joint proxy statement/prospectus as Annex B.

 

Regulatory Approvals (beginning on page 91)

 

State insurance laws generally require that, prior to the acquisition of an insurance company, the acquiring party must obtain approval from the insurance commissioner of the insurance company’s state of domicile or, in certain jurisdictions, where such insurance company is commercially domiciled. Accordingly, the necessary applications have been made with the insurance commissioners of Nebraska, New Jersey, New York and North Carolina, the states of domicile or commercial domicile of Jefferson-Pilot’s U.S. insurance company subsidiaries. We have received approval from the State of Nebraska. In addition, filings have been made under the insurance laws of certain other states that require the filing of a pre-acquisition notice and the expiration or termination of a waiting period prior to the consummation of the merger. Applications or notifications will also be filed with certain foreign regulatory authorities in connection with the merger.

 

The merger is subject to U.S. antitrust laws. LNC and Jefferson-Pilot have separately filed the required notifications under the HSR Act with both the Antitrust Division of the Department of Justice and the Federal Trade Commission, which are referred to as the DOJ and the FTC. Both parties filed the required notifications on November 4, 2005, and the waiting period expired on December 5, 2005. The DOJ or the FTC, as well as a state attorney general or private person, may challenge the merger at any time before or after its completion.

 

In addition, certain subsidiaries of Jefferson-Pilot Communications, a subsidiary of Jefferson-Pilot, are subject to regulation by the Federal Communications Commission, which is referred to as the FCC. The FCC must approve the transfer of control of certain licenses held by the subsidiaries of Jefferson-Pilot Communications as a result of and prior to the completion of the merger. Accordingly, the necessary applications have been filed with the FCC.

 

Restrictions on the Ability to Sell LNC Common Stock (beginning on page 92)

 

All shares of LNC common stock you receive in connection with the merger will be freely transferable unless you are considered an “affiliate” of Jefferson-Pilot for the purposes of the Securities Act of 1933, as amended, which is referred to as the Securities Act, at the time the merger agreement and the plan of merger contained therein are submitted to Jefferson-Pilot shareholders for approval, in which case you will be permitted to sell the shares of LNC common stock you receive in the merger only pursuant to an effective registration

 

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statement or an exemption from the registration requirements of the Securities Act. This joint proxy statement/prospectus does not register the resale of stock held by affiliates.

 

Certain Litigation Relating to the Merger (beginning on page 92)

 

In October 2005, a purported shareholder class action lawsuit was filed in state court in North Carolina naming Jefferson-Pilot, most of the individual members of its board of directors, and LNC as defendants. The complaint alleges that certain defendants have breached their fiduciary duties by entering into the merger agreement. The complaint seeks, among other things, unspecified compensatory damages.

 

In January 2006, the plaintiffs filed a motion to voluntarily dismiss the lawsuit which the court granted without prejudice subject to the restriction that the plaintiffs receive the court’s permission before filing any other action asserting the same claims in North Carolina or any other jurisdiction. The voluntary dismissal of this action did not involve a settlement or any compensation being paid or promised to the plaintiffs.

 

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MARKET PRICE AND DIVIDEND INFORMATION

 

Historical Market Price Data

 

Jefferson-Pilot’s common stock is traded on the NYSE, the Chicago Stock Exchange and the Pacific Stock Exchange under the symbol “JP.” LNC’s common stock is traded on the NYSE, the Chicago Stock Exchange and the Pacific Stock Exchange under the symbol “LNC.”

 

The following table sets forth the high and low sales prices per share of LNC and Jefferson-Pilot common stock as adjusted for all stock splits, as reported on the NYSE composite transaction tape for the periods indicated:

 

     LNC Common Stock

   Jefferson-Pilot
Common Stock


         High    

       Low    

       High    

       Low    

2003

                           

Quarter ended March 31, 2003

   $ 35.70    $ 24.73    $ 40.93    $ 35.75

Quarter ended June 30, 2003

     37.50      27.87      43.20      38.34

Quarter ended September 30, 2003

     38.64      34.63      46.57      41.21

Quarter ended December 31, 2003

     41.32      35.41      50.72      44.55

2004

                           

Quarter ended March 31, 2004

     48.87      39.98      55.08      48.97

Quarter ended June 30, 2004

     50.38      43.26      56.39      47.40

Quarter ended September 30, 2004

     47.50      41.90      50.90      46.66

Quarter ended December 31, 2004

     48.70      40.78      52.73      46.00

2005

                           

Quarter ended March 31, 2005

     49.42      44.36      52.49      47.17

Quarter ended June 30, 2005

     47.77      41.59      51.39      47.11

Quarter ended September 30, 2005

     52.42      46.59      51.25      49.00

Quarter ended December 31, 2005

     54.41      46.94      57.83      50.59

2006

                           

Quarter ending March 31, 2006 (through February 7, 2006)

     54.96      52.00      58.75      56.25

 

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Dividend Information

 

The following table presents information on dividends declared each quarter on LNC common stock and Jefferson-Pilot common stock, respectively, for the periods indicated.

 

     LNC
Dividends


   Jefferson-Pilot
Dividends


2003

             

Quarter ended March 31, 2003

   $ 0.3350    $ 0.3300

Quarter ended June 30, 2003

     0.3350      0.3300

Quarter ended September 30, 2003

     0.3350      0.3300

Quarter ended December 31, 2003

     0.3500      0.3300

2004

             

Quarter ended March 31, 2004

     0.3500      0.3800

Quarter ended June 30, 2004

     0.3500      0.3800

Quarter ended September 30, 2004

     0.3500      0.3800

Quarter ended December 31, 2004

     0.3650      0.3800

2005

             

Quarter ended March 31, 2005

     0.3650      0.4175

Quarter ended June 30, 2005

     0.3650      0.4175

Quarter ended September 30, 2005

     0.3650      0.4175

Quarter ended December 31, 2005

     0.3800      0.4175

 

The merger agreement permits each of LNC and Jefferson-Pilot to continue to pay its respective shareholders its regular quarterly cash dividend consistent with past dividend policy. LNC and Jefferson-Pilot have agreed in the merger agreement that they will coordinate their respective dividend payments, as well as the record dates and payment dates relating to their dividends, with the intent that holders of LNC common stock and Jefferson-Pilot common stock will not receive two dividends, or fail to receive one dividend, for any single calendar quarter due to the merger.

 

The LNC board of directors has the power to determine the amount and frequency of the payment of dividends. Because LNC is a holding company, its ability to pay dividends is dependent on the ability of its subsidiaries to pay dividends to LNC. LNC’s insurance subsidiaries are subject to laws in their states of domicile that limit the amount of dividends that an insurance company can pay without prior approval from the insurance regulators in those states. These limitations are based in part on an insurance subsidiary’s statutory capital and income for the year prior to the dividend payment. At the LNC holding company level, decisions regarding whether or not to pay dividends and the amount of any dividends are based on compliance with the Indiana Business Corporation Law, which is referred to as the IBCL, compliance with agreements governing LNC’s indebtedness, cash requirements and other factors, including the overall long-term financial strength of the organization, that the LNC board of directors considers important. While LNC intends, regardless of whether or not the merger is consummated, to maintain its current dividend policy for the foreseeable future, it cannot assure that it will continue to pay dividends at the current level, or at all.

 

The Jefferson-Pilot board of directors has the power to determine the amount and frequency of the payment of dividends. Because Jefferson-Pilot is a holding company, its ability to pay dividends is dependent on the ability of its subsidiaries to pay dividends to Jefferson-Pilot. Jefferson-Pilot’s insurance subsidiaries are subject to laws in their states of domicile that limit that amount of dividends that an insurance company can pay without prior approval from the insurance regulators in those states. These limitations are based in part on an insurance subsidiary’s statutory capital and income for the year prior to the dividend payment. At the Jefferson-Pilot holding company level, decisions regarding whether or not to pay dividends and the amount of any dividends are

 

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based on compliance with the North Carolina Business Corporation Act, which is referred to as the NCBCA, compliance with agreements governing Jefferson-Pilot’s indebtedness, cash requirements and other factors that the Jefferson-Pilot board of directors considers important. While Jefferson-Pilot anticipates that if the merger were not consummated it would increase the amount of its dividend payable starting in the second quarter of 2006 consistent with its past practice, it cannot assure that it would continue to pay dividends at this level, or at all.

 

Recent Closing Prices and Comparative Market Price Information

 

The following table presents the closing prices per share of LNC common stock and Jefferson-Pilot common stock, in each case based on closing prices for those shares on the composite transaction tape of the NYSE, as well as the equivalent price per share and the equivalent total market value of shares of Jefferson-Pilot common stock. These prices and values are presented on two dates:

 

    October 7, 2005, the last trading day prior to the public announcement of the proposed merger; and

 

    February 7, 2006 the last trading day for which this information could be calculated prior to the date of this joint proxy statement/prospectus.

 

     LNC
Common
Stock (price
per share)


   Jefferson-Pilot
Common
Stock (price
per share)


   Jefferson-Pilot
Equivalent
Stock Price
(price per
share)(1)


October 7, 2005

                    

Closing price per share of common stock

   $ 50.73    $ 50.79    $ 55.33

February 7, 2006

                    

Closing price per share of common stock

   $ 52.66    $ 57.23    $ 57.43

(1) The Jefferson-Pilot equivalent stock prices were calculated by multiplying the per share price of LNC common stock on each date by the exchange ratio of 1.0906.

 

Because the exchange ratio is fixed and will not be adjusted as a result of changes in market price, the implied value of the merger consideration will fluctuate with the market price of LNC common stock. You should obtain current market quotations for the shares of LNC common stock from a newspaper, the Internet or your broker or banker.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

 

Selected Historical Consolidated Financial Data of LNC

 

The following table shows selected historical consolidated financial data for LNC. The data as of and for each of the five years ended December 31, 2004 was derived from LNC’s audited consolidated financial statements. The data as of September 30, 2005 and for the nine-month periods ended September 30, 2005 and 2004 was derived from LNC’s unaudited interim consolidated financial statements. In the opinion of LNC’s management, the unaudited interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the interim consolidated financial statements. Results for the interim periods are not necessarily indicative of the results to be expected for the full year.

 

Detailed historical financial information is included in the audited consolidated balance sheets as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2004 included in LNC’s Annual Report on Form 10-K for the year ended December 31, 2004, as well as the unaudited interim consolidated balance sheet as of September 30, 2005 and the related unaudited interim consolidated statements of operations and cash flows for the nine month periods ended September 30, 2005 and 2004 included in LNC’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2005. You should read the following selected financial data together with LNC’s historical consolidated financial statements, including the related notes, and the other information contained or incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 146.

 

Selected Historical Consolidated Financial Data of LNC

(in millions, except per share information)

 

    Nine Months Ended
September 30,


    Year Ended December 31,

    2005

  2004

    2004

    2003

    2002

  2001(1)

    2000

Consolidated Summaries of Operations

                                                 

Total revenue

  $ 4,099.5   $ 4,023.8     $ 5,371.3     $ 5,283.9     $ 4,635.5   $ 6,378.0     $ 6,847.10

Income before cumulative effect of accounting changes

  $ 605.7   $ 541.6     $ 731.5     $ 767.1     $ 48.8   $ 561.2     $ 585.30

Cumulative Effect of Accounting Changes

    —       (24.5 )     (24.5 )     (255.2 )     —       (15.6 )     —  
   

 


 


 


 

 


 

Net income

  $ 605.7   $ 517.1     $ 707.0     $ 511.9     $ 48.8   $ 545.6     $ 585.30
   

 


 


 


 

 


 

Per Common Share Data(2)

                                                 

Net Income-Basic

  $ 3.50   $ 2.92     $ 4.01     $ 2.89     $ 0.27   $ 2.89     $ 3.06

Net Income-Diluted

    3.44     2.88       3.95       2.85       0.26     2.85       3.03

Common stock dividends

    1.100     1.050       1.415       1.355       1.295     1.235       1.18
    At September 30,

    At December 31,

    2005

  2004

    2004

    2003

    2002

  2001

    2000

Consolidated Balance Sheet Items

                                                 

Assets

  $ 122,104.6   $ 110,377.1     $ 116,219.3     $ 106,774.9     $ 93,184.6   $ 98,041.6     $ 99,870.60

Long-term debt

    999.5     1,315.4       1,048.6       1,117.5       1,119.2     861.8       712.20

Junior subordinated debentures issued to affiliated trusts

    335.9     341.1       339.8       341.3       392.7     474.7       745.00

Shareholders’ equity

    6,284.4     5,970.8       6,175.6       5,811.6       5,347.5     5,303.8       4,980.60

Per Common Share Data(2)

                                                 

Shareholders’ equity (including accumulated other comprehensive income)

  $ 36.23   $ 34.15     $ 35.53     $ 32.56     $ 30.10   $ 28.32     $ 26.05

Shareholders’ equity (excluding accumulated other comprehensive income)

    32.65     29.23       30.17       27.69       25.97     27.39       25.88

Market value of common stock

    52.02     47.00       46.68       40.37       31.58     48.57       47.31

(1) LNC sold its reinsurance operations for approximately $2.0 billion on December 7, 2001. Revenues for 2001 and 2000 include $1.7 billion and $1.8 billion, respectively, from the reinsurance operations.
(2) Per share amounts were affected by the retirement of 2,331,000 and 6,233,307 shares of LNC common stock for the nine month periods ended September 30, 2005 and 2004, respectively, and 7,611,910, 12,088,100, 11,278,022 and 6,222,581 shares of LNC common stock in 2004, 2002, 2001 and 2000, respectively. In addition, 4,630,318 shares of LNC common stock were issued in 2001 related to the settlement of stock purchase contracts.

 

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Selected Historical Consolidated Financial Data of Jefferson-Pilot

 

The following table shows selected historical consolidated financial data for Jefferson-Pilot. The data as of and for each of the five years ended December 31, 2004 was derived from Jefferson-Pilot’s audited consolidated financial statements. The data as of September 30, 2005 and for the nine-month periods ended September 30, 2005 and 2004 was derived from Jefferson-Pilot’s unaudited interim consolidated financial statements. In the opinion of Jefferson-Pilot’s management, the unaudited interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the interim consolidated financial statements. Results for the interim periods are not necessarily indicative of the results to be expected for the full year.

 

Detailed historical financial information is included in the audited consolidated balance sheets as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2004 included in Jefferson-Pilot’s Annual Report on Form 10-K for the year ended December 31, 2004, as well as the unaudited interim consolidated balance sheet as of September 30, 2005 and the related unaudited interim consolidated statements of operations and cash flows for the nine month periods ended September 30, 2005 and 2004 included in Jefferson-Pilot’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2005. You should read the following selected financial data together with Jefferson-Pilot’s historical consolidated financial statements, including the related notes, and the other information contained or incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 146.

 

Selected Historical Consolidated Financial Data of Jefferson-Pilot

(in millions, except per share information)

 

    Nine Months Ended
September 30,


    Year Ended December 31,

    2005

  2004

    2004

    2003

  2002

  2001

  2000

Consolidated Summaries of Operations

                                             

Total revenue

  $ 3,139.5   $ 3,034.1     $ 4,102.1     $ 3,572.9   $ 3,406.0   $ 3,322.0   $ 3,272.0

Income before cumulative effect of accounting changes

  $ 428.9   $ 417.1     $ 562.7     $ 491.6   $ 450.2   $ 511.3   $ 512.1

Cumulative effect of accounting changes

    —       (16.6 )     (16.6 )     —       —       1.5     —  
   

 


 


 

 

 

 

Net Income

  $ 428.9   $ 400.5     $ 546.1     $ 491.6   $ 450.2   $ 512.8   $ 512.1
   

 


 


 

 

 

 

Per Common Share Data

                                             

Net Income-Basic

  $ 3.17   $ 2.89     $ 3.96     $ 3.47   $ 3.07   $ 3.38   $ 3.31

Net Income-Diluted

    3.15     2.87       3.92       3.44     3.04     3.34     3.28

Common stock dividends

    1.215     1.090       1.470       1.293     1.184     1.072     0.960
    At September 30,

    At December 31,

    2005

  2004

    2004

    2003

  2002

  2001

  2000

Consolidated Balance Sheet Items

                                             

Assets

  $ 35,841.1   $ 34,645.7     $ 35,104.8     $ 32,696.3   $ 30,618.9   $ 29,005.0   $ 27,331.0

Long-term debt

    599.7     599.6       599.6       —       —       —       —  

Junior subordinated debentures issued to affiliated trusts

    309.3     309.3       309.3       309.3     309.3     —       —  

Shareholders’ equity

    3,858.2     3,829.0       3,933.9       3,805.9     3,540.0     3,390.9     3,158.7

Per Common Share Data

                                             

Shareholders’ equity (including accumulated other comprehensive income)

  $ 28.79   $ 28.05     $ 28.75     $ 27.07   $ 24.79   $ 22.61   $ 20.47

Shareholders’ equity (excluding accumulated other comprehensive income)

    25.13     23.07       23.76       22.21     20.52     19.84     18.24

Market value of common stock

    51.17     49.66       51.96       50.65     38.11     46.27     49.83

 

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Selected Unaudited Pro Forma Condensed Combined Financial Information

 

The merger will be accounted for under the purchase method of accounting, which means the assets and liabilities of Jefferson-Pilot will be recorded as of the completion of the merger, at their respective fair values, and added to those of LNC.

 

The selected unaudited pro forma condensed combined financial information that follows is intended to provide information regarding how the companies might have looked had LNC and Jefferson-Pilot actually been combined as of the dates indicated. This does not give effect to (1) LNC’s or Jefferson-Pilot’s results of operations or other transactions or developments since September 30, 2005, (2) the impact of possible revenue enhancements, expense efficiencies or synergies expected to result from the merger or contemplated share repurchases of LNC common stock, (3) the merger related costs of approximately $180 million to integrate LNC’s and Jefferson-Pilot’s operations or (4) the effects of transactions or developments that may occur subsequent to the merger, as well as other possible adjustments discussed in the notes to the Unaudited Pro Forma Condensed Combined Financial Statements. The selected unaudited pro forma condensed combined financial information should not be relied upon as being indicative of the historical results that would have occurred had the merger been consummated prior to the periods presented or the future results that may be achieved after the merger is consummated.

 

The following selected unaudited pro forma condensed combined financial information has been derived from, and should be read in conjunction with, the Unaudited Pro Forma Condensed Combined Financial Statements and related notes beginning on page 135. The Unaudited Pro Forma Condensed Combined Balance Sheet combines the historical consolidated balance sheet of LNC and the historical consolidated balance sheet of Jefferson-Pilot as of September 30, 2005, giving effect to the merger as if it had been consummated on that date. The Unaudited Pro Forma Condensed Combined Statements of Income combine the historical consolidated statements of income of LNC and Jefferson-Pilot for the nine months ended September 30, 2005 and the year ended December 31, 2004, giving effect to the merger as if it had occurred on January 1, 2004. We have adjusted the historical consolidated financial information to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable and (3) with respect to the statements of income, expected to have a continuing impact on the combined results.

 

The unaudited pro forma adjustments represent management’s estimates based on information available at this time. Actual adjustments to the combined balance sheet and statements of income will differ, perhaps materially, from those reflected in these Unaudited Pro Forma Condensed Combined Financial Statements because the assets and liabilities of Jefferson-Pilot will be recorded at their respective fair values on the date the merger is consummated and the preliminary assumptions used to estimate these fair values may change between now and the completion of the merger.

 

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Selected Pro Forma Condensed Combined Financial Data of

LNC and Jefferson-Pilot

(in millions, except share amounts)

 

     As of and for the

     Nine Months Ended
September 30, 2005


   Year Ended
December 31, 2004


Statement of Income Information

             

Total revenue

   $ 7,124    $ 9,316

Income before cumulative effect of accounting changes

   $ 1,013    $ 1,267

Per share income before cumulative effect of accounting changes

             

Basic

   $ 3.40    $ 4.18

Diluted

     3.35      4.13

Weighted average shares and share equivalents

             

Basic

     284,091,044      287,262,973

Diluted

     288,144,221      290,943,851

Balance Sheet Information (as of September 30, 2005)

             

Invested assets

   $ 72,508       

Total assets

     161,689       

Policy liabilities

     74,344       

Long-term debt

     2,399       

Shareholders’ equity

     12,780       

Common shares outstanding

     284,289,166       

 

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UNAUDITED COMPARATIVE PER SHARE DATA

 

In the following tables, LNC and Jefferson-Pilot provide, for the periods specified, income from continuing operations, cash dividends declared and book value per common share data separately for LNC and Jefferson-Pilot on a historical basis, on an unaudited pro forma combined basis per LNC common share and on an unaudited pro forma combined basis per Jefferson-Pilot equivalent common share after giving effect to the merger and the payment of the merger consideration. The pro forma amounts included in the table below are presented as if the merger had been effective for the periods presented, have been prepared in accordance with accounting principles generally accepted in the United States and are based on the purchase method of accounting. The Jefferson-Pilot pro forma equivalent earnings per share is calculated by multiplying the LNC pro forma combined earnings by the exchange ratio of 1.0906. The pro forma amounts in the tables below do not, however, give effect to (1) LNC’s or Jefferson-Pilot’s results of operations or other transactions or developments since September 30, 2005, (2) the impact of possible revenue enhancements, expense efficiencies or synergies expected to result from the merger or contemplated share repurchases of LNC common stock, (3) the merger related costs of approximately $180 million to integrate LNC’s and Jefferson-Pilot’s operations or (4) the effects of transactions or developments that may occur subsequent to the merger, as well as other possible adjustments discussed in the notes to the Unaudited Pro Forma Condensed Combined Financial Statements. This data should be read along with the historical consolidated financial statements and notes thereto of LNC and Jefferson-Pilot, which are incorporated by reference in this joint proxy statement/prospectus, and the Unaudited Pro Forma Condensed Combined Financial Statements and accompanying discussions and notes beginning on page 135. See also “Where You Can Find More Information” beginning on page 146.

 

The pro forma information is presented for illustrative purposes only. You should not rely on the pro forma financial information as an indication of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during the periods presented. The combined financial information as of and for the periods presented may have been different had the merger actually been consummated prior to, as of and during those periods.

 

    Historical
LNC


  Historical
Jefferson-Pilot


  LNC
Pro Forma
Combined


  Jefferson-Pilot
Pro Forma
Equivalent(1)


    As of and for the nine months ended September 30, 2005

Per Common Share

                       

Income before cumulative effect of accounting change

                       

Basic

  $ 3.50   $ 3.17   $ 3.40   $ 3.71

Diluted

    3.44     3.15     3.35     3.65

Dividends

    1.10     1.215     1.10     1.20

Book Value

    36.23     28.79     45.00     49.08
    As of and for the year ended December 31, 2004

Per Common Share

                       

Income before cumulative effect of accounting change

                       

Basic

  $ 4.01   $ 3.96   $ 4.18   $ 4.56

Diluted

    3.95     3.92     4.13     4.50

Dividends

    1.415     1.470     1.415     1.543

Book Value

    35.53     28.75     N/A     N/A

(1) The Jefferson-Pilot pro forma equivalent per share amounts are calculated by multiplying the LNC pro forma combined amounts per share by the exchange ratio of 1.0906.

 

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RISK FACTORS

 

We urge you to carefully consider all of the information we have included and incorporated by reference in this joint proxy statement/prospectus before you vote. See “Where You Can Find More Information” beginning on page 146. You should also read and consider the risks associated with each of the businesses of LNC and Jefferson-Pilot because these risks will also affect the resulting company. These risks can be found in the LNC and Jefferson-Pilot Annual Reports on Form 10-K for the year ended December 31, 2004 and in subsequent quarterly reports on Form 10-Q and current reports on Form 8-K, which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. In addition, we urge you to carefully consider the following material risks relating to the merger and the business of the resulting company.

 

Risks Relating to the Merger

 

We must obtain several governmental consents to complete the merger, which, if delayed, not granted or granted with unacceptable conditions may jeopardize or delay the merger, result in additional expense or reduce the anticipated benefits of the transaction.

 

We must obtain specified approvals and consents in a timely manner from federal and state governmental authorities prior to the completion of the merger. State insurance laws generally require that, prior to the acquisition of an insurance company, the acquiring party must obtain approval from the insurance commissioner of the insurance company’s state of domicile or, in certain jurisdictions, where such insurance company is commercially domiciled. If we do not receive these approvals on terms that satisfy the merger agreement, then we will not be obligated to complete the merger. The governmental authorities from which we seek approvals have broad discretion in administering relevant laws and regulations. As a condition to the approval of the merger, governmental authorities may impose requirements, limitations or costs that could negatively affect the way the combined companies conduct business. Neither LNC nor Jefferson-Pilot is obligated to complete the merger if a governmental authority, in connection with the grant of its approval or consent, imposes a condition or restriction upon LNC or Jefferson-Pilot or any of their respective subsidiaries which could reasonably be expected to have a material adverse effect after the completion of the merger on the present or prospective consolidated financial condition, business or operating results of the resulting company after the completion of the merger. If LNC and Jefferson-Pilot agree to any material conditions or restrictions in order to obtain any approvals required to complete the merger, these conditions or restrictions could adversely affect LNC’s ability to integrate the businesses of LNC and Jefferson-Pilot or reduce the anticipated benefits of the merger.

 

Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions in the businesses of LNC and Jefferson-Pilot, which could have an adverse effect on their business and financial results.

 

Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions in the businesses of LNC and Jefferson-Pilot. Specifically:

 

    current and prospective employees and agents may experience uncertainty about their future roles with the resulting company, which might adversely affect LNC’s and Jefferson-Pilot’s ability to retain key managers and other employees and agents; and

 

    the attention of management of each of LNC and Jefferson-Pilot may be directed toward the completion of the merger and not their ongoing businesses.

 

Some directors and executive officers of LNC and Jefferson-Pilot have interests and arrangements that are different from, or in addition to, those of LNC and Jefferson-Pilot shareholders.

 

When considering the recommendation of the LNC and Jefferson-Pilot boards of directors with respect to the merger, you should be aware that some directors and executive officers of LNC and Jefferson-Pilot have interests in the merger that are different from, or in addition to, their interests as shareholders and the interests of shareholders generally. These interests include:

 

    becoming executive officers or senior officers of LNC after the transaction;

 

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    payments under the Jefferson-Pilot executive severance plan which may be triggered if the executive officer’s employment terminates under certain circumstances following the merger;

 

    accelerated vesting and exercisability of Jefferson-Pilot stock options issued under Jefferson-Pilot’s equity compensation plans — Jefferson-Pilot’s seven current executive officers and ten current non-management directors currently hold, in the aggregate, 752,001 and 59,578 unvested stock options, respectively, with a weighted average exercise price of $49.75 per share; and

 

    appointment of eight LNC directors and seven Jefferson-Pilot directors to the LNC board of directors following the merger.

 

For example, Mr. Boscia will be Chairman and Chief Executive Officer of the resulting company and can only be removed by approval of 70% of the directors, and Mr. Glass will be President and Chief Operating Officer of the resulting company.

 

As a result of these interests, these directors and executive officers may be more likely to support and to vote to approve the merger agreement and the plan of merger contained therein than if they did not have these interests. Shareholders should consider whether these interests may have influenced those directors and executive officers to support or recommend approval of the merger. As of the close of business on the record date for the LNC special meeting, LNC directors and executive officers were entitled to vote less than one percent of the then outstanding shares of LNC common stock and LNC Series A preferred stock. As of the close of business on the record date for the Jefferson-Pilot special meeting, Jefferson-Pilot directors and executive officers were entitled to vote less than one percent of the then outstanding shares of Jefferson-Pilot common stock. See “The Merger — Interests of Directors and Executive Officers in the Merger” beginning on page 84.

 

The value of the LNC common stock that Jefferson-Pilot shareholders receive in the merger may be less than the value of such LNC common stock on the date on which the merger was publicly announced, on the date on which you vote or on the date on which Jefferson-Pilot shareholders make their cash/stock election. Further, at the special meetings, shareholders will not know the exact value of the LNC common stock that will be issued in the merger.

 

At the effective time of the merger, each outstanding share of Jefferson-Pilot common stock will be converted into the right to receive 1.0906 shares of LNC common stock or $55.96 in cash. The ratio at which the shares will be converted is fixed and any changes in the price of LNC common stock will affect the value of the shares of LNC common stock that Jefferson-Pilot shareholders receive in the merger such that, if the price of LNC common stock declines prior to completion of the merger, the value of the stock consideration to be received by Jefferson-Pilot shareholders will decrease. Stock price variations could be the result of changes in the business, operations or prospects of LNC, Jefferson-Pilot or the resulting company, market assessments of the likelihood that the merger will be completed within the anticipated time or at all, general market and economic conditions, regulatory considerations and other factors which are beyond the control of LNC and Jefferson-Pilot.

 

LNC and Jefferson-Pilot are working to complete the merger as quickly as possible. However, the time period between the shareholder votes taken at the special meetings and the completion of the merger will depend upon the timing and status of the insurance regulatory approvals that must be obtained prior to the completion of the merger and the satisfaction or waiver of the other conditions described in this joint proxy statement/prospectus, and there is currently no way to predict with certainty how long it will take to obtain these approvals. Because the date when the merger is completed will be later than the date of the special meetings, LNC and Jefferson-Pilot shareholders will not know the exact value of the LNC common stock that will be issued in the merger at the time they vote on the merger proposals or at the time Jefferson-Pilot shareholders make their cash/stock elections.

 

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Jefferson-Pilot shareholders may receive a form of merger consideration different from what they elect.

 

While each Jefferson-Pilot shareholder may elect to receive LNC common stock or cash in the merger, the amount of cash to be exchanged for Jefferson-Pilot common stock, in the aggregate, is fixed at $1.8 billion. As a result, if either a cash or stock election proves to be more popular among Jefferson-Pilot shareholders, and you choose the election that is more popular, you might receive a portion of your consideration in the form that you did not elect.

 

If you deliver your shares of Jefferson-Pilot common stock in order to make an election, you will not be able to sell those shares, unless you revoke your election prior to the election deadline.

 

If you are a Jefferson-Pilot shareholder and want to make a cash or stock election, you will have to deliver your stock certificate(s), if any, and a properly completed and signed form of election to the exchange agent by the election deadline, which is March 28, 2006 unless we extend it. For further details on how we may extend the election deadline see “The Merger Agreement — Elections — Form of Election” beginning on page 99. You will not be able to sell any shares of Jefferson-Pilot common stock that you have delivered in connection with your election unless you revoke your election before the deadline by providing written notice to the exchange agent. If you do not revoke your election, you will not be able to liquidate your investment in Jefferson-Pilot common stock for any reason until you receive cash and/or LNC common stock in the merger. In the time between the delivery of your shares and the closing of the merger, the trading price of Jefferson-Pilot common stock or LNC common stock may decrease, and you might otherwise want to sell your shares of Jefferson-Pilot to gain access to cash, make other investments or reduce the potential for a decrease in the value of your investment.

 

The date that you will receive your merger consideration depends on the completion date of the merger, which is expected to be at the beginning of the second quarter of 2006. The completion date of the merger might be later than expected due to unforeseen events, such as delays in obtaining regulatory approvals.

 

You will not know whether you will have taxable gain in connection with the merger until after you vote and make your election. If you have taxable gain, you may have to pay a greater amount of taxes than you expect in connection with the merger.

 

Jefferson-Pilot shareholders will vote on the transaction and return their merger consideration forms of election prior to the allocation of LNC common stock and cash in the merger. Because Jefferson-Pilot shareholders may receive a different amount of cash and LNC common stock than they elect to receive in the merger, a Jefferson-Pilot shareholder may not know the specific United States federal income tax consequences of the merger at the time such shareholder votes on the transaction. If a Jefferson-Pilot shareholder receives more cash than expected in connection with the merger, the shareholder may recognize an unanticipated taxable gain for United States federal income tax purposes and have to pay a greater amount of taxes than expected in connection with the merger. See “Material United States Federal Income Tax Considerations” beginning on page 93.

 

The merger agreement limits LNC’s and Jefferson-Pilot’s ability to pursue an alternative acquisition proposal to the merger and requires LNC or Jefferson-Pilot to pay a termination fee of up to $300 million if it does.

 

The merger agreement prohibits LNC and Jefferson-Pilot from initiating, soliciting, encouraging or facilitating certain alternative acquisition proposals with any third party, subject to exceptions set forth in the merger agreement. See “The Merger Agreement — Principal Covenants and Agreements — No Solicitation” beginning on page 106. The merger agreement also provides for the payment by LNC or Jefferson-Pilot of a termination fee of up to $300 million if the merger agreement is terminated in certain circumstances in connection with a third party completing an alternative acquisition. See “The Merger Agreement — Termination Events and Termination Fees” beginning on page 109.

 

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These provisions limit LNC’s and Jefferson-Pilot’s ability to pursue offers from third parties that could result in greater value to LNC’s or Jefferson-Pilot’s shareholders. The obligation to pay the termination fee also may discourage a third party from pursuing an alternative acquisition proposal.

 

The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the market price of LNC common stock or Jefferson-Pilot common stock to decline.

 

The merger is subject to customary conditions to closing, including the receipt of required regulatory approvals and approvals of the LNC and Jefferson-Pilot shareholders. If any condition to the merger is not satisfied or waived, to the extent permitted by law or stock exchange rule, the merger will not be completed. In addition, LNC and Jefferson-Pilot may terminate the merger agreement under certain circumstances. If LNC and Jefferson-Pilot do not complete the merger, the market price of LNC common stock or Jefferson-Pilot common stock may fluctuate to the extent that the current market prices of those shares reflect a market assumption that the merger will be completed. Further, whether or not the merger is completed, LNC and Jefferson-Pilot will also be obligated to pay certain investment banking, financing, legal and accounting fees and related expenses in connection with the merger, which could negatively impact results of operations when incurred. In addition, neither company would realize any of the expected benefits of having completed the merger. If the merger is not completed, LNC and Jefferson-Pilot cannot assure their respective shareholders that additional risks will not materialize or not materially adversely affect the business, financial results, financial condition and stock prices of LNC or Jefferson-Pilot.

 

Risks Related to the Resulting Company’s Operations After the Completion of the Merger

 

The anticipated benefits of combining LNC and Jefferson-Pilot may not be realized.

 

LNC and Jefferson-Pilot entered into the merger agreement with the expectation that the merger would result in various benefits including, among other things, benefits relating to enhanced revenues, a strengthened market position for the resulting company in its businesses, cross-selling opportunities, cost savings and operating efficiencies. Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether LNC and Jefferson-Pilot are integrated in an efficient and effective manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially impact the resulting company’s business, financial condition and operating results.

 

The resulting company may have difficulty integrating Jefferson-Pilot and LNC and may incur substantial costs in connection with the integration.

 

The resulting company may experience material unanticipated difficulties or expenses in connection with integrating Jefferson-Pilot and LNC, especially given the relatively large size of the merger. Integrating Jefferson-Pilot and LNC will be a complex, time-consuming and expensive process. Before the merger, LNC and Jefferson-Pilot operated independently, each with its own business, products, customers, employees, culture and systems.

 

The resulting company may face substantial difficulties, costs and delays in integrating Jefferson-Pilot and LNC. These factors may include:

 

    perceived adverse changes in product offerings available to clients or client service standards, whether or not these changes do, in fact, occur;

 

    conditions imposed by regulators in connection with their decisions whether to approve the merger;

 

    potential charges to earnings resulting from the application of purchase accounting to the transaction;

 

    the retention of existing clients, key portfolio managers, sales representatives and wholesalers of each company; and

 

    retaining and integrating management and other key employees of the resulting company.

 

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After the merger, we may seek to combine certain operations and functions using common information and communication systems, operating procedures, financial controls and human resource practices, including training, professional development and benefit programs. We may be unsuccessful or delayed in implementing the integration of these systems and processes.

 

Any one or all of these factors may cause increased operating costs, worse than anticipated financial performance or the loss of clients, employees and agents. Many of these factors are outside the control of either company.

 

Interest rate risk exposure of each company will add risk for LNC and Jefferson-Pilot shareholders; equity market risk exposure of LNC will add risk for Jefferson-Pilot shareholders.

 

Because each of Jefferson-Pilot and LNC has exposures to certain market risks, Jefferson-Pilot and LNC shareholders will, upon completion of the merger, have greater exposure to interest rate and equity market risks than they did in the past.

 

LNC’s and Jefferson-Pilot’s financial position and earnings are each subject to risks resulting from changes in interest rates. Accordingly, the shareholders of the resulting company will continue to be subject to significant interest rate risk exposure.

 

Some of LNC’s and Jefferson-Pilot’s products, principally fixed annuities and interest-sensitive whole life, universal life and the fixed portion of variable universal life insurance, expose them to the risk that changes in interest rates will reduce the “spread,” or the difference between the amounts that they are required to pay under the contracts and the amounts they are able to earn on their general account investments intended to support their obligations under the contracts. Therefore, in periods of declining interest rates, the resulting company will have to reinvest the cash it receives as interest or return of principal on its investments in lower yielding instruments then available. Moreover, borrowers may prepay fixed-income securities, commercial mortgages and mortgage-backed securities in its general account in order to borrow at lower market rates, which exacerbates this risk. Because many policies have guaranteed minimum interest or crediting rates and permit a reset of the interest rates only at limited, pre-established intervals, the resulting company’s spreads could decrease and potentially become negative. Declines in the spread from these products could have a material adverse effect on the business or results of operations of the resulting company.

 

In contrast, in periods of increasing interest rates, the resulting company may not be able to replace the assets in its general account with higher yielding assets needed to fund the higher crediting rates necessary to keep its interest sensitive products competitive. It therefore may have to accept a lower spread and thus lower profitability or face a decline in sales and greater loss of existing contracts and related assets. A sudden demand among consumers to change product types or withdraw funds could lead the resulting company to sell assets at a loss to meet the demand for funds. This may cause investment assets to be sold at a time when the prices of those assets are lower because of the increase in market interest rates, which may result in realized investment losses. In addition, unanticipated withdrawals and terminations also may require the resulting company to accelerate the amortization of deferred acquisition costs (DAC), which would increase the current expenses of the resulting company and reduce net income.

 

LNC’s profitability is subject to risks resulting from declines in equity markets. The fee revenue that LNC earns on equity-based variable annuities, unit-linked accounts, variable universal life insurance policies and investment advisory business, is based upon account values. A weakening of the equity markets results in lower account values, weak equity markets negatively affect LNC’s net income through lower fee revenue and, depending upon the significance of the drop in the equity markets, may result in higher net expenses associated with DAC, deferred sales inducements (DSI), the value of business acquired (VOBA) and deferred front-end sales loads (DFEL) associated with LNC’s products. Furthermore, a decrease in the equity markets will increase the net amount at risk under the guaranteed minimum death benefit, which has the effect of increasing the amount of guaranteed minimum death benefit (GMDB) reserves that LNC must carry. After the merger, Jefferson-Pilot shareholders will have greater exposure to these risks with respect to LNC’s business.

 

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Jefferson-Pilot’s communications business faces risks, which are significantly different from the risks facing LNC’s and Jefferson-Pilot’s insurance businesses.

 

The communications business of Jefferson-Pilot relies on advertising revenues, and therefore is sensitive to cyclical changes in both the general economy and in the economic strength of local markets. Also, its stations derived nearly 25% of their 2004 and year-to-date 2005 advertising revenues from the automotive industry. If automobile advertising is severely curtailed, it could have a negative impact on broadcasting revenues. For the nine-month period ended September 30, 2005, 7.3% of television revenues came from a network agreement with two CBS-affiliated stations that expires in 2011. The trend in the industry is away from the networks compensating affiliates for carrying their programming and there is a possibility those revenues will be eliminated when the contract is renewed. Technological media changes, such as satellite radio and the internet, and consolidation in the broadcast and advertising industries, may increase competition for audiences and advertisers. The communications business has commitments for purchases of syndicated television programming and commitments for other contracts and future sports programming rights, payable through 2011. These commitments are not reflected as an asset or liability in Jefferson-Pilot’s balance sheet because the programs are not currently available for use and will remain commitments of the resulting company. If sports programming advertising revenue decreases in the future, the commitments may have a material adverse effect on the results of operations of this business.

 

Anti-takeover provisions could delay, deter or prevent a change in control of LNC even if the change in control would be beneficial to LNC shareholders.

 

LNC is an Indiana corporation subject to Indiana state law. Certain provisions of Indiana law could interfere with or restrict takeover bids or other change in control events affecting LNC. Also, provisions in LNC’s articles of incorporation, bylaws as amended upon completion of the merger and other agreements to which LNC is a party could delay, deter or prevent a change in control of LNC, even if a change in control would be beneficial to shareholders. In addition, under Indiana law, directors may, in considering the best interests of a corporation, consider the effects of any action on stockholders, employees, suppliers and customers of the corporation and the communities in which offices and other facilities are located, and other factors the directors consider pertinent. One statutory provision prohibits, except under specified circumstances, LNC from engaging in any business combination with any shareholder who owns 10% or more of LNC’s common stock (which shareholder, under the statute, would be considered an “interested shareholder”) for a period of five years following the time that such shareholder became an interested shareholder, unless such business combination is approved by the board of directors prior to such person becoming an interested shareholder. In addition, LNC’s articles of incorporation contain a provision requiring holders of at least three-fourths of the voting shares of LNC then outstanding and entitled to vote at an election of directors, voting together, to approve such a transaction rather than the simple majority required under Indiana law. See “Description of LNC Capital Stock — Anti-Takeover Considerations” beginning on page 118.

 

In addition to the anti-takeover provisions of Indiana law, there are other factors that may delay, deter or prevent a change in control of LNC. After the merger, LNC will continue to be regulated as an insurance holding company and will continue to be subject to the insurance holding company acts of the states in which LNC’s and Jefferson-Pilot’s insurance company subsidiaries are domiciled. The insurance holding company acts and regulations restrict the ability of any person to obtain control of an insurance company without prior regulatory approval. Under those statutes and regulations, without such approval (or an exemption), no person may acquire any voting security of a domestic insurance company, or an insurance holding company which controls an insurance company, or merge with such a holding company, if as a result of such transaction such person would “control” the insurance holding company or insurance company. “Control” is generally defined as the direct or indirect power to direct or cause the direction of the management and policies of a person and is presumed to exist if a person directly or indirectly owns or controls 10% or more of the voting securities of another person.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Except for historical information contained or incorporated by reference in this joint proxy statement/ prospectus, statements made or incorporated by reference in this joint proxy statement/prospectus are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which is referred to as the PSLRA. A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: “believe,” “anticipate,” “expect,” “estimate,” “project,” “will,” “shall” and other words or phrases with similar meaning. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

 

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results contained in the forward-looking statements. Risks and uncertainties that may cause actual results to vary materially, some of which are described within the forward-looking statements include, among others:

 

    we may not obtain the approval of LNC and/or Jefferson-Pilot shareholders at their respective special meetings;

 

    we may be unable to obtain regulatory approvals required for the merger, or required regulatory approvals may delay the merger or result in the imposition of conditions that could have a material adverse effect on the resulting company or cause us to abandon the merger;

 

    we may be unable to complete the merger or completing the merger may be more costly than expected because, among other reasons, conditions to the closing of the merger may not be satisfied;

 

    problems may arise with the ability to successfully integrate LNC’s and Jefferson-Pilot’s businesses, which may result in the resulting company not operating as effectively and efficiently as expected;

 

    the resulting company may not be able to achieve the expected synergies from the merger or it may take longer than expected to achieve those synergies;

 

    the merger may involve unexpected costs or unexpected liabilities, or the effects of purchase accounting may be different from our expectations;

 

    the lowering of one or more of the credit ratings of the resulting company or its subsidiaries may have an adverse impact on the resulting company’s or its subsidiaries’ ability to raise capital and on its liquidity and financial condition;

 

    the lowering of one or more of the insurer financial strength ratings of the resulting company’s insurance subsidiaries may have an adverse impact on the premium writings, policy retention and profitability of our insurance subsidiaries or the resulting company;

 

    the actual financial position and results of operations of the resulting company may differ significantly from the pro forma financial data contained in this joint proxy statement/prospectus;

 

    future legislative, regulatory or tax changes, both domestic and foreign, may affect the cost of, or demand for, the resulting company’s 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 38, restrictions on revenue sharing and 12b-1 payments, and the potential for United States federal tax reform;

 

    the initiation of legal or regulatory proceedings against the resulting company 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 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 which change the law; and (d) unexpected trial court rulings;

 

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    changes in future interest rates and reductions in or continued low interest rates may cause a reduction of investment income, the margins of our fixed annuity and life insurance businesses and demand for our products;

 

    future declines in the equity market may cause a reduction in the sales of the resulting company’s products, a reduction of asset fees that we charge on various investment and insurance products, an acceleration of amortization of DAC, VOBA, DSI and DFEL and an increase in liabilities related to guaranteed benefit features of our variable annuity products;

 

    the resulting company’s various hedging strategies may not be effective to offset the impact of changes in the equity markets;

 

    a deviation in actual experience regarding future persistency, mortality, morbidity, interest rates and equity market returns from the assumptions used in pricing products, in establishing related insurance reserves and in the amortization of intangibles that may result in an increase in reserves and/or a decrease in net income;

 

    competitive conditions that may affect the level of premiums and fees that the resulting company will be able to charge for our products;

 

    uncertainties with respect to capital market conditions which may increase the costs of permanent financing to fund the cash portion of the merger consideration and may impair LNC’s ability to execute on contemplated share repurchases;

 

    future loss of key management, portfolio managers, sales representatives or wholesalers; and

 

    future changes in general economic or business conditions, both domestic and foreign, that may be less favorable than expected and may affect premium levels, claims experience, the level of pension benefit costs and funding, investment results and foreign exchange rates.

 

The risks included here are not exhaustive. The annual reports on Form 10-K, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other documents filed by LNC and Jefferson-Pilot with the SEC and incorporated herein by reference include additional factors which could impact our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors.

 

Further, it is not possible to assess the impact of all risk factors on our or the resulting company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this joint proxy statement/prospectus, except as may be required by law.

 

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THE LNC SPECIAL MEETING

 

General

 

This joint proxy statement/prospectus is being provided to LNC shareholders as part of a solicitation of proxies by the LNC board of directors for use at the LNC special meeting and at any adjournment thereof. This joint proxy statement/prospectus provides LNC shareholders with the information they need to know to be able to vote or instruct their vote to be cast at the LNC special meeting.

 

Date, Time and Place of the LNC Special Meeting

 

The LNC special meeting will be held at 10:00 a.m., local time, on March 20, 2006, at the offices of Delaware Investments, Inc., Second Floor Auditorium, Two Commerce Square, 2001 Market Street, Philadelphia, Pennsylvania.

 

Purposes of the LNC Special Meeting

 

At the LNC special meeting, LNC shareholders will be asked:

 

    to approve the issuance of shares of LNC common stock pursuant to the merger agreement;

 

    to approve adjournments of the LNC special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the LNC special meeting to approve the above proposal; and

 

    to consider and vote upon other matters that may properly be submitted to a vote at the LNC special meeting or any reconvened meeting following an adjournment of the special meeting.

 

Record Date; Shares Entitled to Vote; Outstanding Shares

 

The record date for the meeting for LNC shareholders was February 3, 2006. This means that you must have been a shareholder of record of LNC common stock or LNC Series A preferred stock at the close of business on February 3, 2006 in order to vote at the special meeting. You are entitled to one vote for each share of LNC common stock and LNC Series A preferred stock you own on the record date. On LNC’s record date, LNC had 174,159,561 shares of LNC common stock and 15,335 shares of LNC Series A preferred stock outstanding.

 

A complete list of LNC shareholders entitled to vote at the LNC special meeting will be available for inspection at the executive offices of LNC during regular business hours for a period of at least five business days before the special meeting.

 

Quorum and Voting Rights

 

A quorum of shareholders is necessary to hold a valid special meeting of LNC. A majority of all outstanding shares of LNC entitled to vote and present, in person or by proxy, at the special meeting constitutes a quorum. All shares of LNC common stock and LNC Series A preferred stock represented at the special meeting, including abstentions and broker non-votes, will be counted for purposes of determining whether a quorum is present. “Broker non-votes” are shares held by a broker that are represented at the meeting, but with respect to which the beneficial owner has not instructed the broker on the particular proposal and the broker does not have discretionary voting power on such proposal. Once a share is represented for any purpose at the special meeting, it will be deemed present for quorum purposes for the remainder of the meeting (including any meeting resulting from an adjournment of the special meeting, unless a new record date is set). For purposes of voting on each of the proposals set forth below, the owners of shares of LNC common stock and LNC Series A preferred stock vote together as one class.

 

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The votes required to approve the respective proposals at the LNC special meeting are:

 

    Approval of the issuance of shares of LNC common stock pursuant to the merger agreement requires the approval of a majority of the votes cast on the proposal by the holders of LNC common stock and LNC Series A preferred stock, voting together as a single class, provided that the total votes cast on the proposal represent over 50% of all securities entitled to vote on the proposal.

 

    Approval of adjournments of the LNC special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the LNC special meeting to approve the above proposal requires the affirmative vote of a majority of the votes cast on the proposal, present in person or represented by proxy and entitled to vote at the LNC special meeting.

 

For a discussion of how broker non-votes and abstentions will affect the outcome of the vote on these proposals, see “— Voting; Proxies — Voting Shares Held in ‘Street Name’” beginning on page 35 and “—Voting; Proxies — Abstaining from Voting” beginning on page 35.

 

ITEM 1 — THE ISSUANCE OF SHARES OF LNC COMMON STOCK PURSUANT TO THE MERGER AGREEMENT

 

As discussed elsewhere in this joint proxy statement/prospectus, LNC shareholders are considering and voting on a proposal to approve the issuance of shares of LNC common stock pursuant to the merger agreement. You should carefully read this joint proxy statement/prospectus in its entirety for more detailed information concerning the merger agreement and the merger. You are also urged to read the merger agreement, a composite copy of which is attached to this joint proxy statement/prospectus as Annex A.

 

The LNC board of directors recommends that LNC shareholders vote FOR the issuance of LNC common stock pursuant to the merger agreement.

 

ITEM 2 — APPROVE ADJOURNMENTS OF THE SPECIAL MEETING, IF NECESSARY, TO PERMIT FURTHER SOLICITATION OF PROXIES

 

Shareholders may be asked to vote on a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal. See the discussion regarding adjournments below in “— Adjournments” beginning on page 37.

 

The LNC board of directors recommends that LNC shareholders vote FOR the proposal to adjourn, if necessary, the LNC special meeting.

 

Voting by LNC’s Directors and Executive Officers

 

As of the record date for the LNC special meeting, LNC’s directors and executive officers and their affiliates had the right to vote approximately 455,387 shares of the then outstanding LNC common stock at the LNC special meeting, which represented less than one percent of the LNC common stock outstanding and entitled to vote at the meeting. No LNC director or executive officer or their affiliates beneficially owned any shares of LNC Series A preferred stock.

 

Voting; Proxies

 

You may vote in person at the LNC special meeting or by proxy. We recommend you vote by proxy even if you plan to attend the special meeting. If you vote by proxy, you may change your vote if you attend the special meeting. If you own LNC common stock or LNC Series A preferred stock in your own name, you are an “owner of record.” This means that you may use the enclosed proxy/voting instruction card(s) to tell the persons named

 

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as proxies how to vote your shares. If you properly complete, sign and date your proxy/voting instruction card(s), or vote by telephone or over the Internet, your proxy will be voted in accordance with your instructions. The named proxies will vote all shares at the meeting that have been properly voted (whether by Internet, telephone or mail) and not revoked. If you sign and return your proxy/voting instruction card(s) but do not mark your card(s) to tell the proxies how to vote your shares on each proposal, your proxy will be voted FOR each of the proposals presented.

 

If you hold LNC shares in a stock brokerage account or through a broker, bank or other nominee, or, in other words, in “street name,” please follow the voting instructions provided by your broker, bank or other nominee. Also, see “— Voting Shares Held in ‘Street Name’ ” beginning on page 35.

 

If you participate in LNC’s Employees’ Savings and Profit-Sharing Plan or The Lincoln National Life Insurance Company Agents’ Savings and Profit-Sharing Plan, your proxy/voting instruction card(s) will include the LNC common stock allocated to your accounts in that plan. You may instruct the plan trustee on how to vote your shares by signing, dating and mailing the enclosed proxy/voting instruction card(s), or by submitting your voting instructions by telephone or over the Internet. The plan trustee will vote your shares in accordance with your instructions and the terms of the plans. If you participate in one of these plans and fail to vote, the plan trustee will vote your shares in the same proportion as it votes the shares for which it receives instructions from other plan participants. Your voting instructions must be received by 11:59 p.m. (E.S.T.) on March 17, 2006.

 

If you participate in LNC’s Dividend Reinvestment Plan, your proxy/voting instruction card(s) will also include the LNC common stock allocated to your accounts in that plan. To vote your shares in that plan, sign, date and mail the enclosed proxy/voting instruction card(s) or submit your voting instructions by telephone or over the Internet, as instructed on your proxy/voting instruction card(s).

 

Voting Shares Held in “Street Name”

 

Generally, a broker, bank or other nominee may only vote the common stock that it holds in “street name” for you in accordance with your instructions. However, if your broker has not received your instructions, your broker has the discretion to vote on certain matters that are considered routine.

 

If you wish to vote on the proposal to approve the issuance of LNC common stock in connection with the merger, you must provide instructions to your broker because this proposal is not routine. If you do not provide your broker with instructions, your broker will not be authorized to vote on the proposal to approve the issuance of LNC common stock in connection with the merger. These broker non-votes are not counted as votes cast on the proposal or as votes cast for purposes of determining whether 50% of all votes entitled to be cast on the proposal have been cast. However, they will be deemed as votes present for quorum purposes.

 

If you wish to vote on any proposal to approve adjournments of the LNC special meeting, you should provide instructions to your broker. If you do not provide instructions to your broker, your broker generally will have the authority to vote on proposals such as the adjournment of meetings. However, your broker will not be authorized to vote on any proposal to adjourn the special meeting solely relating to the solicitation of proxies to approve the issuance of shares of LNC common stock pursuant to the merger agreement.

 

Abstaining from Voting

 

Your abstention from voting will have the following effects:

 

    Abstentions will have the same effect as a vote against the approval of the issuance of shares of LNC common stock pursuant to the merger agreement. Abstentions will, however, increase the percentage of votes cast on the proposal and thus could have the effect of causing the proposal to pass if the majority of the votes otherwise cast on the proposal have been voted in favor of the proposal and the abstentions cause the percentage of votes cast on the proposal to total more than 50% of the outstanding shares.

 

    Abstentions will have no effect on any proposal to approve adjournments of the LNC special meeting.

 

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How to Vote

 

You have three voting options:

 

    Internet: You can vote over the Internet at the Internet address shown on your proxy/voting instruction card(s). Internet voting is available 24 hours a day. If you vote over the Internet, do not return your proxy/voting instruction card(s).

 

    Telephone: You can vote by telephone by calling the toll-free number on your proxy/voting instruction card(s). Telephone voting is available 24 hours a day. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by telephone, do not return your proxy/voting instruction card(s).

 

    Mail: You can vote by mail by simply signing, dating and mailing your proxy/voting instruction card(s) in the postage-paid envelope included with this joint proxy statement/prospectus.

 

A number of brokerage firms and banks participate in a program that also permits shareholders whose shares are held in “street name” to direct their vote over the Internet or by telephone. This option, if available, will be reflected in the voting instructions from the brokerage firm or bank that accompany this joint proxy statement/prospectus. If your shares are held in an account at a brokerage firm or bank that participates in such a program, you may direct the vote of these shares by the Internet or telephone by following the voting instructions enclosed with the proxy form from the brokerage firm or bank. Directing the voting of your shares will not affect your right to vote in person if you decide to attend the LNC special meeting; however, you must first obtain a signed and properly executed legal proxy from your broker, bank or other nominee to vote your shares held in “street name” at the special meeting. Requesting a legal proxy will automatically cancel any voting directions you have previously given to your broker, bank or other nominee by the Internet or by telephone with respect to your shares.

 

Revoking Your Proxy

 

You can revoke your proxy at any time before its exercise by:

 

    sending a written notice to the Corporate Secretary of LNC, at Centre Square West Tower, 1500 Market St., Suite 3900, Philadelphia, Pennsylvania 19102, bearing a date later than the date of the proxy, that is received prior to the LNC special meeting and states that you revoke your proxy;

 

    voting again over the Internet or by telephone;

 

    signing another proxy/voting instruction card(s) bearing a later date and mailing it so that it is received prior to the LNC special meeting; or

 

    attending the LNC special meeting and voting in person, although attendance at the special meeting will not, by itself, revoke a proxy.

 

If your shares are held in “street name,” you will need to contact your broker, bank or other nominee to revoke your proxy.

 

Other Voting Matters

 

Voting in Person

 

If you plan to attend the LNC special meeting and wish to vote in person, we will give you a ballot at the special meeting. However, if your shares are held in “street name,” you must first obtain a legal proxy authorizing you to vote the shares in person, which you must bring with you to the special meeting.

 

Electronic Access to Proxy Materials

 

This joint proxy statement/prospectus is available on the SEC’s Internet site at www.sec.gov or on LNC’s Internet site at www.lfg.com or at www.lfgjpmerger.com.

 

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Proxy Solicitations

 

LNC is soliciting proxies for the LNC special meeting from LNC shareholders. LNC will bear the entire cost of soliciting proxies from LNC shareholders, except that LNC and Jefferson-Pilot will share equally the expenses incurred in connection with the filing of the registration statement of which this joint proxy statement/prospectus forms a part with the SEC and the printing and mailing of this joint proxy statement/prospectus. In addition to this mailing, LNC’s directors, officers and employees (who will not receive any additional compensation for their services) may solicit proxies personally, electronically or by telephone. LNC has also engaged Georgeson Shareholder Communications, Inc., for a fee of $15,000 plus reimbursement of expenses, to assist in the solicitation of proxies. LNC and its proxy solicitor will also request that banks, brokerage houses and other custodians, nominees and fiduciaries send proxy materials to the beneficial owners of LNC common stock and LNC Series A preferred stock and will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in doing so. The extent to which these proxy-soliciting efforts will be necessary depends upon how promptly proxies are submitted. You should promptly vote by telephone or over the Internet or submit your completed proxy/voting instruction card(s) by mail.

 

Adjournments

 

If a quorum is not present at the special meeting, the chairman of the meeting will have the authority to adjourn the special meeting to solicit additional proxies without the approval of shareholders. If a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the issuance of LNC common stock pursuant to the merger agreement, holders of LNC common stock and LNC Series A preferred stock may be asked to vote on a proposal to approve the adjournment of the special meeting to permit further solicitation of proxies. Approval by a majority of the votes cast on the proposal to adjourn the meeting will be required. In addition, if the new date, time or place of the new meeting is not given at the adjourned meeting or if after the adjournment a new record date is fixed for an adjourned meeting, which it must be if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting, notice of the adjourned meeting must be given to each shareholder of record entitled to vote at such special meeting.

 

Assistance

 

If you need assistance in completing your proxy/voting instruction card(s) or have questions regarding LNC’s special meeting, please contact Georgeson Shareholder Communications, Inc., LNC’s proxy solicitor, at (888) 666-2572 (toll free) or write to Georgeson Shareholder Communications, Inc., 17 State Street, New York, New York 10004.

 

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THE JEFFERSON-PILOT SPECIAL MEETING

 

General

 

This joint proxy statement/prospectus is being provided to Jefferson-Pilot shareholders as part of a solicitation of proxies by the Jefferson-Pilot board of directors for use at the Jefferson-Pilot special meeting and at any adjournment thereof. In addition, this joint proxy statement/prospectus is being furnished to Jefferson-Pilot shareholders as a prospectus for LNC in connection with its issuance of shares of LNC common stock to Jefferson-Pilot shareholders in connection with the merger. This joint proxy statement/prospectus provides Jefferson-Pilot shareholders with the information they need to know to be able to vote or instruct their vote to be cast at the Jefferson-Pilot special meeting and to make their election as to whether they prefer to receive cash and/or LNC common stock in connection with the merger. For more information about making an election to receive cash and/or LNC common stock and the adjustments to these elections, see “The Merger Agreement — Elections” beginning on page 99.

 

Date, Time and Place of the Jefferson-Pilot Special Meeting

 

The Jefferson-Pilot special meeting will be held at 10:00 a.m., local time, on March 20, 2006, at Jefferson-Pilot’s offices, Fourth Floor, Jefferson-Pilot Building, 100 North Greene Street, Greensboro, North Carolina.

 

Purposes of the Jefferson-Pilot Special Meeting

 

At the Jefferson-Pilot special meeting, Jefferson-Pilot shareholders will be asked:

 

    to approve the merger agreement and the plan of merger contained therein;

 

    to approve adjournments of the Jefferson-Pilot special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Jefferson-Pilot special meeting to approve the above proposal; and

 

    to consider and take action upon any other business that may properly come before the Jefferson-Pilot special meeting or any reconvened meeting following an adjournment of the special meeting.

 

Record Date; Shares Entitled to Vote; Outstanding Shares

 

The record date for the meeting for Jefferson-Pilot shareholders was February 3, 2006. This means that you must have been a shareholder of record of Jefferson-Pilot’s common stock at the close of business on that date in order to vote at the special meeting. You are entitled to one vote for each share of Jefferson-Pilot common stock you own. On Jefferson-Pilot’s record date, Jefferson-Pilot had 134,622,773 shares of Jefferson-Pilot common stock outstanding.

 

A complete list of Jefferson-Pilot shareholders entitled to vote at the Jefferson-Pilot special meeting will be available for inspection at the executive offices of Jefferson-Pilot during regular business hours for at least five business days before the special meeting.

 

Quorum and Voting Rights

 

A quorum of shareholders is necessary to hold a valid special meeting of Jefferson-Pilot. A majority of all outstanding shares of Jefferson-Pilot entitled to vote and present, in person or by proxy, at the special meeting constitutes a quorum. All shares of Jefferson-Pilot common stock represented at the special meeting, including abstentions and broker non-votes, will be counted for purposes of determining whether a quorum is present. Once a share is represented for any purpose at the special meeting, it will be deemed present for quorum purposes for the remainder of the meeting (including any meeting resulting from an adjournment of the special meeting).

 

The approval of the merger agreement and the plan of merger contained therein requires the affirmative vote of a majority of the outstanding shares of Jefferson-Pilot common stock entitled to vote at the Jefferson-Pilot special meeting.

 

For a discussion of how broker non-votes and abstentions will affect the outcome of the vote on these proposals, see “— Voting; Proxies — Voting Shares Held in ‘Street Name’ ” beginning on page 40 and “— Voting; Proxies — Abstaining from Voting” beginning on page 40.

 

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ITEM 1 — THE MERGER

 

As discussed elsewhere in this joint proxy statement/prospectus, Jefferson-Pilot shareholders are considering and voting on a proposal to approve the merger agreement and the plan of merger contained therein. You should read carefully this joint proxy statement/prospectus in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you are directed to the merger agreement, a composite copy of which is attached to this joint proxy statement/prospectus as Annex A.

 

The Jefferson-Pilot board of directors recommends that Jefferson-Pilot shareholders vote FOR the merger agreement and the plan of merger contained therein and your proxy will be so voted unless you specify otherwise.

 

ITEM 2 — APPROVE ADJOURNMENTS OF THE SPECIAL MEETING, IF NECESSARY, TO PERMIT FURTHER SOLICITATION OF PROXIES

 

Shareholders may be asked to vote on a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal. See the discussion regarding adjournments below in “— Adjournments” beginning on page 41.

 

The Jefferson-Pilot board of directors recommends that Jefferson-Pilot shareholders vote FOR the proposal to adjourn, if necessary, the Jefferson-Pilot special meeting.

 

Voting by Jefferson-Pilot’s Directors and Executive Officers

 

As of the record date for the Jefferson-Pilot special meeting, Jefferson-Pilot’s directors and executive officers and their affiliates had the right to vote approximately 500,000 shares of the then outstanding Jefferson-Pilot common stock at the Jefferson-Pilot special meeting which represented less than one percent of the Jefferson-Pilot common stock outstanding and entitled to vote at the meeting.

 

Voting; Proxies

 

You may vote in person at the Jefferson-Pilot special meeting or by proxy. We recommend you vote by proxy even if you plan to attend the special meeting. If you vote by proxy, you may change your vote if you attend the special meeting. If you own Jefferson-Pilot common stock in your own name, you are an “owner of record.” This means that you may use the enclosed proxy/voting instruction card(s) to tell the persons named as proxies how to vote your shares. If you properly complete, sign and date your proxy/voting instruction card(s), or vote by telephone or over the Internet, your proxy will be voted in accordance with your instructions. The named proxies will vote all shares at the meeting that have been properly voted (whether by Internet, telephone or mail) and not revoked. If you sign and return your proxy/voting instruction card(s) but do not mark your card(s) to tell the proxies how to vote your shares on each proposal, your proxy will be voted FOR each of the proposals presented.

 

If your Jefferson-Pilot shares are held in “street name” through a broker, bank or other nominee, please follow the voting instructions provided by your broker, bank or other nominee. Also, see “— Voting Shares Held in ‘Street Name’ ” beginning on page 40.

 

If you participate in Jefferson-Pilot’s 401(k)/TeamShare Plan or Agents’ Retirement Plan, your proxy/voting instruction card(s) will include the Jefferson-Pilot common stock allocated to your accounts in that plan. You may instruct the plan trustee on how to vote your shares by signing, dating and mailing the enclosed proxy/voting instruction card(s), or by submitting your voting instructions by telephone or over the Internet. The plan trustee will vote your shares in accordance with your instructions and the terms of the plans. If you participate in one of those plans and fail to vote, the plan trustee will vote your shares in the same proportion as it votes the shares for which it receives instructions from other participants in that plan. Your voting instructions must be received by 11:59 p.m. (E.S.T.) on March 17, 2006.

 

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If you participate in Jefferson-Pilot’s Dividend Reinvestment Plan, your proxy/voting instruction card(s) will also include the Jefferson-Pilot common stock allocated to your accounts in that plan. To vote your shares in that plan, you must, sign, date and mail the enclosed proxy/voting instruction card(s) or submit your voting instructions by telephone or over the Internet, as instructed on your proxy/voting instruction card(s).

 

Voting Shares Held in “Street Name”

 

Generally, a broker, bank or other nominee may only vote the common stock that it holds in “street name” for you in accordance with your instructions. However, if your broker has not received your instructions, your broker has the discretion to vote on certain matters that are considered routine.

 

If you wish to vote on the proposal to approve the merger agreement and the plan of merger contained therein, you must provide instructions to your broker. If you do not provide your broker with instructions, your broker will not be authorized to vote on the proposal to approve the merger agreement and the plan of merger contained therein. This broker non-vote will have the same effect as a vote against the proposal.

 

If you wish to vote on the proposal to approve adjournments of the Jefferson-Pilot special meeting, you should provide instructions to your broker. If you do not provide instructions to your broker, your broker will not be authorized to vote on any proposal to adjourn the special meeting solely relating to the solicitation of proxies to approve the merger agreement and the plan of merger contained therein.

 

Abstaining from Voting

 

Your abstention from voting will have the same effect as a vote against the proposal to approve the merger agreement and the plan of merger contained therein.

 

How to Vote

 

You have three voting options:

 

    Internet: You can vote over the Internet at the Internet address shown on your proxy/voting instruction card(s). Internet voting is available 24 hours a day. If you vote over the Internet, do not return your proxy/voting instruction card(s).

 

    Telephone: You can vote by telephone by calling the toll-free number on your proxy/voting instruction card(s). Telephone voting is available 24 hours a day. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote by telephone, do not return your proxy/voting instruction card(s).

 

    Mail: You can vote by mail by simply signing, dating and mailing your proxy proxy/voting instruction card(s) in the postage-paid envelope included with this joint proxy statement/prospectus.

 

A number of brokerage firms and banks participate in a program that also permits shareholders whose shares are held in “street name” to direct their vote over the Internet or by telephone. This option, if available, will be reflected in the voting instructions from the brokerage firm or bank that accompany this joint proxy statement/prospectus. If your shares are held in an account at a brokerage firm or bank that participates in such a program, you may direct the vote of these shares by the Internet or telephone by following the voting instructions enclosed with the proxy form from the brokerage firm or bank. Directing the voting of your shares will not affect your right to vote in person if you decide to attend the Jefferson-Pilot special meeting; however, you must first obtain a signed and properly executed legal proxy from your broker, bank or other nominee to vote your shares held in “street name” at the special meeting. Requesting a legal proxy will automatically cancel any voting directions you have previously given to your broker, bank or other nominee by the Internet or by telephone with respect to your shares.

 

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Revoking Your Proxy

 

You can revoke your proxy at any time before its exercise by:

 

    sending a written notice to the Corporate Secretary of Jefferson-Pilot, at 100 North Greene Street, Greensboro, North Carolina 27401, bearing a date later than the date of the proxy, that is received prior to the Jefferson-Pilot special meeting and states that you revoke your proxy;

 

    voting again over the Internet or by telephone;

 

    signing another proxy/voting instruction card(s) bearing a later date and mailing it so that it is received prior to the special meeting; or

 

    attending the special meeting and voting in person, although attendance at the special meeting will not, by itself, revoke a proxy.

 

If your shares are held in “street name,” you will need to contact your broker, bank or other nominee to revoke your proxy.

 

Other Voting Matters

 

Voting in Person

 

If you plan to attend the Jefferson-Pilot special meeting and wish to vote in person, we will give you a ballot at the special meeting. However, if your shares are held in “street name,” you must first obtain a legal proxy authorizing you to vote the shares in person, which you must bring with you to the special meeting.

 

Electronic Access to Proxy Materials

 

This joint proxy statement/prospectus is available on the SEC’s Internet site at www.sec.gov or on Jefferson-Pilot’s Internet site at www.jpfinancial.com or at www.lfgjpmerger.com.

 

Proxy Solicitations

 

Jefferson-Pilot is soliciting proxies for the Jefferson-Pilot special meeting from Jefferson-Pilot shareholders. Jefferson-Pilot will bear the entire cost of soliciting proxies from Jefferson-Pilot shareholders, except that LNC and Jefferson-Pilot will share equally the expenses incurred in connection with the filing of the registration statement of which this joint proxy statement/prospectus forms a part with the SEC and the printing and mailing of this joint proxy statement/prospectus. In addition to this mailing, Jefferson-Pilot’s directors, officers and employees (who will not receive any additional compensation for their services) may solicit proxies personally, electronically or by telephone. Jefferson-Pilot has also engaged Georgeson Shareholder Communications, Inc., for a fee of $20,000 plus reimbursement of expenses, to assist in the solicitation of proxies. Jefferson-Pilot and its proxy solicitor will also request that banks, brokerage houses and other custodians, nominees and fiduciaries send proxy materials to the beneficial owners of Jefferson-Pilot common stock and will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in doing so. The extent to which these proxy-soliciting efforts will be necessary depends upon how promptly proxies are submitted. You should promptly vote by telephone or over the Internet or submit your completed proxy/voting instruction card(s) by mail.

 

Shareholders should not submit any stock certificates with their proxy/voting instruction card(s).

 

Adjournments

 

If a quorum is not present at the special meeting, the chairman of the meeting will have the authority to adjourn the special meeting to solicit additional proxies without the approval of shareholders. If a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the

 

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merger agreement and the plan of merger contained therein, holders of Jefferson-Pilot common stock may also be asked to vote on a proposal to approve the adjournment of the special meeting to permit further solicitation of proxies. Approval by a majority of the votes cast on the proposal to adjourn the meeting will be required. In addition, if the new date, time or place of the new meeting is not given at the adjourned meeting or if after the adjournment a new record date is fixed for an adjourned meeting, which it must be if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting, notice of the adjourned meeting must be given to each shareholder of record entitled to vote at such special meeting.

 

Assistance

 

If you need assistance in completing your proxy/voting instruction card(s) or have questions regarding Jefferson-Pilot’s special meeting, please contact Georgeson Shareholder Communications, Inc., Jefferson-Pilot’s proxy solicitor, at (888) 277-5654 (toll free) or write to Georgeson Shareholder Communications, Inc., 17 State Street, New York, New York 10004.

 

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THE MERGER

 

The following discussion contains material information pertaining to the merger. This discussion is subject and qualified in its entirety by reference to the merger agreement and the related documents attached as Annexes to this joint proxy statement/prospectus. We urge you to read the entirety of those documents as well as the discussion in this joint proxy statement/prospectus.

 

Structure of the Merger

 

The merger agreement provides for the merger of Jefferson-Pilot with Merger Sub. Upon completion of the merger, the separate corporate existence of Jefferson-Pilot will cease and Merger Sub will continue as the surviving entity and a wholly owned subsidiary of LNC.

 

At the effective time of the merger, each issued and outstanding share of Jefferson-Pilot common stock will be converted into the right to receive either (i) 1.0906 shares of LNC common stock or (ii) $55.96 in cash, subject to the election and allocation procedures described in the merger agreement.

 

Upon completion of the merger, we estimate that Jefferson-Pilot’s former shareholders will own approximately 39% and LNC shareholders will own approximately 61% of the then outstanding shares of LNC common stock. LNC’s shareholders will continue to own their existing shares, which will not be affected by the merger. Shares of LNC common stock will continue to be listed on the NYSE under the trading symbol “LNC.” Upon completion of the merger, Jefferson-Pilot common stock, which is listed on the NYSE under the trading symbol “JP,” will be delisted.

 

Background of the Merger

 

At various times over the years, each of LNC’s and Jefferson-Pilot’s boards of directors has considered the possibility of acquisitions, combinations and other business strategies and has engaged with senior management in strategic reviews, including reviews of affiliation opportunities for their respective companies, with a goal of enhancing shareholder value. In addition, at various times over the years, senior executives of LNC and Jefferson-Pilot have engaged in informal discussions with respect to a potential business combination transaction involving the two companies. Specifically, in late-1999 to early 2000, in early 2002, and in late-2003 to early 2004, senior executives of the two companies discussed the possibility of a strategic transaction, but did not reach any agreement and ceased discussions.

 

At its regularly scheduled meeting on February 14, 2005, the Jefferson-Pilot board approved the 2005 operating plan, and agreed with management’s suggestion that management prepare an analysis of Jefferson-Pilot’s strategic alternatives to increase earnings per share in light of the low interest rate environment.

 

On April 1, 2005, Dennis R. Glass, President and Chief Executive Officer of Jefferson-Pilot, telephoned Jon A. Boscia, Chairman and Chief Executive Officer of LNC, regarding a possible strategic business combination involving LNC and Jefferson-Pilot. Messrs. Boscia and Glass agreed that they should meet to discuss such a strategic combination.

 

On April 12, 2005, Jefferson-Pilot’s management made a presentation on growth strategies to the executive committee of the Jefferson-Pilot board of directors. The executive committee consists of six members of the board, including the chairman, the CEO, the lead independent director and three other independent directors. That presentation reviewed Jefferson-Pilot’s historical growth and its current growth challenges. The potential courses of action reviewed were organic growth on a stand alone basis, pursuit of core business acquisitions to strengthen Jefferson-Pilot’s competitive position in its current business, a change in business mix by acquiring a significant new business, and a potential combination with an equal-sized or larger competitor to strengthen the core business and alter the business mix. The organic growth option also included a review of potential financial

 

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restructuring alternatives. The presentations included an analysis of potential accretion, market position and earnings mix resulting from potential acquisitions of or combinations with a number of companies in the life insurance industry. The discussion also reviewed the opportunities and risks presented by each course of action.

 

On May 6, 2005, Mr. Boscia and Mr. Glass met in Philadelphia, Pennsylvania. In general terms, they reviewed the strategic opportunities available to each company, including potential business combinations, potential acquisition opportunities and the ability of each company to maintain a stand alone strategy. Each confirmed that the other’s company was on his respective list of possible combination opportunities. No agreement on terms was reached, however, they concluded that further discussions were warranted.

 

At an LNC board of directors meeting held on May 12, 2005, Mr. Boscia advised LNC’s board of the preliminary discussions that had occurred with Mr. Glass and indicated that he would provide the board with further information regarding any proposed combination as it developed. The board of directors authorized Mr. Boscia to continue discussions with Mr. Glass concerning a proposed combination.

 

At the annual planning retreat of the Jefferson-Pilot board, which was held on May 13 and 14, 2005, management made a presentation substantially similar to the presentation (updated to reflect more current market information) made at the April 12 executive committee meeting. At that meeting, representatives of McKinsey & Company and Morgan Stanley discussed with the Jefferson-Pilot board the strategic position of Jefferson-Pilot in the life insurance industry. Mr. Glass advised the board of his preliminary discussions with Mr. Boscia. The board agreed that Mr. Glass should further explore all of the options that were analyzed in the presentation, including potential business combinations.

 

On June 27, 2005, a meeting of the LNC board of directors was held. Mr. Boscia, along with LNC’s Barbara S. Kowalczyk, Senior Vice President, Corporate Development, and Dennis L. Schoff, Senior Vice President and General Counsel, discussed strategic options, such as remaining a stand alone company or engaging in strategic transactions, and reviewed respective business and product platforms for each strategic option and possible synergies from and risks of each strategic option. The board instructed Mr. Boscia to continue to pursue the potential strategic transactions, including continuing discussions with Jefferson-Pilot.

 

On June 28, 2005, Mr. Boscia and Mr. Glass met in Greensboro, North Carolina. They discussed many of the same types of matters that were discussed by the LNC board of directors on the previous day, including the shareholder value creation opportunity that a potential combination of the two companies presented. In addition, Mr. Boscia and Mr. Glass discussed management roles should a combination occur, including discussions regarding their respective positions within the resulting organization. A general organizational design for how the resulting organization would be focused and managed was discussed, and the two CEOs agreed that both organizations would further analyze the merits and risks of the potential combination.

 

On or about June 30 and July 13, 2005, LNC informally engaged Lehman Brothers and Goldman Sachs to act as its financial advisors with respect to pursuing a strategic combination with Jefferson-Pilot and subsequently entered into engagement letters with each firm dated as of June 30, 2005.

 

During June through August 2005, Mr. Glass had several discussions with two other potential business combination candidates in addition to LNC. On June 15, 2005, Jefferson-Pilot executed a mutual confidentiality agreement with one of the two other companies with whom Mr. Glass had had preliminary discussions concerning a potential business combination, and Jefferson-Pilot received limited expense and operational data from that company. In late June 2005 Jefferson-Pilot’s management concluded that it was not willing to explore further a potential business combination with this candidate on the basis of the limited information that had been provided to it.

 

On July 7, 2005, LNC and Jefferson-Pilot executed a confidentiality agreement. Over the course of the next two weeks, LNC and Jefferson-Pilot each reviewed and analyzed certain expense and operational data of the other company in order to further evaluate the possible benefits of a potential combination, both independently and collaboratively.

 

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On or about July 15, 2005, Jefferson-Pilot informally engaged Lazard to act as its financial advisor with respect to a potential strategic combination with LNC or other potential business combination candidates, and Jefferson-Pilot and Lazard subsequently entered into an engagement letter for that purpose as of September 1, 2005.

 

At meetings of the LNC board of directors and its development committee on July 14, 2005, Mr. Boscia and Ms. Kowalczyk provided updates as to the progress of the discussions and possible timelines for a transaction. At the development committee meeting, Ms. Kowalczyk outlined the benefits and risks of a transaction with Jefferson-Pilot. Mr. Boscia and Ms. Kowalczyk discussed various organizational issues, including the chairman, CEO and chief operating officer roles of the resulting company and governance issues, including a supermajority board approval requirement for certain matters. The development committee concurred that it would be appropriate to proceed with management’s review of a potential transaction. At the board of directors meeting later that day, certain measures regarding the size and scope of the two organizations were again reviewed. Mr. Boscia and Ms. Kowalczyk described the potential benefits of a combination, including product and distribution expansion, earnings diversification, capital flexibility, scale and operating model efficiencies. They also described risks related to such a combination including, but not limited to, success of the integration, concentrations of certain product lines and related reserving requirements, including universal life with secondary guarantees and related reserves and exposure to interest rate movements and spread compression. They also discussed preliminary assumptions related to valuation and the resulting impact on earnings per share. The board of directors also discussed governance and other issues, including possible board composition, senior management balance and the potential effect of a transaction on change of control provisions in LNC benefit and compensation plans, geographic impact on employees and additional constituencies, survival of the Lincoln brand, strategic fit of the communications business and use of external advisors.

 

On July 22, 2005, senior management representatives of LNC and Jefferson-Pilot met in Atlanta, Georgia to discuss the strategies, organization and operations of their respective businesses. Based on the reviews of expense and operational data performed by their respective staffs, the representatives of LNC and Jefferson-Pilot concluded that expense synergies could be realized and that shareholder value could be significantly enhanced through a combination.

 

On July 29, 2005, Mr. Boscia and Mr. Glass spoke about the progress of each company’s management review of the proposed combination and confirmed the preliminary assessments as to nature and sources of operational integration and expected expense savings and the shareholder value that would result.

 

At the Jefferson-Pilot executive committee meeting on July 31, 2005 and the board meeting on August 1, 2005, the directors reviewed with management the terms and structure of a possible merger with LNC and the remaining company with whom Mr. Glass was continuing to have potential combination discussions, as well as other possible merger candidates with whom Jefferson-Pilot had not been in contact. The board reviewed the potential value creation of possible combination transactions, including potential accretion, expense savings and the relative market positions in the industry of the resulting entities, as well as the stand alone operations alternative.

 

The LNC board of directors met on August 1, 2005 and reviewed with management the terms and structure of a possible merger with Jefferson-Pilot. The board considered the LNC stand alone alternative and how a transaction with Jefferson-Pilot would be superior to that alternative, including its strategic fit with LNC. LNC management discussed its preliminary financial analysis of a transaction. It also reviewed the subject matter of the discussions between senior management of LNC and Jefferson-Pilot concerning deal risks, comparable transactions, potential organizational issues and next steps. At the meeting, representatives of Lehman Brothers assisted in the presentation and discussion of the proposed merger. The board of directors designated a special advisory committee of the board, consisting of four independent directors, Messrs. Tilton, Johnson, Barrett and Avery, to consult regularly with senior management and LNC’s advisors as discussions and negotiations continued. Additionally, the board instructed Mr. Boscia to contact Mr. Glass to discuss more specifically the respective roles for each CEO in the resulting organization and to outline expectations as to board continuity and composition.

 

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On August 2, 2005, Mr. Boscia and Mr. Glass spoke to discuss various aspects of the transaction. They affirmed that in a resulting organization, Mr. Boscia would be Chairman as well as Chief Executive Officer and Mr. Glass would be President and Chief Operating Officer, discussed possible board representation from LNC and Jefferson-Pilot and affirmed that a Jefferson-Pilot designated director would serve as lead director. They also discussed the name of the resulting company and the principal business locations of the resulting company, including having Greensboro serve as headquarters for the combined life operations.

 

On August 8, 2005, Mr. Boscia and Mr. Glass spoke again, to discuss the status of each company’s ongoing analysis. They also discussed the different compensation practices within each organization and the need to harmonize the diverse practices in the resulting organization. They also agreed to meet in person the following week to further discuss these issues as well as to establish parameters and expectations for valuation and the exchange ratio.

 

On August 9, 2005, Jefferson-Pilot executed a mutual confidentiality agreement with the remaining company with whom Mr. Glass had had preliminary discussions concerning a potential business combination, and the companies exchanged certain expense and operational data.

 

On August 16, 2005 in Greensboro, Mr. Boscia and Ms. Kowalczyk met with Mr. Glass and Theresa M. Stone, Executive Vice President and Chief Financial Officer of Jefferson-Pilot. The group discussed specific senior management roles as well as approaches to establishing compensation philosophies and practices for the resulting organization. They also discussed potential scenarios in which certain governance matters would require approval of a supermajority of the board of directors of the resulting organization, which the Jefferson-Pilot representatives indicated were necessary to provide reasonable assurance to their board members that significant transactions would require concurrence by both companies’ former directors who were continuing on the resulting company’s board. They also discussed the proposed location of the executive offices of the resulting company in Philadelphia and the importance to Jefferson-Pilot that, if the executive offices were to be located in Philadelphia, there continue to be a significant operational presence in Greensboro. In addition, Mr. Boscia and Mr. Glass in a separate discussion exchanged their respective expectations as to valuation and premium.

 

On August 17, 2005, the special advisory committee of the LNC board met telephonically to discuss with Mr. Boscia, other members of senior management and a representative of Goldman Sachs the status of discussions held the prior day in Greensboro.

 

On August 19, 2005, at a meeting of the Jefferson-Pilot executive committee, Mr. Glass and representatives of Lazard updated the committee on the status of discussions with LNC and the other remaining business combination candidate and reviewed the terms and structure of the business combinations being discussed with the two companies, focusing on the accretion and other financial consequences that could result from such combinations. Mr. Glass also updated the committee as to the other strategic alternatives to either potential business combination transaction that the committee and the board had previously reviewed and discussed, including continuing to operate on a stand alone basis. The executive committee urged Mr. Glass to continue discussions with both potential business combination candidates in the form under which the transactions had been discussed.

 

On August 22, 2005, the other remaining business combination candidate advised Jefferson-Pilot that it was not interested in continuing discussions of a business combination in the form under which the transaction had been discussed, and Jefferson-Pilot’s management concluded that continuing discussions about alternative transactions would not be productive.

 

The special advisory committee of the LNC board met on September 1, 2005, with Mr. Boscia, other members of senior management and representatives of Goldman Sachs. This meeting included a discussion of the general organizational model that LNC could employ absent a transaction with Jefferson-Pilot and how that organizational model might look in combination with Jefferson-Pilot as well as a discussion about the expected

 

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level of cost savings and how an integration process might be managed. This meeting also included an analysis of compensation, benefit and cultural differences between the two companies and an in-depth analysis of the Jefferson-Pilot communications business and the outlook for the broadcasting industry. Representatives of Goldman Sachs assisted with the discussion of topics relating to the Jefferson-Pilot communications business. The special advisory committee requested that Goldman Sachs address various purchase price premiums at the next board of directors meeting.

 

On September 6, 2005, Mr. Boscia and Mr. Glass met again in Philadelphia to further discuss the relative points of view regarding a proposed combination including valuation and board governance issues.

 

On September 8, 2005, the LNC board of directors met and discussed the proposed combination with members of senior management and representatives of Goldman Sachs and Lehman Brothers. The discussion included additional background on the strategic rationale for the transaction, the probable organizational structure resulting from the transaction and an in-depth analysis of the Jefferson-Pilot communications business and the broadcast business in general, including the market value of the business and potential impact of that business on the resulting company’s cash flow. Ms. Kowalczyk presented an analysis of the expected cost savings from the integration of the two companies and implementation risks. The board reviewed implied purchase price premiums of a transaction at various exchange ratios and expected EPS accretion/dilution results under various purchase price premium scenarios, the likely financing structure and other key metrics including expected debt leverage and cash coverage ratios. Additionally, the board discussed governance and organizational issues. Management discussed with the board a recommended purchase price premium amount and the basis for such premium. Representatives of Goldman Sachs and Lehman Brothers outlined their respective processes for undertaking a study to enable them to render their respective opinions as to the fairness from a financial point of view to LNC of the consideration to be paid by LNC in the proposed transaction. The board advised Mr. Boscia to discuss with Mr. Glass a transaction in which LNC would pay a premium of 11% based on the average fixed exchange ratio from September 7, 2005 through the day prior to signing of a definitive merger agreement, subject to, among other things, the results of due diligence, the further input of the financial advisors, the outcome of discussions between the parties and the approval of each party’s board of directors of a definitive merger agreement.

 

On September 8, 2005, Mr. Boscia called Mr. Glass to relay the terms discussed by the LNC board earlier that day.

 

On September 14, 2005, the Jefferson-Pilot executive committee met and discussed the proposed combination with LNC with members of management and representatives of Lazard. The discussion included updated information concerning the terms of the proposed transaction, the proposed organizational structure resulting from the transaction, the proposed board composition and corporate governance issues, including supermajority approval provisions, the merits of a termination fee and historical precedent for such fee, and an analysis of the business of LNC, particularly the variable annuity, asset management and UK life and pension product businesses, which represented business areas that were new or relatively new to Jefferson-Pilot, including the risks and opportunities relating to such businesses. The board reviewed an analysis of the expected cost savings from the integration of the two companies and the integration risks. The board also reviewed the proposed purchase price premium that had been proposed by LNC, compared against the premium paid in other financial services transactions, as well as against the strategic alternatives of organic growth and the potential of other possible business combination transactions. The executive committee authorized senior management to continue discussions and due diligence toward a possible business combination with LNC.

 

On September 15, 2005, Mr. Glass reported to Mr. Boscia that the Jefferson-Pilot executive committee reacted favorably to the basic terms of LNC’s offer, but sought clarification on governance issues, including supermajority board voting rights relating to the sale of the resulting company, change in the CEO and material acquisitions, and had authorized Mr. Glass to continue pursuing the possible transaction.

 

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During the period from September 16 through October 7, 2005, representatives of LNC and Jefferson-Pilot, along with their financial, accounting, actuarial and legal advisors, conducted a due diligence review of business, financial, actuarial, accounting, legal and operational issues through numerous and extensive meetings by telephone and in person, and through the review of relevant documents and materials, to confirm valuation assumptions, to identify and quantify risks and opportunities, to confirm possible cost savings and synergies and to discuss regulatory requirements and strategies relating to a possible combination.

 

On September 24, 2005, LeBoeuf, Lamb, Greene & MacRae LLP, which is referred to as LeBoeuf Lamb, delivered a draft of the merger agreement to Jefferson-Pilot and King & Spalding LLP, which is referred to as King & Spalding.

 

On September 26, 2005, the LNC board of directors met telephonically with members of LNC senior management, representatives of Goldman Sachs and Lehman Brothers and an independent human resources consulting firm to continue discussion of the proposed transaction with Jefferson-Pilot including the various unresolved issues regarding the transaction. LNC’s board of directors discussed a tentative timeline for a transaction and corporate governance issues being discussed between the parties, including the structure of the board of the resulting company, the lead director position of the resulting company and executive retention matters. The board also engaged in discussion with senior management and the financial advisors regarding the supermajority board approval provisions sought by Jefferson-Pilot for certain actions, including a change of control and removal of the chairman and CEO. Representatives of the independent human resources consulting firm discussed methods for retaining Mr. Boscia as Chairman and Chief Executive Officer and Mr. Glass as President and Chief Operating Officer of the resulting organization.

 

On September 27, 2005, Mr. Boscia and key senior operating officers of LNC met with Mr. Glass and key senior operating officers from Jefferson-Pilot in Richmond, Virginia, to further confirm the cultural fit of the two organizations.

 

On September 28, 2005, King & Spalding delivered Jefferson-Pilot’s comments to the draft merger agreement to LNC and LeBoeuf Lamb.

 

On September 29, 2005, the Jefferson-Pilot board of directors met with members of Jefferson-Pilot management and representatives of Lazard and King & Spalding to continue discussions of the proposed transaction with LNC. A representative of King & Spalding reviewed with the board the fiduciary duties of directors in connection with the proposed transaction. The board reviewed and discussed the status of negotiations concerning the potential business combination, including a review of the principal terms of the draft merger agreement, the proposed organizational chart, the supermajority provisions, the composition of the resulting company’s board and board committees and the designation of the chairmen of the committees. The board noted that the proposed termination fee of $300 million, which the draft merger agreement provided would be payable by either party under certain circumstances, was within an acceptable range, based upon other comparable transactions and the prevailing case law, but suggested that such fee should generally not be triggered (other than in connection with a breach of the agreement) unless the other party entered into an alternative transaction with a third party. The board discussed the cash/stock election mechanism, which would provide Jefferson-Pilot shareholders with a choice of preferred merger consideration, subject to proration. The board noted that the cash portion of the proposed merger consideration was slightly higher than originally contemplated but noted that the increased cash positively impacted the EPS accretion/dilution analysis. The board engaged in discussions with management concerning the detailed analyses of cost synergies, which it noted were being developed by the persons in the respective organizations who would be responsible for capturing these savings. The board also discussed the value of the broader product portfolio of the resulting company, which would be obtained with limited overlap in distribution capabilities of the two organizations. The board also discussed the cultural fit of the two organizations and Mr. Glass’ proposal for harmonizing the different compensation structures. The board also reviewed and discussed potential timelines for completion of the business combination and instructed management to complete outstanding diligence and continue discussions relating to the proposed business combination.

 

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On September 30, 2005, the special advisory committee of the LNC board met in Chicago, Illinois, specifically to discuss the proposed transaction with Mr. Glass. On that same date, also in Chicago, Mr. Boscia met with the executive committee of the Jefferson-Pilot board for similar purposes.

 

From September 30 to October 9, 2005, representatives of LeBoeuf Lamb and LNC met, in person or telephonically, with representatives of King & Spalding and Jefferson-Pilot to negotiate several revisions to the draft merger agreement and drafts of the proposed amendments to LNC’s bylaws to reflect corporate governance changes. Among other things, the revisions to the merger agreement included changes to the representations, warranties and covenants, the cash/stock election mechanism and the maximum amount of cash that would be paid as merger consideration, board approvals requiring supermajority approval, the composition of the board and board committees, the designation of committee chairmen and the circumstances under which the termination fee would be payable.

 

On October 4, 2005, the Jefferson-Pilot executive committee met with members of management and representatives of Lazard, King & Spalding and outside actuarial and accounting advisors to review a summary of due diligence conducted to date, updated pro forma information for the proposed combination, updated information concerning integration and the cost savings plan (including one-time costs), a summary of LNC products, with a particular focus on the businesses that are new or relatively new to Jefferson-Pilot such as variable annuities, wirehouse distribution, asset management and UK life insurance and pension products businesses, the insurance risks and risk of capital erosion, and the compensation harmonization risks, as well as outstanding litigation, tax and regulatory risks relating to the LNC business.

 

On October 6, 2005, Jefferson-Pilot formally engaged Morgan Stanley as a financial advisor, principally for the purpose of rendering a fairness opinion to the Jefferson-Pilot board of directors.

 

On October 7, 2005, the LNC board of directors met to review the activities and discussions of the previous few weeks and consider the terms of the proposed transaction with Jefferson-Pilot. Mr. Boscia along with other members of senior management described the due diligence process followed along with the results of the due diligence, the proposed merger, the proposed organizational structure, the expected integration savings and related one time costs and the meetings with various rating agencies held on October 5 and 6, 2005. They also discussed the expected transaction timeline and next steps. Representatives of LeBoeuf Lamb reviewed in detail with the LNC board of director’s information regarding the proposed transaction, including an overview of the terms of the merger agreement. Representatives of LeBoeuf Lamb also reviewed with the LNC board of directors the fiduciary duties of the directors in connection with the proposed transaction. At this meeting, representatives of Goldman Sachs and Lehman Brothers reviewed the financial terms of the merger agreement, presented certain financial analyses conducted in connection with the proposed transaction and delivered oral opinions, which were subsequently confirmed by delivery of written opinions dated October 9, 2005, that, as of that date and subject to the factors and assumptions set forth therein, the merger consideration was fair from a financial point of view to LNC. At the conclusion of the meeting, the LNC board of directors unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the issuance of LNC common stock in the merger and authorized the execution of the merger agreement.

 

On October 9, 2005, the Jefferson-Pilot board of directors met to consider the terms of the proposed transaction with LNC. Mr. Glass, along with members of management and representatives of Lazard, Morgan Stanley and King & Spalding, described the terms of the proposed merger, the results of due diligence, the proposed organizational structure, expected integration savings and related one-time costs, and the results of the meetings with various rating agencies held on October 5 and 6, 2005, and reviewed and discussed updated information concerning the proposed purchase price premium, compared against the premium paid in other financial services transactions, as well as against the strategic alternatives of organic growth and the potential of other possible business combination transactions, and the accretion/dilution analysis, as impacted by the higher amount of cash consideration being proposed from that originally discussed.

 

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A representative of King & Spalding also reviewed again with the board the fiduciary duties of directors in connection with the proposed transaction and reviewed the terms of the merger agreement. He also reviewed with the board a comparison of the governance provisions of Jefferson-Pilot and LNC. Representatives of Lazard and Morgan Stanley each presented financial analyses conducted in connection with the delivery of their respective opinions, that, as of the date of the meeting and based on and subject to certain assumptions, limitations and qualifications set therein the merger consideration to be received pursuant to the merger agreement was fair, from a financial point of view, to the Jefferson-Pilot shareholders (other than LNC and its affiliates). The board met in executive session to consider the merger, the risks and opportunities presented by the merger and the limited possibility of strategic alternatives (based upon, among other things, Jefferson-Pilot’s history of discussions with other life insurance companies) to the proposed merger. Following this session, the Jefferson-Pilot board of directors unanimously approved the merger agreement and the plan of merger contained therein and authorized the execution of the merger agreement.

 

Following the Jefferson-Pilot board meeting on October 9, 2005, LNC and Jefferson-Pilot executed the merger agreement.

 

On October 10, 2005, prior to the commencement of trading of each company’s shares on the NYSE, LNC and Jefferson-Pilot issued a joint press release announcing the proposed merger.

 

The board of directors of each of LNC and Jefferson-Pilot unanimously approved amendment no. 1 to the merger agreement, which was dated as of January 26, 2006. The primary purpose of amendment no. 1 was to provide for Jefferson-Pilot’s merger into a different LNC wholly owned subsidiary than was initially provided for in the merger agreement. In addition, amendment no. 1, among other things, also established a new election deadline and modified the rounding convention for options being assumed in the merger.

 

LNC’s Reasons for the Merger and Recommendation of LNC’s Board of Directors

 

The LNC board of directors believes that the merger agreement and the transactions contemplated by the merger agreement, including the issuance of shares of LNC common stock in connection with the merger, are in the best interests of LNC and its shareholders. Accordingly, LNC, as the sole shareholder of Merger Sub, has approved and adopted the merger agreement and the LNC board of directors recommends that LNC shareholders vote FOR approval of the issuance of shares of LNC common stock pursuant to the merger agreement.

 

In reaching its conclusion to approve and adopt the merger agreement and to recommend that LNC shareholders approve the issuance of shares of LNC common stock in connection with the merger, the LNC board of directors reviewed and discussed the merger agreement and the transactions contemplated thereby, including the merger and the related transactions, with LNC’s management team and its financial, actuarial and legal advisors and considered a number of factors, including the following:

 

Strategic Considerations. LNC’s board of directors believes that the merger with Jefferson-Pilot will provide a number of significant strategic opportunities and benefits, including the following:

 

    The LNC board of directors believes that the merger is expected to result in a company that will be one of the leading financial services companies in the nation with significant scale and reach in the life insurance, annuity and employer sponsored markets.

 

    The merger is expected to create more robust top-line growth as the resulting company will have a broader product portfolio and greater distribution penetration. The LNC board of directors believes that the complementary nature of the respective customer bases, geographic reach, business products and skills of LNC and Jefferson-Pilot may result in enhanced revenue opportunities, and that the merger would bring together companies with complementary distribution networks and multi-channel reach that includes affiliated planners, independent registered representatives, independent marketing organizations, financial institutions and wirehouse/regional broker-dealers.

 

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    The merger will result in a company that, because of increased size and economies of scale, will have greater capital flexibility, a greater ability to respond to competitive pressures and an enhanced ability to compete profitably, which may result in better debt and financial strength ratings. The LNC board of directors believes that this financial strength will be attractive to the agents, brokers and customers of the resulting company and will better enable the resulting company to manage the risks and uncertainties inherent in the insurance industry in general and in the specific business lines in which the resulting company will operate.

 

    The resulting company will include complementary product lines, such as LNC’s variable annuities, fixed and variable universal life, 401(k) and 403(b) products and Jefferson-Pilot’s fixed annuities, including equity-indexed annuities, group life, disability and dental insurance products. In addition, the resulting company will include Delaware Investments, LNC’s investment management organization; Jefferson-Pilot Communications, which owns and operates three television stations, 18 radio stations and the Jefferson-Pilot sports production and syndication business; and Lincoln UK. The LNC board believes that these diverse products and operations will lead to more balanced product risk and create an attractive platform for growth, especially with respect to equity related products. The LNC board also believes that this will result in less volatile earnings and cash flow because of greater diversification of earnings.

 

    The LNC board of directors expects the merger to enhance growth opportunities for the resulting company and enable the resulting company to benefit from improved efficiencies and economies of scale. The resulting company is expected to produce annual cost savings of approximately $180 million with 50% phased in within 12 months after completion of the merger, 80% phased in within 24 months and the balance phased in by the third anniversary of the merger. These cost savings are expected to result from operating efficiencies, the consolidation of corporate services and headquarters functions, reductions in distribution and marketing costs and the adoption of best practices across the resulting company. In addition, based on the institutional brokers’ estimate system, or IBES estimates, as of October 10, 2005, the merger, net of the one-time costs of the acquisition and integration, is expected to be modestly accretive to the operating earnings per share of the resulting company by the end of the first year, building to 6 percent to 7 percent by the end of 2007. While these synergies reflect management’s estimates, the LNC board of directors recognized that there could be no assurance that these synergies would be achieved. On the other hand, the LNC board of directors recognized that the merger could result in greater synergies and lead to more cost savings than currently projected.

 

    The resulting company will have strong management continuity as LNC will be able to augment its talent pool with the most capable managers from Jefferson-Pilot and the resulting company’s management team will be comprised of the most capable managers from both LNC and Jefferson-Pilot.

 

Other Factors Considered by the LNC Board. In addition to considering the strategic factors outlined above, the LNC board of directors considered the following additional factors:

 

    The current and prospective environments in which LNC and Jefferson-Pilot operate, including national and regional industry, economic and market conditions and trends, including the likelihood of continuing consolidation and increased competition in the life insurance and investment advisory and financial service industries, and the likely effect of these factors on LNC’s potential growth, development, productivity and profitability.

 

   

Historical information concerning Jefferson-Pilot’s and LNC’s respective businesses, financial performance and condition, products and distribution, management, competitive positions and stock performance, including the results of the due diligence review of Jefferson-Pilot’s assets, liabilities, financial condition, businesses and operations, which were consistent with the expectations of the board of directors as to potential operating efficiencies and cost savings as well as other strategic

 

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and financial benefits reasonably anticipated as a result of the merger. As insurance products, such as term insurance and universal life, have become more commoditized, the LNC board recognized that the ability to lower expenses is becoming imperative.

 

    Management’s assessment that the proposed merger was likely to meet certain criteria they deemed necessary for a successful merger, such as that Jefferson-Pilot is a strategic fit with LNC and that the merger and the related transactions represent acceptable execution risk and the potential for financial benefits to LNC and LNC’s shareholders.

 

    The financial analyses of LNC’s financial advisors and their respective opinions that, as of October 9, 2005 and based upon and subject to the factors and assumptions set forth in their respective opinions, the consideration to be paid by LNC pursuant to the merger agreement was fair from a financial point of view to LNC. The written opinions of Goldman Sachs and Lehman Brothers are attached as to this joint proxy statement/prospectus as Annexes C and D, respectively, and are summarized under “— Opinions of Financial Advisors — Opinions of LNC’s Financial Advisors” beginning on page 58.

 

    The terms and conditions of the merger agreement, including:

 

    the limited number and nature of the conditions to Jefferson-Pilot’s obligation to consummate the merger and the limited risk of non-satisfaction of such conditions;

 

    that LNC may be entitled to receive a $300 million termination fee from Jefferson-Pilot if the merger is not consummated for certain reasons; and

 

    the risk that LNC will have to pay Jefferson-Pilot a fee of up to $300 million if the merger agreement is terminated under certain circumstances.

 

    That the fixed exchange ratio appropriately reflects the strategic purposes of the merger and is consistent with market practice for mergers of this type and avoids fluctuations caused by near-term market volatility.

 

    That the fixed exchange ratio, by its nature, will not adjust to compensate for changes in the stock prices of LNC or Jefferson-Pilot prior to the completion of the merger, and that neither party has any price-based termination right under the merger agreement.

 

    The likelihood that the merger will be completed on a timely basis, including the likelihood that the merger will receive all necessary antitrust and other regulatory approvals without unacceptable conditions on a timely basis.

 

    The board and management structure of the resulting company provided for under the merger agreement, including LNC’s board representation and the staffing of the executive officer positions of the resulting company, as described in greater detail under “— LNC’s Board of Directors After the Merger.”

 

    Its review of the structure of the merger and the financial and other terms of the merger, and the tax consequences of the merger and the related transactions to LNC, Jefferson-Pilot, their respective shareholders and the resulting company.

 

    The historical and current market prices of LNC common stock and Jefferson-Pilot common stock.

 

    In addition to these factors, the LNC board of directors also considered the potential adverse impact of other factors including:

 

    The challenges of combining the operations of two major life insurance businesses and effecting certain cultural changes.

 

    The possible disruptions from certain anticipated workforce reductions to be implemented as part of the merger integration plan and the potential loss of key management, portfolio managers, sales representatives or wholesalers before and after the merger.

 

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    The one-time costs of the acquisition and integration, which management estimated at approximately $180 million. Depending upon the nature of such costs they will either be included in the purchase price allocation or treated as period costs and charged to the statement of operations as incurred, which LNC expects to occur over a three-year period.

 

    The risk of concentration of certain product lines and related reserves, including universal life with secondary guarantees, as well as continued exposure to equity market and interest rate risks.

 

    The potential dilution to LNC’s shareholders.

 

    The risk of diverting management’s attention from other strategic priorities to implement merger integration plans.

 

The foregoing discussion of the information and factors considered by LNC’s board of directors is not meant to be exhaustive but is believed to include all material factors considered by it in connection with its determination that the terms of the merger agreement, including the merger and the issuance of LNC common stock in the merger, are advisable and in the best interests of LNC and its shareholders. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the LNC board did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In addition, the LNC board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate decision, but rather the LNC board of directors conducted an overall analysis of the factors described above, including through discussions with, and the questioning of, LNC’s management team and outside financial, actuarial and legal advisors. In considering the factors described above, individual members of the LNC board may have given different weight to different factors.

 

In considering the recommendation of the LNC board of directors with respect to the merger agreement and the merger, you should be aware that certain LNC directors and executive officers have arrangements that cause them to have interests in the transaction that are different from, or are in addition to, the interests of LNC shareholders generally. See the section entitled “— Interests of Directors and Executive Officers in the Merger” beginning on page 84.

 

Jefferson-Pilot’s Reasons for the Merger and Recommendation of Jefferson-Pilot’s Board of Directors

 

The Jefferson-Pilot board of directors believes that the merger agreement, the plan of merger contained therein and the transactions contemplated by the merger agreement, including the merger, are in the best interests of Jefferson-Pilot and its shareholders and are consistent with, and in furtherance of, the long-term business strategies and goals of Jefferson-Pilot. Accordingly, the Jefferson-Pilot board of directors has unanimously adopted the merger agreement and the plan of merger contained therein and recommends that Jefferson-Pilot shareholders vote FOR approval of the merger agreement and the plan of merger contained therein.

 

The Jefferson-Pilot board of directors, in reaching its decision to approve the merger agreement and the plan of merger contained therein, consulted with its management, as well as with its financial, accounting, actuarial and legal advisors, carefully reviewed a significant amount of information and considered a variety of factors weighing positively towards the merger, including, without limitation, the following:

 

    The strategic nature of the merger, which will combine highly complementary businesses to create a resulting company with:

 

    leadership positions in life, annuity and group market benefits, including the number one position in universal life sales, number five position in total life sales, number five position in variable annuity sales, number six position in variable universal life sales and number eight position in group disability sales, in each case based upon financial analyses performed by Lazard using data from leading industry information services;

 

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    a multi-channel platform with coverage across a full range of financial planning, general agency and wholesale distribution channels;

 

    strengthened relationships with key distributors and strategic partners;

 

    broadened product portfolios combining LNC’s strength in life insurance and annuities and 401(k) and 403(b) products, with Jefferson-Pilot’s strength in life insurance and fixed annuities, including equity indexed annuities, and group life, disability and dental insurance products;

 

    an attractive platform for growth fueled by a larger and more diversified earnings base with a mix of stable life insurance earnings and equity-driven earnings, which could create a natural hedge against interest rate exposure and equity market risk exposure;

 

    revenue enhancement opportunities across business units, distribution channels and product lines;

 

    strong capital flexibility and attractive risk profile with anticipated continued strong insurer financial strength and debt ratings; and

 

    financial flexibility to pursue further strategic and product initiatives.

 

    The exchange ratio of either 1.0906 shares of LNC common stock or $55.96 cash consideration for each share of Jefferson-Pilot common stock (a combination representing a total blended consideration of $55.48 per share based on the October 7, 2005 closing price of LNC common stock), representing a premium of approximately 11% based on the average closing price of Jefferson-Pilot’s common stock from September 7, 2005 to October 7, 2005.

 

    The election offered to Jefferson-Pilot shareholders of receiving merger consideration in shares of LNC common stock or cash allows Jefferson-Pilot shareholders to choose, subject to proration, either to receive a cash return on their investment in Jefferson-Pilot or to participate in the benefits of a more diversified company with greater resources and, as LNC shareholders, benefit from any future growth of the resulting company. Jefferson-Pilot shareholders who elect to receive cash will have protection from decreases in the trading price of LNC common stock between the announcement of the merger and the closing of the merger to the extent these Jefferson-Pilot shareholders receive cash in the merger.

 

    Because the exchange ratio for the stock is fixed, the opportunity for Jefferson-Pilot shareholders who receive LNC common stock as merger consideration to benefit from any increase in the trading price of LNC common stock between the announcement of the merger and the closing of the merger.

 

    Its analysis of the business, operations, financial condition, earnings and prospects of both Jefferson-Pilot and LNC, including the results of Jefferson-Pilot’s due diligence review of LNC and its business.

 

    The potential for the merger to create significant cost savings and synergies which will inure to a significant degree to the benefit of Jefferson-Pilot’s shareholders as LNC shareholders and to customers of the resulting company. The anticipated pretax costs savings resulting from the efficiencies in shared services, corporate functions, consolidation and reductions in overlapping business unit costs was estimated to be approximately $180 million.

 

    The continuity of certain Jefferson-Pilot senior management in the resulting company through, among other things:

 

    the board of directors of the resulting company being a staggered board originally consisting of 7 Jefferson-Pilot representatives and 8 LNC representatives, with a former Jefferson-Pilot director appointed as the lead director of the resulting company;

 

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    the retention of Dennis R. Glass, President and Chief Executive Officer of Jefferson-Pilot, who will be appointed the President and Chief Operating Officer and a director of the resulting company, and the retention of certain Jefferson-Pilot officers as officers of significant business operations of the resulting company;

 

    Jefferson-Pilot board representatives initially having equal representation on all board committees, and Jefferson-Pilot board representatives being the chairmen of the resulting company’s Compensation Committee and its Corporate Governance Committee; and

 

    the requirement of a supermajority board approval prior to the resulting company taking certain actions with respect to corporate governance and/or entering into certain extraordinary corporate transactions for 30 months following the effective time of the merger because this requirement ensures that Jefferson-Pilot board representatives will have an approval right over any such proposed actions and/or transactions of the resulting company during this time. For a full description of the governance of the resulting company and the supermajority requirements of the resulting company’s board of directors, see “— Interests of Directors and Executive Officers in the Merger—LNC’s Board of Directors After the Merger” beginning on page 84.

 

    The strong track record of Jefferson-Pilot’s management for successful integration following its prior acquisitions.

 

    The alternatives reasonably available to Jefferson-Pilot, including:

 

    remaining a stand-alone entity and pursuing acquisitions of strategic assets or engaging in a capital reorganization; and

 

    the possibility of pursuing an alternative strategic business combination with a third party.

 

    The potential for the merger to be accretive to LNC’s earnings in the first year following completion of the merger (excluding one-time costs), which will inure to a significant degree to the benefit of Jefferson-Pilot’s shareholders as well as LNC’s shareholders.

 

    The financial opinions of Lazard and Morgan Stanley described in the section entitled “— Opinions of Financial Advisors — Opinions of Jefferson-Pilot’s Financial Advisors” beginning on page 68, to the effect that, as of the date of their opinions and based on and subject to the assumptions, limitations and qualifications described in their opinions, the merger consideration to be received by holders of Jefferson-Pilot common stock under the merger agreement was fair from a financial point of view to the holders of Jefferson-Pilot common stock (other than LNC and its affiliates) and the related presentations.

 

    The terms of the merger agreement relating to third-party offers, including:

 

    the limitations on the ability of both parties to solicit offers for alternative business combinations;

 

    the ability of each party’s board of directors to change its recommendation with respect to the merger agreement and the merger to the extent that party’s board of directors reasonably determines (upon advice of outside legal counsel) that such failure to recommend is required to comply with its fiduciary duties under applicable law; and

 

    the inability of each party to terminate the merger agreement solely to accept a third party proposal. See the section entitled “The Merger Agreement” beginning on page 98.

 

    The other terms of the merger agreement, including:

 

    the representations and warranties of LNC;

 

    the covenants of Jefferson-Pilot and LNC and their effect on the operations of Jefferson-Pilot and LNC prior to the merger; and

 

    the conditions required to be satisfied prior to completion of the merger. See the section entitled “The Merger Agreement” beginning on page 98.

 

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    The expectation that the merger will be treated as a reorganization for United States federal income tax purposes as described in the section entitled “Material United States Federal Income Tax Considerations” beginning on page 93.

 

    The prospects for the merger receiving necessary regulatory approvals and the anticipated timing and conditions of those approvals.

 

    The continued strong presence of the resulting company in Greensboro, North Carolina as the center of operations for its life businesses.

 

    The agreed intent of the resulting company to engage in charitable giving and activities to at least the same degree as currently undertaken by LNC, including, without limitation, to use reasonable best efforts (i) to honor all previous charitable commitments made by Jefferson-Pilot up to a limit not to exceed $2,500,000 in the aggregate or five years in duration and (ii) each year for a period of five years, to engage in charitable giving in respect of the communities to which Jefferson-Pilot currently gives, at a level equal to the greater of $2.5 million in aggregate per year or the level determined using LNC’s charitable giving formula.

 

    The current and prospective industry, economic and market conditions and trends, including increased competition in the industry in which Jefferson-Pilot operates, and the belief that the resulting company with greater size and scale would be better positioned to succeed in an industry in which critical mass and market presence are increasingly important.

 

    Providing Jefferson-Pilot with greater brand awareness by aligning Jefferson-Pilot with the Lincoln Financial Group name, a strong well-established brand name in the insurance industry.

 

In addition to these factors, the Jefferson-Pilot board of directors also considered the potential adverse impact of other factors weighing negatively towards the merger. These included the following:

 

    The challenges of combining the businesses and workforces of LNC and Jefferson-Pilot.

 

    The risk inherent in businesses that will be new to Jefferson-Pilot shareholders, such as variable annuity, wirehouse distribution, asset management and UK life insurance, including, without limitation, the significantly increased exposure to potential equity market volatility.

 

    The risk that the cost savings, synergies and other benefits expected to be obtained in the transaction might not be fully realized.

 

    The risk of overlap among the distribution networks of Jefferson-Pilot and LNC.

 

    The disparities in compensation levels and philosophy may pose cultural and management challenges for the resulting company.

 

    The probability that the financial strength ratings for the resulting company will be less favorable than the current comparable ratings for Jefferson-Pilot.

 

    The potential disruption to Jefferson-Pilot’s business that may result from the announcement of the merger, including the potential loss of existing customers and employees.

 

    Because the exchange ratio for the stock is fixed, Jefferson-Pilot shareholders that select LNC shares as consideration will potentially be adversely affected by any decrease in the sale price of LNC common shares between the date of execution of the merger agreement and the closing of the merger, which would not have been the case had the consideration been based on a fixed value (a fixed dollar amount of value per share in all cases).

 

    Based upon current historical practices of Jefferson-Pilot and LNC, the Jefferson-Pilot shareholders that become LNC shareholders pursuant to the merger initially will receive a reduced amount of dividends on an equivalent pro-forma basis than they would have received as Jefferson-Pilot shareholders.

 

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    The limitations imposed in the merger agreement on the conduct by Jefferson-Pilot of its business prior to completion of the merger.

 

    The requirement that Jefferson-Pilot must pay to LNC a termination fee of $300 million if the merger agreement is terminated under certain circumstances specified in the merger agreement. See the section entitled “The Merger Agreement — Termination Events and Termination Fees” beginning on page 109.

 

    The risk that the merger might not be completed and the effect of the resulting public announcement of the termination on:

 

    the market price of Jefferson-Pilot common stock;

 

    Jefferson-Pilot’s operating results, particularly in light of the costs incurred in connection with the proposed transaction, including the potential requirement to make a termination payment; and

 

    Jefferson-Pilot’s ability to attract and retain key personnel.

 

    The possibility of significant costs and delays resulting from seeking regulatory approvals necessary for completion of the proposed merger and the possibility of not completing the merger if these approvals are not obtained, including any approval by a state insurance regulatory authority.

 

The Jefferson-Pilot board of directors, in reaching its decision to approve the merger agreement and the plan of merger contained therein, also considered the interests that certain Jefferson-Pilot executive officers and directors may have with respect to the merger in addition to their interests as Jefferson-Pilot shareholders generally and the fact that certain provisions of Indiana law, the LNC certificate of incorporation and bylaws and the LNC shareholders rights plan may be viewed as having anti-takeover effects with respect to transactions not approved by the LNC board of directors (see the section entitled “Comparison of Shareholder Rights and Corporate Governance Matters” beginning on page 119).

 

The Jefferson-Pilot board of directors concluded that the positive aspects of the merger significantly outweighed the negative factors.

 

This discussion of the information and factors considered by the Jefferson-Pilot board of directors includes all the material positive and negative factors considered by the Jefferson-Pilot board of directors, but it is not intended to be exhaustive and may not include all of the factors considered by the Jefferson-Pilot board of directors. The Jefferson-Pilot board of directors did not quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination that the merger agreement and the merger are advisable and in the best interests of Jefferson-Pilot and its shareholders. Rather, the Jefferson-Pilot board of directors viewed its position and recommendation as being based on the totality of the information presented to and factors considered by it. In addition, individual members of the Jefferson-Pilot board of directors may have given differing weights to different factors.

 

In considering the recommendation of the Jefferson-Pilot board of directors with respect to the merger agreement and the merger, you should be aware that certain Jefferson-Pilot directors and executive officers have arrangements that cause them to have interests in the transaction that are different from, or are in addition to, the interests of Jefferson-Pilot shareholders generally. See the section entitled “— Interests of Directors and Executive Officers in the Merger” beginning on page 84.

 

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Opinions of Financial Advisors

 

LNC engaged Goldman Sachs and Lehman Brothers as its financial advisors and Jefferson-Pilot engaged Lazard and Morgan Stanley in connection with the merger. A summary of their respective opinions and related financial analyses appears below.

 

Opinions of LNC’s Financial Advisors

 

Descriptions of the fairness opinions of LNC’s financial advisors, Goldman Sachs and Lehman Brothers, in connection with the merger are set forth below. These descriptions are qualified in their entirety by reference to the full text of the opinions included in this joint proxy statement/prospectus as Annexes C and D, respectively. You can read the opinions in their entirety for a discussion of the assumptions made, procedures followed, matters considered and limitations on the reviews undertaken by Goldman Sachs and Lehman Brothers in rendering their respective opinions.

 

Opinion of Goldman Sachs. Goldman Sachs rendered its opinion to LNC’s board of directors that, as of October 9, 2005 and based upon and subject to the factors and assumptions set forth therein, the consideration in the aggregate to be paid by LNC pursuant to the merger agreement is fair from a financial point of view to LNC.

 

The full text of the written opinion of Goldman Sachs, dated October 9, 2005, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex C. Goldman Sachs provided its opinion for the information and assistance of LNC’s board of directors in connection with its consideration of the merger. The Goldman Sachs opinion is not a recommendation as to how any holder of LNC’s common stock should vote with respect to the issuance of LNC common stock in connection with the merger.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

    the merger agreement;

 

    annual reports to shareholders and Annual Reports on Form 10-K of LNC and Jefferson-Pilot for the five years ended December 31, 2004;

 

    certain interim reports to shareholders and Quarterly Reports on Form 10-Q of LNC and Jefferson-Pilot;

 

    Statutory Statements filed by certain insurance subsidiaries of each of LNC and Jefferson-Pilot with the insurance departments of the states under the laws in which they are organized, respectively, for the three years ended December 31, 2004 and the quarterly periods ended March 31, 2005 and June 30, 2005;

 

    certain other communications from LNC and Jefferson-Pilot to their respective shareholders;

 

    an independent report prepared by Milliman, Inc., dated October 5, 2005, which is referred to as the Milliman Report, relating to certain actuarial and financial matters of Jefferson-Pilot; and

 

    certain internal financial analyses and forecasts for Jefferson-Pilot prepared by its management, as reviewed and approved for use in connection with Goldman Sachs’ opinion by the management of LNC, certain internal financial analyses and forecasts for LNC prepared by its management and certain financial analyses and forecasts for the resulting company on a pro forma basis prepared by the managements of LNC and Jefferson-Pilot (which reflect certain adjustments to the basis for reporting under U.S. GAAP), including certain cost savings and operating synergies projected by the managements of LNC and Jefferson-Pilot to result from the merger, which are referred to as the Synergies and collectively referred to as the Forecasts.

 

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Goldman Sachs also held discussions with members of the senior managements of LNC and Jefferson-Pilot regarding their assessment of the strategic rationale for, and the potential benefits of, the merger and the past and current business operations, financial condition and future prospects of LNC and Jefferson-Pilot. In addition, Goldman Sachs reviewed the reported price and trading activity for the shares of LNC common stock and the shares of Jefferson-Pilot common stock, compared certain financial and stock market information for LNC and Jefferson-Pilot with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the life insurance industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as it considered appropriate.

 

Goldman Sachs relied upon the accuracy and completeness of all of the financial, accounting, legal, tax and other information discussed with or reviewed by it and assumed such accuracy and completeness for purposes of rendering the opinion described above. In that regard, Goldman Sachs assumed with the consent of LNC that the Forecasts, including the Synergies, were reasonably prepared by the managements of LNC and Jefferson-Pilot, as the case may be, on a basis reflecting the best currently available estimates and judgments of the managements of LNC and Jefferson-Pilot, as the case may be. Goldman Sachs also discussed the Milliman Report with the management of LNC and management agreed with the appropriateness of the use of and reliance on the Milliman Report in the performance of Goldman Sachs’ analysis. Goldman Sachs is not an actuary and its services did not include any actuarial determination or evaluation by Goldman Sachs or any attempt to evaluate actuarial assumptions and Goldman Sachs has relied on LNC’s actuaries with respect to reserve adequacy. In that regard, Goldman Sachs made no analysis of, and expressed no opinion as to, the adequacy of the insurance and investment contract liabilities of LNC or the policy liabilities of Jefferson-Pilot. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any derivative or off-balance-sheet assets and liabilities) of LNC or Jefferson-Pilot or any of their respective subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without adverse effect on LNC or Jefferson-Pilot or on the expected benefits of the merger in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs’ opinion does not address the underlying business decision of LNC to engage in the merger, nor did Goldman Sachs express any opinion as to the prices at which shares of LNC common stock will trade at any time.

 

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as financial advisor to LNC in connection with, and has participated in certain of the negotiations leading to, the merger contemplated by the merger agreement. Goldman Sachs expects to participate in any bridge loan facility entered into by LNC in connection with the merger, as well as to participate in one or more securities offerings, which may include long-term debt, preferred stock or other securities including stock purchase units or a combination of these, that may be undertaken by LNC in lieu of or to replace such bridge loan facility. If such an offering occurs within twelve months of the completion of the merger, Goldman Sachs will be offered the opportunity to participate in such offering upon customary terms. In addition, Goldman Sachs has provided and is providing certain investment banking and other services to LNC, including having acted as exclusive financial advisor to LNC in connection with the sale of its life reinsurance division to Swiss Re Life & Health America Inc., a wholly owned subsidiary of Swiss Reinsurance Company, in December 2001. Goldman Sachs has also provided certain investment banking services to Jefferson-Pilot from time to time, including having acted as a co-manager of the offering of Floating Rate Extendible Notes due 2011 (aggregate principal amount $300 million) of Jefferson-Pilot in January 2004 and as a co-manager of the offering of Senior Floating Rate Notes due 2008 (aggregate principal amount $300 million) of Jefferson-Pilot Life Funding Trust I, a special purpose vehicle formed by Jefferson-Pilot, in May 2005. Goldman Sachs also may provide investment banking services to LNC and Jefferson-Pilot in the future. In connection with the above-described services Goldman Sachs received, and may receive, compensation.

 

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Goldman Sachs is a full service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such services to LNC, Jefferson-Pilot and their respective affiliates, may actively trade the debt and equity securities (or related derivative securities) of LNC and Jefferson-Pilot for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities.

 

The LNC board of directors selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement, dated June 30, 2005, LNC engaged Goldman Sachs to act as its financial advisor in connection with the merger. Pursuant to the terms of this engagement letter, LNC has agreed to pay Goldman Sachs a transaction fee of $15,000,000, a principal portion of which is payable upon consummation of the merger. LNC has agreed to pay Goldman Sachs a fee of approximately $10,000,000 upon receipt of any break-up, termination or similar fee in connection with the merger. In addition, LNC has agreed to reimburse Goldman Sachs for its expenses, including reasonable attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

 

Opinion of Lehman Brothers. On October 9, 2005, Lehman Brothers rendered its opinion to the LNC board of directors that as of such date and, based upon and subject to the matters stated in its opinion, from a financial point of view, the consideration to be paid by LNC in the merger was fair to LNC.

 

The full text of the written opinion of Lehman Brothers, dated October 9, 2005, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken by Lehman Brothers in connection with the opinion, is attached to this joint proxy statement/prospectus as Annex D and is incorporated herein by reference. Lehman Brothers provided its advisory services and opinion for the use and benefit of the LNC board of directors in connection with its consideration of the merger. Lehman Brothers’ opinion is not intended to be and does not constitute a recommendation to any shareholders as to how that shareholder should vote or act with respect to the proposed merger or any other matter described in this joint proxy statement/prospectus. Lehman Brothers was not requested to opine as to, and its opinion does not in any manner address, LNC’s underlying business decision to proceed with or effect the merger. The following is a summary of Lehman Brothers’ opinion and the methodology that Lehman Brothers used to render its opinion. This summary of Lehman Brothers’ opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.

 

In arriving at its opinion, Lehman Brothers reviewed and analyzed, among other things:

 

    the merger agreement and the specific terms of the merger;

 

    publicly available information concerning LNC that Lehman Brothers believed to be relevant to its analysis, including LNC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005 and June 30, 2005;

 

    publicly available information concerning Jefferson-Pilot that Lehman Brothers believed to be relevant to its analysis, including Jefferson-Pilot’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005 and June 30, 2005;

 

    financial and operating information with respect to the businesses, operations and prospects of LNC furnished to Lehman Brothers by the management of LNC, including financial projections of LNC prepared by management of LNC;

 

    financial and operating information with respect to the businesses, operations and prospects of Jefferson-Pilot furnished to Lehman Brothers by the management of Jefferson-Pilot, including financial projections of Jefferson-Pilot prepared by management of Jefferson-Pilot;

 

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    published estimates of third party research analysts with respect to the future financial performance of each of LNC and Jefferson-Pilot;

 

    the trading histories of LNC common stock and Jefferson-Pilot common stock from October 2004 to October 2005 and a comparison of those trading histories with each other and with those of other companies that Lehman Brothers deemed relevant;

 

    a comparison of the historical financial results and present financial condition of LNC and Jefferson-Pilot with each other and with those of other companies that Lehman Brothers deemed relevant;

 

    the amounts and timing of the cost savings and operating synergies expected by the management of LNC to result from a combination of the businesses of LNC and Jefferson-Pilot, which is referred to as the Expected Cost Savings;

 

    the relative contributions of LNC and Jefferson-Pilot to the current and future financial performance of the resulting company on a pro forma basis;

 

    the potential pro forma impact of the merger on the current financial condition and the future financial performance of LNC as prepared by the managements of LNC and Jefferson-Pilot, including the effect of the Expected Cost Savings and the purchase accounting adjustments to the basis for reporting under U.S. GAAP, which are referred to as the Purchase Accounting Adjustments; and

 

    the Milliman Report.

 

In addition, Lehman Brothers had discussions with the managements of LNC and Jefferson-Pilot concerning their respective businesses, operations, assets, liabilities, financial condition and prospects and also undertook such other studies, analyses and investigations as Lehman Brothers deemed appropriate.

 

In arriving at its opinion, Lehman Brothers assumed and relied upon the accuracy and completeness of the financial and other information used by Lehman Brothers without assuming any responsibility for independent verification of such information. Lehman Brothers further relied upon the assurances of the managements of LNC and Jefferson-Pilot that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of LNC, upon advice of LNC, Lehman Brothers assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of LNC as to the future financial performance of LNC and that LNC will perform substantially in accordance with such projections. With respect to the financial projections of Jefferson-Pilot, upon advice of LNC and Jefferson-Pilot, Lehman Brothers assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Jefferson-Pilot as to the future financial performance of Jefferson-Pilot and that Jefferson-Pilot will perform substantially in accordance with such projections. In addition, upon the advice of LNC, Lehman Brothers assumed that the amounts and timing of the Expected Cost Savings and the Purchase Accounting Adjustments were reasonable and that the Expected Cost Savings will be realized substantially in accordance with such estimates and the Purchase Accounting Adjustments will be recorded substantially in accordance with such estimates. In arriving at its opinion, Lehman Brothers did not conduct a physical inspection of the properties and facilities of LNC or Jefferson-Pilot and did not make or obtain any evaluations or appraisals of the respective assets or liabilities of LNC or Jefferson-Pilot other than the Milliman Report. Lehman Brothers discussed the Milliman Report with the management of LNC and management agreed with the appropriateness of the use of and reliance on the Milliman Report in the performance of Lehman Brothers’ analysis. Furthermore, Lehman Brothers is not an actuary and its services did not include actuarial determinations or evaluations by Lehman Brothers or an attempt to evaluate actuarial assumptions. In that regard, Lehman Brothers made no analyses of, and expressed no opinion as to, the adequacy of the policy and other insurance reserves of LNC or Jefferson-Pilot and have relied upon information furnished to it by LNC and Jefferson-Pilot as to the adequacy of such reserves. Lehman Brothers’ opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of Lehman Brothers’ opinion.

 

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As compensation for its services in connection with the merger, LNC paid Lehman Brothers $2,000,000 upon the delivery of Lehman Brothers’ opinion. Compensation of $15,000,000 will be payable on completion of the merger against which the amounts paid for the opinion will be credited. LNC has agreed to pay Lehman Brothers a fee of approximately $10,000,000 upon receipt of any breakup, termination or similar fee in connection with the merger. In addition, LNC has agreed to reimburse Lehman Brothers for reasonable out-of-pocket expenses incurred in connection with the merger and to indemnify Lehman Brothers for certain liabilities that may arise out of its engagement by LNC and the rendering of the Lehman Brothers’ opinion. Lehman Brothers expects to participate in any bridge loan facility entered into by LNC in connection with the merger, as well as to participate in one or more securities offerings, which may include preferred stock, debt, long-term or other securities including stock purchase units, or a combination of these, that may be undertaken by LNC in lieu of or to replace such bridge loan facility. If such offering occurs within twelve months of the completion of the merger, Lehman Brothers will be offered the opportunity to participate in such offering upon customary terms. Lehman Brothers in the past has rendered investment banking services to LNC and Jefferson-Pilot and received customary compensation for such services upon customary terms. In the ordinary course of its business, Lehman Brothers actively trades in the debt or equity securities of LNC and Jefferson-Pilot for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities.

 

Lehman Brothers is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. LNC selected Lehman Brothers as its financial advisor because its investment banking professionals have substantial experience in transactions similar to the merger.

 

Financial Analyses of LNC’s Financial Advisors

 

The following is a summary of the material financial analyses presented by Goldman Sachs and Lehman Brothers to the LNC board of directors in connection with providing their opinions to the LNC board of directors. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs and Lehman Brothers. The order of analyses described does not represent relative importance or weight given to those analyses by Goldman Sachs or Lehman Brothers. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ and Lehman Brothers’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 7, 2005, and is not necessarily indicative of current market conditions.

 

Historical Exchange Ratio Analysis. Goldman Sachs and Lehman Brothers calculated the daily ratios of the LNC common stock price to the Jefferson-Pilot common stock price from October 7, 2004 to October 7, 2005. In addition, Goldman Sachs and Lehman Brothers calculated the average historical ratios of shares of LNC common stock to shares of Jefferson-Pilot common stock based on the prices of shares of LNC common stock and Jefferson-Pilot common stock for the thirty-day, three-month and one-year periods ended October 7, 2005, calculating such ratios to include a 0% premium and 11% premium. The following table sets forth the results of this analysis:

 

     Exchange Ratio

Period


   0% Premium

   11% Premium

As of October 7, 2005

   1.0012x    1.1113x

Thirty-day average ended October 7, 2005

   0.9832x    1.0913x

Three-month average ended October 7, 2005

   1.0088x    1.1197x

One-year average ended October 7, 2005

   1.0646x    1.1817x

Merger

        1.0906x

Source: FactSet Research Systems Inc. (FactSet).

 

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Historical Trading Analysis. Goldman Sachs and Lehman Brothers compared the historical public market trading performance of LNC, Jefferson-Pilot and Jefferson-Pilot’s insurance operations (excluding its communications business) to the historical public market trading performance of certain selected companies in the life insurance industry. Although none of the selected companies is directly comparable to LNC, Jefferson-Pilot and Jefferson-Pilot’s insurance operations, the companies included were chosen because they are companies with operations that for purposes of analysis may be considered similar to certain operations of LNC, Jefferson-Pilot and Jefferson-Pilot’s insurance operations. The companies selected were:

 

    MetLife, Inc.

 

    Prudential Financial, Inc.

 

    Genworth Financial, Inc.

 

    Principal Financial Group, Inc.

 

    Nationwide Financial Services, Inc.

 

    Torchmark Corporation

 

    Protective Life Insurance Company

 

    AmerUS Group Co.

 

Goldman Sachs and Lehman Brothers considered historical data with respect to the trading prices for the common stock of LNC, Jefferson-Pilot and the selected companies for the thirty-day, three-month and one-year periods ended October 7, 2005, and their relative stock performances during the same periods. The results of these analyses are summarized as follows:

 

     Share Price Increase/(Decrease)

 

Period


   Jefferson-Pilot

    LNC

    Selected Companies

 

Thirty-days ended October 7, 2005

   2.2 %   (0.1 )%   (1.1 )%

Three-months ended October 7, 2005

   0.0 %   6.9 %   2.0 %

One-year ended October 7, 2005

   2.0 %   7.9 %   19.3 %

Source: FactSet.

 

Goldman Sachs and Lehman Brothers also calculated the average common stock price for the thirty-day, three-month and one-year periods ended October 7, 2005, as a multiple of their respective: (a) estimated next twelve months (NTM) earnings and (b) book value, which is the value of common equity reported in financial statements, excluding accumulated other comprehensive income (AOCI), for each of LNC, Jefferson-Pilot and the selected companies. The results of these analyses are summarized as follows:

 

     Average Price/NTM Earnings

Period


   Jefferson-Pilot

  LNC

  Selected
Companies


As of October 7, 2005

   12.4x   11.3x   12.2x

Thirty-day average ended October 7, 2005

   12.2x   11.5x   12.3x

Three-month average ended October 7, 2005

   12.4x   11.2x   12.4x

One-year average ended October 7, 2005

   12.3x   10.6x   12.0x

Source: FactSet.

 

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     Average Price/Book Value (excluding AOCI)

Period


   Jefferson-Pilot

  LNC

  Selected
Companies


As of October 7, 2005

   2.05x   1.60x   1.53x

Thirty-day average ended October 7, 2005

   2.03x   1.62x   1.53x

Three-month average ended October 7, 2005

   2.03x   1.59x   1.51x

One-year average ended October 7, 2005

   2.06x   1.54x   1.49x

Source: FactSet and SNL Financial.

 

Finally, Goldman Sachs and Lehman Brothers calculated the average common stock price for the thirty-day, three-month and one-year periods ended October 7, 2005, as a multiple of: (a) estimated next twelve months (NTM) earnings per share and (b) trailing quarterly book value (excluding AOCI) per share for Jefferson-Pilot’s insurance operations as compared to the selected companies. The earnings, book values and equity values with respect to the insurance operations of Jefferson-Pilot were derived by subtracting the earnings, book values and the equity values for the communications operations of Jefferson-Pilot from the corresponding earnings, book values and equity values for the operations of Jefferson-Pilot as a whole. The earnings and book value information for the communications operation were provided by the management of Jefferson-Pilot or taken from the public filings of Jefferson-Pilot. The results of these analyses are summarized as follows:

 

     Average Price/NTM Earnings

Period


   Jefferson-Pilot Insurance

  Selected Companies*

As of October 7, 2005

   11.4x   12.2x

Thirty-day average ended October 7, 2005

   11.2x   12.3x

Three-month average ended October 7, 2005

   11.3x   12.4x

One-year average ended October 7, 2005

   11.3x   12.0x

* Source: FactSet.

 

     Average Price/Book Value (excluding AOCI)

Period


   Jefferson-Pilot Insurance

  Selected Companies*

As of October 7, 2005

   1.75x   1.53x

Thirty-day average ended October 7, 2005

   1.73x   1.53x

Three-month average ended October 7, 2005

   1.73x   1.51x

One-year average ended October 7, 2005

   1.75x   1.49x

* Source: FactSet and SNL Financial.

 

Comparable Companies Analysis. Goldman Sachs and Lehman Brothers calculated valuation multiples implied by the transaction with respect to the insurance operations of Jefferson-Pilot and compared those valuation multiples to comparable valuation multiples of the selected companies. The valuation multiples for each company were calculated by dividing the equity value, in each case, by: (a) expected earnings for the years 2005 and 2006 and (b) book value (excluding AOCI) as of June 30, 2005. As discussed, the estimated earnings, book value and the range of equity values with respect to the insurance operations of Jefferson-Pilot were derived by subtracting certain financial information and the range of equity values (discussed below) for the communications operations of Jefferson-Pilot from the corresponding financial information and the equity value for the operations of Jefferson-Pilot as a whole, in each case using information provided by the management of Jefferson-Pilot and the public filings of Jefferson-Pilot. The results of these analyses are summarized as follows:

 

     Jefferson-Pilot Insurance

  Selected Companies*

         Low    

      High    

      Low    

      High    

Equity Value/2005E Earnings

   12.7x   13.4x   10.6x   16.4x

Equity Value/2006E Earnings

   12.6x   13.3x   10.1x   15.1x

Equity Value/Book Value (ex. AOCI)

   1.91x   2.01x   1.19x   2.04x

* Source: FactSet, SNL Financial and company filings as of June 30, 2005.

 

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Goldman Sachs and Lehman Brothers also calculated and compared various financial multiples and ratios with respect to the radio, television and sports programming components of the communications operations of Jefferson-Pilot with various other public companies in the communications industry. The comparison of financial multiples and ratios for the communications operations of Jefferson-Pilot as a whole were derived by aggregating the comparisons for its radio, television and sports programming components on a separate basis. Goldman Sachs and Lehman Brothers calculated the enterprise value, which is the market value of common equity plus the book value of debt, as a multiple of estimated 2005 and 2006 year earnings before interest, taxes and depreciation and amortization, which is referred to as EBITDA. The estimated EBITDA attributable to the communications operations of Jefferson-Pilot and its components were determined using information provided by the management of Jefferson-Pilot. The same multiples were calculated with respect to other public companies in the communications industry using information, as of June 30, 2005, provided by FactSet. The results of these analyses are summarized as follows:

 

     Enterprise Value/EBITDA

 
     Jefferson-Pilot Communications

    Selected Companies*

 
         Low    

        High    

        Low    

        High    

 

Radio

                        

2005E EBITDA

   11.2 x   13.7 x   11.2 x   16.1 x

2006E EBITDA

   10.2 x   12.4 x   10.1 x   14.1 x

Television

                        

2005E EBITDA

   10.5 x   12.3 x   10.9 x   12.5 x

2006E EBITDA

   9.4 x   11.0 x   9.3 x   11.0 x

Sports Programming

                        

2005E EBITDA

   6.1 x   8.1 x   10.9 x   12.5 x

2006E EBTIDA

   5.5 x   7.3 x   9.3 x   11.0 x

Jefferson-Pilot Communications- Total

                        

2005E EBITDA

   10.7 x   12.9 x   11.1 x   14.6 x

2006E EBITDA

   9.7 x   11.6 x   9.8 x   12.8 x

* For Television and Sports Programming comparison: Gray Television, Inc., Hearst-Argyle Television, Inc., LIN TV Corp., Nexstar Broadcasting Group, Inc. and Sinclair Broadcast Group, Inc.
  For Radio Comparison: Beasley Broadcast Group, Inc., Citadel Broadcasting Corporation, Clear Channel Communications Inc., Cox Radio, Inc., Cumulus Media Inc., Emmis Communications Corporation, Entravision Communications Corporation, Entercom Communications Corp., Radio One, Inc., Regent Communications, Inc. and Spanish Broadcasting System, Inc.

 

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Comparable Transactions Analysis. Goldman Sachs and Lehman Brothers conducted a comparable transactions analysis to assess how similar transactions were valued. Goldman Sachs and Lehman Brothers reviewed certain publicly available information related to comparable transactions to calculate the amount of the premiums paid by acquirers to the acquired companies’ shareholders. Goldman Sachs and Lehman Brothers selected and analyzed the following transactions in the financial institutions and health insurance industries which were valued in excess of $5 billion and announced since 2000.

 

Date Announced


  

Acquiror


  

Target


Jul6, 2005

  

UnitedHealth Group Incorporated

  

PacifiCare Health Systems, Inc.

June 30, 2005

  

Bank of America Corporation

  

MBNA Corporation

June 6, 2005

  

Washington Mutual, Inc.

  

Providian Financial Corporation

June 21, 2004

  

Wachovia Corporation

  

SouthTrust Corporation

May 7, 2004

  

SunTrust Banks, Inc.

   National Commerce Financial Corporation

May 4, 2004

  

Royal Bank of Scotland Group plc

  

Charter One Financial, Inc.

April 26, 2004

  

UnitedHealth Group Incorporated

  

Oxford Health Plans, Inc.

February 15, 2004

  

North Fork Bancorporation, Inc.

  

Greenpoint Financial Corp.

January 22, 2004

  

Regions Financial Corporation

  

Union Planters Corporation

January 14, 2004

  

J. P. Morgan Chase & Co.

  

Bank One Corporation

November 17, 2003

  

The St. Paul Companies, Inc.

  

Travelers Property Casualty Corp.

October 27, 2003

   Anthem, Inc.    Wellpoint Health Networks Inc.

October 27, 2003

   Bank of America Corporation    FleetBoston Financial Corporation

May 21, 2002

   Citigroup Inc.    Golden State Bancorp Inc.

July 30, 2001

   General Electric Company    Heller Financial, Inc.

May 11, 2001

   American International Group, Inc.    American General Corporation

April 15, 2001

   First Union Corporation    Wachovia Corporation

October 4, 2000

   Firstar Corporation    U.S. Bancorp

October 2, 2000

   FleetBoston Financial Corporation    Summit Bancorp

 

For each of the transactions included in the previous table, Goldman Sachs and Lehman Brothers calculated the premiums paid by the acquirer by comparing the per share purchase price in each transaction to the historical stock price of the acquired company as of one-day, one-month and three-months prior to the announcement date. Goldman Sachs and Lehman Brothers also calculated a premium for the proposed merger by comparing the stock price of LNC and Jefferson-Pilot as of October 7, 2005, and the average stock prices during the period between September 7, 2005 and October 7, 2005, with the historical stock prices of LNC and Jefferson-Pilot as of one-day, one-month and three-months prior to October 7, 2005. The results of these analyses are summarized as follows:

 

     3-Month Market
Premium


    1-Month Market
Premium


    1-Day Market
Premium


 

Proposed merger

                  

Average prices 9/7/05 – 10/7/05

   11.4 %   11.0 %   10.2 %

LNC/JP prices on 10/7/05

   10.1 %   9.7 %   8.9 %

Selected transactions

                  

Mean

   26.7 %   23.1 %   16.5 %

Median

   23.1 %   24.0 %   15.1 %

Source: FactSet, SNL Financial and Securities Data Company.

 

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Goldman Sachs and Lehman Brothers also analyzed certain information relating to the following selected transactions in the life insurance industry since May 11, 2001:

 

Date Announced


  

Acquiror


  

Target


May 11, 2001

   American International Group, Inc.    American General Corporation

December 17, 2001

   Sun Life Financial Services of Canada Inc.    Clarica Life Insurance Company

February 17, 2003

   Great-West Lifeco, Inc.    The Canada Life Assurance Company

September 28, 2003

   Manulife Financial Corporation    John Hancock Financial Services, Inc.

January 31, 2005

   MetLife, Inc.    Travelers Insurance Company

 

Using information provided by FactSet, SNL Financial and other sources for each of the selected transactions, Goldman Sachs and Lehman Brothers calculated: (a) purchase price as a multiple of last twelve months (LTM) earnings, (b) purchase price as a multiple of current year estimated earnings, (c) purchase price as a multiple of book value (excluding AOCI) and (d) estimated forward return on equity (ROE). The same analysis was conducted using LTM earnings, book value and a range of equity values attributable to the insurance operations of Jefferson-Pilot for purposes of comparing the selected transactions to the proposed merger. As discussed, the earnings, book value and the range of equity values with respect to the insurance operations of Jefferson-Pilot were derived by subtracting certain financial information and the range of equity values for the communications operations of Jefferson-Pilot from the corresponding financial information and the equity value for the operations of Jefferson-Pilot as a whole. The following table presents the results of this analysis:

 

    

Purchase Price/Equity Value as

Multiple of


    Forward ROE

 
     LTM Earnings

    Current Year
Earnings


    Book Value
(ex. AOCI)


   

Selected transactions

                        

High

   18.1x     16.0x     2.82x     17.6 %

Mean

   13.9x     14.1x     2.04x     15.7 %

Median

   12.8x     14.1x     1.71x     15.7 %

Low

   8.6 x     12.1x     1.53x     13.9 %

Proposed merger

                        

JP Insurance

   12.1-12.7 x   12.7-13.4 x   1.91-2.01 x   15.0 %

 

Pro Forma EPS and Return on Average Equity Accretion/Dilution Analyses. Goldman Sachs and Lehman Brothers performed a pro forma analysis of the financial impact of the merger on LNC’s earnings per share (EPS) for the years 2006, 2007 and 2008, using:

 

    certain estimates of earnings as provided by the managements of LNC and Jefferson-Pilot and IBES, which reflect certain adjustments to the basis for reporting under U.S. GAAP;

 

    pre-tax projected cost savings and pre-tax integration costs for the resulting company as provided by the managements of LNC and Jefferson-Pilot; and

 

    estimates of certain future financing costs and the execution of the contemplated repurchases by LNC of its common stock following the completion of the merger.

 

Based on this analysis, taking into account the effect of certain pre-tax projected cost savings, but excluding estimated pre-tax integration costs, the proposed merger would be accretive to LNC’s EPS in 2006, 2007 and 2008. Taking into account additional estimated pre-tax integration costs as well as certain pre-tax projected cost savings, the proposed merger would be dilutive to LNC’s EPS in 2006 and accretive to LNC’s EPS in 2007 and 2008.

 

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Goldman Sachs and Lehman Brothers also performed a pro forma analysis of the financial impact of the merger on LNC’s return on average equity, which is referred to as ROAE, using the same assumptions and estimates of earnings, pre-tax projected cost savings and pre-tax integration costs for the resulting company as provided by the managements of LNC and Jefferson-Pilot and IBES.

 

Based on this analysis, taking into account the effect of certain pre-tax projected cost savings, but excluding estimated pre-tax integration costs, the proposed merger would be dilutive to LNC’s ROAE in 2006 and become less dilutive in 2007 and 2008. After taking into account additional estimated pre-tax integration costs and certain pre-tax projected cost savings, the proposed merger would be dilutive to LNC’s ROAE in 2006 and become less dilutive in 2007 and 2008.

 

General

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying the Goldman Sachs’ and Lehman Brothers’ opinions. In arriving at its fairness determination, each of Goldman Sachs and Lehman Brothers considered the results of all of its analyses as a whole and did not attribute any particular weight to any factor or analysis considered by it. Rather, each of Goldman Sachs and Lehman Brothers made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to LNC or Jefferson-Pilot or the contemplated merger.

 

Goldman Sachs and Lehman Brothers prepared these analyses for purposes of providing their respective opinions to LNC’s board of directors as to the fairness from a financial point of view of the consideration to be paid by LNC in the merger. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of LNC, Jefferson-Pilot, Goldman Sachs, Lehman Brothers or any other person assumes responsibility if future results are materially different from those forecasted.

 

The consideration to be paid in the merger was determined through arms’-length negotiations between LNC and Jefferson-Pilot and was approved by LNC’s board of directors. Goldman Sachs and Lehman Brothers provided advice to LNC during these negotiations. Goldman Sachs and Lehman Brothers did not, however, recommend any specific amount of consideration to LNC or its board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

 

As described above, Goldman Sachs’ and Lehman Brothers’ opinions to LNC’s board of directors were one of many factors taken into consideration by LNC’s board of directors in making its determination to approve the merger. The foregoing summary does not purport to be a complete description of the analyses performed by each of Goldman Sachs and Lehman Brothers in connection with its fairness opinion and is qualified in its entirety by reference to the written opinions of Goldman Sachs and Lehman Brothers attached to this joint proxy statement/prospectus as Annexes C and D, respectively.

 

Opinions of Jefferson-Pilot’s Financial Advisors

 

The full text of the written opinions of Lazard and Morgan Stanley, each dated October 9, 2005, which set forth the assumptions made, procedures followed, matters considered and limitations on the reviews undertaken in connection with the opinions, are attached to this joint proxy statement/prospectus as Annexes E and F, respectively. The summaries of the opinions of Lazard and Morgan Stanley set forth in this joint proxy statement/prospectus are qualified in their entirety by reference to the full text of such opinions. We urge you to read the

 

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full text of the opinions in their entirety. Each of Lazard and Morgan Stanley provided its opinion for the information and assistance of Jefferson-Pilot’s board of directors in connection with its consideration of the proposed merger. The opinions of Lazard and Morgan Stanley do not constitute a recommendation as to how any shareholder should vote with respect to the proposals set forth in this joint proxy statement/prospectus and do not address the election any shareholders might make regarding the consideration.

 

Opinion of Lazard. Under a letter agreement as of September 1, 2005, Jefferson-Pilot confirmed the retention of Lazard to act as its investment banker in connection with various possible strategic alternatives then under consideration by Jefferson-Pilot. As part of this engagement, Jefferson-Pilot requested that Lazard evaluate the fairness, from a financial point of view, to the holders of the outstanding shares of Jefferson-Pilot common stock (other than LNC and its affiliates) of the merger consideration to be paid to such holders pursuant to the merger. Lazard has delivered to Jefferson-Pilot’s board of directors a written opinion, dated October 9, 2005, that, as of that date, based on and subject to certain assumptions, factors and qualifications set forth therein, the merger consideration to be paid to the holders of Jefferson-Pilot common stock in the merger is fair, from a financial point of view, to such holders (other than LNC and its affiliates).

 

The full text of the Lazard opinion is attached to this joint proxy statement/prospectus as Annex E and is incorporated into this joint proxy statement/prospectus by reference. The description of the Lazard opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the Lazard opinion set forth in this joint proxy statement/prospectus as Annex E. You are urged to read the Lazard opinion in its entirety for a description of the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Lazard in connection with the opinion.

 

Lazard’s written opinion was for the benefit of and was rendered to Jefferson-Pilot’s board of directors in connection with its consideration of the merger. In rendering its written opinion, Lazard analyzed the merger as a strategic business combination not involving a sale of control of Jefferson-Pilot. Lazard’s written opinion does not address the merits of the underlying decision by Jefferson-Pilot to engage in the merger or the relative merits of the merger as compared to other transactions or business strategies that might have been available to Jefferson-Pilot and does not constitute an opinion or recommendation as to how any shareholder should vote on any matter relating to the merger. Lazard’s opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, the date of the Lazard opinion. Subsequent developments may affect the conclusion expressed in Lazard’s opinion and Lazard assumes no responsibility for advising any person of any change in any matter affecting its opinion or for updating or revising its opinion based on circumstances or events occurring after the date of the opinion. The following is only a summary of the Lazard opinion. You are urged to read the entire opinion.

 

In the course of performing its review and analyses in rendering its opinion, Lazard:

 

    reviewed the financial terms and conditions of the merger agreement;

 

    analyzed certain publicly available financial statements and historical business information relating to Jefferson-Pilot and LNC, respectively;

 

    reviewed various internal financial forecasts and other financial and operating data prepared by the managements of Jefferson-Pilot and LNC, respectively, with respect to the businesses and prospects of Jefferson-Pilot and LNC, respectively, the strategic objectives of each, and their estimates of synergies and other anticipated strategic, financial and operational benefits of the merger to the resulting company;

 

    held discussions with members of the senior managements of Jefferson-Pilot and LNC with respect to the businesses and prospects of Jefferson-Pilot and LNC, respectively, the strategic objectives of each, and their estimates of synergies and other anticipated strategic, financial and operational benefits of the merger to the resulting company;

 

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    compared the financial performance of Jefferson-Pilot and LNC and the prices and trading activity of Jefferson-Pilot common stock and LNC common stock with that of certain other publicly traded companies Lazard believed to be generally comparable with Jefferson-Pilot and LNC, respectively, and their securities;

 

    reviewed the potential pro forma impact of the merger on the resulting company’s financial results;

 

    reviewed the financial terms, to the extent publicly available, of certain business combinations involving companies in lines of businesses Lazard believed to be generally comparable to those of Jefferson-Pilot and LNC, and in other industries generally;

 

    reviewed the historical stock prices and trading volumes activity of Jefferson-Pilot common stock and LNC common stock; and

 

    conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.

 

Lazard relied upon the accuracy and completeness of the information provided to it and did not assume any responsibility for and did not conduct any independent verification of such information. Lazard did not conduct any independent valuation or appraisal of any of the assets or liabilities of Jefferson-Pilot or LNC or any of their respective subsidiaries, or concerning the solvency or fair value of any of the foregoing entities, and Lazard was not furnished with any such evaluation or appraisal. Lazard did not rely upon or receive any valuation of Jefferson-Pilot or LNC prepared by any independent third party, including actuarial appraisals of Jefferson-Pilot or LNC. Lazard is not an actuarial firm and its services did not include actuarial determinations or evaluations or an attempt to evaluate actuarial assumptions. With respect to financial forecasts, including projected synergies and other anticipated strategic, financial and operational benefits of the merger, Lazard assumed that they had been reasonably prepared on bases reflecting the best available estimates and judgments of the managements of Jefferson-Pilot and LNC as to the future financial performance of Jefferson-Pilot, LNC and the resulting company, respectively. Lazard assumes no responsibility for and expresses no view as to any such forecasts or the assumptions on which they were based.

 

In rendering its opinion, Lazard assumed that the merger would be consummated on the terms described in the merger agreement, including, among other things, that the merger would be treated as a reorganization under Section 368(a) of the Code and that the merger would be consummated without any waiver of any material terms or conditions. In addition, Lazard assumed that obtaining the necessary regulatory and third-party approvals for the merger would not have an adverse effect on Jefferson-Pilot, LNC or the resulting company, or on the contemplated benefits of the consummation of the merger.

 

Lazard did not express any opinion as to the price at which shares of Jefferson-Pilot common stock or LNC common stock might trade subsequent to the announcement of the merger or as to the price at which shares of LNC common stock might trade subsequent to the consummation of the merger.

 

Lazard has provided investment banking services to LNC on a transaction which was not consummated for which LNC has agreed to pay Lazard a fee of $50,000. In addition, in the course of their respective businesses, affiliates of Lazard and LFCM Holdings LLC (an entity owned in large part by managing directors of Lazard) may from time to time effect transactions and hold securities, including derivative securities, of Jefferson-Pilot or LNC for their own accounts and for the accounts of clients and customers, and, accordingly, may hold a long or short position in such securities.

 

The following is a brief summary of the material financial and comparative analyses that Lazard deemed to be appropriate for this type of transaction and that were performed by Lazard in connection with rendering its opinion. The summary of Lazard’s analyses described below is not a complete description of the analyses underlying Lazard’s opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances, and, therefore, is not readily susceptible to summary

 

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description. In arriving at its opinion, Lazard considered the results of all the analyses and did not attribute any particular weight to any factor or analysis considered by it; rather, Lazard made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses. The financial analyses summarized below include information presented in tabular format. In order to fully understand Lazard’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Lazard’s financial analyses.

 

Public Market Comparison. Lazard reviewed and compared certain financial information of Jefferson-Pilot, LNC and the companies listed below, which were chosen for comparison purposes through a review of publicly traded life insurance companies of similar operating characteristics and size:

 

    Prudential Financial, Inc.

 

    MetLife, Inc.

 

    Genworth Financial, Inc.

 

    Principal Financial, Inc.

 

    Torchmark Corporation

 

    Nationwide Financial Services, Inc.

 

    Protective Life Insurance Company

 

In general, financial data used were as of June 30, 2005, and market data used were as of October 7, 2005. In the course of its analysis, Lazard calculated the following items as a multiple of share price for each of the companies: (i) 2005 estimated EPS based on median estimates from IBES; (ii) 2006 estimated EPS based on median IBES estimates; (iii) reported GAAP book value as of June 30, 2005; and (iv) GAAP book value adjusted to exclude accumulated other comprehensive income as of June 30, 2005, which is referred to as adjusted book value. Lazard then compared the mean and median multiples from the selected life insurance companies (excluding Jefferson-Pilot and LNC) to the multiples resulting from the merger. In performing this comparison, Lazard calculated a per share merger consideration of $55.48, based on a 1.0906 exchange ratio, a $55.96 cash election, and a 76%/24% proration of the merger consideration between stock and cash. The results of this analysis are summarized as follows:

 

   

Jefferson-
Pilot /LNC

Merger


    Trading

   

Public Life

Companies (Excl.

Jefferson-

Pilot & LNC)


   

Prudential

Financial


    MetLife

   

Gen-

worth


   

Principal

Financial


   

Torch-

mark


   

Nation-

wide

Financial


   

Protective

Life


 
    Jefferson-
Pilot


    LNC

    Mean

    Median

               

Market Data:

                                                                                           

Current Share Price (10/7/05)

  $ 55.48 (a)    $ 50.79     $ 50.73                 $ 65.08     $ 48.34     $ 30.88     $ 46.74     $ 52.59     $ 39.27     $ 42.53  

FD Equity Market Capitalization

  $ 7,510     $ 6,848     $ 8,912                 $ 33,822     $ 36,888     $ 14,616     $ 13,190     $ 5,551     $ 6,039     $ 2,995  

Share Price as a Multiple of:

                                                                                           

2005E EPS

    13.5 x     12.3 x     11.6 x   12.6 x   11.9 x     14.1 x     11.4 x     12.5 x     16.4 x     11.4 x     10.6 x     11.9 x

2006E EPS

    13.0 x     11.9 x     11.3 x   11.6 x   11.0 x     12.2 x     10.9 x     11.4 x     15.1 x     10.5 x     10.1 x     11.0 x

Reported Book Value

    1.84 x     1.69 x     1.38 x   1.39 x   1.42 x     1.49 x     1.42 x     1.08 x     1.79 x     1.59 x     1.11 x     1.29 x

Adjusted Book Value

    2.24 x     2.05 x     1.61 x   1.62 x   1.62 x     1.65 x     1.62 x     1.28 x     2.23 x     1.83 x     1.19 x     1.51 x

(a) Based on 1.090 exchange ratio for stock election and $55.96 for cash election and 76% stock proration and 24% cash proration.

 

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Sum-of-the-Parts Analysis. Lazard performed a “sum-of-the-parts” analysis of Jefferson-Pilot by determining trading reference ranges for each of Jefferson-Pilot’s constituent insurance, radio/sports broadcasting, television broadcasting and corporate operations by using certain financial forecasts for fiscal year 2006 provided by Jefferson-Pilot management and other publicly available financial forecast information for fiscal year 2006.

 

In the case of Jefferson-Pilot’s insurance operations, Lazard assumed a reference multiple range of 10.0x to 11.5x estimated net operating earnings. In the case of Jefferson-Pilot’s radio/sports broadcasting operations, Lazard assumed a reference multiple range of 9.5x to 11.0x 2006 estimated cash flow for the radio/sports broadcasting operations, which is referred to as Radio/Sports Broadcast Cash Flow. In the case of Jefferson-Pilot’s television broadcasting operations, Lazard assumed a reference trading multiple range of 9.0x to 9.5x estimated cash flow for the television broadcasting operations for fiscal year 2006, which is referred to as Television Broadcast Cash Flow. In the case of Jefferson-Pilot’s corporate operations, Lazard assumed a reference trading multiple range of 8.0x to 10.0x estimated net operating earnings.

 

In deriving a reference multiple range for Jefferson-Pilot’s insurance net operating earnings, Lazard reviewed the trading statistics of the publicly traded life insurers listed above, particularly those companies whose earnings are derived primarily from the sale of life insurance and annuity products in the United States.

 

In deriving a reference multiple range for Jefferson-Pilot’s Radio/Sports Broadcast Cash Flow, Lazard reviewed the trading statistics of the following publicly traded radio broadcasting companies:

 

   

Clear

Channel


  Emmis

  Citadel

 

Radio

One


  Entercom

 

Cox

Radio


 

Spanish

Broadcasting


  Salem

  Beasley

  Saga

  Regent

   

Summary

Statistics


 
                        Mean

    Median

 

Market Data:

                                                                               

Current Share Price (10/7/05)

  $ 31.61   $ 20.86   $ 13.79   $ 12.79   $ 30.47   $ 14.76   $ 7.00   $ 18.21   $ 14.08   $ 13.21   $ 5.21              

Enterprise Value

    24,257     2,541     2,283     2,242     1,906     1,931     963     774     479     424     313              

Enterprise Value as a Multiple of:

                                                                               

Broadcast Cash-Flow:

                                                                               

2005E

    10.3x     11.0x     12.1x     11.3x     9.9x     10.7x     13.7x     10.1x     11.9x     8.3x     10.6x     10.9x     10.7x  

2006E

    9.3     10.9     11.3     10.4     9.2     10.0     12.2     9.4     10.9     7.7     10.0     10.1     10.0  

 

In deriving a reference multiple range for Jefferson-Pilot’s estimated 2006 Television Broadcast Cash Flow, Lazard reviewed the trading statistics of the following publicly traded television broadcasting companies:

 

    Gray

 

Hearst

Argyle


  Liberty

  LIN

  Nexstar

  Sinclair

  Young

   

Summary

Statistics


 
                Mean

    Median

 

Market Data:

                                                       

Current Share Price (10/7/05)

  $ 10.05   $ 25.32   $ 46.81   $ 13.22   $ 5.30   $ 8.61   $ 3.07              

Enterprise Value

    1,146     3,264     876     1,328     783     2,293     739              

Enterprise Value as a Multiple of:

                                                       

Broadcast Cash-Flow:

                                                       

2005E

    9.4x     11.5x     10.5x     11.2x     8.5x     10.9x     17.8x     11.4x     10.9x  

2006E

    8.4     9.4     8.6     9.5     7.8     8.8     10.8     9.0     8.8  

 

Based on the implied trading reference ranges for each of these constituent operations, Lazard calculated implied trading reference ranges of Jefferson-Pilot as a whole, and such trading reference ranges were subsequently utilized to calculate the implied price per share trading reference ranges of Jefferson-Pilot common stock. The high and low price per share values of Jefferson-Pilot resulting from the sum-of-the-parts analysis were compared to LNC’s stock price of $50.73 as of October 7, 2005, the last trading day before the transaction

 

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with LNC was announced, to calculate a range of implied exchange ratios, assuming a 100% stock transaction. These ranges were then compared to the agreed exchange ratio of 1.0906 in the merger, assuming an all-stock transaction. The results of this analysis are summarized as follows (in millions, except per share amounts):

 

     Reference Trading Range

     Total

   Per Share

Equity Value

   $ 6,068 – $6,959    $44.54 – $51.61

Implied Exchange Ratio Based on LNC Share Price of $50.73(a)

          0.878 – 1.017

Implied Exchange Ratio in the LNC/Jefferson-Pilot Merger

          1.0906

(a) For 100% stock transaction.

 

Contribution Analysis. Lazard analyzed the relative potential contributions of each of Jefferson-Pilot and LNC to the resulting company for (i) the latest twelve months’ operating income as if the companies had been combined; (ii) the estimated operating income for 2005 and 2006, based on median IBES forecasts and the forecasts of the managements of Jefferson-Pilot and LNC; (iii) book value; (iv) adjusted book value; and (v) market capitalization (based on the fully diluted common shares of each company outstanding as of October 7, 2005). In determining the potential contribution of each company, Lazard did not take into account any operating, financial or accounting impacts resulting from the merger, any cost savings or other benefits projected by Jefferson-Pilot and LNC to be realized from the merger or any other pro forma impacts of the merger. Lazard then used the relative potential contributions of each of Jefferson-Pilot and LNC to compute an implied exchange ratio for each item listed above, which was then compared with the exchange ratio for the proposed merger. The results of this analysis are summarized as follows:

 

     Contribution

   

Implied

Exchange

Ratio


     Jefferson-Pilot

    LNC

   

Income Statement:

                

Latest Twelve Months’ Operating Income

   43 %   57 %   0.968

2005E Operating Income — IBES Median

   42 %   58 %   0.953

2006E Operating Income — IBES Median

   42 %   58 %   0.949

2005E Operating Income — Management

   40 %   60 %   0.880

2006E Operating Income — Management

   40 %   60 %   0.881

Balance Sheet:

                

Book Value

   39 %   61 %   0.828

Adjusted Book Value

   38 %   62 %   0.793

Market Capitalization(a)

   43 %   57 %   1.001

LNC / Jefferson-Pilot Merger(b)

   46 %   54 %   1.0906

(a) Based on common shares outstanding.
(b) Assuming an all-stock transaction. Jefferson-Pilot shareholders would receive 46% of the value allocated in the transaction regardless of the mix of consideration.

 

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Selected Precedent Transactions Analysis. Lazard reviewed 17 precedent merger transactions involving companies in the financial services industry since 1995 where the smaller company was allocated at least 40% of the resulting company board of directors and/or the shareholders of the smaller combined company owned at least 40% of the pro forma resulting company. These transactions are referred to as the financial services transactions. Lazard calculated the premium implied by the exchange ratio in each of the financial services transactions to the closing stock prices for the parties in the financial services transactions on the day prior to the announcement of the transaction and calculated the resulting ownership percentages of the constituent shareholders in the resulting company. Lazard then compared the results of this analysis to corresponding data for the proposed merger. The results of this analysis are summarized as follows:

 

Date

 

Merger
Partners


  Equity
Deal
Value
($BN)


  One-day
Premium


    %
Cash


    Ownership
%


  Board
(%)


  Super-
Majority
Provision


    Chairman

  CEO

  Name

  HQ
City


2/15/04   North Fork/ GreenPoint   $ 6.4   14 %   0 %   55%/45%   67%/33%(a)   No     North Fork   North Fork   North Fork   North Fork
1/22/04   Regions/ Union Planters     6.0   0     0     59/41   50/50   Yes (b)   Regions(c)   Regions(c)   Regions   Regions
1/14/04   JPMorgan/ Bank One     58.7   15     0     58/42   50/50   Yes     JPMorgan   JPMorgan(c)   JPMorgan   JPMorgan(d)
11/17/03   Travelers/ St. Paul     8.4   0     0     66/34   52/48   Yes     Travelers(c)   St. Paul   Mix   St. Paul
10/27/03   Anthem/ WellPoint     16.4   20     24     47/53   58/42   Yes (b)   WellPoint(e)   Anthem   WellPoint   Anthem
4/15/01   First Union/ Wachovia     13.6   7     0     73/27   50/50   Yes     Wachovia(e)   First Union   Wachovia   First Union
10/4/00   Firstar/ U.S. Bancorp     21.2   21     0     50/50   56/44   No     U.S. Bancorp   Firstar   U.S. Bancorp   U.S. Bancorp
3/14/99   Fleet/ Bank Boston     16.3   13     0     62/38   55/45   Yes     Fleet(c)   Fleet(c)   Mix   Same
11/23/98   UNUM/ Provident     4.9   5     0     58/42   53/47   Yes     UNUM   UNUM(c)   Mix   Provident
7/1/98   Star Banc/ Firstar     7.4   44     0     49/51   56/44   No     Firstar   Star Banc   Firstar   Firstar
6/8/98   Norwest/ Wells Fargo     34.6   9     0     47/53   50/50   No     Wells Fargo   Norwest   Wells Fargo   Wells Fargo
4/13/98   NationsBank/ B of A     66.6   0     0     54/46   55/45   No     Nations-
Bank(c)
  Nations-
Bank(c)
  New   Nations-
Bank
4/13/98   Bank One/ First Chicago     29.5   6     0     60/40   50/50   No     First Chicago   Bank One   Bank One   First Chicago
4/6/98   Travelers/ Citicorp     82.5   8     0     50/50   50/50   No     Co-Chairmen   Co-CEOs   New   Same
2/5/97   Dean Witter/ Morgan Stanley     10.7   11     0     55/45   50/50   Yes     Dean Witter   Dean Witter   Mix   Same
8/28/95   Chemical/ Chase Manhattan     11.4   7     0     58/42   57/43   No     Chemical   Chemical   New   Same
7/11/95   First Chicago/ NBD     5.1   3     0     50/50   50/50   No     First
Chicago(c)
  NBD   Mix   First Chicago
                                                     
   

Mean

        11 %                                    
   

Median

        8 %                                    
                                                     
    LNC / Jefferson-Pilot   $ 7.5   9 %(f)   24 %   61%/39%(g)   53%/47%   Yes     LNC   LNC(h)   LNC   LNC(i)

(a) Post-announcement board of directors changed 72% / 28%.
(b) Provision existed prior to merger.
(c) Succession commitment to other party.
(d) LOB HQ — Bank One.
(e) Succession commitment to other party.
(f) Implied premium based on estimated value of the merger consideration as of October 7, 2005.
(g) Includes cash consideration.
(h) Jefferson-Pilot CEO will have core operations of resulting company reporting to him.
(i) Core Jefferson-Pilot operations to be headquartered in current Jefferson-Pilot location.

 

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Lazard also reviewed publicly available financial information relating to seven other merger transactions in other industries with similar characteristics as the financial services transactions. These transactions are referred to as the other industry transactions. Lazard calculated the premium implied by the exchange ratio in each of the other industry transactions to the closing stock prices for the parties in the merger transactions on the day prior to the announcement of the transaction and calculated the resulting ownership percentages of the constituent shareholders in the resulting company. Lazard then compared the results of this analysis to corresponding data for the merger. The results of this analysis are summarized as follows:

 

Ann. Date


  Transaction

  Equity
Value


  Price/
Adj. BV(a)


    Price/
FY1 EPS


    Form of
Consideration


  Premium to
Unaffected
Share Price


    Pro Forma
Target
ownership


    Target
as % of
Pro
Forma
Board


 

2001 and Prior Transactions:

                                       

4/3/01

  AIG/American
General
  $ 23.6   2.85 x   15.9 x   Stock   20 %   11 %   5 %

4/28/00

  ING/Reliastar     5.0   2.37     15.4     Cash   75 %   0 %   0 %

2/18/99

  AEGON/Trans-
america
    9.7   2.58     19.4     Stock/Cash   35 %   11 %   8 %

7/8/97

  ING/Equitable of
Iowa
    2.2   2.71     17.0     Stock/Cash   19 %   2 %   N A

Post-2001 Transactions:

                                       

1/31/05

  MetLife/Travelers
Life
  $ 11.5   1.54 x   NA     Cash   N A   N A   N A

9/25/03

  Manulife/John
Hancock
    11.0   1.67     12.1 x   Stock   19 %   42 %   26 %

9/17/03

  AXA/MONY     1.5   0.77     NM     Cash   6 %   0 %   0 %
    LNC/Jefferson-
Pilot
  $ 7.5   2.24 x   13.5 x   Stock/Cash   9 %   39 %(b)   47 %

(a) Excludes accumulated other comprehensive income.
(b) Includes impact of cash consideration.

 

Pro Forma Merger Analysis. Lazard performed a pro forma analysis of the financial impact of the merger on Jefferson-Pilot’s and LNC’s estimated earnings per share for calendar years 2006 through 2008, using median IBES earnings estimates, and making certain adjustments to the basis for reporting under U.S. GAAP, pre-tax cost savings and pre-tax integration costs as provided by the managements of LNC and Jefferson-Pilot, as well as estimates of certain future financing costs and the execution of the contemplated repurchases by LNC of its common stock.

 

Based on this analysis, taking into account the effect of certain pre-tax projected cost savings, but excluding estimated pre-tax integration costs, the proposed merger would be accretive to both Jefferson-Pilot’s and LNC’s EPS in 2006, 2007 and 2008. Taking into account additional estimated pre-tax integration costs as well as certain pre-tax projected cost savings, the proposed merger would be accretive to Jefferson-Pilot’s EPS in each of 2006, 2007 and 2008, but dilutive to LNC’s EPS in 2006 and accretive to LNC’s EPS in 2007 and 2008.

 

Lazard also performed a pro forma analysis of the financial impact of the merger on LNC’s ROAE using the same assumptions and estimates of earnings, pre-tax projected cost savings and pre-tax integration costs for the resulting company as provided by the managements of LNC and Jefferson-Pilot and IBES.

 

Based on this analysis, taking into account the effect of certain pre-tax projected cost savings, but excluding estimated pre-tax integration costs, the proposed merger would be dilutive to LNC’s ROAE in 2006 and become less dilutive in 2007 and 2008. After taking into account additional estimated pre-tax integration costs and certain pre-tax projected cost savings, the proposed merger would be dilutive to LNC’s ROAE in 2006 and become less dilutive in 2007 and 2008.

 

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Other Analyses. Based on assumptions provided by the managements of Jefferson-Pilot and LNC as to the amount of pre-tax cost savings generated by the merger and the expected annual recognition thereof, as well as the pre-tax implementation costs, Lazard calculated the capitalized value of the after-tax fully-phased-in cost savings based a multiple of 10.0x to 11.0x fully-phased-in annual cost-savings, net of after-tax implementation costs. Lazard also calculated the present value of after-tax cost savings, net of after-tax implementation costs, at discount rates of 9% to 10.5% and assuming a 2% perpetuity growth rate beyond fiscal year 2008. Lazard then subtracted the excess of (x) the fully diluted aggregate merger consideration as of October 7, 2005 and (y) Jefferson-Pilot’s fully diluted market capitalization as of the same date (the difference of (x) and (y) which is referred to as the dollar premium) from both the net capitalized value of the after-tax cost savings and the net present value of the after-tax cost savings. Lazard then multiplied the resulting differences by the amount of Jefferson-Pilot shareholders’ pro forma ownership in the resulting company to determine the portion of after-tax cost savings, net of implementation costs and net of the dollar premium (which is referred to as the net cost savings value), implied by the merger consideration that could inure to Jefferson-Pilot shareholders.

 

Lazard noted that based on this illustrative mathematical analysis, the sum of (a) the dollar premium and (b) the net cost savings value that could inure to Jefferson-Pilot shareholders could result in an amount that represents an 11.5% to 13.9% premium to the fully diluted market capitalization of Jefferson-Pilot as of October 7, 2005, although there can be no guarantees as to the prices at which the shares of Jefferson-Pilot or LNC common stock will trade at any time.

 

General. Lazard’s opinion and financial analyses were not the only factors considered by Jefferson-Pilot’s board of directors in their evaluation of the merger and should not be viewed as determinative of the views of Jefferson-Pilot’s board of directors or Jefferson-Pilot’s management. Lazard has consented to the inclusion of and references to its opinion in this joint proxy statement/prospectus.

 

The consideration to be paid in the merger was determined through arm’s-length negotiations between Jefferson-Pilot and LNC and was approved by Jefferson-Pilot’s board of directors. Lazard provided advice to Jefferson-Pilot during these negotiations. Lazard did not, however, recommend any specific amount of consideration to Jefferson-Pilot or its board or that any specific amount of consideration constituted the only appropriate consideration for the merger.

 

Under the terms of Lazard’s engagement, $1,500,000 was payable to Lazard when Lazard provided Jefferson-Pilot’s board of directors with its opinion with respect to the fairness of the consideration to be paid pursuant to the merger agreement. Jefferson-Pilot has agreed to pay Lazard a fee of $17,500,000 upon the closing of the merger. Jefferson-Pilot has agreed to pay Lazard a fee of $4,500,000 upon receipt of any termination or similar fee in connection with the merger. If Jefferson-Pilot effects a repurchase of or a public sale or private placement of equity, preferred debt or debt securities in connection with the merger, Jefferson-Pilot has agreed to discuss the possibility of retaining Lazard’s assistance with such transaction on mutually agreeable terms.

 

Jefferson-Pilot has agreed to reimburse Lazard for all its expenses incurred in performing its services, including the reasonable fees and expenses of Lazard’s legal counsel and other professional advisors. In addition, Jefferson-Pilot has agreed to indemnify Lazard against certain liabilities, including liabilities under the federal securities laws, relating to or arising out of Lazard’s engagement.

 

Lazard is an internationally recognized investment banking and advisory firm and is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, leveraged buyouts and valuations for real estate, corporate and other purposes. Lazard was selected to act as investment banker to Jefferson-Pilot because of its expertise and its reputation in investment banking and mergers and acquisitions and its independence with respect to the merger and the transactions contemplated by the merger agreement.

 

Opinion of Morgan Stanley. Under a letter agreement dated October 6, 2005, Jefferson-Pilot confirmed the retention of Morgan Stanley to provide a financial opinion in connection with a contemplated merger transaction

 

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with LNC. Morgan Stanley was selected by Jefferson-Pilot’s board of directors as a financial advisor based on Morgan Stanley’s qualifications, experience, reputation and its knowledge of the business and affairs of Jefferson-Pilot. At a meeting of the Jefferson-Pilot board of directors on October 9, 2005, Morgan Stanley delivered to Jefferson-Pilot’s board of directors an oral opinion, subsequently in writing as of that same date that, as of that date, based on and subject to certain assumptions, limitations and qualifications set forth therein, the consideration to be paid to the holders of Jefferson-Pilot common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders (other than LNC and its affiliates).

 

The full text of the Morgan Stanley opinion is attached to this joint proxy statement/prospectus as Annex F and is incorporated into this joint proxy statement/prospectus by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. We urge you to read the entire opinion carefully. Morgan Stanley’s opinion is directed to Jefferson-Pilot’s board of directors and addresses only the fairness from a financial point of view of the consideration to be received by holders of shares of Jefferson-Pilot common stock, other than LNC and its affiliates, pursuant to the merger agreement as of the date of the opinion. The opinion does not address any other aspects of the transaction and does not constitute a recommendation to any holder of Jefferson-Pilot common stock as to how the shareholders should vote at the special meeting or the election such holder should make with respect to the consideration.

 

In connection with rendering its opinion, Morgan Stanley, among other things:

 

    reviewed certain publicly available financial statements and other business and financial information of Jefferson-Pilot and LNC, respectively;

 

    reviewed certain internal financial statements and other financial and operating data concerning Jefferson-Pilot and LNC prepared by the managements of Jefferson-Pilot and LNC, respectively;

 

    reviewed certain financial forecasts prepared by the managements of Jefferson-Pilot and LNC, respectively;

 

    discussed the past and current operations and financial condition and the prospects of Jefferson-Pilot and LNC, including information relating to certain strategic, financial and operational benefits anticipated from the merger, with senior executives of Jefferson-Pilot and LNC, respectively;

 

    reviewed the pro forma impact of the merger on certain of LNC’s financial metrics;

 

    reviewed the reported prices and trading activity for Jefferson-Pilot common stock and LNC common stock;

 

    compared the financial performance of Jefferson-Pilot and LNC and the prices and trading activity of Jefferson-Pilot common stock and LNC common stock with that of certain other publicly-traded companies comparable with Jefferson-Pilot and LNC, respectively, and their securities;

 

    reviewed the financial terms, to the extent publicly available, of certain comparable merger transactions;

 

    discussed with the senior managements of Jefferson-Pilot and LNC, respectively, the strategic rationale and objectives of the merger and certain strategic, financial and operational benefits anticipated from the merger to the resulting company;

 

    reviewed the merger agreement and certain related documents; and

 

    performed such other analyses and considered such other factors as Morgan Stanley deemed appropriate.

 

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information supplied or otherwise made available to it by Jefferson-Pilot and

 

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LNC for the purposes of its opinion. With respect to the financial forecasts, including certain strategic, financial and operational benefits anticipated from the merger provided to it by the managements of Jefferson-Pilot and LNC, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the then-best available estimates and judgments of the future financial performance of Jefferson-Pilot and LNC. Additionally, Morgan Stanley did not rely on any valuation of Jefferson-Pilot or LNC prepared by an independent third party, including actuarial appraisals of Jefferson-Pilot or LNC. Morgan Stanley assumed that the merger would be consummated in accordance with the terms of the merger agreement, including, among other things, that the merger would be treated as a reorganization pursuant to Section 368(a) of the Code, without material modification, waiver or delay, and that the final version of the merger agreement would not vary materially from the last draft delivered to it by Jefferson-Pilot prior to the delivery of the opinion. Morgan Stanley further assumed that in the course of obtaining any regulatory or third party approvals, consents and agreements in connection with the merger, no modification, delay, limitation, restriction or condition will be imposed that would have an adverse affect on LNC or Jefferson-Pilot or the contemplated benefits of the consummation of the merger. In addition, Morgan Stanley has relied without independent verification on the assessments by the managements of LNC or Jefferson-Pilot of the strategic rationale and objective of the merger. It has not made any independent valuation or appraisal of the assets or liabilities of Jefferson-Pilot or LNC, nor has it been furnished with any such appraisals. Morgan Stanley is not an actuarial firm and its services did not include actuarial determinations or evaluations by it or an attempt to evaluate any actuarial assumptions. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of its opinion. Morgan Stanley’s opinion did not address the relative merits of the merger as compared to other business strategies that may have been available to Jefferson-Pilot or LNC or either company’s underlying business decision to enter into the merger agreement.

 

The following is a brief summary of the material analyses that Morgan Stanley performed in connection with rendering its opinion. Although each analysis was provided to the Jefferson-Pilot board of directors, in connection with arriving at its opinion, Morgan Stanley considered all of its analysis as a whole and did not attribute any particular weight to any analysis described below. The financial analyses summarized below include information presented in tabular format. In order to fully understand Morgan Stanley’s financial analyses, the tables must be read together with the text of each summary. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Morgan Stanley’s financial analyses.

 

Historical Multiple Analysis. To provide a historical perspective of Jefferson-Pilot’s public market valuation in the months and years prior to the merger, Morgan Stanley compared Jefferson-Pilot’s share price to (i) the average next twelve months EPS estimates available at the time (Price to NTM Earnings Ratio) as well as to (ii) Jefferson-Pilot’s available reported GAAP book value per share (Price to Book Value Multiple). This analysis was conducted on a weekly basis for the time period beginning December 31, 1999 and ending October 7, 2005; EPS projections were obtained from IBES and GAAP book value per share data was obtained from FactSet.

 

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Morgan Stanley also calculated the following multiples:

 

Period


  

Price to

NTM
Earnings

Multiple


  

Price to

Book
Value

Multiple


Closing price on October 7, 2005

   12.0x    1.69x

Period Ending October 7, 2005

         

1 month average

   11.9x    1.67x

3 month average

   11.9x    1.67x

6 month average

   11.9x    1.71x

1 year average

   12.0x    1.73x

3 year average

   11.9x    1.72x

5 year average

   12.6x    1.87x

 

Public Market Metrics. To provide perspective on Jefferson-Pilot and LNC versus companies that share certain characteristics with both companies, Morgan Stanley reviewed and compared certain financial information of Jefferson-Pilot and LNC with the companies listed below, which are also publicly traded life insurance companies of similar operating characteristics and size, which are referred to as Comparable Companies or Peers.

 

    Genworth Financial, Inc.

 

    The Hartford Financial Services Group, Inc.

 

    Manulife Financial Corporation

 

    MetLife, Inc.

 

    Nationwide Financial Services, Inc.

 

    Prudential Financial, Inc.

 

    Sun Life Financial Inc.

 

    Torchmark Corporation

 

Morgan Stanley calculated the following items as a multiple of the October 7, 2005 share price for each of the Comparable Companies: (i) share price versus 2005 estimated EPS, based on latest available average IBES estimates (2005 P/E Ratio); (ii) share price versus 2006 estimated EPS based on latest available average IBES estimates (2006 P/E Ratio); and (iii) share price versus June 30, 2005 reported GAAP book value per share adjusted to exclude accumulated other comprehensive income (Price/Adjusted BVPS Ratio). Additionally, Morgan Stanley assessed the latest available median IBES long term EPS growth estimates for each of the selected companies (IBES L/T EPS Growth) and compared these growth rates to the respective 2005 P/E Ratio for each company (2005 PEG Ratio).

 

The results of this analysis are summarized as follows:

 

    Jefferson-
Pilot


    Lincoln

    Manulife

    Prudential

    Sun Life

    Genworth

    MetLife

    Torchmark

    Nationwide

    Hartford

 

Share Price as a Multiple of:

                                                           

2005E EPS

  12.3 x   11.7 x   14.5 x   14.0 x   13.2 x   12.5 x   11.5 x   11.4 x   10.6 x   9.9 x

2006E EPS

  11.9 x   11.3 x   12.5 x   12.2 x   11.8 x   11.2 x   10.9 x   10.6 x   10.0 x   9.3 x

Adj. BVPS

  2.1 x   1.6 x   2.1 x   1.6 x   1.6 x   1.3 x   1.4 x   1.8 x   1.2 x   1.6 x

IBES L/T EPS Growth

  9.0 %   12.0 %   13.6 %   14.0 %   11.5 %   11.5 %   10.0 %   10.1 %   9.6 %   11.0 %

2005 PEG Ratio

  1.4 x   1.0 x   1.1 x   1.0 x   1.2 x   1.1 x   1.2 x   1.1 x   1.1 x   0.9 x

 

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For each of these metrics, Morgan Stanley noted that LNC’s ratio/measurement was consistent with the median of the Comparable Companies. Regarding Jefferson-Pilot, Morgan Stanley noted that its 2005 P/E Ratio and 2006 P/E Ratio were slightly higher than the median of the Peers and that Jefferson-Pilot’s Price/Adjusted BVPS Ratio was above those of the Comparable Companies, with the exception of one, to which it was equal. Morgan Stanley also noted that Jefferson-Pilot’s IBES L/T EPS Growth estimate was below that of any of its peers and that Jefferson-Pilot’s 2005 PEG Ratio was higher than that of any of its peers.

 

Morgan Stanley also determined that as a result of this analysis the reference ranges that it would use in its analysis were approximately 10.5x-12.0x for the 2005 P/E Ratio and 10.0x-11.5x for the 2006 P/E Ratio, which is referred to as the Reference P/E Ranges of Comparable Companies.

 

Premium to Recent Trading Values. To calculate the premium being received by Jefferson-Pilot shareholders, Morgan Stanley compared the merger consideration to the closing share price of Jefferson-Pilot common stock on October 7, 2005, the last trading day prior to the meeting of the Jefferson-Pilot board of directors to approve the merger, as well as to the Jefferson-Pilot common stock price at various intervals leading up October 7, 2005. In performing this comparison, Morgan Stanley calculated an implied per share merger consideration of $55.48, based on a 1.0906 exchange ratio, a $55.96 cash election and a 76%/24% proration of the merger consideration between stock and cash, which is referred to as the Transaction Value.

 

Morgan Stanley observed the following:

 

Period Ending on October 7, 2005


   Stock Price

   Premium to
$55.48


 

Closing Price on October 7, 2005

   $ 50.79    9.2 %

10-Day Average

   $ 50.82    9.2 %

1 Month Average

   $ 50.41    10.1 %

3 Month Average

   $ 50.24    10.4 %

52-week High

   $ 52.79    5.2 %

 

Analysis of Transaction Multiples. Morgan Stanley calculated the multiples of per share consideration implied by the Transaction Value to 2005 EPS, NTM EPS and 2006 EPS, in each case based upon IBES average estimates. Morgan Stanley also calculated the multiple of per share consideration to Jefferson-Pilot’s June 30, 2005 GAAP book value per share and Adjusted BVPS.

 

Morgan Stanley observed the following:

 

Multiple of Per Share Consideration to


   IBES/Actual

LTM EPS

   13.4x

2005 Estimated EPS

   13.5x

NTM EPS

   13.1x

2006 Estimated EPS

   13.0x

6/30/05 Book Value Per Share

   1.8x

6/30/05 Adjusted BVPS

   2.2x

 

Control Premium Analysis. Morgan Stanley analyzed the premiums paid in comparable precedent financial services transactions that share some characteristics with the merger. In conducting this analysis, Morgan Stanley compared publicly available statistics for selected merger transactions involving companies in the financial services industry since 1995 in which the smaller company was allocated at least 40% of the resulting company board of directors and/or the shareholders of the smaller combined company owned at least 40% of the pro forma resulting company, which are referred to as Comparable Financial Services Transactions.

 

The following is a list of the reviewed transactions (listed acquirer/target):

 

    North Fork / GreenPoint (2/15/2004)

 

    Regions / Union Planters (1/22/2004)

 

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    JPMorgan / Bank One (1/14/2004)

 

    Travelers / St. Paul (11/17/2003)

 

    Anthem / WellPoint (10/27/2003)

 

    First Union / Wachovia (4/15/2001)

 

    Firstar / U.S. Bancorp (10/4/2000)

 

    Fleet / Bank Boston (3/14/1999)

 

    UNUM / Provident (11/23/1998)

 

    Norwest / Wells Fargo (6/8/1998)

 

    NationsBank / Bank of America (4/13/1998)

 

    Bank One / First Chicago (4/13/1998)

 

    Travelers / Citicorp (4/6/1998)

 

    Dean Witter / Morgan Stanley (2/5/1997)

 

    Chemical / Chase Manhattan (8/28/1995)

 

    First Chicago / NBD (7/11/1995)

 

For each transaction noted above, Morgan Stanley reviewed the implied premium paid based upon the stock price one day prior to announcement and selected a reference range for premiums paid in the Comparable Financial Services Transactions of 0% to 20%. Morgan Stanley then applied this premium range (0%-20%) to the values implied by the following metrics to arrive at suggested hypothetical valuation ranges for Jefferson-Pilot: (i) Jefferson-Pilot’s trading value as of October 7, 2005; (ii) Reference P/E Ranges of Comparable Companies; and (iii) price to book multiple for Jefferson-Pilot implied by a regression analysis of the projected return on equity rates for the Comparable Companies versus their Price/Adjusted BVPS multiples (P/BV vs. ROE Regression).

 

Morgan Stanley’s calculations are summarized below:

 

Baseline Valuation Methodology


  

Transaction

Premium Range


  

Implied Transaction

Valuation Range


          (in millions)

i.   Closing Price on October 7, 2005

   0% - 20%    $6,845 - $8,214

ii.  Reference P/E Ranges of Comparable Companies

   0% - 20%    $5,700 - $7,900

iii. P/BV vs. ROE Regression

   0% - 20%    $6,600 - $8,000

 

Morgan Stanley noted that the aggregate consideration offered for Jefferson-Pilot implied by the Transaction Value price as of October 7, 2005 was $7.51 billion.

 

Precedent Transaction Multiples Analysis. Morgan Stanley reviewed publicly available financial information relating to seven acquisitions in the life insurance industry since 1997.

 

The following is a list of the reviewed transactions (listed acquirer / target):

 

    MetLife / Travelers Life (1/31/2005)

 

    Manulife /John Hancock (9/25/2003)

 

    AXA / MONY (9/17/2003)

 

    AIG / American General (4/3/2001)

 

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    ING / Reliastar (4/28/2000)

 

    AEGON / Transamerica (2/18/1999)

 

    ING / Equitable of Iowa (7/8/1997)

 

For each of these transactions, Morgan Stanley calculated the ratio of equity purchase price to estimated earnings for the twelve-month period following the announcement of the transaction (Price to NTM Earnings Transaction Multiple). Morgan Stanley selected a range of Price to NTM Earnings Transaction Multiples for its analysis of approximately 11.5x to 14.0x (Selected Transaction Multiple Range). The Selected Transaction Multiple Range suggested a value of $6.5 billion to $7.9 billion for Jefferson-Pilot. Morgan Stanley noted that the aggregate consideration offered for Jefferson-Pilot implied by the Transaction Value price as of October 7, 2005 was $7.51 billion.

 

Capitalization of Cost Savings Based Analysis. Based on assumptions provided by the respective management teams of Jefferson-Pilot and LNC as to the amount of pre-tax cost savings generated by the merger, Morgan Stanley calculated the capitalized value of the after-tax cost savings by applying a multiple of 11.0x to fully-phased-in annual after-tax cost-savings projected. This calculation resulted in a value of $1,287 million (Capitalized Value of Cost Savings). Morgan Stanley then added a range of 0% to 100% of this amount to the values implied by the following metrics to arrive at suggested hypothetical valuation ranges for Jefferson-Pilot: (i) Jefferson-Pilot’s trading value as of October 7, 2005; (ii) Reference P/E Ranges of Comparable Companies; and (iii) price to book multiple for Jefferson-Pilot implied by the P/BV vs. ROE Regression analysis.

 

The following table illustrates the various valuation levels calculated in this manner:

 

Baseline Valuation Methodology


  

0%-100% of

Capitalized Value&nbs