by Lincoln National Corporation
to Rule 425 under the Securities Act of 1933
Deemed Filed Pursuant to Rule 14a-12
the Securities Exchange Act of 1934
Company: Jefferson-Pilot Corporation
File No. 333-130226)
following is an excerpt of a presentation given by Jon A. Boscia, our Chairman
and CEO, at the 2006 Citigroup Financial Services Conference held on February
1, 2006. A full replay of the conference is available at
look at investments, annuities, and life insurance you can see how we offer
of those in our major channels. The key question to ask at this point is
worked, have you seen a differentiation.’ Here you can see Lincoln Financial
Distributors’ sales growth through the 3rd
of ’05 versus the industry in the major categories. The combination of brand
positioning, excellent product, and distribution that is very differentiated
there in the market place has continued to enable us to gain market
announced that we will be creating a new segment inside of Lincoln. And that
segment is going to be our employer market segment. And the reason that we
doing this, you can see in the third bullet we do have a large defined
contribution business. But (it) wasn’t a very visible business to most people on
the outside because we just had it embedded in our individual retail line.
think by breaking this out into a segment, again two things will happen.
and probably most important, we will provide more of a focus internally on
opportunities and the growth associated with that segment. And second, it
increase the transparency in Lincoln Financial Group for you so that you
and evaluate and measure whether we’re doing an average job, a poor job, or a
good job. We had made this decision to do this long before we began our talks
with Jefferson Pilot. But what Jefferson Pilot will enable us to do is actually
to increase that opportunity.
spend a couple moments here on the merger itself. We believe that it is a
that through the years will drive significant shareholder value. If you look
the capabilities, as shown in blue on the left-hand side, and the strategy
Lincoln, they dovetail and compliment very well the capabilities and strategies
of Jefferson Pilot. You can see the increased earning strength, increased
diversification, the balance of the risk that we will have in the portfolios,
and we’ll drill down a little bit more into the earnings in a
the fears that I had at Lincoln prior to this announcement was that our success
in the variable annuity business, our success in the investment management
business, and our success in the variable life insurance business was
increasingly making Lincoln look like almost a giant mutual fund. If the
went up we’d do well. And if the markets went down we would do less well. I
feared that the transition of our beta that we saw over the last several
in going from a .8 to a 1.2 could eventually result in Lincoln having to
that we would put a quota in place on how much new investment-oriented business
we might do. Hopefully that quota could last the whole 12 months, but what
only lasted nine months. What if LFD continued to hit the cover off the ball
we ran out of space in three or four months. With more than 50% of our earnings
tied into the market itself, I was concerned about the strategic positioning.
You can see all of those fears really go away as a result of this transaction.
Seventy percent of our earnings are going to be stable, but it sure is still
sweet to have about a third of them have market orientation, because as we
on average the market does go up rather than down. So it’s a nice little extra
kicker and good strategic positioning.
announced this transaction, we had a pro forma market capitalization of $15.6
billion. And as we’ll see coming up here, the market’s reaction to the
transaction was what we had advised our Board it would be. Transactions,
few exceptions, normally cause the acquire team, the accounting acquirer
to go down. What you also see here is a parenthetical statement of 16.7 billion.
That 1+ billion dollars is what the market has added to our pro forma
capitalization since the deal was announced, as the market has learned more
about this transaction.
concerns that the market had were the obvious concerns.
you really going to be able to get the cost saves that you need to
this combined company actually have a means to perform
it have better core operational
about the risks in the company. Each company has spread compression
of its concerns out there.
are you going to mitigate interest rate
about the guarantees that are out there, whether they’re on the annuity
side or secondary guarantees on the life insurance
in general, as all of us know, the majority of transactions fail
achieve all of the desired outcomes, and there is significant integration
marketplace has come in and talked with us, learned more about it and they
understand the degree of the comprehensiveness of the due diligence process,
they stop and they look at what did JP do on its own, what did Lincoln do
own, what were the track records of the two companies, they see that in fact
are very experienced. They understand that that puzzle chart earlier showed
have much more complimentary capabilities than there are redundant capabilities.
JP is not a AAA rated company because it didn’t know about risk management. And
Lincoln isn’t one of the highest rated companies because of weak risk management
one of the more exciting areas is on a combined basis our general account
going to be $75 billion. So when you start looking at risk management, spread
compression strategies, asset liability management, etc., the flexibilities
capabilities of that increased scale, we believe, will pay very significant
rewards to the company.
chart shows what the investment community had thought of the transaction,
maps it against the peer group of companies and also the broad market. Again,
this was put together last week. I suspect with the attractive movement we’ve
had at the end of last week and the beginning of this week it may in fact
even more attractive. But you can see, despite the initial worries, we have
outperformed the peer group and the broad market.
going to be happening at this point. On a milestone basis we’ve crossed a number
of them already. We do have the Hart-Scott-Rodino period over now. You may
realize that it’s a period of 30 days from the time that you file it, if the
government does not come back proactively with any questions or objections,
presumption is it can go forward. Once we reached that point in December,
really allowed us to take a much more aggressive hands-on integration planning
activity here. We filed the S-4 in December, which gave the history of the
transaction, how it built to this point. We announced a couple of weeks ago
increase authorization by our Board of Directors for stock repurchase activity.
And we have also announced both companies on March 20 will hold special
shareholders’ meetings - JP to vote specifically on the proposed merger; Lincoln
to vote specifically on authorizing the issuance of the shares to accomplish
noted that I was named CEO in 1998. One of the things that we named or that
stated back in 1998 was what we call our Strategic Intent. Some companies
call this their vision statement, some their mission statement. One of the
things that oftentimes happens is companies change their vision, their strategy,
their mission statement every couple of years and there isn’t a sense of guiding
nor start associated with it. In the eight years since we created this strategic
intent, we have only added one word to this. We came out in 1998 and we said
will become the partner of choice for creating and protecting wealth. What
added since then was the enjoyment factor, as we saw the baby boomer processes
come into play.
you have heard me describe this chart before. Every activity that we have
of the company is able to be mapped through this chart. We start with the
foundation that it’s people that make the difference. From that we build out to
excellence in financial and risk management. With the JP transaction we are
able to legitimately add another foundation which is operational excellence
effectiveness. But then you have to continue to excel in product, in
distribution, and brand.
at this point we can open it up for questions. I think as I look out into
future we have a tremendous opportunity here and I look forward to providing
what clarification I can today.
let’s open it up for questions.
seeing two things happening out there in the market as it pertains to pricing
power. And they are different in their nature. The first thing that is clearly
happening is as you are looking to form relationships with distribution,
onto the shelf more often than not through your product pricing. That tends
be an enabler. If you only have a more limited type of relationship with
distribution, your product has to continue to be top illustrator. What we
to do through our strategy was to have multiple products in our key distribution
relationships. And by doing that you don’t have to have the strongest performing
product in each of the categories, so you can in fact pull back from the
and not be as aggressive. You still have to be competitive, but you don’t have
to cross that somewhat unknown line in terms of bullishness out
second thing that we’re looking at in terms of size and scale is dealing with
the reinsurance community. And how much opportunity do you have for that
reinsurer to be able to participate in your business. And as an ex-owner
largest U.S. based reinsurer, Lincoln Re, we know that big customers have
relationships with the reinsurers than small customers do. We will be a very
customer on the life side now, with Lincoln and JP combined on both in-force
business as well as new business coming in.
second aspect that comes into play in scale as you get it is you will naturally
look at where do you want to set your reinsurance play, because with a different
capital position, with a different level of balance sheet strength, there
ability should you want to use it to continue to hold more risk at your level
rather than passing it on to the reinsurer. This is all a part of what’s going
on in the integration analysis process now. So purchasing power is very,
critical, and scale is an important part of that.
Could you go over what your expectations are for cost savings and (inaudible)
and also a possible re-rating on the company?
cost saves, what we have announced is that we expect to save about $180 million
in costs, with about 50% of that coming in the first 12-month period, cumulative
to 80% in the next 12-month period, and then the final 20% in that third
12-month period of time. So 180 with half of it coming in the first
accretive basis, not counting the one-time cost associated with it, we were
the mid-single digits after the first full year.
of ratings, Best, Moody’s and Fitch have all come out, reaffirmed Lincoln’s
ratings with positive outlook. And S&P actually upgraded our rating as a
result of the transaction.
question was, do we have any plans to get involved in the China market or
plans to manage some of the Chinese money. No, we do not have any current
on either one.
point all we’re saying about any of our businesses that are either in Lincoln or
in JP is they are a part of the new business, and we have no current plans
changing the business portfolio as we come out of the transaction.
Can you talk a little bit about your thoughts on the variable annuity industry
today, what we’re seeing in terms of new products coming in and some of the risk
in managing that?
literally just the last several days, I was cautiously optimistic that there
a fairly good discipline in the variable annuity market as I have seen companies
looking at the types of products that they were offering. I’ve become more
concerned recently as I’m reading and seeing some of the offerings, the rumors
of offerings, and the filings out there in the marketplace. I think that
the features and benefits in the variable annuity area might in fact or probably
are a little bit out in front of the technical capabilities to hedge some
risks that are out there. So I do have some concerns about the things that
seeing. There’s whole areas of the markets that have been fast growing, that
probably one of the bigger ones are the so-called ‘for life’ products, you know,
that we’ve done a lot of work on, and up until this point we have not yet
satisfied ourselves about that area. So there are some that I get concerned
You can comment on them if you want. I’m sure everybody would like
prefer not to comment on another company.
connection with the proposed transaction, Lincoln National Corporation has
with the SEC a Registration Statement on Form S-4 (Registration No. 333-130226),
including a joint proxy statement/prospectus, and other materials. WE URGE
INVESTORS TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND
THESE OTHER DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE AND BEFORE MAKING
VOTING OR INVESTMENT DECISIONS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. Investors will be able to obtain free copies
these materials (when available), as well as other filings containing
information about Lincoln and Jefferson-Pilot, without charge, at the Securities
and Exchange Commission’s website (www.sec.gov). In addition, free copies of the
definitive joint proxy statement/prospectus will be (when available), and
Lincoln’s other SEC filings are, also available on Lincoln’s website
(www.lfg.com). Free copies of the registration statement and joint proxy
statement/prospectus will be (when available), and Jefferson-Pilot‘s other SEC
filings are, also available on Jefferson-Pilot’s website (www.jpfinancial.com).
Jefferson-Pilot, their respective directors and officers and other persons
be deemed, under SEC rules, to be participants in the solicitation of proxies
respect of the proposed transaction. Information regarding Lincoln’s directors
and executive officers is available in its Annual Report on Form 10-K for
year ended December 31, 2004 and in its proxy statement filed with the SEC
April 8, 2005, and information regarding Jefferson-Pilot’s directors and
executive officers is available in its Annual Report on Form 10-K for the
ended December 31, 2004 and in its proxy statement filed with the SEC on
24, 2005. More detailed information regarding the identity of potential
participants in the proxy solicitation and a description of their direct
indirect interests, by security holdings or otherwise, is available in the
preliminary joint proxy statement/prospectus contained in the above-referenced
Registration Statement on Form S-4.
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
for historical information contained in this document, statements made in
document are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 (“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
harbor for forward-looking statements provided by the PSLRA. Forward-looking
statements involve risks and uncertainties that may cause actual results
differ materially from the results contained in the forward-looking statements.
Risks and uncertainties that may cause actual results to vary materially,
of which are described within the forward-looking statements include, among
others: (1) the Lincoln shareholders may not approve the issuance of shares
connection with the merger and/or the Jefferson-Pilot shareholders may not
approve and adopt the merger agreement and the transactions contemplated
merger agreement at the special shareholder meetings; (2) we may be unable
obtain regulatory approvals required for the merger, or required regulatory
approvals may delay the merger or result in the imposition of conditions
could have a material adverse effect on the combined company or cause us
abandon the merger; (3) 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; (4) problems
arise with the ability to successfully integrate Lincoln’s and Jefferson-Pilot’s
businesses, which may result in the combined company not operating as
effectively and efficiently as expected; (5) the combined company may not
able to achieve the expected synergies from the merger or it may take longer
than expected to achieve those synergies; (6) the merger may involve unexpected
costs or unexpected liabilities, or the effects of purchase accounting may
different from our expectations; (7) the credit and insurer financial strength
ratings of the combined company and its subsidiaries may be different from
the companies expect; and (8) the combined company may be adversely affected
future legislative, regulatory, or tax changes as well as other economic,
business and/or competitive factors.
included here are not exhaustive. The Registration Statement on Form S-4
(Registration No. 333-130226) filed by Lincoln with the SEC on December 8,
as well as annual reports on Form 10-K, current reports on Form 8-K and other
documents filed by Lincoln and Jefferson-Pilot with the Securities and Exchange
Commission include additional factors that could impact our businesses and
financial performance. Given these risks and uncertainties, you should not
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 document,
except as may be required by law.