A.M. Best Upgrades the Financial Strength Rating of Lincoln National Rates New $250 Million Senior Debt Issue.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--June 11, 2002

A.M. Best Co. has upgraded the financial strength rating to A+ (Superior) from A (Excellent) of Lincoln National Life Insurance Company (LNL).

A.M. Best has also assigned an "a" senior debt rating to $250 million of 5.25% senior notes recently issued by the parent company, Lincoln National Corporation (NYSE: LNC), Philadelphia.

This rating action reflects the Lincoln Financial Group's (LFG) execution of a strategic repositioning of its businesses, which now focus on less volatile wealth management and asset accumulation in the high net-worth market. This repositioning followed the group's exit over the past few years from various lines of business which had contributed to earnings volatility.

The rating also reflects the successful integration of acquired life and annuity operations and the improvement in the underlying operating fundamentals in each of its remaining business segments. A.M. Best also acknowledges Lincoln's reasonable financial leverage, above-average financial flexibility and expected improvement and enhanced consistency of prospective earnings resulting from the group's restructuring activities.

LFG's sale of its reinsurance business to Swiss Re is the most recent initiative in the group's ongoing strategic repositioning, and is a further demonstration of management's focus on building the retail franchise. Although Lincoln is involved in a dispute with Swiss Re over some aspects of the reinsurance transaction, the dispute is not expected to have a material impact on the group. The dispute does, however have to be considered by LFG's management in deploying the proceeds from the sale.

LFG's three primary business segments have new management and have been restructured over the past few years to strengthen the focus on underlying fundamentals and strict financial discipline.

In the life segment, Lincoln has successfully integrated its 1998 acquisitions of the individual life operations of Cigna Corp. and Aetna Inc. with the existing Lincoln life operations. Although LNC paid a considerable premium for the acquired businesses, strong financial discipline and focused execution of a sound integration strategy has resulted in the segment's exceeding pricing objectives. It has begun adding significant value to the organization.

In the retirement/annuity segment, LNC has significantly strengthened results, reducing net outflows by over $3 billion since 2000. The positive momentum has continued despite a difficult market environment. Contributing to the improved net flows are stronger performance of underlying funds in the variable segment, ongoing conservation efforts, new products and expanded distribution, particularly in the bank channel. While the segment has been meeting corporate return targets, maintaining profitable growth in the mature annuity market will be a significant challenge for Lincoln, as it will for the industry. The shift in customer preferences to products with rate guarantees will require a continued focus on strict financial discipline. Nevertheless, Lincoln is well positioned to address these challenges.

The investment management segment has also been restructured, and A.M. Best believes it is positioned for improved results going forward. Expanded fund offerings and distribution capacity, as well as improved performance of Delaware's underlying retail and institutional funds, have strengthened net flows, particularly on the institutional side. The addition of a strong fixed income research capability is also expected to enhance results.

LNL has a strong risk-based capital position and benefits from the financial flexibility provided by its corporate parent. In addition, LNC, through its investment management subsidiary, Delaware Management Holdings, Inc., continually monitors the liquidity position of its insurance subsidiaries and provides rigorous asset-liability management oversight for the organization.

In line with historical and prospective targets, A.M. Best expects LNC to maintain financial leverage in the mid-20 percent range and manage share repurchase and debt issuance activity accordingly. LNC's financial leverage was 25% at March 31, 2002. Further, A.M. Best expects earnings-based interest coverage to be maintained in the upper single-digit range. For a complete listing of companies with affected financial strength and debt ratings, please visit http://isg2001/press/lincolnnational.pdf .

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com .