JEFFERSON PILOT CORP - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________

COMMISSION FILE NUMBER 1-5955

JEFFERSON-PILOT CORPORATION
(Exact Name of Registrant as Specified in its Charter)

100 NORTH GREENE STREET,
NORTH CAROLINA GREENSBORO, NORTH CAROLINA 27401 56-0896180
(State or Other Jurisdiction (Address of Principal (I.R.S. Employer
of Executive Offices) Identification
Incorporation or Organization) No.)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 336-691-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

State the aggregate market value of the voting and non-voting common equity
held by nonaffiliates of the registrant: approximately $7.8 billion at March 4,
2002.

Indicate the number of shares outstanding of each of the issuer's classes
of common stock:

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held May 6, 2002 are incorporated by reference into Part III.

List of Exhibits appears on page E-1.
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TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

(a) General Development of Business

Jefferson-Pilot Corporation (JP) was incorporated in North Carolina in
1968. While it has broad powers to engage in business, it is solely a holding
company. Our principal subsidiaries, which are wholly owned, are:

Jefferson-Pilot Life Insurance Company (JP Life),

Jefferson Pilot Financial Insurance Company (JPFIC),

Jefferson Pilot LifeAmerica Insurance Company (JPLA),

Jefferson Pilot Securities Corporation, a full service NASD registered
broker/dealer, and

Jefferson-Pilot Communications Company (with its subsidiaries, JPCC).

Through these and other subsidiaries, we primarily engage in the business of
writing life insurance policies, writing annuity policies and selling other
investment products, writing group life, disability income and dental policies,
operating radio and television facilities, and producing sports programming.
Greensboro, North Carolina is the center for most operations, although a major
base of operations in Concord, NH serves JPFIC, JPLA and the broker/dealer, and
the group life, disability income and dental operations have been consolidated
in JPFIC's offices in Omaha, Nebraska. We provide further detail in Management's
Discussion and Analysis of Financial Condition and Results of Operations which
begins on page 10 (MD&A).

We have grown substantially in the past seven years both internally and
through acquisitions.

In May 1995, JP Life assumed certain life insurance and annuity business of
Kentucky Central Life Insurance Company (KCL) in an assumption reinsurance
transaction.

In October 1995, JP acquired Alexander Hamilton Life Insurance Company of
America (AH Life) and its subsidiary, First Alexander Hamilton Life Insurance
Company (FAHL), from a subsidiary of Household International, Inc. With the
acquisition, certain blocks of the acquired business were 100% coinsured with
affiliates of Household; this is more fully discussed in Note 15 on page 57.

Effective May 1, 1997, JP acquired JPFIC, its subsidiary JPLA, and our full
service broker/dealer, Jefferson Pilot Securities Corporation, from The Chubb
Corporation.

On December 30, 1999, JP acquired Guarantee Life Insurance Company (GLIC)
and its non-insurance affiliates.

On August 1, 2000, AH Life and GLIC merged into JPFIC. On December 31,
2000, FAHL merged into JPLA. These mergers reduce costs and improve efficiency
in our insurance operations.

Our Premier Partnering strategy is discussed in MD&A.

(b) Financial Information About Industry Segments

We present industry segment information in Note 16 on page 58.

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(c) Narrative Description of Business

Revenues derived from the principal products and services of our insurance
subsidiaries and revenues from the Communications segment for the past three
years are as follows:

REVENUES BY SEGMENT*

* Revenues include net investment income

The following briefly describes our principal wholly-owned subsidiaries,
including their principal products and services, markets and methods of
distribution.

INSURANCE COMPANY SUBSIDIARIES

JP Life is domiciled in North Carolina and began business in 1903. It is
authorized to write insurance in 49 states, the District of Columbia, Guam, the
Virgin Islands and Puerto Rico. It primarily writes universal life, term and
endowment insurance policies on an individual basis, and individual non-variable
annuities including equity indexed annuities and market value adjustment
annuities.

JPFIC has been domiciled in Nebraska since its redomestication from New
Hampshire in August 2000. It began business in 1903 through predecessor
companies, and is authorized to write insurance in 49 states, the District of
Columbia, Guam, the Virgin Islands and Puerto Rico. It principally writes
universal life, variable universal life and term insurance policies, and
variable annuities. Since its merger with GLIC, JPFIC also writes substantially
all our group term life, disability income and dental insurance.

JPLA, domiciled in New Jersey, began business in 1897. It is authorized to
write insurance in 50 states, the District of Columbia and several U.S.
possessions/territories. JPLA is "commercially domiciled" in New York due to the
large percentage of its business in that state. It primarily writes universal
life, variable universal life and term insurance policies, and non-variable
annuities.

The former AH Life block of universal life insurance policies and variable
and non-variable annuities is now part of JPFIC.

The former FAHL block of non-variable annuities and universal life
insurance policies is now part of JPLA.

Individual Products. Our insurance subsidiaries offer individual life
insurance policies, primarily universal life and variable universal life
policies, as well as traditional life products and level and decreasing term
policies. On most policies, accidental death and disability benefits are
available in the form of riders, and IRA riders also are available, as are other
benefits. We accept certain substandard risks at higher premiums.

Our companies market individual life products through independent general
agents, independent national account marketing firms, agency building general
agents, our district agency network, broker/dealers, banks and strategic
alliances.

Annuity and Investment Products. Our insurance subsidiaries offer annuity
and investment products including variable annuity products. They market through
most of the distribution channels discussed above and through investment
professionals and annuity marketing organizations. Our full service
broker/dealer markets variable life insurance and variable annuities written by
our insurance subsidiaries, and also sells other securities and mutual funds.

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Benefit Partners. JPFIC offers group term life, disability income and
dental insurance, which is sold through regional group offices throughout the
U.S., marketing to employee benefit brokers, third-party administrators and
employee benefit firms.

OTHER INFORMATION REGARDING INSURANCE COMPANY SUBSIDIARIES

Regulation. Insurance companies are subject to regulation and supervision
in all the states where they do business. Generally the state supervisory
agencies have broad administrative powers relating to granting and revoking
licenses to transact business, licensing agents, approving forms of policies
used, regulating trade practices and market conduct, the form and content of
required financial statements, reserve requirements, permitted investments,
approval of dividends and, in general, the conduct of all insurance activities.

Insurance companies also must file detailed annual reports on a statutory
accounting basis with the state supervisory agencies where each does business;
see Note 12 regarding codification of statutory accounting principles. These
agencies may examine the business and accounts at any time. Under the rules of
the National Association of Insurance Commissioners (NAIC) and state laws, the
supervisory agencies of one or more states examine a company periodically,
usually at three to five year intervals.

Various states, including Nebraska, New Jersey and North Carolina, have
enacted insurance holding company legislation. Our insurance subsidiaries have
registered as members of an "insurance holding company system" under applicable
laws. Most states require prior approval by state insurance regulators of
transactions with affiliates, including extraordinary dividends by insurance
subsidiaries, and of acquisitions of insurance companies.

Risk-based capital requirements and state guaranty fund laws are discussed
in MD&A.

Competition. Our insurance subsidiaries operate in a highly competitive
field which consists of a large number of stock, mutual and other types of
insurers.

Certain insurance and annuity products also compete with other investment
vehicles. Marketing of annuities and other competing products by banks and other
financial institutions is increasing. Our broker/dealer also operates in a
highly competitive environment. Existing tax laws affect the taxation of life
insurance and many competing products. Various changes and proposals for changes
have been made in income and estate tax laws, some of which could adversely
affect the taxation of certain products or their use as estate planning
vehicles, and thus impact their marketing and the volume of policies
surrendered.

Employees. As of December 31, 2001, our insurance operations including our
broker/dealer employed approximately 3,000 persons and held contracts with
nearly 46,000 independent and agency building (career) agents. Substantially all
of these employees are payrolled with JP Life and costs are allocated to
affiliates under various service agreements that have been approved by state
insurance regulators. We have been reducing the number of contracted agents in
our core channels, to currently about 25,000 agents, as we increase our focus on
the more productive agents through our Premier Partnering strategy.

COMMUNICATIONS

JPCC owns and operates three television stations and 17 radio stations as
well as Jefferson-Pilot Sports, a sports production and syndication business.

TELEVISION OPERATIONS

WBTV, Channel 3, Charlotte, NC, is affiliated with CBS under a Network
Affiliation Agreement expiring on May 31, 2011. WWBT, Channel 12, Richmond, VA,
is affiliated with NBC under a Network Affiliation Agreement expiring August 15,
2002. WCSC, Channel 5, Charleston, SC, is affiliated with CBS under a Network
Affiliation Agreement expiring on May 31, 2011. Absent cancellation by either
party, each of these Agreements will be renewed for successive five-year
periods.

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RADIO OPERATIONS

JPCC owns and operates one AM and one FM station in Atlanta, GA, one AM and
two FM stations in Charlotte, NC, two AM and three FM stations in Denver, CO,
one AM and two FM stations in Miami, FL and one AM and three FM stations in San
Diego, CA.

JP SPORTS

JP Sports' principal business is to produce and syndicate broadcasts of
Atlantic Coast Conference (ACC) and Southeastern Conference (SEC) football and
basketball events. The contracts with the leagues were renewed in 2001 and
extend through 2005 for ACC football and through 2006 with an option through
2011 for ACC basketball, and through 2009 for the SEC. Raycom Sports is an equal
partner in the contract for ACC basketball. Commitments under these contracts
are discussed in MD&A and in Note 19.

OTHER INFORMATION REGARDING COMMUNICATIONS COMPANIES

Competition. Our radio and television stations compete for programming,
talent and revenues with other radio and television stations as well as with
other advertising and entertainment media, including direct broadcast satellite
television and direct broadcast radio. JP Sports competes with other vendors of
similar products and services.

Employees. As of December 31, 2001, JPCC employed approximately 770
persons full time.

Federal Regulation. Television and radio broadcasting operations are
subject to the jurisdiction of the Federal Communications Commission ("FCC")
under the Communications Act of 1934, as amended (the "Act"). The Act empowers
the FCC to issue, renew, revoke or modify broadcasting licenses, assign
frequencies, determine the locations of stations, regulate the equipment used by
stations, establish areas to be served, adopt necessary regulations, and impose
certain penalties for violation of the regulations. The Act and present
regulations prohibit the transfer of a license or of control of a licensee
without prior approval of the FCC; restrict in various ways the common and
multiple ownership of broadcast facilities; restrict alien ownership of
licenses; and impose various other strictures on ownership and operation.

Broadcasting licenses are granted for a period of eight years for both
television and radio and, in the absence of adverse claims as to the licensee's
qualifications or performance, will normally be renewed by the FCC for an
additional term. All our station licenses have been renewed as required.

(d) Foreign Operations

All our operations are conducted within the United States. Subsidiaries
that had begun life insurance operations in Argentina and Uruguay, which were
not material to our operations, were sold in late 1999. We occasionally make
fixed income investments outside the U.S. for our investment portfolio.

ITEM 2. PROPERTIES

JP Life owns its home office consisting of a 20-story building and an
adjacent 17-story building in downtown Greensboro, NC. These buildings house
insurance operations and provide space for commercial leasing. JP Life also owns
a supply and printing facility, a parking deck and a computer center, all
located on nearby properties. Operations in Lexington, KY for the KCL business
assumed were moved to Greensboro in 2001.

JPFIC, JPLA and our broker/dealer conduct operations in Concord, NH in two
buildings on approximately 196 acres owned by JPFIC. A portion of one building
is available for commercial leasing.

JPFIC conducts operations in Omaha, NE in two buildings on its 11 acre
campus. A portion of one building and a third building provide space for
commercial leasing.

Subsidiaries lease insurance sales and broker/dealer office space in
various jurisdictions.

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JPCC owns its three television studios and office buildings, owns most of
its radio studios and offices, and owns or leases the towers supporting its
radio and television antennas.

ITEM 3. LEGAL PROCEEDINGS

JP Life is a defendant in a proposed class action suit, Romig v.
Jefferson-Pilot Life Insurance Company, filed on November 6, 1995 in the
Superior Court of Guilford County, NC. The suit alleges deceptive practices,
fraudulent and negligent misrepresentation and breach of contract in the sale of
certain life insurance policies using policy performance illustrations which
used then current interest or dividend rates and insurance charges and
illustrated that some or all of the future premiums might be paid from policy
values rather than directly by the insured. The claimant's actual policy values
exceeded those illustrated on a guaranteed basis, but were less than those
illustrated on a then current basis due primarily to the interest crediting
rates having declined along with the overall decline in interest rates in recent
years. The plaintiffs seek unspecified compensatory and punitive damages, costs
and equitable relief. While management is unable to estimate the probability or
range of any possible loss, management believes that we have made appropriate
disclosures to policyholders as a matter of practice, and intends to vigorously
defend the claims asserted.

JP Life, as successor to Pilot Life Insurance Company, is a defendant in a
proposed class action suit, Thorn v. Jefferson-Pilot Life Insurance Company,
filed September 11, 2000 in the United States District Court in Columbia, SC.
The complaint alleges that Pilot Life and its successors decades ago unfairly
discriminated in the sale of certain small face amount life insurance policies
and that these policies were unreasonably priced. The suit alleges fraudulent
inducement, constructive fraud, and negligence in the marketing of these
policies. The plaintiffs seek unspecified compensatory and punitive damages,
costs and equitable relief. While management is unable to estimate the
probability or range of any possible loss, management believes that our
practices have complied with state insurance laws and intends to vigorously
defend the claims asserted.

JP and its subsidiaries are involved in other legal and administrative
proceedings and claims of various types, some of which include claims for
punitive damages. In recent years, the life insurance industry has experienced
increased litigation in which large jury awards including punitive damages or
settlements in lieu of litigation have occurred. Because of the considerable
uncertainties that exist, we cannot predict the outcome of pending or future
litigation with certainty. Based on consultation with our legal advisers,
management believes that resolution of pending legal proceedings will not have a
material adverse effect on our financial position or liquidity, but could have a
material adverse effect on the results of operations for a specific period.

Environmental Proceedings. We have no material administrative proceedings
involving environmental matters.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

David A. Stonecipher, Chairman and Chief Executive Officer, joined JP as
President-Elect and CEO-Elect in September 1992, and became President and CEO in
March 1993, and Chairman in May 1998. He served as President until November
2001. Previously he was President of the Life Insurance Company of Georgia and
Southland Life Insurance Company and their parent company, Georgia US.

Robert D. Bates became an Executive Vice President and President -- Benefit
Partners of JP effective with the GLIC acquisition on December 30, 1999. He was
President of GLIC from 1989 until the August 2000 merger of GLIC into JPFIC, and
was Chairman, President and Chief Executive Officer of GLIC and its publicly
held parent, The Guarantee Life Companies Inc., until December 30, 1999.

Dennis R. Glass, President since November 2001, joined JP in October 1993.
He was Executive Vice President, Chief Financial Officer and Treasurer from 1993
to November 2001. Previously, he was Executive Vice President and CFO of
Protective Life Corporation, and earlier, of the Portman Companies.

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John D. Hopkins, Executive Vice President and General Counsel, joined JP in
April 1993, and previously was a partner in King & Spalding, an Atlanta law
firm.

Kenneth C. Mlekush, Vice Chairman since November 2001, joined JP in January
1993, and also has been President -- Life Companies since February 1999. He was
an Executive Vice President until November 2001. Previously he was President and
Chief Operating Officer of Southland Life Insurance Company and Executive Vice
President of its parent, Georgia US.

Theresa M. Stone has been Chief Financial Officer and Treasurer of JP since
November 2001, and also has been Executive Vice President of JP and President of
JPCC since July 1, 1997. Previously she was President and Chief Executive
Officer of JPFIC, and also was Executive Vice President of The Chubb Corporation
to May 13, 1997.

There are no agreements or understandings between any executive officer and
any other person pursuant to which such executive officer was or is to be
selected as an officer. Executive officers hold office at the will of the Board,
subject for certain executives to their rights under employment agreements
listed as exhibits to this Form 10-K.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a) Market Information. JP common stock principally trades on the New York
Stock Exchange. Quarterly composite tape trading ranges have been:

(b) Holders. As of March 4, 2002, our stock was owned by 9,310
shareholders of record, and a much larger number of street name holders.

(c) Dividends. They are shown in Item 6 below. Dividends to the Registrant
from its insurance subsidiaries are subject to state regulation, as more fully
described in MD&A.

(d) Securities authorized for issuance under equity compensation plans. We
have no equity compensation plans that have not been approved by shareholders.
See Note 11 for information on our two shareholder-approved plans, which provide
for stock options. One plan also permits stock awards and covers common shares
delivered for 50% of earned LTIP awards as described in our 2002 Proxy
Statement.

ITEM 6. SELECTED FINANCIAL DATA

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

REVENUE BY SOURCES

NET INCOME BY SOURCES

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(1) Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA

Note: All share information has been restated to reflect April 2001 and
April 1998 3-for-2 stock splits, effected in the form of dividends.
Cash dividends per share may not add due to rounding related to the splits.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

Note: First year life premiums include single premiums.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three years ended December 31, 2001, analyzes the results of
operations, consolidated financial condition, liquidity and capital resources of
Jefferson-Pilot Corporation and consolidated subsidiaries. The discussion should
be read in conjunction with the Consolidated Financial Statements and Notes. All
dollar amounts are in millions except per share amounts. All references to Notes
are to Notes to the Consolidated Financial Statements. Prior share amounts and
earnings per share have been restated to give retroactive effect to the
Company's 50% stock dividend, which was effective in April 2001.

COMPANY PROFILE

We have five reportable segments: Individual Products, Annuity and
Investment Products (AIP), Benefit Partners, Communications, and Corporate and
Other.

Within our Individual Products segment, we offer a wide array of individual
life insurance products including variable life insurance. AIP offers both fixed
and variable annuities, as well as other investment products marketed through
Jefferson Pilot Securities Corporation, a registered broker/dealer (with related
entities, JPSC). Benefit Partners offers group non-medical products such as term
life, disability and dental insurance to the employer marketplace. We market
these insurance and investment products to individuals and businesses in the
United States. At December 31, 2001, our principal life insurance subsidiaries
were Jefferson-Pilot Life Insurance Company (JP Life), and Jefferson Pilot
Financial Insurance Company (JPFIC) and its subsidiary Jefferson Pilot
LifeAmerica Insurance Company (JPLA) (collectively JP Financial).

Our subsidiary, Jefferson-Pilot Communications Company (JPCC), and its
subsidiaries conduct communications operations consisting of radio and
television broadcasting operations located in strategically selected markets in
the Southeastern and Western United States, and sports program production.

Corporate and Other contains the activities of the parent company and
passive investment affiliates, surplus of the life insurance subsidiaries not
allocated to other reportable segments, financing expenses on Corporate debt,
strategic initiatives designed to benefit the entire company, and federal and
state income taxes not otherwise allocated to business segments. We include
realized gains and losses on investments in the Corporate segment.

We have expanded through acquisitions in prior years. Our most recent
acquisition was Guarantee Life Insurance Company (Guarantee) which we acquired
in late 1999. Our acquisition strategy is designed to enhance core business
growth and deploy excess capital. The focus is to increase distribution, add
products, add technology and provide economies of scale.

Excluding realized gains and losses, our 2001 revenues were derived 52.7%
from Individual Products, 19.9% from AIP, 18.4% from Benefit Partners, 6.0% from
Communications, and 3.0% from Corporate and Other.

As a result of strategic studies in 1999, we adopted a refined marketing
strategy called Premier Partnering. Strategic initiatives include a higher level
of marketing support and improved service for more productive agents, tailoring
specific products and marketing programs, and implementation of "lean
manufacturing" to improve quality and reliability throughout our marketing and
service processes. We are experiencing growth in life sales and an increase in
the number of agents who qualify as Premier Partners as a result of acceptance
in the marketplace of this strategy.

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CRITICAL ACCOUNTING POLICIES

We prepared our consolidated financial statements in accordance with
accounting principles generally accepted in the United States. Our significant
accounting policies are more fully described in Note 2 to our consolidated
financial statements. Certain of our accounting policies are particularly
important to the portrayal of our financial position and results of operations
and require that we apply significant judgment; as a result they are subject to
an inherent degree of uncertainty. In applying those accounting policies, we use
our judgment to determine the appropriate assumptions in the determination of
certain estimates. On an on-going basis, we evaluate our estimates and judgments
based upon historical experience and various other information that we believe
to be reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following are our critical accounting policies because they
involve the more significant judgments and estimates we use in preparing our
financial statements.

Deferred acquisition costs (DAC) and value of business acquired (VOBA)
reflect our expectations about the future experience of the business in force.
Some of the assumptions regarding future experience that can affect the carrying
value of DAC and VOBA balances include mortality, interest spreads and policy
lapse rates. Significant changes in these assumptions can impact the carrying
balance of DAC and VOBA and therefore, produce changes which must be reflected
in earnings. See Financial Position, Capital Resources and Liquidity for further
discussion of these items including a sensitivity analysis.

We have amortized goodwill, representing the cost of prior acquisitions
over the value of the net assets received, through 2001 in a systematic fashion
over periods ranging from 30 to 35 years. Effective January 1, 2002, we adopted
a new accounting standard which eliminates systematic amortization of goodwill
and requires that we test the remaining balance for impairment on at least an
annual basis. As part of the adoption of the new accounting standard, we must
use judgment in both the allocation of goodwill to our reporting units and the
calculation of their fair value. Based upon our preliminary estimates, we do not
expect to recognize a significant impairment as we adopt this new standard.

Our investments in debt securities include both publicly-traded and
privately-placed securities. We obtain values for actively traded securities
from established external pricing services. For infrequently traded securities
and private placements, we utilize an internal pricing model. This model
requires us to make judgments related to the security's credit quality,
liquidity and credit spread. We evaluate securities that have experienced
declines in fair value to determine if the decline is other than temporary. To
do this we evaluate the probability of collecting scheduled payments, and we
monitor other external factors that could affect the security's issuer such as
litigation, bankruptcy proceedings or regulatory changes.

We are involved in legal and administrative proceedings and claims of
various types, some of which include claims for punitive damages. In recent
years, the life insurance industry has experienced increased litigation in which
large jury awards including punitive damages or settlements in lieu of
litigation have occurred. Because of the considerable uncertainties that exist,
we cannot predict the outcome of pending or future litigation with certainty. In
general, we have accrued only the costs of defense because we cannot reasonably
estimate the risk or any potential range of possible loss. Based on consultation
with our legal advisors, we believe that resolution of pending legal proceedings
will not have a material adverse effect on our financial position or liquidity
but could have a material adverse effect on the results of operations for a
specific period.

RESULTS OF OPERATIONS

In the following discussion, "reportable segment results" and "total
reportable segment results" include all elements of net income available to
common stockholders except realized investment gains. Realized investment gains
are gains and losses on sales and writedowns of investments, net of related
income taxes. We include realized investment gains in the Corporate and Other
segment. We use reportable segment results in assessing the performance of our
business segments and believe that reportable segment results are relevant and
useful information. We may realize investment gains in our sole discretion from
our Available for Sale equity and bond

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portfolios. Reportable segment results as described above may not be comparable
to similarly titled measures reported by other companies.

The following tables illustrate our results before and after the inclusion
of realized investment gains:

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(a) Includes $1.5 relating to the cumulative effect of change in accounting for
derivatives.

(b) Includes $0.01 per share of income relating to cumulative effect of change
in accounting for derivatives.

Net income available to common stockholders increased 0.1% in 2001 and 9.1%
in 2000 with the 2001 results reflecting lower realized investment gains and the
other factors described below. Total reportable segment results increased 5.4%
in 2001 and 10.2% in 2000, due to increased profitability in the Individual
Products, Benefit Partners and Corporate and Other segments. The increase in
2000 reflected the deployment of corporate capital into the more profitable
Individual Products, AIP and Benefit Partners segments primarily through the
acquisition of Guarantee. AIP decreased 1.9% in 2001 reflecting a decline in
JPSC earnings and increased competition for fixed annuity products.
Communications segment results decreased 18.7% due to a weak advertising market
throughout 2001. Net realized investment gains decreased 34.7% in 2001
reflecting bond losses and writedowns, partially offset by gains from sales of
equities, and increased 2.1% in 2000.

Total reportable segment results per share, including the cumulative effect
of the change in accounting for derivatives, increased 7.3% in 2001 and 12.5% in
2000, reflecting the increase in core business earnings and share repurchases in
2001 and 2000. Net income available to common stockholders per share increased
2.1% in 2001 and 11.4% in 2000 and net income available to common stockholders
per share assuming dilution increased 1.8% in 2001 and 11.2% in 2000 for the
same reasons as well as lower realized investment gains in 2001. Due to share
repurchases, net of stock option and incentive plan issuances, the average
number of diluted shares outstanding decreased 1.6% to 153 million shares in
2001 and 2.2% to 156 million shares in 2000.

RESULTS BY BUSINESS SEGMENT

We assess profitability by business segment and measure other operating
statistics as detailed in the separate segment discussions that follow. Sales
are one of the statistics we use to track performance. Because of the nature of
our sales, which are primarily long-duration contracts in the Individual
Products and AIP segments, sales in a given quarter do not have a material
impact on operating results and therefore are not considered to be material

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information. However, trends relating to new product sales over a longer period
of time may be an indicator of future growth and profitability.

We determine reportable segments in a manner consistent with the way we
organize for purposes of making operating decisions and assessing performance.
We assign invested assets backing insurance liabilities to segments in relation
to policyholder funds and reserves. We assign net DAC and VOBA, reinsurance
receivables and communications assets to the respective segments where those
assets originate. We also assign invested assets to back capital allocated to
each segment in relation to our philosophy for managing business risks,
reflecting appropriate conservatism. We assign the remainder of invested and
other assets to the Corporate and Other segment.

Results by Reportable Segment

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(a) Includes $1.5 relating to the cumulative effect of change in accounting for
derivatives.

Segment Assets

We discuss each reportable segment in more detail below.

Individual Products

The Individual Products segment markets individual life insurance policies
through independent general agents, independent national account marketing
firms, agency building general agents, home service agents, broker/dealers,
banks and strategic alliances.

Individual Products include universal life (UL) and variable universal life
(VUL), together referred to as UL-type products, as well as traditional life
products. The operating cycle for life insurance products is long term in
nature; therefore, actuarial assumptions are important to financial reporting
for these products. Traditional products require the policyholder to pay
scheduled premiums over the life of the coverage. We recognize traditional
premium receipts as revenues and profits are expected to emerge in relation
thereto. Interest-sensitive product (or UL-type product) premiums may vary over
the life of the policy at the discretion of the policyholder so we do not
recognize them as revenues when received. Revenues and reportable segment
results on these products arise over time from mortality, expense and surrender
charges to policyholder fund balances (policy charges). Additionally, we earn
interest spreads on all UL-type and traditional products. Policy benefits
include interest credited to policyholder fund balances and claim related costs.
Reportable segment results for both traditional and UL-type products also
include earnings on required capital.

13

Segment results were:

Individual Products reportable segment results increased 2.5% in 2001 and
18.6% in 2000. Both years' increases reflect growth of the business in force;
however, the significant 2000 increase was due primarily to the Guarantee
acquisition.

The following table summarizes key information for Individual Products
which we believe are our important drivers and indicators of future
profitability:

Life insurance premium sales, excluding large case BOLI, increased 19.0% in
2001 and decreased 4.7% in 2000. The 2001 results reflected increased sales as a
result of our Premier Partnering initiative and the introduction of several new
UL products. Agency channels provided 71.4%, 80.6% and 73.6% of the life
insurance premium sales excluding large case BOLI for each of the three years
presented above. The remainder was comprised primarily of single premium
products targeted principally to financial institutions. Large case BOLI sales
increased significantly over 2000. Our business strategy is to respond to
individual sales opportunities for large case BOLI when the market accommodates
required returns. Thus, BOLI sales will vary widely between periods.

Revenues include traditional insurance premiums, policy charges, and net
investment income. Individual traditional premiums decreased 7.6% in 2001 as a
result of a decrease in our traditional business in force and certain
reclassifications made in 2000 related to the integration of Guarantee.
Individual traditional premiums increased 12.3% in 2000 resulting primarily from
the Guarantee acquisition. UL and investment product charges increased 2.5% and
16.4% in 2001 and 2000 due to growth in average UL policyholder fund balances of
3.4%

14

and 13.2% in 2001 and 2000. The significant increases in 2000 were due to the
Guarantee acquisition. Average VUL separate account assets declined 3.6% and
increased 39.1% in 2001 and 2000. The decline in 2001 is primarily due to the
drop in the equity markets. Adjusting for the decrease in fair market value, net
of dividends, separate account balances would have increased by approximately
14% in 2001 and total fund balances would have grown by about 5% in 2001.

Investment income, net of expenses, increased 4.4% and 14.1% in 2001 and
2000, reflecting the growth in average policyholder funds and changes in
investment yields. The average investment spread on UL-type products (calculated
as the difference between portfolio yields earned on invested assets less
interest credited to policyholder funds, assuming the same level of invested
assets) increased 3 basis points to 2.00% in 2001 and increased 5 basis points
to 1.97% in 2000. Interest spreads are affected by portfolio yields and
crediting rates, and also may vary over time due to our competitive strategies
and changes in product design.

Total policy benefits increased 4.6% in 2001 due to an increase in
mortality and interest credited, consistent with the growth in business, and
18.0% in 2000 due primarily to the Guarantee acquisition. Policy benefits on
UL-type products increased to 7.3% of average policyholder funds and separate
accounts in 2001 versus 7.1% and 6.8% in 2000 and 1999. Policy benefits include
interest credited to policyholder accounts on UL-type products and death
benefits in excess of fund balances.

Total expenses (including the net deferral and amortization of DAC and
VOBA) decreased 5.9% and increased 0.9% in 2001 and 2000. The 2001 decline is
due primarily to a decrease in amortization of DAC and VOBA resulting from the
increase in mortality on UL-type policies. Amortization of DAC and VOBA on UL-
type products may decline when mortality increases, provided that longer-term
assumptions remain appropriate. Expenses on individual traditional products were
26.0%, 29.7% and 30.0% of premiums in 2001, 2000 and 1999. For UL-type products,
expenses as a percentage of policyholder funds and separate accounts were 2.2%,
2.3% and 2.7% in 2001, 2000 and 1999. The improvement over 1999 reflects
economies of scale from the Guarantee acquisition.

Financial and operating risks for this segment include, among others,
asset/liability management, interest rate risks, changes in the underlying
assumptions of DAC and VOBA and the effects of unresolved litigation. We discuss
these risks in more detail in the Financial Position, Capital Resources and
Liquidity as well as in the Market Risk Exposures sections.

Average Individual Products assets grew 3.0% in 2001 and 14.9% in 2000.
Sales of UL-type products and growth in existing policyholder funds from
interest credited, partially offset by VUL separate account declines,
contributed to the 2001 increase. 2000's increase was due to the Guarantee
acquisition, net receipts on UL-type products, new sales and growth in existing
policyholder funds. The return on average Individual Products assets for 2001
and 2000 was 1.9%.

Annuity and Investment Products

Annuity and Investment Products are marketed through most distribution
channels discussed in the Individual Products segment as well as through
financial institutions, investment professionals and annuity marketing
organizations. JPSC markets variable life insurance and variable annuities
written by our insurance subsidiaries and other carriers, and also sells other
securities and mutual funds.

15

Reportable segment results were:

Reportable segment results decreased 1.9% in 2001 and increased 16.3% in
2000. The largest factors contributing to the 2001 decrease were a decline in
net income from JPSC of $3.6, and lower annuity surrenders that reduced policy
charges. The following table summarizes key information for AIP:

We derive annuity revenues from investment income on segment assets, policy
charges, and concession income earned on investment product sales by JPSC. AIP
revenues increased 3.3% in 2001 and 22.9% in 2000. The 2001 increase is due to
growth in policyholder fund balances, offset by lower surrender charge income
(included in policy charges) and lower JPSC concession income, and include the
adoption of FASB 133, which caused a one-time increase to net investment income
of $2.3. The increase in 2000 is primarily due to the Guarantee acquisition and
higher JPSC concession income. Fixed annuity premium sales increased 16.8% and
43.8% in 2001 and 2000. Recently introduced products drove the strong 2001
sales, especially a fixed annuity with a market value adjustment. Increased
distribution, particularly in financial institutions, also contributed to sales
growth. 2000's results reflect new products introduced in 1999 through the
existing distribution channels. JPSC's concession and other income decreased
15.3% and increased 60.6% in 2001 and 2000. The decrease in 2001 is due to lower
volumes of equity market purchase/sale transactions. The increase in 2000 is due
to higher volumes of securities and mutual fund transactions, and the
integration of a broker/dealer acquisition.

Fixed annuity surrenders as a percentage of beginning fund balances
decreased to 12.7% from 21.2% in 2000. The lower lapse rates reflect the
combined effects of lower interest rates on competing investments, increased
surrender charge protection on our in-force block of business, and internal
conservation initiatives. The surrender rate in the AIP segment is influenced by
many factors such as: (1) the portion of the business that has low or no
remaining surrender charges; (2) competition from annuity products including
those which pay upfront interest rate bonuses or higher market rates and (3)
rising interest rates that may make returns available on new annuities or
investment products more attractive than our older annuities. Fund balances with
5% or more surrender charges, including payout annuities, increased to 43% at
year-end 2001 from 38% at year-end 2000.

16

An inherent risk in the annuity business is that secular declines in
investment yields coupled with intense rate competition from competing products
could further compress our investment spread. Another risk that we face is
rising interest rates or competition from other financial products could lead to
lapses particularly in the portion of business subject to low or no surrender
charges. When surrenders increased to 21.2% in 2000, the impact on profitability
was not material due to offsetting surrender charges. We mitigate these risks by
utilizing the asset/liability management practices discussed later.

Total AIP benefits and expenses increased 4.5% in 2001 versus 24.6% in
2000. Policy benefits, which are mainly comprised of interest credited to
policyholder accounts, as a percentage of average policyholder fund balances
were 5.6% in 2001 and 5.4% in 2000 and 1999. Total AIP expenses decreased 12.4%
in 2001 and increased 63.7% in 2000. The 2001 decrease is due primarily to the
lower commission expenses of JPSC as well as a decrease in amortization expense
as we reflect the effect of lower surrenders in adjustments to amortization
rates of DAC and VOBA and as older products with higher amortization rates are
replaced with newer products which have less associated DAC. The 2000 expense
growth was due to an increase in concessions related to JPSC operations, similar
to the increases in concession and other income, and an increase in amortization
of DAC due to higher surrenders. Effective spreads on fixed annuities declined
to 1.96% in 2001 from 2.14%, primarily due to continued strong sales of our
lower commission five-year products. These products carry a lower spread
requirement based on commission rates that are approximately 50% of full
commissions. The lower commission has the eventual effect of decreasing expenses
through reduced DAC amortization. Of the year-to-date 18 basis points spread
compression, approximately one-third represents economic spread contraction that
occurs in declining interest rate environments and affects earnings, while the
remaining two-thirds is related to the lower commission products and does not
affect earnings.

JPSC earnings included in the segment results were $2.7, $6.3 and $4.4 for
2001, 2000 and 1999. The 2001 decline is directly related to lower equity and
mutual fund purchase/sale transactions, which had increased in 2000.

Benefit Partners

The Benefit Partners segment offers group non-medical products such as term
life, disability and dental insurance to the employer marketplace. These
products are marketed primarily through a national distribution system of
regional group offices. These offices develop business through employee benefit
brokers, third party administrators and other employee benefit firms. The
Benefit Partners segment was created in January 2000 through the integration of
our existing group life and disability operations into Guarantee's life,
disability and dental operations acquired in December 1999. Segment results
before 2000 include only the Group life and health products sold by JP Life.

Reportable segment results were:

17

Benefit Partners reportable segment results increased 36.5% and 33.1% in
2001 and 2000, primarily due to the growth in this business and the integration
of Guarantee. The following table summarizes key information for Benefit
Partners:

Benefit Partners revenues increased $64.9 and $372.7 in 2001 and 2000, with
2000 reflecting the Guarantee acquisition. Sales for the core life, disability
and dental lines of business grew 25.0% and 700.0% in 2001 and 2000. The 2001
increase in revenue results from both sales growth and satisfactory persistency
in our non-medical business. The revenue growth was somewhat dampened by our
exiting the excess loss medical business. These results reflect the success of
our technologically advanced approach to selling and underwriting group
insurance products.

Policy benefits increased 12.3% and 283.8% in 2001 and 2000, consistent
with the growth of business in force including Guarantee. Our life, disability
and dental incurred loss ratio improved to 72.4% in 2001 versus 73.4% in 2000,
reflecting continued claims management efforts coupled with favorable morbidity
and mortality. The 1999 loss ratio of 85.2% did not include Guarantee and
therefore is not comparable to later years.

Risks beyond normal competition that may impact this segment include: (1) a
weak economy may increase disability claim costs; (2) an acceleration in medical
cost inflation can put pressure on non-medical benefit costs because employers
may focus more on the employer's cost of non-medical programs; and (3)
concentration risks from acts of terrorism not priced for or reinsured. We are
mitigating these risks by monitoring new and existing claims and industry health
care trend reports which serve as indicators of increased employer medical
costs, and through intensive review of our concentration risks. Our catastrophe
reinsurance agreement that expires in April 2002 covers extraordinary life
claims arising from catastrophic events in the group life line. Because this
catastrophe reinsurance agreement cannot be replaced except with a much higher
premium and deductible and with a terrorism exclusion, we have determined not to
purchase catastrophic coverage and instead will rely on case by case management
to mitigate our concentration exposures.

Total expenses (including the net deferral and amortization of policy
acquisition costs) increased 1.9% in 2001. This is significantly less than the
increase in sales of core products of 25% as we benefited from both the
integration of the group business to Omaha and increased efficiency in policy
and claims administration. We expect that future increases in sales would
correlate more closely to an increase in expenses as additional policy and
claims administration expenses are incurred. 2000 total expenses increased
285.5% primarily due to the Guarantee acquisition. As a percentage of premium
income, total expenses were 23.7% for 2001 and 26.2% for 2000, and without
Guarantee, 18.4% for 1999. The 2001 improvement is due primarily to the
integration of JP Life's and Guarantee's group operations.

18

Communications

JPCC operates radio and television broadcast properties and produces
syndicated sports and entertainment programming. Reportable segment results
were:

Reportable segment results decreased 18.7% in 2001 and increased 9.6% in
2000. The 2001 decline was primarily due to lower demand for advertising, which
reflects the general softening of the economy in all markets. Combined revenues
for Radio and Television decreased 6.3% in 2001 and grew 5.9% in 2000. Excluding
political revenues, Radio and Television declined 4.8% in 2001 and grew 3.8% in
2000. The 2001 decline is primarily due to decreases in national sales, slowing
economic conditions, and lost revenues due to the September 11th event.

Revenues from Sports operations decreased 8.5% and 16.7% in 2001 and 2000.
The 2001 decline reflects the impact of weak demand for advertising due to the
slowing economic conditions. Sports advertising is typically sold with three to
six month lead times and economic activity was slowing during the prime Sports
selling season. We have commitments of $402 to pay rights fees to the ACC and
SEC conferences. We have offsetting commitments of $300 by various other
broadcasters to repurchase some of those rights, and we have a 50/50 partner in
ACC Basketball to mitigate some of the exposure. We expect advertising contracts
that we sell to produce profits on each product; however, sales contracts
typically have a term of three years or less. Thus, there are currently no sales
contracts on our books to offset exposure in later years under the conference
agreements. See Note 19 which is incorporated by reference.

Broadcast cash flow declined 17.4% in 2001 and grew 5.2% in 2000.

Total expenses, excluding interest expense, decreased 0.3% and increased
0.3% in 2001 and 2000, respectively. Expenses as a percent of communication
revenues were 69.7%, 65.4% and 66.9% for 2001, 2000 and 1999. The 2001 increase
in this percentage is due mainly to the decrease in revenues, while expenses
have been held relatively flat year-to-year. A one-time insurance recovery of
$1.4 after tax reduced corporate general and administrative expenses in 2001,
which helped segment earnings but is not reflected in broadcast cash flow.
Effective January 1, 2002, JPCC will no longer be required to systematically
amortize the amounts paid for FCC licenses or goodwill from previous
acquisitions. Instead, those amounts will be tested for impairment on at least
an annual basis. We do not expect to record impairment losses on JPCC's current
intangible assets. FCC license and goodwill amortization expense was $3.2 in
each of the last three years.

Corporate and Other

The Corporate and Other segment includes the excess capital of the
insurance subsidiaries, other corporate investments including impaired
securities, blocks of business from previous acquisitions not conforming to our
other reportable segment strategies, benefit plan net assets, goodwill related
to previous acquisitions, and corporate debt. The reportable segment results
primarily contain the earnings on the invested excess capital, interest expense
related to the corporate debt, and operating expenses that are corporate in
nature (i.e. advertising, charitable and civic contributions, goodwill
amortization, etc.). The net operating results for blocks of acquired business
are insignificant. All net capital gains and losses, which reflect all
impairments of securities, are reported in this segment.

19

The following table summarizes results for this segment:

Reportable segment results excluding realized gains increased $14.0 in 2001
and decreased $26.4 in 2000, for the reasons that follow.

The increase in investment earnings in 2001 is due to an increase in equity
investment income and a reclassification of intersegment interest expense. The
earnings on investments for this segment include default charge income received
from the operating segments for the Corporate and Other segment's assumption of
all credit related losses on the invested assets of those segments. Default
charges included in this segment's investment income for the last three years
amounted to $20, $19 and $17 and are based on invested assets of the operating
segments. The drop in investment earnings in 2000 was due to lower invested
assets for this segment following the Guarantee acquisition in December 1999.
Earnings on investments in this segment can fluctuate based upon opportunistic
repurchases of common stock, the amount of excess capital generated by the
operating segments and lost investment income on impaired securities.

Interest expense on debt and Exchangeable Securities decreased $7.1 in 2001
primarily due to lower average interest rates, as the average debt outstanding
remained relatively constant during the year. Operating expenses vary with the
level of corporate activities and strategies. Goodwill amortization of $9, $10
and $6, excluding JPCC, was included in operating expenses for the three years
ended 2001. As we adopt a new accounting standard for 2002, we will no longer
amortize goodwill, but will test its value for impairment at least annually. We
do not expect to record a material loss on goodwill impairment for amounts
currently recorded. The provision for income tax expense includes the tax
benefit of preferred dividends on Capital Securities, which we record gross of
related tax effects. Income taxes decreased $5.7 in 2001 due to the
implementation of strategies that reduced federal income taxes on investment
earnings and the resolution of tax issues for which we had previously
established provisions. Income taxes decreased $16.4 in 2000 due primarily to
the tax effect of lower segment pre-tax operating results as compared to 1999.

Realized investment gains and losses for 2001 include a net after tax $52
loss on our bond portfolio, including both writedowns of $36 and actual sales in
the normal course of business, which were offset by gains in equities, resulting
in a net gain of $44. This loss was driven primarily by recent economic events,
including high profile bankruptcies and the continued weak economy. Net after
tax losses in our bond portfolio were $14 and $1 for 2001 and 2000.

20

The following table summarizes assets assigned to this segment at the end
of each year:

Total assets for the Corporate and Other segment decreased 6.0% in 2001 due
primarily to repayment of commercial paper debt, writedowns of impaired
securities and the repurchase of common stock. Unrealized gains and losses on
all Available for Sale fixed income securities are assigned to this segment, and
increased $119 during 2001 and $273 during 2000. The increase both years is
primarily due to declining market interest rates, partially offset by declines
in market values of financial services stocks.

FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY

Our primary resources are investments related to our Individual Products,
AIP and Benefit Partners segments, properties and other assets utilized in all
segments and investments backing corporate capital. The Investments section
reviews our investment portfolio and key strategies.

Total assets increased $1,675 in 2001 due to growth in income, net
policyholder contract deposits and an increase in the value of Available for
Sale securities. In 2000, total assets increased $875 primarily due to growth in
separate accounts, net policyholder contract deposits and an increase in
Available for Sale securities.

The Individual Products, AIP and Benefit Partners segments defer the costs
of acquiring new business, including first year commissions, first year bonus
interest, certain costs of underwriting and issuing policies plus agency office
expenses (referred to as DAC). We capitalize acquisition costs up to the amounts
we used in the specific product pricing models, and we expense any acquisition
costs in excess of the pricing allowable. When we acquire new business through
an acquisition, we allocate a portion of the purchase price to a separately
identifiable intangible asset, referred to as VOBA. We initially establish VOBA
as the actuarially determined present value of future gross profits of each
business acquired.

We amortize DAC and VOBA on traditional products in proportion to premium
revenue recognized. We amortize DAC and VOBA on UL-type products relative to the
future estimated gross profits (EGP) from those products. The EGP for UL-type
products include the following components: (1) estimates of fees charged to
policyholders to cover mortality, surrenders and maintenance costs; (2)
estimated mortality in excess of fund balances accumulated; (3) expected
interest rate spreads between income earned and amounts credited to policyholder
accounts; and (4) estimated cost of policy administration (maintenance). EGP is
also reduced by our estimate of future losses due to defaults in fixed interest
investments. DAC and VOBA related to UL-type products are sensitive to a change
in our assumptions regarding EGP components, and any change in such an
assumption will immediately impact the current DAC and VOBA balances with the
change reflected through the income statement. At December 31, 2001, the DAC and
VOBA related to Individual UL-type products amounted to 74.9% of the $2,070 on
the balance sheet.

21

The models and our assumptions regarding EGP that we utilize for
calculation of amortization expense for UL-type products are continuously
reviewed so that the assumptions reflect a reasonable view of the future. We
consider three assumptions to be most significant: (1) estimated mortality; (2)
estimated interest spread; and (3) estimated future policy lapses. The following
table reflects the possible change which could occur in a given year, if we
change our assumptions as illustrated, as a percentage of current DAC and VOBA
balances related to Individual UL-type products on our balance sheet:

While this list does not cover all of the risks we face in the ordinary
course of business, it does highlight some of the major risks on the assumptions
that we make as we amortize the DAC and VOBA balances. In general, a change in
an assumption that improves our expectations regarding EGP is going to have the
impact of deferring the amortization of DAC and VOBA into the future, thus
increasing earnings and the current DAC and VOBA balances. Conversely, a change
in assumptions that decreases EGP will have the effect of speeding up the
amortization of DAC and VOBA, thus reducing earnings and lowering the current
DAC and VOBA balances. Our review of these assumptions in recent years has
resulted in increases to the year-end Individual UL-type DAC and VOBA balances
of 0.8%, 0.8% and 0.0% in 2001, 2000, and 1999.

We also adjust the carrying value of DAC and VOBA to reflect changes in the
unrealized gains and losses in Available for Sale securities since this impacts
EGP. Note 6 contains roll forwards of DAC and VOBA including the amounts
capitalized, amounts amortized and the effect of the unrealized gains, and is
incorporated by reference.

Goodwill was $312 and $323 at December 31, 2001 and 2000, reflecting
amortization. Goodwill as a percentage of shareholders' equity was 9.2% and
10.2% at year-end 2001 and 2000.

Under previous accounting standards we regularly reviewed carrying amounts
of DAC and VOBA, and goodwill for indications of value impairment, with
consideration given to the financial performance of acquired properties, future
gross profits of insurance in force and other factors.

At December 31, 2001 and 2000, we had reinsurance receivables of $914 and
$947 and policy loans of $153 and $184 which are related to the businesses of JP
Financial that are coinsured with Household International (HI) affiliates. HI
has provided payment, performance and capital maintenance guarantees with
respect to the balances receivable. We regularly evaluate the financial
condition of our reinsurers and monitor concentrations of credit risk related to
reinsurance activities. We have not suffered any significant credit losses from
reinsurance activities in the last three years.

CAPITAL RESOURCES

Stockholders' Equity

The following table shows our capital adequacy:

22

The ratio of equity to assets less separate accounts has remained
relatively constant. Unrealized gains on Available for Sale securities, which
are included as a component of stockholders' equity, increased $69 and $79 in
2001 and 2000. We used $188 in 2001 (4,437,100 shares at an average cost of
$42.42) and $44 in 2000 (1,101,000 shares at an average cost of $40.07) to
purchase common shares outstanding. In February 2001 and again in November 2001,
our Board of Directors updated its ongoing share repurchase authorization to
cover 5 million shares of common stock, and we intend to continue to make
opportunistic repurchases.

We consider existing capital resources to be more than adequate to support
the current level of our business activities. Our business plan places priority
on redirecting certain capital resources invested in bonds and stocks into our
core businesses, which would be expected to produce higher returns over time.

The Individual Products, AIP and Benefit Partners segments are subject to
regulatory constraints. Our insurance subsidiaries have statutory surplus and
risk based capital levels well above required levels. These capital levels
together with the rating agencies' assessments of our business strategies have
enabled the major life insurance affiliates to attain the following claims
paying ratings:

These ratings are currently the highest available by the respective rating
agencies. All of the ratings were affirmed in the last nine months. In the fall
of 2001, Standard & Poor's affirmed our AAA rating, but changed its outlook to
negative which is consistent with Standard & Poor's outlook on the entire life
insurance industry. The other two agencies mentioned above affirmed their
highest ratings. A very significant drop in these ratings, while not
anticipated, could potentially impact future sales and/or accelerate surrenders
on our business in force.

Debt and Exchangeable Securities

We have a bank credit agreement for unsecured revolving credit, under which
we have the option to borrow at various interest rates. The agreement is for
$375 and extends to May 2002. We intend to replace the expiring bank credit
agreement with a new agreement in May 2002. The credit agreement principally
supports the issuance of commercial paper. As of December 31, 2001, outstanding
commercial paper had various maturities, with none in excess of 90 days,
although maturities can be up to 270 days. In the event that we are not able to
remarket commercial paper at maturity, we have sufficient liquidity, consisting
of the bank credit agreement, liquid assets, such as equity securities, and
other resources to retire these obligations. The weighted-average interest rates
for commercial paper borrowings outstanding of $297 and $405 at December 31,
2001 and 2000 were 3.72% and 6.51%. The maximum amount outstanding during 2001
and 2000 was $565 and $525.

Our commercial paper is currently rated by two rating agencies, as follows:

These are both the highest ratings that the agencies issue and have been
affirmed in the past nine months. A significant drop in these ratings, while not
anticipated, could cause us to pay higher rates in commercial paper borrowings
or lose access to the commercial paper market.

Our insurance subsidiaries have sold U.S. Treasury obligations and
collateralized mortgages under repurchase agreements involving various
counterparties, accounted for as financing arrangements. Proceeds normally are
used to purchase securities with longer durations as an asset/liability
management strategy and to provide acquisition financing. From time to time, we
use repurchase agreements in lieu of commercial paper borrowings in order to
obtain a lower borrowing cost. At December 31, 2001 and 2000, repurchase
agreements were $292 and $397. The maximum amounts outstanding were $457 and
$467 during 2001 and 2000, as the portion used to help fund the Guarantee
acquisition was repaid in the first half of 2001 followed by increased

23

asset/liability management activities. The securities involved had a fair value
and amortized cost of $306 and $289 at year-end 2001 versus $415 and $404 at the
end of 2000.

At December 31, 2001 and 2000, we had $150 and $139 of Exchangeable
Securities outstanding, reflecting the Mandatorily Exchangeable Debt Securities
(MEDS). We repaid the $150 MEDS in cash in January 2002. We had $300 of
guaranteed preferred beneficial interest in subordinated debentures (Capital
Securities) outstanding at December 31, 2001 and 2000 at an average interest
rate of 8.2%, maturing in 2046 but redeemable at our option beginning in 2007.

At December 31, 2001 and 2000, net advances from subsidiaries were $417 and
$346, all of which are eliminated in consolidation.

LIQUIDITY

We meet liquidity requirements primarily by positive cash flows from the
operations of subsidiaries. We have sufficient overall sources of liquidity to
satisfy operating requirements. Primary sources of cash from our insurance
operations are premiums, other insurance considerations, receipts for
policyholder accounts, investment sales and maturities and investment income.
Primary uses of cash for our insurance operations include purchases of
investments, payment of insurance benefits, operating expenses, withdrawals from
policyholder accounts, costs related to acquiring new business, dividends and
income taxes. Primary sources of cash from the Communications operations are
revenues from advertising, and primary uses include payments for commissions,
compensation (and compensation-related costs), sports rights, interest, income
taxes and purchases of fixed assets.

Cash provided by operations in 2001, 2000 and 1999 was $739, $501 and $481.
2001's increase reflects changes in payables and receivables including our
receipt of approximately $208 in premiums related primarily to small case
BOLI-type products unprocessed at year-end. 2000's increase of $20 reflects
changes in payables and receivables related to the timing of investment
commitments net of higher policy acquisition costs.

Net cash used in investing activities was $1,363, $611 and $1,111 in 2001,
2000 and 1999. The significant decrease in 2000 reflected additional sales of
securities required to fund increased surrenders primarily in the AIP segment
and coinsured policies with HI in the Corporate and Other segment.

Net cash provided by financing activities was $737, $74 and $671 in 2001,
2000 and 1999, with 2001 reflecting higher policyholder contract deposits
coupled with lower surrenders. The 2000 decrease of $597 is primarily due to net
borrowing repayments of $232 versus 1999 short-term borrowings of $303
reflecting the Guarantee acquisition. Cash inflows from policyholder contract
deposits net of withdrawals were $1,321, $512 and $704. The 2000 decrease is a
result of higher annuity surrenders and decreased UL-type contract receipts,
with both factors reversing in 2001.

In order to meet the parent company's dividend payments, debt servicing
obligations and other expenses, we received internal dividends from
subsidiaries. Total cash dividends paid by subsidiaries were $414 in 2001, $649
in 2000 and $279 in 1999. 2000 included extraordinary dividends of $200 from JP
Life representing all its publicly traded equity securities and $100 from JP
Financial in connection with the merger of Alexander Hamilton Life Insurance
Company of America and Guarantee into JPFIC. JP Life, JPFIC and JPCC were the
primary sources of dividends in all three years. Our life insurance subsidiaries
are subject to laws in the states of domicile that limit the amount of dividends
that can be paid without the prior approval of the respective State's Insurance
Commissioner. We have no reason to believe that such approval will be withheld,
if required.

In connection with a previous acquisition, we acquired a closed block of
business that was financed by a loan program collateralized by pledged mutual
fund shares of our policyholders. In late 1997, the acquired company entered
into an agreement with an unaffiliated third party that provides for the initial
and periodic purchase of the majority of its loans receivable. This agreement is
renewable on an annual basis. If the agreement is not renewed, we can issue debt
to fund the amounts or terminate the entire program. The amount of loans
outstanding at December 31, 2001 was $33. We have no other off balance sheet
arrangements of a financing nature.

24

Cash and cash equivalents were $139, $26 and $62 at December 31, 2001, 2000
and 1999. The increase at year-end 2001 reflected amounts that would be used to
pay off the MEDS in January 2002. Additionally, fixed income and equity
securities held by the parent company and non-regulated subsidiaries were $542,
$549 and $446 at these dates. These securities are considered to be sources of
liquidity to support our strategies.

JPCC has commitments for purchases of syndicated television programming and
commitments on other contracts and future sports programming rights of
approximately $451 as of December 31, 2001, payable through the year 2011. We
have commitments to sell a portion of the sports programming rights to other
entities for $300, over the same period. These commitments are not reflected as
an asset or liability in the accompanying consolidated balance sheet because the
programs are not currently available for use. Advertising revenues that are sold
on an annual basis are expected to fund the purchase commitments.

Total debt and equity securities Available for Sale at December 31, 2001
and 2000 were $14,639 and $13,529.

Investments

Our strategy for managing the insurance investment portfolio is to
consistently meet pricing assumptions while achieving the highest possible
after-tax yields over the long term. We invest cash flows primarily in fixed
income securities. The nature and quality of investments held by insurance
subsidiaries must comply with state regulatory requirements. We have established
a formal investment policy that we use to achieve overall quality and
diversification objectives.

We held the following carrying amounts of investments:

Certain amounts reported in the prior year's schedule of privately-placed
and publicly-issued assets have been reclassified to conform to the presentation
adopted in the current year.

Our internal guidelines require an average quality fixed income portfolio
(excluding mortgage loans) of "A" or higher. Currently, the average quality is
"A1". Our guidelines also limit the amount of lower quality investments and
require diversification by issuer and asset type. Due to deteriorating general
economic conditions during 2001, several bonds were downgraded to
"below-investment grade". We monitor "higher risk" investments in order to
determine if the securities have experienced an other than temporary decline in
value. Securities that experience other than temporary declines in value are
adjusted to fair values through a charge to earnings. Impairment losses totaling
$55, $15 and $1 were recognized in the years ending December 31, 2001, 2000 and
1999. The increase in impairment losses in 2001 reflected several high profile
bankruptcies and the continued declining economy.

We state mortgage loans on real property net of an allowance for credit
losses. We determine this allowance for specific impaired loans by calculating
the fair value of each loan, utilizing estimated future cash flows of the
impaired loan, discounted at the loan's effective interest rate. We also set
aside an additional allowance based on aggregate loans with similar risk
characteristics utilizing historical statistics. At December 31, our allowance
for mortgage loan credit losses was $29 for 2001 and 2000.

25

Carrying amounts of investments categorized as "higher risk" assets were:

A weak economy or a more pronounced downturn, or events which affect one or
more companies or industries, could lead to further credit related portfolio
losses in "higher risk" and other investments.

Our guidelines permit use of derivative financial instruments such as
futures contracts and interest rate swaps in conjunction with specific direct
investments. Our actual use of derivatives has been limited to managing well-
defined interest rate risks. Interest rate swaps with a current notional value
of $132 and $185 were open as of December 31, 2001 and 2000. Also, during 2001,
interest rate swaps with a combined notional value of $50 expired. There were no
terminations of derivative financial instruments in 2000 or 1999.

Effective January 1, 2001, we adopted SFAS 133, "Accounting for Derivative
Instruments and for Hedging Activities", and the discussion in Note 5 is
incorporated by reference.

Mortgage backed securities (including Collateralized Mortgage Obligations)
at December 31, which are included in debt securities Available for Sale, were
as follows:

Our investment strategy with respect to mortgage backed securities (MBS's)
focuses on actively traded, less volatile issues that produce relatively stable
cash flows. The majority of MBS holdings are sequential and planned amortization
class tranches of federal agency issuers. The MBS portfolio has been constructed
with underlying mortgage collateral characteristics and structure in order to
lower cash flow volatility over a range of interest rate levels.

We adopted, EITF 99-20: Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets,
effective for fiscal quarters beginning after March 15, 2001. Given the nature
of the investments held, this pronouncement did not have a material impact on
our financial statements.

MARKET RISK EXPOSURES

Since our assets and liabilities are largely monetary in nature, our
financial position and earnings are subject to risks resulting from changes in
interest rates at varying maturities, changes in spreads over U.S. Treasuries on
new investment opportunities, changes in the yield curve, and equity price
risks. During 2001, 10 year U.S. Treasury rates increased 14 basis points versus
a decrease of 148 basis points in 2000. In 2001 and 2000, in response to
deteriorating economic conditions and the uncertainty created by the September
11th event, risk premiums over rates that could otherwise be earned on U.S.
Treasury securities increased due to continued poor liquidity conditions.

In a falling interest rate environment, the risk of prepayment on some
fixed income securities increases and funds prepaid are then reinvested at lower
yields. We limit this risk by concentrating the fixed income portfolio mainly on
non-callable securities, by carefully selecting MBS's that are structured to
minimize cash flow

26

volatility and by purchasing securities that provide for "make-whole" type
prepayment fees. Falling interest rates can also impact demand for our products,
as bank certificates of deposit with no surrender charges, and higher average
returns from equity markets, may become more attractive to new and existing
customers. Conversely, in a rising interest rate environment, competitive
pressures may make it difficult for us to sustain spreads between rates credited
on interest-sensitive products and portfolio earnings rates, thereby prompting
withdrawals by policyholders. We manage this risk by adjusting our interest
crediting rates with due regard to the yield of our investment portfolio and
pricing assumptions and by prudently managing interest rate risk of assets and
liabilities.

As is typical in the industry, our life and annuity products contain
minimum rate guarantees regarding interest we credit. For interest-sensitive
life products, our minimum rates range from approximately 2.5% to 6.0%, with an
approximate weighted average of 4.2%. For annuity products, our minimum rates
range from 3.0% to 6.0%, with the greatest concentration in the 3.5% to 4.0%
range.

We employ various methodologies to manage our exposure to interest rate
risks. Our asset/liability management process focuses primarily on the
management of interest rate risk of our insurance operations. We monitor the
duration of insurance liabilities compared to the duration of assets backing the
insurance lines, measuring the optionality of cash flows. Our goal in this
analysis is to prudently balance profitability and risk for each insurance
product category, and for us as a whole. At December 31, 2001 and 2000, 89% and
88% of policy liabilities related to interest-sensitive portfolios.

We also consider the timing of cash flows arising from market risk
sensitive instruments and insurance portfolios under varying interest rate
scenarios as well as the related impact on reported earnings under those varying
scenarios. Market risk sensitive instruments include debt and equity securities
Available for Sale and Held to Maturity, mortgage loans, policy loans,
investment commitments, annuities in the accumulation phase and periodic payment
annuities, commercial paper borrowings, repurchase agreements, interest rate
swaps and other debt. The following table shows our estimate of the impact that
various hypothetical interest rate scenarios would have on our earnings for a
calendar year, based on the assumptions contained in our model. The incremental
income (loss) derives primarily from differences in the yield curves and in the
sensitivities they introduce to our model.

We derived these estimated incremental income (loss) amounts by modeling
estimated cash flows of our market risk sensitive instruments and insurance
portfolios. Incremental income or loss is net of taxes at 35%. Estimated cash
flows produced in the model assume reinvestments representative of our current
investment strategy, and calls/prepayments include scheduled maturities as well
as those expected to occur when borrowers can benefit financially based on the
difference between prepayment penalties and new money rates under each scenario.
Assumed lapse rates within insurance portfolios consider the relationships
expected between crediting rates and market interest rates, as well as the level
of surrender charges inherent in individual contracts. The illustrated
incremental income or loss also includes the expected impact on amortization of
DAC and VOBA. The model is based on our existing business in force as of
December 31, 2001 and does not consider new sales of life and annuity products
or the potential impact (as discussed above) of interest rate fluctuations on
sales.

Changes in interest rates illustrated above assume parallel shifts in the
yield curve, graded pro-rata over four quarters. We believe that a 200 basis
point increase or decrease, experienced gradually over four quarters, reflects
reasonably possible near term changes in interest rates as of December 31, 2001.
The incremental income (loss) for shifts larger than 200 basis points or that
occurs more quickly than quarterly grading does not have a linear relationship
to the values shown above. The incremental loss resulting from a larger increase
in interest rates would be proportionally greater due to the optionality of our
interest-sensitive assets and liabilities. In contrast, the incremental income
resulting from a larger decrease in interest rates would be proportionally less
due to the effect of minimum rate guarantees in our interest-sensitive
liabilities. A significant change in the slope of the

27

yield curve could also affect our results. For example, competing products such
as bank CDs could become relatively more attractive than our longer duration
annuities under an inverted yield curve, resulting in higher policyholder
withdrawals.

We are exposed to equity price risk on our equity securities (other than
trading). We hold common stock with a fair value of $509; approximately $477 is
in a single issuer, Bank of America Corporation (BankAmerica). Our Exchangeable
Securities were exchangeable into shares of BankAmerica common stock, but were
repaid in cash in January 2002. We believe that a hypothetical 20% decline in
the equity market is reasonably possible in the near term. If the market value
of the S&P 500 Index, and of BankAmerica common stock specifically, decreased
20%, the fair value of our common stock as of December 31, 2001 would change as
follows:

Certain fixed interest rate market risk sensitive instruments may not give
rise to incremental income or loss during the period illustrated, but may be
subject to changes in fair values which are reflected in equity. Note 18
presents additional disclosures concerning fair values of financial assets and
financial liabilities, and is incorporated by reference.

EXTERNAL TRENDS AND FORWARD LOOKING INFORMATION

We operate within the United States financial services and communications
markets, which are both subject to general economic conditions. After increasing
in 1999 and much of 2000, interest rates on longer maturity instruments began
trending down later in 2000 as economic growth slowed and dropped dramatically
in 2001. Changes in rates may affect our businesses in many ways as discussed
earlier. Our operations are also affected over the longer term by demographic
shifts, global markets, technological innovation and overall capital market
volatility. These forces impact us in various ways such as demand for our
insurance products and advertising revenues, competition from other financial
services providers, competition from emerging technologies for television and
radio advertising, competition for new investments, debt costs, mergers and
consolidations within the financial services and communications sectors, and
costs inherent in administering complex financial products.

The industry's individual life insurance sales in the U.S. decreased 3% for
2001, reflecting a continued weakness in the overall economy, changes in federal
estate and income tax laws and competition from financial products other than
life insurance. As discussed previously, our individual life sales growth has
been better than the overall industry.

Regulatory and Legal Environment

The U.S. insurance industry has experienced an increasing number of
mergers, acquisitions, consolidations, sales of business lines and marketing
arrangements with other financial services providers. These activities have been
driven by a need to reduce costs of distribution and to increase economies of
scale in the face of growing competition from larger insurers, banks, securities
brokers, mutual funds and other non-traditional competitors. The
Gramm-Leach-Bliley Act modernized the regulatory framework for financial
services in the U.S. and allows insurance companies, banks and securities firms
to affiliate under Financial Holding Companies. With the passage of this law,
combined with changing demographics, technological advances and customer
expectations for one-stop shopping, we expect further strategic alignments in
the financial services industry. We continue to analyze our options within this
environment for increasing distribution, adding products and technology and
improving economies of scale.

28

Prescribed or permitted Statutory Accounting Principles (SAP) may vary
between states and between companies. The NAIC has completed the process of
codifying SAP to promote standardization of methods. Our statutory surplus
increased $41.6 as we implemented SAP effective January 1, 2001.

State guaranty associations make assessments to cover losses to
policyholders of insolvent or rehabilitated insurance companies. Assessments may
be partially recovered through a reduction in future premium taxes in most
states. We have accrued for expected assessments net of estimated future premium
tax deductions.

For comments about litigation, see Critical Accounting Policies above.
Also, see Note 19, which is incorporated by reference, for discussion of our
contingent liabilities.

Environmental Liabilities

We are exposed to environmental regulation and litigation as a result of
ownership of investment real estate and real estate owned by JPCC. Our actual
loss experience has been minimal and we consider our exposure to environmental
losses to be insignificant.

Forward Looking Information

You should note that this document and our other SEC filings reflect
information that we believe was accurate as of the date the respective materials
were made publicly available. Thus they do not reflect later developments.

As a matter of policy, we do not normally make projections or forecasts of
future events or our performance. When we do, we rely on a safe harbor provided
by the Private Securities Litigation Reform Act of 1995 for statements that are
not historical facts, called forward looking statements. These may include
statements relating to our future actions, sales and product development
efforts, expenses, the outcome of contingencies such as legal proceedings, or
financial performance.

Certain information in our SEC filings and in any other written or oral
statements made by us or on our behalf, involves forward looking statements. We
have used appropriate care in developing this information, but any forward
looking statements may turn out to be wrong. They can be affected by inaccurate
assumptions or by known or unknown risks and uncertainties that could
significantly affect our actual results. These risks and uncertainties include
among others, the risk that we might fail to successfully complete our strategy
for substantially increasing life insurance sales; general economic conditions
(including the uncertainty as to the depth and duration of the current economic
slowdown and the rate at which the economy recovers), the impact on the economy
from any further terrorist activities, and interest rate changes and
fluctuations, all of which can impact our sales, investment portfolios, and
earnings; competitive factors, including pricing pressures, technological
developments, new product offerings and the emergence of new competitors;
changes in federal and state taxes (including estate taxes); changes in the
regulation of the financial services industry; or changes in other laws and
regulations and their impact.

We undertake no obligation to publicly correct or update any forward
looking statements, whether as a result of new information, future developments
or otherwise. You are advised, however, to consult any further disclosures we
make on related subjects in our press releases and filings with the SEC. In
particular, you should read the discussion in the section entitled "External
Trends and Forward Looking Information," and other sections it may reference, in
our most recent 10-K report as it may be updated in our subsequent 10-Q and 8-K
reports. This discussion covers certain risks, uncertainties and possibly
inaccurate assumptions that could cause our actual results to differ materially
from expected and historical results. Other factors besides those listed there
could also adversely affect our performance.

29

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information under the heading "Market Risk Exposures" in MD&A is
incorporated by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

MANAGEMENT'S PRESENTATION OF QUARTERLY FINANCIAL DATA (UNAUDITED)

- ---------------
(1) Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended.

30

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Jefferson-Pilot Corporation
Greensboro, North Carolina

We have audited the accompanying consolidated balance sheets of
Jefferson-Pilot Corporation and subsidiaries as of December 31, 2001 and 2000,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jefferson-Pilot
Corporation and subsidiaries at December 31, 2001 and 2000, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States.

As discussed in Note 2 to the financial statements, in 2001 the Company
changed its method of accounting for derivative financial instruments.

/s/ ERNST & YOUNG LLP

Greensboro, North Carolina
February 4, 2002

31

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements

32

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See Notes to Consolidated Financial Statements

33

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

See Notes to Consolidated Financial Statements

34

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Consolidated Financial Statements

35

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT SHARE INFORMATION)
DECEMBER 31, 2001

NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT TRANSACTIONS

NATURE OF OPERATIONS

Jefferson-Pilot Corporation (with its subsidiaries, referred to as the
Company) operates in the life insurance and communications industries. Life
insurance, annuities, disability and dental insurance are currently marketed to
individuals and businesses in the United States through the Company's principal
life insurance subsidiaries: Jefferson-Pilot Life Insurance Company (JP Life),
and Jefferson Pilot Financial Insurance Company (JPFIC) and its subsidiary,
Jefferson Pilot LifeAmerica Insurance Company (JPLA), collectively referred to
as JP Financial. Communications operations are conducted by Jefferson-Pilot
Communications Company (JPCC) and consist of radio and television broadcasting,
through facilities located in strategically selected markets in the Southeastern
and Western United States, and sports program production.

BUSINESS ACQUISITIONS

On December 30, 1999, the Company acquired The Guarantee Life Companies
Inc. and its subsidiaries, including Guarantee Life Insurance Company,
collectively referred to as Guarantee. Guarantee's operations include group and
worksite marketed non-medical products, including term life, disability, and
dental products marketed through regional group offices. Guarantee's operations
also include a substantial block of individual insurance products, principally
universal life. The cost of the acquisition consisted of $298 cash paid plus
other acquisition expenses. In addition, the Company assumed outstanding debt of
$123. The Company financed the acquisition through the issuance of commercial
paper and through proceeds from repurchase agreements. The acquisition was
accounted for using the purchase method. Because the acquisition took place on
December 30, none of Guarantee's results of operations are included in the
consolidated income statement for 1999. The acquisition resulted in $105 of
goodwill and $202 of value of business acquired. This goodwill was being
amortized over 35 years on a systematic basis through 2001.

Pro forma financial information for this acquisition has not been
presented, as the pro forma impact on consolidated operations is not
significant.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
(GAAP). The insurance subsidiaries also submit financial statements to insurance
industry regulatory authorities. Those financial statements are prepared on the
basis of statutory accounting practices (SAP) and are significantly different
from financial statements prepared in accordance with GAAP. See Note 12.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of
Jefferson-Pilot Corporation and all of its subsidiaries. All material
intercompany accounts and transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements requires management to make
estimates and assumptions affecting the reported amounts of assets and
liabilities and the disclosures of contingent assets and liabilities as of the
date of the financial statements, and the reported amounts of revenue and
expenses for the reporting period. Those estimates are inherently subject to
change and actual results could differ from those estimates. Included among the
material (or potentially material) reported amounts and disclosures that require
extensive use of estimates are
36

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fair value of certain invested assets, asset valuation allowances, deferred
policy acquisition costs, goodwill, value of business acquired, policy
liabilities, and the potential effects of resolving litigated matters.

CASH AND CASH EQUIVALENTS

The Company includes with cash and cash equivalents its holdings of highly
liquid investments, which mature within three months of the date of acquisition.

DEBT AND EQUITY SECURITIES

Debt and equity securities are classified as either securities held to
maturity, stated at amortized cost, or securities available for sale, stated at
fair value with net unrealized gains and losses included in accumulated other
comprehensive income, net of deferred income taxes and adjustments to deferred
policy acquisition costs and value of business acquired.

Amortization of premiums and accrual of discounts on investments in debt
securities are reflected in earnings over the contractual terms of the
investments in a manner that produces a constant effective yield. Investment
securities are regularly reviewed for impairment based on criteria that include
the extent to which cost exceeds market value, the duration of the market
decline, and the financial health of and specific prospect for the issuer.
Unrealized losses that are considered to be other than temporary are recognized
in realized gains and losses. Realized gains and losses on dispositions of
securities are determined by the specific-identification method.

MORTGAGE AND POLICY LOANS

Mortgage loans on real estate are stated at unpaid balances, net of
estimated unrecoverable amounts. In addition to a general estimated allowance,
an allowance for unrecoverable amounts is provided when a mortgage loan becomes
impaired. Mortgage loans are considered impaired when it becomes probable the
Company will be unable to collect the total amounts due, including principal and
interest, according to contractual terms. The impairment is measured based upon
the present value of expected cash flows discounted at the effective interest
rate on both a loan by loan basis and by measuring aggregated loans with similar
risk characteristics. Interest on mortgage loans is recorded until collection is
deemed improbable. Policy loans are stated at their unpaid balances.

REAL ESTATE AND OTHER INVESTMENTS

Real estate not acquired by foreclosure is stated at cost less accumulated
depreciation. Real estate acquired by foreclosure is stated at the lower of
depreciated cost or fair value minus estimated costs to sell. Real estate,
primarily buildings, is depreciated principally by the straight-line method over
estimated useful lives generally ranging from 30 to 40 years. Accumulated
depreciation was $47 and $43 at December 31, 2001 and 2000. Other investments
are stated at equity, or the lower of cost or market, as appropriate.

PROPERTY AND EQUIPMENT

Property and equipment, which is included in other assets, is stated at
cost and depreciated principally by the straight-line method over estimated
useful lives, generally 30 to 50 years for buildings and approximately 10 years
for other property and equipment. Accumulated depreciation was $181 and $159 at
December 31, 2001 and 2000.

DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED

Costs related to obtaining new and renewal business, including commissions,
certain costs of underwriting and issuing policies, certain agency office
expenses, and first year bonus interest on annuities, all of which vary with and
are primarily related to the production of new and renewal business, have been
deferred.
37

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred policy acquisition costs for traditional life insurance policies
are amortized over the premium paying periods of the related contracts using the
same assumptions for anticipated premium revenue that are used to compute
liabilities for future policy benefits. For universal life and annuity products,
these costs are amortized at a constant rate based on the present value of the
estimated future gross profits to be realized over the terms of the contracts,
not to exceed 25 years.

Value of business acquired represents the actuarially determined present
value of anticipated profits to be realized from life insurance and annuity
business purchased, using the same assumptions used to value the related
liabilities. Amortization of the value of business acquired occurs over the
related contract periods, using current crediting rates to accrete interest and
a constant amortization rate based on the present value of expected future
profits.

The carrying amounts of deferred policy acquisition costs and value of
business acquired are adjusted for the effect of non-credit related realized
gains and losses, credit related gains, and the effects of unrealized gains and
losses on debt securities classified as available for sale. Deferred policy
acquisition costs and value of business acquired are not adjusted for the effect
of credit related losses, rather as a part of the investment income allocation
process a charge is made against the investment income allocated to the
Individual Products, Annuity and Investment Products, and Benefit Partner
segments. This charge is based upon the credit quality of the assets supporting
each segment and is meant to replicate the expected credit losses that will
emerge over a period of years. Through this mechanism, the Individual Products,
Annuity and Investment Products, and Benefit Partner segments pay a relatively
level charge to the corporate segment and in return are reimbursed when credit
related losses actually occur.

Both deferred policy acquisition costs and value of business acquired are
reviewed periodically to determine that the unamortized portion does not exceed
the expected recoverable amounts. No impairment adjustments have been reflected
in the results of operations for the years presented.

GOODWILL

Through December 31, 2001, goodwill was amortized on a straight-line basis
over periods of 25 to 40 years. Accumulated amortization was $41 and $39 at
December 31, 2001 and 2000. Carrying amounts are regularly reviewed for
indications of value impairment, with consideration given to financial
performance and other relevant factors. In addition, certain events including a
significant adverse change in legal factors or the business climate, an adverse
action or assessment by a regulator, or unanticipated competition would cause
the Company to review carrying amounts of goodwill for impairment. When
considered impaired, the carrying amounts are written down using a combination
of fair value and discounted cash flows. Effective January 1, 2002, the Company
will adopt Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets", which primarily addresses the accounting for goodwill
and intangible assets subsequent to their acquisition. See further discussion
under New Accounting Pronouncements below.

SEPARATE ACCOUNTS

Separate account assets and liabilities represent funds segregated for the
benefit of certain policyholders who bear the investment risk. The separate
account assets and liabilities, which are equal, are recorded at fair value.
Policyholder account deposits and withdrawals, investment income and realized
investment gains and losses are excluded from the amounts reported in the
Consolidated Statements of Income. Fees charged on policyholders' deposits are
included in other considerations.

RECOGNITION OF REVENUE

Premiums on traditional life insurance products are reported as revenue
when received unless received in advance of the due date.

38

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Premiums on accident and health, disability and dental insurance are
reported as earned, over the contract period. A reserve is provided for the
portion of premiums written which relates to unexpired coverage terms.

Revenue from universal life-type and annuity products includes charges for
the cost of insurance, initiation and administration of the policy and surrender
of the policy. Revenue from these products is recognized in the year assessed to
the policyholder, except that any portion of an assessment that relates to
services to be provided in future years is deferred and recognized over the
period during which services are provided.

Concession income of the broker/dealer subsidiaries is recorded as earned
and is presented in other revenue.

COMMUNICATION REVENUE, FILM AND PROGRAM RIGHTS

Communications sales are presented net of agency and representative
commissions. Film and program rights result from license agreements under which
the Company has acquired rights to broadcast certain television program material
and are stated at cost less amortization. The cost of rights acquired is
recorded as an asset, and an offsetting liability is also recorded when the cost
is known or reasonably determinable, and the program material has been accepted
and made available for broadcast. Amortization is determined using both
straight-line and accelerated methods based on the terms of the license
agreements. Carrying amounts are regularly reviewed by management for
indications of impairment and are adjusted when appropriate to estimated amounts
recoverable from future broadcast of the applicable program material.

RECOGNITION OF BENEFITS AND EXPENSES

Benefits and expenses, other than deferred policy acquisition costs,
related to traditional life, accident and health, disability and dental
insurance products are recognized when incurred in a manner designed to match
them with related premiums and spread income recognition over expected policy
lives. For universal life-type and annuity products, benefits include interest
credited to policyholders' accounts, which is recognized as it accrues.

FUTURE POLICY BENEFITS

Liabilities for future policy benefits on traditional life and disability
insurance are computed by the net level premium valuation method based on
assumptions about future investment yield, mortality, morbidity and persistency.
Estimates about future circumstances are based principally on historical
experience and provide for possible adverse deviations.

POLICYHOLDER CONTRACT DEPOSITS

Policyholder contract deposits consist of policy values that accrue to
holders of universal life-type contracts and annuities. The liability is
determined using the retrospective deposit method and consists of policy values
that accrue to the benefit of the policyholder, before deduction of surrender
charges.

POLICY AND CONTRACT CLAIMS

The liability for policy and contract claims consists of the estimated
amount payable for claims reported but not yet settled and an estimate of claims
incurred but not reported, which is based on historical experience, adjusted for
trends and circumstances. Management believes that the recorded liability is
sufficient to provide for claims incurred through the balance sheet date and the
associated claims adjustment expenses.

REINSURANCE BALANCES AND TRANSACTIONS

Reinsurance receivables include amounts related to paid benefits and
estimated amounts related to unpaid policy and contract claims, future policy
benefits and policyholder contract deposits. The cost of reinsurance is

39

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accounted for over the terms of the underlying reinsured policies using
assumptions consistent with those used to account for the policies.

STOCK BASED COMPENSATION

The Company accounts for stock incentive awards in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and accordingly,
recognizes no compensation expense for stock option awards to employees when the
option price is not less than the market value of the stock at the date of
award.

INCOME TAXES

The Company and most of its subsidiaries file a consolidated life/nonlife
federal income tax return. Currently, JP Financial files a separate consolidated
return with its respective subsidiaries. Deferred income taxes are recorded on
the differences between the tax bases of assets and liabilities and the amounts
at which they are reported in the consolidated financial statements. Recorded
amounts are adjusted to reflect changes in income tax rates and other tax law
provisions as they become enacted.

NEW ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and for
Hedging Activities" and SFAS 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities" (collectively referred to as SFAS 133). SFAS 133
requires all derivatives to be recorded on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through earnings.
If the derivative is a hedge, changes in its fair value are either offset
against the change in fair value of assets, liabilities or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The adoption of SFAS
133 on January 1, 2001 resulted in a cumulative effect of an accounting change
of $2 with related income tax expense of $1 being recognized as income in the
accompanying consolidated statement of income. There was no cumulative effect
recognized in other comprehensive income related to the Company's interest rate
swaps, used as cash flow hedges, because these swaps were carried at fair value
prior to adoption of SFAS 133. See Note 5 for a complete discussion of the
Company's derivative instruments.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" (SFAS 141) and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142).
SFAS 141 requires that all business combinations initiated after June 30, 2001,
be accounted for under the purchase method of accounting and establishes
specific criteria for the recognition of intangible assets separately from
goodwill. SFAS 142 primarily addresses the accounting for goodwill and
intangible assets subsequent to their acquisition. Upon adoption, goodwill and
certain other intangible assets will no longer be amortized. The Company will
also be required to evaluate all existing goodwill and intangible assets with
indefinite lives for impairment at least annually at the reporting unit level.
The Company does not expect to incur significant impairment losses upon adoption
of this accounting standard.

Based on current levels of amortization expense, the Company estimates that
the elimination of goodwill expense and intangible expenses (primarily Federal
Communication Commission Licenses) will positively impact net income by
approximately $13 or approximately $0.08 per common share (diluted), on an
annual basis.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, "Accounting for Asset Retirement
Obligations" (SFAS 143) which is effective for fiscal years beginning after June
15, 2002. The Statement requires legal obligations associated with the
retirement of long-lived assets to be recognized at their fair value at the time
that the obligations are incurred. The Company

40

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

will adopt SFAS 143 on January 1, 2003, and does not believe that the impact of
adoption will have a significant impact on the Company's financial position or
results of operations.

In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144) which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supercedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", and APB Opinion No. 30, "Reporting the
Results of Operations" for a disposal of a segment of a business. SFAS 144 is
effective for fiscal years beginning after December 15, 2001. The Company will
adopt the Statement as of January 1, 2002 and it does not believe adoption of
the Statement will have a significant impact on the Company's financial position
or results of operations.

NOTE 3. INCOME PER SHARE OF COMMON STOCK

The following table sets forth the computation of earnings per share before
cumulative effect of change in accounting principle and earnings per share
assuming dilution before cumulative effect of change in accounting principle. On
February 12, 2001, the Board authorized a three-for-two stock split which was
effected as a 50% stock dividend distributed on April 9, 2001 to shareholders of
record as of March 19, 2001 (see Note 10). All share and per share amounts have
been restated to give retroactive effect to the stock split:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4. INVESTMENTS

SUMMARY COST AND FAIR VALUE INFORMATION

Aggregate amortized cost, aggregate fair value and gross unrealized gains
and losses are as follows:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONTRACTUAL MATURITIES

Aggregate amortized cost and aggregate fair value of debt securities as of
December 31, 2001, according to contractual maturity date, are as indicated
below. Actual future maturities will differ from the contractual maturities
shown because the issuers of certain debt securities have the right to call or
prepay the amounts due the Company, with or without penalty.

INVESTMENT CONCENTRATION, RISK AND IMPAIRMENT

Investments in debt and equity securities include 1,820 issuers, with one
corporate issuer representing more than one percent of investments. Debt and
equity securities include investments in Bank of America of $584 and $492 as of
December 31, 2001 and 2000.

The Company's mortgage loan portfolio is comprised primarily of
conventional real estate mortgages collateralized by retail (33%), industrial
(19%), office (19%), apartment (17%), and hotel (12%) properties. Mortgage loan
underwriting standards emphasize the credit status of a prospective borrower,
quality of the underlying collateral and conservative loan-to-value
relationships. Approximately 33% of stated mortgage loan balances as of December
31, 2001 are due from borrowers in South Atlantic states and approximately 23%
are due from borrowers in West South Central states. No other geographic region
represents as much as 10% of December 31, 2001 mortgage loans.

At December 31, 2001 and 2000, the recorded investment in mortgage loans
that are considered to be impaired was $81 and $52. Delinquent loans outstanding
as of December 31, 2001 and 2000 totaled $0 and $0.6. The related allowance for
credit losses on all mortgage loans was $29 at December 31, 2001 and December
31, 2000. The average recorded investment in impaired loans was $67, $57 and $64
during the years ended December 31, 2001, 2000 and 1999, on which interest
income of $7, $3 and $6 was recognized on a cash basis.

The Company uses repurchase agreements to meet various cash requirements.
At December 31, 2001 and 2000, the amounts held in debt securities available for
sale pledged as collateral for these borrowings were $306 and $415.

SECURITIES LENDING

In its securities lending program, the Company generally receives cash
collateral in an amount that is in excess of the market value of the securities
loaned. Market values of securities loaned and collateral are monitored daily,
and additional collateral is obtained as necessary. The market value of
securities loaned and collateral received amounted to $248 and $258 at December
31, 2001 and $294 and $303 at December 31, 2000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CHANGES IN NET UNREALIZED GAINS ON SECURITIES

Changes in amounts affecting net unrealized gains included in other
comprehensive income, reduced by deferred income taxes, are as follows:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET INVESTMENT INCOME

The details of investment income, net of investment expenses, follow:

Investment expenses include interest, salaries, expenses of maintaining and
operating investment real estate, real estate depreciation and other allocated
costs of investment management and administration.

REALIZED GAINS AND LOSSES

The details of realized investment gains (losses) follow:

Information about gross realized gains and losses on available for sale
securities transactions follows:

OTHER INFORMATION

The Company sold certain securities that had been classified as held to
maturity, due to significant declines in credit worthiness. The net carrying
amounts of sold securities were $27, $17, and $7 for 2001, 2000, and 1999. The
realized losses on the securities were $6, $4, and $0 for 2001, 2000, and 1999.

NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS

SFAS 133 requires companies to recognize all derivative instruments as
either assets or liabilities in the balance sheet at fair value. The fair values
of the Company's derivative instruments of $10 at December 31, 2001, are
included in other investments in the accompanying balance sheet. The accounting
for changes in the fair value

45

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(i.e., gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and further, on
the type of hedging relationship. For those derivative instruments that are
designated and qualify as hedging instruments, a company must designate the
hedging instrument, based upon the exposure being hedged, as a fair value hedge,
cash flow hedge or a hedge of a net investment in a foreign operation. The
Company accounts for changes in fair values of derivatives that have no hedge
designation or do not qualify for hedge accounting through current earnings
during the period of the change. For derivatives that are designated and qualify
as cash flow hedges, the effective portion of the gain or loss on the derivative
instrument is reported as a component of other comprehensive income and
reclassified into earnings in the same period during which the hedged
transaction impacts earnings. The remaining gain or loss on these derivative
instruments is recognized in current earnings during the period of the change.
Effectiveness of the Company's hedge relationships is assessed and measured on a
quarterly basis. The Company has no fair value hedges or hedges of net
investments in foreign operations.

CASH FLOW HEDGING STRATEGY

The Company uses interest rate swaps to convert floating rate investments
to fixed rate investments. Interest is exchanged periodically on the notional
value, with the Company receiving the fixed rate and paying various short-term
LIBOR rates on a net exchange basis. For the year ended December 31, 2001, the
ineffective portion of the Company's cash flow hedging instruments, which is
recognized in realized investment gains, was not significant. At December 31,
2001, the maximum term of interest rate swaps that hedge floating rate
investments was eleven years.

For the year ended December 31, 2001, the Company recognized other
comprehensive income related to cash flow hedges of $3.

For the year ended December 31, 2001, the Company did not reclassify any
significant gains or losses into earnings as a result of the discontinuance of
its cash flow hedges. Further, the Company does not expect to reclassify a
significant amount of net gains (losses) on derivative instruments from
accumulated other comprehensive income to earnings during the next twelve
months.

OTHER DERIVATIVES

The Company acquired a $30 block of equity-indexed annuities as the result
of its purchase of Guarantee. These contracts have an equity market component,
where interest credited to the contracts is linked to the performance of the S&P
500(R) index. The Company has historically managed this risk by purchasing call
options that mirrored the interest credited to the contracts. These call options
act as an economic hedge, as changes in their fair values are recognized in net
investment income. For the year ended December 31, 2001, activity reflected in
net investment income related to these options was not significant.

Certain swaps serve as economic hedges but do not qualify for hedge
accounting under SFAS 133. These swaps are marked to market through realized
gains. For the year ended December 31, 2001, the Company recognized realized
investment gains of $1 related to these swaps.

The Company also invests in debt securities with embedded options, which
are considered to be derivative instruments under SFAS 133. These derivatives
are marked to market through realized investment gains, but had an insignificant
effect for the year ended December 31, 2001.

Counterparties to derivative instruments expose the Company to credit risk
in the event of non-performance. The Company limits this exposure by
diversifying among counterparties with high credit ratings.

The Company's credit risk exposure on swaps is limited to the fair value of
swap agreements that it has recorded as an asset. The Company does not expect
any counterparty to fail to meet its obligation. Currently, non-performance by a
counterparty would not have a material adverse effect on the Company's financial
position or

46

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

results of operations. The Company's exposure to market risk is mitigated by the
offsetting effects of changes in the value of swap agreements and the related
direct investments and credited interest on annuities.

NOTE 6. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED

DEFERRED POLICY ACQUISITION COSTS

Information about deferred policy acquisition costs follows:

VALUE OF BUSINESS ACQUIRED

Information about value of business acquired follows:

During 2000, the Company finalized its purchase accounting for the
acquisition of Guarantee, resulting in an adjustment to decrease the value of
business acquired by $4.

Expected approximate amortization percentages relating to the value of
business acquired for the next five years are as follows:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7. POLICY LIABILITIES INFORMATION

INTEREST RATE ASSUMPTIONS

The liability for future policy benefits associated with ordinary life
insurance policies has been determined using initial interest rate assumptions
ranging from 2.0% to 11.5% and, when applicable, uniform grading over 10 to 30
years to ultimate rates ranging from 2.0% to 6.5%. Interest rate assumptions for
weekly premium, monthly debit and term life insurance products generally fall
within the same ranges as those pertaining to ordinary life insurance policies.

Credited interest rates for universal life-type products ranged from 4.0%
to 7.5% in 2001, 4.1% to 6.7% in 2000 and 4.1% to 6.7% in 1999. The average
credited interest rates for universal life-type products were 5.6% each of the
last three years. For annuity products, credited interest rates generally ranged
from 4.0% to 9.8% in 2001, 4.0% to 9.0% in 2000 and 4.0% to 9.5% in 1999.

MORTALITY AND WITHDRAWAL ASSUMPTIONS

Assumed mortality rates are generally based on experience multiples applied
to select and ultimate tables commonly used in the industry. Withdrawal
assumptions for individual life insurance policies are based on historical
company experience and vary by issue age, type of coverage and policy duration.

For immediate annuities issued prior to 1987, mortality assumptions are
based on blends of the 1971 Individual Annuity Mortality Table and the 1969-71
U.S. Life Tables. For similar products issued between 1987 and 1999, mortality
assumptions are based on blends of the 1983a and 1979-81 U.S. Life Tables. For
similar products issued after 1999, mortality assumptions are based on the
Annuity 2000 Mortality Table.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ACCIDENT AND HEALTH AND DISABILITY INSURANCE LIABILITIES ACTIVITY

Activity in the liabilities for accident and health and disability
benefits, including reserves for future policy benefits and unpaid claims and
claim adjustment expenses, is summarized below:

The Company uses conservative estimates for determining its liability for
accident and health and disability benefits, which are based on historical claim
payment patterns and attempt to provide for potential adverse changes in claim
patterns and severity. Lower than anticipated claims resulted in adjustments to
liabilities in each year.

NOTE 8. DEBT AND EXCHANGEABLE SECURITIES

COMMERCIAL PAPER AND REVOLVING CREDIT BORROWINGS

The Company has entered into a bank credit agreement for unsecured
revolving credit, under which the Company has the option to borrow at various
interest rates. The agreement is for $375 and expires in May 2002 and
principally supports the issuance of commercial paper. The Company intends to
replace the expiring bank credit agreement with a new agreement in May 2002. As
of December 31, 2001, outstanding commercial paper had various maturities, with
none in excess of 90 days. The Company can issue commercial paper with
maturities of up to 270 days. In the event the Company is not able to remarket
commercial paper at maturity, the Company has sufficient liquidity, consisting
of the bank credit agreement, liquid assets, such as equity securities, and
other resources to retire these obligations. The weighted-average interest rates
for commercial paper borrowings outstanding of $297 and $405 at December 31,
2001 and 2000 were 3.72% and 6.51%.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EXCHANGEABLE SECURITIES

The Mandatorily Exchangeable Debt Securities (MEDS) and Automatic Common
Exchange Securities (ACES) are collectively referred to as Exchangeable
Securities.

MEDS

In April and June 1997, the Company issued MEDS of $75 at 6.95% and $75 at
6.65%. The MEDS are based on BankAmerica common stock. Interest is payable
quarterly. The MEDS represent senior indebtedness of the Corporation. The MEDS
had principal amounts at issue of: 6.95% MEDS, $55.55 per security and 6.65%
MEDS, $66.625 per security. Two weeks prior to, or at, maturity, the Company has
the option of mandatorily exchanging the principal amount of the MEDS into
either a number of shares of the common stock of BankAmerica (stock) determined
based on an exchange rate reflecting the then trading price for the stock, or
cash in an amount of equal value. Subject to adjustments to reflect dilution,
the exchange rate is equal to (1) 0.8264 shares if the stock price is at least:
6.95% MEDS, $67.22 and 6.65% MEDS, $80.62, (2) a fractional share of the stock
having a value equal to the principal amount if the price is more than the
principal amount but less than the amount stated in (1), or (3) one share if the
price is less than or equal to the principal amount.

Effective September 22, 1999, the 6.65% MEDS were renegotiated with the
holder and provide for an interest rate of 3.325% and an additional cash payment
per security at redemption or maturity equal to any shortfall in the stock price
below $66.625 but not more than $11.125 per security. Similarly, effective
December 22, 1999, the 6.95% MEDS were renegotiated to an interest rate of
3.475% with an additional cash payment per security equal to any shortfall in
the stock price below $55.55 but not more than $9.2375 per security.

On January 10, 2002, the Company repaid the MEDS for $150 in cash,
representing the original principal of the debt.

ACES

On January 21, 2000, the Company repaid the ACES for $146 in cash, plus
accrued interest.

The Exchangeable Securities are carried at fair value. Changes in the
carrying value, net of deferred income taxes, are recorded in other
comprehensive income. At December 31, 2001 and 2000, the combined carrying value
of the Exchangeable Securities was $150 and $139, based on the market value of
BankAmerica stock. The value per share of BankAmerica stock was $62.95 and
$45.88 as of year-end 2001 and 2000.

INTEREST

Interest expense totaled $44 for 2001, $67 for 2000 and $50 for 1999.

NOTE 9. CAPITAL SECURITIES

In January and March 1997, respectively, the Company privately placed $200
of 8.14% Capital Securities, Series A and $100 of 8.285% Capital Securities,
Series B. The Capital Securities mature in the year 2046, but are redeemable
prior to maturity at the option of the Company beginning January 15, 2007. The
Capital Securities are supported by subordinated indebtedness of the Company.

50

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10. STOCKHOLDERS' EQUITY

COMMON STOCK

Changes in the number of shares outstanding are as follows:

On February 12, 2001, the Board authorized a three-for-two common stock
split which became effective as a 50% stock dividend distributed on April 9,
2001 to shareholders of record as of March 19, 2001. The split-adjusted value of
fractional shares was paid in cash. The par value of additional shares issued,
which totaled $64, was reclassified from retained earnings to common stock. All
share and per share information gives retroactive effect to the stock split.

SHAREHOLDERS' RIGHTS PLAN

Under a shareholders' rights plan, one common share purchase right is
attached to each share of the Company's common stock. The plan becomes operative
in certain events involving an offer for or the acquisition of 15% or more of
the Company's common stock by any person or group. Following such an event, each
right, unless redeemed by the Company's Board, entitles the holder (other than
the acquiring person or group) to purchase for an exercise price of $156.67 an
amount of common stock of the Company (or in the discretion of the Board,
preferred stock, debt securities, or cash), or in certain circumstances stock of
the acquiring company, having a market value of twice the exercise price.
Approximately 155 million shares of common stock are currently reserved for the
amended rights plan. The rights expire on February 8, 2009 unless extended by
the Board, and are redeemable by the Board at a price of 0.30 cents per right at
any time before they become exercisable.

PREFERRED STOCK

The Company has 20,000,000 shares of preferred stock authorized (none
issued) with the par value, dividend rights and other terms to be fixed by the
Board of Directors, subject to certain limitations on voting rights.

NOTE 11. STOCK INCENTIVE PLANS

LONG TERM STOCK INCENTIVE PLAN

Under the Long Term Stock Incentive Plan, a Committee of disinterested
directors may award nonqualified or incentive stock options and stock
appreciation rights, and make grants of the Company's stock, to employees of the
Company and to life insurance agents. Stock grants may be either restricted
stock or unrestricted stock distributed upon the achievement of performance
goals established by the Committee.

A total of 14,304,849 shares are available for issuance pursuant to
outstanding or future awards as of December 31, 2001. The option price may not
be less than the market value of the Company's common stock on the award date.
Options are exercisable for periods determined by the Committee, not to exceed
ten years from the award date, and vest immediately or over periods as
determined by the Committee. Restricted and unrestricted stock grants are
limited to 10% of the total shares reserved for the Plan. This plan will
terminate as to further awards on May 3, 2009, unless earlier terminated by the
Board.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NON-EMPLOYEE DIRECTORS' PLAN

Under the Non-Employee Directors' Stock Option Plan, 764,721 shares of the
Company's common stock are reserved for issuance pursuant to outstanding or
future awards as of December 31, 2001. Nonqualified stock options are
automatically awarded, at market prices on specified award dates. The options
vest over a period of one to three years, and terminate ten years from the date
of award, but are subject to earlier vesting or termination under certain
circumstances. This plan will terminate as to further awards on March 31, 2003.

SUMMARY STOCK OPTION ACTIVITY

Summarized information about the Company's stock option activity follows:

The following table summarizes certain stock option information at December
31, 2001:

PRO FORMA INFORMATION

SFAS 123 requires the presentation of pro forma information as if the
Company had accounted for its employee and director stock options granted after
December 31, 1994 under the fair value method of that Statement. The fair value
was estimated at grant date using a Black-Scholes option pricing model with the
following weighted-average assumptions for 2001, 2000 and 1999: risk-free
interest rates of 5.2%, 6.7% and 5.2%; volatility factors of the expected market
price of the Company's common stock of 0.22, 0.20 and 0.19; and a
weighted-average expected life of the options of 8.1 years for 2001, 8.6 years
for 2000 and 8.2 years for 1999. Dividends were assumed to increase by 10%
annually.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require

52

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not provide a reliable single
measure of the fair value of the options.

The estimated fair value of the options under SFAS 123 is amortized to
expense over the options' vesting period. The pro forma information follows:

NOTE 12. STATUTORY FINANCIAL INFORMATION

The Company's life insurance subsidiaries prepare financial statements on
the basis of statutory accounting practices (SAP) prescribed or permitted by the
insurance departments of their states of domicile. Prescribed SAP includes the
Accounting Practices and Procedures Manual of the National Association of
Insurance Commissioners (NAIC) as well as state laws, regulations and
administrative rules. Permitted SAP encompasses all accounting practices not so
prescribed. None of the life insurance subsidiaries utilize permitted practices
in the preparation of their statutory financial statements.

The principal differences between SAP and GAAP are (1) policy acquisition
costs are expensed as incurred under SAP, but are deferred and amortized under
GAAP, (2) the value of business acquired is not capitalized under SAP but is
under GAAP, (3) amounts collected from holders of universal life-type and
annuity products are recognized as premiums when collected under SAP, but are
initially recorded as contract deposits under GAAP, with cost of insurance
recognized as revenue when assessed and other contract charges recognized over
the periods for which services are provided, (4) the classification and carrying
amounts of investments in certain securities are different under SAP than under
GAAP, (5) the criteria for providing asset valuation allowances, and the
methodologies used to determine the amounts thereof, are different under SAP
than under GAAP, (6) the timing of establishing certain reserves, and the
methodologies used to determine the amounts thereof, are different under SAP
than under GAAP, and (7) certain assets are not admitted for purposes of
determining surplus under SAP.

Effective January 1, 2001, the NAIC revised the Accounting Practices and
Procedures Manual in a process referred to as Codification. The domiciliary
states of the Company's insurance subsidiaries have adopted the provisions of
the revised manual with certain exceptions. Codification has changed, to some
extent, prescribed statutory accounting practices and resulted in changes to the
accounting practices that the Company's insurance subsidiaries use to prepare
their statutory basis financial statements. The effect of the adoption of
Codification was to increase statutory surplus by $42, primarily through the
addition of deferred income taxes.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A comparison of net income and statutory capital and surplus of the life
insurance subsidiaries (excluding Guarantee for 1999) determined on the basis of
SAP to net income and stockholder's equity of these life insurance subsidiaries
(excluding Guarantee for 1999) on the basis of GAAP is as follows:

At December 31, 1999, Guarantee had statutory capital and surplus of $157
and GAAP stockholder's equity of $426. Prior to its acquisition, Guarantee
converted from a mutual form to a stock life company. In connection with that
conversion, Guarantee agreed to segregate certain assets to provide for
dividends on participating policies using dividend scales in effect at the time
of the conversion, providing that the experience underlying such scales
continued. The assets, including revenue therefrom, allocated to the
participating policies will accrue solely to the benefit of those policies. The
assets and liabilities relating to these participating policies amounted to $298
and $369 at December 31, 2001 and $295 and $372 at December 31, 2000. The excess
of liabilities over the assets represents the total estimated future earnings
expected to emerge from these participating policies.

Risk-Based Capital ("RBC") requirements promulgated by the NAIC require
life insurers to maintain minimum capitalization levels that are determined
based on formulas incorporating credit risk, insurance risk, interest rate risk
and general business risk. As of December 31, 2001, the life insurance
subsidiaries' adjusted capital and surplus exceeded their authorized control
level RBC.

The insurance statutes of the states of domicile limit the amount of
dividends that the life insurance subsidiaries may pay annually without first
obtaining regulatory approval. Generally, the limitations are based on a
combination of statutory net gain from operations for the preceding year, 10% of
statutory surplus at the end of the preceding year, and dividends and
distributions made within the preceding twelve months. Depending on the timing
of payments, approximately $308 of dividends could be paid to the ultimate
parent by the life insurance subsidiaries in 2002 without regulatory approval.

NOTE 13. INCOME TAXES

Income taxes reported are as follows:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of the federal income tax rate to the Company's effective
income tax rate follows:

The tax effects of temporary differences that result in significant
deferred tax assets and deferred tax liabilities are as follows:

Federal income tax returns for all years through 1994 are closed. The
Internal Revenue Service has examined tax years 1995 and 1996, and assessments
totaling $15 have been proposed. The assessments pertain to issues related to
timing differences between tax accounting and generally accepted accounting
principles. The Company has contested the proposed assessments. Tax years 1997,
1998, 1999 and 2000 are currently under examination by the Internal Revenue
Service, and no assessments have been proposed to date. In the opinion of
management, recorded income tax liabilities adequately provide for these pending
assessments as well as all remaining open years.

Under prior federal income tax law, one-half of the excess of a life
insurance company's income from operations over its taxable investment income
was not taxed, but was set aside in a special tax account designated as
"Policyholders' Surplus." The Company has approximately $107 of untaxed
"Policyholders' Surplus" on which no payment of federal income taxes will be
required unless it is distributed as a dividend, or under other specified
conditions. No related deferred tax liability has been recognized for the
potential tax, which would approximate $37.

55

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14. RETIREMENT BENEFIT PLANS

PENSION PLANS

The Company and its subsidiaries have defined benefit pension plans, which
are funded through group annuity contracts with JP Life. The assets of the plans
are those of the related contracts, and are primarily held in separate accounts
of JP Life. Information regarding pension plans is as follows:

OTHER POSTRETIREMENT BENEFIT PLANS

The Company sponsors contributory health care and life insurance benefit
plans for eligible retired employees, qualifying retired agents and certain
surviving spouses. The Company contributes to a welfare benefit trust from which
future benefits will be paid. The Company accrues the cost of providing
postretirement benefits other than pensions during the employees' active service
period. The non-pension postretirement expense was $1 in 2001, 2000 and 1999.
56

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFINED CONTRIBUTION PLANS

Defined contribution retirement plans cover most employees and full time
agents. The Company matches a portion of participant contributions and makes
profit sharing contributions to a fund that acquires and holds shares of the
Company's common stock. Most plan assets are invested under a group variable
annuity contract issued by JP Life. Expenses were $4, $3 and $1 during 2001,
2000 and 1999.

NOTE 15. REINSURANCE

The insurance subsidiaries attempt to reduce exposure to significant
individual claims by reinsuring portions of certain individual life insurance
policies and annuity contracts written. They reinsure the portion of an
individual life insurance risk in excess of their retention, which ranges from
$0.4 to $2.0 for various individual life and annuity products. They also attempt
to reduce exposure to losses that may result from unfavorable events or
circumstances by reinsuring certain levels and types of accident and health
insurance risks underwritten. They assume portions of the life and accident and
health risks underwritten by certain other insurers on a limited basis, but
amounts related to assumed reinsurance are not significant to the consolidated
financial statements.

JPFIC reinsures 100% of the Periodic Payment Annuities (PPA), COLI and
Affiliated credit insurance business written prior to 1995 with affiliates of
Household International, Inc. on a coinsurance basis. Balances are settled
monthly, and the reinsurers compensate JPFIC for administrative services related
to the reinsured business. The amount due from reinsurers in the consolidated
balance sheets includes $914 and $948 due from the Household affiliates at
December 31, 2001 and 2000.

Assets related to the reinsured PPA and COLI business have been placed in
irrevocable trusts formed to hold the assets for the benefit of JPFIC and are
subject to investment guidelines which identify (1) the types and quality
standards of securities in which new investments are permitted, (2) prohibited
new investments, (3) individual credit exposure limits and (4) portfolio
characteristics. Household has unconditionally and irrevocably guaranteed, as
primary obligor, full payment and performance by its affiliated reinsurers.
JPFIC has the right to terminate the PPA and COLI reinsurance agreements by
recapture of the related assets and liabilities if Household does not take a
required action under the guarantee agreements within 90 days of a triggering
event. JPFIC has the option to terminate the PPA and COLI reinsurance agreements
on the seventh anniversary of the acquisition, by recapturing the related assets
and liabilities at an agreed-upon price or their then current fair values as
independently determined.

As of December 31, 2001 and 2000, JPFIC had reinsurance recoverable of $81
and $84 from a single reinsurer, pursuant to a 50% coinsurance agreement. JPFIC
and the reinsurer are joint and equal owners in $162 and $172 of securities and
short-term investments as of December 31, 2001 and 2000, 50% of which is
included in investments in the accompanying consolidated balance sheets.

Reinsurance contracts do not relieve an insurer from its primary obligation
to policyholders. Therefore, the failure of a reinsurer to discharge its
reinsurance obligations could result in a loss to the subsidiaries. The
subsidiaries regularly evaluate the financial condition of their reinsurers and
monitor concentrations of credit risk related to reinsurance activities. No
credit losses have resulted from the reinsurance activities of the subsidiaries
during the three years ended December 31, 2001.

57

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The effects of reinsurance on total premiums and other considerations and
total benefits are as follows:

NOTE 16. SEGMENT INFORMATION

The Company has five reportable segments, which are defined based on the
nature of the products and services offered: Individual Products, Annuity and
Investment Products (AIP), Benefit Partners, Communications, and Corporate and
Other. The Benefit Partners segment was created in the first quarter of 2000, as
a result of the acquisition of Guarantee. Amounts related to group non-medical
products such as term life, disability and dental insurance that had been
classified as Life Insurance Products in prior years have been reclassified to
the Benefit Partners segment for 1999. The remaining amounts that had been
classified as Life Insurance Products in prior years relate to individual life
insurance products and have been renamed Individual Products for 1999. Within
the Individual Products segment, the Company offers a wide array of individual
life insurance products including variable life insurance. AIP offers both fixed
and variable annuities, as well as other investment products. As mentioned
above, Benefit Partners offers group non-medical products such as term life,
disability and dental insurance to the employer marketplace. Various insurance
and investment products are currently marketed to individuals and businesses in
the United States. The Communications segment consists principally of radio and
television broadcasting operations located in strategically selected markets in
the Southeastern and Western United States, and sports program production. The
Corporate and Other segment includes activities of the parent company and
passive investment affiliates, surplus of the life insurance subsidiaries not
allocated to other reportable segments including earnings thereon, financing
expenses on Corporate debt and debt securities including Capital Securities,
federal and state income taxes not otherwise allocated to other reportable
segments, and all of the Company's realized gains and losses. Surplus is
allocated to the Individual Products, AIP, and Benefit Partners reportable
segments based on risk-based capital formulae which give consideration to
asset/liability and general business risks, as well as the Company's strategies
for managing those risks. Various distribution channels and/or product classes
related to the Company's individual life, annuity and investment products and
group insurance have been aggregated in the Individual Products, AIP, and
Benefit Partners reporting segments.

The segments are managed separately because of the different products,
distribution channels and marketing strategies each employs. The Company
evaluates performance based on several factors, of which the primary financial
measure is reportable segment results, which excludes realized gains and losses.
The accounting policies of the business segments are the same as those described
in Note 2. Substantially all revenue is derived from sales

58

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in the United States, and foreign assets are not material. The following table
summarizes financial information of the reportable segments:

59

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company allocates depreciation expense to Individual Products, AIP and
Benefit Partners, but the related fixed assets are contained in the Corporate
and Other segment.

NOTE 17. OTHER COMPREHENSIVE INCOME

The components of other comprehensive income, along with related tax
effects, are as follows:

60

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 18. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values and fair values of financial instruments as of December
31 are summarized as follows:

The fair values of cash, cash equivalents, balances due on account from
agents, reinsurers and others, and accounts payable approximate their carrying
amounts in the consolidated balance sheets due to their short-term maturity or
availability. Assets and liabilities related to separate accounts are reported
at fair value in the consolidated balance sheets.

The fair values of debt and equity securities and derivative financial
instruments have been determined from nationally quoted market prices and by
using values supplied by independent pricing services and discounted cash flow
techniques.

The fair value of the mortgage loan portfolio has been estimated by
discounting expected future cash flows using the interest rate currently offered
for similar loans.

The fair value of policy loans outstanding for traditional life products
has been estimated using a current risk-free interest rate applied to expected
future loan repayments projected based on historical repayment patterns. The
fair values of policy loans on universal life-type and annuity products
approximate carrying values due to the variable interest rates charged on those
loans.

Annuity contracts do not generally have defined maturities. Therefore, fair
values of the liabilities under annuity contracts, the carrying amounts of which
are included with policyholder contract deposits in the consolidated balance
sheets, are estimated to equal the cash surrender values of the contracts.

The fair values of commercial paper and revolving credit borrowings
approximate their carrying amounts due to their short-term nature. Similarly,
the fair value of the liability for securities sold under repurchase agreements
approximates its carrying amount, which includes accrued interest. With respect
to the Exchangeable Securities, the fair value of the MEDS, which are not
publicly traded, is estimated based on the value holders would have received had
the MEDS been redeemable as of year-end based on the market price of BankAmerica
stock.

The fair value of the Capital Securities was determined based on market
quotes for the securities.

61

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 19. COMMITMENTS AND CONTINGENT LIABILITIES

The Company routinely enters into commitments to extend credit in the form
of mortgage loans and to purchase certain debt instruments for its investment
portfolio in private placement transactions. The fair value of outstanding
commitments to fund mortgage loans and to acquire debt securities in private
placement transactions, which are not reflected in the consolidated balance
sheet, approximates $51 at December 31, 2001.

The Company leases electronic data processing equipment and field office
space under noncancelable operating lease agreements. The lease terms generally
range from three to five years. Neither annual rent nor future rental
commitments are significant.

In connection with a previous acquisition, the Company acquired a closed
block of business that was financed by a loan program collateralized by pledged
mutual fund shares of the Company's policyholders. In late 1997, the acquired
company entered into an agreement with an unaffiliated third party that provides
for the initial and periodic purchase of the majority of its collateralized
loans receivable. This agreement is renewable on an annual basis. If the
agreement is not renewed, JP can issue debt to fund the amounts or terminate the
entire program. The amount of loans outstanding at December 31, 2001 was $33. JP
has no other off balance sheet arrangements of a financing nature.

JPCC has commitments for purchases of syndicated television programming and
commitments on other contracts, and future sports programming rights as of
December 31, 2001. The Company also has commitments to sell a portion of the
sports programming rights to other entities, over the same period. They are as
follows:

These commitments are not reflected as an asset or liability in the
accompanying consolidated balance sheet because the programs are not currently
available for use.

JP Life is a defendant in two separate proposed class action suits. The
plaintiffs' fundamental claim in the first suit is that policy illustrations
were misleading to consumers. Management believes that the policy illustrations
made appropriate disclosures and were not misleading. The second suit alleges
that a predecessor company, Pilot Life, decades ago unfairly discriminated in
the sale of certain small face amount life insurance policies, and unreasonably
priced these policies. In both cases, the plaintiffs seek unspecified
compensatory and punitive damages, costs and equitable relief. While management
is unable to estimate the probability or range of any possible loss in either or
both of these cases, management believes that the subsidiary's practices have
complied with state insurance laws and intends to vigorously defend the claims
asserted. Accordingly, only the costs of defense have been recorded.

In the normal course of business, the Company and its subsidiaries are
involved in various lawsuits, including several proposed class action suits in
addition to those noted above. Because of the considerable uncertainties that
exist, the Company cannot predict the outcome of pending or future litigation.
However, management believes that the resolution of pending legal proceedings
will not have a material adverse effect on the Company's financial position or
liquidity, although it could have a material adverse effect on the results of
operations for a specific period.

62

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

We incorporate by reference the background information under the heading
"Proposals I and II -- Election of Directors" in the Registrant's definitive
Proxy Statement for the Annual Meeting to be held on May 6, 2002 (Proxy
Statement). Executive Officers are described in Part I above.

We incorporate by reference the information under the heading "Stock
Ownership -- Section 16(a) Beneficial Ownership Reporting Compliance" in the
Proxy Statement relating to the delinquent filers under Section 16(a) of the
Securities Exchange Act of 1934.

ITEM 11. EXECUTIVE COMPENSATION

We incorporate by reference the information under the heading "Executive
Compensation" in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

We incorporate by reference the information under the heading "Stock
Ownership" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We incorporate by reference the information under the heading "Is the
Compensation Committee Independent?" in the Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) This portion of Item 14 appears in a separate section of this report.
See the index on page F-1. The List and Index of Exhibits appears on page E-1 of
this report.

(b) No Form 8-K was filed in the fourth quarter 2001.

(c) Exhibits appear in a separate section of this report. See page E-1.

(d) Financial Statement Schedules -- This portion of Item 14 appears in a
separate section of this report. See the index on page F-1.

UNDERTAKINGS

For the purposes of complying with the amendments to the rules governing
Form S-8 under the Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be incorporated by reference into
registrant's Registration Statements on Form S-8 Nos. 2-36778 (filed March 23,
1970) and 2-56410 (filed May 12, 1976) and 33-30530 (filed August 15, 1989), and
in outstanding effective registration statements on Form S-16 included in such
S-8 filings:

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

63

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

JEFFERSON-PILOT CORPORATION
(Registrant)

BY (SIGNATURE) /s/ David A. Stonecipher
(NAME AND TITLE) --------------------------------------------
David A. Stonecipher
Chairman and Chief Executive Officer
(also signing as Principal Executive Officer
and Director)
DATE March 26, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

BY (SIGNATURE) /s/ Theresa M. Stone
--------------------------------------------------------
NAME AND TITLE) Theresa M. Stone
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
DATE March 26, 2002

BY (SIGNATURE) /s/ Reggie D. Adamson
--------------------------------------------------------
(NAME AND TITLE) Reggie D. Adamson
Senior Vice President, Financial Operations
(Principal Accounting Officer)
DATE March 26, 2002

BY (SIGNATURE) /s/ Edwin B. Borden*
--------------------------------------------------------
(NAME AND TITLE) Edwin B. Borden, Director
DATE March 26, 2002

BY (SIGNATURE) /s/ William H. Cunningham*
--------------------------------------------------------
(NAME AND TITLE) William H. Cunningham, Director
DATE March 26, 2002

BY (SIGNATURE) /s/ Robert G. Greer*
--------------------------------------------------------
(NAME AND TITLE) Robert G. Greer, Director
DATE March 26, 2002

BY (SIGNATURE) /s/ George W. Henderson, III*
--------------------------------------------------------
(NAME AND TITLE) George W. Henderson, III
DATE March 26, 2002

64

BY (SIGNATURE) /s/ Elizabeth Valk Long*
--------------------------------------------------------
(NAME AND TITLE) Elizabeth Valk Long
DATE March 26, 2002

BY (SIGNATURE) /s/ E. S. Melvin*
--------------------------------------------------------
(NAME AND TITLE) E. S. Melvin, Director
DATE March 26, 2002

BY (SIGNATURE) /s/ Kenneth C. Mlekush*
--------------------------------------------------------
(NAME AND TITLE) Kenneth C. Mlekush, Director
DATE March 26, 2002

BY (SIGNATURE) /s/ William P. Payne*
--------------------------------------------------------
(NAME AND TITLE) William P. Payne, Director
DATE March 26, 2002

BY (SIGNATURE) /s/ Patrick S. Pittard*
--------------------------------------------------------
(NAME AND TITLE) Patrick S. Pittard, Director
DATE March 26, 2002

BY (SIGNATURE) /s/ Donald S. Russell, Jr.*
--------------------------------------------------------
(NAME AND TITLE) Donald S. Russell, Jr., Director
DATE March 26, 2002

*By /s/ Robert A. Reed
--------------------------------------------------------------
Robert A. Reed, Attorney-in-Fact
March 26, 2002

65

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements of Jefferson-Pilot
Corporation and subsidiaries are included in Item 8.

Consolidated Balance Sheets -- December 31, 2001 and 2000

Consolidated Statements of Income -- Years Ended December 31, 2001,
2000 and 1999

Consolidated Statements of Stockholders' Equity -- Years Ended
December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows -- Years Ended December 31,
2001, 2000 and 1999

Notes to Consolidated Financial Statements -- December 31, 2001

The following consolidated financial statement schedules of Jefferson-Pilot
Corporation and subsidiaries are included in Item 14(d).

All other schedules required by Article 7 of Regulation S-X are not
required under the related instructions or are inapplicable and therefore have
been omitted.

F-1

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SCHEDULE I -- SUMMARY OF INVESTMENTS --
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2001
IN MILLIONS

- ---------------

a. Cost of debt securities is original cost, reduced by repayments and adjusted
for amortization of premiums and accrual of discounts. Cost of equity
securities is original cost. Cost of mortgage loans on real estate and policy
loans represents aggregate outstanding balances. Cost of real estate acquired
by foreclosure is the originally capitalized amount, reduced by applicable
depreciation. Cost of other real estate held for investment is depreciated
original cost.
b. Differences between amounts reflected in Column B or Column C and amounts at
which shown in the consolidated balance sheet reflected in Column D result
from the application of SFAS 115, "Accounting for Certain Investments in Debt
and Equity Securities". A portion of bonds and debt securities are recorded
as investments held to maturity at amortized cost and a portion are recorded
as investments available for sale at fair value.
c. Differences between cost reflected in Column B and amounts at which shown in
the consolidated balance sheet reflected in Column D result from valuation
allowances.

F-2

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SCHEDULE II -- CONDENSED BALANCE SHEETS OF JEFFERSON-PILOT CORPORATION
IN MILLIONS (EXCEPT SHARE INFORMATION)

See Note to Condensed Financial Statements.

F-3

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SCHEDULE II -- CONDENSED STATEMENTS OF INCOME
OF JEFFERSON-PILOT CORPORATION
IN MILLIONS

See Note to Condensed Financial Statements.

F-4

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SCHEDULE II -- CONDENSED STATEMENTS OF CASH FLOWS
OF JEFFERSON-PILOT CORPORATION
IN MILLIONS

See Note to Condensed Financial Statements.

F-5

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SCHEDULE II -- NOTE TO CONDENSED FINANCIAL STATEMENTS
OF JEFFERSON-PILOT CORPORATION

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements comprise a condensed presentation of
financial position, results of operations, and cash flows of Jefferson-Pilot
Corporation (the "Company") on a separate-company basis. These condensed
financial statements do not include the accounts of the Company's majority-owned
subsidiaries, but instead include the Company's investment in those
subsidiaries, stated at amounts which are substantially equal to the Company's
equity in the subsidiaries' net assets. Therefore the accompanying financial
statements are not those of the primary reporting entity. The consolidated
financial statements of the Company and its subsidiaries are included in the
Form 10-K for the year ended December 31, 2001.

Additional information about (1) accounting policies pertaining to
investments and other significant accounting policies applied by the Company and
its subsidiaries, (2) debt and (3) commitments and contingent liabilities are as
set forth in Notes 2, 8 and 19, respectively, to the consolidated financial
statements of Jefferson-Pilot Corporation and subsidiaries which are included in
the Form 10-K for the year ended December 31, 2001.

F-6

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS INDICATED -- IN MILLIONS

- ---------------

a. Other policy claims and benefits payable include dividend accumulations and
other policyholder funds on deposit, policy and contract claims (life and
annuity and accident and health), dividends for policyholders and other
policy liabilities.
b. Expenses related to the management and administration of investments have
been netted with investment income in the determination of net investment
income. Such expenses amounted to $71 in 2001, $94 in 2000, and $74 in 1999.

F-7

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

SCHEDULE IV -- REINSURANCE FOR THE YEARS INDICATED
IN MILLIONS

- ---------------

(a) Included with life insurance premiums are premiums on ordinary life
insurance products and policy charges on interest-sensitive products.
(b) Percentage of amount assumed to net is computed by dividing the amount in
Column D by the amount in Column E.

SCHEDULE V -- VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 2001
IN MILLIONS

F-8

LIST AND INDEX OF EXHIBITS

E-1

E-2

(JEFFERSON PILOT FINANCIAL LOGO)

JPC-02578 3/02