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, 2002
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. [X]

State the aggregate market value of the voting and non-voting common equity
held by nonaffiliates of the registrant: approximately $5.4 billion at March 3,
2003.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

At March 3, 2003, 142,843,987 shares of the registrant's common stock, par
value $1.25 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held May 5, 2003 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 non-clearing 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 broadcasting 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 eight 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.

Effective May 1, 1997, JP acquired JPFIC, its subsidiary JPLA, and our
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.

As a result of strategic studies in 1999, we adopted a refined 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 have experienced substantial growth in life insurance
sales and an increase in the number of agents who qualify as Premier Partners
since we began implementing this strategy.

(b) Financial Information About Industry Segments

We present industry segment information in Note 16.

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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 broker/dealer markets
variable life insurance and variable annuities written by our insurance
subsidiaries, and also sells other securities and mutual funds.

2

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, New York 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 retirement or estate
planning vehicles, and thus impact their marketing and the volume of policies
surrendered.

Employees. As of December 31, 2002, our insurance operations including our
broker/dealer employed approximately 3,000 persons. 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 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 December
31, 2011. 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, 2002, 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.

(e) Available Information

JP makes available free of charge on or through our Internet website
(http://www.jpfinancial.com) JP's annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 as soon as reasonably practicable after JP electronically files such
material with, or furnishes it to, the Securities and Exchange Commission.

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.

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JPFIC, JPLA and our broker/dealer conduct operations in Concord, NH in one
of two buildings on approximately 196 acres owned by JPFIC. The other 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.

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. On March 10, 2003, the Court authorized JP Life to send a notice to
participating class policyholders that an agreement had been reached to settle
this suit. The settlement will resolve claims by 165,000 holders and
beneficiaries of certain policies, mostly sold in the 1980s and early 1990s, and
is subject to final Court approval later this year. In the settlement, JP Life
denies any allegations of wrongdoing. JP Life believes that its sales, servicing
and administrative practices are -- and always have been -- designed to match
customers' needs with appropriate products and to fully inform customers about
the operation and features of those products. The settlement will provide
benefits to class policyholders, and will benefit JP Life by resolving and
eliminating the need for corporate resources to be spent on a suit that has been
pending for seven years.

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, including several proposed class action
suits in addition to those noted above. Some suits 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.

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EXECUTIVE OFFICERS OF THE REGISTRANT

David A. Stonecipher, 61, 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, 61, 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, 53, 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.

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. Mr. Hopkins recently turned 65 and will be retiring in keeping with our
mandatory retirement age.

Warren H. May, 48, has been Executive Vice President -- Marketing and
Distribution since he joined JP in October 2002. Mr. May joined Travelers Life &
Annuity Company in Hartford, CT in November 1995 as Senior Vice President,
leading the independent distribution sales and marketing team for life and
annuity products, as well as the advanced sales attorneys, advertising/promotion
professionals and technology support staff. Mr. May later assumed expanded
responsibility including offshore life and qualified plan marketing. In his last
role at Travelers he served as Chief Executive Officer of Travelers Life
Distributors and Chairman of Tower Square Securities, Inc., Travelers'
independent broker dealer.

Kenneth C. Mlekush, 64, 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, 58, 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 3, 2003, our stock was owned by 9,145
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.

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 Statement 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 analyzes the consolidated financial condition, changes in financial
position and results of operations for the three years ended December 31, 2002,
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 share and 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

Overview

Jefferson-Pilot Corporation is a financial services and broadcasting
company providing products and services in four major businesses: 1) life
insurance; 2) annuities and investment products; 3) group life; disability and
dental insurance; and 4) broadcasting and sports programming production. Our
Individual Products segment offers a wide array of both fixed and variable life
insurance products. Our Annuity and Investment Product (AIP) segment offers
fixed and variable annuity products as well as other investment products
marketed through our broker/dealer. Our Benefit Partners segment offers group
non-medical products such as term life, disability and dental insurance to the
employer marketplace. The Communications segment consists of radio and
television broadcasting operations located in selected markets in the
Southeastern and Western United States, and sports program production.

Our other segment, 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 intended to benefit the entire company,
and federal and state income taxes not otherwise allocated to business segments.
We include all realized gains and losses on investments in the Corporate and
Other segment, and hold all impaired securities in this segment. Realized
investment gains are gains and losses on sales and write downs of investments,
and although these are included in revenues, we exclude them in assessing the
performance of our business segments. We may realize investment gains in our
sole discretion from our available-for-sale equity and bond portfolios. See
further discussion under Results of Operations.

Our principal life insurance subsidiaries are Jefferson-Pilot Life
Insurance Company (JP Life), along with Jefferson Pilot Financial Insurance
Company (JPFIC) and its wholly owned subsidiary, Jefferson Pilot LifeAmerica
Insurance Company (JPLA) (collectively JP Financial). Jefferson-Pilot
Communications Company (JPCC) and its wholly owned subsidiaries conduct our
broadcasting operations. Jefferson Pilot Securities Corporation (with related
entities, JPSC) is a registered non-clearing broker/dealer that sells affiliated
and non-affiliated variable life and annuity products and other investment
products.

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Segment Revenues

The revenues for our reportable segments, excluding realized gains and
losses, were as follows:

CRITICAL ACCOUNTING POLICIES

General

We have identified the accounting policies below as critical to the
understanding of our results of operations and our financial position. The
application of these critical accounting policies in preparing our financial
statements requires management to use significant judgments and estimates
concerning future results or other developments including the likelihood, timing
or amount of one or more future transactions or amounts. Actual results may
differ from these estimates under different assumptions or conditions. On an
on-going basis, we evaluate our estimates, assumptions and judgments based upon
historical experience and various other information that we believe to be
reasonable under the circumstances. For a detailed discussion of other
significant accounting policies, see Note 2.

DAC and VOBA

Deferred acquisition costs (DAC) and value of business acquired (VOBA)
reflect our expectations about the future experience of the existing business in
force. The primary 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
amortization of DAC and VOBA in both the current and future periods, which is
reflected in earnings. See the Financial Position section for further discussion
of these items including a sensitivity analysis regarding the impact of changes
in critical assumptions or expectations.

Investments

We regularly monitor our investment portfolio to ensure that investments
that may be other than temporarily impaired are identified in a timely fashion
and properly valued, and that any impairments are charged against earnings in
the proper period. Our methodology to identify potential impairments requires
professional judgment and is further described in the Investments section.

Valuing our investment portfolio involves a variety of assumptions and
estimates, particularly for investments that are not actively traded. We rely on
external pricing sources for highly liquid publicly traded securities and use an
internal pricing matrix for privately placed securities. This matrix relies on
our judgment concerning: 1) the discount rate we use in calculating expected
future cash flows; 2) credit quality; 3) industry sector performance; and 4)
expected maturity. Under certain circumstances, we make adjustments as we apply
professional judgment based upon specific detailed information concerning the
issuer.

As the discussion above indicates, many judgments are involved in timely
identifying and valuing securities, including potentially impaired securities.
Inherently, there are risks and uncertainties involved in making these
judgments. Changes in circumstances and critical assumptions such as a continued
weak economy, a more pronounced economic downturn or unforeseen events which
affect one or more companies, industry sectors or countries could result in
additional write downs in future periods for impairments that are deemed to be
other than temporary.

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Litigation

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. Establishing accruals for specific
litigation inherently involves a variety of estimates of future potential
outcomes. Accordingly, management, based on the advice of internal and external
counsel, reviews each specific litigation matter and makes a judgment whether it
is probable we have incurred a loss. Once it is determined that a loss is
probable, we use professional judgment in determining whether we can reasonably
estimate the loss. In general, we accrue the costs of defense until we can
reasonably estimate the loss or any potential range of possible loss. At that
time, these additional costs are accrued. 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 and losses. We use
reportable segment results in assessing the performance of our business segments
internally and believe it to be relevant and useful information. 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 including realized investment gains and losses and
reconcile reportable segment results to net income available to common
stockholders, the most directly comparable GAAP financial measure:

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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 decreased 12.2% in 2002 and
increased 0.1% in 2001. In 2002, we experienced net investment losses due
primarily to other than temporary bond impairments in excess of gains from sales
of equity securities, which are discussed in more detail in the Corporate and
Other and in the

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Investments sections. Total reportable segment results decreased 0.9% in 2002
and increased 5.4% in 2001. The primary factors contributing to the decline in
2002 earnings were: 1) an increase in the accrual for pending litigation in our
Corporate segment; 2) increased mortality in our individual life lines; 3) weak
equity markets that affected our variable universal life (VUL) and variable
annuity (VA) products; 4) lower spreads on our universal life (UL) and fixed
annuity products; 5) lost income on defaulted securities; and 6) funds used for
stock repurchases which reduced investment income. These unfavorable influences
were mitigated in 2002 by: 1) lower financing costs; 2) the elimination of
amortization of certain intangible assets under SFAS 142; 3) growth in our
Communications and our Benefit Partners segments; and 4) accelerated accrual of
discount on our mortgage backed securities portfolios.

Earnings per share amounts for the reportable segments were more favorable
than the absolute earnings amounts due to repurchases of 7,881,300 shares in
2002 and 4,437,100 shares in 2001. The average number of diluted shares
outstanding declined 3.4% in 2002 and 1.6% in 2001.

RESULTS BY BUSINESS SEGMENT

We assess profitability by business segment and measure other operating
statistics as detailed in the separate segment discussions that follow. We
determine reportable segments in a manner consistent with the way we organize
for purposes of making operating decisions and assessing performance. Sales are
one of the statistics we use to track performance. Our sales, which are
primarily of long-duration contracts in the Individual Products and AIP
segments, have little immediate impact on revenues for these two segments as
described in the segment discussions below.

Results by Reportable Segment

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

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

Segment Assets

We assign invested assets backing insurance liabilities to our 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, including all impaired securities, to the Corporate and Other
segment.

13

INDIVIDUAL PRODUCTS

The Individual Products segment markets individual life insurance policies
through independent general agents, independent national account marketing firms
and agency building general agents, together referred to as our core agency
channels. We also sell products through home service agents, broker/dealers,
banks and other strategic alliances.

Individual Products include UL and 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 and
the judgments used in those assumptions are important to the 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.

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, although UL-type premiums do increase assets and liabilities. We
recognize revenues on these products 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 as well as claim related
costs.

Reportable segment results also include earnings on allocated capital for
both traditional and UL-type products.

Segment results were:

Individual Products reportable segment results decreased 0.5% in 2002 and
increased 2.5% in 2001 as further discussed below.

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

14

Core agency channel sales were $193.6, $130.3 and $124.4 for 2002, 2001 and
2000, which represented 74.5%, 67.2% and 76.3% of annualized life insurance
premium sales excluding large case bank-owned life insurance (BOLI) for each of
the three years presented. This increase in sales is a result of our Premier
Partnering strategic initiative and the introduction of several new UL products.
Total sales excluding BOLI increased 34.0% in 2002 and 19.0% in 2001. Single
premium products targeted to smaller banks and sold through our target marketing
channel provided 22.3% of life sales in 2002 and 28.6% in 2001. For large case
BOLI, our business strategy is to respond to individual sales opportunities when
the market accommodates our required returns. Thus, BOLI sales will vary widely
between periods.

Revenues include traditional insurance premiums and policy charges, net of
reinsurance, and net investment income. Individual traditional premiums
decreased 9.2% in 2002 and 7.6% in 2001 due to the decline in our traditional
business in force as we are focusing our efforts towards UL-type products and
because we began reinsuring 90% of our term life insurance product in 2001. UL
and investment product charges increased 11.1% in 2002 and 2.5% in 2001. The
2002 UL product charges grew faster than the average UL policyholder fund
balances since certain recent products are designed with larger up-front expense
charges. The increase in up-front product charges is offset by an increase in
unearned revenue reserves accounted for as policy benefits, and these product
charges are taken into income over time.

Net investment income increased 5.4% and 4.4% in 2002 and 2001, reflecting
the growth in average policyholder funds partially offset by declines in
investment yields. The average investment spread on fixed UL products
(calculated as the difference between portfolio yields earned on invested assets
less interest credited to policyholder funds, included in policy benefits)
decreased 13 basis points to 1.87% in 2002 and increased 3 basis points to 2.00%
in 2001. Interest spreads are affected by portfolio yields and our crediting
rates, and also may vary over time due to our competitive strategies and changes
in product design. In response to a decline in portfolio yields, we reduced
credited rates across the product line at various times in 2002 by 73 basis
points on average. This includes a reduction of 50 basis points later in the
fourth quarter, the effects of which were only nominally realized in 2002. The
current average crediting rate is 5.00%, while the average minimum guarantee
rate on this product line is 4.21%. During 2002 prepayments of mortgage backed
securities significantly increased as a result of continued declines in
long-term mortgage rates. Our mortgage backed securities portfolio is primarily
a discount portfolio; therefore, the effect of these prepayments was to
accelerate the accretion of discount and increase the effective yields on our
mortgage backed portfolio, which increased net investment income for the
Individual Products segment by $7.3 in 2002 and $1.8 for 2001. These prepayments
were not significant in 2000. We are investing the proceeds from these
prepayments at current market yields which are lower than our portfolio yields.

Total policy benefits increased 9.3% and 4.6% in 2002 and 2001 due
primarily to increases in mortality, interest credited and deferred revenue.
Policy benefits on traditional business include death benefits, dividends,
surrenders and changes in reserves, with the most significant being death
benefits. Total policy benefits on traditional contracts represented 118.4% of
premiums in 2002 compared to 111.3% in 2001 and 102.8% in 2000, reflecting
increased mortality in 2002 and 2001. Policy benefits on UL-type products
include interest credited to policyholder accounts, death benefits in excess of
fund balances and changes in unearned revenue reserves. Total policy benefits on
UL-type products increased to 7.8% of average policyholder funds and separate
accounts in 2002 versus 7.3% in 2001 and 7.1% in 2000. The increases in interest
credited of 6.4% and 4.6% in 2002 and 2001 reflect growth in average UL fund
balances of 8.4% and 3.4% in 2002 and 2001 partially offset by lower crediting
rates. Increased sales of products with higher up-front expense charges have
increased deferred revenue, as discussed earlier. Net deferrals of revenue
increased $47.3 in 2002 and $37.8 in 2001.

Death benefits constitute a significant portion of policy benefits. Our
actual mortality experience for UL-type products per thousand dollars of face
amount of insurance in force was $2.07 in 2002, $1.91 in 2001 and $1.83 in 2000.
Increases in our retention limit from $1.4 to $2.0 in early 2001 caused our
mortality cost per thousand dollars of face amount of insurance in force to
increase by $0.07 in 2002 and $0.02 in 2001. While this change improved our
overall operating results due to lower premiums paid to reinsurers that flow
primarily through UL and investment product charges, it increases the volatility
of our mortality costs in a given year. To aid our analysis of actual mortality
expense, we recently completed a multi-year study that compared our actual
mortality

15

over the past four years to the 1975 -- 1980 Standard Actuarial table. This
study indicates that our mortality experience over the period of the study is
within our expected range, although fluctuating from year to year.

Total expenses (including the net deferral and amortization of DAC and
VOBA) increased 3.7% in 2002 and decreased 5.9% in 2001. The expense details are
as follows:

The increase in 2002 expenses reflects higher amortization of DAC and VOBA,
partially offset by improved maintenance expenses. Recent years' growth in the
Individual Products segment is the primary contributor to this increase in
amortization, although there were other items impacting amortization as well.
Better persistency levels in acquired blocks of business caused us to lower
amortization on our fixed UL products by $17.2 in 2002. Partially offsetting
this is a $16.6 increase in amortization on VUL insurance products due to
limitation of mean reversion techniques as a result of declining equity markets,
as further discussed in the Financial Position section. The expense amounts we
capitalize as DAC include first year commissions, as well as deferrable
acquisition expenses. We generally limit our capitalization of deferrable
acquisition expenses to the lower of product specific pricing allowables or our
actual deferrable acquisition costs. As our sales have increased, pricing
allowables have covered a greater amount of capitalizable acquisition expenses
other than commissions. Increased sales resulted in higher capitalization of
these expenses of $18.9 in 2002 and $13.5 in 2001.

Average Individual Products assets grew 5.3% and 3.0% in 2002 and 2001,
primarily due to sales of fixed UL products and growth in existing UL
policyholder fund balances, partially offset by declines in the market values of
separate account assets of variable products. Average VUL separate account
assets decreased 9.2% and 3.6% in 2002 and 2001. Adjusting for the decrease in
market value, net of dividends, year over year, separate account balances would
have increased by approximately 5.6% in 2002 and total fund balances would have
grown by 8.0% in 2002.

Our financial and operating risks for this segment include, among others,
interest spread risks, mortality 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, and
Market Risk Exposures sections.

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.

16

Reportable segment results were:

AIP reportable segment results increased 5.1% in 2002 and decreased 1.9% in
2001 as further discussed below.

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 5.7% in 2002 and 3.3% in 2001, driven by growth in investment
income, partially offset by lower policy charge income. Our policy charge income
continues to decline as our product mix focuses more on products that derive
most of their earnings from investment spreads rather than from policy charges
and as a result of lower surrenders. Net investment income grew 8.1% in 2002 and
10.6% in 2001, which was lower than the growth in average policyholder fund
balances of 13.9% in 2002, primarily due to a decline in new investment yields.
The effect of the prepayments of mortgage backed securities mentioned earlier
was to accelerate the accretion of discount on our mortgage backed portfolio,
increasing net investment income in the AIP segment by $3.6 in 2002 and $0.8 in
2001. Investment income for 2001 included $2.3 due to the cumulative effect of
the change in accounting for derivatives. Fixed annuity premium sales decreased
28.8% in 2002 and increased 16.8% in 2001. Annuity sales were the highest ever
for the Company in 2001, and the 2002 decline reflects the current competitive
fixed annuity market and our unwillingness to match our competitors' crediting
rates, especially in the bank channel. Despite a slight increase in investment
product sales, JPSC's concession and other income decreased 3.9% and 15.3% in
2002 and 2001, primarily because of sales of lower commission securities.

Fixed annuity surrenders as a percentage of beginning fund balances
declined to 9.5% from 12.7% in 2001 and 21.2% in 2000. The lower lapse rates
reflect the effects of increased surrender charge protection on our in-force
block of business, the lower interest rate environment and the increasing
percentage of our annuity block with multi-year crediting rate guarantees. The
surrender rate in the AIP segment is influenced by many other factors such as:
1) the portion of the business that has low or no remaining surrender charges;
2) competition

17

from annuity products including those which pay up-front 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. Fixed annuity fund balances with 5% or more surrender charges
increased to 55% at year-end 2002 from 46% at year-end 2001.

Policy benefits, which are mainly comprised of interest credited to
policyholder accounts, increased 10.2% in 2002 and 12.8% in 2001, reflecting
growth in average fund balances partially offset by lower crediting rates.

Effective investment spreads on fixed annuities declined to 1.83% in 2002
from 1.96%, as yields earned on the investment portfolio dropped faster than we
lowered our crediting rates and due to sales of products designed with lower
spread requirements because of lower commissions. In response to this decline in
portfolio yields, we lowered crediting rates throughout the year, including a 23
basis point reduction late in the fourth quarter of 2002, the effects of which
were only nominally realized in 2002. The current average crediting rate on the
portfolio is 5.35%, while the average minimum guarantee rate on this portfolio
is 4.55% for 2003.

Total AIP expenses decreased 5.5% and 12.4% in 2002 and 2001, due primarily
to lower maintenance expenses along with lower commission expenses of JPSC. The
expense details are as follows:

As a result of the declining equity markets in 2002, we increased the
amortization of DAC on our variable annuity products by $8.8 using the mean
reversion techniques as further discussed in the Financial Position section.
However, due to lower lapse rates experienced on our fixed annuity products, we
lowered DAC amortization by $13.0. The remaining increase in DAC amortization
was due to overall growth in the business.

JPSC earnings were $4.1, $2.7 and $6.3 for 2002, 2001 and 2000. The 2002
increase was primarily due to lower general and administrative expenses, while
the 2001 decline was directly related to lower equity and mutual fund
purchase/sale transactions.

Return on average assets for AIP was 0.89%, 0.94% and 1.02% for 2002, 2001,
and 2000. A number of factors affected the decline in 2002 including decreased
interest spreads that were partially offset by DAC unlocking. The drop in 2001
generally resulted from reduced JPSC earnings coupled with a decrease in
interest spreads.

An inherent risk in the annuity business is that continued low or further
declines in investment yields coupled with competition from competing products
and minimum rate guarantees could further reduce our investment spread. Another
risk associated with the annuity business is increased lapses when interest
rates rise, particularly in the portion of business subject to low or no
surrender charges. We discuss these risks in more detail in the Financial
Position, Capital Resources and Liquidity, and Market Risk Exposures sections.

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

18

through the integration of our existing group life and disability operations
into Guarantee Life Insurance Company's (Guarantee) 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:

Benefit Partners reportable segment results increased 6.7% in 2002 as
further discussed below. Reportable segment results increased 36.5% in 2001,
primarily due to growth in the business and the integration of Guarantee.

The following table summarizes key information for Benefit Partners:

Benefit Partners revenues increased $96.6 and $64.9 in 2002 and 2001 and
annualized new sales for the core life, disability and dental lines grew 21.3%
in 2002 and 25.0% in 2001. The sales increases for 2002 and 2001 reflect the
impacts of increases in the number of representatives of 16.4% and 15.5% coupled
with the maturation of the sales force selling these products under the
Jefferson Pilot name. Additional factors driving the increase in sales for these
two years included our strong ratings, our technology driven customer service
and a refocus by employers on their non-medical benefit needs.

Policy benefits increased 18.4% and 12.3% in 2002 and 2001 driven by growth
in the business coupled with slightly adverse claims experience in 2002 in the
disability line. Our life, disability and dental incurred loss ratio increased
in 2002 to 73.0% versus 72.4% in 2001 and 73.4% in 2000, but was still within
our expected range. While we closely monitor the loss ratio, we feel our risk
management procedures are sound and some fluctuations are inherent in this
segment.

Total expenses increased 13.7% and 1.9% in 2002 and 2001, due to growth in
the business. As a percentage of premium income, total expenses were 23.2% in
2002 versus 23.7% in 2001 and 26.2% in 2000, reflecting disciplined expense
management.

19

The expense details are as follows:

Acquisition costs consisting of commissions and other expenses that are
primarily related to contracts issued or renewed are capitalized and are charged
to expense in proportion to the revenue recognized. The amount of acquisition
costs capitalized as well as the amount amortized grew in proportion with the
increase in sales for 2002, 2001 and 2000.

Risks beyond normal competition that may impact this segment include: 1)
increased morbidity risk due to a weak economy that may increase disability
claim costs; 2) continued medical cost inflation that can put pressure on
non-medical benefit premium rates because employers may focus more on the
employer's cost of non-medical programs; and 3) mortality risks including
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 group life
reinsurance agreement covering extraordinary life claims arising from
catastrophic events expired in April 2002. We began relying primarily on
case-by-case management to mitigate our concentration exposures over time. We
then supplemented this strategy with the purchase, effective September 1, 2002,
of a new group life facultative reinsurance program which covers extraordinary
life and accidental death or dismemberment claims arising from war or terrorism
events (excluding nuclear, chemical or biological events) for covered groups at
specific sites. The coverage provides reimbursement in various layers for losses
that exceed $50, up to a maximum reimbursement of $64. We continue to monitor
reinsurance market developments to stay abreast of options that could enhance
our management of this risk. One of our non-core products, Exec-U-Care(R), which
provides an insured medical expense reimbursement vehicle to executives for
non-covered health plan costs, produced revenues for this segment of
approximately $100 and net income of approximately $3 in 2002. A discontinuation
of Exec-U-Care(R), while not anticipated, would have a significant impact on
segment revenues, but only a limited effect on net income.

COMMUNICATIONS

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

Reportable segment results increased 18.8% in 2002 and decreased 18.7% in
2001. The 2002 increase was primarily due to increased demand for advertising,
effective ongoing operating expense management and the

20

positive impact from eliminating amortization of certain intangible assets under
SFAS 142. The 2001 decline was due to slowing economic conditions and lost
revenues due to the September 11th event.

Combined revenues for Radio and Television increased 8.5% in 2002 and
decreased 6.3% in 2001, reflecting solid increases in demand for local
advertising and substantial political advertising in 2002. Excluding the impact
of political revenues, combined revenues from Radio and Television increased
6.3% in 2002 and decreased 4.8% in 2001. Revenues from Sports operations
decreased 6.5% and 8.5% in 2002 and 2001, reflecting a hesitancy of the market
to enter into the longer-term structure of Sports advertising contracts.

Broadcast cash flow increased 14.6% in 2002 and decreased 17.4% in 2001.
The 2002 increase was due to improved profitability at our Radio and TV
properties, though these increases were partially offset by weak results in our
Sports basketball product earlier in the year.

Total expenses, excluding interest expense, increased 3.1% in 2002 and
decreased 0.3% in 2001. As a percent of communication revenues, these expenses
were 67.2%, 69.7% and 65.4% for 2002, 2001 and 2000. The 2002 improvement
reflects continued expense discipline combined with the elimination of FCC
license and goodwill amortization under SFAS 142 in the current year. This
amortization expense was $3.2 for 2001 and 2000. A one-time insurance recovery
of $1.4 after tax reduced corporate general and administrative expenses in 2001,
which improved segment earnings, but is not reflected in broadcast cash flow.

Because broadcasting stations rely on advertising revenues, they are
sensitive to cyclical changes in both the general economy and in the economic
strength of their local markets. Furthermore, our stations derived 25.3% of
their advertising revenues from the automotive industry in 2002. If automobile
advertising is seriously curtailed, it could have a negative impact on
broadcasting revenues. Radio and television stations require a license from the
FCC to operate with periodic renewal. While failure to renew is unlikely, any
station that failed to receive renewal would be forced to cease operations and
could no longer generate revenue. Technology and consolidation in the broadcast
industry may increase competition for audiences and advertisers.

CORPORATE AND OTHER

The Corporate and Other segment includes the excess capital of the
insurance subsidiaries, other corporate investments including all our impaired
securities, benefit plan net assets, goodwill related to insurance 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 (such as
advertising and charitable and civic contributions). All net capital gains and
losses, which include all impairments of securities, are reported in this
segment.

The following table summarizes results for this segment:

21

Reportable segment results excluding realized gains (losses) decreased
$15.8 in 2002 and increased $14.0 in 2001. Several items impacted the 2002
Corporate and Other segment results including a decline in earnings on
investments due to lost income on defaulted securities and funds used for share
repurchases, lower interest expense on debt and Exchangeable Securities and an
increase in accruals for litigation.

The earnings on investments for the 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 were $22, $20 and $19 for 2002, 2001 and 2000 and are
calculated as a percentage of the invested assets. 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 bonds impaired or sold at a loss.

Interest expense on debt and Exchangeable Securities decreased $17.6 in
2002 primarily due to lower market interest rates, the replacement of the MEDS
securities with short-term borrowings in January 2002 and overall lower amounts
outstanding. See Note 8 that more fully addresses our debt structure and
interest costs. Operating expenses vary with the level of corporate activities
and strategies. In 2002, we increased our accrual for litigation by $23.1 taking
into consideration the status of pending litigation, including several class
action lawsuits. In March 2003, we announced that a North Carolina judge had
authorized us to send a notice to participating class policyholders that an
agreement had been reached with plaintiff's counsel to settle one of the
existing class action suits. The settlement is subject to final approval by the
Court. Management believes its current accruals for litigation expense are
adequate. Goodwill amortization of $9 and $10, excluding JPCC, was included in
operating expenses in this segment for 2001 and 2000 but has been eliminated in
2002 under SFAS 142. Note 2 details the pro forma effect that goodwill
amortization would have in 2002. 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 $7.3 in 2002 and $5.7 in
2001. The 2002 decline is primarily due to lower pretax segment income while the
2001 decline is 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.

Realized investment gains and losses were as follows:

The following table summarizes assets assigned to this segment.

22

Total assets for the Corporate and Other segment increased 11.2% in 2002
due primarily to unrealized gains on fixed interest investments. Unrealized
gains and losses on all available-for-sale fixed income securities are assigned
to this segment, and increased $408 and $119 in 2002 and 2001.

Risks for this segment include investment impairments due to continuing
economic weakness or further economic decline, the risk of rising interest rates
on our short-term debt, the ability to replace existing debt agreements with
comparable terms, an additional decline in the value of our equity securities
which would limit our potential for gains, the general uncertainty regarding
litigation, and the potential for future impairment of goodwill. Additionally,
as discussed in the Liquidity section, to service our debt and to pay
shareholder dividends, this segment relies on excess cash flows through
dividends from the insurance subsidiaries. These dividends are dependent upon
regulatory approval above certain limits.

FINANCIAL POSITION

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. This section identifies
several items on our balance sheet that are important to the overall
understanding of our financial position. The Investments section reviews our
investment portfolio and key portfolio management strategies.

Total assets increased $1,613 in 2002 and $1,675 in 2001 due to growth in
investment income, net policyholder contract deposits, and unrealized gains on
investments, all of which more than offset declines in fair values of separate
account assets, dividends, stock repurchases and impairment losses.

Intangible assets on our balance sheet include DAC, VOBA and goodwill.

DAC and VOBA

The Individual Products, AIP and Benefit Partners segments defer the costs
of acquiring new business, including first year commissions, first year bonus
interest or day one premium bonuses on annuities, certain costs of underwriting
and issuing policies plus agency office expenses, referred to as DAC. We limit
our capitalization of acquisition costs other than commissions to the lower of
product specific pricing allowables or the actual deferrable acquisition costs.
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. Both DAC and VOBA are amortized
through expenses as revenues are recognized in the future. Some of the
assumptions regarding future experience that can affect the carrying value of
DAC and VOBA balances include mortality, interest spreads, lapse rates and
policy fees earned. Significant changes in these assumptions can impact the
carrying balance of DAC and VOBA and therefore produce changes that must be
reflected in earnings. These changes can be positive or negative.

We amortize DAC and VOBA on traditional products in proportion to premium
revenue recognized. The DAC and VOBA balances on these products were $208.2 or
8.9% of the gross balances at December 31, 2002, and are generally subject to
little volatility.

We amortize DAC and VOBA on UL-type products and annuity products relative
to the future estimated gross profits (EGP) from those products. In calculating
the EGP for these products, management must make assumptions regarding 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 costs of
policy administration (maintenance). DAC and VOBA calculations are sensitive to
a change in our assumptions regarding EGP components, and any significant change
in these assumptions will immediately impact the current DAC and VOBA balances
with the change reflected through the income statement. We continuously review
the models and our assumptions regarding EGP that we use for calculation of
amortization expense for these products so that the assumptions reflect
management's view of future events.

23

We consider the following assumptions to be most significant to UL-type
products: 1) estimated mortality; 2) estimated interest spreads; and 3)
estimated future policy lapses. DAC and VOBA on UL-type products were $1,711.3
or 73.3% of the gross balances at December 31, 2002.

In addition to these three assumptions on all UL-type products, VUL
products and VA products contain an additional assumption that affects the DAC
and VOBA amortization. This critical assumption is the rate of growth of the
separate account mutual funds that generate additional policy fees utilized in
the EGP on VUL and VA products. We assume a long-term total net return on
separate account assets, including dividends and market value increases, of
8.25% and a five-year reversion period. The reversion period is a period over
which a short-term return assumption is used to maintain the model's overall
long-term rate of return. We capped the reversion rate of return at 8.25% for
one year and 10% for years two through five. The effect of this limitation was
to reduce the cumulative effective long-term rate at this point in time to less
than 7.00%. Our decision to cap the first-year reversion and to limit our
overall reversion rate reflects recent declines in equity markets and a lower
than historic allocation of fund assets by our policyholders to equity funds.

The following table reflects the possible pretax income statement impacts
that could occur in a given year if we change our assumptions as illustrated
related to UL-type products in the Individual Segment:

We consider estimated interest spreads and estimated future policy lapses
to be the most significant assumptions related to our annuity products. DAC and
VOBA on these products were $356.6 or 15.3% of the gross balances at December
31, 2002. The following table reflects the possible income statement impacts on
our AIP segment that could occur in a given year if we change our assumptions as
illustrated related to annuity products:

In general, a change in an assumption on either individual life or annuity
products that improves our expectations regarding future EGP is going to have
the impact of deferring the amortization of DAC and VOBA into the future, thus
increasing earnings in the current period. Conversely, a change in assumptions
that decreases future EGP will have the effect of speeding up the amortization
of DAC and VOBA, thus reducing earnings in the current period.

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.

24

Goodwill

Through December 31, 2001, goodwill was amortized on a straight-line basis
over periods of 25 to 40 years. Effective January 1, 2002, the Company adopted
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. Under SFAS 142, we test
goodwill for impairment at least on an annual basis, and we concluded that there
had been no impairments in 2002. Goodwill was $312 at December 31, 2002 and 2001
and 8.8% and 9.2% as a percentage of shareholders' equity at these dates. We
regularly review the carrying amounts for indications of value impairment,
considering financial performance and other relevant factors such as a
significant adverse change in the business or legal climate, an adverse action
or assessment by a regulator, or unanticipated competition. When considered
impaired, the carrying amounts are written down to a value determined by using a
combination of fair value and discounted cash flows.

Other

At December 31, 2002 and 2001, we had reinsurance receivables of $889 and
$914 and policy loans of $135 and $153 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.

At December 31, 2002 and 2001, the fair values of the assets related to the
defined benefit pension plans were $331 and $361. The projected benefit
obligations at December 31, 2002 and 2001 were $322 and $267 with the primary
growth due to actuarial losses which arose primarily from an actual loss on the
return on plan assets versus an 8% return assumed in the actuarial assumptions.
The 2002 decline in assets reflects the decline in the equity markets in which
most of these assets are invested coupled with a consistent level of benefit
payments. Net periodic benefit cost, which includes service cost, interest cost,
return on plan assets and net amortization and deferrals of gains and losses,
contributed $3.0 and $3.5 to our income for 2002 and 2001. See Note 14 for
further details regarding our pension plans.

CAPITAL RESOURCES

Stockholders' Equity

The following table shows our capital adequacy.

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 $196 and $69 in
2002 and 2001, reflecting lower interest rates partially offset by increased
credit spreads.

In 2002 we repurchased 7,881,300 of our common shares at an average cost of
$43.69 per share compared to 4,437,100 shares at an average cost of $42.42 in
2001. In August 2002, our board refreshed our share repurchase authorization to
cover 5 million shares, of which approximately 2.8 million shares remained at
December 31, 2002.

We consider existing capital resources to be more than adequate to support
the current level of our business activities.

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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 our major life insurance affiliates to attain the following claims
paying ratings:

The ratings by A.M. Best and Standard & Poor's are currently the highest
available by those rating agencies and have been recently reaffirmed. Standard &
Poor's also kept in effect their negative outlook for Jefferson Pilot and the
life insurance industry as a whole. In 2002, Fitch Ratings downgraded our major
life insurance affiliates' ratings to AA+, the agency's second highest rating,
along with numerous other companies in the financial services industry. This
action by Fitch has not had a perceptible effect on us, but a very significant
drop in our ratings, while not anticipated, could potentially impact future
sales and/or accelerate surrenders on our business in force.

Short-Term Borrowings and Debt

We have bank credit agreements for unsecured revolving credit, under which
we have the option to borrow at various interest rates. In May 2002, we replaced
an expiring $375 bank credit agreement with new unsecured revolving credit
agreements, currently aggregating $525, half available for five years and half
available for 364 days. The credit agreements principally support our issuance
of commercial paper. Outstanding commercial paper had various maturities, with
$74 at December 31, 2002 in excess of 90 days, although maturities can be up to
270 days. If we cannot remarket commercial paper at maturity, we have sufficient
liquidity, consisting of the bank credit agreements, liquid assets, such as
equity securities, and other resources to retire these obligations. The
weighted-average interest rates for commercial paper borrowings outstanding of
$453 and $297 at December 31, 2002 and 2001 were 1.44% and 3.72%. The maximum
amount outstanding during 2002 and 2001 was $455 and $565.

Our commercial paper is currently rated by two rating agencies.

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 on commercial paper borrowings
or lose access to the commercial paper market.

Our insurance subsidiaries have sold U.S. Treasury obligations and
collateralized mortgage obligations under repurchase agreements involving
various counterparties, accounted for as financing arrangements. We may use
proceeds to purchase securities with longer durations as an asset/liability
management strategy. We also may use repurchase agreements from time to time in
lieu of commercial paper borrowings. At December 31, 2002 and 2001, repurchase
agreements, including accrued interest, were $499 and $292, with the increase
reflecting lower interest rates on repurchase agreements compared to rates on
commercial paper. The securities involved had a fair value and amortized cost of
$532 and $493 at December 31, 2002 versus $306 and $289 at December 31, 2001.
The maximum principal amounts outstanding were $636 and $457 during 2002 and
2001.

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

26

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 broadcast advertising, and primary uses include payments for
commissions, compensation and related costs, sports rights, interest, income
taxes and purchases of fixed assets.

Cash provided by operations in 2002, 2001 and 2000 was $428, $801 and $501.
The primary reason for the large swings was approximately $208 of single
premiums that were received pending policy issuance in late 2001 and reported as
cash received from operations in that year. In 2002 those policies were issued
and the premiums were reported as a decrease in cash from operations in 2002 and
an increase in policyholder deposits.

Net cash used in investing activities was $1,599, $1,425 and $611 in 2002,
2001 and 2000, reflecting increased investment purchases primarily using
proceeds received from net policyholder contract deposits due to higher sales.

Net cash provided by financing activities was $1,099, $737 and $74 in 2002,
2001 and 2000, including cash inflows from policyholder contract deposits net of
withdrawals of $1,404, $1,321 and $512, reflecting both the increase in sales
and the processing of the premiums received in late 2001. Net borrowings
increased in 2002 to fund investing activities as well as stock repurchases.

In order to meet the parent company's dividend payments, debt servicing
obligations and other expenses, we receive dividends from subsidiaries.
Subsidiaries paid total cash dividends of $455, $414 and $649 in 2002, 2001 and
2000. Our life insurance subsidiaries are subject to laws in their states of
domicile that limit the amount of dividends that can be paid without the prior
approval of the respective state's insurance regulator. The limits are based in
part on the prior year's statutory income and capital, which are negatively
impacted by bond losses and write downs. Approval of these dividends will depend
upon the circumstances at the time, but we have not experienced problems with
state approvals in the past.

Cash and cash equivalents were $67, $139 and $26 at December 31, 2002, 2001
and 2000. The decrease from 2002 reflects the build up of cash used to pay off
the MEDS in January 2002. The parent company and non-regulated subsidiaries held
equity and fixed income securities of $424, $542 and $549 at these dates. We
consider these securities to be sources of liquidity to support our strategies.

Total debt and equity securities available-for-sale at December 31, 2002
and 2001 were $16,874 and $14,639.

Off Balance Sheet Liabilities and Commitments

One of our subsidiaries entered into an agreement with an unaffiliated
third party to provide 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, 2002 was $16. We
have 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 of
approximately $419 as of December 31, 2002, payable through the year 2011. We
have commitments to sell a portion of the sports programming rights to other
entities for $258 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. We expect advertising revenues
that are sold on an annual basis to fund the purchase commitments.

We routinely enter into commitments to extend credit in the form of
mortgage loans and to purchase certain debt instruments in private placement
transactions for our investment portfolio. The fair value of such outstanding
commitments as of December 31, 2002 approximates $73. These commitments will be
funded through cash flows from operations and investment maturities.

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INVESTMENTS

Portfolio Description

Our strategy for managing the investment portfolio of our insurance
subsidiaries is to consistently meet pricing assumptions while appropriately
managing credit risk. We invest for the long term, and most of our investments
are held until they mature. Our investment portfolio includes primarily fixed
income securities and commercial mortgage loans. The nature and quality of
investments our insurance subsidiaries hold must comply with state regulatory
requirements. We have established a formal investment policy, which describes
our overall quality and diversification objectives and limits.

The following table shows the carrying values of our invested assets.
Approximately 80% of our portfolio has been designated as available-for-sale
(AFS) and is carried on the balance sheet at fair value. We determine fair
values of our securities, including securities not actively traded, using the
methodology described in the Critical Accounting Policies section above. Changes
in fair values of AFS securities are reflected in other comprehensive income.
The remainder of our portfolio has been designated as held-to-maturity (HTM). As
prescribed by generally accepted accounting principles, HTM securities are
carried at amortized cost, and accordingly there will be a difference between
fair value and carrying value for HTM securities.

Credit Risk Management and Impairment Review

Our internal guidelines require an average quality of an S&P or equivalent
rating of "A" or higher for the entire bond portfolio. At December 31, 2002 the
average quality rating of our bond portfolio was "A+". We monitor the overall
credit quality of our portfolio within internal investment guidelines. This
table describes our debt security portfolio by credit rating.

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Limiting our bond exposure to any one creditor is another way we manage
credit risk. The following table lists our ten largest exposures to an
individual creditor in our bond portfolio as of December 31, 2002. As noted
above, the carrying values in the following tables are stated at fair value for
AFS securities and amortized cost for HTM securities.

Throughout 2002 large bankruptcy filings, defaults by companies within
certain industries and specific country-related issues adversely affected the
bond market. In addition, we witnessed significant deterioration in credit
ratings throughout the year. Industries that were particularly affected included
passenger airlines, communications, energy and technology. Credit spreads
increased considerably, resulting in significantly lower market values on bonds
in these sectors.

As noted above, credit risk is inherent in our bond portfolio. We manage
this risk through a structured approach in which we assess the effects of the
changing economic landscape. We devote a significant amount of effort of both
highly specialized, well-trained internal resources and external experts in our
approach to managing credit risk.

In identifying "potentially distressed securities" we first screen for all
securities that have a fair value to amortized cost ratio of less than 80%.
However, as part of this identification process, management must make
assumptions and judgments using the following information:

- current fair value of the security compared to amortized cost

- length of time the fair value was below amortized cost

- industry factors or conditions related to a geographic area that are
negatively affecting the security

- downgrades by a rating agency

- past due interest or principal payments or other violation of covenants

- deterioration of the overall financial condition of the specific issuer

In analyzing securities for other-than-temporary impairments, we then pay
special attention to securities that have been potentially distressed for a
period greater than six months. We assume that, absent reliable contradictory
evidence, a security that is potentially distressed for a continuous period
greater than twelve months has incurred an other-than-temporary impairment. Such
reliable contradictory evidence might include, among other factors, a
liquidation analysis performed by our investment professionals and consultants,
improving financial performance or valuation of underlying assets specifically
pledged to support the credit.

When we identify a security as potentially impaired, we add it to our
potentially distressed security list and determine if the impairment is other
than temporary. Various committees comprised of senior management and investment
analysts intensively review the potentially distressed security list to
determine if a security is deemed to be other than temporarily impaired. In this
review, we consider the following criteria:

- fundamental analysis of the liquidity and financial condition of the
specific issuer

- underlying valuation of assets specifically pledged to support the credit

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- time period in which the fair value has been significantly below
amortized cost

- industry sector or geographic area applicable to the specific issuer

- our ability and intent to retain the investment for a sufficient time to
recover its value

When this intensive review determines that the decline is other than
temporary based on management's judgment, the security is written down to fair
value through a charge to realized investment gains and losses and is moved to
the Corporate and Other segment. We adjust the amortized cost for both AFS and
HTM securities that have experienced other-than-temporary impairments to reflect
fair value at the time of the impairment. We consider factors that lead to an
other-than-temporary impairment of a particular security in order to determine
whether these conditions have impacted other similar securities.

Below Investment Grade Securities

We monitor those securities that are rated below investment grade as to
individual exposures and in comparison to the entire portfolio, as an additional
credit risk management strategy.

The following table shows the ten largest below investment grade debt
security exposures by individual issuer at December 31, 2002.

Bonds of these issuers that are investment grade are not included in these
values. Securities of several of these creditors are also on the potentially
distressed security list and are subject to additional analysis for other-
than-temporary impairment.

At December 31, 2002 and 2001, below investment grade bonds were $1,287 or
6.6% and $1,065 or 6.1% of the carrying value of the bond portfolio. These are
higher than our historical exposures. We are currently managing our below
investment grade bonds to reduce our exposure as a percentage of the total
portfolio over time.

Unrealized Gains and Losses

The majority of our unrealized gains and losses can be attributed to
changes in interest rates and market changes in credit spreads, which have
caused temporary price fluctuations. However, within the specific bonds with
unrealized losses, we further stratify and analyze them as discussed above to
determine if the unrealized loss is other than temporary.

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The following table summarizes by category the unrealized gains and losses
in our entire securities portfolios, including common stock and redeemable
preferred stock, as of December 31, 2002.

These unrealized gains and losses do not necessarily represent future gains
or losses that we will realize. Changing conditions related to specific bonds,
overall market interest rates or credit spreads as well as our decisions
concerning the timing of any sales may impact values we ultimately realize.
Gross unrealized gains and losses at December 31, 2001 were $1,114 and $(369).

The following table shows the diversification of unrealized gains and
losses for our debt securities portfolio across industry sectors as of December
31, 2002:

We monitor unrealized losses through further analysis according to maturity
date, credit quality, individual creditor exposure and the length of time the
individual security has continuously been in an unrealized loss position.

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The following table shows the maturity date distribution of our debt
securities in an unrealized loss position at December 31, 2002. The fair values
of these securities could fluctuate over the respective periods to maturity or
any sale.

The following table shows the credit quality of our debt securities with
unrealized losses at December 31, 2002.

The following table shows the bonds of individual creditors that have
unrealized losses of $10 or greater as of December 31, 2002. Bonds of the same
creditors that have unrealized gains are not included.

The following table shows the length of time that individual securities
have been in a continuous unrealized loss position.

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Of the $287 gross unrealized losses at December 31, 2002, approximately
$150 was included in our potentially distressed securities list mentioned above.
Of this amount, $8 had been continuously included in our potentially distressed
securities list for more than twelve months.

Information about unrealized gains and losses is subject to rapidly
changing conditions. Securities with unrealized gains and losses will fluctuate,
as will those securities that we have identified as potentially distressed. The
recent volatility of financial markets and declines in market interest rates has
led to an increase in both unrealized gains and losses. We consider all of the
factors discussed earlier when we determine if an unrealized loss is other than
temporary, including our ability and intent to hold the security until the value
recovers. Our current evaluation of other-than-temporary impairments reflects
our positive intent to hold certain securities until maturity. However, we may
subsequently decide to sell certain of these securities in future periods within
the overall context of our portfolio management strategies. If we make the
decision to dispose of a security with an unrealized loss, we will write down
the security to its fair value if we have not sold it by the end of the
reporting period.

Realized Losses -- Write Downs and Sales

Realized losses are comprised of both write downs on other-than-temporary
impairments and actual sales of securities.

In 2002 we had other-than-temporary impairments on bonds of $163 as
compared to $55 for 2001. The individual impairments in excess of $10, how they
were measured, the circumstances giving rise to the losses, and the impact those
circumstances have on other material investments we held at the time are as
follows:

2002

- $19.8 write down of manufactured housing debt that was secured by long
term mortgages on mobile homes and a corporate guarantee from the
manufacturer and underwriter of the underlying collateral. The
manufacturer filed for Chapter 11 bankruptcy protection rendering the
corporate guarantee essentially worthless. In addition, we concluded that
projected cash flows of the underlying collateral may be insufficient
based on third-party valuations. This had no impact on other holdings in
our portfolio.

- $19.8 write down of securitized refinanced HUD residential loans that
also carried a corporate guarantee from the finance company that made the
underlying loans. The finance company filed for Chapter 11 bankruptcy
protection, which left us unable to collect under the corporate
guarantee. Again, we concluded that projected cash flows of the
underlying collateral may be insufficient based on third-party
valuations. This had no impact on other holdings in our portfolio.

- $19.6 write down on debt of WorldCom, Inc., which filed for bankruptcy in
July. This issuer had specific problems with accounting restatements and
potentially questionable business practices. The entire
telecommunications sector has been under pressure due to overcapacity. We
then sold these securities in 2002. We specifically looked at other
creditors in this sector including several on our potentially distressed
security list and determined that at this point, the unrealized losses on
securities we hold of other material creditors are temporary.

- $16.5 write down related to United Airlines equipment trust certificates.
This airline filed for Chapter 11 bankruptcy protection. This had no
impact on other holdings in our portfolio.

- $11.6 write down on debt of NRG Energy that defaulted due to liquidity
issues brought upon by rapid ratings downgrades. We then sold these
securities in 2002. The bulk of our holdings in the utilities sector are
regulated utility bonds. However, we did review our exposure to
unregulated companies, whose bonds are typically lower rated and display
greater risk profile than regulated companies. In this review we did not
identify any other write downs.

2001

- $13.0 write down on unsecured debt of Burlington Industries. The textile
manufacturer had been suffering from liquidity issues and filed for
Chapter 11 bankruptcy protection. We reviewed our exposure to

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securities issued by other textile manufacturers and did not identify any
other write downs. This security was sold in 2002 at a price equal to
book value.

There were no individual impairments in excess of $10 for 2000. The other
write downs resulting from other-than-temporary impairments in all years were
spread across many different sectors and related to specific issuer
circumstances. The majority of write downs in 2002 were in the transportation,
energy and telecommunications sectors.

In 2002, we incurred losses of $37 on sales of securities. The only
individually material realized loss that occurred in 2002 from a sale of
securities was an $8.9 loss on debt of Williams Cos., Inc., which suffered
significant credit downgrades within a short period. The other realized losses
from sales of securities were individually less than $1.0. These disposals were
in accordance with established portfolio management strategies and did not
previously meet the criteria for other-than-temporary impairment.

Mortgage Backed Securities

Mortgage backed securities (including Commercial Mortgage Backed
Securities) at December 31, 2002 and 2001, all of which are included in debt
securities available-for-sale, were as follows:

Our investment strategy with respect to mortgage backed securities (MBS)
portfolio focuses on actively traded issues with less volatile cash flows. The
majority of the 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
mitigate cash flow volatility over a range of interest rates.

Because of the steep decline in interest rates to record lows, the mortgage
market has experienced record levels of refinancings and the structural
protection of our MBS portfolio has eroded. We experienced prepayments on
mortgage-backed securities totaling $1,277 or 22.8% of the average carrying
value of the MBS portfolio in 2002, which exceeded our expectations. Our MBS
portfolio is primarily a discount portfolio; therefore, larger than expected
prepayments accelerated the amortization of income in 2002. Also, pursuant to
SFAS 91, we adjusted our long-term prepayment speeds for the calculation of
effective yields on a retrospective basis as a result of these prepayments.
These two factors increased 2002 investment income by $7.6 after tax. Further,
these repayments are reinvested at yields that are lower than our current
portfolio yields, producing less investment income going forward. The decline in
interest rates has continued into 2003, and we have continued to receive
additional prepayments.

Mortgage Loans

We record mortgage loans on real property net of an allowance for credit
losses. This allowance includes both reserve amounts for specific loans that are
believed to be at a higher risk of becoming impaired in the near future, and a
general reserve that is calculated by review of historical industry loan loss
statistics. We consider future cash flows and the probability of payment when we
calculate our specific loan loss reserve. At December 31, 2002 and 2001, our
allowances for mortgage loan credit losses were $36 and $29.

Derivative Instruments

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 through December 31, 2002 has been
limited to managing well-defined interest rate risks. Interest rate swaps
utilized in our asset/liability management strategy with a current notional
value of $278 and $132 were open as of December 31, 2002 and 2001. During 2002,
we began using interest rate swaps to hedge future bond purchases that will back
deposits on

34

certain annuity contracts. This hedging strategy protects the spread between the
annuity crediting rate offered at the time the annuities are sold and the income
that will eventually be earned on bonds that will back annuity contracts issued.
These interest rates contracts are generally terminated within a month.
Effective August 1, 2002, we now purchase S&P 500 Index(R) options in
association with our current sales of equity indexed annuities. The reinsurance
agreement on previously issued equity indexed annuities remains in existence.

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 2002, 10 year U.S. Treasury rates decreased 124 basis points
versus an increase of 14 basis points in 2001.

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 selecting MBS's that are structured to minimize cash
flow 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 these risks by adjusting our interest
crediting rates with due regard to the yield of our investment portfolio,
minimum rate guarantees 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, 2002 and 2001, 89% 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 (including MBS securities), mortgage
loans, policy loans, investment commitments, annuities in the accumulation phase
and periodic payment annuities, commercial paper borrowings, repurchase
agreements and interest rate swaps.

We have derived estimated incremental 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%. The model also assumes that
all short-term debt consisting of commercial paper and reverse repurchase
agreements are replaced with similar instruments. 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,
2002 and does not consider new sales of life and annuity products or the
potential impact of interest rate fluctuations on sales.

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The following table shows our estimate of the impact that various
hypothetical interest rate scenarios would have on our earnings for a single
year, based on the assumptions in our model. We believe that, based upon
historically low current interest rates, a symmetrical change in interest rates
is not reasonably possible. Our model shows the effect on income with an
increase up to 300 basis points and a decrease in 100 basis points. We believe
that the 300 basis point increase or 100 basis point decrease, experienced
gradually over four quarters, reflects reasonably possible near term changes in
interest rates as of December 31, 2002. The incremental loss for a year derives
primarily from differences in the yield curves and in the sensitivities they
introduce to our model.

Generally, an increase in interest rates will benefit our earnings in the
insurance portfolio, yet increase our interest expense on short-term debt.
Conversely, a decrease in interest rates will decrease earnings from the
insurance portfolio as minimum rate guarantees would begin to take effect and/or
competitive conditions would not permit us to reduce crediting rates, while we
would benefit from the decline in interest expense on our short-term debt.

Changes in interest rates for a single year illustrated above assume shifts
in the yield curve, graded pro-rata over four quarters. The model also assumes
that changes in our crediting rates will occur correspondingly with declines or
increases in investment yields. The above table reflects the effect on one year.
A spike in interest rates of 300 basis points that lasts for three years would
produce a significantly larger estimated loss in the second and third years, as
policyholders would potentially seek more attractive rates elsewhere.
Correspondingly, a larger than 100 basis point decrease would cause a
significantly larger estimated loss in the single year and cumulatively, as
minimum rate guarantees would prohibit us from lowering credited rates on most
products.

The incremental income or loss for shifts in excess of those shown or that
occur more quickly than quarterly grading does not have a linear relationship to
the values shown above. The incremental loss resulting from a higher change 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 greater 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 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. An
anticipated increase in interest rates could also suggest that we would term out
some of the short-term debt, which the model does not take into consideration.

We are exposed to equity price risk on our equity securities (other than
trading). We hold common stock with a fair value of $407; approximately $368 is
in a single issuer, Bank of America Corporation (BankAmerica). We believe that a
hypothetical 20% decline in the equity market is 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, 2002 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.

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EXTERNAL TRENDS AND FORWARD LOOKING INFORMATION

We operate within the United States financial services and broadcasting
markets, which are both subject to general economic conditions. Interest rates
on longer maturity debt instruments began trending down in late 2000 as economic
growth slowed and have continued to drop dramatically especially in 2002 and
early 2003. Additional changes in rates may affect our businesses in many ways
as discussed earlier in the Market Risk Exposure section. As noted in the
Investment section, the prolonged decline in general economic conditions has
increased our credit risk. A prolonged period of further declining or even level
interest rates in their current position would have an impact on our Individual
and AIP segments. Investments purchased for those segments yielding rates lower
than our current portfolio rates will lower our overall portfolio earned rates.
In the Individual and AIP segments, there are minimum crediting rates on
policyholder accounts inherent in the insurance portfolio due to both product
guarantees and various state requirements. Our inability to reduce crediting
rates in response to the declines in earned rates would result in a significant
negative impact on future earnings. Furthermore, a continued general economic
weakness would cause deterioration in our balance sheet and our overall future
profitability.

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.

Demographic changes include the aging of the baby boomers, reaching their
high earning years at a time when investment yields from both equities and fixed
rate products are at historically low points. This challenge has been met by the
insurance industry by offering various types of fixed and variable products
aimed at this population. The industry's overall individual life insurance sales
in the U.S. increased 3% for 2002 and reflected a trend towards those financial
products with a fixed rate given the volatility in the equity markets. As
discussed previously, our individual life sales growth continues to be better
than the overall industry.

Regulatory and Legal Environment

The U.S. insurance industry has experienced 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. We expect further strategic
alignments in the financial services industry given changing demographics,
technological advances, customer expectations for one-stop shopping, and the
modernization of the regulatory framework for financial services under the
Gramm-Leach-Bliley Act. We continue to analyze our options within this
environment for increasing distribution, adding products and technology and
improving economies of scale.

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

See Item 3 for discussion of Legal Proceedings.

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.

37

Accounting Pronouncements

See Note 2.

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. 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, 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 or any US military engagements, and interest rate levels, 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 the Bush Administration's tax
proposals on dividends and retirement savings, and estate taxes); changes in the
regulation of the financial services industry; or changes in other laws and
regulations and their impact; and the various risks discussed earlier in this
Item 7.

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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information under the heading "Market Risk Exposures" in Management's Discussion
and Analysis of Financial Condition and Results of Operations is incorporated
herein by reference.

38

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

39

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
Jefferson-Pilot Corporation

We have audited the accompanying consolidated balance sheets of
Jefferson-Pilot Corporation and subsidiaries as of December 31, 2002 and 2001,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 2002.
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, 2002 and 2001, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States.

As discussed in Note 2 to the financial statements, in 2002 the Company
changed its method of accounting for goodwill and in 2001 the Company changed
its method of accounting for derivative financial instruments.

/s/ ERNST & YOUNG LLP

Greensboro, North Carolina
February 3, 2003, except for
Note 19, as to which the
date is March 10, 2003

40

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements

41

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See Notes to Consolidated Financial Statements

42

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

See Notes to Consolidated Financial Statements

43

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Consolidated Financial Statements

44

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT SHARE INFORMATION)
DECEMBER 31, 2002

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 broadcasting 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. Broadcasting 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.

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. We have three
immaterial investments in which we own less than 50% but greater than 20%.
Neither the carrying value on the balance sheet nor the equity in earnings on
the income statement related to these investments is material. We do not
exercise control over any of these entities and therefore, do not consolidate
these entities in accordance with ARB 51 and SFAS 94. We account for these
investments on the equity method in accordance with APB 18. 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 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.

RECLASSIFICATIONS

Certain amounts in prior years have been reclassified to conform with the
current year presentation.

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.

45

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 prospects 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 $51 and $47 at December 31, 2002 and 2001. 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 $180 and $181 at
December 31, 2002 and 2001.

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 or day one premium bonuses on annuities,
all of which vary with and are primarily related to the production of new and
renewal business, have been deferred.

Deferred policy acquisition costs for traditional insurance products 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 fixed 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.

46

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 for fixed universal life and annuity products.

Deferred policy acquisition costs and the value of business acquired for
variable life and annuity products are amortized utilizing mean reversion
techniques. In calculating the estimated gross profits for these products we
utilize a long-term total net return on assets of 8.25% and a five-year
reversion period. The reversion period is a period over which a short-term
return assumption is utilized to maintain the model's overall long-term rate of
return. The Company caps the reversion rate of return at 8.25% for one year and
10% for years two through five. Mean reversion techniques have the effect of
smoothing out spikes or valleys in the amortization related to variable
products.

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

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets", which primarily addresses the accounting for goodwill
and intangible assets subsequent to their acquisition. Through December 31,
2001, goodwill was amortized on a straight-line basis over periods of 25 to 40
years. Accumulated amortization was $41 at December 31, 2002 and 2001. Under
SFAS 142, 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. 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.

47

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECOGNITION OF REVENUE

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

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.

48

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
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 or
directors when the option price is not less than the market value of the stock
at the date of award. The Company recognizes expense utilizing the fair value
method in accordance with SFAS 123 for stock options granted to non-employees,
specifically agents.

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 following is a reconciliation of reported net income and proforma
information as if the Company had adopted SFAS 123 for its employee and director
stock option awards.

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, 2002, the Company adopted 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. In accordance
with the statements, the Company no longer amortizes goodwill nor certain other
intangible assets (primarily Federal Communication Commission

49

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Licenses), but rather tests these intangible assets for impairment at least on
an annual basis. During 2001, the Company recognized $13 of amortization expense
related to these assets. The Company did not recognize any impairment losses
upon adoption of SFAS 142. Further, the Company completed its annual test of
impairment in the second quarter of 2002 and concluded that there had been no
impairments. No subsequent events have occurred that would have led to
impairment of goodwill and other intangibles.

Following is a reconciliation of reported earnings to adjusted earnings as
if SFAS 142 had been in effect for all periods presented. In connection with the
implementation of SFAS 142, the Company did not change the life on any
intangible that was subject to amortization:

In July 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" (SFAS 146), which is effective for exit or disposal
activities that are initiated after December 31, 2002. The Company currently is
not engaging in any exit or disposal activities.

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others"
(Interpretation No. 45). The disclosure requirements of Interpretation No. 45
are effective for financial statements of interim or annual periods ending after
December 15, 2002. Adoption of Interpretation No. 45 had no impact on the
Company's financial statement disclosure for 2002. The initial recognition and
initial measurement provisions are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002 and are not expected to
have a significant impact on the Company's financial position or results of
operations.

In December 2002, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure" (SFAS 148), which is effective for
fiscal years ending after December 15, 2002. The Statement provides alternative
methods of transition to SFAS 123's fair value method of accounting for
stock-based employee compensation, if the Company had selected that method. SFAS
148 also increased the disclosure for companies' not electing to implement SFAS
123.

50

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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:

51

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:

52

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, 2002, according to contractual maturity date, are as indicated
below. Actual future maturities may 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 1,747 issuers, with no
one corporate issuer representing more than one percent of investments. Debt and
equity securities include investments in Bank of America of $368 and $584 as of
December 31, 2002 and 2001.

The Company's mortgage loan portfolio is comprised of conventional real
estate mortgages collateralized primarily by retail (32%), industrial (20%),
office (18%), apartment (17%), and hotel (11%) 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 34% of stated mortgage loan balances as of December
31, 2002 are due from borrowers in South Atlantic states, approximately 21% are
due from borrowers in West South Central states and approximately 12% are due
from borrowers in Pacific states. No other geographic region represents as much
as 10% of December 31, 2002 mortgage loans.

At December 31, 2002 and 2001, the recorded investment in mortgage loans
that are considered to be impaired was $66 and $81. Delinquent loans outstanding
as of December 31, 2002 and 2001 totaled $12 and $0. The related allowance for
credit losses on all mortgage loans was $36 at December 31, 2002 and $29 at
December 31, 2001. The average recorded investment in impaired loans was $77,
$67 and $57 during the years ended December 31, 2002, 2001 and 2000, on which
interest income of $6, $7 and $3 was recognized.

The Company uses repurchase agreements to meet various cash requirements.
At December 31, 2002 and 2001, the amounts held in debt securities available for
sale pledged as collateral for these borrowings were $532 and $306.

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 $533 and $555 at December
31, 2002 and $248 and $258 at December 31, 2001.

53

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

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:

54

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) including other than
temporary impairments follow:

Information about total gross realized gains and losses including other
than temporary impairments on securities transactions follows:

55

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information about gross realized gains and losses including other than
temporary impairments 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 $86, $27, and $17 for 2002, 2001, and 2000. The
realized gains/(losses) on the securities were $0, $(6), and $(4) for 2002,
2001, and 2000.

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 $18 and $10 at December 31, 2002 and
2001, are included in other investments in the accompanying balance sheet. The
accounting for changes in the fair value (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 related to foreign
currency exposure. The Company accounts for changes in fair values of
derivatives that are not part of a hedge 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, 2002 and
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, 2002 and 2001 the maximum term of interest rate swaps that hedge
floating rate investments were ten years and eleven years.

The Company also uses interest rate swaps to hedge anticipated purchases of
assets that support the annuity line of business. As assets are purchased, the
interest rate swap is unwound resulting in a realized gain/(loss) which
effectively offsets the change in the cost of the assets purchased to back
annuities issued. The gain/(loss) is amortized into income over time, resulting
in an overall yield that is consistent with the companies' pricing assumptions.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, 2002 and 2001, the Company's realized
investment gains were insignificant.

For the year ended December 31, 2002 and 2001, the Company recognized other
comprehensive income related to cash flow hedges of $5 and $3.

For the year ended December 31, 2002 and 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 markets equity-indexed annuities as the result of its purchase
of The Guarantee Life Companies Inc. and its subsidiaries, including Guarantee
Life Insurance Company, collectively referred to as 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, 2002 and 2001, activity reflected in net investment income related
to these options was not significant.

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 and were insignificant
for the year ended December 31, 2002 and 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 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:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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:

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 2002 and 2001, and 4.1% to 6.7% in 2000. 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 3.0%
to 7.8% in 2002, 4.0% to 9.8% in 2001 and 4.0% to 9.0% in 2000.

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 structured settlements 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)

For immediate annuities, the 1971 IAM is used for issues prior to 1992, the
83a table is used for issues between 1992 and 1999, and issues after 1999 use
the 2000a table.

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. In May 2002, the Company replaced an expiring $375 bank
agreement with new unsecured revolving credit agreements, currently aggregating
$525, half available for five years and half available for 364 days. The credit
agreements principally support our issuance of commercial paper. As of December
31, 2002, outstanding commercial paper had various maturities, with none in
excess of 120 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
59

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

weighted-average interest rates for commercial paper borrowings outstanding of
$453 and $297 at December 31, 2002 and 2001 were 1.44% and 3.72%.

EXCHANGEABLE SECURITIES

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

MEDS

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

ACES

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

INTEREST

Interest expense totaled $15, $44, and $67 for 2002, 2001 and 2000,
respectively.

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.

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
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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 143 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 independent
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 13,616,841 shares are available for issuance pursuant to
outstanding or future awards as of December 31, 2002. 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.

NON-EMPLOYEE DIRECTORS' PLAN

Under the Non-Employee Directors' Stock Option Plan, 758,721 shares of the
Company's common stock are reserved for issuance pursuant to outstanding or
future awards as of December 31, 2002. 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:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes certain stock option information at December
31, 2002:

These tables include 551,346 outstanding and 421,594 exercisable stock
options held by life insurance agents. These are five year options with most
vesting based on future production and forfeitures have been much higher than on
other options. They are expensed upon vesting in accordance with SFAS 123.

The fair value was estimated at grant date using a Black-Scholes option
pricing model with the following weighted-average assumptions for 2002, 2001 and
2000: risk-free interest rates of 5.0%, 5.2% and 6.7%; volatility factors of the
expected market price of the Company's common stock of 0.22, 0.22 and 0.20; and
a weighted-average expected life of the options of 7.9 years for 2002, 8.1 years
for 2001 and 8.6 years for 2000. 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 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.

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.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 in 2001, primarily through
the addition of deferred income taxes.

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

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 $336 and $364 at December 31, 2002 and $342 and $369 at
December 31, 2001. 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, 2002, 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 $114 of dividends could be paid to the ultimate
parent by the life insurance subsidiaries in 2003 without regulatory approval.

Some states require life insurers to maintain a certain value of securities
on deposit with the state in order to conduct business in that state. Our
insurance subsidiaries had securities totaling $27 million on deposit with
various states in 2002 and 2001.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13. INCOME TAXES

Income taxes reported are as follows:

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, 1996, 1997 and 1998, and
assessments totaling $33.5 million have been proposed. The assessments pertain
to issues related to timing differences between tax accounting and accounting
principles generally accepted in the United States. The Company has contested
the proposed assessments. The 1999 tax year is currently under examination by
the Internal Revenue Service, and no assessments have been proposed to date.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 million.

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:

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 $2 in 2002, and $1 in 2001
and 2000.

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, $4 and $3 during 2002,
2001 and 2000.

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 74% of the Periodic Payment Annuities (PPA) and 100% 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 $889 and $914 due from the Household affiliates at
December 31, 2002 and 2001.

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.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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, 2002 and 2001, JPFIC had reinsurance recoverable of $79
and $81 from a single reinsurer, pursuant to a 50% coinsurance agreement. JPFIC
and the reinsurer are joint and equal owners in $144 and $162 of securities and
short-term investments as of December 31, 2002 and 2001, 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, 2002.

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. 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

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the business segments are the same as those described in Note 2.
Substantially all revenue is derived from sales in the United States, and
foreign assets are not material. The following table summarizes financial
information of the reportable segments:

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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.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17. OTHER COMPREHENSIVE INCOME

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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

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 $73 at December 31, 2002.

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, 2002 was $16. JP
has no other off balance sheet arrangements of a financing nature.

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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

The Company and certain life insurance subsidiaries have been defendants in
two separate proposed class action suits. The plaintiffs' fundamental claim in
the first suit is that policy illustrations were misleading to consumers. The
second suit alleges that a predecessor company, decades ago, unfairly
discriminated in the sale of certain small face amount life insurance policies,
and unreasonably priced these policies. In 2002, the Company increased its
litigation accrual by $23.1 taking into consideration the status of pending
litigation for class action suits and other cases. On March 10, 2003, the
Company announced that a North Carolina judge had authorized us to send a notice
to participating class policyholders that an agreement had been reached with
plaintiff's counsel to settle one of the existing class action suits. In the
settlement, the Company has denied any wrongdoing but believes that the
settlement provides benefits to the policyholder class, and to the Company by
resolving and eliminating the need for corporate resources to be spent on a
lawsuit that has been pending for seven years. In the second suit, management
believes that the Company's practices have complied with state insurance laws
and intends to vigorously defend the claims asserted.

In the normal course of business, the Company and its subsidiaries are
parties to various lawsuits. 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.

72

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 5, 2003 (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 absence of any 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 AND
RELATED STOCKHOLDER MATTERS

We incorporate by reference the information under the headings "Stock
Ownership" and "Equity Compensation Plan Information" in the Proxy Statement. We
have no equity compensation plans that have not been approved by shareholders.

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.

ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this report, we carried out
an evaluation, under the supervision and with the participation of our
management, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Securities Exchange Act of 1934
Rule 13a-15. Based upon that evaluation, our management, including our CEO and
CFO, concluded that our disclosure controls and procedures were effective.
Disclosure controls and procedures are controls and procedures that are designed
to ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.

There have been no significant changes in our internal controls or in other
factors that could significantly affect our internal controls subsequent to the
date we carried out this evaluation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) This portion of Item 15 appears in a separate section of this report.
See the index on page F-1. The List and Index of Exhibits appears on pages E-1 -
E-2 of this report.

(b) No Form 8-K was filed in the fourth quarter 2002.

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

(d) Financial Statement Schedules -- This portion of Item 15 appears in a
separate section of this report. See the index on page F-1.

73

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.

74

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, 2003

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, 2003

BY (SIGNATURE) /s/ REGGIE D. ADAMSON
--------------------------------------------------------
(NAME AND TITLE) Reggie D. Adamson
Senior Vice President, Financial Operations
(Principal Accounting Officer)
DATE March 26, 2003

BY (SIGNATURE) /s/ EDWIN B. BORDEN*
--------------------------------------------------------
(NAME AND TITLE) Edwin B. Borden, Director
DATE March 26, 2003

BY (SIGNATURE) /s/ WILLIAM H. CUNNINGHAM*
--------------------------------------------------------
(NAME AND TITLE) William H. Cunningham, Director
DATE March 26, 2003

BY (SIGNATURE) /s/ ROBERT G. GREER*
--------------------------------------------------------
(NAME AND TITLE) Robert G. Greer, Director
DATE March 26, 2003

BY (SIGNATURE) /s/ GEORGE W. HENDERSON, III*
--------------------------------------------------------
(NAME AND TITLE) George W. Henderson, III
DATE March 26, 2003

BY (SIGNATURE) /s/ ELIZABETH VALK LONG*
--------------------------------------------------------
(NAME AND TITLE) Elizabeth Valk Long
DATE March 26, 2003

75

BY (SIGNATURE) /s/ E. S. MELVIN*
---------------------------------------------------------
(NAME AND TITLE) E. S. Melvin, Director
DATE March 26, 2003

BY (SIGNATURE) /s/ KENNETH C. MLEKUSH
---------------------------------------------------------
(NAME AND TITLE) Kenneth C. Mlekush, Director
DATE March 26, 2003

BY (SIGNATURE) /s/ WILLIAM P. PAYNE*
---------------------------------------------------------
(NAME AND TITLE) William P. Payne, Director
DATE March 26, 2003

BY (SIGNATURE) /s/ PATRICK S. PITTARD*
---------------------------------------------------------
(NAME AND TITLE) Patrick S. Pittard, Director
DATE March 26, 2003

BY (SIGNATURE) /s/ DONALD S. RUSSELL, JR.*
---------------------------------------------------------
(NAME AND TITLE) Donald S. Russell, Jr., Director
DATE March 26, 2003

*By /s/ ROBERT A. REED
--------------------------------------------------------------
Robert A. Reed, Attorney-in-Fact
March 26, 2003

76

CERTIFICATIONS

I, David A. Stonecipher, certify that:

1. I have reviewed this annual report on Form 10-K of Jefferson-Pilot
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ DAVID A. STONECIPHER
--------------------------------------
David A. Stonecipher
Chief Executive Officer
March 26, 2003

77

I, Theresa M. Stone, certify that:

1. I have reviewed this annual report on Form 10-K of Jefferson-Pilot
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

(d) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and

(e) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ THERESA M. STONE
--------------------------------------
Theresa M. Stone
Chief Financial Officer

March 26, 2003

78

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, 2002 and 2001

Consolidated Statements of Income -- Years Ended December 31, 2002,
2001 and 2000

Consolidated Statements of Stockholders' Equity -- Years Ended
December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows -- Years Ended December 31,
2002, 2001 and 2000

Notes to Consolidated Financial Statements -- December 31, 2002

The following consolidated financial statement schedules of Jefferson-Pilot
Corporation and subsidiaries are included in Item 15(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, 2002
IN MILLIONS

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

a. Cost of debt securities is original cost, reduced by repayments and
other-than-temporary impairments and adjusted for amortization of premiums
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, 2002.

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, 2002.

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 $45 in 2002, $71 in 2001, and $94 in 2000.

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.

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 2002
IN MILLIONS

F-8

LIST AND INDEX OF EXHIBITS

E-1

E-2

(JEFFERSON PILOT FINANCIAL LOGO)

JPC-03547 3/03