##### 









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, DC 20549




---

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,
    2003                                             
|           |  | 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)


|                                                                                 |  |                                                                                                           |  |                                                   
|-------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|North Carolina(State or Other Jurisdiction of
    Incorporation or Organization) |  | 100 North Greene Street,
    Greensboro, North Carolina 27401(Address of Principal
    Executive Offices) |  | 56-0896180(I.R.S. Employer
    Identification No.)

Registrants Telephone Number, Including
Area Code: 336-691-3000

Securities registered pursuant to
Section 12(b) of the Act:

|                               |  |                                                 
|------------------------------ |  | ------------------------------------------------
|                               |  | Name of Exchange(s)                             
|Title of Each Class            |  | on Which Registered                             
|                               |  |                                                 
|Common Stock (Par Value $1.25) |  | New York, Midwest and
    Pacific Stock Exchange

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  o

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.  o

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

The aggregate market value of the voting and
non-voting common equity held by nonaffiliates of the registrant
at June 30, 2003 was approximately $5.9 billion. At
March 1, 2004, 141.1 million shares of the
registrants common stock, par value $1.25 per share, were
outstanding.

Documents Incorporated by Reference

Portions of the definitive Proxy Statement to be
filed for the May 3, 2004 Annual Meeting of Shareholders
are incorporated by reference into Part III.

List of Exhibits appears on page E-1.



---






---



##### 



TABLE OF CONTENTS

|                                                                                              |  |                                                                                                    |     |      |    | 
|--------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- | --- | ---- | -- | 
|                                                                                              |  |                                                                                                    |     | Page
|                                                                                              |  |                                                                                                    |     |     
|PART I                                                                                       
|ITEM 1.                                                                                       |  | BUSINESS                                                                                           |     |      | 1  | 
|ITEM 2.                                                                                       |  | PROPERTIES                                                                                         |     |      | 4  | 
|ITEM 3.                                                                                       |  | LEGAL PROCEEDINGS                                                                                  |     |      | 5  | 
|ITEM 4.                                                                                       |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
    HOLDERS                                          |     |      | 5  | 
|                                                                                              |  | EXECUTIVE OFFICERS OF THE REGISTRANT                                                               |     |      | 5  | 
|PART II                                                                                      
|ITEM 5.                                                                                       |  | MARKET FOR THE REGISTRANTS COMMON STOCK AND
    RELATED STOCKHOLDER MATTERS                       |     |      | 7  | 
|ITEM 6.                                                                                       |  | SELECTED FINANCIAL DATA                                                                            |     |      | 7  | 
|ITEM 7.                                                                                       |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |     |      | 10 | 
|ITEM 7A.                                                                                      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK                                     |     |      | 41 | 
|ITEM 8.                                                                                       |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                        |     |      | 42 | 
|ITEM 9.                                                                                       |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE           |     |      | 80 | 
|ITEM 9A.                                                                                      |  | CONTROLS AND PROCEDURES                                                                            |     |      | 80 | 
|PART III                                                                                     
|ITEM 10.                                                                                      |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                 |     |      | 80 | 
|ITEM 11.                                                                                      |  | EXECUTIVE COMPENSATION                                                                             |     |      | 80 | 
|ITEM 12.                                                                                      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |     |      | 80 | 
|ITEM 13.                                                                                      |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                     |     |      | 80 | 
|ITEM 14.                                                                                      |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                             |     |      | 80 | 
|PART IV                                                                                      
|ITEM 15.                                                                                      |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
    REPORTS ON FORM 8-K                                |     |      | 81 | 
|Undertakings                                                                                  |  |                                                                                                    | 81  |     
|Signatures                                                                                    |  |                                                                                                    | 82  |     
|List of Financial Statements and Financial
    Statement Schedules, followed by the Schedules |  |                                                                                                    | F-1 |     
|List and Index of Exhibits, followed by Exhibits
    including certifications                 |  |                                                                                                    | E-1 |     



---



##### 



PART I



|        |         
|------- | --------
|Item 1. | Business

(a) General
Development of Business

Jefferson-Pilot Corporation (JP) was incorporated
in North Carolina in 1968. While JP 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 (with its
    subsidiaries, JPSC), 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 our
broker/dealers, and the group life, disability income and dental
operations operate primarily 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 nine
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 principal 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 reduced costs and improved efficiency in our
insurance operations.

In March 2004, JPFIC acquired the U.S. group
life, disability income and dental insurance business of The
Canada Life Assurance Company.

Following strategic studies, in 2000 we adopted a
refined strategy called Premier Partnering. Strategic
initiatives include improved service for more productive agents.
We experienced substantial growth in life insurance sales and an
increase in the number of agents who qualify as Premier Partners
after we began implementing this strategy.

(b) Financial
Information About Industry Segments

We present industry segment information in
Note 15.

1



---



##### 



(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*

|                                |  |               |       |      |  |      |       |  |  |   |       | 
|------------------------------- |  | ------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                |  | 2003          |       | 2002 |  | 2001
|                                |  |               |       |      |  |     
|                                |  |              
|                                |  | (In Millions)
|Individual Products             |  | $             | 1,774 |      |  | $    | 1,737 |  |  | $ | 1,682 | 
|Annuity and Investment Products |  |               | 694   |      |  |      | 686   |  |  |   | 647   | 
|Benefit Partners                |  |               | 820   |      |  |      | 698   |  |  |   | 602   | 
|Communications                  |  |               | 214   |      |  |      | 208   |  |  |   | 195   | 
|Corporate and Other             |  |               | 71    |      |  |      | 77    |  |  |   | 196   | 
|                                |  |               |       |      |  |      |       |  |  |   |       | 
|                                |  | $             | 3,573 |      |  | $    | 3,406 |  |  | $ | 3,322 | 
|                                |  |               |       |      |  |      |       |  |  |   |       | 

|  |                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Revenues include net investment income. Corporate
    and Other revenues include ($47), ($22) and $66 of realized
    (losses) gains for 2003, 2002 and 2001.

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 insurance
policies on an individual basis, and individual non-variable
annuities including equity indexed 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. 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. 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 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 11
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 dividends by insurance subsidiaries above specified
limits, 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, 2003, our insurance operations including our
broker/dealer employed approximately 2,600 persons and
contracted with another approximately 600 agency building
general agents (career agents) and home service agents who are
statutory employees for FICA purposes. 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
reduced 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 operates 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.

3



---



##### 



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 and one AM and two FM
stations in Miami, FL. In San Diego, CA, JPCC owns and operates
three FM stations, owns one AM station now operated by a third
party under a local marketing agreement (LMA) and operates one
FM station under an LMA with the stations owner.

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 18.

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
distribution cable and satellite television and direct
transmission radio. JP Sports competes with other vendors of
similar products and services.

Employees.As of
December 31, 2003, JPCC employed approximately 765 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. 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.

4



---



##### 



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

JPFIC conducts operations in Omaha, NE in three
buildings on its 11 acre campus. Portions of two buildings are
leased to others.

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 was 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 plaintiffs fundamental claim was
that policy illustrations were misleading to consumers. The
Court approved a settlement of this case on June 17, 2003
and we do not intend to further report on this case. In the
settlement, JP Life denied any wrongdoing but believes that the
settlement provides benefits to class policyholders, and will
benefit JP Life by resolving and eliminating the need for
corporate resources to be spent on a lawsuit that has been
pending for seven years. JP Life has administered the
settlement in accordance with its terms.

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. Based on consultation with our legal advisers,
management believes that resolution of pending legal proceedings
will not have a material adverse effect on our financial
position or liquidity, but could have a material adverse effect
on the results of operations for a specific period.

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



|        |                                                          
|------- | ---------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of
    Securities Holders

None.

Executive Officers of the Registrant

David A. Stonecipher, 62, Chairman of the
Board, and also Chief Executive Officer to March 1, 2004,
joined JP in 1992 and became President and CEO in March 1993,
and Chairman in May 1998. He also served as President until
November 2001.

Dennis R. Glass, 54, President and Chief
Executive Officer since March 1, 2004, and previously
President and Chief Operating Officer since November 2001,
joined JP in 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.

5



---



##### 



Robert D. Bates, 62, 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.

Charles C. Cornelio, 44, has been Executive Vice
President  Technology and Insurance Services since
February 9, 2004, and previously he was Senior Vice
President. He joined JP in 1997 when we acquired JPFIC from The
Chubb Corporation.

Mark E. Konen, 45, has been Executive Vice
President  Life and Annuity Manufacturing since
February 9, 2004, and previously he was Senior Vice
President. He joined JP in 1994.

Warren H. May, 49, 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.

Theresa M. Stone, 59, 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 when we
acquired JPFIC.

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.

6



---



##### 



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:

|               |  |      |       |      |  |      |       |      |  |      |       |     |  |      |       |     |  |      |       |     |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|-------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  | ---- | ----- | --- |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|               |  |      |       |      |  |      |       |      |  |     
|               |  | 2003 |       | 2002 |  | 2001 |       | 2000 |  | 1999
|               |  |      |       |      |  |      |       |      |  |     
|               |  | High |       | Low  |  | High |       | Low  |  | High |       | Low |  | High |       | Low |  | High |       | Low
|               |  |      |       |      |  |      |       |      |  |      |       |     |  |      |       |     |  |      |       |    
|First Quarter  |  |      | 40.93 |      |  |      | 35.75 |      |  |      | 53.00 |     |  |      | 45.23 |     |  |      | 49.67 |     |  |  | 41.00 |  |  |  | 45.42 |  |  |  | 33.25 |  |  |  | 51.58 |  |  |  | 44.04 | 
|Second Quarter |  |      | 43.20 |      |  |      | 38.34 |      |  |      | 52.99 |     |  |      | 45.07 |     |  |      | 49.25 |     |  |  | 44.07 |  |  |  | 46.46 |  |  |  | 36.88 |  |  |  | 47.50 |  |  |  | 42.42 | 
|Third Quarter  |  |      | 46.57 |      |  |      | 41.21 |      |  |      | 47.50 |     |  |      | 36.75 |     |  |      | 49.00 |     |  |  | 38.00 |  |  |  | 47.21 |  |  |  | 37.83 |  |  |  | 50.42 |  |  |  | 41.00 | 
|Fourth Quarter |  |      | 50.72 |      |  |      | 44.55 |      |  |      | 45.21 |     |  |      | 36.35 |     |  |      | 46.90 |     |  |  | 41.15 |  |  |  | 50.58 |  |  |  | 39.33 |  |  |  | 53.08 |  |  |  | 40.79 | 

(b) Holders. As of March 1,
2004, our stock was owned by 8,848 shareholders of record,
and a much larger number of street name holders.

(c) Dividends. They are shown in
Item 6 below on page 8. 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

REVENUE BY SOURCES

|                                                                                                          |                |               |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |       | 
|--------------------------------------------------------------------------------------------------------- | -------------- | ------------- | ----- | ----- |  | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                                                                                          |                | 2003          |       | 2002  |  | 2001 |       | 2000  |  | 1999
|                                                                                                          |                |               |       |       |  |      |       |       |  |     
|                                                                                                          |                |              
|                                                                                                          |                | (In Millions)
|Individual Products                                                                                       |                | $             | 1,774 |       |  | $    | 1,737 |       |  | $    | 1,682 |       |  | $ | 1,664 |       |  | $ | 1,462 |      
|Annuities and Investment Products                                                                         |                |               | 694   |       |  |      | 686   |       |  |      | 647   |       |  |   | 629   |       |  |   | 511   |      
|Benefit Partners                                                                                          |                |               | 820   |       |  |      | 698   |       |  |      | 602   |       |  |   | 537   |       |  |   | 164   |      
|Communications                                                                                            |                |               | 214   |       |  |      | 208   |       |  |      | 195   |       |  |   | 206   |       |  |   | 200   |      
|Corporate and Other                                                                                       |                |               | 118   |       |  |      | 99    |       |  |      | 130   |       |  |   | 134   |       |  |   | 150   |      
|                                                                                                          |                |               |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|Revenues before investment (losses)
    gains and cumulative effect of change in accounting
    principle |                |               | 3,620 |       |  |      | 3,428 |       |  |      | 3,256 |       |  |   | 3,170 |       |  |   | 2,487 |      
|Realized investment (losses) gains                                                                        |                |               | (47   | )     |  |      | (22   | )     |  |      | 66    |       |  |   | 102   |       |  |   | 101   |      
|Cumulative effect of change in accounting for
    derivative instruments (1)                              |                |               |      |       |  |      |      |       |  |      | 2     |       |  |   |      |       |  |   |      |      
|                                                                                                          |                |               |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|                                                                                                          | Total Revenues |               | $     | 3,573 |  |      | $     | 3,406 |  |      | $     | 3,324 |  |   | $     | 3,272 |  |   | $     | 2,588 | 
|                                                                                                          |                |               |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      

NET INCOME BY SOURCES

|                                                                                                            |                                             |               |     |      |  |      |     |      |  |      |     |     |  |   |     |     |  |   |     |     | 
|----------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | --- |  | - | --- | --- |  | - | --- | --- | 
|                                                                                                            |                                             | 2003          |     | 2002 |  | 2001 |     | 2000 |  | 1999
|                                                                                                            |                                             |               |     |      |  |      |     |      |  |     
|                                                                                                            |                                             |              
|                                                                                                            |                                             | (In Millions)
|Individual Products                                                                                         |                                             | $             | 309 |      |  | $    | 293 |      |  | $    | 295 |     |  | $ | 287 |     |  | $ | 242 |    
|Annuities and Investment Products                                                                           |                                             |               | 85  |      |  |      | 80  |      |  |      | 75  |     |  |   | 78  |     |  |   | 67  |    
|Benefit Partners                                                                                            |                                             |               | 51  |      |  |      | 48  |      |  |      | 44  |     |  |   | 33  |     |  |   | 25  |    
|Communications                                                                                              |                                             |               | 46  |      |  |      | 40  |      |  |      | 34  |     |  |   | 41  |     |  |   | 38  |    
|Corporate and Other                                                                                         |                                             |               | 32  |      |  |      | 4   |      |  |      | 20  |     |  |   | 6   |     |  |   | 33  |    
|                                                                                                            |                                             |               |     |      |  |      |     |      |  |      |     |     |  |   |     |     |  |   |     |    
|Net income before investment (losses)
    gains and cumulative effect of change in accounting
    principle |                                             |               | 523 |      |  |      | 465 |      |  |      | 468 |     |  |   | 445 |     |  |   | 405 |    
|Realized investment (losses) gains, net of taxes                                                            |                                             |               | (31 | )    |  |      | (15 | )    |  |      | 44  |     |  |   | 67  |     |  |   | 65  |    
|Cumulative effect of change in accounting for
    derivative instruments, net of taxes (1)                  |                                             |               |    |      |  |      |    |      |  |      | 1   |     |  |   |    |     |  |   |    |    
|                                                                                                            |                                             |               |     |      |  |      |     |      |  |      |     |     |  |   |     |     |  |   |     |    
|                                                                                                            | Net Income Available to Common Stockholders |               | $   | 492  |  |      | $   | 450  |  |      | $   | 513 |  |   | $   | 512 |  |   | $   | 470 | 
|                                                                                                            |                                             |               |     |      |  |      |     |      |  |      |     |     |  |   |     |     |  |   |     |    



---



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

7



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

SUMMARY OF SELECTED FINANCIAL DATA

|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |      |      | 
|------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------- | ---------------------------------------------------- | ------- | ---- | ---- | ---- | ------- | ---- | ---- | ---- | ------- | ---- | ---- | - | ------- | ---- | ---- | - | ------- | ---- | ---- | 
|                                                                                                                                                 |                                             | 2003                                                 |         | 2002 |      | 2001 |         | 2000 |      | 1999
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |     
|                                                                                                                                                 |                                             |                                                     
|                                                                                                                                                 |                                             | (In Millions Except Share and Per Share Information)
|Total reportable segment results before gains
    (losses) from sales of investments and cumulative effect of
    change in accounting principle |                                             | $                                                    | 523     |      |      | $    | 465     |      |      | $    | 468     |      |      | $ | 445     |      |      | $ | 405     |     
|Gains (losses) from sales of investments, net of
    taxes                                                                                       |                                             |                                                      | (31     | )    |      |      | (15     | )    |      |      | 44      |      |      |   | 67      |      |      |   | 65      |     
|Cumulative effect of change in accounting for
    derivative instruments, net of taxes                                                           |                                             |                                                      |        |      |      |      |        |      |      |      | 1       |      |      |   |        |      |      |   |        |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Net income available to common stockholders                                                                                                      |                                             | $                                                    | 492     |      |      | $    | 450     |      |      | $    | 513     |      |      | $ | 512     |      |      | $ | 470     |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Income per share of common stock before
    cumulative effect of change in accounting principle                                                  |                                             | $                                                    | 3.47    |      |      | $    | 3.07    |      |      | $    | 3.37    |      |      | $ | 3.31    |      |      | $ | 2.97    |     
|Cumulative effect of change in accounting for
    derivative instruments, net of taxes                                                           |                                             |                                                      |        |      |      |      |        |      |      |      | 0.01    |      |      |   |        |      |      |   |        |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Net income available to common stockholders                                                                                                      |                                             | $                                                    | 3.47    |      |      | $    | 3.07    |      |      | $    | 3.38    |      |      | $ | 3.31    |      |      | $ | 2.97    |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Income per share of common stock 
    assuming dilution:                                                                                        |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|                                                                                                                                                 | Net income available to common stockholders |                                                      | $       | 3.44 |      |      | $       | 3.04 |      |      | $       | 3.34 |      |   | $       | 3.28 |      |   | $       | 2.95 |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Cash dividends declared on common stock                                                                                                          |                                             | $                                                    | 187     |      |      | $    | 175     |      |      | $    | 166     |      |      | $ | 152     |      |      | $ | 138     |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Cash dividends paid per common share:                                                                                                            |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|                                                                                                                                                 | First quarter                               |                                                      | $       | 0.30 |      |      | $       | 0.28 |      |      | $       | 0.25 |      |   | $       | 0.22 |      |   | $       | 0.20 |     
|                                                                                                                                                 | Second quarter                              |                                                      |         | 0.33 |      |      |         | 0.30 |      |      |         | 0.28 |      |   |         | 0.25 |      |   |         | 0.22 |     
|                                                                                                                                                 | Third quarter                               |                                                      |         | 0.33 |      |      |         | 0.30 |      |      |         | 0.28 |      |   |         | 0.25 |      |   |         | 0.22 |     
|                                                                                                                                                 | Fourth quarter                              |                                                      |         | 0.33 |      |      |         | 0.30 |      |      |         | 0.28 |      |   |         | 0.25 |      |   |         | 0.22 |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|                                                                                                                                                 |                                             | Total                                                |         | $    | 1.29 |      |         | $    | 1.18 |      |         | $    | 1.07 |   |         | $    | 0.96 |   |         | $    | 0.86 | 
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Average common shares outstanding (thousands)                                                                                                    |                                             |                                                      | 141,795 |      |      |      | 146,847 |      |      |      | 151,915 |      |      |   | 154,576 |      |      |   | 157,725 |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Total assets                                                                                                                                     |                                             | $                                                    | 32,696  |      |      | $    | 30,619  |      |      | $    | 29,005  |      |      | $ | 27,331  |      |      | $ | 26,456  |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Debt, junior subordinated debentures and
    mandatorily redeemable preferred stock                                                              |                                             | $                                                    | 963     |      |      | $    | 762     |      |      | $    | 756     |      |      | $ | 853     |      |      | $ | 960     |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Stockholders equity                                                                                                                             |                                             | $                                                    | 3,806   |      |      | $    | 3,540   |      |      | $    | 3,391   |      |      | $ | 3,159   |      |      | $ | 2,753   |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Stockholders equity per share of common
    stock                                                                                               |                                             | $                                                    | 27.07   |      |      | $    | 24.79   |      |      | $    | 22.61   |      |      | $ | 20.47   |      |      | $ | 17.75   |     
|                                                                                                                                                 |                                             |                                                      |         |      |      |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     

Note: All share information has been restated to
reflect the April 2001

3-for-2 stock split, effected in the form of a
stock dividend.


Cash dividends per share may not add due to
rounding related to the splits.


8



---



##### 



SUPPLEMENTAL INFORMATION

|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |       |         | 
|------------------------------------------------------ | -------------- | ----------------------------- | ------- | ----- | ------- | ---- | ------ | ----- | ------- | ---- | ------ | ----- | ------- | - | ------ | ----- | ------- | - | ------ | ----- | ------- | 
|                                                       |                | 2003                          |         | 2002  |         | 2001 |        | 2000  |         | 1999
|                                                       |                |                               |         |       |         |      |        |       |         |     
|                                                       |                |                              
|                                                       |                | (In Millions)                
|Life Insurance In Force (Excludes
    Annuities):      |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|Traditional                                            |                | $                             | 40,583  |       |         | $    | 41,570 |       |         | $    | 41,185 |       |         | $ | 43,083 |       |         | $ | 46,997 |      
|Universal Life                                         |                |                               | 96,369  |       |         |      | 91,675 |       |         |      | 89,054 |       |         |   | 89,741 |       |         |   | 93,407 |      
|Variable Universal Life                                |                |                               | 29,547  |       |         |      | 30,327 |       |         |      | 28,650 |       |         |   | 23,884 |       |         |   | 17,944 |      
|Benefit Partners                                       |                |                               | 100,432 |       |         |      | 90,627 |       |         |      | 53,763 |       |         |   | 61,812 |       |         |   | 55,877 |      
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|                                                       |                | Total Life Insurance In Force |         | $     | 266,931 |      |        | $     | 254,199 |      |        | $     | 212,652 |   |        | $     | 218,520 |   |        | $     | 214,225 | 
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|Life Premiums on a SFAS 60
    Basis:                  |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|First Year Life (Note)                                 |                | $                             | 834     |       |         | $    | 821    |       |         | $    | 918    |       |         | $ | 517    |       |         | $ | 605    |      
|Renewal and Other Life                                 |                |                               | 1,106   |       |         |      | 1,059  |       |         |      | 1,061  |       |         |   | 1,062  |       |         |   | 931    |      
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|                                                       | Life Insurance |                               |         | 1,940 |         |      |        | 1,880 |         |      |        | 1,979 |         |   |        | 1,579 |         |   |        | 1,536 |        
|Accident and Health, Including Premium
    Equivalents |                |                               | 533     |       |         |      | 445    |       |         |      | 382    |       |         |   | 351    |       |         |   | 144    |      
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|                                                       |                | Total Life Insurance Premiums |         | $     | 2,473   |      |        | $     | 2,325   |      |        | $     | 2,361   |   |        | $     | 1,930   |   |        | $     | 1,680   | 
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|Annuity Premiums on a SFAS 60
    Basis:               |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|Fixed Annuity                                          |                | $                             | 815     |       |         | $    | 1,051  |       |         | $    | 1,497  |       |         | $ | 1,273  |       |         | $ | 858    |      
|Variable Annuity (including separate accounts)         |                |                               | 11      |       |         |      | 26     |       |         |      | 59     |       |         |   | 127    |       |         |   | 140    |      
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|                                                       |                | Total Annuity Premiums        |         | $     | 826     |      |        | $     | 1,077   |      |        | $     | 1,556   |   |        | $     | 1,400   |   |        | $     | 998     | 
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|Investment Product Sales                               |                | $                             | 3,258   |       |         | $    | 2,904  |       |         | $    | 2,803  |       |         | $ | 3,677  |       |         | $ | 2,361  |      
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      
|Communications Broadcast Cash Flow                     |                | $                             | 92      |       |         | $    | 85     |       |         | $    | 74     |       |         | $ | 90     |       |         | $ | 85     |      
|                                                       |                |                               |         |       |         |      |        |       |         |      |        |       |         |   |        |       |         |   |        |      

Note: First year life premiums include single
premiums.

9



---



##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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, 2003, 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 holding company
whose financial services and broadcasting subsidiaries provide
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 principal life insurance subsidiaries are
Jefferson-Pilot Life Insurance Company (JP Life), Jefferson
Pilot Financial Insurance Company (JPFIC) and its wholly
owned subsidiary, Jefferson Pilot LifeAmerica Insurance Company
(JPLA). 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.

In our three financial services segments,
effective investment management and asset/liability management
are important to our financial position and results of
operations. Interest spread, which represents the difference
between interest earned on our investments and interest credited
to policyholder funds, is a key component of our reportable
segment results. The earned rate on our investments has declined
in recent years as a result of a decline in the general interest
rate environment. We establish credited rates within a highly
competitive market for financial products. In establishing these
rates, we start with an analysis of rates credited by other
insurance companies and also compare rates offered by other
financial services providers, such as bank certificates of
deposit. These rates may impact the level of new sales or
retention of existing customers. We believe that the
historically low interest rate levels that we are currently
experiencing will continue to challenge our earnings
progression. Our operating results are also dependent on the
level of mortality (death) and morbidity (disability and
health) costs we incur. We attempt to address these conditions
through underwriting risk selection and classification, by
adjusting policyholder crediting rates to achieve desired spread
performance, by monitoring claim and industry health care trend
reports, and through a focus on conservative product designs.
Also, we record substantial intangible asset balances because of
commissions and expenses incurred in selling new policies, and
because of acquisitions (DAC, VOBA, goodwill). The assumptions
that we use in accounting for these intangible assets are
important to our reported results.

For a more complete explanation of these
important concepts, please see the Critical Accounting Policies,
Financial Position, Investments and Market Risk Exposures
sections of this report.

We use reportable segment results in assessing
the performance of our business segments internally and believe
it to be relevant and useful information. 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. Reportable segment results
as described above may not be comparable to similarly titled
measures reported by other companies.

10



---



##### 



Our Individual Productssegment sells life
insurance on individuals, through which we underwrite the
economic risks of mortality and provide vehicles for the
accumulation of individual savings. We select and classify
mortality risks, using actuarial science, within a competitive
marketplace in accordance with various state and federal
regulations. Because we earn revenues for accepting mortality
risks, the growth in face amount of insurance in force is a key
measure for a portion of our revenue growth. Because Individual
Products operates under two distinct accounting models, we
further analyze this segment by its two main product types:
UL-type products and traditional products. UL-type products
offered by this segment include universal life (UL) and
variable universal life (VUL) products. 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 earn spreads between interest earned and
credited to policyholders from aggregation and investment of
policyholder funds. In managing these spreads, we develop and
maintain systems and skills that are necessary to understand and
mitigate credit and interest rate risks. We also recognize
revenues on these products from mortality, expense and surrender
charges earned (policy charges). Trends in policyholder fund
balances and segment assets are important measures when
analyzing the development of segment earnings. Due to
competition from other financial services providers, it is
important that we achieve continuing improvements in internal
cost efficiencies in relation to policies administered and
assets under management.

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. Because of market
preferences, we do not offer new traditional products except for
some term life insurance.

Product development is important to growth in
sales. We operate within a competitive marketplace by offering
products that respond to demographic changes, the evolving
financial needs of our customers, and regulatory requirements.
We currently sell individual life insurance products designed to
provide our customers vehicles for wealth accumulation,
mortality protection, and a balance between those two
objectives. Because this segment issues long duration contracts,
sales results may not materially impact current period
profitability, but longer-term sales trends are an important
indicator of future growth in reportable segment results.

Our Annuity and Investment Product (AIP)segment primarily offers our proprietary fixed annuity
products. We also sell mutual funds and other investment
products through our broker/dealer. We earn interest spreads and
policy charges on our annuity products, and recognize revenues
from concession income earned on investment product sales by our
broker/dealer. The principal source of reportable segment
results is investment spreads on policyholder fund balances.
Investment selection and matching of interest rate risk profiles
of investments to those of policyholder fund balances are
critical to achieving successful results within this segment. In
recent years, historically low levels of interest rates have
reduced the margin between rates we credit to policyholder
accounts and those that are guaranteed under contractual
provisions, and therefore will limit our ability to reduce
crediting rates. We have responded to that exposure through
innovative product designs that reduce spreads required to
achieve desired returns. Because we derive a majority of our
earnings from spread management activities, trends in
policyholder fund balances and effective investment spreads
earned are both important drivers of reportable segment results.

Product development activities are important to
providing appropriate products to a highly competitive
marketplace. We have introduced new products with fixed interest
and equity index components in recent months that have
contributed to improving sales trends, whereas sales of
traditional fixed interest, multi-year guarantee products
declined in the two most recent years because of competition
from other financial services providers within a declining
interest rate environment. New fixed annuity premium sales and
surrenders of existing policies are both key indicators of
growth in policyholder fund balances.

Our Benefit Partnerssegment insures
individuals for mortality, morbidity and dental costs under
master group insurance contracts with employers. This segment
offers various forms of contributory and noncontributory plans,
as well as supplemental contracts. Most of our group contracts
are sold to employers with fewer than 500 employees. We
select and classify risks within a competitive marketplace based
on group characteristics, applying actuarial science and group
underwriting practices. We may adjust premiums charged for
insuring group

11



---



##### 



risks, usually on an annual basis, in relation to
evolving group characteristics and subject to policyholder
acceptance.


Insurance products offered by this segment to the
employer marketplace include group non-medical products,
principally term life, disability and dental insurance. As these
are traditional products, we recognize premium receipts from
this segment as revenues and profits are expected to emerge in
proportion to the revenue recognized. Because group underwriting
risks may change over time, management focuses on trends in loss
ratios to compare actual experience with pricing expectations.
Also, expense ratios are an important factor in profitability
since group insurance contracts are offered within an
environment that competes on the basis of price and service.
Reported sales relate to long duration contracts sold to new
policyholders. The trend in sales is an important indicator of
development of business in force over time.

In March 2004, we acquired Canada Lifes
U.S. based group life, disability and dental business.
Following this acquisition, we are positioned with approximately
$1 billion of annual group life, disability and dental
premiums, one-third of which is due to the acquisition.

Our Communicationssegment consists of
radio and television broadcasting operations located in selected
markets in the Southeastern and Western United States, and
sports program production. We generate revenues for this segment
through advertising, sales of programming rights and other
programming compensation.

Management evaluates the performance of our
broadcast stations using a number of metrics including audience
levels (ratings), growth in audiences, revenue growth, relative
share of market revenues, and operating efficiencies, with the
ultimate goal of achieving growth in broadcast cash flow. We
focus our efforts at the local level, combining sound business
practices with service to the community. We monitor each
stations product through market research and tailor the
product to our target audiences tastes and
listening/viewing habits. We attempt to maximize revenues and
increase revenue share by focusing on management of commercial
inventory and pricing. We achieve operating efficiencies by
exercising tight expense control at both the local and corporate
levels.

Our Corporate and Othersegment 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 defaulted 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.

The Companys business segments, operating
results, risks and opportunities are discussed in further detail
in the sections that follow.



| |                 
| | ----------------
| | Segment Revenues

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

|                    |  |            |    |      |  |      |    |   |  |  |    |  
|------------------- |  | ---------- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                    |  |           
|                    |  | Year Ended
|                    |  |           
|                    |  | 2003       |    | 2002 |  | 2001
|                    |  |            |    |      |  |     
|Individual Products |  |            | 50 | %    |  |      | 52 | % |  |  | 53 | %
|AIP                 |  |            | 19 | %    |  |      | 20 | % |  |  | 20 | %
|Benefit Partners    |  |            | 22 | %    |  |      | 20 | % |  |  | 18 | %
|Communications      |  |            | 6  | %    |  |      | 6  | % |  |  | 6  | %
|Corporate and Other |  |            | 3  | %    |  |      | 2  | % |  |  | 3  | %

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

12



---



##### 



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, VOBA and Unearned Revenue

The Individual Products, AIP and Benefit Partners
segments defer the costs of acquiring new business. These costs
include first year commissions and group sales representative
incentive compensation, first year bonus interest or day one
premium bonuses on annuities, certain costs of underwriting and
issuing policies plus agency office expenses. These deferred
expenses are referred to as deferred acquisition costs (DAC). We
limit our capitalization of acquisition costs other than
commissions in the Individual and AIP segments 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 value
of business acquired (VOBA). We initially establish VOBA as the
actuarially determined present value of future gross profits of
each business acquired. Both DAC and VOBA reflect our
expectations about the future experience of business in force.
Our 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. Our unearned revenue reserves result from
the deferral of policy charges on certain products with large
up-front expense charges. These reserves are amortized into
income over periods similar to those used for DAC and VOBA. Both
the deferral and amortization of unearned revenue reserves are
reported in U.L. and investment product charges. 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
other-than-temporary impairments, requires professional judgment
and is further described in the Investments section and in
Note 4.

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 other-than-temporary impairments on securities.
Inherently, there are risks and uncertainties involved in making
these judgments. See the discussion of Investments and
Note 4 for further details. Critical assumptions and
changes in circumstances such as a weak economy, an 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.



| |           
| | ----------
| | 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

13



---



##### 



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 estimated 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. See further discussion in Note 18.


Results of Operations

The following tables illustrate our results
before and after realized investment gains and losses, and
reconcile reportable segment results to net income available to
common stockholders, the most directly comparable GAAP financial
measure:

|                                |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |        |   
|------------------------------- | ----------------------------------------------------------------------- | ---- | - | ----- | - | ---- | - | ------------- | - | -------- | - | ----- | --- |  |  | ------ | - |  |  | ------ | --
|                                |                                                                         |      |   |       |   |      |   |              
|                                |                                                                         |      |   |       |   |      |   | Favorable/   
|                                |                                                                         |      |   |       |   |      |   | (Unfavorable)
|                                |                                                                         |      |   |       |   |      |   |              
|                                |                                                                         |      |   |       |   |      |   | 2003 vs.      |   | 2002 vs.
|                                |                                                                         | 2003 |   | 2002  |   | 2001 |   | 2002          |   | 2001    
|                                |                                                                         |      |   |       |   |      |   |               |   |         
|Consolidated Summary of Income  |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|                                | Total reportable segment results                                        |      | $ | 522.5 |   |      | $ | 465.1         |   |          | $ | 469.1 | (a) |  |  | 12.3   | % |  |  | (0.9   | )%
|                                | Realized investment (losses) gains (net of
    applicable income taxes) |      |   | (30.9 | ) |      |   | (14.9         | ) |          |   | 43.7  |     |  |  | (107.4 | ) |  |  | (134.1 | ) 
|                                |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|                                | Net income available to common stockholders                             |      | $ | 491.6 |   |      | $ | 450.2         |   |          | $ | 512.8 |     |  |  | 9.2    | % |  |  | (12.2  | )%
|                                |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|Consolidated Earnings Per Share |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|Basic:                          |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|                                | Total reportable segment results                                        |      | $ | 3.69  |   |      | $ | 3.17          |   |          | $ | 3.09  | (b) |  |  | 16.4   | % |  |  | 2.6    | % 
|                                | Realized investment (losses) gains (net of
    applicable income taxes) |      |   | (0.22 | ) |      |   | (0.10         | ) |          |   | 0.29  |     |  |  | (120.0 | ) |  |  | (134.5 | ) 
|                                |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|                                | Net income available to common stockholders                             |      | $ | 3.47  |   |      | $ | 3.07          |   |          | $ | 3.38  |     |  |  | 13.0   | % |  |  | (9.2   | )%
|                                |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|Fully-diluted:                  |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|                                | Total reportable segment results                                        |      | $ | 3.66  |   |      | $ | 3.14          |   |          | $ | 3.06  |     |  |  | 16.6   | % |  |  | 2.6    | % 
|                                | Realized investment (losses) gains (net of
    applicable income taxes) |      |   | (0.22 | ) |      |   | (0.10         | ) |          |   | 0.28  |     |  |  | (120.0 | ) |  |  | (135.7 | ) 
|                                |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       
|                                | Net income available to common stockholders                             |      | $ | 3.44  |   |      | $ | 3.04          |   |          | $ | 3.34  |     |  |  | 13.2   | % |  |  | (9.0   | )%
|                                |                                                                         |      |   |       |   |      |   |               |   |          |   |       |     |  |  |        |   |  |  |       




|    |                                                                                             
|--- | --------------------------------------------------------------------------------------------
|(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 the cumulative effect of change in accounting for derivatives.

|                                                             |  |      |             |      |  |      |             |  |  |  |             | 
|------------------------------------------------------------ |  | ---- | ----------- | ---- |  | ---- | ----------- |  |  |  | ----------- | 
|                                                             |  | 2003 |             | 2002 |  | 2001
|                                                             |  |      |             |      |  |     
|Average number of shares outstanding                         |  |      | 141,795,065 |      |  |      | 146,846,698 |  |  |  | 151,914,983 | 
|                                                             |  |      |             |      |  |      |             |  |  |  |             | 
|Average number of shares outstanding 
    assuming dilution |  |      | 142,867,215 |      |  |      | 148,222,342 |  |  |  | 153,411,170 | 
|                                                             |  |      |             |      |  |      |             |  |  |  |             | 

The 2003 increase in net income available to
common stockholders reflected earnings growth in all business
segments, partially offset by an increase in net investment
losses. These net investment losses in 2003 and 2002 were
primarily the result of other than temporary bond impairments,
partially offset in 2002 by realized gains from sales of equity
securities.

Total reportable segment results increased in
2003 driven by growth in all segments. An increase in interest
spreads benefited our Individual and our AIP lines and effective
expense management benefited the whole

14



---



##### 



organization. The 2002 results were primarily
influenced by an increase in the accrual for pending litigation
in our Corporate segment which offset growth in our AIP,
Communications and Benefit Partners segments.


Earnings per share amounts for the reportable
segments were more favorable than the absolute earnings amounts
due to repurchases of 3,578,600 shares in 2003 and
7,881,300 shares in 2002.

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 make operating
decisions and assess 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

|                                            |  |      |       |      |  |      |       |               |  |          |       |     |  |  |        |   |  |  |        |   
|------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ------------- |  | -------- | ----- | --- |  |  | ------ | - |  |  | ------ | --
|                                            |  |      |       |      |  |      |       |              
|                                            |  |      |       |      |  |      |       | Favorable/   
|                                            |  |      |       |      |  |      |       | (Unfavorable)
|                                            |  |      |       |      |  |      |       |              
|                                            |  |      |       |      |  |      |       | 2003 vs.      |  | 2002 vs.
|                                            |  | 2003 |       | 2002 |  | 2001 |       | 2002          |  | 2001    
|                                            |  |      |       |      |  |      |       |               |  |         
|Individual Products                         |  | $    | 309.4 |      |  | $    | 293.1 |               |  | $        | 294.5 |     |  |  | 5.6    | % |  |  | (0.5   | )%
|AIP                                         |  |      | 85.0  |      |  |      | 80.3  |               |  |          | 76.4  | (a) |  |  | 5.9    |   |  |  | 5.1    |   
|Benefit Partners                            |  |      | 50.6  |      |  |      | 47.5  |               |  |          | 44.5  |     |  |  | 6.5    |   |  |  | 6.7    |   
|Communications                              |  |      | 45.4  |      |  |      | 39.8  |               |  |          | 33.5  |     |  |  | 14.1   |   |  |  | 18.8   |   
|Corporate and Other                         |  |      | 32.1  |      |  |      | 4.4   |               |  |          | 20.2  |     |  |  | 629.5  |   |  |  | (78.2  | ) 
|                                            |  |      |       |      |  |      |       |               |  |          |       |     |  |  |        |   |  |  |        |   
|Total reportable segment results            |  |      | 522.5 |      |  |      | 465.1 |               |  |          | 469.1 |     |  |  | 12.3   |   |  |  | (0.9   | ) 
|Net realized investment (losses) gains      |  |      | (30.9 | )    |  |      | (14.9 | )             |  |          | 43.7  |     |  |  | (107.4 | ) |  |  | (134.1 | ) 
|                                            |  |      |       |      |  |      |       |               |  |          |       |     |  |  |        |   |  |  |        |   
|Net income available to common stockholders |  | $    | 491.6 |      |  | $    | 450.2 |               |  | $        | 512.8 |     |  |  | 9.2    | % |  |  | (12.2  | )%
|                                            |  |      |       |      |  |      |       |               |  |          |       |     |  |  |        |   |  |  |        |   






|    |                                                                                            
|--- | -------------------------------------------------------------------------------------------
|(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 defaulted securities, to the Corporate and
Other segment. Segment assets as of December 31 were as
follows:

|                    |              |      |        |        |  |   |        |        | 
|------------------- | ------------ | ---- | ------ | ------ |  | - | ------ | ------ | 
|                    |              | 2003 |        | 2002  
|                    |              |      |        |       
|Individual Products |              | $    | 17,717 |        |  | $ | 16,671 |       
|AIP                 |              |      | 9,941  |        |  |   | 9,397  |       
|Benefit Partners    |              |      | 1,079  |        |  |   | 909    |       
|Communications      |              |      | 210    |        |  |   | 204    |       
|Corporate and Other |              |      | 3,749  |        |  |   | 3,438  |       
|                    |              |      |        |        |  |   |        |       
|                    | Total assets |      | $      | 32,696 |  |   | $      | 30,619 | 
|                    |              |      |        |        |  |   |        |       

Individual Products

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

15



---



##### 



Segment results were:

|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |       |     | 
|--------------------- | ----------------------------------------------- | ---------------------------- | - | ------ | ----- | ---- | - | ------------- | ----- | -------- | - | ------ | ----- |  |  | ----- | ---- | - |  | ----- | --- | 
|                      |                                                 |                              |   |        |       |      |   |              
|                      |                                                 |                              |   |        |       |      |   | Favorable/   
|                      |                                                 |                              |   |        |       |      |   | (Unfavorable)
|                      |                                                 |                              |   |        |       |      |   |              
|                      |                                                 |                              |   |        |       |      |   | 2003 vs.      |       | 2002 vs.
|                      |                                                 | 2003                         |   | 2002   |       | 2001 |   | 2002          |       | 2001    
|                      |                                                 |                              |   |        |       |      |   |               |       |         
|UL-Type Products:     |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      | Net investment income                           |                              | $ | 749.2  |       |      | $ | 744.1         |       |          | $ | 693.2  |       |  |  | 0.7   | %    |   |  | 7.3   | %  
|                      | Interest credited to policyholders              |                              |   | (515.4 | )     |      |   | (534.6        | )     |          |   | (502.3 | )     |  |  | 3.6   |      |   |  | (6.4  | )  
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      |                                                 | Interest margin              |   |        | 233.8 |      |   |               | 209.5 |          |   |        | 190.9 |  |  |       | 11.6 |   |  |       | 9.7 | 
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      | Product charge revenue:                         |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |       |    
|                      |                                                 | Cost of insurance charges    |   |        | 511.9 |      |   |               | 478.9 |          |   |        | 463.4 |  |  |       | 6.9  |   |  |       | 3.3 | 
|                      |                                                 | Expense charges              |   |        | 141.6 |      |   |               | 115.4 |          |   |        | 111.0 |  |  |       | 22.7 |   |  |       | 4.0 | 
|                      |                                                 | Surrender charges            |   |        | 34.9  |      |   |               | 38.0  |          |   |        | 35.0  |  |  |       | (8.2 | ) |  |       | 8.6 | 
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      |                                                 | Total product charge revenue |   |        | 688.4 |      |   |               | 632.3 |          |   |        | 609.4 |  |  |       | 8.9  |   |  |       | 3.8 | 
|                      | Death benefits and other insurance benefits     |                              |   | (272.4 | )     |      |   | (245.9        | )     |          |   | (226.9 | )     |  |  | (10.8 | )    |   |  | (8.4  | )  
|                      | Expenses excluding amortization of DAC and VOBA |                              |   | (96.4  | )     |      |   | (101.7        | )     |          |   | (108.3 | )     |  |  | 5.2   |      |   |  | 6.1   |    
|                      | Amortization of DAC and VOBA                    |                              |   | (179.0 | )     |      |   | (154.4        | )     |          |   | (127.6 | )     |  |  | (15.9 | )    |   |  | (21.0 | )  
|                      | Miscellaneous income (expense)                  |                              |   | (2.1   | )     |      |   | 0.1           |       |          |   | (0.1   | )     |  |  |      |      |   |  |      |    
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      | UL-type product income before taxes             |                              |   | 372.3  |       |      |   | 339.9         |       |          |   | 337.4  |       |  |  | 9.5   |      |   |  | 0.7   |    
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|Traditional Products: |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      | Premiums and other considerations               |                              |   | 173.0  |       |      |   | 180.4         |       |          |   | 197.9  |       |  |  | (4.1  | )    |   |  | (8.8  | )  
|                      | Net investment income                           |                              |   | 165.2  |       |      |   | 179.5         |       |          |   | 183.4  |       |  |  | (8.0  | )    |   |  | (2.1  | )  
|                      | Benefits                                        |                              |   | (197.8 | )     |      |   | (208.2        | )     |          |   | (215.5 | )     |  |  | 5.0   |      |   |  | 3.4   |    
|                      | Expenses excluding amortization of DAC and VOBA |                              |   | (24.1  | )     |      |   | (27.6         | )     |          |   | (34.2  | )     |  |  | 12.7  |      |   |  | 19.3  |    
|                      | Amortization of DAC and VOBA                    |                              |   | (16.3  | )     |      |   | (13.1         | )     |          |   | (16.1  | )     |  |  | (24.4 | )    |   |  | 18.6  |    
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      | Traditional product income before taxes         |                              |   | 100.0  |       |      |   | 111.0         |       |          |   | 115.5  |       |  |  | (9.9  | )    |   |  | (3.9  | )  
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      | Total income before taxes                       |                              |   | 472.3  |       |      |   | 450.9         |       |          |   | 452.9  |       |  |  | 4.7   |      |   |  | (0.4  | )  
|                      | Provision for income taxes                      |                              |   | (162.9 | )     |      |   | (157.8        | )     |          |   | (158.4 | )     |  |  | (3.2  | )    |   |  | 0.4   |    
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      
|                      | Reportable segment results                      |                              | $ | 309.4  |       |      | $ | 293.1         |       |          | $ | 294.5  |       |  |  | 5.6   | %    |   |  | (0.5  | )% 
|                      |                                                 |                              |   |        |       |      |   |               |       |          |   |        |       |  |  |       |      |   |  |      

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

|                                                          |                  |      |        |         |  |      |        |               |  |          |        |         |  |  |       |     |   |  |       |     |  
|--------------------------------------------------------- | ---------------- | ---- | ------ | ------- |  | ---- | ------ | ------------- |  | -------- | ------ | ------- |  |  | ----- | --- | - |  | ----- | --- | -
|                                                          |                  |      |        |         |  |      |        |              
|                                                          |                  |      |        |         |  |      |        | Favorable/   
|                                                          |                  |      |        |         |  |      |        | (Unfavorable)
|                                                          |                  |      |        |         |  |      |        |              
|                                                          |                  |      |        |         |  |      |        | 2003 vs.      |  | 2002 vs.
|                                                          |                  | 2003 |        | 2002    |  | 2001 |        | 2002          |  | 2001    
|                                                          |                  |      |        |         |  |      |        |               |  |         
|Annualized life insurance premium sales:                  |                  |      |        |         |  |      |        |               |  |          |        |         |  |  |       |     |   |  |       |    
|Individual Markets excluding Community Banks and
    BOLI |                  | $    | 216    |         |  | $    | 202    |               |  | $        | 139    |         |  |  | 6.9   | %   |   |  | 45.3  | %  
|Community Banks and BOLI                                  |                  | $    | 9      |         |  | $    | 58     |               |  | $        | 66     |         |  |  | (84.5 | )%  |   |  | (12.1 | )% 
|                                                         
|Average UL policyholder fund balances                     |                  | $    | 10,585 |         |  | $    | 9,875  |               |  | $        | 9,110  |         |  |  | 7.2   | %   |   |  | 8.4   | %  
|Average VUL separate account assets                       |                  |      | 1,233  |         |  |      | 1,211  |               |  |          | 1,333  |         |  |  | 1.8   |     |   |  | (9.2  | )  
|                                                          |                  |      |        |         |  |      |        |               |  |          |        |         |  |  |       |     |   |  |       |    
|                                                          |                  | $    | 11,818 |         |  | $    | 11,086 |               |  | $        | 10,443 |         |  |  | 6.6   | %   |   |  | 6.2   | %  
|                                                          |                  |      |        |         |  |      |        |               |  |          |        |         |  |  |       |     |   |  |       |    
|Average face amount of insurance in force:                |                  |      |        |         |  |      |        |               |  |          |        |         |  |  |       |     |   |  |       |    
|                                                          | Total            |      | $      | 164,963 |  |      | $      | 161,841       |  |          | $      | 157,438 |  |  |       | 1.9 | % |  |       | 2.8 | %
|                                                          | UL-type policies |      | $      | 123,848 |  |      | $      | 120,229       |  |          | $      | 115,582 |  |  |       | 3.0 | % |  |       | 4.0 | %
|                                                         
|Average assets                                            |                  | $    | 17,128 |         |  | $    | 16,352 |               |  | $        | 15,524 |         |  |  | 4.7   | %   |   |  | 5.3   | %  

16



---



##### 



Sales from our Individual markets excluding
Community Banks and bank-owned life insurance (BOLI) grew
in 2003 over 2002, and increased significantly in 2002 over 2001
due to new product introductions in 2002 and the strength of our
Premier Partnering strategy. Sales in our core agency channels
were up 7.5% in 2003 and were strongest in the latter part of
the year as additional products were brought to market. With
these new product offerings no single product comprised more
than 30% of total sales in the fourth quarter of 2003. Sales to
Community Banks and BOLI business declined in both 2003 and
2002. Community Bank and BOLI business will vary widely between
periods as we respond to sales opportunities for these single
premium products only when the market accommodates our required
returns.

Interest margin on UL-type products grew in 2003,
despite lower investment yields, due to growth in policyholder
fund balances and an increase in average interest spread. The
lower investment yield was due to the general interest rate
environment and an increase in default charges paid from the
Individual Products segment to the Corporate and Other segment
of $6 as discussed under Corporate and Other. We actively manage
interest spreads on our fixed UL-type products in response to
changes in investment yields by adjusting the rates credited to
policyholder fund balances while considering our competitive
strategies as well. The average investment spread on fixed UL
products increased 14 basis points to 2.03% in 2003 after
having decreased 11 basis points in 2002. During 2003 and
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. The effect of prepayments in
excess of expected levels increased effective investment yields
by 20 and 15 basis points in 2003 and 2002. Prepayments
were not significant in 2001. Of the 20 basis point
investment yield impact in 2003, only a portion affected
interest margin due to partial pass through of the higher yield
to policyholders through crediting rates. DAC amortization and
income taxes also reduce the earnings impact of excess accretion
of discount. Our ability to manage interest crediting rates on
fixed UL-type products is limited by minimum guaranteed rates
provided in policyholder contracts. Therefore, continued low
general market interest rates may impact future profitability,
as the investment of cash flows at current interest rates
reduces our average portfolio yield. At the end of 2003 and
2002, our crediting rates were approximately 49 and
79 basis points on average in excess of our minimum
guaranteed rates, including some policies that were already at
their minimum guaranteed rates.

Due to strong growth in expense charges and $8.4
of cost of insurance charges associated with a reinsurance
recapture, product charge revenue grew at a rate faster than
average UL policyholder fund balances in 2003. Excluding
this recapture, product charge revenue in 2003 grew 7.5% over
2002. Products issued in recent years are designed to generate
more of their revenues from expense charges. We defer expense
charges received in excess of ultimate annual expense charges
and amortize them into income relative to future estimated gross
profits.

UL-type death benefits and other insurance
benefits for 2003 included $7.6 related to the reinsurance
recapture mentioned above. Absent this item, the increase in
2003 over 2002 was 7.7%. Death benefits, net of reinsurance, per
thousand dollars of face amount of insurance in-force were $2.13
for 2003 compared to $2.07 for 2002 and $1.91 for 2001. Cost of
insurance charges have grown as well. These trends relate to
growth in average face amount of insurance in force and aging of
our blocks. Changes in product design also impact cost of
insurance charges.

Traditional premiums and other considerations
declined in both 2003 and 2002 as we are focusing our sales
efforts towards UL-type products and because in 2001 we began
reinsuring 90% of our term life insurance sales. Net investment
income from our traditional blocks declined in 2003 despite a
favorable impact from prepayments of mortgage backed securities,
due to the decline in investment yields and the decreasing size
of the block.

Policy benefits on traditional business include
death benefits, dividends, surrenders and changes in reserves,
with the most significant being death benefits. Policy benefits
as a percentage of premiums and other considerations were 114.3%
in 2003, down slightly from 115.4% in 2002. The benefit ratio
was 108.9% in 2001, reflecting favorable mortality experience in
that year.

17



---



##### 



Total expenses (including the net deferral and
amortization of DAC and VOBA) are as follows:

|                                                     |                                         |      |        |       |  |      |        |               |  |          |        |       |  |  |       |      |   |  |       |       |  
|---------------------------------------------------- | --------------------------------------- | ---- | ------ | ----- |  | ---- | ------ | ------------- |  | -------- | ------ | ----- |  |  | ----- | ---- | - |  | ----- | ----- | -
|                                                     |                                         |      |        |       |  |      |        |              
|                                                     |                                         |      |        |       |  |      |        | Favorable/   
|                                                     |                                         |      |        |       |  |      |        | (Unfavorable)
|                                                     |                                         |      |        |       |  |      |        |              
|                                                     |                                         |      |        |       |  |      |        | 2003 vs.      |  | 2002 vs.
|                                                     |                                         | 2003 |        | 2002  |  | 2001 |        | 2002          |  | 2001    
|                                                     |                                         |      |        |       |  |      |        |               |  |         
|Commissions                                          |                                         | $    | 295.5  |       |  | $    | 270.5  |               |  | $        | 212.1  |       |  |  | (9.2  | )%   |   |  | (27.5 | )%   
|General and administrative  acquisition
    related |                                         |      | 87.2   |       |  |      | 87.8   |               |  |          | 79.5   |       |  |  | 0.7   |      |   |  | (10.4 | )    
|General and administrative  maintenance
    related |                                         |      | 36.0   |       |  |      | 38.9   |               |  |          | 44.5   |       |  |  | 7.5   |      |   |  | 12.6  |      
|Taxes, licenses and fees                             |                                         |      | 50.3   |       |  |      | 55.4   |               |  |          | 51.1   |       |  |  | 9.2   |      |   |  | (8.4  | )    
|                                                     |                                         |      |        |       |  |      |        |               |  |          |        |       |  |  |       |      |   |  |       |      
|                                                     | Total commissions and expenses incurred |      |        | 469.0 |  |      |        | 452.6         |  |          |        | 387.2 |  |  |       | (3.6 | ) |  |       | (16.9 | )
|Less commissions and expenses capitalized            |                                         |      | (348.5 | )     |  |      | (323.2 | )             |  |          | (244.7 | )     |  |  | 7.8   |      |   |  | 32.1  |      
|Expenses excluding amortization of DAC and VOBA      |                                         |      | 120.5  |       |  |      | 129.4  |               |  |          | 142.5  |       |  |  | 6.9   |      |   |  | 9.2   |      
|Amortization of DAC and VOBA                         |                                         |      | 195.3  |       |  |      | 167.5  |               |  |          | 143.7  |       |  |  | (16.6 | )    |   |  | (16.6 | )    
|                                                     |                                         |      |        |       |  |      |        |               |  |          |        |       |  |  |       |      |   |  |       |      
|Total expense                                        |                                         | $    | 315.8  |       |  | $    | 296.9  |               |  | $        | 286.2  |       |  |  | (6.4  | )%   |   |  | (3.7  | )%   
|                                                     |                                         |      |        |       |  |      |        |               |  |          |        |       |  |  |       |      |   |  |       |      

Expenses excluding amortization of DAC and VOBA
were down in 2003 due to a reduction in the effective rate of
premium taxes, and effective expense controls in our maintenance
functions. The expense amounts we capitalize as DAC include
first year commissions and 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. See further discussion
of DAC and VOBA under the Financial Position section. The
decline in expenses excluding amortization of DAC and VOBA in
2002 from 2001 was primarily a function of increased deferral of
acquisition-related general and administrative expenses stemming
from the significant increase in sales in 2002. Recent
years sales growth combined with higher emergence of gross
profits on UL-type products, particularly interest margin and
expense charges in 2003, were the primary contributors to the
increases in the amortization of DAC and VOBA. Unlocking of DAC
assumptions reduced DAC amortization on fixed UL products by
$20.5 and $17.2 in 2003 and 2002. The 2003 unlocking pertained
primarily to assumptions regarding interest spreads and
mortality, while the 2002 unlocking was related primarily to
persistency assumptions. The 2002 unlocking was partially offset
by a $16.6 increase in amortization on VUL products due to
limitation of mean reversion techniques, as discussed in the
Financial Position section.

The growth in average Individual Products assets
in 2003 and 2002 was primarily due to growth in UL policyholder
fund balances, partially offset by a decline in assets
supporting our traditional block of business. In 2002, market
values of separate account assets of variable products declined,
which hindered the growth in average assets for this segment.

Our financial and operating risks for this
segment include, among others, interest margin risks, mortality
risks, variances between actual and underlying assumptions of
DAC and VOBA, changes in taxation of our products and competing
offerings, 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. See
Note 2 for a discussion of Statement of Position 03-1, a
new accounting pronouncement that is effective January 1,
2004, which may significantly impact the timing of this
segments earnings emergence in 2004 and beyond, depending
on the outcome of evolving implementation guidance.

Annuity and Investment Products

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

18



---



##### 



Reportable segment results were:

|                                                  |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |    |  |  |       |   
|------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ------------- |  | -------- | ----- |  |  |  | ----- | -- |  |  | ----- | --
|                                                  |  |      |       |      |  |      |       |              
|                                                  |  |      |       |      |  |      |       | Favorable/   
|                                                  |  |      |       |      |  |      |       | (Unfavorable)
|                                                  |  |      |       |      |  |      |       |              
|                                                  |  |      |       |      |  |      |       | 2003 vs.      |  | 2002 vs.
|                                                  |  | 2003 |       | 2002 |  | 2001 |       | 2002          |  | 2001    
|                                                  |  |      |       |      |  |      |       |               |  |         
|Policy charges, premiums and other considerations |  | $    | 8.8   |      |  | $    | 12.2  |               |  | $        | 14.9  |  |  |  | (27.9 | )% |  |  | (18.1 | )%
|Net investment income                             |  |      | 586.6 |      |  |      | 576.8 |               |  |          | 533.4 |  |  |  | 1.7   |    |  |  | 8.1   |   
|Concession and other income                       |  |      | 98.3  |      |  |      | 97.3  |               |  |          | 101.2 |  |  |  | 1.0   |    |  |  | (3.9  | ) 
|                                                  |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |    |  |  |       |   
|Total revenues                                    |  |      | 693.7 |      |  |      | 686.3 |               |  |          | 649.5 |  |  |  | 1.1   |    |  |  | 5.7   |   
|                                                  |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |    |  |  |       |   
|Policy benefits                                   |  |      | 416.6 |      |  |      | 424.7 |               |  |          | 385.3 |  |  |  | 1.9   |    |  |  | (10.2 | ) 
|Expenses                                          |  |      | 146.5 |      |  |      | 138.1 |               |  |          | 146.2 |  |  |  | (6.1  | )  |  |  | 5.5   |   
|                                                  |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |    |  |  |       |   
|Total benefits and expenses                       |  |      | 563.1 |      |  |      | 562.8 |               |  |          | 531.5 |  |  |  | (0.1  | )  |  |  | (5.9  | ) 
|                                                  |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |    |  |  |       |   
|Reportable segment results before income taxes    |  |      | 130.6 |      |  |      | 123.5 |               |  |          | 118.0 |  |  |  | 5.7   |    |  |  | 4.7   |   
|Provision for income taxes                        |  |      | 45.6  |      |  |      | 43.2  |               |  |          | 41.6  |  |  |  | (5.6  | )  |  |  | (3.8  | ) 
|                                                  |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |    |  |  |       |   
|Reportable segment results                        |  | $    | 85.0  |      |  | $    | 80.3  |               |  | $        | 76.4  |  |  |  | 5.9   | %  |  |  | 5.1   | % 
|                                                  |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |    |  |  |       |   

The following table summarizes key information
for AIP:

|                                                                        |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|----------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ------------- |  | -------- | ----- | - |  |  | ----- | -- |  |  | ----- | --
|                                                                        |  |      |       |      |  |      |       |              
|                                                                        |  |      |       |      |  |      |       | Favorable/   
|                                                                        |  |      |       |      |  |      |       | (Unfavorable)
|                                                                        |  |      |       |      |  |      |       |              
|                                                                        |  |      |       |      |  |      |       | 2003 vs.      |  | 2002 vs.
|                                                                        |  | 2003 |       | 2002 |  | 2001 |       | 2002          |  | 2001    
|                                                                        |  |      |       |      |  |      |       |               |  |         
|Fixed annuity premium sales                                             |  | $    | 756   |      |  | $    | 994   |               |  | $        | 1,396 |   |  |  | (23.9 | )% |  |  | (28.8 | )%
|Variable annuity premium sales                                          |  |      | 2     |      |  |      | 10    |               |  |          | 26    |   |  |  | (80.0 | )  |  |  | (61.5 | ) 
|                                                                        |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|                                                                        |  | $    | 758   |      |  | $    | 1,004 |               |  | $        | 1,422 |   |  |  | (24.5 | )% |  |  | (29.4 | )%
|                                                                        |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|                                                                       
|Investment product sales                                                |  | $    | 3,258 |      |  | $    | 2,904 |               |  | $        | 2,803 |   |  |  | 12.2  | %  |  |  | 3.6   | % 
|                                                                        |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|                                                                       
|Average policyholder fund balances                                      |  | $    | 8,400 |      |  | $    | 7,810 |               |  | $        | 6,858 |   |  |  | 7.6   | %  |  |  | 13.9  | % 
|Average separate account policyholder fund
    balances                 |  |      | 340   |      |  |      | 481   |               |  |          | 533   |   |  |  | (29.3 | )  |  |  | (9.8  | ) 
|                                                                        |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|                                                                        |  | $    | 8,740 |      |  | $    | 8,291 |               |  | $        | 7,391 |   |  |  | 5.4   | %  |  |  | 12.2  | % 
|                                                                        |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|                                                                       
|Average assets                                                          |  | $    | 9,537 |      |  | $    | 9,064 |               |  | $        | 8,138 |   |  |  | 5.2   | %  |  |  | 11.4  | % 
|                                                                       
|Effective investment spreads for fixed annuities                        |  |      | 1.88  | %    |  |      | 1.83  | %             |  |          | 1.96  | % |  |  |       |    |  |  |       |   
|Fixed annuity surrenders as a percentage of
    beginning fund balances |  |      | 8.4   | %    |  |      | 9.5   | %             |  |          | 12.7  | % |  |  |       |    |  |  |       |   

Fixed annuity premium sales declined in 2003 and
2002 reflecting continued competition in the fixed annuity
market and our unwillingness to match our competitors
crediting rates, especially in the bank channel. Sales trends
showed substantial improvement in late 2003 as approximately
$321 of our total fixed annuity premium sales for 2003 came in
the fourth quarter, following the introduction of a new product
portfolio with fixed interest and equity-indexed components. We
continue to develop differentiated annuity products designed to
create new distribution opportunities and strengthen existing
marketing relationships.

Our policy charge income declined in both 2003
and 2002 as our product mix focused more on products that
derived most of their earnings from investment spreads rather
than from policy charges, and as a result of lower surrenders.
Net investment income growth was lower than the growth in
average policyholder fund balances, primarily due to a decline
in investment yields. The effect of the prepayments of mortgage
backed securities in excess of expected levels in the AIP
segment increased effective yields by 24 and 4 basis points
in 2003 and 2002. Prepayments were not significant in 2001. Of
the 24 basis point investment yield impact in 2003, only a
portion impacted effective investment spreads on fixed annuities
due to partial pass through of the higher yield to

19



---



##### 



policyholders through crediting rates. DAC
amortization and income taxes also reduce the earnings impact of
excess accretion of discount.


We actively manage spreads on fixed annuity
products in response to changes in our investment portfolio
yields by adjusting the interest rates we credit on annuity
policyholder fund balances while considering our competitive
strategies. Effective investment spreads on fixed annuities
increased in 2003 after having decreased in 2002. Our ability to
manage interest crediting rates on fixed annuity products is
limited by minimum guaranteed rates provided in policyholder
contracts, and continued low general market interest rates will
impact future profitability, as the investment of cash flows at
current interest rates reduces our average portfolio yield. We
have approximately $4 billion of fixed annuity policyholder
fund balances with crediting rates that are reset on an annual
basis, and our crediting rates on average are approximately
39 basis points in excess of our minimum guaranteed rates
at December 31, 2003. Of the remaining $4 billion of fixed
annuity policyholder fund balances, approximately $3 billion
have multi-year guaranteed rates, which will begin to reset in
the second half of 2004. Our recent sales have been of products
with lower guaranteed minimum rates and lower spread
requirements, developed in response to the declining interest
rate environment.

Policy benefits, which are mainly comprised of
interest credited to policyholder accounts, decreased in 2003
despite growth in average policyholder fund balances, reflecting
crediting rate actions we took as part of our management of
investment spreads.

Fixed annuity surrenders as a percentage of
beginning fund balances declined in 2003 and 2002, reflecting
the effects of the lower interest rate environment and the
increased 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 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 surrender
charges of 5% or more decreased to 48% at year-end 2003 from 55%
at year-end 2002.

Total expenses (including the net deferral and
amortization of DAC and VOBA) were as follows:

|                                                     |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |  
|---------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ------------- |  | -------- | ----- | - |  |  | ----- | -- |  |  | ----- | -
|                                                     |  |      |       |      |  |      |       |              
|                                                     |  |      |       |      |  |      |       | Favorable/   
|                                                     |  |      |       |      |  |      |       | (Unfavorable)
|                                                     |  |      |       |      |  |      |       |              
|                                                     |  |      |       |      |  |      |       | 2003 vs.      |  | 2002 vs.
|                                                     |  | 2003 |       | 2002 |  | 2001 |       | 2002          |  | 2001    
|                                                     |  |      |       |      |  |      |       |               |  |         
|Commissions  insurance companies                    |  | $    | 36.7  |      |  | $    | 53.0  |               |  | $        | 67.5  |   |  |  | 30.8  | %  |  |  | 21.5  | %
|Commissions  broker/ dealer                         |  |      | 80.5  |      |  |      | 80.6  |               |  |          | 85.3  |   |  |  | 0.1   |    |  |  | 5.5   |  
|General and administrative  acquisition
    related |  |      | 13.2  |      |  |      | 16.8  |               |  |          | 13.6  |   |  |  | 21.4  |    |  |  | (23.5 | )
|General and administrative  maintenance
    related |  |      | 13.9  |      |  |      | 14.2  |               |  |          | 20.4  |   |  |  | 2.1   |    |  |  | 30.4  |  
|Taxes, licenses and fees                             |  |      | 3.2   |      |  |      | 3.1   |               |  |          | 3.0   |   |  |  | (3.2  | )  |  |  | (3.3  | )
|                                                     |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |  
|Total commissions and expenses incurred              |  |      | 147.5 |      |  |      | 167.7 |               |  |          | 189.8 |   |  |  | 12.0  |    |  |  | 11.6  |  
|Less commissions and expenses capitalized            |  |      | (47.2 | )    |  |      | (67.1 | )             |  |          | (81.4 | ) |  |  | (29.7 | )  |  |  | (17.6 | )
|Amortization of DAC and VOBA                         |  |      | 46.2  |      |  |      | 37.5  |               |  |          | 37.8  |   |  |  | (23.2 | )  |  |  | 0.8   |  
|                                                     |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |  
|Total expense                                        |  | $    | 146.5 |      |  | $    | 138.1 |               |  | $        | 146.2 |   |  |  | (6.1  | )% |  |  | 5.5   | %
|                                                     |  |      |       |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |  

Total AIP expenses increased in 2003, reflecting
the increase in amortization of DAC and VOBA from overall growth
in the business. Also, 2002 reflected a decrease in amortization
of $13.0 due to lower lapse rates on fixed annuity
products, partially offset by an $8.8 increase in amortization
on variable annuity products using the mean reversion techniques
discussed in the Financial Position section.

Risks in the annuity business other than those
mentioned in our Overview are that equity market volatility
could reduce demand for our products with interest credited
rates indexed to those markets, increased lapses when interest
rates rise, particularly in the portion of business subject to
low or no surrender charges, and changes in taxation of our
products and competing offerings. We discuss these risks in more
detail in the Financial Position, Capital Resources and
Liquidity, and Market Risk Exposures sections.

20



---



##### 



Benefit Partners

The Benefit Partners segment markets products
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.

Reportable segment results were:

|                                               |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |       |  
|---------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ------------- |  | -------- | ----- |  |  |  | ----- | - |  |  | ----- | -
|                                               |  |      |       |      |  |      |       |              
|                                               |  |      |       |      |  |      |       | Favorable/   
|                                               |  |      |       |      |  |      |       | (Unfavorable)
|                                               |  |      |       |      |  |      |       |              
|                                               |  |      |       |      |  |      |       | 2003 vs.      |  | 2002 vs.
|                                               |  | 2003 |       | 2002 |  | 2001 |       | 2002          |  | 2001    
|                                               |  |      |       |      |  |      |       |               |  |         
|Premiums and other considerations              |  | $    | 756.0 |      |  | $    | 638.1 |               |  | $        | 546.7 |  |  |  | 18.5  | % |  |  | 16.7  | %
|Investment income, net of expenses             |  |      | 63.8  |      |  |      | 60.2  |               |  |          | 55.0  |  |  |  | 6.0   |   |  |  | 9.5   |  
|                                               |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |       |  
|Total revenues                                 |  |      | 819.8 |      |  |      | 698.3 |               |  |          | 601.7 |  |  |  | 17.4  |   |  |  | 16.1  |  
|                                               |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |       |  
|Policy benefits                                |  |      | 576.3 |      |  |      | 477.9 |               |  |          | 403.7 |  |  |  | (20.6 | ) |  |  | (18.4 | )
|Expenses                                       |  |      | 165.6 |      |  |      | 147.3 |               |  |          | 129.6 |  |  |  | (12.4 | ) |  |  | (13.7 | )
|                                               |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |       |  
|Total benefits and expenses                    |  |      | 741.9 |      |  |      | 625.2 |               |  |          | 533.3 |  |  |  | (18.7 | ) |  |  | (17.2 | )
|                                               |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |       |  
|Reportable segment results before income taxes |  |      | 77.9  |      |  |      | 73.1  |               |  |          | 68.4  |  |  |  | 6.6   |   |  |  | 6.9   |  
|Provision for income taxes                     |  |      | 27.3  |      |  |      | 25.6  |               |  |          | 23.9  |  |  |  | (6.6  | ) |  |  | (7.1  | )
|                                               |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |       |  
|Reportable segment results                     |  | $    | 50.6  |      |  | $    | 47.5  |               |  | $        | 44.5  |  |  |  | 6.5   | % |  |  | 6.7   | %
|                                               |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |       |  

The following table summarizes key information
for Benefit Partners:

|                                             |            |          |      |      |      |      |      |               |      |          |      |      |      |   |      |        |     |   |      |       |     |  
|-------------------------------------------- | ---------- | -------- | ---- | ---- | ---- | ---- | ---- | ------------- | ---- | -------- | ---- | ---- | ---- | - | ---- | ------ | --- | - | ---- | ----- | --- | -
|                                             |            |          |      |      |      |      |      |              
|                                             |            |          |      |      |      |      |      | Favorable/   
|                                             |            |          |      |      |      |      |      | (Unfavorable)
|                                             |            |          |      |      |      |      |      |              
|                                             |            |          |      |      |      |      |      | 2003 vs.      |      | 2002 vs.
|                                             |            | 2003     |      | 2002 |      | 2001 |      | 2002          |      | 2001    
|                                             |            |          |      |      |      |      |      |               |      |         
|Life, Disability and Dental annualized sales |            | $        | 200  |      |      | $    | 182  |               |      | $        | 150  |      |      |   | 9.9  | %      |     |   | 21.3 | %    
|Reportable segment results:                  |            |          |      |      |      |      |      |               |      |          |      |      |      |   |      |        |     |   |      |      
|                                             | Life       |          | $    | 17.7 |      |      | $    | 19.8          |      |          | $    | 15.3 |      |   |      | (10.6  | )%  |   |      | 29.4  | %  
|                                             | Disability |          |      | 28.2 |      |      |      | 20.6          |      |          |      | 20.5 |      |   |      | 36.9   |     |   |      | 0.5   |    
|                                             | Dental     |          |      | 5.2  |      |      |      | 4.1           |      |          |      | 2.7  |      |   |      | 26.8   |     |   |      | 51.9  |    
|                                             | Other      |          |      | (0.5 | )    |      |      | 3.0           |      |          |      | 6.0  |      |   |      | (116.7 | )   |   |      | (50.0 | )  
|                                             |            |          |      |      |      |      |      |               |      |          |      |      |      |   |      |        |     |   |      |      
|                                             |            | Total    |      | $    | 50.6 |      |      | $             | 47.5 |          |      | $    | 44.5 |   |      |        | 6.5 | % |      |       | 6.7 | %
|                                             |            |          |      |      |      |      |      |               |      |          |      |      |      |   |      |        |     |   |      |      
|Loss ratios:                                 |            |          |      |      |      |      |      |               |      |          |      |      |      |   |      |        |     |   |      |      
|                                             | Life       |          |      | 77.5 | %    |      |      | 74.6          | %    |          |      | 76.8 | %    |   |      |        |     |   |      |       |    
|                                             | Disability |          |      | 69.2 |      |      |      | 70.4          |      |          |      | 66.1 |      |   |      |        |     |   |      |       |    
|                                             | Dental     |          |      | 75.6 |      |      |      | 74.6          |      |          |      | 75.7 |      |   |      |        |     |   |      |       |    
|                                             |            | Combined |      |      | 73.7 | %    |      |               | 73.0 | %        |      |      | 72.4 | % |      |        |     |   |      |       |     |  
|                                            
|Total expenses as a % of premium income      |            |          | 21.9 | %    |      |      | 23.2 | %             |      |          | 23.7 | %    |      |   |      |        |     |   |      |      
|                                            
|Average assets                               |            | $        | 988  |      |      | $    | 851  |               |      | $        | 752  |      |      |   | 16.1 | %      |     |   | 13.2 | %    

The Benefit Partners segment grew in 2003 and
2002. Total revenues increased along with annualized new sales
for the core life, disability and dental lines. Sales growth,
while competitively strong in 2003, moderated relative to 2002.
The reasons for this moderation include the focus by our
customers on their medical lines in 2003 with greater tendency
to retain existing carriers for their non-medical coverages.
Also, in 2003 we tightened certain underwriting rules and
strengthened our sales focus on higher margin, smaller case
business.

The increases in policy benefits in 2003 and 2002
were driven by growth in overall business coupled with an
increased loss ratio, primarily related to adverse mortality
experience in our life business. Accordingly, we made pricing
increases to address an isolated segment of our life line of
business that was under-performing, and we implemented greater
management scrutiny of larger cases, especially renewals of
groups with adverse experience. Going forward, we expect these
actions to progressively improve our reportable segment results.

21



---



##### 



Expenses were as follows:

|                                          |  |      |        |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|----------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | ------------- |  | -------- | ----- | - |  |  | ----- | -- |  |  | ----- | --
|                                          |  |      |        |      |  |      |       |              
|                                          |  |      |        |      |  |      |       | Favorable/   
|                                          |  |      |        |      |  |      |       | (Unfavorable)
|                                          |  |      |        |      |  |      |       |              
|                                          |  |      |        |      |  |      |       | 2003 vs.      |  | 2002 vs.
|                                          |  | 2003 |        | 2002 |  | 2001 |       | 2002          |  | 2001    
|                                          |  |      |        |      |  |      |       |               |  |         
|Commissions                               |  | $    | 85.3   |      |  | $    | 74.7  |               |  | $        | 63.4  |   |  |  | (14.2 | )% |  |  | (17.8 | )%
|General and administrative                |  |      | 75.6   |      |  |      | 69.6  |               |  |          | 65.7  |   |  |  | (8.6  | )  |  |  | (5.9  | ) 
|Taxes, licenses and fees                  |  |      | 19.2   |      |  |      | 17.9  |               |  |          | 14.9  |   |  |  | (7.3  | )  |  |  | (20.1 | ) 
|                                          |  |      |        |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|Total commissions and expenses incurred   |  |      | 180.1  |      |  |      | 162.2 |               |  |          | 144.0 |   |  |  | (11.0 | )  |  |  | (12.6 | ) 
|Less commissions and expenses capitalized |  |      | (114.4 | )    |  |      | (95.7 | )             |  |          | (69.9 | ) |  |  | 19.5  |    |  |  | 36.9  |   
|Amortization of DAC                       |  |      | 99.9   |      |  |      | 80.8  |               |  |          | 55.5  |   |  |  | (23.6 | )  |  |  | (45.6 | ) 
|                                          |  |      |        |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   
|Total expense                             |  | $    | 165.6  |      |  | $    | 147.3 |               |  | $        | 129.6 |   |  |  | (12.4 | )% |  |  | (13.7 | )%
|                                          |  |      |        |      |  |      |       |               |  |          |       |   |  |  |       |    |  |  |       |   

Total expenses increased in 2003 and 2002 in line
with overall growth in the business.

In March 2004, we acquired Canada Lifes
group life, disability and dental business. This transaction
resulted in a commitment of approximately $200 of capital. This
acquisition will enable us to expand our distribution network
and further grow this business segment.

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 mitigate these
risks by monitoring new and existing claims and industry health
care trend reports which serve as indicators of increased
employer medical costs, through scrutiny of larger cases,
especially renewals of groups with adverse experience, and
through intensive review of our concentration risks. One of our
non-core products, Exec-U-Care®, which provides an insured
medical expense reimbursement vehicle to executives for
non-covered health plan costs, produced revenues for this
segment of approximately $112 and net income of approximately $2
in 2003. A discontinuation of Exec-U-Care®, 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:

|                                              |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |        |  
|--------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ------------- |  | -------- | ----- |  |  |  | ----- | - |  |  | ------ | -
|                                              |  |      |       |      |  |      |       |              
|                                              |  |      |       |      |  |      |       | Favorable/   
|                                              |  |      |       |      |  |      |       | (Unfavorable)
|                                              |  |      |       |      |  |      |       |              
|                                              |  |      |       |      |  |      |       | 2003 vs.      |  | 2002 vs.
|                                              |  | 2003 |       | 2002 |  | 2001 |       | 2002          |  | 2001    
|                                              |  |      |       |      |  |      |       |               |  |         
|Communications revenues (net)                 |  | $    | 216.7 |      |  | $    | 210.3 |               |  | $        | 196.8 |  |  |  | 3.0   | % |  |  | 6.9    | %
|Cost of sales                                 |  |      | 45.8  |      |  |      | 44.2  |               |  |          | 42.4  |  |  |  | (3.6  | ) |  |  | (4.2   | )
|Operating expenses                            |  |      | 79.3  |      |  |      | 81.4  |               |  |          | 80.5  |  |  |  | 2.6   |   |  |  | (1.1   | )
|                                              |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |        |  
|Broadcast cash flow                           |  |      | 91.6  |      |  |      | 84.7  |               |  |          | 73.9  |  |  |  | 8.1   |   |  |  | 14.6   |  
|Depreciation and amortization                 |  |      | 8.4   |      |  |      | 8.1   |               |  |          | 10.9  |  |  |  | (3.7  | ) |  |  | 25.7   |  
|Corporate general and administrative expenses |  |      | 6.4   |      |  |      | 7.7   |               |  |          | 3.3   |  |  |  | 16.9  |   |  |  | (133.3 | )
|Net interest expense                          |  |      | 2.2   |      |  |      | 2.9   |               |  |          | 4.1   |  |  |  | 24.1  |   |  |  | 29.3   |  
|                                              |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |        |  
|Operating revenue before income taxes         |  |      | 74.6  |      |  |      | 66.0  |               |  |          | 55.6  |  |  |  | 13.0  |   |  |  | 18.7   |  
|Provision for income taxes                    |  |      | 29.2  |      |  |      | 26.2  |               |  |          | 22.1  |  |  |  | (11.5 | ) |  |  | (18.6  | )
|                                              |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |        |  
|Reportable segment results                    |  | $    | 45.4  |      |  | $    | 39.8  |               |  | $        | 33.5  |  |  |  | 14.1  | % |  |  | 18.8   | %
|                                              |  |      |       |      |  |      |       |               |  |          |       |  |  |  |       |   |  |  |        |  

Communications revenues increased in 2003 due to
growth in our Radio operations as we increased market share and
due to growth in our Sports operations. Combined revenues for
Radio and Television increased 1.4% in 2003 despite lower than
expected Radio and Television advertising growth in our markets
in 2003 and significant

22



---



##### 



political advertising revenues in 2002 that did
not repeat in 2003. Political revenues have the most significant
impact on Television. Excluding the impact of political
revenues, revenues from Television increased 5.7% in 2003 and
3.3% in 2002. Revenues from Sports operations increased $3.7 in
2003 due to increased demand for our football products, compared
to a decrease of $1.4 in 2002.


Broadcast cash flow, a non-GAAP measure of
operating income that is commonly used in the broadcast
industry, is calculated as communications revenues less
operating costs and expenses before depreciation and
amortization. Broadcast cash flow increased in all businesses in
2003 as a result of the increase in Sports and Radio revenues
combined with effective operating expense control in all the
businesses, especially Television. The increase in 2002 was
attributable to improved profitability at our Radio and
Television properties despite weak results in our Sports
basketball product.

Cost of sales represents direct and variable
costs, consisting primarily of sales commissions, rights fees
and Sports production costs. Operating expenses represent other
costs to operate the broadcast properties, including salaries,
marketing, research, purchased programming and station overhead
costs. Total expenses, excluding interest expense, decreased
1.1% in 2003 and increased 3.1% in 2002. As a percent of
communication revenues, these expenses were 64.6%, 67.2% and
69.7% for 2003, 2002 and 2001. The 2003 improvement reflects
continued expense discipline while 2002 benefited from the
elimination of FCC license and goodwill amortization under
SFAS 142. A one-time insurance recovery of $2.2 reduced
general and administrative expenses in 2001.

Because our broadcasting businesses rely on
advertising revenues, they are sensitive to cyclical changes in
both the general economy and in the economic strength of local
markets. Furthermore, our stations derived 23.5% and 25.3% of
their advertising revenues from the automotive industry in 2003
and 2002. If automobile advertising is significantly curtailed,
it could have a negative impact on broadcasting revenues. In
2003, 7.8% of television revenues came from a network agreement
with our CBS-affiliated stations that expires in 2011. The trend
in the industry is away from the networks compensating
affiliates for carrying their programming, and there is a
possibility those revenues will be eliminated when the contract
is renewed. Radio and television stations require a license from
the FCC to operate, with periodic renewal. While management
considers failure to renew remote, any station that fails to
receive renewal would be forced to cease operations. Many
different businesses compete for available advertising sales in
our markets, including newspapers, magazines, billboards, and
other radio and television broadcasters. Technological changes
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 other-than-temporarily 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
realized capital gains and losses, which include
other-than-temporary impairments of securities, are reported in
this segment.

23



---



##### 



The following table summarizes results for this
segment. Prior year amounts have been restated to conform to the
current year presentation for the adoption of FIN 46, under
which, as discussed later and in Note 2, we no longer
consolidate two affiliated Capital Trusts.

|                                                                  |  |      |       |      |  |      |       |   |  |   |       |  
|----------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                                  |  | 2003 |       | 2002 |  | 2001
|                                                                  |  |      |       |      |  |     
|Earnings on investments                                           |  | $    | 93.9  |      |  | $    | 77.2  |   |  | $ | 103.8 |  
|Interest expense on debt and Exchangeable
    Securities          |  |      | (33.8 | )    |  |      | (35.9 | ) |  |   | (53.5 | )
|Operating expenses                                                |  |      | (31.2 | )    |  |      | (47.9 | ) |  |   | (33.8 | )
|Income tax benefit                                                |  |      | 3.2   |      |  |      | 11.0  |   |  |   | 3.7   |  
|                                                                  |  |      |       |      |  |      |       |   |  |   |       |  
|Total expenses                                                    |  |      | (61.8 | )    |  |      | (72.8 | ) |  |   | (83.6 | )
|                                                                  |  |      |       |      |  |      |       |   |  |   |       |  
|Reportable segment results                                        |  |      | 32.1  |      |  |      | 4.4   |   |  |   | 20.2  |  
|Realized investment (losses) gains, net                           |  |      | (30.9 | )    |  |      | (14.9 | ) |  |   | 43.7  |  
|                                                                  |  |      |       |      |  |      |       |   |  |   |       |  
|Reportable segment results, including realized
    (losses) gains |  | $    | 1.2   |      |  | $    | (10.5 | ) |  | $ | 63.9  |  
|                                                                  |  |      |       |      |  |      |       |   |  |   |       |  

Earnings on investments increased $16.7 in 2003
driven by increases in earnings on equity investments and
dividends on equity securities, resumed income on previously
defaulted securities and an increase in default charges received
from the operating segments. Default charges are received from
the operating segments for this segments assumption of all
credit related losses on the invested assets of those segments.
These charges are calculated in part as a percentage of invested
assets. In response to the recent default environment in the
securities market, we increased default charges assessed to the
other operating segments in 2003 resulting in default charge
income of $31.3 compared to $21.9 and $20.0 for 2002 and 2001.
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 defaulted or sold at a loss.

Interest expense on debt and Exchangeable
Securities remained flat in 2003 and decreased $17.6, in 2002.
The 2002 decline was primarily due to lower interest rates on
borrowed money, the maturity of the Exchangeable Securities that
were replaced with lower short-term floating rate borrowings in
January 2002 and overall lower amounts outstanding. See
Note 8 for details of our debt structure and interest
costs. Operating expenses declined in 2003 as expenses for 2002
included an accrual for litigation of $23.1. Excluding this
accrual for litigation, operating expenses increased $6.4 in
2003 and declined $9.0 in 2002. Operating expenses vary with the
level of corporate activities and strategies. Goodwill
amortization of $9.5, excluding JPCC, was included in operating
expenses in this segment for 2001 but was eliminated in 2002 and
2003 under SFAS 142. The income tax benefit decreased $7.8
in 2003 and increased $7.3 in 2002, in line with the changes in
pre-tax income.

Realized investment gains and losses were as
follows:

|                              |             |      |       |      |  |      |        |     |  |   |       |      | 
|----------------------------- | ----------- | ---- | ----- | ---- |  | ---- | ------ | --- |  | - | ----- | ---- | 
|                              |             | 2003 |       | 2002 |  | 2001
|                              |             |      |       |      |  |     
|Bond gains                    |             | $    | 58.0  |      |  | $    | 31.2   |     |  | $ | 15.0  |     
|Bond losses                   |             |      | (34.0 | )    |  |      | (36.9  | )   |  |   | (39.3 | )   
|Bond impairment charges       |             |      | (94.8 | )    |  |      | (163.1 | )   |  |   | (55.4 | )   
|Stock gains (net)             |             |      | 13.8  |      |  |      | 160.4  |     |  |   | 145.9 |     
|Other losses                  |             |      | (4.1  | )    |  |      | (8.7   | )   |  |   | (1.6  | )   
|DAC and VOBA amortization     |             |      | 14.4  |      |  |      | (4.9   | )   |  |   | 0.9   |     
|                              |             |      |       |      |  |      |        |     |  |   |       |     
|Gross realized (losses) gains |             |      | (46.7 | )    |  |      | (22.0  | )   |  |   | 65.5  |     
|                              | Less: taxes |      |       | 15.8 |  |      |        | 7.1 |  |   |       | 21.8 | 
|                              |             |      |       |      |  |      |        |     |  |   |       |     
|Net realized (losses) gains   |             | $    | (30.9 | )    |  | $    | (14.9  | )   |  | $ | 43.7  |     
|                              |             |      |       |      |  |      |        |     |  |   |       |     

Realized gains and losses reflect several
initiatives implemented in 2003 designed to enhance our
long-term investment portfolio performance. The increase in
market yields provided opportunities for sales of lower yielding
bonds with redeployment at higher portfolio rates. This had the
added benefit of creating taxable losses that we were able to
carry back against previously paid income taxes. Bond
impairments declined in 2003 as a result of significant
improvement in the corporate credit environment and proactive
portfolio management.

24



---



##### 



We reflect provisions for credit related losses
in our estimated gross profits when calculating DAC and VOBA
amortization. As reflected in the preceding table, we record DAC
and VOBA amortization on realized gains and losses on
investments that back UL-type products. During the third quarter
of 2003, we recorded a DAC unlocking of $15.6 due to higher
actual credit losses experienced over an economic cycle of
several years than what we had assumed in our expected gross
profits. Modeling of expected gross profits is discussed further
in the DAC and VOBA section that follows.

The following table summarizes assets assigned to
this segment.

|                                                                                                     |       |      |       |       |  |          |       |       |  |  |      |     |  
|---------------------------------------------------------------------------------------------------- | ----- | ---- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | --- | -
|                                                                                                     |       |      |       |       |  | 2003 vs.
|                                                                                                     |       | 2003 |       | 2002  |  | 2002    
|                                                                                                     |       |      |       |       |  |         
|Parent company, passive investment companies and
    Corporate line assets of insurance subsidiaries |       | $    | 1,206 |       |  | $        | 929   |       |  |  | 29.8 | %  
|Unrealized gain on fixed interest investments                                                        |       |      | 612   |       |  |          | 570   |       |  |  | 7.4  |    
|Co-insurance receivables on acquired blocks                                                          |       |      | 980   |       |  |          | 1,056 |       |  |  | (7.2 | )  
|Employee benefit plan assets                                                                         |       |      | 369   |       |  |          | 330   |       |  |  | 11.8 |    
|Goodwill arising from insurance acquisitions                                                         |       |      | 270   |       |  |          | 270   |       |  |  |     |    
|Other                                                                                                |       |      | 312   |       |  |          | 283   |       |  |  | 10.2 |    
|                                                                                                     |       |      |       |       |  |          |       |       |  |  |      |    
|                                                                                                     | Total |      | $     | 3,749 |  |          | $     | 3,438 |  |  |      | 9.0 | %
|                                                                                                     |       |      |       |       |  |          |       |       |  |  |      |    

Total assets for the Corporate and Other segment
increased as a result of improvement in the corporate credit
environment, growth of our excess capital levels, and an
increase of approximately $88 in unrealized gains on equity
securities. We experienced a record level of bond impairments in
2002 due to the deterioration of the bond market as shown in the
realized investment gains and losses table above.

Risks for this segment include investment
impairments due to continuing economic weakness or further
economic decline, the risk of rising interest rates on our
floating rate debt, the ability to replace existing debt
agreements with comparable terms, declines in the values of our
equity securities which would limit our potential for realized
gains, general uncertainty regarding litigation, and the
potential for future impairment of goodwill. Also, as discussed
in the Liquidity section, to service our debt and to pay
shareholder dividends, we rely on excess cash flows through
dividends from the insurance subsidiaries. These dividends are
dependent upon regulatory approval when 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 $2,077 in 2003 and $1,613
in 2002 due to net policyholder contract deposits, growth in
DAC, and unrealized gains on investments, which more than offset
dividends, stock repurchases and impairment losses.

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



| |                               
| | ------------------------------
| | DAC, VOBA and Unearned Revenue

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 differences between actual experience and
assumptions we use 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.

Our traditional individual and group insurance
products are long-duration contracts. DAC and VOBA related to
these products are amortized in proportion to premium revenue
recognized. The DAC and VOBA balances on

25



---



##### 



these products were $199.5 or 7.9% of the gross
balances (before adjustments for unrealized gains and losses) at
December 31, 2003, 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) over the life of these 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, including default charges paid to the
Corporate and Other segment, and amounts credited to
policyholder accounts; and 4) estimated costs of policy
administration (maintenance). As mentioned earlier, certain
UL-type products sold in our Individual Products segment are
designed with larger up-front expense charges. Significant
portions of these up-front expense charges are deferred as
unearned revenue reserves and are amortized into income over
time using assumptions similar to those used for DAC and VOBA.
The EGP used in our DAC and VOBA calculations include these
up-front expense charges net of the deferrals but exclude the
related amortization. DAC and VOBA calculations are sensitive to
changes 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 regularly review the models and
the assumptions regarding EGP used in the calculation of
amortization expense for these products so that the assumptions
reflect managements current view of future events.

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 $1,884.8 or
74.9% of the gross balances at December 31, 2003.

In addition to these three assumptions all
UL-type, VUL 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 cap the reversion rate of return at
8.25% for one year and 10% for years two through five. The
effect of this limitation is to reduce the cumulative effective
long-term rate.

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 Products segment:

|                                                                                                                                         |  |                    |      |             |  |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | ----------- |  | - | ----- | -
|                                                                                                                                         |  |                   
|                                                                                                                                         |  | One-time Effect on
|                                                                                                                                         |  | DAC, VOBA and     
|                                                                                                                                         |  | Unearned Revenue  
|                                                                                                                                         |  | Amortization      
|                                                                                                                                         |  |                   
|                                                                                                                                         |  | Favorable          |      | Unfavorable
|Quantitative Change in Significant Assumptions                                                                                           |  | Change             |      | Change     
|                                                                                                                                         |  |                    |      |            
|Estimated mortality improving (degrading)
    0.5% per year for 10 years from the current estimate                                       |  | $                  | 41.4 |             |  | $ | (41.8 | )
|Estimated interest spread increasing
    (decreasing) 2.5 basis points per year for
    10 years from the current assumed spread         |  |                    | 23.6 |             |  |   | (24.2 | )
|Estimated policy lapse rates decreasing
    (increasing) 25% immediately and then increasing
    (decreasing) 2.5% per year for 10 years |  |                    | 24.2 |             |  |   | (22.9 | )
|Estimated long-term rate of return from VUL
    assets increasing (decreasing) 1.25% using mean reversion
    techniques                 |  |                    | 2.4  |             |  |   | (9.3  | )

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 $360.5 or 14.3% of the gross balances at
December 31, 2003. The following table reflects the
possible income statement impacts for our

26



---



##### 



AIP segment that could occur in a given year if
we change our assumptions as illustrated related to annuity
products:


|                                                                                                                                         |  |                    |     |             |  |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --- | ----------- |  | - | ----- | -
|                                                                                                                                         |  |                   
|                                                                                                                                         |  | One-time Effect on
|                                                                                                                                         |  | DAC and VOBA      
|                                                                                                                                         |  | Amortization      
|                                                                                                                                         |  |                   
|                                                                                                                                         |  | Favorable          |     | Unfavorable
|Quantitative Change in Significant Assumptions                                                                                           |  | Change             |     | Change     
|                                                                                                                                         |  |                    |     |            
|Estimated interest spread increasing
    (decreasing) 2.5 basis points per year for
    10 years from the current assumed spread         |  | $                  | 9.8 |             |  | $ | (10.4 | )
|Estimated policy lapse rates decreasing
    (increasing) 25% immediately and then increasing
    (decreasing) 2.5% per year for 10 years |  |                    | 9.8 |             |  |   | (9.5  | )

We also adjust the carrying value of DAC and VOBA
to reflect changes in the unrealized gains and losses in
available-for-sale securities backing UL-type and annuity
products, since this impacts the timing of and possible
realization of EGPs. Note 6 contains roll forwards of
DAC and VOBA including the amounts capitalized, amounts
amortized and the effect of the unrealized gains.



| |         
| | --------
| | Goodwill

Goodwill was $312 at December 31, 2003 and
2002 and 8.2% and 8.8% as a percentage of shareholders
equity at these dates. 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. As a result,
we regularly review the carrying amounts of these assets 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. If considered impaired, the carrying amounts would
be written down to a value determined by using a combination of
fair value and discounted cash flows. Absent an indication of
impairment, we test goodwill for impairment annually in the
month of June. We concluded that there had been no impairments
in 2003 or 2002.



| |      
| | -----
| | Other

At December 31, 2003 and 2002, we had
reinsurance receivables of $845 and $889 and policy loans of
$103 and $135 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, 2003 and 2002, the fair
values of the assets related to the defined benefit pension
plans were $369 and $331. The increase in assets reflects the
improvement in the equity markets in which the majority of these
assets are invested. The projected benefit obligations at
December 31, 2003 and 2002 were $361 and $322 with the
majority of the growth due to actuarial losses that arose from a
lower discount rate we used in the liability calculations for
2003 due to the declining interest rate environment. Net
periodic benefit cost, which includes service cost, interest
cost, return on plan assets and net amortization and deferrals
of gains and losses, was an expense of $1.0 for 2003 compared to
income of $3.0 for 2002. See Note 13 for further details
regarding our pension plans.

Capital Resources

At December 31, 2003, our capital structure
consisted of short-term commercial paper, securities sold under
repurchase agreements, long-term junior subordinated debentures,
and stockholders equity. We also have bank credit
agreements for unsecured revolving credit, under which we have
the option to borrow at various interest

27



---



##### 



rates. The two agreements currently aggregate
$525 with half available until May 2004 and half available until
May 2007. The credit agreements principally support our issuance
of commercial paper.


Outstanding commercial paper has various
maturities that 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 $654 and $453 at
December 31, 2003 and 2002 were 1.13% and 1.44%. The
maximum amount outstanding during 2003 and 2002 was $656 and
$455.

Our commercial paper is currently rated by two
rating agencies.

|                  |  |        |     | 
|----------------- |  | ------ | --- | 
|Agency            |  | Rating
|                  |  |       
|Fitch             |  |        | F1+ | 
|Standard & Poors |  |        | A1+ | 

These are both the highest ratings that the
agencies issue and have been affirmed in the past six 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
collateralized mortgage obligations and agency debentures under
repurchase agreements involving various counterparties,
accounted for as financing arrangements with maturities less
than six months. We may use proceeds to purchase securities with
longer durations as an asset/liability management strategy. At
December 31, 2003 and 2002, repurchase agreements,
including accrued interest, were $401 and $499. The securities
involved had a fair value and amortized cost of $428 and $406 at
December 31, 2003 versus $532 and $493 at December 31,
2002. The maximum principal amounts outstanding were $597 and
$636 during 2003 and 2002.

Under FIN 46 as described in Note 2,
effective December 2003, we no longer consolidate two affiliated
Capital Trusts that sold preferred Capital Securities in private
placements and used the proceeds to purchase junior subordinated
debentures from the Company in 1997. The debentures pay interest
semi-annually and mature in 2046 or earlier, at our option,
beginning in 2007. At December 31, 2003 and 2002, the
debentures outstanding were $309. Prior to the adoption of
FIN 46 we reported $300 of Capital Securities in the
mezzanine equity section of our consolidated balance sheet.

On January 27, 2004, we issued $300 of 4.75%
10-year term notes and $300 of floating rate EXtendible
Liquidity Securities® (EXLs) with an initial maturity of
February 17, 2005 subject to periodic extension through
2011. The proceeds from the debt issuance were used to finance
the Canada Life acquisition and to pay down commercial paper
while rebalancing the mix of fixed and floating rate debt and
short and long term maturities in our capital structure. We have
received confirmation from both Fitch and S&P that the debt
issuance will have no impact on our ratings or outlook.

Stockholders equity increased $266 in 2003
compared to $149 in 2002. Unrealized gains on available-for-sale
securities, which are included as a component of
stockholders equity, increased $73 and $196 in those
years. The remaining change in stockholders equity is due
to net income, dividends to stockholders, and common share
activity due to issuance of shares under our stock option plans
and share repurchases. Our ratio of stockholders equity to
assets excluding separate accounts was 12.5%, 12.3%, and 12.6%
at December 31, 2003, 2002 and 2001.

In 2003 we repurchased 3,578,600 of our common
shares at an average cost of $43.15 per share compared to
7,881,300 shares at an average cost of $43.69 in 2002. In
February 2004, our board refreshed its share repurchase
authorization to 5 million shares.

28



---



##### 



Our insurance subsidiaries have statutory surplus
and risk based capital levels well above regulatory 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:

|                  |  |         |     |       |  |      |     |  |  |  |     | 
|----------------- |  | ------- | --- | ----- |  | ---- | --- |  |  |  | --- | 
|                  |  | JP Life |     | JPFIC |  | JPLA
|                  |  |         |     |       |  |     
|A.M. Best         |  |         | A++ |       |  |      | A++ |  |  |  | A++ | 
|Standard & Poors |  |         | AAA |       |  |      | AAA |  |  |  | AAA | 
|Fitch Ratings     |  |         | AA+ |       |  |      | AA+ |  |  |  | AA+ | 

The ratings by A.M. Best and Standard &
Poors are currently the highest available by those rating
agencies and have been recently reaffirmed, while the ratings by
Fitch Ratings is that agencys second highest rating. A
significant drop in our ratings, while not anticipated, could
potentially impact future sales and/or accelerate surrenders on
our business in force.

Liquidity

We meet liquidity requirements primarily by
positive cash flows from the operations of subsidiaries. Primary
sources of cash from our insurance operations are premiums,
other insurance considerations, receipts for policyholder
accounts, investment sales and maturities and investment income.
Primary uses of cash for our insurance operations include
purchases of investments, payment of insurance benefits,
operating expenses, withdrawals from policyholder accounts,
costs related to acquiring new business, dividends and income
taxes. Primary sources of cash from the Communications
operations are revenues from 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 2003, 2002 and
2001 was $537, $403 and $776. The primary drivers for the
increase over 2002 were an increase in traditional product
premium receipts in our Benefit Partners segment due to growth
in that segment, combined with the timing of the processing of
Community Banks and BOLI single premiums received in late 2001,
pending policy issuance which then occurred in 2002. Those
premiums were reported as cash received from operations in 2001
and as a decrease in cash from operations in 2002.

Net cash used in investing activities was $1,420,
$1,599 and $1,425 in 2003, 2002 and 2001. The decrease in AIP
sales in 2003 provided less funds for investment purposes.
Record sales levels in our Individual Products segment in 2002
increased funds available for investment.

Net cash provided by financing activities was
$888, $1,124 and $762 in 2003, 2002 and 2001, including cash
inflows from policyholder contract deposits net of withdrawals
of $1,081, $1,404 and $1,321. The fluctuations in net
policyholder contract deposits again reflect the lower 2003 AIP
sales, increased life sales in 2002, combined with the
processing of the premiums received in late 2001. Net borrowings
decreased in 2003 as borrowings were used in 2002 to fund
investing activities as well as increased stock repurchases in
that year.

In order to meet the parent companys
dividend payments, debt servicing obligations and other
expenses, we rely on dividends from our insurance subsidiaries.
Cash dividends received from subsidiaries by the parent company
were $273, $402 and $382 in 2003, 2002 and 2001. 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 $72, $67 and $139
at December 31, 2003, 2002 and 2001. The decrease in 2002
reflects the year-end 2001 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 $753,
$424 and $542 at these dates. We consider the majority of these
securities to be a source of liquidity to support our strategies.

Total debt and equity securities
available-for-sale at December 31, 2003 and 2002 were
$18,462 and $16,874.

29



---



##### 





| |                        
| | -----------------------
| | Contractual Obligations

The following table details our contractual
obligations at December 31, 2003:

|                     |       |                        |       |           |  |           |       |           |  |         |     |     |  |   |    |    |  |   |     |     | 
|-------------------- | ----- | ---------------------- | ----- | --------- |  | --------- | ----- | --------- |  | ------- | --- | --- |  | - | -- | -- |  | - | --- | --- | 
|                     |       |                       
|                     |       | Payments Due by Period
|                     |       |                       
|                     |       |                        |       | Less than |  |           |       | More than
|                     |       | Total                  |       | 1 Year    |  | 1-3 Years |       | 3-5 Years |  | 5 Years
|                     |       |                        |       |           |  |           |       |           |  |        
|Debt                 |       | $                      | 1,364 |           |  | $         | 1,055 |           |  | $       |    |     |  | $ |   |    |  | $ | 309 |    
|Purchase obligations |       |                        | 377   |           |  |           | 62    |           |  |         | 160 |     |  |   | 48 |    |  |   | 107 |    
|                     |       |                        |       |           |  |           |       |           |  |         |     |     |  |   |    |    |  |   |     |    
|                     | Total |                        | $     | 1,741     |  |           | $     | 1,117     |  |         | $   | 160 |  |   | $  | 48 |  |   | $   | 416 | 
|                     |       |                        |       |           |  |           |       |           |  |         |     |     |  |   |    |    |  |   |     |    

Reverse repurchase agreements and external
commercial paper represent debt due in less than one year. The
junior subordinated debentures mentioned earlier are the debt
due in five years or more.

Purchase obligations consist of JPCC commitments
for purchases of syndicated television programming and
commitments on other contracts and future sports programming
rights of approximately $377 as of December 31, 2003,
payable through the year 2011. We have commitments to sell a
portion of the sports programming rights to other entities for
$257 over the same period. These commitments are not reflected
as an asset or liability in our balance sheets 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.

Our total policy liabilities also represent
contractual obligations, where the timing of payments is unknown
because it depends on insurable events or policyholder
surrenders. Our asset/liability management process, discussed
further in Market Risk Exposures, is designed to appropriately
match our invested assets with the actuarially estimated timing
of amounts payable to our policyholders.



| |                                                   
| | --------------------------------------------------
| | Off Balance Sheet Arrangements and
    Commitments

We have no material off balance sheet
arrangements of a financing nature.

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, 2003 approximates $86. These
commitments will be funded through cash flows from operations
and investment maturities during 2004 and are not included in
contractual obligations listed above.

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 that 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.

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

30



---



##### 



at amortized cost, and accordingly there is a
difference between fair value and carrying value for HTM
securities. The following table shows the carrying values of our
invested assets:


|                                |                       |             |        |             |        |  |      |      |       |   |        |        |        |  |      |      |       |  
|------------------------------- | --------------------- | ----------- | ------ | ----------- | ------ |  | ---- | ---- | ----- | - | ------ | ------ | ------ |  | ---- | ---- | ----- | -
|                                |                       |             |        |            
|                                |                       | December 31 |        | December 31
|                                |                       | 2003        |        | 2002       
|                                |                       |             |        |            
|                                |                       |             |        |             |        | 
|Publicly-issued bonds           |                       | $           | 15,823 |             |        |  | 61.3 | %    |       | $ | 15,239 |        |        |  | 62.6 | %   
|Privately-placed bonds          |                       |             | 4,621  |             |        |  | 17.9 |      |       |   | 4,238  |        |        |  | 17.4 |     
|                                |                       |             |        |             |        |  |      |      |       |   |        |        |        |  |      |     
|                                | Total bonds           |             |        | 20,444      |        |  |      | 79.2 |       |   |        | 19,477 |        |  |      | 80.0 |      
|Redeemable preferred stock      |                       |             | 14     |             |        |  |     |      |       |   | 24     |        |        |  | 0.1  |     
|                                |                       |             |        |             |        |  |      |      |       |   |        |        |        |  |      |     
|                                | Total debt securities |             |        | 20,458      |        |  |      | 79.2 |       |   |        | 19,501 |        |  |      | 80.1 |      
|Mortgage loans on real property |                       |             | 3,472  |             |        |  | 13.4 |      |       |   | 3,294  |        |        |  | 13.5 |     
|Common stock                    |                       |             | 754    |             |        |  | 2.9  |      |       |   | 407    |        |        |  | 1.7  |     
|Non-redeemable preferred stock  |                       |             | 2      |             |        |  |     |      |       |   | 2      |        |        |  |     |     
|Policy loans                    |                       |             | 869    |             |        |  | 3.4  |      |       |   | 909    |        |        |  | 3.7  |     
|Real estate                     |                       |             | 132    |             |        |  | 0.5  |      |       |   | 133    |        |        |  | 0.6  |     
|Other                           |                       |             | 65     |             |        |  | 0.3  |      |       |   | 42     |        |        |  | 0.1  |     
|Cash and equivalents            |                       |             | 72     |             |        |  | 0.3  |      |       |   | 67     |        |        |  | 0.3  |     
|                                |                       |             |        |             |        |  |      |      |       |   |        |        |        |  |      |     
|                                |                       | Total       |        | $           | 25,824 |  |      |      | 100.0 | % |        | $      | 24,355 |  |      |      | 100.0 | %
|                                |                       |             |        |             |        |  |      |      |       |   |        |        |        |  |      |     



| |                            
| | ---------------------------
| | 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.

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, 2003:

|                                                                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |        | 
|-------------------------------------------------------------------------------------------------------- | ---------------------------- | --------- | ------ | ---------- |  | ---------- | ----- | ----- |  | -------- | ---- | ---- | - | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                                         |                              |           |        | Gross      |  | Gross      |       |       |  |         
|                                                                                                         |                              | Amortized |        | Unrealized |  | Unrealized |       | Fair  |  | Carrying
|                                                                                                         |                              | Cost      |        | Gains      |  | Losses     |       | Value |  | Value   
|                                                                                                         |                              |           |        |            |  |            |       |       |  |         
|Available-for-sale, carried at fair
    value:                                                           |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       
|US Treasury obligations and direct obligations of
    US Government agencies                             |                              | $         | 247    |            |  | $          | 21    |       |  | $        |     |      |   | $ | 268    |        |  | $ | 268    |       
|Federal agency mortgage backed securities
    (including collateralized mortgage obligations)            |                              |           | 2,045  |            |  |            | 111   |       |  |          | (4   | )    |   |   | 2,152  |        |  |   | 2,152  |       
|Obligations of states and political subdivisions                                                         |                              |           | 211    |            |  |            | 4     |       |  |          | (2   | )    |   |   | 213    |        |  |   | 213    |       
|Corporate obligations                                                                                    |                              |           | 13,582 |            |  |            | 821   |       |  |          | (96  | )    |   |   | 14,307 |        |  |   | 14,307 |       
|Corporate private-labeled mortgage backed
    securities (including collateralized mortgage obligations) |                              |           | 721    |            |  |            | 34    |       |  |          | (3   | )    |   |   | 752    |        |  |   | 752    |       
|Redeemable preferred stock                                                                               |                              |           | 13     |            |  |            | 1     |       |  |          |     |      |   |   | 14     |        |  |   | 14     |       
|                                                                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       
|                                                                                                         | Subtotal, debt securities    |           |        | 16,819     |  |            |       | 992   |  |          |      | (105 | ) |   |        | 17,706 |  |   |        | 17,706 | 
|Non-redeemable preferred stock                                                                           |                              |           | 2      |            |  |            |      |       |  |          |     |      |   |   | 2      |        |  |   | 2      |       
|Common stock                                                                                             |                              |           | 302    |            |  |            | 454   |       |  |          | (2   | )    |   |   | 754    |        |  |   | 754    |       
|                                                                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       
|Securities available-for-sale                                                                            |                              |           | 17,123 |            |  |            | 1,446 |       |  |          | (107 | )    |   |   | 18,462 |        |  |   | 18,462 |       
|                                                                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       
|Held-to-maturity, carried at amortized
    cost:                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       
|Obligations of state and political subdivisions                                                          |                              |           | 7      |            |  |            | 1     |       |  |          |     |      |   |   | 8      |        |  |   | 7      |       
|Corporate obligations                                                                                    |                              |           | 2,745  |            |  |            | 186   |       |  |          | (21  | )    |   |   | 2,910  |        |  |   | 2,745  |       
|                                                                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       
|Debt securities held-to-maturity                                                                         |                              |           | 2,752  |            |  |            | 187   |       |  |          | (21  | )    |   |   | 2,918  |        |  |   | 2,752  |       
|                                                                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       
|                                                                                                         | Total AFS and HTM securities |           | $      | 19,875     |  |            | $     | 1,633 |  |          | $    | (128 | ) |   | $      | 21,380 |  |   | $      | 21,214 | 
|                                                                                                         |                              |           |        |            |  |            |       |       |  |          |      |      |   |   |        |        |  |   |        |       

These unrealized gains and losses do not
necessarily represent future gains or losses that will be
realized. Changing conditions related to specific bonds, overall
market interest rates, credit spreads or equity securities
markets as well as general portfolio management decisions might
impact values we ultimately realize. Gross unrealized gains and
losses at December 31, 2002 were $1,716 and $(290).

31



---



##### 



The following table shows the diversification of
unrealized gains and losses for our debt securities portfolio
across industry sectors as of December 31, 2003:

|                                                                                 |                       |           |       |            |        |            |     |       |       |          |     |     |      |   |       |       |        |  |       |       |        | 
|-------------------------------------------------------------------------------- | --------------------- | --------- | ----- | ---------- | ------ | ---------- | --- | ----- | ----- | -------- | --- | --- | ---- | - | ----- | ----- | ------ |  | ----- | ----- | ------ | 
|                                                                                 |                       |           |       | Gross      |        | Gross      |     |       |       |         
|                                                                                 |                       | Amortized |       | Unrealized |        | Unrealized |     | Fair  |       | Carrying
|                                                                                 |                       | Cost      |       | Gains      |        | Losses     |     | Value |       | Value   
|                                                                                 |                       |           |       |            |        |            |     |       |       |         
|Industrials                                                                      |                       |           |       |            |        |            |     |       |       |          |     |     |      |   |       |       |        |  |       |      
|                                                                                 | Basic Materials       |           | $     | 905        |        |            | $   | 51    |       |          | $   | (10 | )    |   | $     | 946   |        |  | $     | 941   |       
|                                                                                 | Capital Goods         |           |       | 1,284      |        |            |     | 77    |       |          |     | (9  | )    |   |       | 1,352 |        |  |       | 1,333 |       
|                                                                                 | Communications        |           |       | 1,086      |        |            |     | 75    |       |          |     | (4  | )    |   |       | 1,157 |        |  |       | 1,141 |       
|                                                                                 | Consumer Cyclical     |           |       | 1,031      |        |            |     | 68    |       |          |     | (9  | )    |   |       | 1,090 |        |  |       | 1,076 |       
|                                                                                 | Consumer Non-Cyclical |           |       | 2,083      |        |            |     | 122   |       |          |     | (10 | )    |   |       | 2,195 |        |  |       | 2,174 |       
|                                                                                 | Energy                |           |       | 1,197      |        |            |     | 61    |       |          |     | (5  | )    |   |       | 1,253 |        |  |       | 1,248 |       
|                                                                                 | Technology            |           |       | 310        |        |            |     | 8     |       |          |     | (2  | )    |   |       | 316   |        |  |       | 316   |       
|                                                                                 | Transportation        |           |       | 744        |        |            |     | 61    |       |          |     | (17 | )    |   |       | 788   |        |  |       | 779   |       
|                                                                                 | Other Industrials     |           |       | 885        |        |            |     | 46    |       |          |     | (3  | )    |   |       | 928   |        |  |       | 924   |       
|Utilities                                                                        |                       |           | 3,585 |            |        |            | 224 |       |       |          | (27 | )   |      |   | 3,782 |       |        |  | 3,743 |      
|Financials                                                                       |                       |           |       |            |        |            |     |       |       |          |     |     |      |   |       |       |        |  |       |      
|                                                                                 | Banks                 |           |       | 1,902      |        |            |     | 142   |       |          |     | (11 | )    |   |       | 2,033 |        |  |       | 2,011 |       
|                                                                                 | Insurance             |           |       | 522        |        |            |     | 23    |       |          |     | (3  | )    |   |       | 542   |        |  |       | 539   |       
|                                                                                 | Other Financials      |           |       | 1,271      |        |            |     | 76    |       |          |     | (9  | )    |   |       | 1,338 |        |  |       | 1,329 |       
|Mortgage Backed Securities (including Commercial
    Mortgage Backed Securities) |                       |           | 2,766 |            |        |            | 145 |       |       |          | (7  | )   |      |   | 2,904 |       |        |  | 2,904 |      
|                                                                                 |                       |           |       |            |        |            |     |       |       |          |     |     |      |   |       |       |        |  |       |      
|                                                                                 |                       | Total     |       | $          | 19,571 |            |     | $     | 1,179 |          |     | $   | (126 | ) |       | $     | 20,624 |  |       | $     | 20,458 | 
|                                                                                 |                       |           |       |            |        |            |     |       |       |          |     |     |      |   |       |       |        |  |       |      



| |                       
| | ----------------------
| | Credit Risk Management

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, 2003,
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:

|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |  |       |  
|------ |  | ------------------ |  | --------- | ------ | ----- |  | -------- | ------ | -------- |  | - | ------ |  |  |  | ----- | -
|       |  | S&P or             |  |           |        |       |  |          |        | % of    
|SVO    |  | Equivalent         |  | Amortized |        | Fair  |  | Carrying |        | Carrying
|Rating |  | Designation        |  | Cost      |        | Value |  | Value    |        | Value   
|       |  |                    |  |           |        |       |  |          |        |         
|1      |  | AAA                |  | $         | 3,404  |       |  | $        | 3,569  |          |  | $ | 3,565  |  |  |  | 17.4  | %
|1      |  | AA                 |  |           | 1,740  |       |  |          | 1,855  |          |  |   | 1,842  |  |  |  | 9.0   |  
|1      |  | A                  |  |           | 5,997  |       |  |          | 6,360  |          |  |   | 6,285  |  |  |  | 30.7  |  
|2      |  | BBB                |  |           | 6,977  |       |  |          | 7,389  |          |  |   | 7,310  |  |  |  | 35.7  |  
|3      |  | BB                 |  |           | 741    |       |  |          | 752    |          |  |   | 756    |  |  |  | 3.7   |  
|4      |  | B                  |  |           | 508    |       |  |          | 507    |          |  |   | 508    |  |  |  | 2.5   |  
|5      |  | CCC and lower      |  |           | 164    |       |  |          | 155    |          |  |   | 155    |  |  |  | 0.8   |  
|6      |  | In or near default |  |           | 40     |       |  |          | 37     |          |  |   | 37     |  |  |  | 0.2   |  
|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |  |       |  
|       |  | Total              |  | $         | 19,571 |       |  | $        | 20,624 |          |  | $ | 20,458 |  |  |  | 100.0 | %
|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |  |       |  

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, 2003. As noted

32



---



##### 



above, the carrying values in the following
tables are stated at fair value for AFS securities and amortized
cost for HTM securities.


|                            |  |                        |  |          |    | 
|--------------------------- |  | ---------------------- |  | -------- | -- | 
|                            |  |                        |  | Carrying
|Creditor                    |  | Sector                 |  | Value   
|                            |  |                        |  |         
|HSBC Holdings PLC           |  | Financial Institutions |  | $        | 87 | 
|US Bancorp                  |  | Financial Institutions |  |          | 87 | 
|National Rural Utilities    |  | Utilities              |  |          | 87 | 
|Goldman Sachs Group         |  | Financial Institutions |  |          | 87 | 
|Piedmont Natural Gas        |  | Utilities              |  |          | 86 | 
|Weingarten Realty Investors |  | Financial Institutions |  |          | 86 | 
|Verizon Communications      |  | Communications         |  |          | 86 | 
|Scana                       |  | Utilities              |  |          | 85 | 
|JP Morgan Chase             |  | Financial Institutions |  |          | 84 | 
|Wells Fargo                 |  | Financial Institutions |  |          | 84 | 

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, 2003. Investment grade bonds of issuers listed
below are not included in these values. The gross unrealized
gain or loss shown below is calculated as the difference between
the fair value of the securities and their carrying values.

|                         |  |                      |  |           |    |                |  |             |    |  |  |   |    |  
|------------------------ |  | -------------------- |  | --------- | -- | -------------- |  | ----------- | -- |  |  | - | -- | -
|                         |  |                      |  |           |    |                |  | Gross      
|                         |  |                      |  | Amortized |    |                |  | Unrealized 
|Creditor                 |  | Sector               |  | Cost      |    | Carrying Value |  | Gain/(Loss)
|                         |  |                      |  |           |    |                |  |            
|El Paso                  |  | Utilities            |  | $         | 61 |                |  | $           | 60 |  |  | $ | (1 | )
|Rite Aid                 |  | Consumer Cyclical    |  |           | 48 |                |  |             | 44 |  |  |   | (4 | )
|Ahold, Royal             |  | Consumer Noncyclical |  |           | 41 |                |  |             | 43 |  |  |   | 2  |  
|Discovery Communications |  | Communications       |  |           | 40 |                |  |             | 40 |  |  |   | 2  |  
|Thomas & Betts Company   |  | Technology           |  |           | 36 |                |  |             | 37 |  |  |   | 1  |  
|Intertape Polymer Group  |  | Capital Goods        |  |           | 35 |                |  |             | 33 |  |  |   | (2 | )
|Williams Companies       |  | Utilities            |  |           | 27 |                |  |             | 28 |  |  |   | 2  |  
|Homer City Funding LLC   |  | Utilities            |  |           | 25 |                |  |             | 27 |  |  |   | 2  |  
|Qwest Communications     |  | Communications       |  |           | 24 |                |  |             | 25 |  |  |   | 1  |  
|Delta Airlines           |  | Transportation       |  |           | 29 |                |  |             | 25 |  |  |   | (5 | )

At December 31, 2003 and 2002, below
investment grade bonds were $1,452 or 7.1% and $1,287 or 6.6% of
the carrying value of the bond portfolio, reflecting increases
in market prices of below investment grade bonds that occurred
in 2003.

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.



| |                  
| | -----------------
| | Impairment Review

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

33



---



##### 





| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | 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                 
|
| |  | 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. 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.

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.

The following table shows the maturity date
distribution of our debt securities in an unrealized loss
position at December 31, 2003. The fair values of these
securities could fluctuate over the respective periods to
maturity or any sale.

|                                          |          |           |       |       |       |            |       |          |       |   |     |      |      |   |       |       |       | 
|----------------------------------------- | -------- | --------- | ----- | ----- | ----- | ---------- | ----- | -------- | ----- | - | --- | ---- | ---- | - | ----- | ----- | ----- | 
|                                          |          |           |       |       |       | Gross      |       |         
|                                          |          | Amortized |       | Fair  |       | Unrealized |       | Carrying
|                                          |          | Cost      |       | Value |       | Losses     |       | Value   
|                                          |          |           |       |       |       |            |       |         
|Due in one year or less                   |          | $         | 31    |       |       | $          | 26    |          |       | $ | (5  | )    |      | $ | 26    |      
|Due after one year through five years     |          |           | 448   |       |       |            | 435   |          |       |   | (13 | )    |      |   | 438   |      
|Due after five years through ten years    |          |           | 1,767 |       |       |            | 1,728 |          |       |   | (39 | )    |      |   | 1,736 |      
|Due after ten years through twenty years  |          |           | 1,064 |       |       |            | 1,013 |          |       |   | (52 | )    |      |   | 1,022 |      
|Due after twenty years                    |          |           | 397   |       |       |            | 383   |          |       |   | (13 | )    |      |   | 384   |      
|Amounts not due at a single maturity date |          |           | 81    |       |       |            | 77    |          |       |   | (4  | )    |      |   | 77    |      
|                                          |          |           |       |       |       |            |       |          |       |   |     |      |      |   |       |      
|                                          | Subtotal |           |       | 3,788 |       |            |       | 3,662    |       |   |     | (126 | )    |   |       | 3,683 |      
|Redeemable preferred stocks               |          |           | 4     |       |       |            | 4     |          |       |   |    |      |      |   | 4     |      
|                                          |          |           |       |       |       |            |       |          |       |   |     |      |      |   |       |      
|                                          |          | Total     |       | $     | 3,792 |            |       | $        | 3,666 |   |     | $    | (126 | ) |       | $     | 3,687 | 
|                                          |          |           |       |       |       |            |       |          |       |   |     |      |      |   |       |      

34



---



##### 



The following table shows the credit quality of
our debt securities with unrealized losses at December 31,
2003:

|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |          |  |   |      |   |  |  |       |   |  |   |       | 
|------ |  | ------------------ |  | --------- | ----- | ----- |  | ----- | ----- | ---------- |  | ---------- | ----- | -------- |  | - | ---- | - |  |  | ----- | - |  | - | ----- | 
|       |  |                    |  |           |       |       |  |       |       |            |  | % of       |       |         
|       |  |                    |  |           |       |       |  | % of  |       | Gross      |  | Gross      |       |         
|SVO    |  | S&P or Equivalent  |  | Amortized |       | Fair  |  | Fair  |       | Unrealized |  | Unrealized |       | Carrying
|Rating |  | Designation        |  | Cost      |       | Value |  | Value |       | Losses     |  | Losses     |       | Value   
|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |         
|1      |  | AAA/AA/A           |  | $         | 1,823 |       |  | $     | 1,784 |            |  |            | 48.7  | %        |  | $ | (39  | ) |  |  | 30.9  | % |  | $ | 1,787 | 
|2      |  | BBB                |  |           | 1,318 |       |  |       | 1,280 |            |  |            | 34.9  |          |  |   | (38  | ) |  |  | 30.2  |   |  |   | 1,288 | 
|3      |  | BB                 |  |           | 265   |       |  |       | 247   |            |  |            | 6.7   |          |  |   | (18  | ) |  |  | 14.3  |   |  |   | 255   | 
|4      |  | B                  |  |           | 242   |       |  |       | 224   |            |  |            | 6.1   |          |  |   | (18  | ) |  |  | 14.3  |   |  |   | 226   | 
|5      |  | CCC and lower      |  |           | 119   |       |  |       | 109   |            |  |            | 3.0   |          |  |   | (10  | ) |  |  | 7.9   |   |  |   | 109   | 
|6      |  | In or near default |  |           | 25    |       |  |       | 22    |            |  |            | 0.6   |          |  |   | (3   | ) |  |  | 2.4   |   |  |   | 22    | 
|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |          |  |   |      |   |  |  |       |   |  |   |       | 
|       |  | Total              |  | $         | 3,792 |       |  | $     | 3,666 |            |  |            | 100.0 | %        |  | $ | (126 | ) |  |  | 100.0 | % |  | $ | 3,687 | 
|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |          |  |   |      |   |  |  |       |   |  |   |       | 

No individual creditor has an unrealized loss of
$10 or greater at December 31, 2003.

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

|                   |       |       |       |            |  |            |     |          |   |  |      |       |   |   |       |       | 
|------------------ | ----- | ----- | ----- | ---------- |  | ---------- | --- | -------- | - |  | ---- | ----- | - | - | ----- | ----- | 
|                   |       |       |       |            |  | % of       |     |         
|                   |       |       |       | Gross      |  | Gross      |     |         
|                   |       | Fair  |       | Unrealized |  | Unrealized |     | Carrying
|                   |       | Value |       | Losses     |  | Losses     |     | Value   
|                   |       |       |       |            |  |            |     |         
|More than 1 year   |       | $     | 622   |            |  | $          | (51 | )        |   |  | 40.5 | %     |   | $ | 629   |      
|6 months  1 year  |       |       | 558   |            |  |            | (32 | )        |   |  | 25.4 |       |   |   | 564   |      
|Less than 6 months |       |       | 2,486 |            |  |            | (43 | )        |   |  | 34.1 |       |   |   | 2,494 |      
|                   |       |       |       |            |  |            |     |          |   |  |      |       |   |   |       |      
|                   | Total |       | $     | 3,666      |  |            | $   | (126     | ) |  |      | 100.0 | % |   | $     | 3,687 | 
|                   |       |       |       |            |  |            |     |          |   |  |      |       |   |   |       |      

Of the $126 gross unrealized losses on debt
securities at December 31, 2003, approximately $8 was
included in our potentially distressed securities list mentioned
above. Of this amount, $5 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. 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 2003 we had other-than-temporary impairments
on bonds of $95 as compared to $163 for 2002. 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:

2003



| |   |                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $16.6 write down on debt of Dairy Holdings (a
    subsidiary of Parmalat). This issuer defaulted on this security
    and subsequently filed for bankruptcy protection. This is the
    only exposure we had to Parmalat. This security was sold for its
    written down value in 2003. This had no impact on other holdings
    in our portfolio.

35



---



##### 





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $16.6 write down related to airline equipment
    trusts that were secured by passenger aircraft. Given the
    overall softness in the U.S. passenger airline industry,
    these securities became other than temporarily impaired. We sold
    these bonds at their book value after this write down. We have
    been actively managing all of our exposures to the passenger
    airline industry, although this had no impact on other holdings
    in our portfolio.
|
| |  | $15.0 write down of US Generating. This was an
    investment in a project finance security in the power generating
    industry. The lessee of this facility filed bankruptcy and
    rejected this lease. As a result, the investment became other
    than temporarily impaired. This had no impact on other holdings
    in our portfolio.                                                                                                                             
|
| |  | $11.0 write down on preferred stock of a
    financial marketing firm. The circumstances surrounding this
    other than temporary impairment do not impact any other
    securities in our portfolio.                                                                                                                                                                                                                                                                     

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 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, 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.                                                                                                            

In 2003, we incurred losses of $34 on sales of
securities. There were no individually material losses on sales
of securities in 2003. All 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, 2003 and 2002,
all of which are included in debt securities available-for-sale,
were as follows:

|                                                         |       |      |       |       |  |   |       |       | 
|-------------------------------------------------------- | ----- | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                         |       | 2003 |       | 2002 
|                                                         |       |      |       |      
|Federal agency issued mortgage backed securities         |       | $    | 2,152 |       |  | $ | 3,449 |      
|Corporate private-labeled mortgage backed
    securities |       |      | 752   |       |  |   | 1,938 |      
|                                                         |       |      |       |       |  |   |       |      
|                                                         | Total |      | $     | 2,904 |  |   | $     | 5,387 | 
|                                                         |       |      |       |       |  |   |       |      

36



---



##### 



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 decline in interest rates during
2002 and early 2003, the mortgage market experienced record
levels of refinancings and the structural protection of our MBS
portfolio eroded. We experienced MBS prepayments totaling $2,656
or 64.1% and $1,277 or 22.8% of the average carrying value of
the MBS portfolio in 2003 and 2002. Our MBS portfolio is
primarily a discount portfolio; therefore, prepayments
accelerate the accretion of discount into income. The excess
accretion of discount increased investment income in 2003 by
$49.8 compared to $28.0 in 2002, on a pre-tax basis. Prepayments
were not material in 2001. These prepayments are reinvested at
yields that are lower than our current portfolio yields,
producing less investment income going forward. As shown above,
our MBS portfolio declined substantially in 2003, and we
reinvested most of the proceeds in investment grade corporate
bonds.



| |               
| | --------------
| | 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, 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. See
Note 4 for more detail regarding the composition and
concentration of our mortgage loan portfolio.



| |                       
| | ----------------------
| | Derivative Instruments

Our investment 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, 2003 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 $348 and $278 were open as of December 31, 2003
and 2002. During 2002, we began using interest rate swaps to
hedge prospective bond purchases to back deposits on certain
annuity contracts. This hedging strategy protects the spread
between the annuity crediting rate offered at the time the
annuities are sold and the yield on bonds to be purchased to
back those annuity contracts. These interest rate swap contracts
are generally terminated within a month. We also purchase
S&P 500 Index® options in conjunction with our
sales of equity indexed annuities. The reinsurance agreement on
previously issued equity indexed annuities remains in force.

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 2003, 10 year U.S. Treasury
rates increased 44 basis points from 3.81% to 4.25%.

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 we credit on interest-sensitive products and our
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.

37



---



##### 



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 3.0% to 9.0%, with an approximate
weighted average of 4.2%. For annuity products, our minimum
rates range from 1.5% to 6.0%, with an approximate weighted
average of 3.3%.

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, 2003 and 2002, 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 the estimated incremental loss
amounts below 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 floating rate debt, including reverse repurchase
agreements, is 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, 2003 and does not consider new
sales of life and annuity products or the potential impact of
interest rate fluctuations on sales.

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 of up to 300 basis points and a decrease
of 100 basis points. We believe that the 300 basis
point increase or 100 basis point decrease, graded pro-rata
over four quarters, reflects reasonably possible near term
changes in interest rates as of December 31, 2003. The
incremental loss for a year derives primarily from differences
in the yield curves and in the sensitivities they introduce to
our model.

These estimated impacts are incremental to
potential earnings impacts from trends and/or environmental
factors already in existence, such as an expected reduction in
the level of prepayments on mortgage backed securities. The
model assumes that changes in our crediting rates will occur
correspondingly with increases or declines in investment yields,
subject to the impact of minimum rate guarantees. As discussed
previously, as of year end our crediting rates on blocks of
business that are on an annual reset basis were approximately
49 basis points and 39 basis points on average in
excess of minimum guaranteed rates for Individual Products and
AIP.

The table reflects the effect of the interest
rate scenarios on one years reportable segment results. 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. Correspond-

38



---



##### 



ingly, a 100 basis point decrease would
cause a significantly larger estimated loss in the second and
third years, as minimum rate guarantees would prohibit us from
lowering credited rates on most products.


|                        |  |                       |    |  
|----------------------- |  | --------------------- | -- | -
|                        |  | Estimated Incremental
|Change in Interest Rate |  | Single Year Loss     
|                        |  |                      
|+ 300 basis points      |  | $                     | (7 | )
|+ 200 basis points      |  |                       | (5 | )
|+ 100 basis points      |  |                       | (3 | )
|- 100 basis points      |  |                       | (2 | )

Generally, an increase in interest rates will
benefit our earnings in the insurance portfolio, yet increase
our interest expense on floating rate debt. Conversely, a
decrease in interest rates will decrease earnings from the
insurance portfolio as minimum rate guarantees have more of an
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 floating rate debt.

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.
Similarly, the incremental loss resulting from a greater
decrease in interest rates would be proportionally greater 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 more of our floating rate
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 $754; approximately $411 is in a single issuer,
Bank of America Corporation (BankAmerica). We believe that a
hypothetical 20% decline in the equity market is possible. 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, 2003 would
change as follows:

|                         |                             |                        |     |      |  
|------------------------ | --------------------------- | ---------------------- | --- | ---- | -
|                         |                             | Hypothetical Change in
|                         |                             | Fair Value from 20%   
|                         |                             | Market Decline        
|                         |                             |                       
|BankAmerica common stock |                             | $                      | (82 | )   
|Other equity securities  |                             |                        | (69 | )   
|                         |                             |                        |     |     
|                         | Total change in fair values |                        | $   | (151 | )
|                         |                             |                        |     |     

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 17 presents
additional disclosures concerning fair values of financial
assets and financial liabilities.

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 continued to drop dramatically 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

39



---



##### 



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 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. were flat in
2003 and, until late in the year, reflected a trend towards
those financial products with a fixed rate given the volatility
in the equity markets.



| |                                 
| | --------------------------------
| | 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, and customer expectations for one-stop
shopping. We continue to analyze our options within this
environment for increasing distribution, adding products and
technology and improving economies of scale.

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.



| |                          
| | -------------------------
| | 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
or financial condition.

40



---



##### 



These risks and uncertainties include among
others, general economic conditions (including the uncertainty
as to the duration and rate of the current economic recovery),
the impact on the economy from 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; any failure to successfully complete
the integration of our recently completed group acquisition;
competitive factors, including pricing pressures, technological
developments, new product offerings and the emergence of new
competitors; changes in federal and state taxes (including the
recent or future changes to general tax rates, dividends,
capital gains, 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 managements discussion and
analysis.


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.

41



---



##### 





|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |   |  |   |      |  
|---------------------------------------------------------- |  | -------------------------------------- | ---- | -------- |  | ------------- | ---- | ------------ |  | - | ---- | - |  | - | ---- | -
|                                                           |  | March 31,                              |      | June 30, |  | September 30, |      | December 31,
|                                                           |  | 2003                                   |      | 2003     |  | 2003          |      | 2003        
|                                                           |  |                                        |      |          |  |               |      |             
|                                                           |  |                                       
|                                                           |  | (In Millions Except Share Information)
|Revenues, excluding realized investment (losses)
    gains |  | $                                      | 887  |          |  | $             | 897  |              |  | $ | 911  |   |  | $ | 925  |  
|Realized investment (losses) gains                         |  |                                        | (19  | )        |  |               | 20   |              |  |   | (5   | ) |  |   | (43  | )
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |   |  |   |      |  
|Revenues                                                   |  |                                        | 868  |          |  |               | 917  |              |  |   | 906  |   |  |   | 882  |  
|Benefits and expenses                                      |  |                                        | 701  |          |  |               | 703  |              |  |   | 718  |   |  |   | 713  |  
|Provision for income taxes                                 |  |                                        | 58   |          |  |               | 74   |              |  |   | 62   |   |  |   | 52   |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |   |  |   |      |  
|Net income available to common stockholders                |  | $                                      | 109  |          |  | $             | 140  |              |  | $ | 126  |   |  | $ | 117  |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |   |  |   |      |  
|Per share of common stock                                  |  | $                                      | 0.76 |          |  | $             | 0.99 |              |  | $ | 0.89 |   |  | $ | 0.82 |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |   |  |   |      |  
|Per share of common stock  assuming
    dilution          |  | $                                      | 0.76 |          |  | $             | 0.98 |              |  | $ | 0.88 |   |  | $ | 0.82 |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |   |  |   |      |  

|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |  |  |   |      |  
|---------------------------------------------------------- |  | -------------------------------------- | ---- | -------- |  | ------------- | ---- | ------------ |  | - | ---- |  |  | - | ---- | -
|                                                           |  | March 31,                              |      | June 30, |  | September 30, |      | December 31,
|                                                           |  | 2002                                   |      | 2002     |  | 2002          |      | 2002        
|                                                           |  |                                        |      |          |  |               |      |             
|                                                           |  |                                       
|                                                           |  | (In Millions Except Share Information)
|Revenues, excluding realized investment gains
    (losses) |  | $                                      | 838  |          |  | $             | 857  |              |  | $ | 857  |  |  | $ | 876  |  
|Realized investment gains (losses)                         |  |                                        | 34   |          |  |               | 4    |              |  |   | 4    |  |  |   | (64  | )
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |  |  |   |      |  
|Revenues                                                   |  |                                        | 872  |          |  |               | 861  |              |  |   | 861  |  |  |   | 812  |  
|Benefits and expenses                                      |  |                                        | 660  |          |  |               | 669  |              |  |   | 680  |  |  |   | 712  |  
|Provision for income taxes                                 |  |                                        | 72   |          |  |               | 67   |              |  |   | 62   |  |  |   | 34   |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |  |  |   |      |  
|Net income available to common stockholders                |  | $                                      | 140  |          |  | $             | 125  |              |  | $ | 119  |  |  | $ | 66   |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |  |  |   |      |  
|Per share of common stock                                  |  | $                                      | 0.93 |          |  | $             | 0.84 |              |  | $ | 0.82 |  |  | $ | 0.46 |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |  |  |   |      |  
|Per share of common stock  assuming
    dilution          |  | $                                      | 0.92 |          |  | $             | 0.83 |              |  | $ | 0.81 |  |  | $ | 0.46 |  
|                                                           |  |                                        |      |          |  |               |      |              |  |   |      |  |  |   |      |  

42



---



##### 



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, 2003 and 2002, and the related
consolidated statements of income, stockholders equity,
and cash flows for each of the three years in the period ended
December 31, 2003. Our audits also included the financial
statement schedules listed in the Index at Item 15(a).
These financial statements and schedules are the responsibility
of the Companys management. Our responsibility is to
express an opinion on these financial statements and schedules
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, 2003 and 2002, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set
forth therein.

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



| |                      
| | ---------------------
| | -s- ERNST & YOUNG LLP

Greensboro, North Carolina

February 2, 2004


43



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |        |        | 
|-------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------ | ------ |  | ----- | ------ | ------ | 
|                                                                     |                                                                                                                                                                                     |                                           
|                                                                     |                                                                                                                                                                                     | December 31,                              
|                                                                     |                                                                                                                                                                                     |                                           
|                                                                     |                                                                                                                                                                                     | 2003                                       |       | 2002  
|                                                                     |                                                                                                                                                                                     |                                            |       |       
|                                                                     |                                                                                                                                                                                     |                                           
|                                                                     |                                                                                                                                                                                     | (Dollar Amounts in                        
|                                                                     |                                                                                                                                                                                     | Millions Except                           
|                                                                     |                                                                                                                                                                                     | Share Information)                        
|ASSETS                                                              
|Investments:                                                         |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     | Debt securities available for sale, at fair value
    (amortized cost $16,819 and $15,591)                                                                                          |                                            | $     | 17,706 |        |  | $     | 16,465 |       
|                                                                     | Debt securities held to maturity, at amortized
    cost (fair value $2,918 and $3,225)                                                                                              |                                            |       | 2,752  |        |  |       | 3,036  |       
|                                                                     | Equity securities available for sale, at fair
    value (cost $304 and $46)                                                                                                         |                                            |       | 756    |        |  |       | 409    |       
|                                                                     | Mortgage loans on real estate                                                                                                                                                       |                                            |       | 3,472  |        |  |       | 3,294  |       
|                                                                     | Policy loans                                                                                                                                                                        |                                            |       | 869    |        |  |       | 909    |       
|                                                                     | Real estate                                                                                                                                                                         |                                            |       | 132    |        |  |       | 133    |       
|                                                                     | Other investments                                                                                                                                                                   |                                            |       | 65     |        |  |       | 42     |       
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     |                                                                                                                                                                                     | Total investments                          |       |        | 25,752 |  |       |        | 24,288 | 
|Cash and cash equivalents                                            |                                                                                                                                                                                     |                                            | 72    |        |        |  | 67    |       
|Accrued investment income                                            |                                                                                                                                                                                     |                                            | 326   |        |        |  | 302   |       
|Due from reinsurers                                                  |                                                                                                                                                                                     |                                            | 1,340 |        |        |  | 1,375 |       
|Deferred policy acquisition costs and value of
    business acquired |                                                                                                                                                                                     |                                            | 2,230 |        |        |  | 2,027 |       
|Goodwill                                                             |                                                                                                                                                                                     |                                            | 312   |        |        |  | 312   |       
|Assets held in separate accounts                                     |                                                                                                                                                                                     |                                            | 2,166 |        |        |  | 1,785 |       
|Other assets                                                         |                                                                                                                                                                                     |                                            | 498   |        |        |  | 463   |       
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     |                                                                                                                                                                                     | Total assets                               |       | $      | 32,696 |  |       | $      | 30,619 | 
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|LIABILITIES AND STOCKHOLDERS
    EQUITY                            
|Policy liabilities:                                                  |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     | Future policy benefits                                                                                                                                                              |                                            | $     | 2,674  |        |  | $     | 2,592  |       
|                                                                     | Policyholder contract deposits                                                                                                                                                      |                                            |       | 20,642 |        |  |       | 19,545 |       
|                                                                     | Dividend accumulations and other policyholder
    funds on deposit                                                                                                                  |                                            |       | 251    |        |  |       | 248    |       
|                                                                     | Policy and contract claims                                                                                                                                                          |                                            |       | 165    |        |  |       | 161    |       
|                                                                     | Other                                                                                                                                                                               |                                            |       | 638    |        |  |       | 586    |       
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     |                                                                                                                                                                                     | Total policy liabilities                   |       |        | 24,370 |  |       |        | 23,132 | 
|Commercial paper and revolving credit borrowings                     |                                                                                                                                                                                     |                                            | 654   |        |        |  | 453   |       
|Securities sold under repurchase agreements                          |                                                                                                                                                                                     |                                            | 401   |        |        |  | 499   |       
|Junior subordinated debentures                                       |                                                                                                                                                                                     |                                            | 309   |        |        |  | 309   |       
|Currently (recoverable) payable income taxes                         |                                                                                                                                                                                     |                                            | (72   | )      |        |  | 46    |       
|Deferred income tax liabilities                                      |                                                                                                                                                                                     |                                            | 543   |        |        |  | 385   |       
|Liabilities related to separate accounts                             |                                                                                                                                                                                     |                                            | 2,166 |        |        |  | 1,785 |       
|Accounts payable, accruals and other liabilities                     |                                                                                                                                                                                     |                                            | 519   |        |        |  | 470   |       
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     |                                                                                                                                                                                     | Total liabilities                          |       |        | 28,890 |  |       |        | 27,079 | 
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|Commitments and contingent liabilities                               |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|Stockholders Equity:                                                |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     | Common stock and paid in capital, par value
    $1.25 per share: authorized 350,000,000 shares; issued
    and outstanding 2003  140,610,540 shares;
    2002  142,798,768 shares |                                            |       | 176    |        |  |       | 180    |       
|                                                                     | Retained earnings                                                                                                                                                                   |                                            |       | 2,947  |        |  |       | 2,750  |       
|                                                                     | Accumulated other comprehensive income                                                                                                                                              |                                            |       | 683    |        |  |       | 610    |       
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     |                                                                                                                                                                                     |                                            | 3,806 |        |        |  | 3,540 |       
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       
|                                                                     |                                                                                                                                                                                     | Total liabilities and stockholders equity |       | $      | 32,696 |  |       | $      | 30,619 | 
|                                                                     |                                                                                                                                                                                     |                                            |       |        |        |  |       |       

See Notes To Consolidated Financial Statements

44



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |       | 
|----------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ----------------------- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                                                                                                    |                             |                        
|                                                                                                                                    |                             | Year Ended December 31,
|                                                                                                                                    |                             |                        
|                                                                                                                                    |                             | 2003                    |       | 2002  |  | 2001
|                                                                                                                                    |                             |                         |       |       |  |     
|                                                                                                                                    |                             |                        
|                                                                                                                                    |                             | (Dollar Amounts in     
|                                                                                                                                    |                             | Millions Except        
|                                                                                                                                    |                             | Share Information)     
|Revenue:                                                                                                                            |                             |                         |       |       |  |      |       |       |  |   |       |      
|Premiums and other considerations                                                                                                   |                             | $                       | 951   |       |  | $    | 841   |       |  | $ | 770   |      
|Universal life and investment product charges                                                                                       |                             |                         | 691   |       |  |      | 638   |       |  |   | 616   |      
|Net investment income                                                                                                               |                             |                         | 1,657 |       |  |      | 1,634 |       |  |   | 1,563 |      
|Realized investment (losses) gains                                                                                                  |                             |                         | (47   | )     |  |      | (22   | )     |  |   | 66    |      
|Communications sales                                                                                                                |                             |                         | 216   |       |  |      | 210   |       |  |   | 196   |      
|Other                                                                                                                               |                             |                         | 105   |       |  |      | 105   |       |  |   | 111   |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|                                                                                                                                    | Total revenue               |                         |       | 3,573 |  |      |       | 3,406 |  |   |       | 3,322 | 
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|Benefits and Expenses:                                                                                                              |                             |                         |       |       |  |      |       |       |  |   |       |      
|Insurance and annuity benefits                                                                                                      |                             |                         | 2,005 |       |  |      | 1,914 |       |  |   | 1,758 |      
|Insurance commissions, net of deferrals                                                                                             |                             |                         | 108   |       |  |      | 115   |       |  |   | 132   |      
|General and administrative expenses, net of
    deferrals                                                                           |                             |                         | 149   |       |  |      | 167   |       |  |   | 171   |      
|Insurance taxes, licenses and fees                                                                                                  |                             |                         | 73    |       |  |      | 78    |       |  |   | 71    |      
|Amortization of policy acquisition costs and
    value of business acquired                                                         |                             |                         | 341   |       |  |      | 286   |       |  |   | 237   |      
|Interest expense                                                                                                                    |                             |                         | 34    |       |  |      | 36    |       |  |   | 55    |      
|Communications operations                                                                                                           |                             |                         | 125   |       |  |      | 125   |       |  |   | 123   |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|                                                                                                                                    | Total benefits and expenses |                         |       | 2,835 |  |      |       | 2,721 |  |   |       | 2,547 | 
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|Income before income taxes                                                                                                          |                             |                         | 738   |       |  |      | 685   |       |  |   | 775   |      
|Income taxes                                                                                                                        |                             |                         | 246   |       |  |      | 235   |       |  |   | 263   |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|Net income before cumulative effect of change in
    accounting principle                                                           |                             |                         | 492   |       |  |      | 450   |       |  |   | 512   |      
|Cumulative effect of change in accounting for
    derivative instruments, net of income taxes                                       |                             |                         |      |       |  |      |      |       |  |   | 1     |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|Net income available to common stockholders                                                                                         |                             | $                       | 492   |       |  | $    | 450   |       |  | $ | 513   |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|Earnings Per Share:                                                                                                                 |                             |                         |       |       |  |      |       |       |  |   |       |      
|Net income available to common stockholders
    before cumulative effect of change in accounting principle, net
    of income taxes |                             | $                       | 3.47  |       |  | $    | 3.07  |       |  | $ | 3.37  |      
|Cumulative effect of change in accounting for
    derivative instruments, net of income taxes                                       |                             |                         |      |       |  |      |      |       |  |   | 0.01  |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|Net income per share available to common
    stockholders                                                                           |                             | $                       | 3.47  |       |  | $    | 3.07  |       |  | $ | 3.38  |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      
|Net income per share available to common
    stockholders  assuming dilution                                                       |                             | $                       | 3.44  |       |  | $    | 3.04  |       |  | $ | 3.34  |      
|                                                                                                                                    |                             |                         |       |       |  |      |       |       |  |   |       |      

See Notes to Consolidated Financial Statements

45



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |      |  
|-------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------------- | --- | ----------------- | - | ----------------- | ----- | ------------- | - | - | --- | --- | - | - | ----- | ---- | -
|                           |                                                                                   | Common Stock                                          |     |                   |   | Accumulated Other |       | Total        
|                           |                                                                                   | and                                                   |     |                   |   | Comprehensive     |       | Stockholders
|                           |                                                                                   | Paid in Capital                                       |     | Retained Earnings |   | Income            |       | Equity       
|                           |                                                                                   |                                                       |     |                   |   |                   |       |              
|                           |                                                                                   |                                                      
|                           |                                                                                   | (Dollar Amounts in Millions Except Share Information)
|Balance, January 1, 2001   |                                                                                   | $                                                     | 131 |                   |   | $                 | 2,683 |               |   | $ | 345 |     |   | $ | 3,159 |     
|                           | Net income                                                                        |                                                       |     |                  |   |                   |       | 513           |   |   |     |    |   |   |       | 513  |  
|                           | Change in fair value of derivative financial
    instruments, net of income taxes |                                                       |     |                  |   |                   |       |              |   |   |     | 4   |   |   |       | 4    |  
|                           | Unrealized gain on available for sale securities,
    net of income taxes         |                                                       |     |                  |   |                   |       |              |   |   |     | 65  |   |   |       | 65   |  
|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |     
|                           | Comprehensive income                                                              |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       | 582  |  
|                           | Common dividends $1.07 per share                                                  |                                                       |     |                  |   |                   |       | (166          | ) |   |     |    |   |   |       | (166 | )
|                           | Common stock issued                                                               |                                                       |     | 4                 |   |                   |       |              |   |   |     |    |   |   |       | 4    |  
|                           | Common stock reacquired                                                           |                                                       |     | (11               | ) |                   |       | (177          | ) |   |     |    |   |   |       | (188 | )
|                           | Three-for-two common stock split                                                  |                                                       |     | 64                |   |                   |       | (64           | ) |   |     |    |   |   |       |     |  
|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |     
|Balance, December 31, 2001 |                                                                                   |                                                       | 188 |                   |   |                   | 2,789 |               |   |   | 414 |     |   |   | 3,391 |     
|                           | Net income                                                                        |                                                       |     |                  |   |                   |       | 450           |   |   |     |    |   |   |       | 450  |  
|                           | Change in fair value of derivative financial
    instruments, net of income taxes |                                                       |     |                  |   |                   |       |              |   |   |     | 9   |   |   |       | 9    |  
|                           | Unrealized gain on available for sale securities,
    net of income taxes         |                                                       |     |                  |   |                   |       |              |   |   |     | 187 |   |   |       | 187  |  
|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |     
|                           | Comprehensive income                                                              |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       | 646  |  
|                           | Common dividends $1.18 per share                                                  |                                                       |     |                  |   |                   |       | (175          | ) |   |     |    |   |   |       | (175 | )
|                           | Common stock issued                                                               |                                                       |     | 22                |   |                   |       |              |   |   |     |    |   |   |       | 22   |  
|                           | Common stock reacquired                                                           |                                                       |     | (30               | ) |                   |       | (314          | ) |   |     |    |   |   |       | (344 | )
|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |     
|Balance, December 31, 2002 |                                                                                   |                                                       | 180 |                   |   |                   | 2,750 |               |   |   | 610 |     |   |   | 3,540 |     
|                           | Net income                                                                        |                                                       |     |                  |   |                   |       | 492           |   |   |     |    |   |   |       | 492  |  
|                           | Change in fair value of derivative financial
    instruments, net of income taxes |                                                       |     |                  |   |                   |       |              |   |   |     | (5  | ) |   |       | (5   | )
|                           | Unrealized gain on available for sale securities,
    net of income taxes         |                                                       |     |                  |   |                   |       |              |   |   |     | 78  |   |   |       | 78   |  
|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |     
|                           | Comprehensive income                                                              |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       | 565  |  
|                           | Common dividends $1.29 per share                                                  |                                                       |     |                  |   |                   |       | (187          | ) |   |     |    |   |   |       | (187 | )
|                           | Common stock issued                                                               |                                                       |     | 43                |   |                   |       |              |   |   |     |    |   |   |       | 43   |  
|                           | Common stock reacquired                                                           |                                                       |     | (47               | ) |                   |       | (108          | ) |   |     |    |   |   |       | (155 | )
|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |     
|Balance, December 31, 2003 |                                                                                   | $                                                     | 176 |                   |   | $                 | 2,947 |               |   | $ | 683 |     |   | $ | 3,806 |     
|                           |                                                                                   |                                                       |     |                   |   |                   |       |               |   |   |     |     |   |   |       |     

See Notes to Consolidated Financial Statements

46



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |        |        |  
|------------------------------------------------------------------------------------- | ------------------------------------------------------------- | -------------------------------------------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                                                      |                                                               |                                                         
|                                                                                      |                                                               | Year Ended December 31,                                 
|                                                                                      |                                                               |                                                         
|                                                                                      |                                                               | 2003                                                     |        | 2002   |        | 2001
|                                                                                      |                                                               |                                                          |        |        |        |     
|                                                                                      |                                                               |                                                         
|                                                                                      |                                                               | (Dollar Amounts in Millions)                            
|Cash Flows from Operating Activities                                                  |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Net income                                                                            |                                                               | $                                                        | 492    |        |        | $    | 450    |        |        | $ | 513    |       
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|                                                                                      | Change in policy liabilities other than deposits              |                                                          |        | 121    |        |      |        | 103    |        |   |        | 79     |       
|                                                                                      | Credits to policyholder accounts, net                         |                                                          |        | 96     |        |      |        | 165    |        |   |        | 172    |       
|                                                                                      | Deferral of policy acquisition costs, net of
    amortization |                                                          |        | (221   | )      |      |        | (277   | )      |   |        | (215   | )     
|                                                                                      | Change in receivables and asset accruals                      |                                                          |        | (40    | )      |      |        | 15     |        |   |        | (12    | )     
|                                                                                      | Change in payables and expense accruals                       |                                                          |        | 55     |        |      |        | (127   | )      |   |        | 234    |       
|                                                                                      | Realized investment losses (gains)                            |                                                          |        | 47     |        |      |        | 22     |        |   |        | (66    | )     
|                                                                                      | Depreciation and amortization                                 |                                                          |        | (33    | )      |      |        | (23    | )      |   |        | 19     |       
|                                                                                      | Amortization of value of business acquired, net               |                                                          |        | 52     |        |      |        | 77     |        |   |        | 56     |       
|                                                                                      | Other                                                         |                                                          |        | (32    | )      |      |        | (2     | )      |   |        | (4     | )     
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|                                                                                      |                                                               | Net cash provided by operating activities                |        |        | 537    |      |        |        | 403    |   |        |        | 776    |  
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Cash Flows from Investing Activities                                                  |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Securities available for sale:                                                        |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|                                                                                      | Sales                                                         |                                                          |        | 1,370  |        |      |        | 719    |        |   |        | 421    |       
|                                                                                      | Maturities, calls and redemptions                             |                                                          |        | 3,392  |        |      |        | 1,848  |        |   |        | 1,035  |       
|                                                                                      | Purchases                                                     |                                                          |        | (6,242 | )      |      |        | (4,214 | )      |   |        | (2,303 | )     
|Securities held to maturity:                                                          |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|                                                                                      | Sales                                                         |                                                          |        | 31     |        |      |        | 86     |        |   |        | 21     |       
|                                                                                      | Maturities, calls and redemptions                             |                                                          |        | 527    |        |      |        | 425    |        |   |        | 405    |       
|                                                                                      | Purchases                                                     |                                                          |        | (299   | )      |      |        | (227   | )      |   |        | (658   | )     
|Repayments of mortgage loans                                                          |                                                               |                                                          | 205    |        |        |      | 188    |        |        |   | 156    |       
|Mortgage loans originated                                                             |                                                               |                                                          | (382   | )      |        |      | (394   | )      |        |   | (477   | )     
|Increase (decrease) in policy loans, net                                              |                                                               |                                                          | 7      |        |        |      | 2      |        |        |   | (19    | )     
|Other investing activities, net                                                       |                                                               |                                                          | (29    | )      |        |      | (32    | )      |        |   | (6     | )     
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|                                                                                      |                                                               | Net cash used in investing activities                    |        |        | (1,420 | )    |        |        | (1,599 | ) |        |        | (1,425 | )
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Cash Flows from Financing Activities                                                  |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Policyholder contract deposits                                                        |                                                               |                                                          | 2,525  |        |        |      | 2,867  |        |        |   | 2,918  |       
|Withdrawals of policyholder contract deposits                                         |                                                               |                                                          | (1,444 | )      |        |      | (1,463 | )      |        |   | (1,597 | )     
|Borrowings under short-term credit facilities                                         |                                                               |                                                          | 5,178  |        |        |      | 3,643  |        |        |   | 3,830  |       
|Repayments under short-term credit facilities                                         |                                                               |                                                          | (4,977 | )      |        |      | (3,487 | )      |        |   | (3,937 | )     
|Net (payments) proceeds from securities sold
    under repurchase agreements          |                                                               |                                                          | (98    | )      |        |      | 208    |        |        |   | (105   | )     
|Cash dividends paid                                                                   |                                                               |                                                          | (184   | )      |        |      | (173   | )      |        |   | (162   | )     
|Common stock transactions, net                                                        |                                                               |                                                          | (112   | )      |        |      | (321   | )      |        |   | (184   | )     
|Other financing activities, net                                                       |                                                               |                                                          |       |        |        |      | (150   | )      |        |   | (1     | )     
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|                                                                                      |                                                               | Net cash provided by financing activities                |        |        | 888    |      |        |        | 1,124  |   |        |        | 762    |  
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|                                                                                      |                                                               | Net increase (decrease) in cash and cash
    equivalents |        |        | 5      |      |        |        | (72    | ) |        |        | 113    |  
|Cash and cash equivalents, beginning                                                  |                                                               |                                                          | 67     |        |        |      | 139    |        |        |   | 26     |       
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Cash and cash equivalents, ending                                                     |                                                               | $                                                        | 72     |        |        | $    | 67     |        |        | $ | 139    |       
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Supplemental Cash Flow Information                                                    |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Income taxes paid                                                                     |                                                               | $                                                        | 236    |        |        | $    | 222    |        |        | $ | 258    |       
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       
|Interest paid                                                                         |                                                               | $                                                        | 37     |        |        | $    | 45     |        |        | $ | 72     |       
|                                                                                      |                                                               |                                                          |        |        |        |      |        |        |        |   |        |       

See Notes to Consolidated Financial Statements

47



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollar amounts in millions, except share
information)


December 31, 2003




|        |                     
|------- | --------------------
|NOTE 1. | NATURE OF OPERATIONS

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 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 11.

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

Principles of Consolidation

The consolidated financial statements include the
accounts of Jefferson-Pilot Corporation and all of its
subsidiaries. All material intercompany accounts and
transactions have been eliminated. The Company has three
immaterial investments in which it owns less than 50% but
greater than 20%. The Company does not exercise control over any
of these entities and therefore, does not consolidate these
entities. The Company accounts for these investments on the
equity method. Neither the carrying value on the balance sheet
nor the equity in earnings on the income statement related to
these investments is material. In accordance with the provisions
of Financial Accounting Standards Board issued Interpretation
No. 46®, Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin
No. 51 (the Interpretation), the Company deconsolidated
two variable interest entities, as defined in the
Interpretation, that had previously been consolidated. See New
Accounting Pronouncements for further discussion.

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.

Cash and Cash Equivalents

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

48



---



##### 



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. See Note 4 for further discussion of the
Companys policies regarding identification of other than
temporary impairments. 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 $55 and $51 at
December 31, 2003 and 2002. Other investments are stated at
equity, fair value 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 $204 and $180 at December 31, 2003 and
2002.

Deferred Policy Acquisition Costs and Value of
Business Acquired

Costs related to obtaining new and renewal
business, including commissions and group sales representative
incentive compensation, 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.

Our traditional individual and group insurance
products are long-duration contracts. Deferred policy
acquisition costs related to these products are amortized over
the expected premium paying periods 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.

49



---



##### 



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 the Company
utilizes 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
result in the application of reasonable yield assumptions to
trend the long-term rate of return back to the assumed rate over
a period of time following a historical deviation from the
assumed long-term rate.

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,
referred to as a default charge, is made against the investment
income allocated to the Individual Products, Annuity and
Investment Products, and Benefit Partner segments. The default
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 an economic cycle. 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. See Note 6 for
further discussion.

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, 2003 and 2002. 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.

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.

50



---



##### 



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 as unearned revenue and is recognized as income over
the period during which services are provided. The net of
amounts deferred and amounts recognized is reflected in
universal life and investment product charges in the
consolidated statements of income.

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 to 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,

51



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

adjusted for trends and circumstances. Management
believes that the recorded liability is sufficient to provide
for claims and the associated claims adjustment expenses
incurred through the balance sheet date.

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.

|                                                                                                                                                    |  |                         |      |      |  |      |      |  |  |   |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                                                                                                                                                    |  |                        
|                                                                                                                                                    |  | Year Ended December 31,
|                                                                                                                                                    |  |                        
|                                                                                                                                                    |  | 2003                    |      | 2002 |  | 2001
|                                                                                                                                                    |  |                         |      |      |  |     
|Net income, as reported                                                                                                                             |  | $                       | 492  |      |  | $    | 450  |  |  | $ | 513  | 
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects |  |                         | 6    |      |  |      | 11   |  |  |   | 11   | 
|                                                                                                                                                    |  |                         |      |      |  |      |      |  |  |   |      | 
|Pro forma net income available to common
    stockholders                                                                                           |  | $                       | 486  |      |  | $    | 439  |  |  | $ | 502  | 
|                                                                                                                                                    |  |                         |      |      |  |      |      |  |  |   |      | 
|Earnings per share available to common
    stockholders, as reported                                                                                |  | $                       | 3.47 |      |  | $    | 3.07 |  |  | $ | 3.38 | 
|Pro forma earnings per share available to common
    stockholders                                                                                   |  | $                       | 3.42 |      |  | $    | 2.99 |  |  | $ | 3.30 | 
|Earnings per share available to common
    stockholders  assuming dilution, as reported                                                            |  | $                       | 3.44 |      |  | $    | 3.04 |  |  | $ | 3.34 | 
|Pro forma earnings per share available to common
    stockholders  assuming dilution                                                               |  | $                       | 3.40 |      |  | $    | 2.96 |  |  | $ | 3.27 | 

Income Taxes

The Company and its subsidiaries file a
consolidated life/nonlife federal income tax return. 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

52



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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
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 2003 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:

|                                                            |  |                    |      |      |  |      |      |  |  |   |      | 
|----------------------------------------------------------- |  | ------------------ | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                                                            |  |                   
|                                                            |  | For the Year Ended
|                                                            |  | December 31,      
|                                                            |  |                   
|                                                            |  | 2003               |      | 2002 |  | 2001
|                                                            |  |                    |      |      |  |     
|Reported net income available to common
    stockholders    |  | $                  | 492  |      |  | $    | 450  |  |  | $ | 513  | 
|Add back: Goodwill amortization                             |  |                    |     |      |  |      |     |  |  |   | 11   | 
|Add back: FCC Licenses amortization                         |  |                    |     |      |  |      |     |  |  |   | 2    | 
|                                                            |  |                    |      |      |  |      |      |  |  |   |      | 
|Adjusted net income available to common
    stockholders    |  | $                  | 492  |      |  | $    | 450  |  |  | $ | 526  | 
|                                                            |  |                    |      |      |  |      |      |  |  |   |      | 
|Basic Earnings Per Share of Common Stock:                   |  |                    |      |      |  |      |      |  |  |   |      | 
|Reported net income available to common
    stockholders    |  | $                  | 3.47 |      |  | $    | 3.07 |  |  | $ | 3.38 | 
|Add back: Goodwill amortization                             |  |                    |     |      |  |      |     |  |  |   | 0.07 | 
|Add back: FCC Licenses amortization                         |  |                    |     |      |  |      |     |  |  |   | 0.01 | 
|                                                            |  |                    |      |      |  |      |      |  |  |   |      | 
|Adjusted net income available to common
    stockholders    |  | $                  | 3.47 |      |  | $    | 3.07 |  |  | $ | 3.46 | 
|                                                            |  |                    |      |      |  |      |      |  |  |   |      | 
|Earnings Per Share of Common Stock 
    Assuming Dilution: |  |                    |      |      |  |      |      |  |  |   |      | 
|Reported net income available to common
    stockholders    |  | $                  | 3.44 |      |  | $    | 3.04 |  |  | $ | 3.34 | 
|Add back: Goodwill amortization                             |  |                    |     |      |  |      |     |  |  |   | 0.07 | 
|Add back: FCC Licenses amortization                         |  |                    |     |      |  |      |     |  |  |   | 0.01 | 
|                                                            |  |                    |      |      |  |      |      |  |  |   |      | 
|Adjusted net income available to common
    stockholders    |  | $                  | 3.44 |      |  | $    | 3.04 |  |  | $ | 3.42 | 
|                                                            |  |                    |      |      |  |      |      |  |  |   |      | 

The Financial Accounting Standards Board (FASB)
has issued Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51(FIN 46). Under FIN 46, an enterprise consolidates
a variable interest entity (VIE), as defined, if the enterprise
absorbs a majority of the VIEs expected losses, receives a
majority of its expected residual returns, or both, as a result
of ownership, contractual or other financial interests in the
VIE. Prior to FIN 46, entities were generally consolidated
by an enterprise only when it had a controlling financial
interest through ownership of a majority voting interest in the
entity. In accordance with FIN 46, effective
December 31, 2003, the Company deconsolidated Jefferson
Pilot Capital Trust A and Jefferson Pilot Capital
Trust B (the Trusts), VIEs that issued $300 of redeemable
preferred securities in private placement transaction in 1997.
All periods presented have been restated accordingly. The
redeemable preferred securities were previously presented in the
Companys financial statements as Capital Securities in the
consolidated balance sheets. Dividends on the Capital Securities
were presented in the consolidated statements of income as a
deduction to arrive at net income available to common
stockholders, and as a financing outflow on the consolidated
statements of cash flows. As a result of the deconsolidation of
the Trusts, the consolidated balance sheets now reflect junior
subordinated debentures purchased from the Company by the Trusts
in 1997, which had previously been eliminated in consolidation.
Interest expense on the junior subordinated debentures is
presented as interest expense in the consolidated statements of
income and is presented as an operating cash outflow on the
consolidated statements of cash flow.

53



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In April 2003, the FASB issued Statement of
Financial Accounting Standards No. 149, Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities(SFAS 149), which is effective for
contracts entered into or modified after June 30, 2003,
with certain exceptions. The adoption of SFAS 149 did not
impact the Companys financial position or results of
operations.

In April 2003, the FASBs Derivative
Implementation Group issued SFAS No. 133 Implementation
Issue No. B36, Embedded Derivatives: Modified
Coinsurance Arrangements and Debt Instruments that Incorporate
Credit Risk Exposure that are Unrelated or Only Partially
Related to the Creditworthiness of the Obligor of Those
Instruments (DIG B36), which is effective
October 1, 2003. DIG B36 requires the bifurcation of a
derivative from the receivable or payable related to modified
coinsurance agreement, where the yield on the receivable and
payable is based on a return of a specified block of assets
rather than the creditworthiness of the ceding company. The
Company has no coinsurance agreement subject to DIG B36 due
to the grandfathering provisions contained therein.

In May 2003, the FASB issued Statement of
Financial Accounting Standards No. 150, Accounting
for Certain Financial Instruments with Characteristics of both
Liabilities and Equity(the Statement). The Statement
requires the classification of certain financial instruments as
either a liability or equity, depending on the characteristics
of the instrument. Because of the deconsolidation of Capital
Trusts A and B described above, SFAS 150 had no impact
on the Company.

In July 2003, the Accounting Standards Executive
Committee of the American Institute of Certified Public
Accountants issued Statement of Position 03-1
Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional Long-Duration Contracts and for Separate
Accounts (the SOP). The SOP addresses: (i) separate
account presentation; (ii) accounting for an insurance
companys proportionate interest in separate accounts;
(iii) transfers of assets from the general account to a
separate account; (iv) valuation of certain insurance
liabilities and policy features such as guaranteed minimum death
benefits and annuitization benefits; and (v) accounting for
sales inducements. The SOP was effective January 1, 2004
and will be adopted through an adjustment for the cumulative
effect of a change in accounting principle. Implementation
guidance pertaining to the SOP is still evolving. As a result,
we are unable to estimate the impact of adoption at this time.
We do not expect the cumulative effect adjustment to be material
to our financial position, but it may be material to our results
of operations for 2004. Ongoing application of the SOP may
significantly impact earnings emergence in 2004 and beyond,
lowering earnings in earlier years and increasing earnings in
later years, for certain blocks of individual life insurance.

In December 2003, the FASB revised Statement of
Financial Accounting Standards No. 132,
Employers Disclosures about Pensions and Other
Postretirement Benefits.This statement revises
employers disclosures about pension plans and other
postretirement benefit plans. It does not require change in the
measurement or recognition of those plans. This statement is
effective for financial statements with fiscal years ending
after December 15, 2003. See Note 13 for the related
disclosure.

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%

54



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

stock dividend distributed on April 9, 2001
to shareholders of record as of March 19, 2001 (see
Note 9). All share and per share amounts have been restated
to give retroactive effect to the stock split:

|             |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |             |           | 
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | - | ----------- | --------- | ---- | - | ----------- | --------- |  | - | ----------- | --------- | 
|             |                                                                                                                                                                                                       |                                            
|             |                                                                                                                                                                                                       | Year Ended December 31,                    
|             |                                                                                                                                                                                                       |                                            
|             |                                                                                                                                                                                                       | 2003                                        |   | 2002        |           | 2001
|             |                                                                                                                                                                                                       |                                             |   |             |           |     
|Numerator:   |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |            
|             | Numerator for net income per share and net income
    per share  assuming dilution  Net income
    available to common stockholders, before cumulative effect of
    change in accounting principle |                                             | $ | 492         |           |      | $ | 450         |           |  | $ | 512         |          
|             |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |            
|Denominator: |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |            
|             | Denominator for net income per share 
    weighted-average shares outstanding                                                                                                                        |                                             |   | 141,795,065 |           |      |   | 146,846,698 |           |  |   | 151,914,983 |          
|             | Effect of dilutive securities:                                                                                                                                                                        |                                             |   |             |           |      |   |             |           |  |   |             |          
|             |                                                                                                                                                                                                       | Employee, director, and agent stock options |   |             | 1,072,150 |      |   |             | 1,375,644 |  |   |             | 1,496,187 | 
|             |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |            
|             | Denominator for net income per share 
    assuming dilution  adjusted weighted-average shares
    outstanding                                                                                       |                                             |   | 142,867,215 |           |      |   | 148,222,342 |           |  |   | 153,411,170 |          
|             |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |            
|             | Net income per share, before cumulative effect
    of change in accounting principle                                                                                                                  |                                             | $ | 3.47        |           |      | $ | 3.07        |           |  | $ | 3.37        |          
|             |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |            
|             | Net income per share  assuming
    dilution, before cumulative effect of change in accounting
    principle                                                                                          |                                             | $ | 3.44        |           |      | $ | 3.04        |           |  | $ | 3.33        |          
|             |                                                                                                                                                                                                       |                                             |   |             |           |      |   |             |           |  |   |            



|         |            
|-------- | -----------
|NOTE  4. | INVESTMENTS

Summary Cost and Fair Value
Information

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

|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|-------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ---------- |  | ---------- | ----- | ----- |  | - | ---- | - |  | - | ------ | 
|                                                                                                         |  |                  
|                                                                                                         |  | December 31, 2003
|                                                                                                         |  |                  
|                                                                                                         |  | Cost or           |        | Gross      |  | Gross      |       |      
|                                                                                                         |  | Amortized         |        | Unrealized |  | Unrealized |       | Fair 
|                                                                                                         |  | Cost              |        | Gains      |  | (Losses)   |       | Value
|                                                                                                         |  |                   |        |            |  |            |       |      
|Available for sale carried at fair
    value                                                             |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|U.S. Treasury obligations and direct
    obligations of U.S. Government agencies                         |  | $                 | 247    |            |  | $          | 21    |       |  | $ |     |   |  | $ | 268    | 
|Federal agency issued mortgage backed securities
    (including collateralized mortgage obligations)     |  |                   | 2,045  |            |  |            | 111   |       |  |   | (4   | ) |  |   | 2,152  | 
|Obligations of states and political subdivisions                                                         |  |                   | 211    |            |  |            | 4     |       |  |   | (2   | ) |  |   | 213    | 
|Corporate obligations                                                                                    |  |                   | 13,582 |            |  |            | 821   |       |  |   | (96  | ) |  |   | 14,307 | 
|Corporate private-labeled mortgage backed
    securities (including collateralized mortgage obligations) |  |                   | 721    |            |  |            | 34    |       |  |   | (3   | ) |  |   | 752    | 
|Redeemable preferred stocks                                                                              |  |                   | 13     |            |  |            | 1     |       |  |   |     |   |  |   | 14     | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Subtotal, debt securities                                                                                |  |                   | 16,819 |            |  |            | 992   |       |  |   | (105 | ) |  |   | 17,706 | 
|Equity securities                                                                                        |  |                   | 304    |            |  |            | 454   |       |  |   | (2   | ) |  |   | 756    | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Securities available for sale                                                                            |  | $                 | 17,123 |            |  | $          | 1,446 |       |  | $ | (107 | ) |  | $ | 18,462 | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Held to maturity carried at amortized
    cost                                                           |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Obligations of state and political subdivisions                                                          |  | $                 | 7      |            |  | $          | 1     |       |  | $ |     |   |  | $ | 8      | 
|Corporate obligations                                                                                    |  |                   | 2,745  |            |  |            | 186   |       |  |   | (21  | ) |  |   | 2,910  | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Debt securities held to maturity                                                                         |  | $                 | 2,752  |            |  | $          | 187   |       |  | $ | (21  | ) |  | $ | 2,918  | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 

55



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|-------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ---------- |  | ---------- | ----- | ----- |  | - | ---- | - |  | - | ------ | 
|                                                                                                         |  |                  
|                                                                                                         |  | December 31, 2002
|                                                                                                         |  |                  
|                                                                                                         |  | Cost or           |        | Gross      |  | Gross      |       |      
|                                                                                                         |  | Amortized         |        | Unrealized |  | Unrealized |       | Fair 
|                                                                                                         |  | Cost              |        | Gains      |  | (Losses)   |       | Value
|                                                                                                         |  |                   |        |            |  |            |       |      
|Available for sale carried at fair
    value                                                             |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|U.S. Treasury obligations and direct
    obligations of U.S. Government agencies                         |  | $                 | 340    |            |  | $          | 27    |       |  | $ |     |   |  | $ | 367    | 
|Federal agency issued mortgage backed securities
    (including collateralized mortgage obligations)     |  |                   | 3,225  |            |  |            | 224   |       |  |   |     |   |  |   | 3,449  | 
|Obligations of states and political subdivisions                                                         |  |                   | 79     |            |  |            | 5     |       |  |   |     |   |  |   | 84     | 
|Corporate obligations                                                                                    |  |                   | 10,094 |            |  |            | 746   |       |  |   | (237 | ) |  |   | 10,603 | 
|Corporate private-labeled mortgage backed
    securities (including collateralized mortgage obligations) |  |                   | 1,829  |            |  |            | 113   |       |  |   | (4   | ) |  |   | 1,938  | 
|Redeemable preferred stocks                                                                              |  |                   | 24     |            |  |            | 1     |       |  |   | (1   | ) |  |   | 24     | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Subtotal, debt securities                                                                                |  |                   | 15,591 |            |  |            | 1,116 |       |  |   | (242 | ) |  |   | 16,465 | 
|Equity securities                                                                                        |  |                   | 46     |            |  |            | 366   |       |  |   | (3   | ) |  |   | 409    | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Securities available for sale                                                                            |  | $                 | 15,637 |            |  | $          | 1,482 |       |  | $ | (245 | ) |  | $ | 16,874 | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Held to maturity carried at amortized
    cost                                                           |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Obligations of state and political subdivisions                                                          |  | $                 | 11     |            |  | $          | 1     |       |  | $ |     |   |  | $ | 12     | 
|Corporate obligations                                                                                    |  |                   | 3,025  |            |  |            | 233   |       |  |   | (45  | ) |  |   | 3,213  | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 
|Debt securities held to maturity                                                                         |  | $                 | 3,036  |            |  | $          | 234   |       |  | $ | (45  | ) |  | $ | 3,225  | 
|                                                                                                         |  |                   |        |            |  |            |       |       |  |   |      |   |  |   |        | 

Contractual Maturities

Aggregate amortized cost and aggregate fair value
of debt securities as of December 31, 2003, 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.

|                                          |  |                    |        |                  |  |           |        |       |  |   |       |  |  |   |       | 
|----------------------------------------- |  | ------------------ | ------ | ---------------- |  | --------- | ------ | ----- |  | - | ----- |  |  | - | ----- | 
|                                          |  |                    |        |                 
|                                          |  | Available for Sale |        | Held to Maturity
|                                          |  |                    |        |                 
|                                          |  | Amortized          |        | Fair             |  | Amortized |        | Fair 
|                                          |  | Cost               |        | Value            |  | Cost      |        | Value
|                                          |  |                    |        |                  |  |           |        |      
|Due in one year or less                   |  | $                  | 361    |                  |  | $         | 367    |       |  | $ | 211   |  |  | $ | 215   | 
|Due after one year through five years     |  |                    | 3,420  |                  |  |           | 3,648  |       |  |   | 908   |  |  |   | 969   | 
|Due after five years through ten years    |  |                    | 6,900  |                  |  |           | 7,264  |       |  |   | 1,107 |  |  |   | 1,180 | 
|Due after ten years through twenty years  |  |                    | 2,717  |                  |  |           | 2,822  |       |  |   | 405   |  |  |   | 416   | 
|Due after twenty years                    |  |                    | 3,325  |                  |  |           | 3,514  |       |  |   | 121   |  |  |   | 138   | 
|Amounts not due at a single maturity date |  |                    | 83     |                  |  |           | 77     |       |  |   |      |  |  |   |      | 
|                                          |  |                    |        |                  |  |           |        |       |  |   |       |  |  |   |       | 
|                                          |  |                    | 16,806 |                  |  |           | 17,692 |       |  |   | 2,752 |  |  |   | 2,918 | 
|Redeemable preferred stocks               |  |                    | 13     |                  |  |           | 14     |       |  |   |      |  |  |   |      | 
|                                          |  |                    |        |                  |  |           |        |       |  |   |       |  |  |   |       | 
|                                          |  | $                  | 16,819 |                  |  | $         | 17,706 |       |  | $ | 2,752 |  |  | $ | 2,918 | 
|                                          |  |                    |        |                  |  |           |        |       |  |   |       |  |  |   |       | 

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
$637 and $659 at December 31, 2003 and $533 and $555 at
December 31, 2002.

56



---



##### 



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:

|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |      |  
|-------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------- | --- | ---------- | - | ----- | --- | ---- | - | - | --- | ---- | -
|                                                                                       |                                                                                  |                              
|                                                                                       |                                                                                  | Net Unrealized Gains (Losses)
|                                                                                       |                                                                                  |                              
|                                                                                       |                                                                                  | Debt                          |     | Equity     |   |      
|                                                                                       |                                                                                  | Securities                    |     | Securities |   | Total
|                                                                                       |                                                                                  |                               |     |            |   |      
|Net unrealized gains on securities available for
    sale as of December 31, 2000      |                                                                                  | $                             | 29  |            |   | $     | 316 |      |   | $ | 345 |     
|Change during year ended December 31, 2001:                                            |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|                                                                                       | Increase (decrease) in stated amount of securities                               |                               |     | 165        |   |       |     | (5   | ) |   |     | 160  |  
|                                                                                       | Decrease in value of business acquired and
    deferred policy acquisition costs |                               |     | (48        | ) |       |     |     |   |   |     | (48  | )
|                                                                                       | Decrease in carrying value of Exchangeable
    Securities (Note 8)               |                               |     |           |   |       |     | (11  | ) |   |     | (11  | )
|                                                                                       | Increase in derivative financial instruments                                     |                               |     | 6          |   |       |     |     |   |   |     | 6    |  
|Decrease (increase) in deferred income tax
    liabilities                             |                                                                                  |                               | (40 | )          |   |       | 2   |      |   |   | (38 | )   
|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|Increase (decrease) in net unrealized gains
    included in other comprehensive income |                                                                                  |                               | 83  |            |   |       | (14 | )    |   |   | 69  |     
|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|Net unrealized gains on securities available for
    sale as of December 31, 2001      |                                                                                  |                               | 112 |            |   |       | 302 |      |   |   | 414 |     
|Change during year ended December 31, 2002:                                            |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|                                                                                       | Increase (decrease) in stated amount of securities                               |                               |     | 650        |   |       |     | (119 | ) |   |     | 531  |  
|                                                                                       | Decrease in value of business acquired and
    deferred policy acquisition costs |                               |     | (238       | ) |       |     |     |   |   |     | (238 | )
|                                                                                       | Increase in derivative financial instruments                                     |                               |     | 9          |   |       |     |     |   |   |     | 9    |  
|                                                                                       | Decrease (increase) in deferred income tax
    liabilities                       |                               |     | (144       | ) |       |     | 38   |   |   |     | (106 | )
|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|Increase (decrease) in net unrealized gains
    included in other comprehensive income |                                                                                  |                               | 277 |            |   |       | (81 | )    |   |   | 196 |     
|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|Net unrealized gains on securities available for
    sale as of December 31, 2002      |                                                                                  |                               | 389 |            |   |       | 221 |      |   |   | 610 |     
|Change during year ended December 31, 2003:                                            |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|                                                                                       | Increase in stated amount of securities                                          |                               |     | 13         |   |       |     | 89   |   |   |     | 102  |  
|                                                                                       | Increase in value of business acquired and
    deferred policy acquisition costs |                               |     | 20         |   |       |     |     |   |   |     | 20   |  
|                                                                                       | Decrease in derivative financial instruments                                     |                               |     | (7         | ) |       |     |     |   |   |     | (7   | )
|                                                                                       | Increase in deferred income tax liabilities                                      |                               |     | (13        | ) |       |     | (29  | ) |   |     | (42  | )
|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|Increase in net unrealized gains included in
    other comprehensive income            |                                                                                  |                               | 13  |            |   |       | 60  |      |   |   | 73  |     
|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     
|Net unrealized gains on securities available for
    sale as of December 31, 2003      |                                                                                  | $                             | 402 |            |   | $     | 281 |      |   | $ | 683 |     
|                                                                                       |                                                                                  |                               |     |            |   |       |     |      |   |   |     |     

57



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Net Investment Income

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

|                                       |  |                         |       |      |  |      |       |   |  |   |       |  
|-------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                       |  |                        
|                                       |  | Year Ended December 31,
|                                       |  |                        
|                                       |  | 2003                    |       | 2002 |  | 2001
|                                       |  |                         |       |      |  |     
|Interest on debt securities            |  | $                       | 1,317 |      |  | $    | 1,325 |   |  | $ | 1,270 |  
|Investment income on equity securities |  |                         | 25    |      |  |      | 18    |   |  |   | 23    |  
|Interest on mortgage loans             |  |                         | 256   |      |  |      | 250   |   |  |   | 234   |  
|Interest on policy loans               |  |                         | 50    |      |  |      | 52    |   |  |   | 48    |  
|Other investment income                |  |                         | 42    |      |  |      | 24    |   |  |   | 33    |  
|                                       |  |                         |       |      |  |      |       |   |  |   |       |  
|Gross investment income                |  |                         | 1,690 |      |  |      | 1,669 |   |  |   | 1,608 |  
|Investment expenses                    |  |                         | (33   | )    |  |      | (35   | ) |  |   | (45   | )
|                                       |  |                         |       |      |  |      |       |   |  |   |       |  
|Net investment income                  |  | $                       | 1,657 |      |  | $    | 1,634 |   |  | $ | 1,563 |  
|                                       |  |                         |       |      |  |      |       |   |  |   |       |  

Investment expenses include 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:

|                                                                                     |                  |                         |     |      |   |      |      |    |   |   |     |    | 
|------------------------------------------------------------------------------------ | ---------------- | ----------------------- | --- | ---- | - | ---- | ---- | -- | - | - | --- | -- | 
|                                                                                     |                  |                        
|                                                                                     |                  | Year Ended December 31,
|                                                                                     |                  |                        
|                                                                                     |                  | 2003                    |     | 2002 |   | 2001
|                                                                                     |                  |                         |     |      |   |     
|Common stocks                                                                        |                  | $                       | 14  |      |   | $    | 160  |    |   | $ | 146 |   
|Debt securities                                                                      |                  |                         | (71 | )    |   |      | (167 | )  |   |   | (80 | ) 
|                                                                                     |                  |                         |     |      |   |      |      |    |   |   |     |   
|                                                                                     | Total securities |                         |     | (57  | ) |      |      | (7 | ) |   |     | 66 | 
|Real estate                                                                          |                  |                         |    |      |   |      | (2   | )  |   |   | 1   |   
|Other                                                                                |                  |                         | (4  | )    |   |      | (8   | )  |   |   | (2  | ) 
|Amortization of deferred policy acquisition costs
    and value of business acquired |                  |                         | 14  |      |   |      | (5   | )  |   |   | 1   |   
|                                                                                     |                  |                         |     |      |   |      |      |    |   |   |     |   
|Realized investment (losses) gains                                                   |                  | $                       | (47 | )    |   | $    | (22  | )  |   | $ | 66  |   
|                                                                                     |                  |                         |     |      |   |      |      |    |   |   |     |   

See Note 6 for discussion of amortization of
Deferred Policy Acquisition Cost and VOBA.

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

|                                                |        |                         |     |      |   |      |    |      |   |   |    |     |  
|----------------------------------------------- | ------ | ----------------------- | --- | ---- | - | ---- | -- | ---- | - | - | -- | --- | -
|                                                |        |                        
|                                                |        | Year Ended December 31,
|                                                |        |                        
|                                                |        | 2003                    |     | 2002 |   | 2001
|                                                |        |                         |     |      |   |     
|Gross realized:                                 |        |                         |     |      |   |      |    |      |   |   |    |    
|                                                | Gains  |                         | $   | 71   |   |      | $  | 196  |   |   | $  | 160 |  
|                                                | Losses |                         |     | (128 | ) |      |    | (203 | ) |   |    | (94 | )
|                                                |        |                         |     |      |   |      |    |      |   |   |    |    
|Net realized (losses) gains on total securities |        | $                       | (57 | )    |   | $    | (7 | )    |   | $ | 66 |    
|                                                |        |                         |     |      |   |      |    |      |   |   |    |    

58



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Information about gross realized gains and losses
on available for sale securities including other than temporary
impairments follows:

|                                                                 |        |                         |     |      |   |      |   |      |   |   |    |     |  
|---------------------------------------------------------------- | ------ | ----------------------- | --- | ---- | - | ---- | - | ---- | - | - | -- | --- | -
|                                                                 |        |                        
|                                                                 |        | Year Ended December 31,
|                                                                 |        |                        
|                                                                 |        | 2003                    |     | 2002 |   | 2001
|                                                                 |        |                         |     |      |   |     
|Gross realized:                                                  |        |                         |     |      |   |      |   |      |   |   |    |    
|                                                                 | Gains  |                         | $   | 56   |   |      | $ | 191  |   |   | $  | 156 |  
|                                                                 | Losses |                         |     | (105 | ) |      |   | (182 | ) |   |    | (75 | )
|                                                                 |        |                         |     |      |   |      |   |      |   |   |    |    
|Net realized (losses) gains on available for sale
    securities |        | $                       | (49 | )    |   | $    | 9 |      |   | $ | 81 |    
|                                                                 |        |                         |     |      |   |      |   |      |   |   |    |    

Investment Concentration Risk and
Impairment

Investments in debt and equity securities include
1,773 issuers. Debt and equity securities include investments in
Bank of America of $494 and $471 as of December 31, 2003
and 2002. No other corporate issuer represents more than one
percent of investments.

The Company uses repurchase agreements to meet
various cash requirements. At December 31, 2003 and 2002,
the amounts held in debt securities available for sale pledged
as collateral for these borrowings were $428 and $532.

The Companys mortgage loan portfolio is
comprised of conventional real estate mortgages collateralized
primarily by retail (33%), office (20%), industrial (20%),
apartment (16%), 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 32% of
stated mortgage loan balances as of December 31, 2003 are
due from borrowers in South Atlantic states, approximately 18%
are due from borrowers in West South Central states,
approximately 14% are due from borrowers in Pacific states and
approximately 10% are due from borrowers in Mountain states. No
other geographic region represents as much as 10% of
December 31, 2003 mortgage loans.

At December 31, 2003 and 2002, the recorded
investment in mortgage loans that are considered to be
potentially impaired was $62 and $66. Delinquent loans
outstanding as of December 31, 2003 and 2002 totaled $4 and
$12. The related allowance for credit losses on all mortgage
loans was $36 at December 31, 2003 and 2002. The average
recorded investment in potentially impaired loans was $64, $77
and $67 during the years ended December 31, 2003, 2002 and
2001, on which interest income of $6, $6 and $7 was recognized.

The Company sold certain securities that had been
classified as held to maturity, due to significant declines in
credit worthiness. The net amortized cost of sold securities
were $29, $86, and $27 for 2003, 2002, and 2001. The realized
gains/(losses) on the sales of these securities, some of which
were previously impaired, were $9, $0, and $(6) for 2003, 2002,
and 2001.

59



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company monitors its portfolio closely to
ensure that all other than temporary impairments are identified
and recognized in earnings as they occur. The table below
summarizes unrealized losses on all securities held by both
asset class and length of time that a security has been in
unrealized loss position:

|                                                                                                         |                           |                                       |       |            |       |       |     |            |     |       |     |            |     |   |     |     |     |   |       |       |       |   |      |      |      |  
|-------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------- | ----- | ---------- | ----- | ----- | --- | ---------- | --- | ----- | --- | ---------- | --- | - | --- | --- | --- | - | ----- | ----- | ----- | - | ---- | ---- | ---- | -
|                                                                                                         |                           |                                       |       |            |       |       |     |           
|                                                                                                         |                           | Less than                             |       | 12 months  |       |      
|                                                                                                         |                           | 12 months                             |       | or longer  |       | Total
|                                                                                                         |                           |                                       |       |            |       |      
|                                                                                                         |                           |                                       |       | Gross      |       |       |     | Gross      |     |       |     | Gross     
|                                                                                                         |                           | Fair                                  |       | Unrealized |       | Fair  |     | Unrealized |     | Fair  |     | Unrealized
|                                                                                                         |                           | Value                                 |       | Losses     |       | Value |     | Losses     |     | Value |     | Losses    
|                                                                                                         |                           |                                       |       |            |       |       |     |            |     |       |     |           
|U.S. Treasury obligations and direct
    obligations of U.S. Government agencies                         |                           | $                                     | 14    |            |       | $     |    |            |     | $     |    |            |     | $ |    |     |     | $ | 14    |       |       | $ |     |     
|Federal agency issued mortgage backed securities
    (including collateralized mortgage obligations)     |                           |                                       | 101   |            |       |       | (4  | )          |     |       |    |            |     |   |    |     |     |   | 101   |       |       |   | (4   | )   
|Obligations of states and political subdivisions                                                         |                           |                                       | 148   |            |       |       | (2  | )          |     |       |    |            |     |   |    |     |     |   | 148   |       |       |   | (2   | )   
|Corporate obligations                                                                                    |                           |                                       | 2,746 |            |       |       | (69 | )          |     |       | 600 |            |     |   | (48 | )   |     |   | 3,346 |       |       |   | (117 | )   
|Corporate private-labeled mortgage backed
    securities (including collateralized mortgage obligations) |                           |                                       | 35    |            |       |       |    |            |     |       | 18  |            |     |   | (3  | )   |     |   | 53    |       |       |   | (3   | )   
|Redeemable preferred stock                                                                               |                           |                                       |      |            |       |       |    |            |     |       | 4   |            |     |   |    |     |     |   | 4     |       |       |   |     |     
|                                                                                                         |                           |                                       |       |            |       |       |     |            |     |       |     |            |     |   |     |     |     |   |       |       |       |   |      |     
|                                                                                                         | Subtotal, debt securities |                                       |       | 3,044      |       |       |     | (75        | )   |       |     | 622        |     |   |     | (51 | )   |   |       | 3,666 |       |   |      | (126 | )   
|Equity securities                                                                                        |                           |                                       | 15    |            |       |       | (1  | )          |     |       | 4   |            |     |   | (1  | )   |     |   | 19    |       |       |   | (2   | )   
|                                                                                                         |                           |                                       |       |            |       |       |     |            |     |       |     |            |     |   |     |     |     |   |       |       |       |   |      |     
|                                                                                                         |                           | Total temporarily impaired securities |       | $          | 3,059 |       |     | $          | (76 | )     |     | $          | 626 |   |     | $   | (52 | ) |       | $     | 3,685 |   |      | $    | (128 | )
|                                                                                                         |                           |                                       |       |            |       |       |     |            |     |       |     |            |     |   |     |     |     |   |       |       |       |   |      |     

One statistic we pay particular attention to with
respect to debt securities is the Fair Value to Amortized Cost
ratio. Securities with a fair value to amortized cost ratio in
the 90%-99% range are typically securities that have been
impacted by increases in market interest rates or credit
spreads. Securities in the 80%-89% range are typically
securities that have been impacted by increased market yields,
specific credit concerns or both. These securities are monitored
to ensure that the impairment is not other than temporary.
Securities with a fair value to amortized cost ratio less then
80% are considered to be potentially distressed
securities, and are subjected to rigorous review. The
following factors are considered: the length of time a
securitys fair value has been below amortized cost,
industry factors or conditions related to a geographic area that
are negatively affecting the security, downgrades by rating
agencies, the valuation of assets specifically pledged to
support the credit, the overall financial condition of the
issuer, past due interest or principal payments, and our intent
and ability to hold the security for a sufficient time to allow
for a recovery in value.

The table below summarizes the securities with
unrealized losses in our debt portfolio as of December 31,
2003.

|          |  |           |       |       |  |            |       |            |  |   |      |   |  |  |       |  
|--------- |  | --------- | ----- | ----- |  | ---------- | ----- | ---------- |  | - | ---- | - |  |  | ----- | -
|          |  | Amortized |       | Fair  |  | Unrealized |       |           
|          |  | Cost      |       | Value |  | Losses     |       | Percentage
|          |  |           |       |       |  |            |       |           
|90%-99%   |  | $         | 3,543 |       |  | $          | 3,456 |            |  | $ | (87  | ) |  |  | 69.0  | %
|80%-89%   |  |           | 224   |       |  |            | 193   |            |  |   | (31  | ) |  |  | 24.6  | %
|Below 80% |  |           | 25    |       |  |            | 17    |            |  |   | (8   | ) |  |  | 6.4   | %
|          |  |           |       |       |  |            |       |            |  |   |      |   |  |  |       |  
|          |  | $         | 3,792 |       |  | $          | 3,666 |            |  | $ | (126 | ) |  |  | 100.0 | %
|          |  |           |       |       |  |            |       |            |  |   |      |   |  |  |       |  

As of December 31, 2003 we held nine
securities that were potentially distressed. Four of
these securities are equipment trust securities secured by
passenger aircraft. We have evaluated both the underlying
collateral and the health of the passenger airlines that are
leasing these aircraft, and have concluded that these securities
are not other than temporally impaired. The remaining five
securities have been potentially distressed for less
than six months and, based on our review of the factors
delineated above, are not considered to be other than
temporarily impaired.

60



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                                 
|------- | --------------------------------
|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 $33 and $18 at
December 31, 2003 and 2002, are included in other
investments in the consolidated balance sheets. 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 earnings in the period of the change. For
derivatives that are designated and qualify as cash flow hedges,
the effective portion of the gain or loss realized 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 years ended
December 31, 2003, 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, 2003 and 2002 the maximum term of interest
rate swaps that hedged floating rate investments was ten 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 Companys pricing assumptions.

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 years ended
December 31, 2003, 2002 and 2001, the Companys
realized investment gains from these swaps were insignificant.

For the years ended December 31, 2003 and
2002, the Company recognized other comprehensive income related
to cash flow hedges, net of taxes, of $(5) and $9.

For the years ended December 31, 2003, 2002
and 2001 the Company recognized $4, $0 and $0 in previously
deferred losses as a result of sales of securities purchased
through the use of cash flow hedges. 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.
These contracts have an equity market component, where interest
credited to the contracts is linked to the performance of the
S&P 500® 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, 2003,
activity reflected in net investment income related to these
options was $18. Such amounts were insignificant for 2002 and
2001.

61



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 years ended December 31, 2003, 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:

|                                                                                          |             |                         |       |      |  |      |       |     |  |   |       |     | 
|----------------------------------------------------------------------------------------- | ----------- | ----------------------- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- | --- | 
|                                                                                          |             |                        
|                                                                                          |             | Year Ended December 31,
|                                                                                          |             |                        
|                                                                                          |             | 2003                    |       | 2002 |  | 2001
|                                                                                          |             |                         |       |      |  |     
|Beginning balance                                                                         |             | $                       | 1,525 |      |  | $    | 1,410 |     |  | $ | 1,219 |    
|Deferral:                                                                                 |             |                         |       |      |  |      |       |     |  |   |       |    
|                                                                                          | Commissions |                         |       | 381  |  |      |       | 357 |  |   |       | 284 | 
|                                                                                          | Other       |                         |       | 120  |  |      |       | 122 |  |   |       | 100 | 
|                                                                                          |             |                         |       |      |  |      |       |     |  |   |       |    
|                                                                                          |             |                         | 501   |      |  |      | 479   |     |  |   | 384   |    
|Amortization                                                                              |             |                         | (280  | )    |  |      | (202  | )   |  |   | (169  | )  
|Adjustment related to unrealized losses
    (gains) on debt securities available for sale |             |                         | 19    |      |  |      | (159  | )   |  |   | (24   | )  
|Adjustment related to realized losses
    (gains) on debt securities                      |             |                         | 6     |      |  |      | (3    | )   |  |   |      |    
|                                                                                          |             |                         |       |      |  |      |       |     |  |   |       |    
|Ending balance                                                                            |             | $                       | 1,771 |      |  | $    | 1,525 |     |  | $ | 1,410 |    
|                                                                                          |             |                         |       |      |  |      |       |     |  |   |       |    

Value of Business Acquired

Information about value of business acquired
follows:

|                                                                                          |  |                         |     |      |  |      |     |   |  |   |     |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | --- | ---- |  | ---- | --- | - |  | - | --- | -
|                                                                                          |  |                        
|                                                                                          |  | Year Ended December 31,
|                                                                                          |  |                        
|                                                                                          |  | 2003                    |     | 2002 |  | 2001
|                                                                                          |  |                         |     |      |  |     
|Beginning balance                                                                         |  | $                       | 502 |      |  | $    | 660 |   |  | $ | 740 |  
|Deferral of commissions and accretion of interest                                         |  |                         | 9   |      |  |      | 7   |   |  |   | 12  |  
|Amortization                                                                              |  |                         | (61 | )    |  |      | (84 | ) |  |   | (68 | )
|Adjustment related to unrealized losses
    (gains) on debt securities available for sale |  |                         | 1   |      |  |      | (79 | ) |  |   | (25 | )
|Adjustment related to realized losses
    (gains) on debt securities                      |  |                         | 8   |      |  |      | (2  | ) |  |   | 1   |  
|                                                                                          |  |                         |     |      |  |      |     |   |  |   |     |  
|Ending balance                                                                            |  | $                       | 459 |      |  | $    | 502 |   |  | $ | 660 |  
|                                                                                          |  |                         |     |      |  |      |     |   |  |   |     |  

62



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|     |  |              |      |  
|---- |  | ------------ | ---- | -
|     |  | Amortization
|Year |  | Percentage  
|     |  |             
|2004 |  |              | 11.9 | %
|2005 |  |              | 9.9  | %
|2006 |  |              | 8.7  | %
|2007 |  |              | 8.2  | %
|2008 |  |              | 7.0  | %

As discussed in Note 2, investment income
allocated to the Individual Products, AIP and Benefit Partners
segments are reduced by a default charge intended to replicate
expected credit losses over an economic cycle. In 2003, the
Company unlocked its deferred policy acquisition cost and VOBA
models with respect to the default charge assumption, resulting
in a favorable adjustment of $16 to realized gains and losses.



|        |                               
|------- | ------------------------------
|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 3.0% to 9.0% in 2003 and from 4.0% to 7.5%
in 2002 and 2001. The average credited interest rates for
universal life-type products were 5.0% for 2003 and 5.6% for
years 2002 and 2001. For annuity products, credited interest
rates generally ranged from 3.0% to 7.6% in 2003, 3.0% to 7.8%
in 2002 and 4.0% to 9.8% in 2001.

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 (71 IAM) and the 1969-71
U.S. Life Tables. For similar products issued between 1987
and 1999, mortality assumptions are based on blends of the 1983
Table a(83a) and 1979-81 U.S. Life Tables. For similar
products issued after 1999, mortality assumptions are based on
the Annuity 2000 Mortality Table (2000a).

For immediate annuities, the 71 IAM table 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.

63



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Accident and Health and Disability Insurance
Liabilities Activity

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

|                                         |                            |      |     |      |   |      |     |     |   |   |     |     |  
|---------------------------------------- | -------------------------- | ---- | --- | ---- | - | ---- | --- | --- | - | - | --- | --- | -
|                                         |                            | 2003 |     | 2002 |   | 2001
|                                         |                            |      |     |      |   |     
|Balance as of January 1                  |                            | $    | 564 |      |   | $    | 540 |     |   | $ | 552 |    
|Less reinsurance recoverables            |                            |      | 132 |      |   |      | 135 |     |   |   | 146 |    
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|Net balance as of January 1              |                            |      | 432 |      |   |      | 405 |     |   |   | 406 |    
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|Amount incurred:                         |                            |      |     |      |   |      |     |     |   |   |     |    
|                                         | Current year               |      |     | 408  |   |      |     | 366 |   |   |     | 304 |  
|                                         | Prior years                |      |     | (1   | ) |      |     | (38 | ) |   |     | (44 | )
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|                                         |                            |      | 407 |      |   |      | 328 |     |   |   | 260 |    
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|Less amount paid:                        |                            |      |     |      |   |      |     |     |   |   |     |    
|                                         | Current year               |      |     | 224  |   |      |     | 211 |   |   |     | 174 |  
|                                         | Prior years                |      |     | 115  |   |      |     | 90  |   |   |     | 87  |  
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|                                         |                            |      | 339 |      |   |      | 301 |     |   |   | 261 |    
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|Net balance as of December 31            |                            |      | 500 |      |   |      | 432 |     |   |   | 405 |    
|Plus reinsurance recoverables            |                            |      | 130 |      |   |      | 132 |     |   |   | 135 |    
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|Balance as of December 31                |                            | $    | 630 |      |   | $    | 564 |     |   | $ | 540 |    
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|Balance as of December 31 included with: |                            |      |     |      |   |      |     |     |   |   |     |    
|                                         | Future policy benefits     |      | $   | 591  |   |      | $   | 530 |   |   | $   | 498 |  
|                                         | Policy and contract claims |      |     | 39   |   |      |     | 34  |   |   |     | 42  |  
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    
|                                         |                            | $    | 630 |      |   | $    | 564 |     |   | $ | 540 |    
|                                         |                            |      |     |      |   |      |     |     |   |   |     |    

The Company uses 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

Commercial Paper and Revolving Credit
Borrowings

The Company has entered into bank credit
agreements 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 until May 2004 and half
available until May 2007. The credit agreements principally
support the issuance of commercial paper. As of
December 31, 2003, 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 weighted-average interest rates for
commercial paper borrowings outstanding of $654 and $453 at
December 31, 2003 and 2002 were 1.13% and 1.44%.

The junior subordinated debentures were issued in
1997 and consist of $206 at an interest rate of 8.14% and $103
at an interest rate of 8.285%. Interest is paid semi-annually.
These debentures mature in 2046, but are redeemable prior to
maturity at the option of the Company beginning January 15,
2007, two-thirds subject to a call premium of 4.07% and the
remainder subject to a call premium of 4.14% that grades to zero
as of January 15, 2017.

64



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                     
|------- | --------------------
|NOTE 9. | STOCKHOLDERS EQUITY

Common Stock

Changes in the number of shares outstanding are
as follows:

|                                       |  |                         |             |      |  |      |             |   |  |  |             |  
|-------------------------------------- |  | ----------------------- | ----------- | ---- |  | ---- | ----------- | - |  |  | ----------- | -
|                                       |  |                        
|                                       |  | Year Ended December 31,
|                                       |  |                        
|                                       |  | 2003                    |             | 2002 |  | 2001
|                                       |  |                         |             |      |  |     
|Shares outstanding, beginning          |  |                         | 142,798,768 |      |  |      | 150,006,582 |   |  |  | 154,305,846 |  
|Shares issued under stock option plans |  |                         | 1,390,372   |      |  |      | 673,486     |   |  |  | 141,075     |  
|Shares reacquired                      |  |                         | (3,578,600  | )    |  |      | (7,881,300  | ) |  |  | (4,440,339  | )
|                                       |  |                         |             |      |  |      |             |   |  |  |             |  
|Shares outstanding, ending             |  |                         | 140,610,540 |      |  |      | 142,798,768 |   |  |  | 150,006,582 |  
|                                       |  |                         |             |      |  |      |             |   |  |  |             |  

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

Shareholders Rights Plan

Under a shareholders rights plan, one
common share purchase right is attached to each share of the
Companys common stock. The plan becomes operative in
certain events involving an offer for or the acquisition of 15%
or more of the Companys common stock by any person or
group. Following such an event, each right, unless redeemed by
the Companys Board, entitles the holder (other than the
acquiring person or group) to purchase for an exercise price of
$156.67 an amount of common stock of the Company (or in the
discretion of the Board, preferred stock, debt securities, or
cash), or in certain circumstances stock of the acquiring
company, having a market value of twice the exercise price.
Approximately 141 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 set by the Board of
Directors, subject to certain limitations on voting rights.



|         |                      
|-------- | ---------------------
|NOTE 10. | 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 12,348,825 shares are available
for issuance pursuant to outstanding or future awards as of
December 31, 2003. The option price is never 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.

65



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Non-Employee Directors Plan

Under the Non-Employee Directors Stock
Option Plan, 603,707 shares of the Companys common
stock are reserved for issuance pursuant to outstanding awards
as of December 31, 2003. 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 terminated as to further awards on March 31, 2003. In
2004, the Board of Directors has approved a replacement plan,
subject to shareholder approval, with 425,000 shares
reserved for this plan.

Summary Stock Option Activity

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

|                                                                   |  |         |            |           |  |         |       |           |  |         |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|------------------------------------------------------------------ |  | ------- | ---------- | --------- |  | ------- | ----- | --------- |  | ------- | --------- | --------- |  | - | ----- |  |  | - | --------- | - |  | - | ----- | 
|                                                                   |  |         |            |           |  |        
|                                                                   |  | 2003    |            | 2002      |  | 2001   
|                                                                   |  |         |            |           |  |        
|                                                                   |  |         |            | Weighted- |  |         |       | Weighted- |  |         |           | Weighted-
|                                                                   |  |         |            | Average   |  |         |       | Average   |  |         |           | Average  
|                                                                   |  |         |            | Exercise  |  |         |       | Exercise  |  |         |           | Exercise 
|                                                                   |  |         |            | Price     |  |         |       | Price     |  |         |           | Price    
|                                                                   |  | Options |            | Per Share |  | Options |       | Per Share |  | Options |           | Per Share
|                                                                   |  |         |            |           |  |         |       |           |  |         |           |          
|Outstanding beginning of year                                      |  |         | 9,952,806  |           |  | $       | 37.01 |           |  |         | 9,492,389 |           |  | $ | 34.82 |  |  |   | 7,644,441 |   |  | $ | 31.32 | 
|Granted                                                            |  |         | 1,378,550  |           |  |         | 38.49 |           |  |         | 1,436,361 |           |  |   | 47.71 |  |  |   | 2,222,163 |   |  |   | 46.39 | 
|Exercised                                                          |  |         | (1,525,590 | )         |  |         | 26.30 |           |  |         | (707,740  | )         |  |   | 26.63 |  |  |   | (132,948  | ) |  |   | 21.43 | 
|Forfeited                                                          |  |         | (148,463   | )         |  |         | 51.53 |           |  |         | (268,204  | )         |  |   | 44.15 |  |  |   | (241,267  | ) |  |   | 37.79 | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|Outstanding end of year                                            |  |         | 9,657,303  |           |  | $       | 38.80 |           |  |         | 9,952,806 |           |  | $ | 37.01 |  |  |   | 9,492,389 |   |  | $ | 34.82 | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|Exercisable at end of year                                         |  |         | 7,427,496  |           |  | $       | 37.54 |           |  |         | 7,576,734 |           |  | $ | 34.23 |  |  |   | 6,070,322 |   |  | $ | 30.82 | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |           |           |  |   |       |  |  |   |           |   |  |   |       | 
|Weighted-average fair value of options granted
    during the year |  | $       | 8.80       |           |  |         |       |           |  | $       | 10.73     |           |  |   |       |  |  | $ | 11.27     |   |  |   |       | 
|                                                                   |  |         |            |           |  |         |       |           |  |         |           |           |  |   |       |  |  |   |           |   |  |   |       | 

The following table summarizes certain stock
option information at December 31, 2003:

|                         |  |                     |           |                     |  |                |     |           |  |                |       |  |  |  |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ------------------- |  | -------------- | --- | --------- |  | -------------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |  |                     |           |                    
|                         |  | Options Outstanding |           | Options Exercisable
|                         |  |                     |           |                    
|                         |  |                     |           | Weighted-           |  |                |     |          
|                         |  |                     |           | Average             |  |                |     |           |  |               
|                         |  |                     |           | Remaining           |  | Weighted-      |     |           |  | Weighted-     
|                         |  | Number              |           | Contractual         |  | Average        |     | Number    |  | Average       
|Range of Exercise Prices |  | of Shares           |           | Life                |  | Exercise Price |     | of Shares |  | Exercise Price
|                         |  |                     |           |                     |  |                |     |           |  |               
|$13.37  $16.19          |  |                     | 388,310   |                     |  |                | 1.0 |           |  | $              | 15.94 |  |  |  | 388,310   |  |  | $ | 15.94 | 
|$23.83  $25.72          |  |                     | 1,336,966 |                     |  |                | 2.6 |           |  |                | 24.89 |  |  |  | 1,336,966 |  |  |   | 24.89 | 
|$32.33  $35.96          |  |                     | 1,459,626 |                     |  |                | 5.1 |           |  |                | 35.11 |  |  |  | 1,459,626 |  |  |   | 35.11 | 
|$36.00  $46.17          |  |                     | 3,119,203 |                     |  |                | 5.8 |           |  |                | 40.42 |  |  |  | 2,090,820 |  |  |   | 41.64 | 
|$46.55  $51.04          |  |                     | 3,353,198 |                     |  |                | 6.9 |           |  |                | 47.09 |  |  |  | 2,151,774 |  |  |   | 46.97 | 
|                         |  |                     |           |                     |  |                |     |           |  |                |       |  |  |  |           |  |  |   |       | 
|                         |  |                     | 9,657,303 |                     |  |                |     |           |  | $              | 38.80 |  |  |  | 7,427,496 |  |  | $ | 37.54 | 
|                         |  |                     |           |                     |  |                |     |           |  |                |       |  |  |  |           |  |  |   |       | 

These tables include 759,746 outstanding and
447,663 exercisable stock options held by life insurance agents.
These are five year options with most vesting based on future
production. Forfeitures on agent options have been much higher
than on other options. These options are expensed upon vesting
in accordance with SFAS 123.

Fair values were estimated at grant date using a
Black-Scholes option pricing model with the following
weighted-average assumptions for 2003, 2002 and 2001: risk-free
interest rates of 3.7%, 5.0% and 5.2%; volatility factors of the
expected market price of the Companys common stock of
0.24, 0.22 and 0.22; and a weighted-average expected life of the
options of 7.2 years for 2003, 7.9 years for 2002 and
8.1 years for 2001. An

66



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

expected dividend yield of 2.57% was assumed for
those grants made in 2003, and dividends were assumed to
increase by 10% annually for those grants in 2002 and 2001.

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 because 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 11. | STATUTORY FINANCIAL INFORMATION

The Companys life insurance subsidiaries
prepare financial statements on the basis of 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, (5) the criteria for providing
asset valuation allowances, and the methodologies used to
determine the amounts thereof, (6) the timing of
establishing certain reserves, and the methodologies used to
determine the amounts thereof, and (7) certain assets are
not admitted for purposes of determining surplus under SAP.

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

|                                                    |  |      |       |      |  |      |       |  |  |   |       | 
|--------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                    |  | 2003 |       | 2002 |  | 2001
|                                                    |  |      |       |      |  |     
|Statutory Accounting Practices                      |  |      |       |      |  |      |       |  |  |   |       | 
|Net income for the year ended December 31           |  | $    | 424   |      |  | $    | 240   |  |  | $ | 353   | 
|                                                    |  |      |       |      |  |      |       |  |  |   |       | 
|Statutory capital and surplus as of
    December 31 |  | $    | 1,774 |      |  | $    | 1,555 |  |  | $ | 1,547 | 
|                                                    |  |      |       |      |  |      |       |  |  |   |       | 
|Generally Accepted Accounting
    Principles        |  |      |       |      |  |      |       |  |  |   |       | 
|Net income for the year ended December 31           |  | $    | 450   |      |  | $    | 323   |  |  | $ | 400   | 
|                                                    |  |      |       |      |  |      |       |  |  |   |       | 
|Stockholders equity as of December 31              |  | $    | 4,244 |      |  | $    | 4,023 |  |  | $ | 3,720 | 
|                                                    |  |      |       |      |  |      |       |  |  |   |       | 

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

67



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 $324 and
$356 at December 31, 2003 and $336 and $364 at
December 31, 2002. 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,
2003, 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 $238
of dividends could be paid to the ultimate parent by the life
insurance subsidiaries in 2004 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 $25 and $27 on deposit with various
states in 2003 and 2002.



|         |             
|-------- | ------------
|NOTE 12. | INCOME TAXES

Income taxes reported are as follows:

|                                                                         |                          |              |     |      |  |      |     |     |  |   |     |     | 
|------------------------------------------------------------------------ | ------------------------ | ------------ | --- | ---- |  | ---- | --- | --- |  | - | --- | --- | 
|                                                                         |                          |             
|                                                                         |                          | Year Ended  
|                                                                         |                          | December 31,
|                                                                         |                          |             
|                                                                         |                          | 2003         |     | 2002 |  | 2001
|                                                                         |                          |              |     |      |  |     
|Current expense                                                          |                          | $            | 127 |      |  | $    | 238 |     |  | $ | 222 |    
|Deferred expense                                                         |                          |              | 119 |      |  |      | (3  | )   |  |   | 41  |    
|Cumulative effect of change in accounting for
    derivative instruments |                          |              |    |      |  |      |    |     |  |   | 1   |    
|                                                                         |                          |              |     |      |  |      |     |     |  |   |     |    
|                                                                         | Total income tax expense |              | $   | 246  |  |      | $   | 235 |  |   | $   | 264 | 
|                                                                         |                          |              |     |      |  |      |     |     |  |   |     |    

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

|                          |                                                          |              |       |      |   |      |       |      |   |  |       |      |  
|------------------------- | -------------------------------------------------------- | ------------ | ----- | ---- | - | ---- | ----- | ---- | - |  | ----- | ---- | -
|                          |                                                          |             
|                          |                                                          | Year Ended  
|                          |                                                          | December 31,
|                          |                                                          |             
|                          |                                                          | 2003         |       | 2002 |   | 2001
|                          |                                                          |              |       |      |   |     
|Federal income tax rate   |                                                          |              | 35.0% |      |   |      | 35.0% |      |   |  | 35.0% |     
|Reconciling items:        |                                                          |              |       |      |   |      |       |      |   |  |       |     
|                          | Tax exempt interest and dividends received
    deduction |              |       | (1.2 | ) |      |       | (1.5 | ) |  |       | (1.1 | )
|                          | Other, net                                               |              |       | (0.5 | ) |      |       | 0.8  |   |  |       |     |  
|                          |                                                          |              |       |      |   |      |       |      |   |  |       |     
|Effective income tax rate |                                                          |              | 33.3% |      |   |      | 34.3% |      |   |  | 33.9% |     
|                          |                                                          |              |       |      |   |      |       |      |   |  |       |     

68



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                  |                                                                         |              |       |      |  |   |     |     | 
|--------------------------------- | ----------------------------------------------------------------------- | ------------ | ----- | ---- |  | - | --- | --- | 
|                                  |                                                                         |             
|                                  |                                                                         | December 31,
|                                  |                                                                         |             
|                                  |                                                                         | 2003         |       | 2002
|                                  |                                                                         |              |       |     
|Deferred tax assets:              |                                                                         |              |       |      |  |   |     |    
|                                  | Difference in policy liabilities                                        |              | $     | 470  |  |   | $   | 402 | 
|                                  | Obligation for postretirement benefits                                  |              |       | 1    |  |   |     | 6   | 
|                                  | Deferred compensation                                                   |              |       | 33   |  |   |     | 26  | 
|                                  | Capital loss carryforward                                               |              |       | 25   |  |   |     |    | 
|                                  | Other deferred tax assets                                               |              |       | 32   |  |   |     | 23  | 
|                                  |                                                                         |              |       |      |  |   |     |    
|Gross deferred tax assets         |                                                                         |              | 561   |      |  |   | 457 |    
|                                  |                                                                         |              |       |      |  |   |     |    
|Deferred tax liabilities:         |                                                                         |              |       |      |  |   |     |    
|                                  | Net unrealized gains on securities                                      |              |       | 369  |  |   |     | 327 | 
|                                  | Deferral of policy acquisition costs and value of
    business acquired |              |       | 517  |  |   |     | 407 | 
|                                  | Deferred gain recognition for income tax purposes                       |              |       | 41   |  |   |     | 16  | 
|                                  | Differences in investment bases                                         |              |       | 64   |  |   |     | 61  | 
|                                  | Depreciation differences                                                |              |       | 44   |  |   |     | 18  | 
|                                  | Other deferred tax liabilities                                          |              |       | 69   |  |   |     | 13  | 
|                                  |                                                                         |              |       |      |  |   |     |    
|Gross deferred tax liabilities    |                                                                         |              | 1,104 |      |  |   | 842 |    
|                                  |                                                                         |              |       |      |  |   |     |    
|Net deferred income tax liability |                                                                         | $            | 543   |      |  | $ | 385 |    
|                                  |                                                                         |              |       |      |  |   |     |    

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 $7
have been agreed upon and paid. The examination of the 1999 tax
year has been completed by the Internal Revenue Service and
assessments totaling $6 have been agreed upon and paid. In the
opinion of management, recorded income tax liabilities
adequately provide for additional assessments on 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.

69



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                         
|-------- | ------------------------
|NOTE 13. | RETIREMENT BENEFIT PLANS

Pension Plans

The Company and its subsidiaries have
tax-qualified and nonqualified defined benefit pension plans,
which provide benefits based on years of service and final
average earnings. The plans 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:

|                                    |                                           |              |     |      |   |   |     |     |  
|----------------------------------- | ----------------------------------------- | ------------ | --- | ---- | - | - | --- | --- | -
|                                    |                                           |             
|                                    |                                           | Year Ended  
|                                    |                                           | December 31,
|                                    |                                           |             
|                                    |                                           | 2003         |     | 2002
|                                    |                                           |              |     |     
|Change in benefit obligation:       |                                           |              |     |      |   |   |     |    
|                                    | Benefit obligation at beginning of year   |              | $   | 322  |   |   | $   | 267 |  
|                                    | Service cost                              |              |     | 13   |   |   |     | 11  |  
|                                    | Interest cost                             |              |     | 21   |   |   |     | 20  |  
|                                    | Actuarial loss                            |              |     | 30   |   |   |     | 42  |  
|                                    | Benefits paid                             |              |     | (25  | ) |   |     | (18 | )
|                                    |                                           |              |     |      |   |   |     |    
|Benefit obligation at end of year   |                                           |              | 361 |      |   |   | 322 |    
|                                    |                                           |              |     |      |   |   |     |    
|Change in plan assets:              |                                           |              |     |      |   |   |     |    
|                                    | Fair value of assets at beginning of year |              |     | 331  |   |   |     | 361 |  
|                                    | Actual return on plan assets              |              |     | 58   |   |   |     | (13 | )
|                                    | Transfer in                               |              |     | 5    |   |   |     | 1   |  
|                                    | Benefits paid                             |              |     | (25  | ) |   |     | (18 | )
|                                    |                                           |              |     |      |   |   |     |    
|Fair value of assets at end of year |                                           |              | 369 |      |   |   | 331 |    
|                                    |                                           |              |     |      |   |   |     |    
|Funded status of the plans          |                                           |              | 8   |      |   |   | 9   |    
|Unrecognized net loss               |                                           |              | 8   |      |   |   | 9   |    
|Unrecognized transition net asset   |                                           |              | (2  | )    |   |   | (4  | )  
|Unrecognized prior service cost     |                                           |              |    |      |   |   | 1   |    
|                                    |                                           |              |     |      |   |   |     |    
|Net amount recognized               |                                           | $            | 14  |      |   | $ | 15  |    
|                                    |                                           |              |     |      |   |   |     |    
|Amounts recognized consist of:      |                                           |              |     |      |   |   |     |    
|Prepaid benefit cost                |                                           | $            | 28  |      |   | $ | 31  |    
|Accrued benefit cost                |                                           |              | (14 | )    |   |   | (16 | )  
|                                    |                                           |              |     |      |   |   |     |    
|Net amount recognized               |                                           | $            | 14  |      |   | $ | 15  |    
|                                    |                                           |              |     |      |   |   |     |    

The accumulated benefit obligation for all
defined benefit pension plans was $319 and $286 at
December 31, 2003 and 2002.

Information for Nonqualified Pension Plans,
included above:

|                               |  |              |    |      |  |   |    | 
|------------------------------ |  | ------------ | -- | ---- |  | - | -- | 
|                               |  |             
|                               |  | December 31,
|                               |  |             
|                               |  | 2003         |    | 2002
|                               |  |              |    |     
|Projected benefit obligation   |  | $            | 26 |      |  | $ | 22 | 
|Accumulated benefit obligation |  |              | 21 |      |  |   | 18 | 
|Fair value of plan assets      |  |              |   |      |  |   |   | 

70



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Components of Net Periodic Benefit
Cost:

|                                     |  |              |     |      |  |      |     |   |  |   |     |  
|------------------------------------ |  | ------------ | --- | ---- |  | ---- | --- | - |  | - | --- | -
|                                     |  |             
|                                     |  | Year Ended  
|                                     |  | December 31,
|                                     |  |             
|                                     |  | 2003         |     | 2002 |  | 2001
|                                     |  |              |     |      |  |     
|Service cost                         |  | $            | 13  |      |  | $    | 11  |   |  | $ | 12  |  
|Interest cost                        |  |              | 21  |      |  |      | 20  |   |  |   | 19  |  
|Expected return on plan assets       |  |              | (31 | )    |  |      | (30 | ) |  |   | (30 | )
|Amortization of net transition asset |  |              | (1  | )    |  |      | (2  | ) |  |   | (2  | )
|Amortization of prior service cost   |  |              | 1   |      |  |      | 1   |   |  |   | 1   |  
|Amortization of net loss             |  |              | (2  | )    |  |      | (3  | ) |  |   | (4  | )
|                                     |  |              |     |      |  |      |     |   |  |   |     |  
|Net periodic benefit cost            |  | $            | 1   |      |  | $    | (3  | ) |  | $ | (4  | )
|                                     |  |              |     |      |  |      |     |   |  |   |     |  

Assumptions:

|                                                                                         |                                |      |  |       |  |      |  |       |  |  |  |      | 
|---------------------------------------------------------------------------------------- | ------------------------------ | ---- |  | ----- |  | ---- |  | ----- |  |  |  | ---- | 
|                                                                                         |                                | 2003 |  | 2002  |  | 2001
|                                                                                         |                                |      |  |       |  |     
|Weighted-average assumptions used to determine
    benefit obligations at December 31:   |                                |      |  |       |  |      |  |       |  |  |  |     
|                                                                                         | Discount rate                  |      |  | 6.25% |  |      |  | 6.75% |  |  |  | 7.0% | 
|                                                                                         | Rate of compensation increase  |      |  | 4.0%  |  |      |  | 4.0%  |  |  |  | 5.0% | 
|Weighted-average assumptions used to determine
    net cost for years ended December 31: |                                |      |  |       |  |      |  |       |  |  |  |     
|                                                                                         | Discount rate                  |      |  | 6.75% |  |      |  | 7.0%  |  |  |  | 7.0% | 
|                                                                                         | Expected return on plan assets |      |  | 8.0%  |  |      |  | 8.0%  |  |  |  | 8.0% | 
|                                                                                         | Rate of compensation increase  |      |  | 4.0%  |  |      |  | 4.0%  |  |  |  | 5.0% | 

The assumption for long-term rate of return on
assets is derived from historical returns on investments of the
types in which pension assets are invested. A range of
assumptions for long-term rate of return is made for benchmarks
representing each asset class. The upper and lower range limits
are based on optimistic and pessimistic assumptions,
respectively, and reflect historical returns that are adjusted
to reflect factors that might cause future experience to differ
from the past, differences between the benchmarks and the
Plans assets, and the effects of asset smoothing. The
adjusted rates of return are weighted by target allocations for
each asset class to derive limits for a range of overall
long-term gross rates of return. Within this range, one rate of
return is selected as the best estimate. From that rate the
Company subtracts an estimate of expenses, and the result is the
basis for the assumed long-term rate of return on assets.

Plan Assets

The Companys pension plans weighted-average
asset allocations at December 31, 2003 and 2002 by asset
category are as follows based on fair value:

|                  |       |              |    |      |   |  |    |     |  
|----------------- | ----- | ------------ | -- | ---- | - |  | -- | --- | -
|                  |       |             
|                  |       | December 31,
|                  |       |             
|Asset Category    |       | 2003         |    | 2002
|                  |       |              |    |     
|Equity securities |       |              | 70 | %    |   |  | 62 | %  
|Debt securities   |       |              | 29 | %    |   |  | 37 | %  
|Other             |       |              | 1  | %    |   |  | 1  | %  
|                  |       |              |    |      |   |  |    |    
|                  | Total |              |    | 100  | % |  |    | 100 | %
|                  |       |              |    |      |   |  |    |    

The overall investment objective of the Plans is
to meet or exceed the actuarial assumptions of each Plan. The
Plans are assumed to exist in perpetuity; therefore, the
investment portfolio is managed to provide stable and growing
income, as well as to achieve growth in principal equal to the
rate of inflation. Allocation of Plan assets

71



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

is reviewed at least annually. As of
December 31, 2003, the guidelines were: equity securities,
a range of 40% to 70% of the total portfolios value, with
no more than 20% of the total equity exposure in
non-U.S. equities; fixed income, a range of 30% to 60% of
the total portfolios value; cash, up to 5% of the
portfolios value. Late in 2003, increases in the market
value of equity securities caused the percentage of the
portfolio invested in debt securities to be 29% at year end.
Guidelines subsequent to December 31, 2003 allow an
allocation of up to 75% to equity securities and an allocation
to fixed income securities of no less than 25%, to accommodate
fluctuations in market value. The portfolio may be invested in
individual securities, mutual funds, or co-mingled funds of
various kinds. In order to achieve a prudent level of portfolio
diversification, the securities of any one company or issuer,
other than the U.S. Treasury, should not exceed 5% of the
portfolios value and no more than 20% of the fund should
be invested in any one industry. Without specific written
instructions from the Plan Administrator, a Plan will not be
invested in short sales of individual securities, put or call
options on individual securities or commodities, or commodity
futures.

Contributions

The Company estimates that there will be no
contributions during 2004 for qualified plans and $6 to $10 for
nonqualified plans.

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 2003, $2 in 2002 and $1 in 2001.

In December 2003, the Medicare Prescription
Drug, Improvement and Modernization Act (the Act) was
signed into law. The Act includes a federal subsidy to sponsors
of retiree health plans that provide a prescription drug benefit
that is at least actuarially equivalent to the benefit to be
provided under Medicare Part D. While we are still evaluating
the provisions of the Act, we expect it will have a favorable
impact on our postretirement benefits liability. We do not
expect the impact to be material to our results of operations or
our financial position. The Company has elected to defer
recognition of any accounting effects of the Act until
authoritative guidance is issued by the Financial Accounting
Standards Board.

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 $2,
$4 and $4 during 2003, 2002 and 2001.



|          |            
|--------- | -----------
|NOTE  14. | 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 $2.1 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.

72



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

JPFIC reinsures certain 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 $845 and $889 due from the Household affiliates at
December 31, 2003 and 2002.

Assets related to the Household reinsured
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.

As of December 31, 2003 and 2002, JPFIC also
had a reinsurance recoverable of $76 and $79 from a single
reinsurer, pursuant to a 50% coinsurance agreement. JPFIC and
the reinsurer are joint and equal owners in $153 and $144 of
securities and short-term investments as of December 31,
2003 and 2002, 50% of which is included in investments in the
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, 2003.

The effects of reinsurance on premiums and other
considerations, universal life and investment product charges
and total benefits are as follows:

|                                                                                      |  |                         |       |      |  |      |       |  |  |   |       | 
|------------------------------------------------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                                                      |  |                        
|                                                                                      |  | Year Ended December 31,
|                                                                                      |  |                        
|                                                                                      |  | 2003                    |       | 2002 |  | 2001
|                                                                                      |  |                         |       |      |  |     
|Premiums and other considerations, before effect
    of reinsurance ceded             |  | $                       | 1,031 |      |  | $    | 928   |  |  | $ | 851   | 
|Less premiums and other considerations ceded                                          |  |                         | 80    |      |  |      | 87    |  |  |   | 81    | 
|                                                                                      |  |                         |       |      |  |      |       |  |  |   |       | 
|Net premiums and other considerations                                                 |  | $                       | 951   |      |  | $    | 841   |  |  | $ | 770   | 
|                                                                                      |  |                         |       |      |  |      |       |  |  |   |       | 
|Universal life and investment product charges,
    before effect of reinsurance ceded |  | $                       | 798   |      |  | $    | 745   |  |  | $ | 712   | 
|Less universal life and investment product
    charges ceded                          |  |                         | 107   |      |  |      | 107   |  |  |   | 96    | 
|                                                                                      |  |                         |       |      |  |      |       |  |  |   |       | 
|Net universal life and investment product charges                                     |  | $                       | 691   |      |  | $    | 638   |  |  | $ | 616   | 
|                                                                                      |  |                         |       |      |  |      |       |  |  |   |       | 
|Benefits, before reinsurance recoveries                                               |  | $                       | 2,233 |      |  | $    | 2,275 |  |  | $ | 1,986 | 
|Less reinsurance recoveries                                                           |  |                         | 228   |      |  |      | 361   |  |  |   | 228   | 
|                                                                                      |  |                         |       |      |  |      |       |  |  |   |       | 
|Net benefits                                                                          |  | $                       | 2,005 |      |  | $    | 1,914 |  |  | $ | 1,758 | 
|                                                                                      |  |                         |       |      |  |      |       |  |  |   |       | 



|          |                    
|--------- | -------------------
|NOTE  15. | 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. 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.
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

73



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

United States, and sports program production. The
Corporate and Other segment includes activities of the parent
company and passive investment affiliates, default charges as
discussed in Note 2, surplus of the life insurance
subsidiaries not allocated to other reportable segments
including earnings thereon, financing expenses on Corporate
debt, federal and state income taxes not otherwise allocated to
other reportable segments, and all of the Companys
realized gains and losses. Surplus is allocated to the
Individual Products, AIP, and Benefit Partners reportable
segments based on risk-based capital formulae which give
consideration to asset/liability and general business risks, as
well as the Companys strategies for managing those risks.
Various distribution channels and/or product classes related to
the Companys individual life, annuity and investment
products and group insurance have been aggregated in the
Individual Products, AIP, and Benefit Partners reporting
segments.

The segments are managed separately because of
the different products, distribution channels and marketing
strategies each employs. The Company evaluates performance based
on several factors, of which the primary financial measure is
reportable segment results, which excludes realized gains and
losses. The accounting policies of the business segments are the
same as those described in Note 2. Substantially all
revenue is derived from sales in the United States, and foreign
assets are not material. The following table summarizes
financial information of the reportable segments:

|                    |              |              |        |        |  |   |        |        | 
|------------------- | ------------ | ------------ | ------ | ------ |  | - | ------ | ------ | 
|                    |              |             
|                    |              | December 31,
|                    |              |             
|                    |              | 2003         |        | 2002  
|                    |              |              |        |       
|Assets              |              |              |        |        |  |   |        |       
|Individual Products |              | $            | 17,717 |        |  | $ | 16,671 |       
|AIP                 |              |              | 9,941  |        |  |   | 9,397  |       
|Benefit Partners    |              |              | 1,079  |        |  |   | 909    |       
|Communications      |              |              | 210    |        |  |   | 204    |       
|Corporate & Other   |              |              | 3,749  |        |  |   | 3,438  |       
|                    |              |              |        |        |  |   |        |       
|                    | Total assets |              | $      | 32,696 |  |   | $      | 30,619 | 
|                    |              |              |        |        |  |   |        |       

74



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |       | 
|---------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ----------------------- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                                                                           |                                                                                                             |                        
|                                                                                                           |                                                                                                             | Year Ended December 31,
|                                                                                                           |                                                                                                             |                        
|                                                                                                           |                                                                                                             | 2003                    |       | 2002  |  | 2001
|                                                                                                           |                                                                                                             |                         |       |       |  |     
|Revenues                                                                                                   |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|Individual Products                                                                                        |                                                                                                             | $                       | 1,774 |       |  | $    | 1,737 |       |  | $ | 1,682 |      
|AIP                                                                                                        |                                                                                                             |                         | 694   |       |  |      | 686   |       |  |   | 647   |      
|Benefit Partners                                                                                           |                                                                                                             |                         | 820   |       |  |      | 698   |       |  |   | 602   |      
|Communications                                                                                             |                                                                                                             |                         | 214   |       |  |      | 208   |       |  |   | 195   |      
|Corporate & Other                                                                                          |                                                                                                             |                         | 118   |       |  |      | 99    |       |  |   | 130   |      
|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|                                                                                                           |                                                                                                             |                         | 3,620 |       |  |      | 3,428 |       |  |   | 3,256 |      
|Realized investment (losses) gains, before tax                                                             |                                                                                                             |                         | (47   | )     |  |      | (22   | )     |  |   | 66    |      
|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|                                                                                                           | Total revenues, before cumulative effect of
    change in accounting principle                              |                         | $     | 3,573 |  |      | $     | 3,406 |  |   | $     | 3,322 | 
|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|Total reportable segment results and
    reconciliation to net income available to common
    stockholders |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|Individual Products                                                                                        |                                                                                                             | $                       | 309   |       |  | $    | 293   |       |  | $ | 295   |      
|AIP                                                                                                        |                                                                                                             |                         | 85    |       |  |      | 80    |       |  |   | 75    |      
|Benefit Partners                                                                                           |                                                                                                             |                         | 51    |       |  |      | 48    |       |  |   | 44    |      
|Communications                                                                                             |                                                                                                             |                         | 46    |       |  |      | 40    |       |  |   | 34    |      
|Corporate & Other                                                                                          |                                                                                                             |                         | 32    |       |  |      | 4     |       |  |   | 20    |      
|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|                                                                                                           | Total reportable segment results, before
    cumulative effect of change in accounting principle            |                         |       | 523   |  |      |       | 465   |  |   |       | 468   | 
|Realized investment (losses) gains, net of tax                                                             |                                                                                                             |                         | (31   | )     |  |      | (15   | )     |  |   | 44    |      
|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|                                                                                                           | Net income available to common stockholders,
    before cumulative effect of change in accounting principle |                         |       | 492   |  |      |       | 450   |  |   |       | 512   | 
|                                                                                                           | Cumulative effect of change in accounting for
    derivative instruments, net of income taxes               |                         |       |      |  |      |       |      |  |   |       | 1     | 
|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      
|                                                                                                           | Net income available to common stockholders                                                                 |                         | $     | 492   |  |      | $     | 450   |  |   | $     | 513   | 
|                                                                                                           |                                                                                                             |                         |       |       |  |      |       |       |  |   |       |      

75



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |       | 
|------------------------------------------------------------------------------------ | ---------------------------------- | ----------------------- | --- | ----- |  | ---- | --- | ----- |  | - | --- | ----- | 
|                                                                                     |                                    |                        
|                                                                                     |                                    | Year Ended December 31,
|                                                                                     |                                    |                        
|                                                                                     |                                    | 2003                    |     | 2002  |  | 2001
|                                                                                     |                                    |                         |     |       |  |     
|Net investment income (expense)                                                      |                                    |                         |     |       |  |      |     |       |  |   |     |      
|Individual Products                                                                  |                                    | $                       | 914 |       |  | $    | 924 |       |  | $ | 877 |      
|AIP                                                                                  |                                    |                         | 587 |       |  |      | 577 |       |  |   | 530 |      
|Benefit Partners                                                                     |                                    |                         | 64  |       |  |      | 60  |       |  |   | 55  |      
|Communications                                                                       |                                    |                         | (2  | )     |  |      | (3  | )     |  |   | (4  | )    
|Corporate & Other                                                                    |                                    |                         | 94  |       |  |      | 76  |       |  |   | 105 |      
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      
|                                                                                     | Total net investment income        |                         | $   | 1,657 |  |      | $   | 1,634 |  |   | $   | 1,563 | 
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      
|Amortization of deferred policy acquisition
    costs and value of business acquired |                                    |                         |     |       |  |      |     |       |  |   |     |      
|Individual Products                                                                  |                                    | $                       | 195 |       |  | $    | 167 |       |  | $ | 144 |      
|AIP                                                                                  |                                    |                         | 46  |       |  |      | 38  |       |  |   | 38  |      
|Benefit Partners                                                                     |                                    |                         | 100 |       |  |      | 81  |       |  |   | 55  |      
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      
|Amortization reflected in total reportable
    segment results                       |                                    |                         | 341 |       |  |      | 286 |       |  |   | 237 |      
|Amortization on realized investment gains (losses)                                   |                                    |                         | (14 | )     |  |      | 5   |       |  |   | (1  | )    
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      
|Amortization of deferred policy acquisition costs
    and value of business acquired |                                    | $                       | 327 |       |  | $    | 291 |       |  | $ | 236 |      
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      
|Income tax (benefit) expense                                                         |                                    |                         |     |       |  |      |     |       |  |   |     |      
|Individual Products                                                                  |                                    | $                       | 163 |       |  | $    | 158 |       |  | $ | 158 |      
|AIP                                                                                  |                                    |                         | 46  |       |  |      | 43  |       |  |   | 41  |      
|Benefit Partners                                                                     |                                    |                         | 27  |       |  |      | 26  |       |  |   | 24  |      
|Communications                                                                       |                                    |                         | 29  |       |  |      | 26  |       |  |   | 22  |      
|Corporate & Other                                                                    |                                    |                         | (3  | )     |  |      | (11 | )     |  |   | (4  | )    
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      
|                                                                                     | Total operating income tax expense |                         |     | 262   |  |      |     | 242   |  |   |     | 241   | 
|Income tax (benefit) expense on realized
    investment (losses) gains               |                                    |                         | (16 | )     |  |      | (7  | )     |  |   | 22  |      
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      
|                                                                                     | Total income tax expense           |                         | $   | 246   |  |      | $   | 235   |  |   | $   | 263   | 
|                                                                                     |                                    |                         |     |       |  |      |     |       |  |   |     |      

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.

76



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

NOTE 16.     OTHER
COMPREHENSIVE INCOME

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

|                                                                            |                                                           |            |     |                |   |       |    |   |  |   |     |     |  
|--------------------------------------------------------------------------- | --------------------------------------------------------- | ---------- | --- | -------------- | - | ----- | -- | - |  | - | --- | --- | -
|                                                                            |                                                           | Unrealized |     |                |   |      
|                                                                            |                                                           | Gains on   |     | Derivative     |   |      
|                                                                            |                                                           | Available- |     | Financial      |   |      
|                                                                            |                                                           | for-Sale   |     | Instruments    |   |      
|                                                                            |                                                           | Securities |     | Gains/(Losses) |   | Total
|                                                                            |                                                           |            |     |                |   |      
|Balance at December 31, 2000                                                |                                                           | $          | 345 |                |   | $     |   |   |  | $ | 345 |    
|Unrealized holding gains arising during period,
    net of $64 tax expense  |                                                           |            | 118 |                |   |       |   |   |  |   | 118 |    
|Change in fair value of derivatives, net of $2
    tax expense              |                                                           |            |    |                |   |       | 4  |   |  |   | 4   |    
|Less: reclassification adjustment                                           |                                                           |            |     |                |   |       |    |   |  |   |     |    
|                                                                            | Gains realized in net income, net of $28 tax
    expense  |            |     | 53             |   |       |    |  |  |   |     | 53  |  
|                                                                            |                                                           |            |     |                |   |       |    |   |  |   |     |    
|Balance at December 31, 2001                                                |                                                           |            | 410 |                |   |       | 4  |   |  |   | 414 |    
|Unrealized holding gains arising during period,
    net of $104 tax expense |                                                           |            | 193 |                |   |       |   |   |  |   | 193 |    
|Change in fair value of derivatives, net of $5
    tax expense              |                                                           |            |    |                |   |       | 9  |   |  |   | 9   |    
|Less: reclassification adjustment                                           |                                                           |            |     |                |   |       |    |   |  |   |     |    
|                                                                            | Gains realized in net income, net of $3 tax
    expense   |            |     | 6              |   |       |    |  |  |   |     | 6   |  
|                                                                            |                                                           |            |     |                |   |       |    |   |  |   |     |    
|Balance at December 31, 2002                                                |                                                           |            | 597 |                |   |       | 13 |   |  |   | 610 |    
|Unrealized holding gains arising during period,
    net of $23 tax expense  |                                                           |            | 46  |                |   |       |   |   |  |   | 46  |    
|Change in fair value of derivatives, net of $2
    tax benefit              |                                                           |            |    |                |   |       | (5 | ) |  |   | (5  | )  
|Less: reclassification adjustment                                           |                                                           |            |     |                |   |       |    |   |  |   |     |    
|                                                                            | Losses realized in net income, net of $17 tax
    benefit |            |     | (32            | ) |       |    |  |  |   |     | (32 | )
|                                                                            |                                                           |            |     |                |   |       |    |   |  |   |     |    
|Balance at December 31, 2003                                                |                                                           | $          | 675 |                |   | $     | 8  |   |  | $ | 683 |    
|                                                                            |                                                           |            |     |                |   |       |    |   |  |   |     |    

NOTE 17.     DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

|                                                   |  |          |        |       |  |          |        |       |  |   |        |  |  |   |        | 
|-------------------------------------------------- |  | -------- | ------ | ----- |  | -------- | ------ | ----- |  | - | ------ |  |  | - | ------ | 
|                                                   |  |          |        |      
|                                                   |  | 2003     |        | 2002 
|                                                   |  |          |        |      
|                                                   |  | Carrying |        | Fair  |  | Carrying |        | Fair 
|                                                   |  | Value    |        | Value |  | Value    |        | Value
|                                                   |  |          |        |       |  |          |        |      
|Financial Assets                                   |  |          |        |       |  |          |        |       |  |   |        |  |  |   |        | 
|Debt securities available for sale                 |  | $        | 17,706 |       |  | $        | 17,706 |       |  | $ | 16,465 |  |  | $ | 16,465 | 
|Debt securities held to maturity                   |  |          | 2,752  |       |  |          | 2,918  |       |  |   | 3,036  |  |  |   | 3,225  | 
|Equity securities available for sale               |  |          | 756    |       |  |          | 756    |       |  |   | 409    |  |  |   | 409    | 
|Mortgage loans                                     |  |          | 3,472  |       |  |          | 3,675  |       |  |   | 3,294  |  |  |   | 3,608  | 
|Policy loans                                       |  |          | 869    |       |  |          | 972    |       |  |   | 909    |  |  |   | 1,010  | 
|Derivative financial instruments                   |  |          | 33     |       |  |          | 33     |       |  |   | 18     |  |  |   | 18     | 
|Financial Liabilities                              |  |          |        |       |  |          |        |       |  |   |        |  |  |   |        | 
|Annuity contract liabilities in accumulation phase |  |          | 8,059  |       |  |          | 7,714  |       |  |   | 7,622  |  |  |   | 7,295  | 
|Commercial paper and revolving credit borrowings   |  |          | 654    |       |  |          | 654    |       |  |   | 453    |  |  |   | 453    | 
|Securities sold under repurchase agreements        |  |          | 401    |       |  |          | 401    |       |  |   | 499    |  |  |   | 499    | 
|Junior subordinated debentures                     |  |          | 309    |       |  |          | 309    |       |  |   | 309    |  |  |   | 309    | 

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

77



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


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 junior subordinated
debentures was determined based on market quotes for similar
securities.



|         |                                           
|-------- | ------------------------------------------
|NOTE 18. | 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 sheets, approximates $86
at December 31, 2003.

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.

JPCC has commitments for purchases of syndicated
television programming and commitments on other contracts, and
future sports programming rights as of December 31, 2003.
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:

|           |  |             |     |          |  |     |     |  |  |   |     | 
|---------- |  | ----------- | --- | -------- |  | --- | --- |  |  | - | --- | 
|           |  | Commitments |     | Revenues |  | Net
|           |  |             |     |          |  |    
|2004       |  | $           | 62  |          |  | $   | 49  |  |  | $ | 13  | 
|2005       |  |             | 59  |          |  |     | 29  |  |  |   | 30  | 
|2006       |  |             | 52  |          |  |     | 28  |  |  |   | 24  | 
|2007       |  |             | 49  |          |  |     | 29  |  |  |   | 20  | 
|2008       |  |             | 48  |          |  |     | 30  |  |  |   | 18  | 
|Thereafter |  |             | 107 |          |  |     | 92  |  |  |   | 15  | 
|           |  |             |     |          |  |     |     |  |  |   |     | 
|Total      |  | $           | 377 |          |  | $   | 257 |  |  | $ | 120 | 
|           |  |             |     |          |  |     |     |  |  |   |     | 

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

78



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A life insurance subsidiary is a defendant in a
proposed class action suit. The 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. Management believes that the
life 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.

NOTE 19.     SUBSEQUENT
EVENTS

Agreement to Acquire Business

In March 2004, the Company acquired the
U.S. group life, disability and dental business of The
Canada Life Assurance Company (Canada Life), an indirect
subsidiary of Great-West Lifeco Inc. The transaction resulted in
a commitment of capital of approximately $200, including capital
to support the acquired blocks.

Issuance of Debt

On January 27, 2004, the Company issued $300
of 4.75% 10-year term notes and $300 of floating rate EXtendible
Liquidity Securities® (EXLs) with an initial maturity of
February 17, 2005 subject to periodic extension through
2011. The proceeds from the debt issuance were used to finance
the Canada Life acquisition and to pay down commercial paper
while rebalancing the mix of fixed and floating rate debt and
short and long term maturities in the Companys capital
structure.

79



---



##### 





|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.



|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

(a) 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 our disclosure
controls and procedures pursuant to Securities Exchange Act of
1934 (Act) Rule 13a-15. Based on that evaluation, our
management, including our CEO and CFO, concluded, as of the end
of the period covered by this report, that our disclosure
controls and procedures were effective. Disclosure controls and
procedures include controls and procedures designed to ensure
that management, including our CEO and CFO, is alerted to
material information required to be disclosed in our filings
under the Act so as to allow timely decisions regarding our
disclosures. In designing and evaluating disclosure controls and
procedures, we recognized that any controls and procedures, no
matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives, as ours are designed to do.

(b) There have been no changes in our
internal controls over financial reporting identified in
connection with the evaluation described in the above paragraph
that occurred during the fourth quarter 2003 that have
materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

PART III



|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

We incorporate by reference the information
regarding directors and executive officers under the headings
Proposals I and II  Election of
Directors and Stock Ownership  Section
16(a) beneficial ownership reporting compliance in our
2004 definitive Proxy Statement to be filed for the May 2004
annual shareholders meeting (Proxy Statement). We also
incorporate the information regarding Executive Officers set
forth in Part I above.

Our Board of Directors has determined that
George W. Henderson, III is an audit committee
financial expert as defined by applicable SEC rules.
Mr. Henderson is independent under applicable SEC rules.

We have adopted a Code of Ethics for Financial
Officers which applies to our chief executive officer, chief
financial officer and chief accounting officer. This code is
available on our website, www.jpfinancial.com, under
Investors. We intend to promptly post any amendments to or
waivers of this Code at this location on our website.



|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

We incorporate by reference the information under
the headings How are directors compensated and
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.



|         |                                                   
|-------- | --------------------------------------------------
|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. | Principal Accountant Fees and
    Services

We incorporate by reference the information under
the heading Audit Committee Report in the Proxy
Statement.

80



---



##### 



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) Reports on Form 8-K filed in the
fourth quarter 2003:



| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) On October 27, 2003, a
    Form 8-K furnished under Item 12 of our press release
    reporting financial results for the third quarter of 2003.

(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.

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.

81



---



##### 



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)
    (NAME AND TITLE) |  | /s/ Dennis R. Glass
    ------------------------------------------------
    Dennis R. Glass                           
|DATE                                |  | President and Chief Executive Officer
    (also signing as Principal Executive Officer and Director)
    March 15, 2004

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.

| |  |                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | /s/ THERESA M. STONE
    ---------------------------------------------
    Theresa M. Stone
    Executive Vice President,
    Chief Financial Officer and Treasurer
    (Principal Financial Officer)
    March 15, 2004
|
| |  | /s/ REGGIE D. ADAMSON
    ---------------------------------------------
    Reggie D. Adamson
    Senior Vice President, Corporate Finance
    (Principal Accounting Officer)
    March 15, 2004                        
|
| |  | /s/ EDWIN B. BORDEN*
    ---------------------------------------------
    Edwin B. Borden, Director
    March 15, 2004                                                                                                 
|
| |  | /s/ WILLIAM H. CUNNINGHAM*
    ---------------------------------------------
    William H. Cunningham, Director
    March 15, 2004                                                                                     
|
| |  | /s/ ROBERT G. GREER*
    ---------------------------------------------
    Robert G. Greer, Director
    March 15, 2004                                                                                                 
|
| |  | /s/ GEORGE W. HENDERSON, III*
    ---------------------------------------------
    George W. Henderson, III
    March 15, 2004                                                                                         
|
| |  | /s/ ELIZABETH VALK LONG*
    ---------------------------------------------
    Elizabeth Valk Long
    March 15, 2004                                                                                                   

82



---



##### 



| |  |                                                                                                                                      
| |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  | /s/ E. S. MELVIN*
    ---------------------------------------------
    E. S. Melvin, Director
    March 15, 2004                    
|
| |  | /s/ WILLIAM P. PAYNE*
    ---------------------------------------------
    William P. Payne, Director
    March 15, 2004            
|
| |  | /s/ PATRICK S. PITTARD*
    ---------------------------------------------
    Patrick S. Pittard, Director
    March 15, 2004        
|
| |  | /s/ DONALD S. RUSSELL, JR.*
    ---------------------------------------------
    Donald S. Russell, Jr., Director
    March 15, 2004
|
| |  | /s/ DAVID A. STONECIPHER*
    ---------------------------------------------
    David A. Stonecipher, Director
    March 15, 2004    



|    |                   
|--- | ------------------
|*By | /s/ ROBERT A. REED




Robert A. Reed, Attorney-in-Fact


March 15, 2004


83



---



##### 



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, 2003 and 2002



| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Income 
    Years Ended December 31, 2003, 2002 and 2001                  
|
| | Consolidated Statements of Stockholders
    Equity  Years Ended December 31, 2003, 2002 and
    2001
|
| | Consolidated Statements of Cash
    Flows  Years Ended December 31, 2003, 2002 and
    2001          

Notes to Consolidated Financial
Statements  December 31, 2003

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

|                                                                                     |                                                                                             |      |         |     | 
|------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------- | ---- | ------- | --- | 
|                                                                                     |                                                                                             | Page
|                                                                                     |                                                                                             |     
|Schedule I   Summary of
    Investments  Other Than Investments in Related Parties |                                                                                             |      | F-2     |    
|Schedule II  Financial Statements
    of Jefferson-Pilot Corporation:               |                                                                                             |      |         |    
|                                                                                     | Condensed Balance Sheets as of December 31,
    2003 and 2002                               |      |         | F-3 | 
|                                                                                     | Condensed Statements of Income for the Years
    Ended December 31, 2003, 2002 and 2001     |      |         | F-4 | 
|                                                                                     | Condensed Statements of Cash Flows for the Years
    Ended December 31, 2003, 2002 and 2001 |      |         | F-5 | 
|                                                                                     | Note to Condensed Financial Statements                                                      |      |         | F-6 | 
|Schedule III  Supplementary
    Insurance Information                               |                                                                                             |      | F-7     |    
|Schedule IV  Reinsurance for the
    Years Indicated                                |                                                                                             |      | F-8     |    
|Schedule V  Valuation and
    Qualifying Accounts                                   |                                                                                             |      | F-8     |    
|List and Index of Exhibits                                                           |                                                                                             |      | E-1-E-2 |    

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, 2003


In millions


|                                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |    |        |        | 
|------------------------------------- | --------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------- | -------- | ------ | ------------- |  | -- | ------ | ------ | ----- | -- | ------ | ------ | 
|Column A                              |                                   | Column B                                                                                  |                         | Column C |        | Column D     
|                                      |                                   |                                                                                           |                         |          |        |              
|                                      |                                   |                                                                                           |                         |          |        | Amount       
|                                      |                                   |                                                                                           |                         |          |        | at Which     
|                                      |                                   |                                                                                           |                         |          |        | Shown in the 
|                                      |                                   |                                                                                           |                         | Fair     |        | Consolidated 
|Type of Investment                    |                                   | Cost (a)                                                                                  |                         | Value    |        | Balance Sheet
|                                      |                                   |                                                                                           |                         |          |        |              
|Debt securities:                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   
|                                      | Bonds and other debt instruments: |                                                                                           |                         |          |        |               |  |    |        |        |       |    |       
|                                      |                                   | United States Treasury obligations and direct
    obligations of U.S. Government agencies |                         | $        | 247    |               |  | $  | 268    |        |       | $  | 268    |       
|                                      |                                   | Federal agency issued collateralized mortgage
    obligations                             |                         |          | 2,045  |               |  |    | 2,152  |        |       |    | 2,152  |       
|                                      |                                   | Obligations of states, municipalities and
    political subdivisions (b)                  |                         |          | 218    |               |  |    | 221    |        |       |    | 220    |       
|                                      |                                   | Obligations of public utilities (b)                                                       |                         |          | 3,585  |               |  |    | 3,782  |        |       |    | 3,743  |       
|                                      |                                   | Corporate obligations (b)                                                                 |                         |          | 12,742 |               |  |    | 13,435 |        |       |    | 13,309 |       
|                                      |                                   | Corporate private-labeled collateralized mortgage
    obligations                         |                         |          | 721    |               |  |    | 752    |        |       |    | 752    |       
|                                      | Redeemable preferred stocks       |                                                                                           |                         | 13       |        |               |  | 14 |        |        |       | 14 |       
|                                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   
|                                      |                                   |                                                                                           | Total debt securities   |          |        | 19,571        |  |    |        | 20,624 |       |    |        | 20,458 | 
|                                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   
|Equity securities:                    |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   
|                                      | Common stocks:                    |                                                                                           |                         |          |        |               |  |    |        |        |       |    |       
|                                      |                                   | Public utilities                                                                          |                         |          | 115    |               |  |    | 126    |        |       |    | 126    |       
|                                      |                                   | Banks, trust and insurance companies                                                      |                         |          | 59     |               |  |    | 471    |        |       |    | 471    |       
|                                      |                                   | Industrial and all other                                                                  |                         |          | 128    |               |  |    | 157    |        |       |    | 157    |       
|                                      | Nonredeemable preferred stocks    |                                                                                           |                         | 2        |        |               |  | 2  |        |        |       | 2  |       
|                                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   
|                                      |                                   |                                                                                           | Total equity securities |          |        | 304           |  |    |        | 756    |       |    |        | 756    | 
|                                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   
|Mortgage loans on real estate (c)     |                                   |                                                                                           | 3,508                   |          |        |               |  |    |        |        | 3,472 |   
|Other real estate held for investment |                                   |                                                                                           | 132                     |          |        |               |  |    |        |        | 132   |   
|Policy loans                          |                                   |                                                                                           | 869                     |          |        |               |  |    |        |        | 869   |   
|Other long-term investments           |                                   |                                                                                           | 65                      |          |        |               |  |    |        |        | 65    |   
|                                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   
|                                      |                                   |                                                                                           | Total investments       |          | $      | 24,449        |  |    |        |        |       |    | $      | 25,752 | 
|                                      |                                   |                                                                                           |                         |          |        |               |  |    |        |        |       |   






|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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)


|                                         |                                                                                                                                                            |                            |       |       |       |   |       |       |       | 
|---------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                                         |                                                                                                                                                            |                           
|                                         |                                                                                                                                                            | December 31,              
|                                         |                                                                                                                                                            |                           
|                                         |                                                                                                                                                            | 2003                       |       | 2002 
|                                         |                                                                                                                                                            |                            |       |      
|ASSETS                                  
|Cash and investments:                    |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         | Cash and cash equivalents (overdrafts)                                                                                                                     |                            | $     | 13    |       |   | $     | (265  | )    
|                                         | Investment in subsidiaries                                                                                                                                 |                            |       | 5,300 |       |   |       | 4,972 |      
|                                         | Other investments                                                                                                                                          |                            |       |      |       |   |       | 5     |      
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         |                                                                                                                                                            | Total cash and investments |       |       | 5,313 |   |       |       | 4,712 | 
|Other assets                             |                                                                                                                                                            |                            | 16    |       |       |   | 93    |      
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         |                                                                                                                                                            | $                          | 5,329 |       |       | $ | 4,805 |      
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Liabilities:                             |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         | Notes payable, short-term                                                                                                                                  |                            | $     | 654   |       |   | $     | 453   |      
|                                         | Notes payable, subsidiaries                                                                                                                                |                            |       | 486   |       |   |       | 397   |      
|                                         | Junior subordinated debentures                                                                                                                             |                            |       | 309   |       |   |       | 309   |      
|                                         | Payables and accruals                                                                                                                                      |                            |       | 32    |       |   |       | 57    |      
|                                         | Dividends payable                                                                                                                                          |                            |       | 46    |       |   |       | 43    |      
|                                         | Income taxes (receivable) payable                                                                                                                          |                            |       | (9    | )     |   |       | 11    |      
|                                         | Deferred income tax liabilities (assets)                                                                                                                   |                            |       | 5     |       |   |       | (5    | )    
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         |                                                                                                                                                            | Total liabilities          |       |       | 1,523 |   |       |       | 1,265 | 
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      
|Commitments & contingent liabilities     |                                                                                                                                                            |                            |       |       |       |   |       |      
|Stockholders equity:                    |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         | Common stock, par value $1.25 per share,
    authorized 2003 and 2002:  350,000,000; issued:
    2003  140,610,540 shares; 2002 
    142,798,768 shares |                            |       | 176   |       |   |       | 180   |      
|                                         | Retained earnings, including equity in
    undistributed net income of subsidiaries 2003 
    $2,466, 2002  $2,210                                       |                            |       | 2,947 |       |   |       | 2,750 |      
|                                         | Accumulated other comprehensive
    income  net unrealized gains on securities                                                                            |                            |       | 683   |       |   |       | 610   |      
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         |                                                                                                                                                            | Total stockholders equity |       |       | 3,806 |   |       |       | 3,540 | 
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      
|                                         |                                                                                                                                                            | $                          | 5,329 |       |       | $ | 4,805 |      
|                                         |                                                                                                                                                            |                            |       |       |       |   |       |      

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


|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |    |     |     | 
|-------------------------------------------------------------- | ---------------------------------------------------------------------- | ------------------------------------------- | -------------------------------------------------------------------------------------------- | ---- | --- | ---- | --- | -- | ---- | --- | --- | -- | --- | --- | 
|                                                               |                                                                        |                                            
|                                                               |                                                                        | Years Ended December 31,                   
|                                                               |                                                                        |                                            
|                                                               |                                                                        | 2003                                        |                                                                                              | 2002 |     | 2001
|                                                               |                                                                        |                                             |                                                                                              |      |     |     
|Income:                                                        |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|                                                               | Dividends from subsidiaries:                                           |                                             |                                                                                              |      |     |      |     |    |      |     |     |    |    
|                                                               |                                                                        | Jefferson-Pilot Life Insurance Company      |                                                                                              | $    | 130 |      |     | $  | 20   |     |     | $  | 160 |    
|                                                               |                                                                        | Jefferson Pilot Financial Insurance Company |                                                                                              |      | 96  |      |     |    | 216  |     |     |    | 128 |    
|                                                               |                                                                        | Jefferson-Pilot Communications Company      |                                                                                              |      | 38  |      |     |    | 33   |     |     |    | 26  |    
|                                                               |                                                                        | Other subsidiaries                          |                                                                                              |      | 8   |      |     |    | 133  |     |     |    | 68  |    
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|                                                               |                                                                        |                                             | 272                                                                                          |      |     |      | 402 |    |      |     | 382 |   
|                                                               | Other investment income, including interest from
    subsidiaries, net |                                             |                                                                                              | 2    |     |      |     | 1  |      |     |     | 5  |    
|                                                               | Realized investment losses                                             |                                             |                                                                                              | (2   | )   |      |     | (7 | )    |     |     | (6 | )  
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|                                                               |                                                                        |                                             | Total income                                                                                 |      |     | 272  |     |    |      | 396 |     |    |     | 381 | 
|Financing costs                                                |                                                                        |                                             | 45                                                                                           |      |     |      | 47  |    |      |     | 71  |   
|Other expenses                                                 |                                                                        |                                             | 25                                                                                           |      |     |      | 24  |    |      |     | 23  |   
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|                                                               |                                                                        |                                             | Income before income taxes and equity in
    undistributed net income (loss) of subsidiaries |      |     | 202  |     |    |      | 325 |     |    |     | 287 | 
|Income tax benefits                                            |                                                                        |                                             | (34                                                                                          | )    |     |      | (27 | )  |      |     | (33 | ) 
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|                                                               |                                                                        |                                             | Income before equity in undistributed net income
    (loss) of subsidiaries                  |      |     | 236  |     |    |      | 352 |     |    |     | 320 | 
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|Equity in undistributed net income (loss) of
    subsidiaries: |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|                                                               |                                                                        | Jefferson-Pilot Life Insurance Company      |                                                                                              |      | 35  |      |     |    | 138  |     |     |    | 16  |    
|                                                               |                                                                        | Jefferson Pilot Financial Insurance Company |                                                                                              |      | 165 |      |     |    | (104 | )   |     |    | 64  |    
|                                                               |                                                                        | Jefferson-Pilot Communications Company      |                                                                                              |      | 7   |      |     |    | 7    |     |     |    | 7   |    
|                                                               |                                                                        | Other subsidiaries, net                     |                                                                                              |      | 49  |      |     |    | 57   |     |     |    | 106 |    
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|                                                               |                                                                        |                                             | 256                                                                                          |      |     |      | 98  |    |      |     | 193 |   
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   
|Net income available to common stockholders                    |                                                                        | $                                           | 492                                                                                          |      |     | $    | 450 |    |      | $   | 513 |   
|                                                               |                                                                        |                                             |                                                                                              |      |     |      |     |    |      |     |     |   

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


|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |        |      |      |  
|--------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------------- | ------ | ---- | ---- | - | ------ | --- | ---- | - | ------ | ---- | ---- | -
|                                        |                                                                                       |                                                   
|                                        |                                                                                       | Year Ended December 31,                           
|                                        |                                                                                       |                                                   
|                                        |                                                                                       | 2003                                               |                                                          | 2002   |      | 2001
|                                        |                                                                                       |                                                    |                                                          |        |      |     
|Cash Flows from Operating Activities:   |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        | Net income                                                                            |                                                    | $                                                        | 492    |      |      | $ | 450    |     |      | $ | 513    |     
|                                        | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                    |                                                          |        |      |      |   |        |     |      |   |        |     
|                                        |                                                                                       | Equity in undistributed net income of subsidiaries |                                                          |        | (256 | )    |   |        | (97 | )    |   |        | (193 | )   
|                                        |                                                                                       | Realized investment losses                         |                                                          |        | 2    |      |   |        | 7   |      |   |        | 6    |     
|                                        |                                                                                       | Change in accrued items and other adjustments, net |                                                          |        | 110  |      |   |        | (76 | )    |   |        | 33   |     
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        |                                                                                       |                                                    | Net cash provided by operating activities                |        |      | 348  |   |        |     | 284  |   |        |      | 359  |  
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|Cash Flows from Investing Activities:   |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        | Purchases of investments                                                              |                                                    |                                                          |       |      |      |   |       |     |      |   | (15    | )   
|                                        | Sales of investments                                                                  |                                                    |                                                          | 4      |      |      |   | 2      |     |      |   | 2      |     
|                                        | Other returns from (investments in) subsidiaries                                      |                                                    |                                                          | 250    |      |      |   | (7     | )   |      |   |       |     
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        |                                                                                       |                                                    | Net cash provided by (used in) investing
    activities  |        |      | 254  |   |        |     | (5   | ) |        |      | (13  | )
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|Cash Flows from Financing Activities:   |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        | Cash dividends                                                                        |                                                    |                                                          | (184   | )    |      |   | (174   | )   |      |   | (163   | )   
|                                        | Common stock transactions, net                                                        |                                                    |                                                          | (112   | )    |      |   | (321   | )   |      |   | (184   | )   
|                                        | Proceeds from external borrowings                                                     |                                                    |                                                          | 5,178  |      |      |   | 3,643  |     |      |   | 3,829  |     
|                                        | Repayments of external borrowings                                                     |                                                    |                                                          | (4,977 | )    |      |   | (3,637 | )   |      |   | (3,937 | )   
|                                        | Borrowings from subsidiaries, net                                                     |                                                    |                                                          | (229   | )    |      |   | (12    | )   |      |   | 66     |     
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        |                                                                                       |                                                    | Net cash used in financing activities                    |        |      | (324 | ) |        |     | (501 | ) |        |      | (389 | )
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        |                                                                                       |                                                    | Net increase (decrease) in cash and cash
    equivalents |        |      | 278  |   |        |     | (222 | ) |        |      | (43  | )
|Cash and cash equivalents (overdrafts): |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        | Beginning                                                                             |                                                    |                                                          | (265   | )    |      |   | (43    | )   |      |   |       |     
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       
|                                        | Ending                                                                                |                                                    | $                                                        | 13     |      |      | $ | (265   | )   |      | $ | (43    | )   
|                                        |                                                                                       |                                                    |                                                          |        |      |      |   |        |     |      |   |       

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, 2003.

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 18, 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, 2003.

F-6



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

SCHEDULE III  SUPPLEMENTARY
INSURANCE INFORMATION

For the Years Indicated  In
millions


|                                      |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |     | 
|------------------------------------- | ----- | --------------- | ----- | ----------------- |  | ----------- | ------ | ------------ |  | -------------- | --- | --- |  | - | --- | --- |  | - | --- | --- | 
|Column A                              |       | Column B        |       | Column C          |  | Column D    |        | Column E     |  | Column F      
|                                      |       |                 |       |                   |  |             |        |              |  |               
|                                      |       | Deferred Policy |       |                   |  | Deferred    |        |              |  |               
|                                      |       | Acquisition     |       | Future Policy     |  | Revenue and |        | Other Policy |  |               
|                                      |       | Costs and Value |       | Benefits and      |  | Premiums    |        | Claims and   |  | Premiums      
|                                      |       | of Business     |       | Policyholder      |  | Collected   |        | Benefits     |  | and Other     
|Segment                               |       | Acquired        |       | Contract Deposits |  | in Advance  |        | Payable(a)   |  | Considerations
|                                      |       |                 |       |                   |  |             |        |              |  |               
|As of or Year Ended December 31, 2003 |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|Individual Products                   |       | $               | 1,847 |                   |  | $           | 13,077 |              |  | $              | 303 |     |  | $ | 603 |     |  | $ | 171 |    
|AIP                                   |       |                 | 320   |                   |  |             | 9,849  |              |  |                |    |     |  |   |    |     |  |   |    |    
|Benefit Partners                      |       |                 | 61    |                   |  |             | 370    |              |  |                | 4   |     |  |   | 141 |     |  |   | 756 |    
|Corporate and Other                   |       |                 | 2     |                   |  |             | 20     |              |  |                |    |     |  |   | 3   |     |  |   | 24  |    
|                                      |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|                                      | Total |                 | $     | 2,230             |  |             | $      | 23,316       |  |                | $   | 307 |  |   | $   | 747 |  |   | $   | 951 | 
|                                      |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|As of or Year Ended December 31, 2002 |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|Individual Products                   |       | $               | 1,668 |                   |  | $           | 12,458 |              |  | $              | 225 |     |  | $ | 631 |     |  | $ | 180 |    
|AIP                                   |       |                 | 310   |                   |  |             | 9,350  |              |  |                |    |     |  |   |    |     |  |   |    |    
|Benefit Partners                      |       |                 | 47    |                   |  |             | 308    |              |  |                | 5   |     |  |   | 130 |     |  |   | 638 |    
|Corporate and Other                   |       |                 | 2     |                   |  |             | 21     |              |  |                |    |     |  |   | 4   |     |  |   | 23  |    
|                                      |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|                                      | Total |                 | $     | 2,027             |  |             | $      | 22,137       |  |                | $   | 230 |  |   | $   | 765 |  |   | $   | 841 | 
|                                      |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|As of or Year Ended December 31, 2001 |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|Individual Products                   |       | $               | 1,711 |                   |  | $           | 11,704 |              |  | $              | 140 |     |  | $ | 636 |     |  | $ | 198 |    
|AIP                                   |       |                 | 318   |                   |  |             | 8,588  |              |  |                |    |     |  |   |    |     |  |   |    |    
|Benefit Partners                      |       |                 | 39    |                   |  |             | 268    |              |  |                | 3   |     |  |   | 136 |     |  |   | 547 |    
|Corporate and Other                   |       |                 | 2     |                   |  |             | 22     |              |  |                |    |     |  |   | 2   |     |  |   | 25  |    
|                                      |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    
|                                      | Total |                 | $     | 2,070             |  |             | $      | 20,582       |  |                | $   | 143 |  |   | $   | 774 |  |   | $   | 770 | 
|                                      |       |                 |       |                   |  |             |        |              |  |                |     |     |  |   |     |     |  |   |     |    

|                                      |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |     | 
|------------------------------------- | ----- | ---------- | --- | ---------- |  | ------------ | --- | ----------- |  | - | --- | --- |  | - | --- | --- | 
|Column A                              |       | Column G   |     | Column H   |  | Column I     |     | Column J   
|                                      |       |            |     |            |  |              |     |            
|                                      |       |            |     |            |  | Amortization |     |            
|                                      |       |            |     |            |  | of Deferred  |     |            
|                                      |       |            |     |            |  | Policy       |     |            
|                                      |       |            |     | Benefits,  |  | Acquisition  |     |            
|                                      |       |            |     | Claims,    |  | Costs and    |     |            
|                                      |       | Net        |     | Losses and |  | Value of     |     | Other      
|                                      |       | Investment |     | Settlement |  | Business     |     | Operating  
|Segment                               |       | Income     |     | Expenses   |  | Acquired     |     | Expenses(b)
|                                      |       |            |     |            |  |              |     |            
|As of or Year Ended December 31, 2003 |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|Individual Products                   |       | $          | 914 |            |  | $            | 986 |             |  | $ | 195 |     |  | $ | 121 |    
|AIP                                   |       |            | 587 |            |  |              | 417 |             |  |   | 46  |     |  |   | 100 |    
|Benefit Partners                      |       |            | 64  |            |  |              | 576 |             |  |   | 100 |     |  |   | 65  |    
|Communications                        |       |            | (2  | )          |  |              |    |             |  |   |    |     |  |   | 141 |    
|Corporate and Other                   |       |            | 94  |            |  |              | 26  |             |  |   |    |     |  |   | 62  |    
|                                      |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|                                      | Total |            | $   | 1,657      |  |              | $   | 2,005       |  |   | $   | 341 |  |   | $   | 489 | 
|                                      |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|As of or Year Ended December 31, 2002 |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|Individual Products                   |       | $          | 924 |            |  | $            | 989 |             |  | $ | 167 |     |  | $ | 129 |    
|AIP                                   |       |            | 577 |            |  |              | 425 |             |  |   | 38  |     |  |   | 101 |    
|Benefit Partners                      |       |            | 60  |            |  |              | 478 |             |  |   | 81  |     |  |   | 67  |    
|Communications                        |       |            | (3  | )          |  |              |    |             |  |   |    |     |  |   | 141 |    
|Corporate and Other                   |       |            | 76  |            |  |              | 22  |             |  |   |    |     |  |   | 83  |    
|                                      |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|                                      | Total |            | $   | 1,634      |  |              | $   | 1,914       |  |   | $   | 286 |  |   | $   | 521 | 
|                                      |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|As of or Year Ended December 31, 2001 |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|Individual Products                   |       | $          | 877 |            |  | $            | 945 |             |  | $ | 143 |     |  | $ | 142 |    
|AIP                                   |       |            | 530 |            |  |              | 385 |             |  |   | 38  |     |  |   | 108 |    
|Benefit Partners                      |       |            | 55  |            |  |              | 404 |             |  |   | 56  |     |  |   | 74  |    
|Communications                        |       |            | (4  | )          |  |              |    |             |  |   |    |     |  |   | 137 |    
|Corporate and Other                   |       |            | 105 |            |  |              | 24  |             |  |   |    |     |  |   | 91  |    
|                                      |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    
|                                      | Total |            | $   | 1,563      |  |              | $   | 1,758       |  |   | $   | 237 |  |   | $   | 552 | 
|                                      |       |            |     |            |  |              |     |             |  |   |     |     |  |   |     |    






|   |                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 $33 in 2003, $34 in 2002, and $41 in 2001.

F-7



---



##### 



JEFFERSON-PILOT CORPORATION AND
SUBSIDIARIES

SCHEDULE IV  REINSURANCE FOR THE
YEARS INDICATED

In millions


|                              |                                        |              |   |           |  |            |   |            |  |            |   |       |  |  |   |         |  |  |  |      | 
|----------------------------- | -------------------------------------- | ------------ | - | --------- |  | ---------- | - | ---------- |  | ---------- | - | ----- |  |  | - | ------- |  |  |  | ---- | 
|Column A                      |                                        | Column B     |   | Column C  |  | Column D   |   | Column E   |  | Column F  
|                              |                                        |              |   |           |  |            |   |            |  |           
|                              |                                        |              |   |           |  |            |   |            |  | Percentage
|                              |                                        |              |   |           |  |            |   |            |  | of        
|                              |                                        |              |   |           |  |            |   |            |  | Amount    
|                              |                                        |              |   | Ceded to  |  | Assumed    |   |            |  | Assumed   
|                              |                                        |              |   | Other     |  | From Other |   |            |  | to        
|                              |                                        | Gross Amount |   | Companies |  | Companies  |   | Net Amount |  | Net(a)    
|                              |                                        |              |   |           |  |            |   |            |  |           
|Year Ended December 31, 2003: |                                        |              |   |           |  |            |   |            |  |            |   |       |  |  |   |         |  |  |  |     
|                              | Life insurance in force at end of year |              | $ | 269,163   |  |            | $ | 58,797     |  |            | $ | 1,966 |  |  | $ | 212,332 |  |  |  | 0.9% | 
|                              | Premiums and other considerations      |              | $ | 1,029     |  |            | $ | 80         |  |            | $ | 2     |  |  | $ | 951     |  |  |  | 0.2% | 
|Year Ended December 31, 2002: |                                        |              |   |           |  |            |   |            |  |            |   |       |  |  |   |         |  |  |  |     
|                              | Life insurance in force at end of year |              | $ | 257,463   |  |            | $ | 58,607     |  |            | $ | 1,501 |  |  | $ | 200,357 |  |  |  | 0.7% | 
|                              | Premiums and other considerations      |              | $ | 924       |  |            | $ | 87         |  |            | $ | 4     |  |  | $ | 841     |  |  |  | 0.5% | 
|Year Ended December 31, 2001: |                                        |              |   |           |  |            |   |            |  |            |   |       |  |  |   |         |  |  |  |     
|                              | Life insurance in force at end of year |              | $ | 216,717   |  |            | $ | 55,857     |  |            | $ | 962   |  |  | $ | 161,822 |  |  |  | 0.6% | 
|                              | Premiums and other considerations      |              | $ | 842       |  |            | $ | 81         |  |            | $ | 9     |  |  | $ | 770     |  |  |  | 1.2% | 






|    |  |                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------
|(a) |  | 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, 2003


In millions


|         |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |    |    | 
|-------- | --------------------------------------------------------- | ------------ | - | ---------------- | -- | -------------- | - | ---------- | - | ------------- | - | - | - |  | - | - | - |  | - | -- | -- | 
|         |                                                           |              |   |                  |    |                |   |           
|Column A |                                                           | Column B     |   | Column C         |    | Column D       |   | Column E  
|         |                                                           |              |   |                  |    |                |   |           
|         |                                                           |              |   |                  |    |                |   |           
|         |                                                           |              |   | Additions        |    |                |   |           
|         |                                                           |              |   |                  |    |                |   |           
|         |                                                           | Balance at   |   | Charged          |    |                |   |            |   |              
|         |                                                           | Beginning of |   | to Realized      |    | Charged to     |   |            |   | Balance at   
|         |                                                           | Period       |   | Investment Gains |    | Other Accounts |   | Deductions |   | End of Period
|         |                                                           |              |   |                  |    |                |   |            |   |              
|2003:    |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|         | Valuation allowance for mortgage loans on real
    estate |              | $ | 36               |    |                | $ |           |   |               | $ |  |   |  | $ |  |   |  | $ | 36 |   
|         | Valuation allowance for uncollectible agents
    balances |              |   | 1                |    |                |   |           |   |               |   |  |   |  |   |  |   |  |   | 1  |   
|         |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|         |                                                           | Total        |   | $                | 37 |                |   | $          |  |               |   | $ |  |  |   | $ |  |  |   | $  | 37 | 
|         |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|2002:    |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|         | Valuation allowance for mortgage loans on real
    estate |              | $ | 29               |    |                | $ | 7          |   |               | $ |  |   |  | $ |  |   |  | $ | 36 |   
|         | Valuation allowance for uncollectible agents
    balances |              |   | 1                |    |                |   |           |   |               |   |  |   |  |   |  |   |  |   | 1  |   
|         |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|         |                                                           | Total        |   | $                | 30 |                |   | $          | 7 |               |   | $ |  |  |   | $ |  |  |   | $  | 37 | 
|         |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|2001:    |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|         | Valuation allowance for mortgage loans on real
    estate |              | $ | 29               |    |                | $ |           |   |               | $ |  |   |  | $ |  |   |  | $ | 29 |   
|         | Valuation allowance for uncollectible agents
    balances |              |   |                 |    |                |   |           |   |               |   | 1 |   |  |   |  |   |  |   | 1  |   
|         |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   
|         |                                                           | Total        |   | $                | 29 |                |   | $          |  |               |   | $ | 1 |  |   | $ |  |  |   | $  | 30 | 
|         |                                                           |              |   |                  |    |                |   |            |   |               |   |   |   |  |   |   |   |  |   |   

F-8



---



##### 



LIST AND INDEX OF EXHIBITS

|            |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |  |      | 
|----------- | ---- |  |  | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---- | 
|Reference   |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Per Exhibit |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Table       |      |  |  | Description of Exhibit |  | Page                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|            |      |  |  |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | (3)  |  |  | (i)                    |  | Articles of Incorporation and amendments that
    have been approved by shareholders are incorporated by reference
    to Form 10-Q (Commission file no. 1-5955) for the
    first quarter 1996                                                                                                                                                                                                                                                                                                                                           |  |  |     | 
|            |      |  |  | (ii)                   |  | By-laws as amended November 3, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  | E-3  | 
|            | (4)  |  |  | (i)                    |  | Amended and Restated Rights Agreement dated
    November 7, 1994 between Jefferson-Pilot Corporation and
    First Union National Bank, as Rights Agent, was included in
    Form 8-K for November 7, 1994, and Amendment to Rights
    Agreement dated February 8, 1999 was included in
    Form 8-K for February 8, 1999 (Commission file
    no. 1-5955); both are incorporated by reference                                                                                                                                           |  |  |     | 
|            |      |  |  | (ii)                   |  | Credit agreements and other agreements and
    instruments relating to debt securities issued by or borrowings
    available to the Registrant, are not being filed because the
    total amount of borrowing available under credit agreements or
    amount of debt securities authorized by any other agreement or
    instrument respectively does not exceed 10% of total
    consolidated assets. The Registrant agrees to furnish a copy of
    any such agreements and documents to the Commission upon request                   |  |  |     | 
|            | (10) |  |  |                        |  | The following contracts and plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |  |      | 
|            |      |  |  | (i)                    |  | Employment agreement between the Registrant and
    David A. Stonecipher, an executive officer, effective
    September 15, 1997, the 1999 amendment thereto, and the
    February 2002 letter extending this agreement are incorporated
    by reference to Form 10-Q for the third quarter 1997 and
    Form 10-K for 1999 (Commission file no. 1-5955) and
    for 2001, respectively. The new employment agreement signed in
    December 2002 and effective to March 31, 2005 is
    incorporated by reference to Form 10-K for 2002 |  |  |     | 
|            |      |  |  | (ii)                   |  | Employment Agreement between the Registrant and
    Dennis R. Glass, our new Chief Executive Officer, dated
    December 6, 2003                                                                                                                                                                                                                                                                                                                                                                                                          |  |  | E-11 | 
|            |      |  |  | (iii)                  |  | Long Term Stock Incentive Plan, as amended, is
    incorporated by reference to Form 10-K for 1998 (Commission
    file no. 1-5955); the summaries of the long term incentive
    compensation awards and payments (LTIP) on pages 9 and 13,
    and of the Special Incentive Awards on page 9 and in
    note 2 on page 11, of the Registrants 2004 Proxy
    Statement are incorporated by reference                                                                                                                                   |  |  |     | 
|            |      |  |  | (iv)                   |  | Non-Employee Directors Stock Option Plan
    which expired in March 2003 is incorporated by reference to
    Form 10-K (Commission file no. 1-5955) for 1998. The
    new plan is incorporated by reference to our 2004 definitive
    Proxy Statement to be filed.                                                                                                                                                                                                                                                                      |  |  |     | 
|            |      |  |  | (v)                    |  | Jefferson-Pilot Corporation Supplemental Benefit
    Plan, as amended, is incorporated by reference to Form 10-K
    for 1999; the Executive Special Supplemental Benefit Plan, which
    now operates under this Plan, is incorporated by reference to
    Form 10-K (Commission file no. 1-5955) for 1994.                                                                                                                                                                                                                              |  |  |     | 
|            |      |  |  | (vi)                   |  | Management Incentive Compensation Plan for
    Jefferson-Pilot Corporation and its insurance subsidiaries is
    incorporated by reference to Form 10-K for 2002.                                                                                                                                                                                                                                                                                                                                                                         |  |  |     | 
|            |      |  |  | (vii)                  |  | Deferred Fee Plan for Non-Employee Directors, as
    amended, is incorporated by reference to Form 10-K
    (Commission file no. 1-5955) for 1998                                                                                                                                                                                                                                                                                                                                                                                         |  |  |     | 

E-1



---



##### 



|            |        |  |  |                        |  |                                                                                                                                                                                                |  |  |      | 
|----------- | ------ |  |  | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---- | 
|Reference   |        |  |  |                        |  |                                                                                                                                                                                               
|Per Exhibit |        |  |  |                        |  |                                                                                                                                                                                               
|Table       |        |  |  | Description of Exhibit |  | Page                                                                                                                                                                                          
|            |        |  |  |                        |  |                                                                                                                                                                                               
|            |        |  |  | (vii)                  |  | Executive Change in Control Severance Plan and
    the 1999 amendment thereto are incorporated by reference to
    Forms 10-K (Commission file no. 1-5955) for 1998 and
    1999, respectively |  |  |     | 
|            |        |  |  | (viii)                 |  | Employment arrangement letter between the
    Registrant and Warren H. May, an executive officer, is
    incorporated by reference to Form 10-Q for the third
    quarter 2002                 |  |  |     | 
|            | (21)   |  |  |                        |  | Subsidiaries of the Registrant                                                                                                                                                                 |  |  | E-20 | 
|            | (23)   |  |  |                        |  | Consent of Independent Auditors                                                                                                                                                                |  |  | E-21 | 
|            | (24)   |  |  |                        |  | Power of Attorney form                                                                                                                                                                         |  |  | E-22 | 
|            | (31.1) |  |  |                        |  | Certification of Chief Executive Officer pursuant
    to Rule 13a-14(a) of the Exchange Act                                                                                                    |  |  | E-23 | 
|            | (31.2) |  |  |                        |  | Certification of Chief Financial Officer pursuant
    to Rule 13(a)-14(a) of the Exchange Act                                                                                                  |  |  | E-24 | 
|            | (32)   |  |  |                        |  | Written Statement Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002                                                                                                                |  |  | E-25 | 

E-2