##### 



FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D. C. 20549


Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

|                                |  |                              
|------------------------------- |  | -----------------------------
|For Quarter Ended June 30, 2003 |  | 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) |  | 56-0896180
(I.R.S. Employer
Identification No.)

|                                                                                             |  |                 
|-------------------------------------------------------------------------------------------- |  | ----------------
|100 North Greene Street, Greensboro, North Carolina
(Address of principal executive offices) |  | 27401
(Zip Code)

(336) 691-3000
(Registrants telephone number, including area code)

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 such
filing requirements for the past 90 days. Yes [X] No [  ]

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

Number of shares of common stock outstanding at June 30, 2003 141,789,519





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JEFFERSON-PILOT CORPORATION

INDEX

|                                    |  |                                                                                       |    |                                                                                                           |    |              |   | 
|----------------------------------- |  | ------------------------------------------------------------------------------------- | -- | --------------------------------------------------------------------------------------------------------- | -- | ------------ | - | 
|                                    |  |                                                                                       |    |                                                                                                           |    | - Page No. -
|                                    |  |                                                                                       |    |                                                                                                           |    |             
|Part I.                             |  | Financial Information                                                                 |    |                                                                                                           |    |             
|Item 1.                             |  | Consolidated Unaudited Condensed Balance Sheets - June 30, 2003 and December 31, 2002 |    |                                                                                                           | 3  |             
|                                    |  |                                                                                       |    | Consolidated Unaudited Condensed Statements of Income - Three and Six Months ended June 30, 2003 and 2002 |    |              | 4 | 
|                                    |  |                                                                                       |    | Consolidated Unaudited Condensed Statements of Cash Flows - Six Months ended June 30, 2003 and 2002       |    |              | 5 | 
|                                    |  |                                                                                       |    | Notes to Consolidated Unaudited Condensed Financial
Statements                                            |    |              | 6 | 
|Item 2.                             |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |    |                                                                                                           | 12 |             
|Item 3.                             |  | Quantitative and Qualitative Disclosures about Market Risk                            |    |                                                                                                           | 42 |             
|Item 4.                             |  | Controls and Procedures                                                               |    |                                                                                                           | 42 |             
|Part II.                            |  | Other Information                                                                     |    |                                                                                                           |    |             
|Item 1.                             |  | Legal Proceedings                                                                     |    |                                                                                                           | 43 |             
|Item 4.                             |  | Submission of Matters to a Vote of Security Holders                                   |    |                                                                                                           | 43 |             
|Item 6.                             |  | Exhibits and Reports on Form 8-K                                                      |    |                                                                                                           | 43 |             
|Signatures                          |  |                                                                                       |    |                                                                                                           | 44 |             
|Exhibit Index, followed by Exhibits |  |                                                                                       | 45 |                                                                                                          

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##### 



PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts in Millions Except Share Information)

|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |             |        |        |        | 
|------------------------------------------------------------------------------------------ | -------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ------ | ------- | ------ | ----------- | ------ | ------ | ------ | 
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        | June 30 |        | December 31
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        | 2003    |        | 2002       
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     |                                            | ASSETS                               |        |         |        |             |        |        |        | 
|Investments:                                                                               |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                | Debt securities available for sale, at fair value
(amortized cost $15,997 and $15,591)                                                                              |                                            | $                                    | 17,259 |         |        | $           | 16,465 |       
|                                                                                           |                                                                | Debt securities held to maturity, at amortized cost
(fair value $3,155 and $3,225)                                                                                  |                                            |                                      | 2,912  |         |        |             | 3,036  |       
|                                                                                           |                                                                | Equity securities available for sale, at fair value
(cost $295 and $46)                                                                                             |                                            |                                      | 713    |         |        |             | 409    |       
|                                                                                           |                                                                | Mortgage loans on real estate                                                                                                                                       |                                            |                                      | 3,267  |         |        |             | 3,294  |       
|                                                                                           |                                                                | Policy loans                                                                                                                                                        |                                            |                                      | 901    |         |        |             | 909    |       
|                                                                                           |                                                                | Real estate                                                                                                                                                         |                                            |                                      | 131    |         |        |             | 133    |       
|                                                                                           |                                                                | Other investments                                                                                                                                                   |                                            |                                      | 34     |         |        |             | 33     |       
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     |                                            | Total investments                    |        |         | 25,217 |             |        |        | 24,279 | 
|Cash and cash equivalents                                                                  |                                                                |                                                                                                                                                                     | 52                                         |                                      |        |         | 67     |            
|Accrued investment income                                                                  |                                                                |                                                                                                                                                                     | 310                                        |                                      |        |         | 302    |            
|Due from reinsurers                                                                        |                                                                |                                                                                                                                                                     | 1,373                                      |                                      |        |         | 1,375  |            
|Deferred policy acquisition costs and value
of business acquired                           |                                                                |                                                                                                                                                                     | 2,007                                      |                                      |        |         | 2,027  |            
|Goodwill                                                                                   |                                                                |                                                                                                                                                                     | 312                                        |                                      |        |         | 312    |            
|Assets held in separate accounts                                                           |                                                                |                                                                                                                                                                     | 1,916                                      |                                      |        |         | 1,785  |            
|Other assets                                                                               |                                                                |                                                                                                                                                                     | 491                                        |                                      |        |         | 462    |            
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | Total assets                               |                                      | $      | 31,678  |        |             | $      | 30,609 |       
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |        |         |        |             |        |        |        | 
|Policy liabilities:                                                                        |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           | Future policy benefits                                         |                                                                                                                                                                     | $                                          | 2,638                                |        |         | $      | 2,592       |       
|                                                                                           | Policyholder contract deposits                                 |                                                                                                                                                                     |                                            | 20,001                               |        |         |        | 19,545      |       
|                                                                                           | Dividend accumulations and other policyholder funds on deposit |                                                                                                                                                                     |                                            | 247                                  |        |         |        | 248         |       
|                                                                                           | Policy and contract claims                                     |                                                                                                                                                                     |                                            | 161                                  |        |         |        | 161         |       
|                                                                                           | Other                                                          |                                                                                                                                                                     |                                            | 636                                  |        |         |        | 586         |       
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | Total policy liabilities                   |                                      |        | 23,683  |        |             |        | 23,132 |       
|Commercial paper and revolving credit borrowings                                           |                                                                |                                                                                                                                                                     | 528                                        |                                      |        |         | 453    |            
|Securities sold under repurchase agreements                                                |                                                                |                                                                                                                                                                     | 376                                        |                                      |        |         | 499    |            
|Currently payable income taxes                                                             |                                                                |                                                                                                                                                                     | (25                                        | )                                    |        |         | 46     |            
|Deferred income tax liabilities                                                            |                                                                |                                                                                                                                                                     | 534                                        |                                      |        |         | 385    |            
|Liabilities related to separate accounts                                                   |                                                                |                                                                                                                                                                     | 1,916                                      |                                      |        |         | 1,785  |            
|Accounts payable, accruals and other liabilities                                           |                                                                |                                                                                                                                                                     | 495                                        |                                      |        |         | 469    |            
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | Total liabilities                          |                                      |        | 27,507  |        |             |        | 26,769 |       
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|Commitments and contingent liabilities                                                     |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|Guaranteed preferred beneficial interest in
subordinated debentures (Capital Securities) |                                                                |                                                                                                                                                                     | 300                                        |                                      |        |         | 300    |            
|Stockholders Equity:                                                                      |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                | Common stock and paid in capital, par value $1.25 per share: authorized
350,000,000 shares; issued and outstanding 2003-141,789,519 shares;
2002-142,798,768 shares |                                            |                                      | 177    |         |        |             | 180    |       
|                                                                                           |                                                                | Retained earnings                                                                                                                                                   |                                            |                                      | 2,864  |         |        |             | 2,750  |       
|                                                                                           |                                                                | Accumulated other comprehensive income                                                                                                                              |                                            |                                      | 830    |         |        |             | 610    |       
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | 3,871                                      |                                      |        |         | 3,540  |            
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | Total liabilities and stockholders equity |                                      | $      | 31,678  |        |             | $      | 30,609 |       
|                                                                                           |                                                                |                                                                                                                                                                     |                                            |                                      |        |         |        |            

See Notes to Consolidated Financial Statements

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##### 



JEFFERSON-PILOT CORPORATION
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF INCOME
(Dollar Amounts in Millions Except Per Share Information)

|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |       | 
|----------------------------------------------------------------------------------- | --------------------------- | - | ------------------ | --- | ---------------- | - | ----- | --- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                                                                                    |                             |   | Three Months Ended |     | Six Months Ended
|                                                                                    |                             |   | June 30            |     | June 30         
|                                                                                    |                             |   |                    |     |                 
|                                                                                    |                             |   | 2003               |     | 2002             |   | 2003  |     | 2002
|                                                                                    |                             |   |                    |     |                  |   |       |     |     
|Revenue:                                                                            |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Premiums and other considerations                                                   |                             | $ | 426                |     |                  | $ | 391   |     |      | $ | 852   |       |  | $ | 763   |      
|Net investment income                                                               |                             |   | 413                |     |                  |   | 403   |     |      |   | 820   |       |  |   | 807   |      
|Realized investment gains                                                           |                             |   | 20                 |     |                  |   | 4     |     |      |   | 1     |       |  |   | 38    |      
|Communications sales                                                                |                             |   | 51                 |     |                  |   | 50    |     |      |   | 101   |       |  |   | 98    |      
|Other                                                                               |                             |   | 24                 |     |                  |   | 30    |     |      |   | 48    |       |  |   | 57    |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|                                                                                    | Total revenue               |   |                    | 934 |                  |   |       | 878 |      |   |       | 1,822 |  |   |       | 1,763 | 
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Benefits and Expenses:                                                              |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Insurance and annuity benefits                                                      |                             |   | 524                |     |                  |   | 495   |     |      |   | 1,045 |       |  |   | 981   |      
|Insurance commissions, net of deferrals                                             |                             |   | 25                 |     |                  |   | 32    |     |      |   | 50    |       |  |   | 63    |      
|General and administrative expenses, net of deferrals                               |                             |   | 57                 |     |                  |   | 56    |     |      |   | 109   |       |  |   | 109   |      
|Amortization of policy acquistion costs and value of
business acquired              |                             |   | 81                 |     |                  |   | 69    |     |      |   | 163   |       |  |   | 132   |      
|Communications operations                                                           |                             |   | 27                 |     |                  |   | 28    |     |      |   | 62    |       |  |   | 62    |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|                                                                                    | Total benefits and expenses |   |                    | 714 |                  |   |       | 680 |      |   |       | 1,429 |  |   |       | 1,347 | 
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Income before income taxes                                                          |                             |   | 220                |     |                  |   | 198   |     |      |   | 393   |       |  |   | 416   |      
|Income taxes                                                                        |                             |   | 74                 |     |                  |   | 67    |     |      |   | 132   |       |  |   | 139   |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Net income before dividends on Capital Securities                                   |                             |   | 146                |     |                  |   | 131   |     |      |   | 261   |       |  |   | 277   |      
|Dividends on Capital Securities                                                     |                             |   | (6                 | )   |                  |   | (6    | )   |      |   | (12   | )     |  |   | (12   | )    
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Net income available to common stockholders                                         |                             | $ | 140                |     |                  | $ | 125   |     |      | $ | 249   |       |  | $ | 265   |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Net income available to common stockholders, before dividends
on Capital Securities |                             | $ | 146                |     |                  | $ | 131   |     |      | $ | 261   |       |  | $ | 277   |      
|Other comprehensive income                                                          |                             |   | 191                |     |                  |   | 191   |     |      |   | 220   |       |  |   | 86    |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Comprehensive income                                                                |                             | $ | 337                |     |                  | $ | 322   |     |      | $ | 481   |       |  | $ | 363   |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Average number of shares outstanding                                                |                             |   | 142.0              |     |                  |   | 149.4 |     |      |   | 142.4 |       |  |   | 149.7 |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Net Income Per Share of Common Stock:                                               |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Net income available to common stockholders                                         |                             | $ | 0.99               |     |                  | $ | 0.84  |     |      | $ | 1.75  |       |  | $ | 1.77  |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Net income available to common stockholders -
assuming dilution                     |                             | $ | 0.98               |     |                  | $ | 0.83  |     |      | $ | 1.74  |       |  | $ | 1.75  |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      
|Dividends declared per common share                                                 |                             | $ | 0.330              |     |                  | $ | 0.303 |     |      | $ | 0.633 |       |  | $ | 0.605 |      
|                                                                                    |                             |   |                    |     |                  |   |       |     |      |   |       |       |  |   |       |      

See Notes to Consolidated Financial Statements

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JEFFERSON-PILOT CORPORATION
CONSOLIDATED UNAUDITED CONDENSED
STATEMENTS OF CASH FLOWS
(In Millions)

|                                                 |  |                  |       |      |  |   |       |  
|------------------------------------------------ |  | ---------------- | ----- | ---- |  | - | ----- | -
|                                                 |  | Six Months Ended
|                                                 |  | June 30         
|                                                 |  | 2003             |       | 2002
|                                                 |  |                  |       |     
|Net cash provided by operations                  |  | $                | 220   |      |  | $ | 113   |  
|                                                 |  |                  |       |      |  |   |       |  
|Cash Flows from Investing Activities:            |  |                  |       |      |  |   |       |  
|Investments purchased, net                       |  |                  | (476  | )    |  |   | (644  | )
|Other investing activities                       |  |                  | 1     |      |  |   | (15   | )
|                                                 |  |                  |       |      |  |   |       |  
|Net cash used in investing activities            |  |                  | (475  | )    |  |   | (659  | )
|                                                 |  |                  |       |      |  |   |       |  
|Cash Flows from Financing Activities:            |  |                  |       |      |  |   |       |  
|Policyholder contract deposits                   |  |                  | 1,183 |      |  |   | 1,352 |  
|Policyholder contract withdrawals                |  |                  | (748  | )    |  |   | (684  | )
|Net short-term repayments                        |  |                  | (48   | )    |  |   | (19   | )
|Repurchase of common shares, net                 |  |                  | (46   | )    |  |   | (112  | )
|Cash dividends paid                              |  |                  | (102  | )    |  |   | (99   | )
|Other financing activities                       |  |                  | 1     |      |  |   | 4     |  
|                                                 |  |                  |       |      |  |   |       |  
|Net cash provided by financing activities        |  |                  | 240   |      |  |   | 442   |  
|                                                 |  |                  |       |      |  |   |       |  
|Decrease in cash and cash equivalents            |  |                  | (15   | )    |  |   | (104  | )
|Cash and cash equivalents at beginning of period |  |                  | 67    |      |  |   | 139   |  
|                                                 |  |                  |       |      |  |   |       |  
|Cash and cash equivalents at end of period       |  | $                | 52    |      |  | $ | 35    |  
|                                                 |  |                  |       |      |  |   |       |  
|Supplemental Cash Flow Information:              |  |                  |       |      |  |   |       |  
|Income taxes paid                                |  | $                | 167   |      |  | $ | 121   |  
|                                                 |  |                  |       |      |  |   |       |  
|Interest paid                                    |  | $                | 7     |      |  | $ | 14    |  
|                                                 |  |                  |       |      |  |   |       |  

See Notes to Consolidated Financial Statements

5



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##### 



JEFFERSON-PILOT CORPORATION

NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Dollar amounts in millions)

1. Basis of Presentation

The accompanying consolidated unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. All significant intercompany accounts and transactions have
been eliminated in consolidation. Operating results for the six-month period
ended June 30, 2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. Certain prior year amounts have
been reclassified to conform with the current year presentation.

2. Significant Accounting 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.

6



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##### 



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

|                                                                                                                                            |  |                    |      |                  |  |      |      |      |  |   |      |  |  |   |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | ---------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                                                                                                                                            |  | Three Months Ended |      | Six Months Ended
|                                                                                                                                            |  | June 30            |      | June 30         
|                                                                                                                                            |  | 2003               |      | 2002             |  | 2003 |      | 2002
|                                                                                                                                            |  |                    |      |                  |  |      |      |     
|Net income, as reported                                                                                                                     |  | $                  | 140  |                  |  | $    | 125  |      |  | $ | 249  |  |  | $ | 265  | 
|Deduct: Total
stock-based employee
compensation expense
determined under fair
value based method for
all awards, net of
related tax effects |  |                    |     |                  |  |      | 2    |      |  |   | 3    |  |  |   | 7    | 
|                                                                                                                                            |  |                    |      |                  |  |      |      |      |  |   |      |  |  |   |      | 
|Pro forma net income
available to common
stockholders                                                                                       |  | $                  | 140  |                  |  | $    | 123  |      |  | $ | 246  |  |  | $ | 258  | 
|                                                                                                                                            |  |                    |      |                  |  |      |      |      |  |   |      |  |  |   |      | 
|Earnings per share
available to common
stockholders, as
reported                                                                            |  | $                  | 0.99 |                  |  | $    | 0.84 |      |  | $ | 1.75 |  |  | $ | 1.77 | 
|Pro forma earnings per
share available to
common stockholders                                                                               |  | $                  | 0.99 |                  |  | $    | 0.82 |      |  | $ | 1.73 |  |  | $ | 1.72 | 
|Earnings per share
available to common
stockholders 
assuming dilution, as
reported                                                        |  | $                  | 0.98 |                  |  | $    | 0.83 |      |  | $ | 1.74 |  |  | $ | 1.75 | 
|Pro forma earnings per
share available to
common stockholders 
assuming dilution                                                           |  | $                  | 0.98 |                  |  | $    | 0.81 |      |  | $ | 1.72 |  |  | $ | 1.70 | 

All Significant Accounting Policies remain as we described in our Form 10-K for
2002.

3. Segment Reporting

The Company has five reportable segments that are defined based on the nature
of the products and services offered: Individual Products, Annuity and
Investment Products (AIP), Benefit Partners, Communications, and Corporate and
Other. The segments remain as we described in our Form 10-K for 2002.

The following table summarizes certain financial information regarding the
Companys reportable segments:

|       |                     |              |   |         |        |             |   |        |        | 
|------ | ------------------- | ------------ | - | ------- | ------ | ----------- | - | ------ | ------ | 
|       |                     |              |   | June 30 |        | December 31
|       |                     |              |   | 2003    |        | 2002       
|       |                     |              |   |         |        |            
|Assets |                     |              |   |         |        |             |   |       
|       | Individual Products |              | $ | 17,124  |        |             | $ | 16,671 |       
|       | AIP                 |              |   | 9,487   |        |             |   | 9,397  |       
|       | Benefit Partners    |              |   | 980     |        |             |   | 909    |       
|       | Communications      |              |   | 201     |        |             |   | 204    |       
|       | Corporate & other   |              |   | 3,886   |        |             |   | 3,428  |       
|       |                     |              |   |         |        |             |   |        |       
|       |                     | Total assets |   | $       | 31,678 |             |   | $      | 30,609 | 
|       |                     |              |   |         |        |             |   |       

7



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##### 



|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |     |       | 
|--------------------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------- | --- | ------------------ | --- | ---------------- | --- | ---- | --- | ---- | ----- | --- | ----- |  | ----- | --- | ----- | 
|                                                                                              |                                       |                                             |     | Three Months Ended |     | Six Months Ended
|                                                                                              |                                       |                                             |     | June 30            |     | June 30         
|                                                                                              |                                       |                                             |     | 2003               |     | 2002             |     | 2003 |     | 2002
|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |     
|Revenues                                                                                      |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |    
|                                                                                              | Individual Products                   |                                             | $   | 457                |     |                  | $   | 451  |     |      | $     | 923 |       |  | $     | 898 |      
|                                                                                              | AIP                                   |                                             |     | 173                |     |                  |     | 171  |     |      |       | 343 |       |  |       | 341 |      
|                                                                                              | Benefit Partners                      |                                             |     | 208                |     |                  |     | 177  |     |      |       | 405 |       |  |       | 340 |      
|                                                                                              | Communications                        |                                             |     | 50                 |     |                  |     | 49   |     |      |       | 100 |       |  |       | 97  |      
|                                                                                              | Corporate & Other                     |                                             |     | 26                 |     |                  |     | 26   |     |      |       | 50  |       |  |       | 49  |      
|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |    
|                                                                                              |                                       |                                             | 914 |                    |     |                  | 874 |      |     |      | 1,821 |     |       |  | 1,725 |    
|                                                                                              | Realized investment gains, before tax |                                             |     | 20                 |     |                  |     | 4    |     |      |       | 1   |       |  |       | 38  |      
|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |    
|                                                                                              |                                       | Total revenues                              |     | $                  | 934 |                  |     | $    | 878 |      |       | $   | 1,822 |  |       | $   | 1,763 | 
|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |    
|Reportable segments results and
reconciliation to net income available
to common stockholders |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |    
|                                                                                              | Individual Products                   |                                             | $   | 74                 |     |                  | $   | 75   |     |      | $     | 150 |       |  | $     | 145 |      
|                                                                                              | AIP                                   |                                             |     | 22                 |     |                  |     | 20   |     |      |       | 43  |       |  |       | 41  |      
|                                                                                              | Benefit Partners                      |                                             |     | 12                 |     |                  |     | 12   |     |      |       | 24  |       |  |       | 25  |      
|                                                                                              | Communications                        |                                             |     | 12                 |     |                  |     | 10   |     |      |       | 19  |       |  |       | 17  |      
|                                                                                              | Corporate & Other                     |                                             |     | 7                  |     |                  |     | 5    |     |      |       | 12  |       |  |       | 12  |      
|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |    
|                                                                                              |                                       | Total reportable segment results            |     |                    | 127 |                  |     |      | 122 |      |       |     | 248   |  |       |     | 240   | 
|                                                                                              | Realized investment gains, net of tax |                                             |     | 13                 |     |                  |     | 3    |     |      |       | 1   |       |  |       | 25  |      
|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |    
|                                                                                              |                                       | Net income available to common
stockholders |     | $                  | 140 |                  |     | $    | 125 |      |       | $   | 249   |  |       | $   | 265   | 
|                                                                                              |                                       |                                             |     |                    |     |                  |     |      |     |      |       |     |       |  |       |     |      

8



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##### 



4. Income from Continuing Operations Per Share of Common Stock

The following table sets forth the computation of earnings per share and
earnings per share assuming dilution:

|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |           | 
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | ------------- | ---- | ------------------ | --------- | ---------------- | ---- | ----------- | --------- | ---- | ---- | ----------- | ------- | - | ---- | ----------- | --------- | 
|                                       |                                                                                                                           |               |      | Three Months Ended |           | Six Months Ended
|                                       |                                                                                                                           |               |      | June 30            |           | June 30         
|                                       |                                                                                                                           |               |      | 2003               |           | 2002             |      | 2003        |           | 2002
|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |     
|Numerator:                             |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |            
|                                       | Net income before dividends on
Capital Securities                                                                         |               | $    | 146                |           |                  | $    | 131         |           |      | $    | 261         |         |   | $    | 277         |          
|                                       | Dividends on Capital Securities                                                                                           |               |      | (6                 | )         |                  |      | (6          | )         |      |      | (12         | )       |   |      | (12         | )        
|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |          
|                                       | Numerator for earnings per
share and earnings per
share - assuming dilution 
Net income available to common
stockholders |               | $    | 140                |           |                  | $    | 125         |           |      | $    | 249         |         |   | $    | 265         |          
|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |          
|Denominator:                           |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |            
|                                       | Denominator for earnings per
share  weighted-average
shares outstanding                                                  |               |      | 142,038,270        |           |                  |      | 149,370,907 |           |      |      | 142,419,088 |         |   |      | 149,733,120 |          
|                                       | Effect of dilutive securities:                                                                                            |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |          
|                                       |                                                                                                                           | Stock options |      |                    | 1,017,098 |                  |      |             | 1,662,955 |      |      |             | 937,649 |   |      |             | 1,684,168 | 
|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |          
|                                       | Denominator for earnings per
share assuming dilution 
adjusted weighted-average
shares outstanding                       |               |      | 143,055,368        |           |                  |      | 151,033,862 |           |      |      | 143,356,737 |         |   |      | 151,417,288 |          
|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |          
|Earnings per share                     |                                                                                                                           | $             | 0.99 |                    |           | $                | 0.84 |             |           | $    | 1.75 |             |         | $ | 1.77 |            
|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |          
|Earnings per share  assuming
dilution |                                                                                                                           | $             | 0.98 |                    |           | $                | 0.83 |             |           | $    | 1.74 |             |         | $ | 1.75 |            
|                                       |                                                                                                                           |               |      |                    |           |                  |      |             |           |      |      |             |         |   |      |             |          

9



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##### 



5. Contingent Liabilities

A life insurance subsidiary has been a defendant in two separate proposed class
action suits. The plaintiffs fundamental claim in the first suit is that
policy illustrations were misleading to consumers. A settlement of this case
was approved by the court on June 17, 2003. In agreeing to settle, the life
company has denied any wrongdoing but believes that the settlement provides
benefits to the policyholder class and to the life company by resolving and
eliminating the need for corporate resources to be spent on a lawsuit that has
been pending for seven years.

The second proposed class action 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, including several proposed class action suits in addition
to those noted above. Because of the considerable uncertainties that exist,
the Company cannot predict the outcome of pending or future litigation.
However, management believes that the resolution of pending legal proceedings
will not have a material adverse effect on the Companys financial position or
liquidity, although it could have a material adverse effect on the results of
operations for a specified period.

6. Accounting Pronouncements

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

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, Consolidation of Variable Interest Entities, and interpretation of
Accounting Research Bulletin No. 51(the Interpretation). The Interpretation
requires the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a majority of the entitys
expected residual returns, or both, as a result of ownership, contractual or
other financial interests in the entity. Currently, entities are generally
consolidated by an enterprise when it has a controlling financial interest
through ownership of a majority voting interest in the entity.

One of the Companys subsidiaries has sold certain of its loans receivables to
an unrelated third-party bank sponsored conduit under a securitization
facility. Under the securitization facility, the Company has an agreement to
sell, on an initial and periodic basis, pools of certain loans receivable to a
special-purpose entity (SPE). The SPE then sells a senior interest in the
receivables at a discount to the conduit in exchange for cash, which is used to
purchase additional receivables from the Company. The Companys maximum
exposure to loss as a result of its involvement with the conduit is limited to
the carrying value of the retained subordinate
interest of approximately $12 at June 30, 2003.

10



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##### 



The transfer of the loans receivable are recognized as sales in
accordance with SFAS No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. Gains and losses from
transfers are recognized in the income statement when the Company relinquishes
control of the transferred financial assets. The gain or loss recognized on a
sale depends in part on the previous carrying amount of the assets involved in
the transfer, allocated between the portion of the assets sold and the retained
interests based upon their respective fair values at the date of sale.
Therefore, the application of the Interpretation will not have an effect on the
Companys consolidation policy.

Additionally, the Company is in the process of evaluating the implications of
the Interpretation to a few small selected interests in partnerships and
investment companies. Presently, it is not anticipated that the application
will have any impact on our consolidation practices.

In April 2003, the Financial Accounting Standards Board 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 is not expected to impact the Companys
financial position or results of operation.

In May 2003, the Financial Accounting Standards Board 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. Currently, the Company has its Capital Securities
classified as Mezzanine Capital in that they are grouped neither as a
liability or equity. The application of the Statement would require the
Capital Securities to be classified as a liability. Additionally, payments to
Capital Security holders that are currently classified as dividends will be
required to be included as interest expense on a prospective basis. This
statement will be effective as of July 1, 2003. Prior reported amounts of
dividends will not be restated. There will be no cumulative effect of the
change in accounting principle upon adoption, only reclassification on both the
balance sheet and income statement on a prospective basis.

11



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##### 



|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|Item 2. |  | 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 month and six month periods
ended June 30, 2003, as compared to the same periods of 2002, of
Jefferson-Pilot Corporation and subsidiaries. The discussion supplements
Managements Discussion and Analysis in Form 10-K for the year ended December
31, 2002, and should be read in conjunction with the interim financial
statements and notes contained herein. All dollar amounts are in millions
except share and per share amounts.

Company Profile

As detailed in our Form 10-K, we have five reportable segments: Individual
Products, Annuity and Investment Product (AIP), Benefit Partners,
Communications, and Corporate and Other.

Our reportable segments revenues as a percentage of total revenues, excluding
realized gains and losses, were as follows:

|                    |  |                    |    |                  |  |      |    |      |  |  |    |   |  |  |    |  
|------------------- |  | ------------------ | -- | ---------------- |  | ---- | -- | ---- |  |  | -- | - |  |  | -- | -
|                    |  | Three Months Ended |    | Six Months Ended
|                    |  | June 30            |    | June 30         
|                    |  |                    |    |                 
|                    |  | 2003               |    | 2002             |  | 2003 |    | 2002
|                    |  |                    |    |                  |  |      |    |     
|Individual Products |  |                    | 50 | %                |  |      | 52 | %    |  |  | 51 | % |  |  | 52 | %
|AIP                 |  |                    | 19 | %                |  |      | 20 | %    |  |  | 19 | % |  |  | 20 | %
|Benefit Partners    |  |                    | 23 | %                |  |      | 20 | %    |  |  | 22 | % |  |  | 20 | %
|Communications      |  |                    | 5  | %                |  |      | 5  | %    |  |  | 5  | % |  |  | 5  | %
|Corporate and Other |  |                    | 3  | %                |  |      | 3  | %    |  |  | 3  | % |  |  | 3  | %

Update on Critical Accounting Policies

Our Form 10-K described our accounting policies that are critical to the
understanding of our results of operations and our financial position. They
relate to deferred acquisition costs (DAC) and value of business acquired
(VOBA), assumptions and judgments utilized in determining if declines in fair
values of investments are other than temporary, valuation methods for
infrequently traded securities and private placements, and accruals relating to
legal and administrative proceedings.

We believe that these policies continued to be applied in a consistent manner
during the first six months of 2003. Legal proceedings are discussed in Note 5
to the Consolidated Condensed Financial Statements.

12



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##### 



Results of Operations

In the following discussion, reportable segment results and total reportable
segment results include all elements of net income available to common
stockholders except realized investment gains and losses. We use reportable
segment results in assessing the performance of our business segments
internally and believe that it is relevant and useful information. Reportable
segment results as described above may not be comparable to similarly titled
measures reported by other companies. The following tables illustrate our
results before and after including realized investment gains and losses and
reconcile reportable segment results to net income available to common
stockholders, the most directly comparable Generally Accepted Accounting
Principles (GAAP) financial measure:

|                                                           |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |      | 
|---------------------------------------------------------- | ---------------------------------------------------------- | - | ------------------ | ---- | ---------------- | - | ----- | ---- | ---- | - | ----- | ---- |  | - | ----- | ---- | 
|                                                           |                                                            |   | Three Months Ended |      | Six Months Ended
|                                                           |                                                            |   | June 30            |      | June 30         
|                                                           |                                                            |   |                    |      |                 
|                                                           |                                                            |   | 2003               |      | 2002             |   | 2003  |      | 2002
|                                                           |                                                            |   |                    |      |                  |   |       |      |     
|Consolidated Summary of Income                             |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Total reportable segment results                           |                                                            | $ | 126.9              |      |                  | $ | 122.4 |      |      | $ | 248.4 |      |  | $ | 240.1 |     
|Realized investment gains (net of applicable
income taxes) |                                                            |   | 13.2               |      |                  |   | 2.8   |      |      |   | 0.8   |      |  |   | 24.7  |     
|                                                           |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Net income available to common stockholders                |                                                            | $ | 140.1              |      |                  | $ | 125.2 |      |      | $ | 249.2 |      |  | $ | 264.8 |     
|                                                           |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Consolidated Earnings Per Share                            |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Basic:                                                     |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                           | Total reportable segment results                           |   | $                  | 0.90 |                  |   | $     | 0.82 |      |   | $     | 1.74 |  |   | $     | 1.60 | 
|                                                           | Realized investment gains (net of
applicable income taxes) |   |                    | 0.09 |                  |   |       | 0.02 |      |   |       | 0.01 |  |   |       | 0.17 | 
|                                                           |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                           | Net income available to common
stockholders                |   | $                  | 0.99 |                  |   | $     | 0.84 |      |   | $     | 1.75 |  |   | $     | 1.77 | 
|                                                           |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|Fully-diluted:                                             |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                           | Total reportable segment results                           |   | $                  | 0.89 |                  |   | $     | 0.81 |      |   | $     | 1.73 |  |   | $     | 1.59 | 
|                                                           | Realized investment gains (net of
applicable income taxes) |   |                    | 0.09 |                  |   |       | 0.02 |      |   |       | 0.01 |  |   |       | 0.16 | 
|                                                           |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     
|                                                           | Net income available to common
stockholders                |   | $                  | 0.98 |                  |   | $     | 0.83 |      |   | $     | 1.74 |  |   | $     | 1.75 | 
|                                                           |                                                            |   |                    |      |                  |   |       |      |      |   |       |      |  |   |       |     

|                                                         |  |                    |             |                  |  |      |             |      |  |  |             |  |  |  |             | 
|-------------------------------------------------------- |  | ------------------ | ----------- | ---------------- |  | ---- | ----------- | ---- |  |  | ----------- |  |  |  | ----------- | 
|                                                         |  | Three Months Ended |             | Six Months Ended
|                                                         |  | June 30            |             | June 30         
|                                                         |  |                    |             |                 
|                                                         |  | 2003               |             | 2002             |  | 2003 |             | 2002
|                                                         |  |                    |             |                  |  |      |             |     
|Average number of
shares outstanding                     |  |                    | 142,038,270 |                  |  |      | 149,370,907 |      |  |  | 142,419,088 |  |  |  | 149,733,120 | 
|                                                         |  |                    |             |                  |  |      |             |      |  |  |             |  |  |  |             | 
|Average number of
shares outstanding
- assuming dilution |  |                    | 143,055,368 |                  |  |      | 151,033,862 |      |  |  | 143,356,737 |  |  |  | 151,417,288 | 
|                                                         |  |                    |             |                  |  |      |             |      |  |  |             |  |  |  |             | 

Compared to second quarter 2002, net income available to common stockholders
increased 11.9%, and for the first six months decreased 5.9% from 2002,
primarily due to fluctuations in realized investment gains (which include
other-than-temporary bond impairments in all of these periods).

13



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##### 



We make decisions to realize investment gains based upon economic and market
conditions. This quarter we chose to take advantage of the recent increase in
the equity markets and market value recoveries on several debt securities that
we had previously written down as other-than-temporarily impaired. Total
reportable segment results increased 3.7% and 3.5% over the second quarter and
first six months of 2002 due to higher AIP segment results, growth in our
Communications segment and, in the second quarter, higher Corporate and Other
segment results. Our Individual Products segment results were essentially flat
for the second quarter and increased 4.0% over the first six months of 2002 as
further discussed below. Our Benefit Partners segment results were also flat
for the second quarter and decreased 3.9% from the first six months of 2002 due
to adverse mortality in the group life business.

Increases in earnings per share amounts were more favorable than the increases
in total earnings amounts due to continued share repurchases. Average diluted
shares outstanding declined 5.3% from the second quarter and first six months
of 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 organize
for purposes of making operating decisions and assessing performance. Sales
performance is a statistic we use to assess results. Our sales, which are
primarily of long-duration contracts in the Individual Products and AIP
segments, have less proportional immediate impact on results for these two
segments as described in the segment discussions below.

Reportable Segment Results

|                                            |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                            |  | Three Months Ended |       | Six Months Ended
|                                            |  | June 30            |       | June 30         
|                                            |  |                    |       |                 
|                                            |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                            |  |                    |       |                  |  |      |       |     
|Individual Products                         |  | $                  | 74.3  |                  |  | $    | 74.8  |      |  | $ | 150.3 |  |  | $ | 144.5 | 
|AIP                                         |  |                    | 21.6  |                  |  |      | 19.3  |      |  |   | 42.8  |  |  |   | 40.7  | 
|Benefit Partners                            |  |                    | 12.5  |                  |  |      | 12.5  |      |  |   | 24.4  |  |  |   | 25.4  | 
|Communications                              |  |                    | 11.5  |                  |  |      | 10.6  |      |  |   | 18.6  |  |  |   | 17.1  | 
|Corporate and Other                         |  |                    | 7.0   |                  |  |      | 5.2   |      |  |   | 12.3  |  |  |   | 12.4  | 
|                                            |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Total reportable segment results            |  |                    | 126.9 |                  |  |      | 122.4 |      |  |   | 248.4 |  |  |   | 240.1 | 
|Net realized investment gains               |  |                    | 13.2  |                  |  |      | 2.8   |      |  |   | 0.8   |  |  |   | 24.7  | 
|                                            |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Net income available to common
stockholders |  | $                  | 140.1 |                  |  | $    | 125.2 |      |  | $ | 249.2 |  |  | $ | 264.8 | 
|                                            |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 

14



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##### 



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. We assign the remainder of invested and other assets, including all
defaulted securities, to the Corporate and Other segment.

|                    |              |   |         |        |      |   |        |        | 
|------------------- | ------------ | - | ------- | ------ | ---- | - | ------ | ------ | 
|                    |              |   | June 30
|                    |              |   |        
|                    |              |   | 2003    |        | 2002
|                    |              |   |         |        |     
|Individual Products |              | $ | 17,124  |        |      | $ | 16,319 |       
|AIP                 |              |   | 9,487   |        |      |   | 9,022  |       
|Benefit Partners    |              |   | 980     |        |      |   | 852    |       
|Communications      |              |   | 201     |        |      |   | 197    |       
|Corporate and Other |              |   | 3,886   |        |      |   | 3,268  |       
|                    |              |   |         |        |      |   |        |       
|                    | Total assets |   | $       | 31,678 |      |   | $      | 29,658 | 
|                    |              |   |         |        |      |   |        |       

Individual Products

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

Individual Products include universal life (UL) and variable universal life
(VUL), together referred to as UL-type products, as well as traditional life
products. The operating cycle for life insurance products is long term in
nature; therefore, actuarial assumptions and the judgments used in those
assumptions are important to the financial reporting for these products.

Traditional products require the policyholder to pay scheduled premiums over
the life of the coverage. We recognize traditional premium receipts as
revenues, and profits are expected to emerge in relation thereto.

UL-type product premiums may vary over the life of the policy at the discretion
of the policyholder, so we do not recognize them as revenues when received,
although UL-type premiums do increase assets and liabilities. We recognize
revenues on these products from mortality, expense and surrender charges to
policyholder fund balances (product charges). Additionally, we earn interest
spreads on all UL-type and traditional products. Policy benefits include
interest credited to policyholder fund balances as well as claim related costs.

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

15



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##### 



Segment results were:

|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|---------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                               |  | Three Months Ended |       | Six Months Ended
|                                               |  | June 30            |       | June 30         
|                                               |  |                    |       |                 
|                                               |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                               |  |                    |       |                  |  |      |       |     
|Traditional premiums and other considerations  |  | $                  | 42.0  |                  |  | $    | 45.6  |      |  | $ | 86.2  |  |  | $ | 92.8  | 
|UL and investment product charges              |  |                    | 185.0 |                  |  |      | 174.4 |      |  |   | 378.2 |  |  |   | 342.6 | 
|Net investment income                          |  |                    | 229.1 |                  |  |      | 229.3 |      |  |   | 456.1 |  |  |   | 459.2 | 
|Other income                                   |  |                    | 1.5   |                  |  |      | 1.8   |      |  |   | 2.9   |  |  |   | 3.6   | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Total revenues                                 |  |                    | 457.6 |                  |  |      | 451.1 |      |  |   | 923.4 |  |  |   | 898.2 | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Policy benefits                                |  |                    | 266.5 |                  |  |      | 264.9 |      |  |   | 540.8 |  |  |   | 536.2 | 
|Expenses                                       |  |                    | 76.8  |                  |  |      | 71.1  |      |  |   | 151.4 |  |  |   | 139.7 | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Total benefits and expenses                    |  |                    | 343.3 |                  |  |      | 336.0 |      |  |   | 692.2 |  |  |   | 675.9 | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Reportable segment results before income taxes |  |                    | 114.3 |                  |  |      | 115.1 |      |  |   | 231.2 |  |  |   | 222.3 | 
|Provision for income taxes                     |  |                    | 40.0  |                  |  |      | 40.3  |      |  |   | 80.9  |  |  |   | 77.8  | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Reportable segment results                     |  | $                  | 74.3  |                  |  | $    | 74.8  |      |  | $ | 150.3 |  |  | $ | 144.5 | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 

Individual Products reportable segment results decreased 0.7% from second
quarter 2002 and increased 4.0% over the first six months of 2002 reflecting
improved profitability on our UL-type products, offset by lower earnings on our
older traditional products as well as increased amortization of VUL DAC as
further discussed below.

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

|                                           |                                                       |   |                    |         |                  |   |        |         |      |   |        |         |  |   |        |         | 
|------------------------------------------ | ----------------------------------------------------- | - | ------------------ | ------- | ---------------- | - | ------ | ------- | ---- | - | ------ | ------- |  | - | ------ | ------- | 
|                                           |                                                       |   | Three Months Ended |         | Six Months Ended
|                                           |                                                       |   | June 30            |         | June 30         
|                                           |                                                       |   |                    |         |                 
|                                           |                                                       |   | 2003               |         | 2002             |   | 2003   |         | 2002
|                                           |                                                       |   |                    |         |                  |   |        |         |     
|Annualized life insurance premium sales:   |                                                       |   |                    |         |                  |   |        |         |      |   |        |         |  |   |        |        
|                                           | Individual markets excluding
Community Banks and BOLI |   | $                  | 49      |                  |   | $      | 52      |      |   | $      | 106     |  |   | $      | 91      | 
|                                           | Community Banks and BOLI                              |   | $                  |        |                  |   | $      | 19      |      |   | $      | 5       |  |   | $      | 42      | 
|                                          
|Average UL policyholder fund balances      |                                                       | $ | 10,508             |         |                  | $ | 9,779  |         |      | $ | 10,430 |         |  | $ | 9,645  |        
|Average VUL separate account assets        |                                                       |   | 1,166              |         |                  |   | 1,290  |         |      |   | 1,136  |         |  |   | 1,311  |        
|                                           |                                                       |   |                    |         |                  |   |        |         |      |   |        |         |  |   |        |         | 
|                                           |                                                       | $ | 11,674             |         |                  | $ | 11,069 |         |      | $ | 11,566 |         |  | $ | 10,956 |        
|                                           |                                                       |   |                    |         |                  |   |        |         |      |   |        |         |  |   |        |         | 
|Average face amount of insurance in
force: |                                                       |   |                    |         |                  |   |        |         |      |   |        |         |  |   |        |        
|                                           | Total                                                 |   | $                  | 164,139 |                  |   | $      | 160,749 |      |   | $      | 163,950 |  |   | $      | 160,129 | 
|                                           | UL-type policies                                      |   | $                  | 122,716 |                  |   | $      | 119,174 |      |   | $      | 122,479 |  |   | $      | 118,684 | 
|                                          
|Average assets                             |                                                       | $ | 16,977             |         |                  | $ | 16,301 |         |      | $ | 16,864 |         |  | $ | 16,260 |        

Sales from our Individual markets excluding Community Banks and bank owned life
insurance (BOLI) declined 5.8% from second quarter 2002, primarily due to
training and market repositioning related to the introduction of a new fixed UL
product. For the first six months, however, these sales increased 16.5% due to
continued demand for several UL products introduced in 2002 and our continued
Premier Partnering initiatives. We had no sales to Community Banks or of BOLI
business for the quarter, and we experienced an 88.1% decrease in these sales
from the first half of 2002. Community Bank and BOLI sales will vary widely
between periods as we respond to sales

16



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##### 



opportunities for these single premium products only when the market
accommodates our required returns. This has not occurred in recent quarters.

Revenues include traditional insurance premiums and policy charges, net of
reinsurance, and net investment income. Individual traditional premiums
decreased 7.9% and 7.1% from the second quarter and first half of 2002 due to
the continued decline in our traditional business in force as we are focusing
our efforts towards UL-type products. UL and investment product charges
increased 6.1% and 10.4% from the second quarter and first half of 2002. For
the quarter, growth in UL product charges was in line with the growth of
average UL policyholder fund balances of 7.5%. For the first six months, UL
product charges grew faster than the average UL fund balances due to sales of
certain products designed with higher up-front expense charges in the first
year. Approximately 30% of the up-front expense charges, representing the
levelized portion of these up-front expense charges, are taken into income
immediately with the remaining 70% deferred through a charge to unearned
revenue reserves, which are accounted for as policy benefits. The deferred
expense charges on these products are taken into income over time in a manner
consistent with DAC amortization.

Net investment income was flat when compared to both the second quarter and
first six months of 2002, reflecting a decline in investment yields despite
growth in business. Investment income earned on our traditional block of
business decreased $3.2 and $6.6 from the second quarter and first half of 2002
due to this decline in our portfolio yields. Also negatively impacting net
investment income was an increase in default charges from the Individual
Products segment to the Corporate and Other segment of $1.4 over the second
quarter and $2.6 over the first half of 2002, as further discussed below under
Corporate and Other. During second quarter 2003, we continued to experience
prepayments of mortgage-backed securities held by this segment. Our mortgage
backed securities portfolio is primarily a discount portfolio; therefore, the
effect of these prepayments was to accelerate the accretion of discount and
increase the effective yields on our mortgage backed portfolio. For the second
quarter and first six months of 2003, the excess accretion of discount as a
result of these prepayments in this segment was $4.7 and $8.1 compared to $2.3
and $7.3 for the same periods of 2002. We continue to invest the proceeds from
these prepayments at current market yields, which are lower than our portfolio
yields.

In response to a decline in portfolio yields, we have actively managed our
interest spreads (calculated as the difference between portfolio yields earned
on invested assets less interest credited to policyholder funds, included in
policy benefits) on our fixed UL-type products through crediting rate
reductions. The average investment spread on fixed UL products increased 13
basis points to 2.01% and 6 basis points to 1.97% from the second quarter and
first six months of 2002, and the average crediting rate decreased 58 basis
points to 5.04% and 51 basis points to 5.09% from the these same periods.
After these reductions our crediting rates are approximately 70 basis points on
average in excess of our minimum guaranteed rates at June 30, 2003. Continued
declines in general market interest rates may impact future profitability to
the extent that these declines cannot be recovered through policy crediting
rate reductions, and interest spreads may vary over time due to our competitive
strategies and changes in product design.

Total policy benefits were flat compared to the second quarter and first six
months of 2002. Policy benefits on traditional business include death
benefits, dividends, surrenders and changes in reserves, with the most
significant being death benefits. Total policy benefits on traditional
contracts represented 126.6% and 125.4% of premiums in the second quarter and
the first six months of 2003 compared to 118.7% and 127.7% in the second
quarter and the first six months of 2002. The increase over second quarter
2002 is driven by the fact that our premium income on this

17



---



##### 



block of business is declining at a faster rate than the benefits. The
improvement over the first six months of 2002 primarily reflects lower
surrender activity.

Policy benefits on UL-type products include interest credited to policyholder
accounts, death benefits in excess of fund balances and changes in unearned
revenue reserves. Total policy benefits on UL-type products, on an annualized
basis, decreased to 7.4% and 7.5% of average policyholder funds and separate
accounts versus 7.6% and 7.7% from the second quarter and first six months of
2002. Interest credited declined $4.1 and $7.1 or 3.1% and 2.7% from the second
quarter and first half of 2002, despite an increase in average UL fund balances
of 7.5% and 8.1%, reflecting the crediting rate reductions described above.
The change in deferred revenue reserves increased $1.6 and $9.2 over the second
quarter and first six months of 2002 due to increased sales of products with
higher up-front expense charges. Death benefits on UL-type products for the
second quarter increased over 2002 partially due to the growth of business and
due to an increase in the average age of our insureds. Actual mortality
experience, net of reinsurance, for UL-type products per thousand dollars of
face amount of insurance in force was $2.19 and $2.25 for the second quarter
and first six months of 2003 compared to $2.04 and $2.10 for the 2002 periods.
Mortality policy charges per thousand dollars of face amount of insurance in
force were $4.02 and $4.06 for the second quarter and first six months of 2003
compared to $4.00 and $3.97 for the 2002 periods, again reflecting the increase
in average age of our insureds. Recent products are designed to rely more on
expense charges rather than mortality charges.

Total expenses (including the net deferral and amortization of DAC and VOBA)
increased 8.0% and 8.4% from the second quarter and first six months of 2002.
The expense details are as follows:

|                                                 |  |                    |       |                  |  |      |       |      |  |   |        |   |  |   |        |  
|------------------------------------------------ |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                 |  | Three Months Ended |       | Six Months Ended
|                                                 |  | June 30            |       | June 30         
|                                                 |  |                    |       |                 
|                                                 |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                                 |  |                    |       |                  |  |      |       |     
|Commissions                                      |  | $                  | 66.4  |                  |  | $    | 67.4  |      |  | $ | 145.6  |   |  | $ | 130.5  |  
|General and administrative
 acquisition related |  |                    | 22.1  |                  |  |      | 20.7  |      |  |   | 45.2   |   |  |   | 41.9   |  
|General and administrative
 maintenance related |  |                    | 10.6  |                  |  |      | 11.7  |      |  |   | 17.6   |   |  |   | 20.9   |  
|Taxes, licenses and fees                         |  |                    | 12.5  |                  |  |      | 13.9  |      |  |   | 27.4   |   |  |   | 28.6   |  
|                                                 |  |                    |       |                  |  |      |       |      |  |   |        |   |  |   |        |  
|Total commissions and
expenses incurred          |  |                    | 111.6 |                  |  |      | 113.7 |      |  |   | 235.8  |   |  |   | 221.9  |  
|Less commissions and
expenses capitalized        |  |                    | (79.5 | )                |  |      | (81.2 | )    |  |   | (174.7 | ) |  |   | (156.4 | )
|Amortization of DAC and VOBA                     |  |                    | 44.7  |                  |  |      | 38.6  |      |  |   | 90.3   |   |  |   | 74.2   |  
|                                                 |  |                    |       |                  |  |      |       |      |  |   |        |   |  |   |        |  
|Total expense                                    |  | $                  | 76.8  |                  |  | $    | 71.1  |      |  | $ | 151.4  |   |  | $ | 139.7  |  
|                                                 |  |                    |       |                  |  |      |       |      |  |   |        |   |  |   |        |  

The increase in expenses over the second quarter and first six months of 2002
reflects higher amortization of DAC and VOBA, partially offset by decreases in
taxes, licenses and fees and maintenance expenses. Recent years sales growth
combined with adjustments to the assumptions of our mean reversion techniques
for VUL products that we made in the third quarter of 2002 are the primary
contributors to the increase in the amortization of DAC and VOBA. Amortization
of DAC and VOBA on VUL products increased $3.2 and $6.8 over the second quarter
and first half of 2002. The expense amounts we capitalize as DAC include first
year commissions, as well as deferrable acquisition expenses. We generally
limit our capitalization of deferrable acquisition

18



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##### 



expenses to the lower of product specific pricing allowables or our actual
deferrable acquisition costs. As second quarter sales decreased, pricing
allowables capped the amounts of acquisition expenses and commissions
capitalized.

Average Individual Products assets grew 4.1% and 3.7% over the second quarter
and first six months of 2002, primarily due to growth in existing UL
policyholder fund balances, partially offset by declines in the market values
of separate account assets of variable products. Average VUL separate account
assets decreased 9.6% and 13.3% compared to the second quarter and first six
months of 2002. Compared to the first six months of 2002, adjusting for the
change in market value, net of dividends, average separate account balances
increased 3.2%, and total average fund balances grew by 7.4%.

Our financial and operating risks for this segment include, among others,
interest spread 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 of our Form 10-K.

Annuity and Investment Products

Annuity and Investment Products are marketed through most distribution channels
discussed in the Individual Products segment as well as through financial
institutions, investment professionals and annuity marketing organizations.
Jefferson Pilot Securities Corporation (with related entities, JPSC), a
registered non-clearing broker/dealer, markets variable life insurance and
variable annuities written by our insurance subsidiaries and other carriers,
and also sells other securities and mutual funds.

Reportable segment results were:

|                                                  |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|------------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                                  |  | Three Months Ended |       | Six Months Ended
|                                                  |  | June 30            |       | June 30         
|                                                  |  |                    |       |                 
|                                                  |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                                  |  |                    |       |                  |  |      |       |     
|Policy charges, premiums and other considerations |  | $                  | 2.5   |                  |  | $    | 3.0   |      |  | $ | 4.5   |  |  | $ | 6.6   | 
|Net investment income                             |  |                    | 147.4 |                  |  |      | 140.9 |      |  |   | 292.9 |  |  |   | 281.5 | 
|Concession and other income                       |  |                    | 23.1  |                  |  |      | 27.2  |      |  |   | 45.3  |  |  |   | 52.6  | 
|                                                  |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Total revenues                                    |  |                    | 173.0 |                  |  |      | 171.1 |      |  |   | 342.7 |  |  |   | 340.7 | 
|                                                  |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Policy benefits                                   |  |                    | 103.7 |                  |  |      | 103.1 |      |  |   | 207.3 |  |  |   | 203.5 | 
|Expenses                                          |  |                    | 36.1  |                  |  |      | 38.2  |      |  |   | 69.5  |  |  |   | 74.6  | 
|                                                  |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Total benefits and expenses                       |  |                    | 139.8 |                  |  |      | 141.3 |      |  |   | 276.8 |  |  |   | 278.1 | 
|                                                  |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Reportable segment results before income taxes    |  |                    | 33.2  |                  |  |      | 29.8  |      |  |   | 65.9  |  |  |   | 62.6  | 
|Provision for income taxes                        |  |                    | 11.6  |                  |  |      | 10.5  |      |  |   | 23.1  |  |  |   | 21.9  | 
|                                                  |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Reportable segment results                        |  | $                  | 21.6  |                  |  | $    | 19.3  |      |  | $ | 42.8  |  |  | $ | 40.7  | 
|                                                  |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 

AIP reportable segment results increased by 11.9% and 5.2% compared to the
second quarter and first six months of 2002 as detailed in the following
discussion.

19



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##### 



The following table summarizes key information for AIP:

|                                                                    |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|------------------------------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                                    |  | Three Months Ended |       | Six Months Ended
|                                                                    |  | June 30            |       | June 30         
|                                                                    |  |                    |       |                 
|                                                                    |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                                                    |  |                    |       |                  |  |      |       |     
|Fixed annuity premium sales                                         |  | $                  | 132   |                  |  | $    | 256   |      |  | $ | 247   |   |  | $ | 442   |  
|Variable annuity premium sales                                      |  |                    | 1     |                  |  |      | 2     |      |  |   | 2     |   |  |   | 7     |  
|                                                                    |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|                                                                    |  | $                  | 133   |                  |  | $    | 258   |      |  | $ | 249   |   |  | $ | 449   |  
|                                                                    |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|Investment product sales                                            |  | $                  | 663   |                  |  | $    | 773   |      |  | $ | 1,278 |   |  | $ | 1,517 |  
|                                                                    |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|Average policyholder fund balances                                  |  | $                  | 8,319 |                  |  | $    | 7,674 |      |  | $ | 8,280 |   |  | $ | 7,603 |  
|Average separate account policyholder fund
balances                 |  |                    | 336   |                  |  |      | 455   |      |  |   | 336   |   |  |   | 474   |  
|                                                                    |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|                                                                    |  | $                  | 8,655 |                  |  | $    | 8,129 |      |  | $ | 8,616 |   |  | $ | 8,077 |  
|                                                                    |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|                                                                   
|Effective investment spreads for fixed annuities                    |  |                    | 1.88  | %                |  |      | 1.82  | %    |  |   | 1.89  | % |  |   | 1.83  | %
|Fixed annuity surrenders as a percentage of
beginning fund balances |  |                    | 7.8   | %                |  |      | 10.2  | %    |  |   | 7.9   | % |  |   | 9.8   | %
|                                                                   
|Average assets                                                      |  | $                  | 9,449 |                  |  | $    | 8,963 |      |  | $ | 9,427 |   |  | $ | 8,899 |  

We derive annuity revenues from investment income on segment assets, policy
charges and concession income earned on investment product sales by JPSC. Our
policy charge income declined $0.9 and $1.7 from the second quarter and first
six months of 2002 as a result of lower surrender charge income due to
historically low surrenders. Net investment income grew 4.6% and 4.0% over the
second quarter and first six months of 2002, which was lower than the growth in
average policyholder fund balances of 6.5% and 6.7%, primarily due to a decline
in new investment yields. The AIP segment experienced prepayments of mortgage
backed securities, which increased net investment income in the AIP segment
through acceleration of the accretion of discount on our mortgage backed
portfolio. The excess accretion of discount as a result of these prepayments
was $5.0 and $8.5 in the second quarter and first half of 2003 compared to $0.1
and $2.5 for the same periods of 2002. Fixed annuity premium sales decreased
48.4% and 44.1% from the second quarter and first six months of 2002,
reflecting continued competition in the fixed annuity market and our
unwillingness to match our competitors crediting rates, especially in our bank
channel. Consistent with a decrease in investment product sales, JPSCs
concession and other income decreased 15.1% and 13.9% from the second quarter
and first half of 2002.

Fixed annuity surrenders as a percentage of beginning fund balances on an
annualized basis declined to 7.8% versus 10.2% and 7.9% versus 9.8% from the
second quarter and first six months of 2002. The lower lapse rates reflect the
effects of increased surrender charge protection within our in-force block of
business, the lower interest rate environment and the increasing percentage of
our annuity block with multi-year crediting rate guarantees. The surrender
rate in the AIP segment is influenced by many other factors such as: 1) the
portion of the business that has low or no remaining surrender charges; 2)
competition from annuity products including those which pay up-front interest
rate bonuses or higher market rates and 3) rising interest rates that may make
returns available on new annuities or investment products more attractive than
our older annuities. Fixed annuity fund balances with 5% or more surrender
charges were 52% of total fixed annuity fund balances at June 30, 2003 compared
to 49% a year earlier.

20



---



##### 



Policy benefits, which are mainly comprised of interest credited to
policyholder accounts, were flat compared to second quarter 2002 and increased
1.9% over the first six months of 2002, reflecting crediting rate reductions
despite growth in average fund balances.

Effective investment spreads on fixed annuities increased to 1.88% and 1.89%
from 1.82% and 1.83% for the second quarter and first six months of 2002. We
are continuing to realize the effects of crediting rate reductions we made in
late 2002 and during the first half of 2003, which generally take effect on
annuity contract anniversary dates. The average crediting rate on the
portfolio decreased to 5.02% and 5.10% in the second quarter and first six
months of 2003 from 5.48% and 5.49% for the same 2002 periods. We have
approximately $4 billion of policyholder fund balances with crediting rates on
an annual reset basis, and our crediting rates are approximately 75 basis
points on average in excess of our minimum guaranteed rates at June 30, 2003.
We also have approximately $3 billion of policyholder fund balances with
multi-year guaranteed rates, which will begin to expire in about eighteen
months. As mentioned earlier, increased accretion of discount on mortgage
backed securities is also continuing to positively impact our investment
spreads.

The expense details for the AIP segment are as follows:

|                                                 |  |                    |      |                  |  |      |       |      |  |   |       |   |  |   |       |  
|------------------------------------------------ |  | ------------------ | ---- | ---------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                 |  | Three Months Ended |      | Six Months Ended
|                                                 |  | June 30            |      | June 30         
|                                                 |  |                    |      |                 
|                                                 |  | 2003               |      | 2002             |  | 2003 |       | 2002
|                                                 |  |                    |      |                  |  |      |       |     
|Commissions  insurance companies                |  | $                  | 7.0  |                  |  | $    | 11.9  |      |  | $ | 13.0  |   |  | $ | 23.1  |  
|Commissions  broker/dealer                      |  |                    | 19.1 |                  |  |      | 23.0  |      |  |   | 37.2  |   |  |   | 44.5  |  
|General and administrative  acquisition related |  |                    | 2.6  |                  |  |      | 3.4   |      |  |   | 6.3   |   |  |   | 7.1   |  
|General and administrative  maintenance related |  |                    | 3.7  |                  |  |      | 4.1   |      |  |   | 6.4   |   |  |   | 7.2   |  
|Taxes, licenses and fees                         |  |                    | 0.8  |                  |  |      | 0.8   |      |  |   | 1.5   |   |  |   | 1.5   |  
|                                                 |  |                    |      |                  |  |      |       |      |  |   |       |   |  |   |       |  
|Total commissions and expenses incurred          |  |                    | 33.2 |                  |  |      | 43.2  |      |  |   | 64.4  |   |  |   | 83.4  |  
|Less commissions and expenses capitalized        |  |                    | (9.2 | )                |  |      | (15.2 | )    |  |   | (18.5 | ) |  |   | (29.8 | )
|Amortization of DAC and VOBA                     |  |                    | 12.1 |                  |  |      | 10.2  |      |  |   | 23.6  |   |  |   | 21.0  |  
|                                                 |  |                    |      |                  |  |      |       |      |  |   |       |   |  |   |       |  
|Total expense                                    |  | $                  | 36.1 |                  |  | $    | 38.2  |      |  | $ | 69.5  |   |  | $ | 74.6  |  
|                                                 |  |                    |      |                  |  |      |       |      |  |   |       |   |  |   |       |  

Total AIP expenses decreased 5.5% and 6.8% from the second quarter and first
six months of 2002, due primarily to lower commission expenses of JPSC.
However, we continue to closely manage the maintenance related general and
administrative expenses, which declined 9.8% and 11.1% from the second quarter
and first six months of 2002.

JPSC earnings were $1.0 and $2.2 for the second quarter and first six months of
2003 compared to $1.0 and $2.0 for the same 2002 periods.

An inherent risk in the annuity business is that continued low or further
declines in investment yields coupled with competition from competing products
and minimum rate guarantees could further reduce our investment spread and
reduce annuity sales. Other risks associated with the annuity business include
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 of our Form 10-K.

21



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##### 



Benefit Partners

The Benefit Partners segment offers group non-medical products such as term
life, disability and dental insurance to the employer marketplace. These
products are marketed primarily through a national distribution system of
regional offices. These offices develop business through employee benefit
brokers, third party administrators and other employee benefit firms.
Reportable segment results were:

|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|---------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                               |  | Three Months Ended |       | Six Months Ended
|                                               |  | June 30            |       | June 30         
|                                               |  |                    |       |                 
|                                               |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                               |  |                    |       |                  |  |      |       |     
|Premiums and other considerations              |  | $                  | 191.3 |                  |  | $    | 162.0 |      |  | $ | 373.1 |  |  | $ | 310.4 | 
|Investment income, net of expenses             |  |                    | 16.5  |                  |  |      | 14.6  |      |  |   | 32.4  |  |  |   | 29.6  | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Total revenues                                 |  |                    | 207.8 |                  |  |      | 176.6 |      |  |   | 405.5 |  |  |   | 340.0 | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Policy benefits                                |  |                    | 147.8 |                  |  |      | 120.9 |      |  |   | 285.5 |  |  |   | 230.1 | 
|Expenses                                       |  |                    | 40.7  |                  |  |      | 36.5  |      |  |   | 82.4  |  |  |   | 70.8  | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Total benefits and expenses                    |  |                    | 188.5 |                  |  |      | 157.4 |      |  |   | 367.9 |  |  |   | 300.9 | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Reportable segment results before
income taxes |  |                    | 19.3  |                  |  |      | 19.2  |      |  |   | 37.6  |  |  |   | 39.1  | 
|Provision for income taxes                     |  |                    | 6.8   |                  |  |      | 6.7   |      |  |   | 13.2  |  |  |   | 13.7  | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 
|Reportable segment results                     |  | $                  | 12.5  |                  |  | $    | 12.5  |      |  | $ | 24.4  |  |  | $ | 25.4  | 
|                                               |  |                    |       |                  |  |      |       |      |  |   |       |  |  |   |       | 

Benefit Partners reportable segment results were flat for the second quarter
and decreased 3.9% compared to the first six months of 2002 as discussed below.

The following table summarizes key information for Benefit Partners:

|                                    |                  |   |                    |      |                  |   |      |      |      |   |      |      |   |   |      |      |  
|----------------------------------- | ---------------- | - | ------------------ | ---- | ---------------- | - | ---- | ---- | ---- | - | ---- | ---- | - | - | ---- | ---- | -
|                                    |                  |   | Three Months Ended |      | Six Months Ended
|                                    |                  |   | June 30            |      | June 30         
|                                    |                  |   |                    |      |                 
|                                    |                  |   | 2003               |      | 2002             |   | 2003 |      | 2002
|                                    |                  |   |                    |      |                  |   |      |      |     
|Life, Disability, and Dental:       |                  |   |                    |      |                  |   |      |      |      |   |      |      |   |   |      |     
|                                    | Annualized sales |   | $                  | 40   |                  |   | $    | 37   |      |   | $    | 113  |   |   | $    | 93   |  
|                                    | Loss ratio       |   |                    | 74.7 | %                |   |      | 73.1 | %    |   |      | 74.3 | % |   |      | 72.4 | %
|                                   
|Total expenses, % of premium
income |                  |   | 21.4               | %    |                  |   | 22.7 | %    |      |   | 22.2 | %    |   |   | 22.9 | %   
|                                   
|Average assets                      |                  | $ | 962                |      |                  | $ | 838  |      |      | $ | 945  |      |   | $ | 822  |     

Benefit Partners revenues increased 17.7% and 19.3% over the second quarter and
first six months of 2002. Annualized new sales for the core life, disability
and dental lines grew 8.1% and 21.5% over the second quarter and first six
months of 2002, reflecting continued distribution channel growth, the
maturation of the sales force selling these products under the Jefferson Pilot
name, our strong ratings and our technology driven customer service.

Policy benefits increased 22.2% and 24.1% over the second quarter and first six
months of 2002 driven by growth in the business coupled with adverse claims
experience during the first six months of 2003 in the life product line. Our
life, disability and dental incurred loss ratio increased to 74.7% versus 73.1%
and 74.3% versus 72.4% from the second quarter and first six months of 2002 due
to the adverse mortality experienced in the life product line. While loss
ratios for our life products are

22



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##### 



higher than levels we would expect, they did improve measurably from first
quarter 2003. During the quarter we engaged an outside consulting firm to
assist us in studying the mortality experience of our life block. Following
this study, we are continuing our evaluation and anticipate making certain
adjustments in our underwriting practices to reduce potential anti-selection as
well as pricing adjustments to selected cells of business to provide more
satisfactory results going forward.

Total expenses for the Benefit Partners segment increased 11.5% and 16.4% over
the second quarter and first six months of 2002, due to overall growth in the
business. As a percentage of premium income, total expenses were 21.4% versus
22.7% and 22.2% versus 22.9% for the second quarter and first half of 2002.

The expense details are as follows:

|                                          |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|----------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                          |  | Three Months Ended |       | Six Months Ended
|                                          |  | June 30            |       | June 30         
|                                          |  |                    |       |                 
|                                          |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                          |  |                    |       |                  |  |      |       |     
|Commissions                               |  | $                  | 21.6  |                  |  | $    | 18.5  |      |  | $ | 42.4  |   |  | $ | 36.1  |  
|General and administrative                |  |                    | 18.2  |                  |  |      | 16.7  |      |  |   | 37.7  |   |  |   | 33.6  |  
|Taxes, licenses and fees                  |  |                    | 5.0   |                  |  |      | 5.0   |      |  |   | 10.3  |   |  |   | 9.0   |  
|                                          |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|Total commissions and expenses incurred   |  |                    | 44.8  |                  |  |      | 40.2  |      |  |   | 90.4  |   |  |   | 78.7  |  
|Less commissions and expenses capitalized |  |                    | (28.9 | )                |  |      | (24.0 | )    |  |   | (57.2 | ) |  |   | (45.1 | )
|Amortization of DAC                       |  |                    | 24.8  |                  |  |      | 20.3  |      |  |   | 49.2  |   |  |   | 37.2  |  
|                                          |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|Total expense                             |  | $                  | 40.7  |                  |  | $    | 36.5  |      |  | $ | 82.4  |   |  | $ | 70.8  |  
|                                          |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  

Acquisition costs consisting of commissions and other expenses that are
primarily related to contracts issued or renewed are capitalized and are
charged to expense in proportion to the revenue recognized. The amount of
acquisition costs capitalized as well as the amount amortized grew in
proportion with the increase in sales for the second quarter and first six
months of 2003.

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
discuss these risks in more detail in the Benefit Partners section of our Form
10-K.

23



---



##### 



Communications

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

|                                              |  |                    |      |                  |  |      |      |      |  |   |       |  |  |   |      | 
|--------------------------------------------- |  | ------------------ | ---- | ---------------- |  | ---- | ---- | ---- |  | - | ----- |  |  | - | ---- | 
|                                              |  | Three Months Ended |      | Six Months Ended
|                                              |  | June 30            |      | June 30         
|                                              |  |                    |      |                 
|                                              |  | 2003               |      | 2002             |  | 2003 |      | 2002
|                                              |  |                    |      |                  |  |      |      |     
|Communications revenues (net)                 |  | $                  | 50.7 |                  |  | $    | 50.0 |      |  | $ | 101.2 |  |  | $ | 98.6 | 
|Operating costs and expenses                  |  |                    | 27.6 |                  |  |      | 27.8 |      |  |   | 62.3  |  |  |   | 61.5 | 
|                                              |  |                    |      |                  |  |      |      |      |  |   |       |  |  |   |      | 
|Broadcast cash flow                           |  |                    | 23.1 |                  |  |      | 22.2 |      |  |   | 38.9  |  |  |   | 37.1 | 
|Depreciation and amortization                 |  |                    | 2.1  |                  |  |      | 1.9  |      |  |   | 4.2   |  |  |   | 3.8  | 
|Corporate general and administrative expenses |  |                    | 1.2  |                  |  |      | 1.9  |      |  |   | 2.7   |  |  |   | 3.2  | 
|Net interest expense                          |  |                    | 0.5  |                  |  |      | 0.7  |      |  |   | 1.1   |  |  |   | 1.5  | 
|                                              |  |                    |      |                  |  |      |      |      |  |   |       |  |  |   |      | 
|Operating revenue before income taxes         |  |                    | 19.3 |                  |  |      | 17.7 |      |  |   | 30.9  |  |  |   | 28.6 | 
|Provision for income taxes                    |  |                    | 7.8  |                  |  |      | 7.1  |      |  |   | 12.3  |  |  |   | 11.5 | 
|                                              |  |                    |      |                  |  |      |      |      |  |   |       |  |  |   |      | 
|Reportable segment results                    |  | $                  | 11.5 |                  |  | $    | 10.6 |      |  | $ | 18.6  |  |  | $ | 17.1 | 
|                                              |  |                    |      |                  |  |      |      |      |  |   |       |  |  |   |      | 

Reportable segment results increased 8.5% and 8.8% over the second quarter and
first six months of 2002, primarily due to increased demand for advertising,
increased share in our Television and Radio markets and effective ongoing
operating expense management.

Combined revenues for Radio and Television increased 1.3% and 3.0% over the
second quarter and first half of 2002, reflecting solid increases in demand for
local advertising in Television and national advertising in Radio. Political
revenues for combined Radio and Television declined by $0.5 from the second
quarter and first half of 2002. Disregarding revenues from political
advertising, combined revenues for Radio and Television increased 2.3% and 3.6%
over the second quarter and first half of 2002. The second quarter is
typically a slow period for Sports with minimal collegiate activity.

Broadcast cash flow increased 4.1% and 4.9% over the second quarter and first
half of 2002 due to improved profitability at our Radio and Television
properties, despite disappointing first quarter 2003 results in our Sports
basketball product.

Total expenses, excluding interest expense, decreased $0.7 or 2.2% from the
second quarter and increased $0.7 or 1.0% over the first half of 2002. As a
percent of communication revenues, these expenses were 60.9% versus 63.2% and
68.4% versus 69.5% in the second quarter and first six months of 2003 and 2002,
reflecting continued expense discipline in this segment.

Risks for this segment include sensitivity to cyclical changes in both the
general economy and the economic strength of local markets, concentration of
our advertising revenues from the automotive industry, the ability to
periodically renew FCC licenses, technological changes and consolidation in the
broadcast industry. We discuss these risks in more detail in the Communications
section of our Form 10-K.

24



---



##### 



Corporate and Other

The Corporate and Other segment includes the excess capital of the insurance
subsidiaries, other corporate investments including 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 all impairments of securities, are reported in this
segment.

The following table summarizes results for this segment:

|                                                                  |  |                    |      |                  |  |      |      |      |  |   |       |   |  |   |       |  
|----------------------------------------------------------------- |  | ------------------ | ---- | ---------------- |  | ---- | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                                  |  | Three Months Ended |      | Six Months Ended
|                                                                  |  | June 30            |      | June 30         
|                                                                  |  |                    |      |                 
|                                                                  |  | 2003               |      | 2002             |  | 2003 |      | 2002
|                                                                  |  |                    |      |                  |  |      |      |     
|Earnings on investments                                           |  | $                  | 22.3 |                  |  | $    | 22.1 |      |  | $ | 43.9  |   |  | $ | 43.1  |  
|Interest expense on debt and
Exchangeable Securities              |  |                    | 2.1  |                  |  |      | 2.6  |      |  |   | 4.6   |   |  |   | 5.0   |  
|Operating expenses                                                |  |                    | 6.7  |                  |  |      | 7.3  |      |  |   | 13.0  |   |  |   | 12.2  |  
|Provision for income tax expense                                  |  |                    | 0.3  |                  |  |      | 0.8  |      |  |   | 1.7   |   |  |   | 1.2   |  
|                                                                  |  |                    |      |                  |  |      |      |      |  |   |       |   |  |   |       |  
|Total expenses                                                    |  |                    | 9.1  |                  |  |      | 10.7 |      |  |   | 19.3  |   |  |   | 18.4  |  
|                                                                  |  |                    |      |                  |  |      |      |      |  |   |       |   |  |   |       |  
|Reportable segment results
before dividends on Capital
Securities |  |                    | 13.2 |                  |  |      | 11.4 |      |  |   | 24.6  |   |  |   | 24.7  |  
|Dividends on Capital Securities                                   |  |                    | (6.2 | )                |  |      | (6.2 | )    |  |   | (12.3 | ) |  |   | (12.3 | )
|                                                                  |  |                    |      |                  |  |      |      |      |  |   |       |   |  |   |       |  
|Reportable segment results                                        |  |                    | 7.0  |                  |  |      | 5.2  |      |  |   | 12.3  |   |  |   | 12.4  |  
|Realized investment gains, net                                    |  |                    | 13.2 |                  |  |      | 2.8  |      |  |   | 0.8   |   |  |   | 24.7  |  
|                                                                  |  |                    |      |                  |  |      |      |      |  |   |       |   |  |   |       |  
|Reportable segment results,
including realized gains              |  | $                  | 20.2 |                  |  | $    | 8.0  |      |  | $ | 13.1  |   |  | $ | 37.1  |  
|                                                                  |  |                    |      |                  |  |      |      |      |  |   |       |   |  |   |       |  

Reportable segment results excluding realized gains increased $1.8 from the
second quarter and declined $0.1 from the first half of 2002. Several items
impacted results, including an increase in earnings on investments due to
increased default charge income, resumed income in the second quarter of this
year on certain previously defaulted securities, lower interest expense on debt
and lower quarterly operating expenses in this segment as further discussed
below.

The earnings on investments for this segment include default charge income
received from the operating segments for this segments assumption of all
credit related losses on the invested assets of those segments. Default
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 to the other operating segments. This resulted in default
charge income of $7.7 and $14.6 for the second quarter and first six months
compared to $5.7 and $10.9 for the same periods of 2002. 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 investment income fluctuations on bonds impaired or sold, among
other factors.

Operating expenses declined $0.6 from the second quarter and increased $0.8
over the first six months of last year. The increase in the first half was
primarily caused by the expensing in the first quarter of stock options granted
to our Premier Partners. Operating expenses for this segment vary with the
level of corporate activities and strategies.

25



---



##### 



The provision for income tax expense includes the tax benefit of preferred
dividends on Capital Securities, which we record gross of related tax effects.

Realized investment gains and losses were as follows:

|                        |             |   |                    |      |                  |   |       |      |      |   |       |      |   |   |       |       |  
|----------------------- | ----------- | - | ------------------ | ---- | ---------------- | - | ----- | ---- | ---- | - | ----- | ---- | - | - | ----- | ----- | -
|                        |             |   | Three Months Ended |      | Six Months Ended
|                        |             |   | June 30            |      | June 30         
|                        |             |   |                    |      |                 
|                        |             |   | 2003               |      | 2002             |   | 2003  |      | 2002
|                        |             |   |                    |      |                  |   |       |      |     
|Bonds gains             |             | $ | 22.5               |      |                  | $ | 9.5   |      |      | $ | 36.8  |      |   | $ | 12.2  |      
|Bond losses             |             |   | (1.9               | )    |                  |   | (7.1  | )    |      |   | (4.7  | )    |   |   | (12.1 | )    
|Bond impairment charges |             |   | (12.1              | )    |                  |   | (39.5 | )    |      |   | (41.1 | )    |   |   | (52.8 | )    
|Stock gains (net)       |             |   | 13.8               |      |                  |   | 42.1  |      |      |   | 13.8  |      |   |   | 94.0  |      
|Other losses            |             |   | (2.0               | )    |                  |   | (0.7  | )    |      |   | (3.6  | )    |   |   | (3.3  | )    
|                        |             |   |                    |      |                  |   |       |      |      |   |       |      |   |   |       |      
|Gross realized gains    |             |   | 20.3               |      |                  |   | 4.3   |      |      |   | 1.2   |      |   |   | 38.0  |      
|                        | Less: taxes |   |                    | (7.1 | )                |   |       | (1.5 | )    |   |       | (0.4 | ) |   |       | (13.3 | )
|                        |             |   |                    |      |                  |   |       |      |      |   |       |      |   |   |       |      
|Net realized gains      |             | $ | 13.2               |      |                  | $ | 2.8   |      |      | $ | 0.8   |      |   | $ | 24.7  |      
|                        |             |   |                    |      |                  |   |       |      |      |   |       |      |   |   |       |      

The level of bond write-downs and losses for second quarter 2003 was the lowest
in seven quarters, a result of significant improvement in the corporate credit
environment and proactive portfolio management. Approximately 60% of the bond
gains realized in second quarter 2003 were on previously written down
securities, which we sold after their prices improved in order to reposition
our holdings. We also elected to realize gains on equity securities due to the
recent increase in the equity markets, especially of our investment in Bank of
America common stock.

The following table summarizes assets assigned to this segment.

|                                                                                                 |       |   |         |       |      |   |       |       | 
|------------------------------------------------------------------------------------------------ | ----- | - | ------- | ----- | ---- | - | ----- | ----- | 
|                                                                                                 |       |   | June 30
|                                                                                                 |       |   |        
|                                                                                                 |       |   | 2003    |       | 2002
|                                                                                                 |       |   |         |       |     
|Parent company, passive investment companies and
Corporate line assets of insurance subsidiaries |       | $ | 1,042   |       |      | $ | 901   |      
|Unrealized gain on fixed interest investments                                                    |       |   | 867     |       |      |   | 334   |      
|Co-insurance receivables on acquired blocks                                                      |       |   | 1,045   |       |      |   | 1,084 |      
|Employee benefit plan assets                                                                     |       |   | 344     |       |      |   | 349   |      
|Goodwill arising from insurance acquisitions                                                     |       |   | 270     |       |      |   | 270   |      
|Other                                                                                            |       |   | 318     |       |      |   | 330   |      
|                                                                                                 |       |   |         |       |      |   |       |      
|                                                                                                 | Total |   | $       | 3,886 |      |   | $     | 3,268 | 
|                                                                                                 |       |   |         |       |      |   |       |      

Total assets for the Corporate and Other segment increased 18.9% over June 30,
2002 due primarily to unrealized gains on fixed interest investments.
Unrealized gains and losses on all available-for-sale fixed income securities,
which are assigned to this segment, increased $533.

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

26



---



##### 



Financial Position

Our primary resources are investments related to our Individual Products, AIP
and Benefit Partners segments, properties and other assets utilized in all
segments and investments backing corporate capital. This section identifies
several items on our balance sheet that are important to the overall
understanding of our financial position. The Investments section reviews our
investment portfolio and key portfolio management strategies.

Total assets increased $1,069 from year end 2002 due to growth in investment
income, net policyholder contract deposits, and unrealized gains on
investments, all of which more than offset declines in fair values of separate
account assets, dividends, stock repurchases and impairment losses.

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

DAC and VOBA

The Individual Products, AIP and Benefit Partners segments defer the costs of
acquiring new business, which is referred to as DAC. These costs include first
year commissions, first year bonus interest or day one premium bonuses on
annuities, certain costs of underwriting and issuing policies plus agency
office expenses. We limit our capitalization of acquisition costs other than
commissions in the Individual Products and AIP segments to the lower of product
specific pricing allowable or the actual deferrable acquisition costs. When we
acquire new business through an acquisition, we allocate a portion of the
purchase price to a separately identifiable intangible asset, referred to as
VOBA. We initially establish VOBA as the actuarially determined present value
of future gross profits of each business acquired. Both DAC and VOBA are
amortized through expenses as revenues are recognized in the future. Some of
the assumptions regarding future experience that can affect the carrying value
of DAC and VOBA balances include mortality, interest spreads, lapse rates and
policy fees earned. Significant differences between actual experience and
assumptions utilized can impact the carrying balance of DAC and VOBA and
therefore produce changes that must be reflected in earnings. These changes
can be positive or negative.

We amortize DAC and VOBA on traditional products (including the products in our
Benefit Partners segment) in proportion to premium revenue recognized. The DAC
and VOBA balances on these products were $203.0 or 8.4% of the gross balances
at June 30, 2003 compared to $208.2 or 8.9% at December 31, 2002, and are
generally subject to little volatility.

We amortize DAC and VOBA on UL-type products and annuity products relative to
the future estimated gross profits (EGP) from those products. In calculating
the EGP for these products, management must make assumptions regarding the
following components: 1) estimates of fees charged to policyholders to cover
mortality, surrenders and maintenance costs; 2) estimated mortality in excess
of fund balances accumulated; 3) expected interest rate spreads between income
earned and amounts credited to policyholder accounts; and 4) estimated costs of
policy administration (maintenance). DAC and VOBA calculations are sensitive
to a change in our assumptions regarding EGP components, and any significant
change in these assumptions will immediately impact the current DAC and VOBA
balances with the change reflected through the income statement. We
continuously review the models and our assumptions regarding EGP that we use
for calculation of amortization expense for these products so that the
assumptions reflect managements view of future events.

27



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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. The DAC and VOBA balances on UL-type products
were $1,799.0 or 74.4% of the gross balances at June 30, 2003 compared to
$1,711.3 or 73.3% at December 31, 2002.

In addition to these three assumptions on all UL-type products, VUL products
and VA products contain an additional assumption that affects the DAC and VOBA
amortization. This critical assumption is the rate of growth of the separate
account mutual funds that generate additional policy fees utilized in the EGP
on VUL and VA products. We assume a long-term total net return on separate
account assets, including dividends and market value increases, of 8.25% and a
five-year reversion period. The reversion period is a period over which a
short-term return assumption is used to maintain the models overall long-term
rate of return. We 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.

We provided a sensitivity analysis of changes in significant assumptions to DAC
and VOBA relating to UL-type products in the Individual Products segment
discussion in our Form 10-K. In the first six months of 2003, no variances
were significant enough to have caused us to change the significant assumptions
utilized in this analysis or its estimated results.

We consider estimated interest spreads and estimated future policy lapses to be
the most significant assumptions related to our annuity products. The DAC and
VOBA balances on these products were $350.5 or 14.5% of the gross balances at
June 30, 2003 compared to $356.6 or 15.3% at December 31, 2002. We provided a
sensitivity analysis of changes in significant assumptions to DAC and VOBA
relating to annuity products in our Form 10-K. In the first six months of
2003, no variances were significant enough to have caused us to change the
significant assumptions or the estimated results utilized in this analysis.

We also adjust the carrying value of DAC and VOBA to reflect changes in the
unrealized gains and losses in available-for-sale securities since this impacts
the timing of and possible realization of EGPs.

Goodwill

Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, which
primarily addresses the accounting for goodwill and intangible assets
subsequent to their acquisition. Under SFAS 142, we test goodwill for
impairment at least on an annual basis. Goodwill was $312 at June 30, 2003 or
8.1% as a percentage of stockholders equity. We regularly review the carrying
amounts for indications of value impairment, considering financial performance
and other relevant factors such as a significant adverse change in the business
or legal climate, an adverse action or assessment by a regulator, or
unanticipated competition. Nothing indicated an impairment of goodwill during
the first six months of 2003. When considered impaired, the carrying amounts
are required to be written down to a value determined by using a combination of
fair value and discounted cash flows.

Other

At June 30, 2003 and December 31, 2002, we had reinsurance receivables of $869
and $889 and policy loans of $133 and $135, which are related to the businesses
of JP Financial that are coinsured

28



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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 June 30, 2003, the fair values of the assets related to the defined benefit
pension plans were $344 compared to $331 at December 31, 2002. The increase in
plan assets of $13 reflects an increase in unrealized gains on securities in
the portfolio. Additionally, at December 31, 2002, we lowered the discount
rate to 6.75% from 7.00% in the calculation of the Projected Benefit Obligation
(PBO) and will utilize that rate for the calculation of expense in 2003.
Lowering this discount rate will eventually lead to a higher pension expense
over time.

Capital Resources

Stockholders Equity

The following table shows our capital adequacy.

|                                                               |  |         |        |             |  |   |        |  
|-------------------------------------------------------------- |  | ------- | ------ | ----------- |  | - | ------ | -
|                                                               |  | June 30 |        | December 31
|                                                               |  | 2003    |        | 2002       
|                                                               |  |         |        |            
|Total assets less separate accounts                            |  | $       | 29,762 |             |  | $ | 28,824 |  
|Total stockholders equity                                     |  |         | 3,871  |             |  |   | 3,540  |  
|Ratio of stockholders equity to assets
less separate accounts |  |         | 13.0   | %           |  |   | 12.3   | %

The ratio of equity to assets less separate accounts has remained relatively
constant in recent years. Unrealized gains on available-for-sale securities,
which are included as a component of stockholders equity, increased $220 from
year-end 2002, reflecting an increase in the bond and equity securities
markets.

During the first six months of 2003, we repurchased 1,500,000 of our common
shares at an average cost of $39.01 per share.

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

The Individual Products, AIP and Benefit Partners segments are subject to
regulatory constraints. Our insurance subsidiaries have statutory surplus and
risk based capital levels well above required levels. These capital levels
together with the rating agencies assessments of our business strategies have
enabled our major life insurance affiliates to attain the highest available
claims paying ratings by A.M. Best and Standard & Poors and the second highest
rating by Fitch Ratings.

Short-Term Borrowings and Debt

We have bank credit agreements for unsecured revolving credit, under which we
have the option to borrow at various interest rates. The two agreements
currently aggregate $525 with half available until May of 2004 and half
available until May of 2007. The credit agreements principally support our
issuance of commercial paper. Outstanding commercial paper has various
maturities, with none at June 30, 2003 in excess of 90 days, although
maturities can be up to 270 days. If we cannot remarket commercial paper at
maturity, we have sufficient liquidity, consisting of the bank credit
agreements, liquid assets, such as equity securities, and other resources to
retire these obligations.

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The weighted-average interest rates for commercial paper borrowings outstanding
of $528 and $453 at June 30, 2003 and December 31, 2002 were 1.13% and 1.44%.
The maximum amount outstanding during the first six months of 2003 was $529
versus $455 for the year ended December 31, 2002.

Our commercial paper has retained the highest ratings by Standard & Poors and
Fitch Ratings as detailed in our Form 10-K. A significant drop in these
ratings, while not anticipated, could cause us to pay higher rates on
commercial paper borrowings or lose access to the commercial paper market.

Our insurance subsidiaries have sold U.S. Treasury obligations and
collateralized mortgage obligations under repurchase agreements involving
various counterparties, accounted for as financing arrangements. We may use
proceeds to purchase securities with longer durations as an asset/liability
management strategy. We also may use repurchase agreements from time to time
in lieu of commercial paper borrowings. At June 30, 2003 and December 31,
2002, repurchase agreements, including accrued interest, were $376 and $499,
which include $72 and $244 of repurchase agreements in lieu of commercial paper
borrowings. The securities involved had a fair value and amortized cost of
$313 and $287 at June 30, 2003 versus $532 and $493 at December 31, 2002. The
maximum principal amounts outstanding were $444 during the first six months of
2003 compared to $636 for the year ended December 31, 2002.

Under SFAS 150, effective with the third quarter 2003, we will account for our
Capital Securities as a liability rather than as mezzanine financing.
Accordingly, the payments to the holders of the Capital Securities will be
included in interest expense rather than as dividends. Prior amounts will not
be restated, and this change will only result in reclassifications on the
balance sheets and statements of income.

Liquidity

We meet liquidity requirements primarily by positive cash flows from the
operations of subsidiaries. We have sufficient overall sources of liquidity to
satisfy operating requirements. Primary sources of cash from our insurance
operations are premiums, other insurance considerations, receipts for
policyholder accounts, investment sales and maturities and investment income.
Primary uses of cash for our insurance operations include purchases of
investments, payment of insurance benefits, operating expenses, withdrawals
from policyholder accounts, costs related to acquiring new business, dividends
and income taxes. Primary sources of cash from the Communications operations
are revenues from 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 the first six months of 2003 and 2002 was $220
and $113. The primary drivers of this increase are larger increases in policy
reserves to $93.2 in 2003 from $22.7 for the first six months of 2002 and the
swing in gains realized on the sale of investments to $1.2 for the first half
of 2003 from a $38.0 loss for the prior period, both of which serve as
adjustments to cash generated from operations.

Net cash used in investing activities was $475 and $659 for the first half of
2003 and 2002. The 2002 amount included the investment of approximately $208
of single premiums received in late 2001.

30



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Net cash provided by financing activities was $240 and $442 for the first
six months of 2003 and 2002, including cash inflows from policyholder contract
deposits net of withdrawals of $435 and $668, reflecting the processing of the
premiums received in late 2001 combined with lower policyholder contract
deposits in 2003 in connection with the decline in fixed annuity sales. Net
borrowings declined in 2003 as funds were used to pay down debt rather than for
investing purposes.

In order to meet the parent companys dividend payments, debt servicing
obligations and other expenses, we receive dividends from subsidiaries.
Subsidiaries paid total cash dividends during the first six months of $146 and
$183 in 2003 and 2002. 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
dividends above these limits 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 $52 and $67 at June 30, 2003 and December 31,
2002. The parent company and non-regulated subsidiaries held equity and fixed
income securities of $725 and $424 at these dates. We consider the majority of
these securities to be sources of liquidity to support our strategies.

Total debt and equity securities available-for-sale at June 30, 2003 and
December 31, 2002 were $17,972 and $16,874.

Off Balance Sheet Liabilities and Commitments

One of our subsidiaries entered into an agreement with an unaffiliated third
party to provide for the initial and periodic purchase of the majority of its
loans receivable. This agreement is renewable on an annual basis and the
amount of loans involved continued to decline. If the agreement is not
renewed, we can issue debt to fund the amounts or terminate the entire program.
The amount of loans outstanding at June 30, 2003 was $12 compared to $16 at
December 31, 2002. We have no other off balance sheet arrangements of a
financing nature.

JPCC has commitments for purchases of syndicated television programming and
commitments on other contracts and future sports programming rights of
approximately $407 as of June 30, 2003, payable through the year 2011. We have
commitments to sell a portion of the sports programming rights to other
entities for $248 over the same period. These commitments are not reflected as
an asset or liability in the accompanying consolidated balance sheet because
the programs are not currently available for use. We expect advertising
revenues that are sold on an annual basis to fund the purchase commitments.

We routinely enter into commitments to extend credit in the form of mortgage
loans and to purchase certain debt instruments in private placement
transactions for our investment portfolio. The fair value of such outstanding
commitments as of June 30, 2003 and December 31, 2002 approximated $115 and
$73. These commitments will be funded through cash flows from operations and
investment maturities.

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Investments

Portfolio Description

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

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

|                                |                          |   |         |        |             |  |      |       |   |   |        |        |  |  |      |       |  
|------------------------------- | ------------------------ | - | ------- | ------ | ----------- |  | ---- | ----- | - | - | ------ | ------ |  |  | ---- | ----- | -
|                                |                          |   | June 30 |        | December 31
|                                |                          |   | 2003    |        | 2002       
|                                |                          |   |         |        |            
|Publicly-issued bonds           |                          | $ | 15,698  |        |             |  | 62.1 | %     |   | $ | 15,239 |        |  |  | 62.6 | %    
|Privately-placed bonds          |                          |   | 4,448   |        |             |  | 17.6 |       |   |   | 4,238  |        |  |  | 17.4 |      
|                                |                          |   |         |        |             |  |      |       |   |   |        |        |  |  |      |      
|                                | Subtotal bonds           |   |         | 20,146 |             |  |      | 79.7  |   |   |        | 19,477 |  |  |      | 80.0  |  
|Redeemable preferred stock      |                          |   | 25      |        |             |  | 0.1  |       |   |   | 24     |        |  |  | 0.1  |      
|                                |                          |   |         |        |             |  |      |       |   |   |        |        |  |  |      |      
|                                | Subtotal debt securities |   |         | 20,171 |             |  |      | 79.8  |   |   |        | 19,501 |  |  |      | 80.1  |  
|Mortgage loans on real property |                          |   | 3,267   |        |             |  | 12.9 |       |   |   | 3,294  |        |  |  | 13.5 |      
|Common stock                    |                          |   | 711     |        |             |  | 2.8  |       |   |   | 407    |        |  |  | 1.7  |      
|Non-redeemable preferred stock  |                          |   | 2       |        |             |  | 0.1  |       |   |   | 2      |        |  |  | 0.0  |      
|Policy loans                    |                          |   | 901     |        |             |  | 3.6  |       |   |   | 909    |        |  |  | 3.7  |      
|Real estate                     |                          |   | 131     |        |             |  | 0.5  |       |   |   | 133    |        |  |  | 0.6  |      
|Other                           |                          |   | 34      |        |             |  | 0.1  |       |   |   | 33     |        |  |  | 0.1  |      
|Cash and equivalents            |                          |   | 52      |        |             |  | 0.2  |       |   |   | 67     |        |  |  | 0.3  |      
|                                |                          |   |         |        |             |  |      |       |   |   |        |        |  |  |      |      
|                                | Total                    |   | $       | 25,269 |             |  |      | 100.0 | % |   | $      | 24,346 |  |  |      | 100.0 | %
|                                |                          |   |         |        |             |  |      |       |   |   |        |        |  |  |      |      

The table above reflects the increase in our non-insurance subsidiaries
investments in common stocks by $250 in the second quarter, which we view as
attractive for capital appreciation as well as dividend yields.

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Credit Risk Management and Impairment Review

Our internal guidelines require an average quality of an S&P or equivalent
rating of A or higher for the entire bond portfolio. At June 30, 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 at June 30, 2003.

|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |      |       |  
|------ |  | ------------------ |  | --------- | ------ | ----- |  | -------- | ------ | -------- |  | - | ------ |  |  | ---- | ----- | -
|       |  | S&P or             |  |           |        |       |  |          |        |          |  |   |        |  |  | % of
|SVO    |  | Equivalent         |  | Amortized |        | Fair  |  | Carrying |        | Carrying
|Rating |  | Designation        |  | Cost      |        | Value |  | Value    |        | Value   
|       |  |                    |  |           |        |       |  |          |        |         
|1      |  | AAA                |  | $         | 4,175  |       |  | $        | 4,430  |          |  | $ | 4,425  |  |  |      | 21.9  | %
|1      |  | AA                 |  |           | 1,827  |       |  |          | 2,002  |          |  |   | 1,982  |  |  |      | 9.8   |  
|1      |  | A                  |  |           | 5,220  |       |  |          | 5,772  |          |  |   | 5,662  |  |  |      | 28.1  |  
|2      |  | BBB                |  |           | 6,150  |       |  |          | 6,706  |          |  |   | 6,587  |  |  |      | 32.7  |  
|3      |  | BB                 |  |           | 707    |       |  |          | 710    |          |  |   | 710    |  |  |      | 3.5   |  
|4      |  | B                  |  |           | 527    |       |  |          | 511    |          |  |   | 514    |  |  |      | 2.5   |  
|5      |  | CCC and lower      |  |           | 210    |       |  |          | 190    |          |  |   | 194    |  |  |      | 1.0   |  
|6      |  | In or near default |  |           | 93     |       |  |          | 93     |          |  |   | 97     |  |  |      | 0.5   |  
|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |      |       |  
|       |  | Total              |  | $         | 18,909 |       |  | $        | 20,414 |          |  | $ | 20,171 |  |  |      | 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 June 30, 2003. As noted 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   
|                             |  |                       |  |         
|General Electric             |  | Capital Goods         |  | $        | 94 | 
|National City                |  | Banks                 |  |          | 92 | 
|Bank of America              |  | Banks                 |  |          | 91 | 
|National Rural Utilities     |  | Utilities             |  |          | 91 | 
|U. S. Bancorp                |  | Banks                 |  |          | 90 | 
|Citigroup                    |  | Banks                 |  |          | 88 | 
|HSBC Holdings PLC            |  | Banks                 |  |          | 87 | 
|Scana                        |  | Utilities             |  |          | 87 | 
|Cargill                      |  | Consumer Non-Cyclical |  |          | 86 | 
|Burlington Northern Santa Fe |  | Transportation        |  |          | 86 | 

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.

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To identify potentially distressed securities, we first screen for all
securities that have a fair value to amortized cost ratio of less than 80%. As
part of this identification process, management must make assumptions and
judgments using the following information:



| |  |  | current fair value of the security compared to amortized cost                                         
| | - |  | ------------------------------------------------------------------------------------------------------
|
| |  |  | length of time the fair value was below amortized cost                                                
|
| |  |  | industry factors or conditions related to a geographic area
that are negatively affecting the security
|
| |  |  | downgrades by a rating agency                                                                         
|
| |  |  | past due interest or principal payments or other violation of covenants                               
|
| |  |  | deterioration of the overall financial condition of the specific issuer                               

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

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



| |  |  | fundamental analysis of the liquidity and financial condition of the specific issuer      
| | - |  | ------------------------------------------------------------------------------------------
|
| |  |  | underlying valuation of assets specifically pledged to support the credit                 
|
| |  |  | 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,
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.

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Below Investment Grade Securities

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

The following table shows the ten largest below investment grade debt security
exposures by individual creditor at June 30, 2003.

|                           |  |                       |  |           |    |          |  |             |    |  |  |       |    |  
|-------------------------- |  | --------------------- |  | --------- | -- | -------- |  | ----------- | -- |  |  | ----- | -- | -
|                           |  |                       |  |           |    |          |  |             |    |  |  | Gross
|                           |  |                       |  | Amortized |    | Carrying |  | Unrealized 
|Creditor                   |  | Sector                |  | Cost      |    | Value    |  | Gain/(Loss)
|                           |  |                       |  |           |    |          |  |            
|El Paso                    |  | Utilities             |  | $         | 65 |          |  | $           | 63 |  |  | $     | (3 | )
|Rite Aid                   |  | Consumer Cyclical     |  |           | 48 |          |  |             | 44 |  |  |       | (5 | )
|Qwest Communications       |  | Communications        |  |           | 45 |          |  |             | 41 |  |  |       | (4 | )
|Ahold, Royal               |  | Consumer Cyclical     |  |           | 40 |          |  |             | 40 |  |  |       | (1 | )
|Intertape Polymer Group    |  | Basic Materials       |  |           | 35 |          |  |             | 33 |  |  |       | (1 | )
|Tenet Healthcare           |  | Consumer Non-Cyclical |  |           | 33 |          |  |             | 31 |  |  |       | (2 | )
|Thomas & Betts Company     |  | Capital Goods         |  |           | 28 |          |  |             | 28 |  |  |       |   |  
|Homer City Funding LLC     |  | Energy                |  |           | 25 |          |  |             | 27 |  |  |       | 2  |  
|Carolina Tractor Equipment |  | Capital Goods         |  |           | 25 |          |  |             | 26 |  |  |       | 1  |  
|Williams Companies         |  | Utilities             |  |           | 25 |          |  |             | 25 |  |  |       | 1  |  

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

At June 30, 2003 and December 31, 2002, below investment grade bonds were
$1,515 or 7.5% and $1,287 or 6.6% of the carrying value of the bond portfolio.
These are higher than our historical exposures. We constantly monitor our
below investment grade bonds and evaluate our exposure as a percentage of the
total portfolio.

Unrealized Gains and Losses

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

35



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The following table summarizes by category the unrealized gains and losses in
our entire securities portfolios, including common stock and redeemable
preferred stock, as of June 30, 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                             |                           | $ | 241       |        |            | $ | 29         |       |       | $ |         |      |   | $ | 270    |        |  | $ | 270    |       
|Federal agency mortgage backed
securities (including collateralized
mortgage obligations)            |                           |   | 2,808     |        |            |   | 159        |       |       |   | (1       | )    |   |   | 2,966  |        |  |   | 2,966  |       
|Obligations of states and political
subdivisions                                                     |                           |   | 55        |        |            |   | 5          |       |       |   |         |      |   |   | 60     |        |  |   | 60     |       
|Corporate obligations                                                                                |                           |   | 11,494    |        |            |   | 1,100      |       |       |   | (105     | )    |   |   | 12,489 |        |  |   | 12,489 |       
|Corporate private-labeled mortgage
backed securities (including
collateralized mortgage obligations) |                           |   | 1,375     |        |            |   | 77         |       |       |   | (3       | )    |   |   | 1,449  |        |  |   | 1,449  |       
|Redeemable preferred stock                                                                           |                           |   | 24        |        |            |   | 1          |       |       |   |         |      |   |   | 25     |        |  |   | 25     |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|                                                                                                     | Subtotal, debt securities |   |           | 15,997 |            |   |            | 1,371 |       |   |          | (109 | ) |   |        | 17,259 |  |   |        | 17,259 | 
|Non-redeemable preferred stock                                                                       |                           |   | 1         |        |            |   | 1          |       |       |   |         |      |   |   | 2      |        |  |   | 2      |       
|Common stock                                                                                         |                           |   | 294       |        |            |   | 420        |       |       |   | (3       | )    |   |   | 711    |        |  |   | 711    |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Securities available-for-sale                                                                        |                           |   | 16,292    |        |            |   | 1,792      |       |       |   | (112     | )    |   |   | 17,972 |        |  |   | 17,972 |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Held-to-maturity, carried at
amortized cost:                                                         |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Obligations of state and political
subdivisions                                                      |                           |   | 9         |        |            |   | 2          |       |       |   |         |      |   |   | 11     |        |  |   | 9      |       
|Corporate obligations                                                                                |                           |   | 2,903     |        |            |   | 263        |       |       |   | (22      | )    |   |   | 3,144  |        |  |   | 2,903  |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Debt securities held-to-maturity                                                                     |                           |   | 2,912     |        |            |   | 265        |       |       |   | (22      | )    |   |   | 3,155  |        |  |   | 2,912  |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Total AFS and HTM securities                                                                         |                           | $ | 19,204    |        |            | $ | 2,057      |       |       | $ | (134     | )    |   | $ | 21,127 |        |  | $ | 20,884 |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       

These unrealized gains and losses do not necessarily represent future gains or
losses that we will realize. Changing conditions related to specific bonds,
overall market interest rates or credit spreads as well as our decisions
concerning the timing of any sales may impact values we ultimately realize.
Gross unrealized gains and losses at December 31, 2002 were $1,716 and $(290).

36



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The following table shows the diversification of unrealized gains and losses
for our debt securities portfolio across industry sectors as of June 30, 2003:

|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |       |        | 
|---------------------------------------------------------------------------- | --------------------- | ----- | ----- | --------- | ------ | ---------- | --- | ---------- | ----- | ----- | --- | -------- | ---- | - | ----- | ----- | ------ |  | ----- | ----- | ------ | 
|                                                                             |                       |       |       |           |        |            |     | Gross      |       | Gross |     |          |      |   |       |       |        | 
|                                                                             |                       |       |       | Amortized |        | Unrealized |     | Unrealized |       | Fair  |     | Carrying
|                                                                             |                       |       |       | Cost      |        | Gains      |     | Losses     |       | Value |     | Value   
|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |         
|Industrials                                                                  |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |      
|                                                                             | Basic Materials       |       | $     | 1,203     |        |            | $   | 97         |       |       | $   | (13      | )    |   | $     | 1,287 |        |  | $     | 1,262 |       
|                                                                             | Capital Goods         |       |       | 916       |        |            |     | 78         |       |       |     | (6       | )    |   |       | 988   |        |  |       | 974   |       
|                                                                             | Communications        |       |       | 505       |        |            |     | 64         |       |       |     | (6       | )    |   |       | 563   |        |  |       | 550   |       
|                                                                             | Consumer Cyclical     |       |       | 1,970     |        |            |     | 173        |       |       |     | (19      | )    |   |       | 2,124 |        |  |       | 2,081 |       
|                                                                             | Consumer Non-Cyclical |       |       | 1,311     |        |            |     | 124        |       |       |     | (5       | )    |   |       | 1,430 |        |  |       | 1,406 |       
|                                                                             | Energy                |       |       | 1,184     |        |            |     | 112        |       |       |     | (1       | )    |   |       | 1,295 |        |  |       | 1,282 |       
|                                                                             | Technology            |       |       | 219       |        |            |     | 9          |       |       |     | (6       | )    |   |       | 222   |        |  |       | 220   |       
|                                                                             | Transportation        |       |       | 731       |        |            |     | 78         |       |       |     | (25      | )    |   |       | 784   |        |  |       | 773   |       
|                                                                             | Other Industrials     |       |       | 354       |        |            |     | 43         |       |       |     |         |      |   |       | 397   |        |  |       | 393   |       
|Utilities                                                                    |                       |       | 2,903 |           |        |            | 285 |            |       |       | (25 | )        |      |   | 3,163 |       |        |  | 3,114 |      
|Financials                                                                   |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |      
|                                                                             | Banks                 |       |       | 1,779     |        |            |     | 197        |       |       |     | (12      | )    |   |       | 1,964 |        |  |       | 1,934 |       
|                                                                             | Insurance             |       |       | 395       |        |            |     | 30         |       |       |     | (1       | )    |   |       | 424   |        |  |       | 421   |       
|                                                                             | Other Financials      |       |       | 1,256     |        |            |     | 110        |       |       |     | (8       | )    |   |       | 1,358 |        |  |       | 1,346 |       
|Mortgage Backed Securities
(including Commercial
Mortgage Backed
Securities) |                       |       | 4,183 |           |        |            | 236 |            |       |       | (4  | )        |      |   | 4,415 |       |        |  | 4,415 |      
|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |       |       
|                                                                             |                       | Total |       | $         | 18,909 |            |     | $          | 1,636 |       |     | $        | (131 | ) |       | $     | 20,414 |  |       | $     | 20,171 | 
|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |       |       

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 June 30, 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                   |          | $ | 21        |       |       | $ | 18         |       |          | $ | (3    | )    |   | $ | 18  |      
|Due after one year through five years     |          |   | 381       |       |       |   | 352        |       |          |   | (29   | )    |   |   | 362 |      
|Due after five years through ten years    |          |   | 518       |       |       |   | 496        |       |          |   | (22   | )    |   |   | 501 |      
|Due after ten years through twenty years  |          |   | 582       |       |       |   | 528        |       |          |   | (54   | )    |   |   | 534 |      
|Due after twenty years                    |          |   | 241       |       |       |   | 227        |       |          |   | (14   | )    |   |   | 228 |      
|Amounts not due at a single maturity
date |          |   | 81        |       |       |   | 72         |       |          |   | (9    | )    |   |   | 72  |      
|                                          |          |   |           |       |       |   |            |       |          |   |       |      |   |   |     |      
|                                          | Subtotal |   |           | 1,824 |       |   |            | 1,693 |          |   |       | (131 | ) |   |     | 1,715 | 
|Redeemable preferred stocks               |          |   | 4         |       |       |   | 4          |       |          |   |      |      |   |   | 4   |      
|                                          |          |   |           |       |       |   |            |       |          |   |       |      |   |   |     |      
|                                          | Total    |   | $         | 1,828 |       |   | $          | 1,697 |          |   | $     | (131 | ) |   | $   | 1,719 | 
|                                          |          |   |           |       |       |   |            |       |          |   |       |      |   |   |     |      

37



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The following table shows the credit quality of our debt securities with
unrealized losses at June 30, 2003.

|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |          |  |            |      |   |  |  |       |   |  |   |       | 
|------ |  | ------------------ |  | --------- | ----- | ----- |  | ----- | ----- | ---------- |  | ---------- | ----- | -------- |  | ---------- | ---- | - |  |  | ----- | - |  | - | ----- | 
|       |  | S&P or             |  |           |       |       |  |       |       |            |  | % of       |       | Gross    |  | % of Gross |      |   |  | 
|SVO    |  | Equivalent         |  | Amortized |       | Fair  |  | Fair  |       | Unrealized |  | Unrealized |       | Carrying
|Rating |  | Designation        |  | Cost      |       | Value |  | Value |       | Losses     |  | Losses     |       | Value   
|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |         
|1      |  | AAA/AA/A           |  | $         | 497   |       |  | $     | 470   |            |  |            | 27.7  | %        |  | $          | (27  | ) |  |  | 20.6  | % |  | $ | 472   | 
|2      |  | BBB                |  |           | 568   |       |  |       | 542   |            |  |            | 31.9  |          |  |            | (26  | ) |  |  | 19.8  |   |  |   | 549   | 
|3      |  | BB                 |  |           | 258   |       |  |       | 233   |            |  |            | 13.7  |          |  |            | (25  | ) |  |  | 19.1  |   |  |   | 236   | 
|4      |  | B                  |  |           | 286   |       |  |       | 259   |            |  |            | 15.3  |          |  |            | (27  | ) |  |  | 20.6  |   |  |   | 262   | 
|5      |  | CCC and lower      |  |           | 197   |       |  |       | 175   |            |  |            | 10.3  |          |  |            | (22  | ) |  |  | 16.8  |   |  |   | 178   | 
|6      |  | In or near default |  |           | 22    |       |  |       | 18    |            |  |            | 1.1   |          |  |            | (4   | ) |  |  | 3.1   |   |  |   | 22    | 
|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |          |  |            |      |   |  |  |       |   |  |   |       | 
|       |  | Total              |  | $         | 1,828 |       |  | $     | 1,697 |            |  |            | 100.0 | %        |  | $          | (131 | ) |  |  | 100.0 | % |  | $ | 1,719 | 
|       |  |                    |  |           |       |       |  |       |       |            |  |            |       |          |  |            |      |   |  |  |       |   |  |   |       | 

In prior periods, we have presented a table showing bonds of individual issuers
that have unrealized losses of $10 or greater. At June 30, 2003 we held no
bonds that met this criteria.

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

|                   |       |   |       |       |            |   |            |      |            |  |      |       |   |   |     |       | 
|------------------ | ----- | - | ----- | ----- | ---------- | - | ---------- | ---- | ---------- |  | ---- | ----- | - | - | --- | ----- | 
|                   |       |   |       |       |            |   | Gross      |      | % of Gross |  |      |       |  
|                   |       |   | Fair  |       | Unrealized |   | Unrealized |      | Carrying  
|                   |       |   | Value |       | Losses     |   | Losses     |      | Value     
|                   |       |   |       |       |            |   |            |      |           
|More than 1 year   |       | $ | 675   |       |            | $ | (88        | )    |            |  | 67.2 | %     |   | $ | 688 |      
|6 months  1 year  |       |   | 196   |       |            |   | (16        | )    |            |  | 12.2 |       |   |   | 201 |      
|Less than 6 months |       |   | 826   |       |            |   | (27        | )    |            |  | 20.6 |       |   |   | 830 |      
|                   |       |   |       |       |            |   |            |      |            |  |      |       |   |   |     |      
|                   | Total |   | $     | 1,697 |            |   | $          | (131 | )          |  |      | 100.0 | % |   | $   | 1,719 | 
|                   |       |   |       |       |            |   |            |      |            |  |      |       |   |   |     |      

As we described previously, we pay particular attention to those securities
with unrealized losses that we have identified as potentially impaired and
include them in our potentially distressed securities list. Of the $131 gross
unrealized losses in the table above, approximately $28 was included in our
potentially distressed securities list. The length of time that securities
have continuously remained on our potentially distressed securities listing is
summarized as follows:

|                   |       |   |       |    |            |   |            |     |            |  |      |       |   |   |    |    | 
|------------------ | ----- | - | ----- | -- | ---------- | - | ---------- | --- | ---------- |  | ---- | ----- | - | - | -- | -- | 
|                   |       |   |       |    |            |   | Gross      |     | % of Gross |  |      |       |  
|                   |       |   | Fair  |    | Unrealized |   | Unrealized |     | Carrying  
|                   |       |   | Value |    | Losses     |   | Losses     |     | Value     
|                   |       |   |       |    |            |   |            |     |           
|More than 1 year   |       | $ | 13    |    |            | $ | (6         | )   |            |  | 21.4 | %     |   | $ | 14 |   
|6 months  1 year  |       |   | 27    |    |            |   | (9         | )   |            |  | 32.2 |       |   |   | 27 |   
|Less than 6 months |       |   | 25    |    |            |   | (13        | )   |            |  | 46.4 |       |   |   | 28 |   
|                   |       |   |       |    |            |   |            |     |            |  |      |       |   |   |    |   
|                   | Total |   | $     | 65 |            |   | $          | (28 | )          |  |      | 100.0 | % |   | $  | 69 | 
|                   |       |   |       |    |            |   |            |     |            |  |      |       |   |   |    |   

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. We
consider all of the factors discussed earlier when we determine if an
unrealized loss is other than temporary, including our ability and intent to
hold the security until the value recovers. Our current evaluation of
other-than-temporary impairments reflects our positive intent to hold certain
securities until maturity. However, we may subsequently decide to sell certain

38



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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. For the quarter and the six months
ended June 30, 2003, we had other-than-temporary impairments on bonds of $12
and $41 as compared to $40 and $53 for the same periods of 2002. We had no
individual impairments in excess of $10 for the second quarter of 2003.
Rather, all write downs resulting from other-than-temporary impairments ranged
from $6 to less than $1.

For the second quarter and first six months of 2003, we incurred losses of $2
and $5 on actual sales of securities. All actual losses were individually less
than $1. These disposals were in accordance with established portfolio
management strategies and did not relate to securities that were
other-than-temporarily impaired.

Mortgage Backed Securities

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

|                                                     |       |   |          |       |              |   |       |       | 
|---------------------------------------------------- | ----- | - | -------- | ----- | ------------ | - | ----- | ----- | 
|                                                     |       |   | June 30, |       | December 31,
|                                                     |       |   | 2003     |       | 2002        
|                                                     |       |   |          |       |             
|Federal agency issued mortgage backed securities     |       | $ | 2,966    |       |              | $ | 3,449 |      
|Corporate private-labeled mortgage backed
securities |       |   | 1,449    |       |              |   | 1,938 |      
|                                                     |       |   |          |       |              |   |       |      
|                                                     | Total |   | $        | 4,415 |              |   | $     | 5,387 | 
|                                                     |       |   |          |       |              |   |       |      

Our investment strategy with respect to our mortgage backed securities (MBS)
portfolio focuses on actively traded issues with less volatile cash flows. The
majority of the MBS holdings are sequential and planned amortization class
tranches of federal agency issuers. The MBS portfolio has been constructed
with underlying mortgage collateral characteristics and structure in order to
mitigate cash flow volatility over a range of interest rates.

Because of the steep decline in interest rates to record lows, the mortgage
market experienced record levels of refinancings in 2002, and the structural
protection of our MBS portfolio eroded. During 2003, we continued to
experience prepayments on our MBS portfolio. Our MBS portfolio is primarily a
discount portfolio; therefore, prepayments accelerate the amortization of
income. The excess accretion of discount as a result of these prepayments
increased investment income in the second quarter and first six months of 2003
by $11.0 and $18.6 compared to $8.2 and $10.8 for the same periods of 2002, on
a pre-tax basis. Further, these repayments are reinvested at yields that are
lower than our current portfolio yields, producing less investment income going
forward.

Mortgage Loans

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

39



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calculate our specific loan loss reserve. At June 30, 2003 and December 31,
2002, our allowance for mortgage loan credit losses was $36.

Derivative Instruments

Our guidelines permit use of derivative financial instruments such as futures
contracts and interest rate swaps in conjunction with specific direct
investments. Our actual use of derivatives through June 30, 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 $339 and $278 were open as of June 30, 2003 and December 31, 2002.
During 2002, we began using interest rate swaps to hedge future bond purchases
that will 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 income that will eventually be earned on bonds that
will back annuity contracts issued. These interest rate contracts are
generally terminated within a month. We also purchase S&P 500 Index® options
in association with our current sales of equity indexed annuities. The
reinsurance agreement on previously issued equity indexed annuities remains in
existence.

Market Risk Exposure

We believe that the amounts shown in Form 10-K with respect to interest rates,
changes in spreads over U.S. Treasuries on new investment opportunities,
changes in the yield curve, and equity price risks continue to be
representative. As of July 31, 2003, 10 year U.S. Treasury rates had increased
56 basis points since December 31, 2002. See further discussion in our Form
10-K regarding the impacts that a changing interest rate environment has on our
financial position and earnings.

External Trends and Forward Looking Information

With respect to external trends, general economic conditions, interest rate
risks, credit risks, environmental liabilities and the legal environment, see
managements comments in our Form 10-K.

Forward Looking Information

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

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

Certain information in our SEC filings and in any other written or oral
statements made by us or on our behalf, involves forward looking statements.
We have used appropriate care in developing this information, but any forward
looking statements may turn out to be wrong. They can be affected by
inaccurate assumptions or by known or unknown risks and uncertainties that
could significantly affect our actual results. These risks and uncertainties
include among others, general economic conditions (including the uncertainty as
to the depth and duration of the current economic slowdown

40



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and the rate at which the economy recovers), the impact on the economy from any
further terrorist activities or any US military engagements, and interest rate
levels, changes and fluctuations, all of which can impact our sales, investment
portfolios, and earnings; competitive factors, including pricing pressures,
technological developments, new product offerings and the emergence of new
competitors; changes in federal and state taxes (including recent or future
changes as to 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.

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.

41



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Item 3. 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.

Item 4. 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 second quarter 2003 that have
materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material developments in the proceedings described in Item 3
of Form 10-K, except for a settlement approved by the court on June 17, 2003
for a proposed class action suit alleging that policy illustrations were
misleading to consumers. In agreeing to settle, the life company has denied
any wrongdoing but believes that the settlement provides benefits to the
policyholder class and to the life company by resolving and eliminating the
need for corporate resources to be spent on a lawsuit that has been pending for
seven years. There are no new material proceedings to report here.

Item 4. Submission of Matters to a Vote of Security Holders

The following information relates to the registrants Annual Meeting of
Shareholders held on May 5, 2003.



|(a) |  | Election of Directors:
|--- |  | ----------------------

|                |  |           |  |           |             |          |  |  |           | 
|--------------- |  | --------- |  | --------- | ----------- | -------- |  |  | --------- | 
|Class I         |  | Term      |  | Votes For |             | Withheld
|                |  |           |  |           |             |         
|Edwin B. Borden |  | Two Years |  |           | 122,416,282 |          |  |  | 1,692,736 | 
|E.S. Melvin     |  | Two Years |  |           | 121,940,364 |          |  |  | 2,168,654 | 

|                       |  |             |  |           |             |          |  |  |           | 
|---------------------- |  | ----------- |  | --------- | ----------- | -------- |  |  | --------- | 
|Class II               |  | Term        |  | Votes For |             | Withheld
|                       |  |             |  |           |             |         
|William H. Cunningham  |  | Three Years |  |           | 121,965,363 |          |  |  | 2,143,655 | 
|Elizabeth Valk Long    |  | Three Years |  |           | 121,102,969 |          |  |  | 3,006,049 | 
|Donald S. Russell, Jr. |  | Three Years |  |           | 121,148,631 |          |  |  | 2,960,387 | 



|(b) |  | Approval of certain material terms of the annual incentive program:
|--- |  | -------------------------------------------------------------------

|            |  |               |           |         |  |  |           | 
|----------- |  | ------------- | --------- | ------- |  |  | --------- | 
|Votes For   |  | Votes Against |           | Abstain
|            |  |               |           |        
|115,978,060 |  |               | 6,298,241 |         |  |  | 1,832,714 | 

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits. See Exhibit Index
on page 45.                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Reports on Form 8-K since the first quarter 2003                                                                                                                            
|   
|    |  | 1. April 29, 2003 - a Form 8-K furnished under items 7 and 9 (for item 12)
the press release reporting financial results for the first quarter of 2003.                     
|   
|    |  | 2. June 17, 2003 - a Form 8-K furnished under item 5 (for item 11) a notice
of a covered 401(k) plan blackout period that was given to our directors and
executive officers.
|   
|    |  | 3. July 29, 2003 - a Form 8-K furnished under items 7 and 9 (for item 12)
the press release reporting financial results for the second quarter of
2003.                     

43



---



##### 



SIGNATURES

Pursuant to the requirements 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                                                                                                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | By (Signature) /s/Theresa M. Stone
(Name and Title) Theresa M. Stone, Executive Vice President,                                                          Chief
Financial Officer and Treasurer
Date August 13, 2003    
|
| |  | By (Signature) /s/Reggie D. Adamson
(Name and Title) Reggie D. Adamson, Senior Vice President - Finance                                                               Principal
Accounting Officer
Date August 13, 2003

44



---



##### 



EXHIBIT INDEX

|        |  |                                                                                                                                                                                
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                
|Number  |  | Description                                                                                                                                                                    
|        |  |                                                                                                                                                                                
|31(i)   |  | Certification of Chief Executive Officer pursuant to
Exchange Act Rule 13a-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.                        
|        |  |                                                                                                                                                                                
|31(ii)  |  | Certification of Chief Financial Officer pursuant to
Exchange Act Rule 13a-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.                        
|        |  |                                                                                                                                                                                
|32      |  | Certifications of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

45