##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM 10-Q
 þ
    
    Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2005
 Commission file number 1-5955
 JEFFERSON-PILOT CORPORATION
  North Carolina
    
    56-0896180(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)100 North Greene Street, Greensboro, North Carolina
    
    27401(Address of principal executive offices)
    
    (Zip Code)
 (336) 691-3000
  þ o
 þ o




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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
 INDEX
 - Page No. -PART I  FINANCIAL INFORMATIONItem 1 . Financial StatementsConsolidated
Condensed Balance Sheets 
 June 30, 2005 (Unaudited) and
December 31, 2004
    
    
    1Consolidated
Unaudited Condensed Statements of Income 
 Three and
Six Months ended June 30, 2005 and 2004
    
    
    2Consolidated
Unaudited Condensed Statements of Cash Flows 
 Six
Months ended June 30, 2005 and 2004
    
    
    3Notes to Consolidated Unaudited Condensed Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    42Item 4. Controls and Procedures
    
    
    42PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    43Item 2. Changes in Securities, Use of Proceeds and Issuer Repurchase of Equity
Securities
    
    
    43Item 6. Exhibits
    
    
    43Signatures
    
    
    44Exhibit Index, followed by Exhibits
    
    
    45EX-31.1EX-31.2EX-32




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##### Table of Contents



Item 1. Financial Statements
 JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED
CONDENSED BALANCE SHEETS
 (Unaudited)
    
    (Audited)June 30,
    
    December 31,2005
    
    2004ASSETSInvestments:Debt securities available-for-sale, at fair value (amortized cost $19,533 and $18,816)
    
    $
    20,549
    
    
    $
    19,725Debt securities held-to-maturity, at amortized cost (fair value $2,353 and $2,514)
    
    
    2,197
    
    
    
    2,369Equity securities available-for-sale, at fair value (cost $195 and $201)
    
    
    637
    
    
    
    650Mortgage loans on real estate
    
    
    3,811
    
    
    
    3,667Policy loans
    
    
    833
    
    
    
    839Real estate
    
    
    124
    
    
    
    125Other investments
    
    
    215
    
    
    
    193Total investments
    
    
    28,366
    
    
    
    27,568Cash and cash equivalents
    
    
    (19
    )
    
    
    87Accrued investment income
    
    
    348
    
    
    
    342Due from reinsurers
    
    
    1,314
    
    
    
    1,341Deferred policy acquisition costs and value of business acquired
    
    
    2,499
    
    
    
    2,430Goodwill
    
    
    312
    
    
    
    312Other assets
    
    
    654
    
    
    
    652Assets held in separate accounts
    
    
    2,354
    
    
    
    2,373$
    35,828
    
    
    $
    35,105LIABILITIES AND STOCKHOLDERS EQUITYPolicy liabilities:Future policy benefits
    
    $
    3,111
    
    
    $
    3,096Policyholder contract deposits
    
    
    21,989
    
    
    
    21,694Policy and contract claims
    
    
    209
    
    
    
    232Funding agreements
    
    
    301
    
    
    
    Other
    
    
    1,197
    
    
    
    1,144Total policy liabilities
    
    
    26,807
    
    
    
    26,166Commercial paper and revolving credit borrowings
    
    
    198
    
    
    
    188Securities sold under repurchase agreements
    
    
    401
    
    
    
    468Notes payable
    
    
    600
    
    
    
    600Junior subordinated debentures
    
    
    309
    
    
    
    309Income tax liabilities
    
    
    654
    
    
    
    620Accounts payable, accruals and other liabilities
    
    
    444
    
    
    
    447Liabilities related to separate accounts
    
    
    2,354
    
    
    
    2,373Total liabilities
    
    
    31,767
    
    
    
    31,171Commitments and contingent liabilitiesStockholders equity:Common stock and paid in capital, par value $1.25 per share: authorized 350,000,000
shares; issued and outstanding 2005-134,775,029 shares; 2004-136,819,214 shares
    
    
    168
    
    
    
    180Retained earnings
    
    
    3,164
    
    
    
    3,071Accumulated other comprehensive income
    
    
    729
    
    
    
    683Total stockholders equity
    
    
    4,061
    
    
    
    3,934$
    35,828
    
    
    $
    35,105
  1




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##### Table of Contents



JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED
UNAUDITED CONDENSED STATEMENTS OF INCOME
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004RevenuePremiums and other considerations
    
    $
    353
    
    
    $
    352
    
    
    $
    684
    
    
    $
    632Universal life and investment product charges
    
    
    191
    
    
    
    183
    
    
    
    391
    
    
    
    365Net investment income
    
    
    425
    
    
    
    414
    
    
    
    833
    
    
    
    820Realized investment gains (losses)
    
    
    5
    
    
    
    10
    
    
    
    10
    
    
    
    34Communications sales
    
    
    57
    
    
    
    57
    
    
    
    118
    
    
    
    115Broker-dealer concessions and other
    
    
    32
    
    
    
    31
    
    
    
    64
    
    
    
    66Total revenue
    
    
    1,063
    
    
    
    1,047
    
    
    
    2,100
    
    
    
    2,032Benefits and ExpensesInsurance and annuity benefits
    
    
    601
    
    
    
    585
    
    
    
    1,138
    
    
    
    1,126Insurance commissions, net of deferrals
    
    
    68
    
    
    
    68
    
    
    
    133
    
    
    
    127General and administrative expenses, net of deferrals
    
    
    47
    
    
    
    47
    
    
    
    86
    
    
    
    85Insurance taxes, licenses and fees
    
    
    20
    
    
    
    20
    
    
    
    43
    
    
    
    37Amortization of policy acquisition costs and value of
business acquired
    
    
    78
    
    
    
    75
    
    
    
    156
    
    
    
    142Interest expense
    
    
    15
    
    
    
    12
    
    
    
    29
    
    
    
    23Communications operations
    
    
    29
    
    
    
    29
    
    
    
    67
    
    
    
    66Total benefits and expenses
    
    
    858
    
    
    
    836
    
    
    
    1,652
    
    
    
    1,606Income before income taxes and cumulative effect of
change in accounting principle
    
    
    205
    
    
    
    211
    
    
    
    448
    
    
    
    426Income taxes
    
    
    68
    
    
    
    69
    
    
    
    150
    
    
    
    143Income before cumulative effect of change in
accounting principle
    
    
    137
    
    
    
    142
    
    
    
    298
    
    
    
    283Cumulative effect of change in accounting for long-duration contracts, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )Net income
    
    $
    137
    
    
    $
    142
    
    
    $
    298
    
    
    $
    266Per Share Information  BasicIncome before cumulative effect of change in
accounting principle
    
    $
    1.01
    
    
    $
    1.03
    
    
    $
    2.20
    
    
    $
    2.03Cumulative effect of change in accounting for long-duration contracts, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.12
    )Net income
    
    $
    1.01
    
    
    $
    1.03
    
    
    $
    2.20
    
    
    $
    1.91Per Share Information  Assuming DilutionIncome before cumulative effect of change in
accounting principle
    
    $
    1.00
    
    
    $
    1.02
    
    
    $
    2.18
    
    
    $
    2.01Cumulative effect of change in accounting for long-duration contracts, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.12
    )Net income
    
    $
    1.00
    
    
    $
    1.02
    
    
    $
    2.18
    
    
    $
    1.89Dividends declared per common share
    
    $
    0.418
    
    
    $
    0.380
    
    
    $
    0.798
    
    
    $
    0.710
  2




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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30,2005
    
    
    2004Cash Flows from Operating Activities
    
    $
    208
    
    
    $
    647Cash Flows from Investing ActivitiesSecurities and loans purchased, net
    
    
    (659
    )
    
    
    (1,152
    )Other investing activities
    
    
    (21
    )
    
    
    (106
    )Net cash used in investing activities
    
    
    (680
    )
    
    
    (1,258
    )Cash Flows from Financing ActivitiesPolicyholder contract deposits
    
    
    1,406
    
    
    
    1,447Policyholder contract withdrawals
    
    
    (1,071
    )
    
    
    (762
    )Funding agreements issuance
    
    
    300
    
    
    
    Net borrowings (repayments)
    
    
    (58
    )
    
    
    241Net repurchase of common shares
    
    
    (106
    )
    
    
    (227
    )Cash dividends paid
    
    
    (108
    )
    
    
    (99
    )Other financing activities
    
    
    3
    
    
    
    8Net cash provided by financing activities
    
    
    366
    
    
    
    608Decrease in cash and cash equivalents
    
    
    (106
    )
    
    
    (3
    )Cash and cash equivalents at beginning of period
    
    
    87
    
    
    
    72Cash and cash equivalents at end of period
    
    $
    (19
    )
    
    $
    69Supplemental Cash Flow InformationIncome taxes paid (received)
    
    $
    137
    
    
    $
    (6
    )Interest paid
    
    $
    32
    
    
    $
    18
  3




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JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Dollar Amounts In Millions, Except Share Information)
 1. Basis of Presentation
 Regulation S-X
  First Quarter Earnings
  2. Significant Accounting
Policies
 Stock Based Compensation
 Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation,
  4




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income, as reported
    
    $
    137
    
    
    $
    142
    
    
    $
    298
    
    
    $
    266Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of taxes
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    4Pro forma net income
    
    $
    136
    
    
    $
    141
    
    
    $
    296
    
    
    $
    262Per Share  BasicAs reported
    
    $
    1.01
    
    
    $
    1.03
    
    
    $
    2.20
    
    
    $
    1.91Pro forma
    
    
    1.00
    
    
    
    1.02
    
    
    
    2.18
    
    
    
    1.88Per Share  Assuming DilutionAs reported
    
    $
    1.00
    
    
    $
    1.02
    
    
    $
    2.18
    
    
    $
    1.89Pro forma
    
    
    1.00
    
    
    
    1.01
    
    
    
    2.16
    
    
    
    1.86
 New Accounting Pronouncements
 Accounting Changes and Error Corrections
 Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting
Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements.
 Share-Based Payment
 Share Based Payment
  5




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Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
 Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement, and Modernization Act of
2003.
 The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments
 The Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments.  Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, 03-1
 Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts
 Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional Long-Duration
Contracts and for Separate Accounts.
 6




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##### Table of Contents



Six Months
    
    
    
    
    
    Six MonthsEnded
    
    
    
    
    
    EndedJune 30, 2004
    
    Adoption
    
    June 30, 2004As Reported
    

of TPAs
    
    RestatedIncome before cumulative effect of change
in accounting principle
    
    $
    283
    
    
    $
    
    
    
    $
    283Cumulative effect of change in accounting
principle, net of taxes
    
    
    (13
    )
    
    
    (4
    )
    
    
    (17
    )Net income
    
    $
    270
    
    
    $
    (4
    )
    
    $
    266Per Share Earnings  BasicIncome before cumulative effect of change
in accounting principle
    
    $
    2.03
    
    
    $
    
    
    
    $
    2.03Cumulative effect of change in accounting
principle, net of taxes
    
    
    (0.09
    )
    
    
    (0.03
    )
    
    
    (0.12
    )Net income
    
    $
    1.94
    
    
    $
    (0.03
    )
    
    $
    1.91Per Share Earnings  Assuming DilutionIncome before cumulative effect of change
in accounting principle
    
    $
    2.01
    
    
    $
    
    
    
    $
    2.01Cumulative effect of change in accounting
principle, net of taxes
    
    
    (0.09
    )
    
    
    (0.03
    )
    
    
    (0.12
    )Net income
    
    $
    1.92
    
    
    $
    (0.03
    )
    
    $
    1.89
  3. Comprehensive Income
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income, as reported
    
    $
    137
    
    
    $
    142
    
    
    $
    298
    
    
    $
    266Change in unrealized gains (losses) on
securities, net of reclassifications
    
    
    223
    
    
    
    (368
    )
    
    
    54
    
    
    
    (225
    )Change in minimum pension liability
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    Change in the fair value of derivative
financial instruments
    
    
    (3
    )
    
    
    (11
    )
    
    
    (6
    )
    
    
    (8
    )Comprehensive income (loss)
    
    $
    356
    
    
    $
    (237
    )
    
    $
    344
    
    
    $
    33
 7




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##### Table of Contents



4. Income Per Share of Common Stock
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004NumeratorsIncome before cumulative effect
of change in accounting principle
    
    $
    137
    
    
    $
    142
    
    
    $
    298
    
    
    $
    283Cumulative effect of change in
accounting principle, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )Net income
    
    $
    137
    
    
    $
    142
    
    
    $
    298
    
    
    $
    266DenominatorsWeighted average shares outstanding
    
    
    135,152,330
    
    
    
    138,286,952
    
    
    
    135,877,740
    
    
    
    139,473,141Effect of dilutive securities:Stock options
    
    
    895,152
    
    
    
    1,258,786
    
    
    
    902,676
    
    
    
    1,384,368Weighted average shares outstanding -
assuming dilution
    
    
    136,047,482
    
    
    
    139,545,738
    
    
    
    136,780,416
    
    
    
    140,857,509Earnings Per Share  BasicIncome before cumulative effect of
change in accounting principle
    
    $
    1.01
    
    
    $
    1.03
    
    
    $
    2.20
    
    
    $
    2.03Cumulative effect of change in
accounting principle, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.12
    )Net income
    
    $
    1.01
    
    
    $
    1.03
    
    
    $
    2.20
    
    
    $
    1.91Earnings
Per Share  Assuming DilutionIncome before cumulative effect of
change in accounting principle
    
    $
    1.00
    
    
    $
    1.02
    
    
    $
    2.18
    
    
    $
    2.01Cumulative effect of change in
accounting principle, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.12
    )Net income
    
    $
    1.00
    
    
    $
    1.02
    
    
    $
    2.18
    
    
    $
    1.89
 5. Policy Liabilities
  8




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##### Table of Contents



6. Contingent Liabilities
   7. Retirement Benefit Plans
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    4
    
    
    $
    4
    
    
    $
    8
    
    
    $
    8Interest cost
    
    
    6
    
    
    
    5
    
    
    
    12
    
    
    
    11Expected return on plan assets
    
    
    (8
    )
    
    
    (7
    )
    
    
    (16
    )
    
    
    (15
    )Amortization of net transition asset
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Amortization of net (gain) loss
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1Net periodic benefit cost
    
    $
    3
    
    
    $
    2
    
    
    $
    5
    
    
    $
    4
  8. Reinsurance Transaction
   9




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##### Table of Contents



9. Segment Reporting
  June 30,
    
    December 31,2005
    
    2004AssetsIndividual Products
    
    $
    19,160
    
    
    $
    18,776AIP
    
    
    10,706
    
    
    
    10,504Benefit Partners
    
    
    1,859
    
    
    
    1,839Communications
    
    
    217
    
    
    
    223Corporate and Other
    
    
    3,886
    
    
    
    3,763Total assets
    
    $
    35,828
    
    
    $
    35,105
 10




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004RevenuesIndividual Products
    
    $
    450
    
    
    $
    444
    
    
    $
    906
    
    
    $
    888AIP
    
    
    184
    
    
    
    178
    
    
    
    353
    
    
    
    353Benefit Partners
    
    
    334
    
    
    
    331
    
    
    
    647
    
    
    
    582Communications
    
    
    57
    
    
    
    55
    
    
    
    117
    
    
    
    113Corporate and Other
    
    
    33
    
    
    
    29
    
    
    
    67
    
    
    
    621,058
    
    
    
    1,037
    
    
    
    2,090
    
    
    
    1,998Realized investment gains, before taxes
    
    
    5
    
    
    
    10
    
    
    
    10
    
    
    
    34Total revenues
    
    $
    1,063
    
    
    $
    1,047
    
    
    $
    2,100
    
    
    $
    2,032Total Reportable Segment Results and
Reconciliation to Net IncomeIndividual Products
    
    $
    76
    
    
    $
    75
    
    
    $
    160
    
    
    $
    150AIP
    
    
    15
    
    
    
    20
    
    
    
    37
    
    
    
    39Benefit Partners
    
    
    21
    
    
    
    20
    
    
    
    55
    
    
    
    31Communications
    
    
    15
    
    
    
    13
    
    
    
    26
    
    
    
    24Corporate and Other
    
    
    6
    
    
    
    7
    
    
    
    13
    
    
    
    17Total reportable segment results
    
    
    133
    
    
    
    135
    
    
    
    291
    
    
    
    261Realized investment gains, net of taxes
    
    
    4
    
    
    
    7
    
    
    
    7
    
    
    
    22Income before cumulative effect of change
in accounting principle
    
    
    137
    
    
    
    142
    
    
    
    298
    
    
    
    283Cumulative effect of change in accounting
for long-duration contracts, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )Net income
    
    $
    137
    
    
    $
    142
    
    
    $
    298
    
    
    $
    266
  11




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Company Profile
 Overview
  Segment Revenues
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Individual Products
    
    
    43
    %
    
    
    43
    %
    
    
    43
    %
    
    
    44
    %AIP
    
    
    17
    %
    
    
    17
    %
    
    
    17
    %
    
    
    18
    %Benefit Partners
    
    
    32
    %
    
    
    32
    %
    
    
    31
    %
    
    
    29
    %Communications
    
    
    5
    %
    
    
    5
    %
    
    
    6
    %
    
    
    6
    %Corporate and Other
    
    
    3
    %
    
    
    3
    %
    
    
    3
    %
    
    
    3
    %
 Critical Accounting Policies and Estimates
  12




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##### Table of Contents



Results of Operations
  Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeConsolidated Summary of IncomeIncome before cumulative
effect of change in
accounting principle
    
    $
    136.8
    
    
    $
    142.1
    
    
    
    (3.7
    )%
    
    $
    298.0
    
    
    $
    283.3
    
    
    
    5.2
    %Cumulative effect of change
in accounting principle for
long duration contracts,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.6
    )
    
    
    Net income
    
    $
    136.8
    
    
    $
    142.1
    
    
    
    (3.7
    )%
    
    $
    298.0
    
    
    $
    266.7
    
    
    
    11.7
    %Consolidated Earnings Per ShareAssuming dilution:Income before realized
gains (losses) and
cumulative effect of change
in accounting principle
    
    $
    0.98
    
    
    $
    0.97
    
    
    
    1.0
    %
    
    $
    2.13
    
    
    $
    1.86
    
    
    
    14.5
    %Realized investment gains
(losses), net of taxes
    
    
    0.02
    
    
    
    0.05
    
    
    
    (60.0
    )%
    
    
    0.05
    
    
    
    0.15
    
    
    
    (66.7
    )%Income before cumulative
effect of change in
accounting principle
    
    
    1.00
    
    
    
    1.02
    
    
    
    (2.0
    )%
    
    
    2.18
    
    
    
    2.01
    
    
    
    8.5
    %Cumulative effect of change
in accounting principle,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.12
    )
    
    
    Net income
    
    $
    1.00
    
    
    $
    1.02
    
    
    
    (2.0
    )%
    
    $
    2.18
    
    
    $
    1.89
    
    
    
    15.3
    %
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Average number of
shares outstanding
    
    
    136,047,482
    
    
    
    139,545,738
    
    
    
    136,780,416
    
    
    
    140,857,509
  13




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##### Table of Contents



Results by Business Segment
   14




---



##### Table of Contents



Results by Reportable Segment
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeIndividual Products
    
    $
    75.9
    
    
    $
    75.3
    
    
    
    0.8
    %
    
    $
    160.2
    
    
    $
    150.3
    
    
    
    6.6
    %AIP
    
    
    15.5
    
    
    
    19.7
    
    
    
    (21.3
    )%
    
    
    37.2
    
    
    
    38.8
    
    
    
    (4.1
    )%Benefit Partners
    
    
    21.3
    
    
    
    19.6
    
    
    
    8.7
    %
    
    
    55.1
    
    
    
    31.1
    
    
    
    77.2
    %Communications
    
    
    15.0
    
    
    
    13.7
    
    
    
    9.5
    %
    
    
    26.0
    
    
    
    24.3
    
    
    
    7.0
    %Corporate and Other
    
    
    6.1
    
    
    
    6.6
    
    
    
    (7.6
    )%
    
    
    13.0
    
    
    
    16.9
    
    
    
    (23.1
    )%Total reportable segment results
    
    
    133.8
    
    
    
    134.9
    
    
    
    (0.8
    )%
    
    
    291.5
    
    
    
    261.4
    
    
    
    11.5
    %Realized investment gains, net of taxes
    
    
    3.0
    
    
    
    7.2
    
    
    
    (58.3
    )%
    
    
    6.5
    
    
    
    21.9
    
    
    
    (70.3
    )%Net income before cumulative effect
of change in accounting principle
    
    
    136.8
    
    
    
    142.1
    
    
    
    (3.7
    )%
    
    
    298.0
    
    
    
    283.3
    
    
    
    5.2
    %Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16.6
    )
    
    
    Net income
    
    $
    136.8
    
    
    $
    142.1
    
    
    
    (3.7
    )%
    
    $
    298.0
    
    
    $
    266.7
    
    
    
    11.7
    %
 Segment Assets
  June 302005
    
    2004Individual Products
    
    $
    19,160
    
    
    $
    18,283AIP
    
    
    10,706
    
    
    
    10,445Benefit Partners
    
    
    1,859
    
    
    
    1,765Communications
    
    
    217
    
    
    
    214Corporate and Other
    
    
    3,886
    
    
    
    3,289Total assets
    
    $
    35,828
    
    
    $
    33,996
 Individual Products
  15




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##### Table of Contents



(1)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeUL-Type Products:Net investment income
    
    $
    187.6
    
    
    $
    184.5
    
    
    
    1.7
    %
    
    $
    371.7
    
    
    $
    368.6
    
    
    
    0.8
    %Interest credited to policyholders
    
    
    (126.9
    )
    
    
    (125.4
    )
    
    
    (1.2
    )%
    
    
    (254.0
    )
    
    
    (251.1
    )
    
    
    (1.2
    )%Interest margin
    
    
    60.7
    
    
    
    59.1
    
    
    
    2.7
    %
    
    
    117.7
    
    
    
    117.5
    
    
    
    0.2
    %Product charge revenue:Cost of insurance charges
    
    
    143.8
    
    
    
    135.8
    
    
    
    5.9
    %
    
    
    297.0
    
    
    
    268.4
    
    
    
    10.7
    %Expense charges
    
    
    37.3
    
    
    
    37.8
    
    
    
    (1.3
    )%
    
    
    74.9
    
    
    
    75.2
    
    
    
    (0.4
    )%Surrender charges
    
    
    9.0
    
    
    
    9.6
    
    
    
    (6.3
    )%
    
    
    17.0
    
    
    
    20.6
    
    
    
    (17.5
    )%Total product charge revenue
    
    
    190.1
    
    
    
    183.2
    
    
    
    3.8
    %
    
    
    388.9
    
    
    
    364.2
    
    
    
    6.8
    %Death benefits and other insurance
benefits
    
    
    (84.7
    )
    
    
    (76.0
    )
    
    
    (11.4
    )%
    
    
    (175.0
    )
    
    
    (153.2
    )
    
    
    (14.2
    )%Expenses excluding amortization of DAC and
VOBA
    
    
    (22.6
    )
    
    
    (24.5
    )
    
    
    7.8
    %
    
    
    (41.5
    )
    
    
    (47.0
    )
    
    
    11.7
    %Amortization of DAC and VOBA
    
    
    (52.6
    )
    
    
    (52.5
    )
    
    
    (0.2
    )%
    
    
    (91.3
    )
    
    
    (97.5
    )
    
    
    6.4
    %Miscellaneous income (expense)
    
    
    (0.4
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.4
    )
    
    
    50.0
    %UL-type product income before taxes
    
    
    90.5
    
    
    
    88.9
    
    
    
    1.8
    %
    
    
    198.6
    
    
    
    183.6
    
    
    
    8.2
    %Traditional Products:Premiums and other considerations
    
    
    35.6
    
    
    
    37.9
    
    
    
    (6.1
    )%
    
    
    71.8
    
    
    
    78.1
    
    
    
    (8.1
    )%Net investment income
    
    
    36.6
    
    
    
    38.6
    
    
    
    (5.2
    )%
    
    
    73.3
    
    
    
    77.1
    
    
    
    (4.9
    )%Benefits
    
    
    (38.2
    )
    
    
    (40.9
    )
    
    
    6.6
    %
    
    
    (81.6
    )
    
    
    (88.3
    )
    
    
    7.6
    %Expenses excluding amortization of DAC and
VOBA
    
    
    (7.4
    )
    
    
    (6.6
    )
    
    
    (12.1
    )%
    
    
    (13.7
    )
    
    
    (13.8
    )
    
    
    0.7
    %Amortization of DAC and VOBA
    
    
    (2.9
    )
    
    
    (3.6
    )
    
    
    19.4
    %
    
    
    (6.7
    )
    
    
    (7.6
    )
    
    
    11.8
    %Traditional product income before taxes
    
    
    23.7
    
    
    
    25.4
    
    
    
    (6.7
    )%
    
    
    43.1
    
    
    
    45.5
    
    
    
    (5.3
    )%Reportable segment results before income
taxes(1)
    
    
    114.2
    
    
    
    114.3
    
    
    
    (0.1
    )%
    
    
    241.7
    
    
    
    229.1
    
    
    
    5.5
    %Income taxes
    
    
    (38.3
    )
    
    
    (39.0
    )
    
    
    1.8
    %
    
    
    (81.5
    )
    
    
    (78.8
    )
    
    
    (3.4
    )%Reportable segment results(1)
    
    $
    75.9
    
    
    $
    75.3
    
    
    
    0.8
    %
    
    $
    160.2
    
    
    $
    150.3
    
    
    
    6.6
    %
 
 (1)
    
    Reportable segment results is a non-GAAP measure. See Note 15 of
the Consolidated Financial Statements in our Form 10-K for further discussion. 16




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeAnnualized life
insurance premium
sales:Individual Markets
excluding Community
Banks and BOLI
    
    $
    64
    
    
    $
    51
    
    
    
    25.5
    %
    
    $
    121
    
    
    $
    100
    
    
    
    21.0
    %Community Banks and
BOLI
    
    
    
    
    
    $
    3
    
    
    
    (100.0
    )%
    
    
    
    
    
    $
    4
    
    
    
    (100.0
    )%Average UL
policyholder fund
balances
    
    $
    11,529
    
    
    $
    11,074
    
    
    
    4.1
    %
    
    $
    11,469
    
    
    $
    11,006
    
    
    
    4.2
    %Average VUL
separate account
assets
    
    
    1,672
    
    
    
    1,528
    
    
    
    9.4
    %
    
    
    1,668
    
    
    
    1,509
    
    
    
    10.5
    %$
    13,201
    
    
    $
    12,602
    
    
    
    4.8
    %
    
    $
    13,137
    
    
    $
    12,515
    
    
    
    5.0
    %Average face amount
of insurance in
force:Total
    
    $
    166,457
    
    
    $
    165,702
    
    
    
    0.5
    %
    
    $
    166,215
    
    
    $
    165,967
    
    
    
    0.1
    %UL-type contracts
    
    $
    129,087
    
    
    $
    126,587
    
    
    
    2.0
    %
    
    $
    128,752
    
    
    $
    126,369
    
    
    
    1.9
    %Average assets
    
    $
    19,063
    
    
    $
    18,185
    
    
    
    4.8
    %
    
    $
    18,967
    
    
    $
    18,061
    
    
    
    5.0
    %
    17




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##### Table of Contents



18




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeCommissions
    
    $
    80.6
    
    
    $
    65.6
    
    
    
    (22.9
    )%
    
    $
    161.0
    
    
    $
    129.4
    
    
    
    (24.4
    )%General and administrative 
acquisition related
    
    
    21.3
    
    
    
    19.1
    
    
    
    (11.5
    )%
    
    
    38.7
    
    
    
    38.0
    
    
    
    (1.8
    )%General and administrative 
maintenance related
    
    
    11.0
    
    
    
    11.3
    
    
    
    2.7
    %
    
    
    20.4
    
    
    
    22.2
    
    
    
    8.1
    %Taxes, licenses and fees
    
    
    11.0
    
    
    
    11.3
    
    
    
    2.7
    %
    
    
    23.7
    
    
    
    22.3
    
    
    
    (6.3
    )%Total commissions and
expenses incurred
    
    
    123.9
    
    
    
    107.3
    
    
    
    (15.5
    )%
    
    
    243.8
    
    
    
    211.9
    
    
    
    (15.1
    )%Less commissions and
expenses capitalized
    
    
    (93.9
    )
    
    
    (76.2
    )
    
    
    23.2
    %
    
    
    (188.6
    )
    
    
    (151.1
    )
    
    
    24.8
    %Expenses excluding
amortization of DAC and
VOBA
    
    
    30.0
    
    
    
    31.1
    
    
    
    3.5
    %
    
    
    55.2
    
    
    
    60.8
    
    
    
    9.2
    %Amortization of DAC and
VOBA
    
    
    55.5
    
    
    
    56.1
    
    
    
    1.1
    %
    
    
    98.0
    
    
    
    105.1
    
    
    
    6.8
    %Total expense
    
    $
    85.5
    
    
    $
    87.2
    
    
    
    1.9
    %
    
    $
    153.2
    
    
    $
    165.9
    
    
    
    7.7
    %
    19




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##### Table of Contents



Annuity and Investment Products
  (1)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeInvestment product charges and premiums
    
    $
    3.1
    
    
    $
    3.2
    
    
    
    (3.1
    )%
    
    $
    6.0
    
    
    $
    5.6
    
    
    
    7.1
    %Net investment income
    
    
    149.8
    
    
    
    144.7
    
    
    
    3.5
    %
    
    
    285.6
    
    
    
    288.2
    
    
    
    (0.9
    )%Broker-dealer concessions and other
    
    
    31.4
    
    
    
    29.5
    
    
    
    6.4
    %
    
    
    61.3
    
    
    
    58.9
    
    
    
    4.1
    %Total revenue
    
    
    184.3
    
    
    
    177.4
    
    
    
    3.9
    %
    
    
    352.9
    
    
    
    352.7
    
    
    
    0.1
    %Policy benefits (including interest
credited)
    
    
    113.1
    
    
    
    103.7
    
    
    
    (9.1
    )%
    
    
    195.6
    
    
    
    207.3
    
    
    
    5.6
    %Insurance expenses
    
    
    17.6
    
    
    
    15.9
    
    
    
    (10.7
    )%
    
    
    42.3
    
    
    
    30.8
    
    
    
    (37.3
    )%Broker-dealer expenses
    
    
    30.0
    
    
    
    27.9
    
    
    
    (7.5
    )%
    
    
    58.5
    
    
    
    55.4
    
    
    
    (5.6
    )%Total benefits and expenses
    
    
    160.7
    
    
    
    147.5
    
    
    
    (8.9
    )%
    
    
    296.4
    
    
    
    293.5
    
    
    
    (1.0
    )%Reportable segment results before income
taxes(1)
    
    
    23.6
    
    
    
    29.9
    
    
    
    (21.1
    )%
    
    
    56.5
    
    
    
    59.2
    
    
    
    (4.6
    )%Income taxes
    
    
    8.1
    
    
    
    10.2
    
    
    
    20.6
    %
    
    
    19.3
    
    
    
    20.4
    
    
    
    5.4
    %Reportable segment results(1)
    
    $
    15.5
    
    
    $
    19.7
    
    
    
    (21.3
    )%
    
    $
    37.2
    
    
    $
    38.8
    
    
    
    (4.1
    )%
 
 (1)
    
    Reportable segment results is a non-GAAP measure. See Note 15 of the Consolidated
Financial Statements in our Form 10-K for further discussion. 20




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeFixed annuity premium sales
    
    $
    291
    
    
    $
    291
    
    
    
    
    
    
    $
    535
    
    
    $
    601
    
    
    
    (11.0
    )%Funding agreement issuance
    
    $
    300
    
    
    $
    
    
    
    
    100.0
    %
    
    $
    300
    
    
    $
    
    
    
    
    100.0
    %Investment product sales
    
    $
    1,338
    
    
    $
    1,406
    
    
    
    (4.8
    )%
    
    $
    2,635
    
    
    $
    2,730
    
    
    
    (3.5
    )%Average fixed policyholder
fund balances
    
    $
    9,492
    
    
    $
    9,128
    
    
    
    4.0
    %
    
    $
    9,469
    
    
    $
    9,002
    
    
    
    5.2
    %Average separate account
policyholder fund balances
    
    
    295
    
    
    
    340
    
    
    
    (13.2
    )%
    
    
    303
    
    
    
    345
    
    
    
    (12.2
    )%Average funding agreement
balances
    
    
    150
    
    
    
    
    
    
    
    100.0
    %
    
    
    75
    
    
    
    
    
    
    
    100.0
    %$
    9,937
    
    
    $
    9,468
    
    
    
    5.0
    %
    
    $
    9,847
    
    
    $
    9,347
    
    
    
    5.4
    %Average assets
    
    $
    10,624
    
    
    $
    10,369
    
    
    
    2.5
    %
    
    $
    10,574
    
    
    $
    10,243
    
    
    
    3.2
    %Effective investment
spreads for fixed
annuities and funding
agreements
    
    
    1.53
    %
    
    
    1.71
    %
    
    
    
    
    
    
    1.82
    %
    
    
    1.71
    %Effective investment
spreads for fixed
annuities and funding
agreements excluding gross
SFAS 133 impact
    
    
    1.96
    %
    
    
    1.64
    %
    
    
    
    
    
    
    1.91
    %
    
    
    1.67
    %Fixed annuity surrenders
as a percentage of
beginning fund balances
    
    
    16.4
    %
    
    
    8.5
    %
    
    
    
    
    
    
    14.5
    %
    
    
    8.8
    %
   21




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22




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeInsurance companies:Commissions
    
    $
    18.8
    
    
    $
    17.6
    
    
    
    (6.8
    )%
    
    $
    33.1
    
    
    $
    36.0
    
    
    
    8.1
    %General and administrative 
acquisition related
    
    
    5.7
    
    
    
    3.5
    
    
    
    (62.9
    )%
    
    
    9.6
    
    
    
    6.8
    
    
    
    (41.2
    )%General and administrative 
maintenance related
    
    
    1.6
    
    
    
    1.6
    
    
    
    
    
    
    
    3.0
    
    
    
    3.2
    
    
    
    6.3
    %Taxes, licenses and fees
    
    
    0.8
    
    
    
    0.6
    
    
    
    (33.3
    )%
    
    
    1.6
    
    
    
    1.2
    
    
    
    (33.3
    )%Gross commissions and expenses
incurred
    
    
    26.9
    
    
    
    23.3
    
    
    
    (15.5
    )%
    
    
    47.3
    
    
    
    47.2
    
    
    
    (0.2
    )%Less commissions and expenses
capitalized
    
    
    (23.6
    )
    
    
    (19.6
    )
    
    
    20.4
    %
    
    
    (40.1
    )
    
    
    (40.1
    )
    
    
    Amortization of DAC and VOBA
    
    
    14.3
    
    
    
    12.2
    
    
    
    (17.2
    )%
    
    
    35.1
    
    
    
    23.7
    
    
    
    (48.1
    )%Net expense  insurance companies
    
    
    17.6
    
    
    
    15.9
    
    
    
    (10.7
    )%
    
    
    42.3
    
    
    
    30.8
    
    
    
    (37.3
    )%Broker/Dealer:Commissions
    
    
    26.9
    
    
    
    24.8
    
    
    
    (8.5
    )%
    
    
    52.7
    
    
    
    49.6
    
    
    
    (6.3
    )%Other
    
    
    3.1
    
    
    
    3.1
    
    
    
    
    
    
    
    5.8
    
    
    
    5.8
    
    
    
    Net expense  broker/dealer
    
    
    30.0
    
    
    
    27.9
    
    
    
    (7.5
    )%
    
    
    58.5
    
    
    
    55.4
    
    
    
    (5.6
    )%Net expense
    
    $
    47.6
    
    
    $
    43.8
    
    
    
    (8.7
    )%
    
    $
    100.8
    
    
    $
    86.2
    
    
    
    (16.9
    )%
  23




---



##### Table of Contents



Form 10-K
 Benefit Partners
  (1)
 Three Months Ended
    
    Six Months EndedJune 30
    

June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangePremiums and other
considerations
    
    $
    310.3
    
    
    $
    307.7
    
    
    
    0.8
    %
    
    $
    599.8
    
    
    $
    540.2
    
    
    
    11.0
    %Net investment income
    
    
    23.9
    
    
    
    23.2
    
    
    
    3.0
    %
    
    
    47.7
    
    
    
    41.6
    
    
    
    14.7
    %Total revenues
    
    
    334.2
    
    
    
    330.9
    
    
    
    1.0
    %
    
    
    647.5
    
    
    
    581.8
    
    
    
    11.3
    %Policy benefits
    
    
    231.1
    
    
    
    232.7
    
    
    
    0.7
    %
    
    
    419.4
    
    
    
    413.1
    
    
    
    (1.5
    )%Expenses
    
    
    70.2
    
    
    
    67.9
    
    
    
    (3.4
    )%
    
    
    143.3
    
    
    
    120.8
    
    
    
    (18.6
    )%Total benefits and expenses
    
    
    301.3
    
    
    
    300.6
    
    
    
    (0.2
    )%
    
    
    562.7
    
    
    
    533.9
    
    
    
    (5.4
    )%Reportable segment results
before income taxes(1)
    
    
    32.9
    
    
    
    30.3
    
    
    
    8.6
    %
    
    
    84.8
    
    
    
    47.9
    
    
    
    77.0
    %Income taxes
    
    
    11.6
    
    
    
    10.7
    
    
    
    (8.4
    )%
    
    
    29.7
    
    
    
    16.8
    
    
    
    (76.8
    )%Reportable segment
results(1)
    
    $
    21.3
    
    
    $
    19.6
    
    
    
    8.7
    %
    
    $
    55.1
    
    
    $
    31.1
    
    
    
    77.2
    %
 
 (1)
    
    Reportable segment results is a non-GAAP measure. See Note 15 of the Consolidated
Financial Statements in our Form 10-K for further discussion. 24




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeLife, Disability and
Dental annualized sales
    
    $
    52.3
    
    
    $
    48.1
    
    
    
    8.7
    %
    
    $
    122.8
    
    
    $
    102.0
    
    
    
    20.4
    %Premiums and other
considerations:Life
    
    $
    108.4
    
    
    $
    114.9
    
    
    
    (5.7
    )%
    
    $
    216.8
    
    
    $
    200.4
    
    
    
    8.2
    %Disability
    
    
    120.5
    
    
    
    110.5
    
    
    
    9.0
    %
    
    
    237.6
    
    
    
    199.9
    
    
    
    18.9
    %Dental
    
    
    32.4
    
    
    
    35.4
    
    
    
    (8.5
    )%
    
    
    64.4
    
    
    
    64.8
    
    
    
    (0.6
    )%Other
    
    
    49.0
    
    
    
    46.9
    
    
    
    4.5
    %
    
    
    81.0
    
    
    
    75.1
    
    
    
    7.9
    %Total
    
    $
    310.3
    
    
    $
    307.7
    
    
    
    0.8
    %
    
    $
    599.8
    
    
    $
    540.2
    
    
    
    11.0
    %Reportable segment results:Life
    
    $
    12.5
    
    
    $
    8.3
    
    
    
    50.6
    %
    
    $
    28.5
    
    
    $
    11.8
    
    
    
    141.5
    %Disability
    
    
    7.2
    
    
    
    10.3
    
    
    
    (30.1
    )%
    
    
    24.4
    
    
    
    17.1
    
    
    
    42.7
    %Dental
    
    
    1.0
    
    
    
    0.5
    
    
    
    100.0
    %
    
    
    0.9
    
    
    
    1.1
    
    
    
    (18.2
    )%Other
    
    
    0.6
    
    
    
    0.5
    
    
    
    20.0
    %
    
    
    1.3
    
    
    
    1.1
    
    
    
    18.2
    %Total
    
    $
    21.3
    
    
    $
    19.6
    
    
    
    8.7
    %
    
    $
    55.1
    
    
    $
    31.1
    
    
    
    77.2
    %Loss ratios:Life
    
    
    66.8
    %
    
    
    73.0
    %
    
    
    
    
    
    
    63.2
    %
    
    
    75.5
    %Disability
    
    
    75.1
    %
    
    
    71.5
    %
    
    
    
    
    
    
    67.7
    %
    
    
    72.2
    %Dental
    
    
    76.7
    %
    
    
    79.4
    %
    
    
    
    
    
    
    77.8
    %
    
    
    78.9
    %Combined
    
    
    71.8
    %
    
    
    73.2
    %
    
    
    
    
    
    
    67.1
    %
    
    
    74.5
    %Gross general and
administrative expenses as
a % of premium income
    
    
    9.5
    %
    
    
    9.4
    %
    
    
    
    
    
    
    9.4
    %
    
    
    9.6
    %Total expenses as a % of
premium income
    
    
    22.6
    %
    
    
    22.1
    %
    
    
    
    
    
    
    23.9
    %
    
    
    22.4
    %Average assets
    
    $
    1,846
    
    
    $
    1,738
    
    
    
    6.2
    %
    
    $
    1,841
    
    
    $
    1,566
    
    
    
    17.6
    %
   25




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeCommissions
    
    $
    34.9
    
    
    $
    34.7
    
    
    
    (0.6
    )%
    
    $
    69.1
    
    
    $
    61.6
    
    
    
    (12.2
    )%General and administrative
    
    
    29.4
    
    
    
    29.0
    
    
    
    (1.4
    )%
    
    
    56.2
    
    
    
    52.0
    
    
    
    (8.1
    )%Taxes, licenses and fees
    
    
    7.8
    
    
    
    7.3
    
    
    
    (6.8
    )%
    
    
    15.8
    
    
    
    12.3
    
    
    
    (28.5
    )%Total commissions and expenses
incurred
    
    
    72.1
    
    
    
    71.0
    
    
    
    (1.5
    )%
    
    
    141.1
    
    
    
    125.9
    
    
    
    (12.1
    )%Less commissions and expenses
capitalized
    
    
    (10.3
    )
    
    
    (9.8
    )
    
    
    5.1
    %
    
    
    (20.9
    )
    
    
    (18.0
    )
    
    
    16.1
    %Amortization of DAC
    
    
    8.4
    
    
    
    6.7
    
    
    
    (25.4
    )%
    
    
    23.1
    
    
    
    12.9
    
    
    
    (79.1
    )%Total expense
    
    $
    70.2
    
    
    $
    67.9
    
    
    
    (3.4
    )%
    
    $
    143.3
    
    
    $
    120.8
    
    
    
    (18.6
    )%
   26




---



##### Table of Contents



Communications
 (1)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    Change
    
    2005
    
    2004
    
    ChangeCommunications revenues (net)
    
    $
    57.2
    
    
    $
    56.5
    
    
    
    1.2
    %
    
    $
    118.1
    
    
    $
    115.0
    
    
    
    2.7
    %Cost of sales
    
    
    7.4
    
    
    
    7.5
    
    
    
    1.3
    %
    
    
    22.4
    
    
    
    22.2
    
    
    
    (0.9
    )%Operating expenses
    
    
    22.0
    
    
    
    21.8
    
    
    
    (0.9
    )%
    
    
    44.9
    
    
    
    43.8
    
    
    
    (2.5
    )%Broadcast cash flow
    
    
    27.8
    
    
    
    27.2
    
    
    
    2.2
    %
    
    
    50.8
    
    
    
    49.0
    
    
    
    3.7
    %Depreciation and amortization
    
    
    2.2
    
    
    
    2.2
    
    
    
    
    
    
    
    4.3
    
    
    
    4.4
    
    
    
    2.3
    %Corporate general and
administrative expenses
    
    
    1.6
    
    
    
    2.0
    
    
    
    20.0
    %
    
    
    3.5
    
    
    
    3.6
    
    
    
    2.8
    %Net interest expense
    
    
    0.5
    
    
    
    0.6
    
    
    
    16.7
    %
    
    
    1.0
    
    
    
    1.0
    
    
    
    Operating revenue before income
taxes
    
    
    23.5
    
    
    
    22.4
    
    
    
    4.9
    %
    
    
    42.0
    
    
    
    40.0
    
    
    
    5.0
    %Provision for income taxes
    
    
    8.5
    
    
    
    8.7
    
    
    
    2.3
    %
    
    
    16.0
    
    
    
    15.7
    
    
    
    (1.9
    )%Reportable segment results(1)
    
    $
    15.0
    
    
    $
    13.7
    
    
    
    9.5
    %
    
    $
    26.0
    
    
    $
    24.3
    
    
    
    7.0
    %
 
 (1)
    
    Reportable segment results is a non-GAAP measure. See Note 15 of the Consolidated
Financial Statements in our Form 10-K for further discussion.     27




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##### Table of Contents



Corporate and Other
  (1)
 Three Months
    
    Six MonthsEnded
    
    EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Earnings on investments and other income
    
    $

    27.0
    
    
    $
    23.0
    
    
    $
    55.1
    
    
    $
    48.9Interest expense on debt
    
    
    (14.8
    )
    
    
    (11.7
    )
    
    
    (28.6
    )
    
    
    (22.5
    )Operating expenses
    
    
    (6.0
    )
    
    
    (6.8
    )
    
    
    (13.2
    )
    
    
    (9.8
    )Income taxes
    
    
    (0.1
    )
    
    
    2.1
    
    
    
    (0.3
    )
    
    
    0.3Reportable segment results(1)
    
    
    6.1
    
    
    
    6.6
    
    
    
    13.0
    
    
    
    16.9Realized investment gains, net of taxes
    
    
    3.0
    
    
    
    7.2
    
    
    
    6.5
    
    
    
    21.9Reportable segment results, including
realized gains(1)
    
    $
    9.1
    
    
    $
    13.8
    
    
    $
    19.5
    
    
    $
    38.8
 
 (1)
    
    Reportable segment results is a non-GAAP measure. See Note 15 of the Consolidated
Financial Statements in our Form 10-K for further discussion.  28




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30
    
    June 302005
    
    2004
    
    2005
    
    2004Stock gains
    
    $
    4.6
    
    
    $
    35.1
    
    
    $
    11.0
    
    
    $
    63.6Stock losses
    
    
    
    
    
    
    (0.6
    )
    
    
    (1.1
    )
    
    
    (3.0
    )Bond gains
    
    
    10.9
    
    
    
    7.8
    
    
    
    19.1
    
    
    
    25.5Bond losses from sales
    
    
    (6.4
    )
    
    
    (22.8
    )
    
    
    (10.9
    )
    
    
    (26.3
    )Bond losses from write-downs
    
    
    (4.5
    )
    
    
    (16.4
    )
    
    
    (10.3
    )
    
    
    (32.3
    )Other gains and losses (net)
    
    
    0.4
    
    
    
    2.2
    
    
    
    3.0
    
    
    
    2.2Total pretax gains
    
    
    5.0
    
    
    
    5.3
    
    
    
    10.8
    
    
    
    29.7DAC amortization
    
    
    (0.4
    )
    
    
    4.9
    
    
    
    (0.8
    )
    
    
    4.0Income taxes
    
    
    (1.6
    )
    
    
    (3.0
    )
    
    
    (3.5
    )
    
    
    (11.8
    )Realized investment gains, net of
taxes
    
    $
    3.0
    
    
    $
    7.2
    
    
    $
    6.5
    
    
    $
    21.9
    Favorable/June 30
    
    Unfavorable2005
    
    2004
    
    2005 vs.2004Parent company, passive investment companies and
Corporate line assets of insurance subsidiaries
    
    $
    1,270
    
    
    $
    995
    
    
    
    27.6
    %Unrealized gain on fixed interest investments
    
    
    710
    
    
    
    291
    
    
    
    144.0
    %Coinsurance receivables on acquired blocks
    
    
    893
    
    
    
    957
    
    
    
    (6.7
    )%Employee benefit plan assets
    
    
    392
    
    
    
    379
    
    
    
    3.4
    %Goodwill arising from insurance acquisitions
    
    
    270
    
    
    
    270
    
    
    
    Other
    
    
    351
    
    
    
    397
    
    
    
    (11.6
    )%Total
    
    $
    3,886
    
    
    $
    3,289
    
    
    
    18.2
    %
  29




---



##### Table of Contents



Capital Resources
    Agency
    
    RatingFitch
    
    F1 +Standard & Poors
    
    A1 +
    30




---



##### Table of Contents



JP Life
    
    JPFIC
    
    JPLAA.M. Best
    
    A++
    
    A++
    
    A++Standard & Poors
    
    AAA
    
    AAA
    
    AAAFitch Ratings
    
    AA+
    
    AA+
    
    AA+
  Liquidity
   31




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##### Table of Contents



Contractual Obligations
  Off Balance Sheet Arrangements and Commitments
  32




---



##### Table of Contents



Investments
 Portfolio Description
   June 30
    
    December 312005
    
    2004Publicly-issued bonds
    
    $
    17,495
    
    
    
    61.7
    %
    
    $
    16,871
    
    
    
    61.0
    %Privately-placed bonds
    
    
    5,239
    
    
    
    18.5
    
    
    
    5,210
    
    
    
    18.8Total bonds
    
    
    22,734
    
    
    
    80.2
    
    
    
    22,081
    
    
    
    79.8Redeemable preferred stock
    
    
    12
    
    
    
    
    
    
    
    13
    
    
    
    0.1Total debt securities
    
    
    22,746
    
    
    
    80.2
    
    
    
    22,094
    
    
    
    79.9Mortgage loans on real property
    
    
    3,811
    
    
    
    13.5
    
    
    
    3,667
    
    
    
    13.3Common stock
    
    
    635
    
    
    
    2.2
    
    
    
    647
    
    
    
    2.3Non-redeemable preferred stock
    
    
    2
    
    
    
    
    
    
    
    3
    
    
    
    Policy loans
    
    
    833
    
    
    
    2.9
    
    
    
    839
    
    
    
    3.0Real estate
    
    
    124
    
    
    
    0.4
    
    
    
    125
    
    
    
    0.5Other
    
    
    215
    
    
    
    0.9
    
    
    
    193
    
    
    
    0.7Cash and equivalents
    
    
    (19
    )
    
    
    (0.1
    )
    
    
    87
    
    
    
    0.3Total
    
    $
    28,347
    
    
    
    100.0
    %
    
    $
    27,655
    
    
    
    100.0
    %
 33




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##### Table of Contents



Unrealized
Gains and Losses
  Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    CarryingCost
    
    Gains
    
    Losses
    
    Value
    
    ValueAvailable-for-sale, carried at fair value:US Treasury obligations and direct obligations
of US Government agencies
    
    $
    225
    
    
    $
    12
    
    
    $
    
    
    
    $
    237
    
    
    $
    237Federal agency mortgage-backed securities
(including collateralized mortgage obligations)
    
    
    1,438
    
    
    
    57
    
    
    
    (3
    )
    
    
    1,492
    
    
    
    1,492Obligations of states and political subdivisions
    
    
    66
    
    
    
    6
    
    
    
    
    
    
    
    72
    
    
    
    72Corporate obligations
    
    
    16,822
    
    
    
    966
    
    
    
    (60
    )
    
    
    17,728
    
    
    
    17,728Corporate private-labeled mortgage-backed
securities (including collateralized
mortgage
obligations)
    
    
    972
    
    
    
    39
    
    
    
    (3
    )
    
    
    1,008
    
    
    
    1,008Redeemable preferred stock
    
    
    10
    
    
    
    2
    
    
    
    
    
    
    
    12
    
    
    
    12Subtotal, debt securities
    
    
    19,533
    
    
    
    1,082
    
    
    
    (66
    )
    
    
    20,549
    
    
    
    20,549Non-redeemable preferred stock
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    2Common stock
    
    
    194
    
    
    
    441
    
    
    
    
    
    
    
    635
    
    
    
    635Securities available-for-sale
    
    
    19,728
    
    
    
    1,524
    
    
    
    (66
    )
    
    
    21,186
    
    
    
    21,186Held-to-maturity, carried at amortized cost:Obligations of state and political subdivisions
    
    
    5
    
    
    
    1
    
    
    
    
    
    
    
    6
    
    
    
    5Corporate obligations
    
    
    2,192
    
    
    
    162
    
    
    
    (7
    )
    
    
    2,347
    
    
    
    2,192Debt securities held-to-maturity
    
    
    2,197
    
    
    
    163
    
    
    
    (7
    )
    
    
    2,353
    
    
    
    2,197Total AFS and HTM securities
    
    $
    21,925
    
    
    $
    1,687
    
    
    $
    (73
    )
    
    $
    23,539
    
    
    $
    23,383
  34




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##### Table of Contents



Gross
    
    GrossAmortized
    
    Unrealized
    
    Unrealized
    
    Fair
    
    CarryingCost
    
    Gains
    
    Losses
    
    Value
    
    ValueIndustrialsBasic Materials
    
    $
    963
    
    
    $
    48
    
    
    $
    (2
    )
    
    $
    1,009
    
    
    $
    998Capital Goods
    
    
    1,381
    
    
    
    83
    
    
    
    (5
    )
    
    
    1,459
    
    
    
    1,440Communications
    
    
    1,401
    
    
    
    75
    
    
    
    (5
    )
    
    
    1,471
    
    
    
    1,452Consumer Cyclical
    
    
    1,202
    
    
    
    57
    
    
    
    (19
    )
    
    
    1,240
    
    
    
    1,224Consumer Non-Cyclical
    
    
    2,293
    
    
    
    157
    
    
    
    (5
    )
    
    
    2,445
    
    
    
    2,428Energy
    
    
    1,421
    
    
    
    81
    
    
    
    (3
    )
    
    
    1,499
    
    
    
    1,493Technology
    
    
    379
    
    
    
    7
    
    
    
    (1
    )
    
    
    385
    
    
    
    385Transportation
    
    
    827
    
    
    
    62
    
    
    
    (4
    )
    
    
    885
    
    
    
    882Other Industrials
    
    
    695
    
    
    
    37
    
    
    
    (2
    )
    
    
    730
    
    
    
    727Utilities
    
    
    3,921
    
    
    
    291
    
    
    
    (8
    )
    
    
    4,204
    
    
    
    4,166FinancialsBanks
    
    
    2,536
    
    
    
    138
    
    
    
    (9
    )
    
    
    2,665
    
    
    
    2,651Insurance
    
    
    782
    
    
    
    37
    
    
    
    (1
    )
    
    
    818
    
    
    
    814Other Financials
    
    
    1,519
    
    
    
    76
    
    
    
    (3
    )
    
    
    1,592
    
    
    
    1,587Mortgage-backed Securities(including Commercial
Mortgage-backed Securities)
    
    
    2,410
    
    
    
    96
    
    
    
    (6
    )
    
    
    2,500
    
    
    
    2,499Total
    
    $
    21,730
    
    
    $
    1,245
    
    
    $
    (73
    )
    
    $
    22,902
    
    
    $
    22,746
  35




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##### Table of Contents



Credit Risk Management
  S&P or
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofSVO
    
    Equivalent
    
    Amortized
    
    Fair
    
    Carrying
    
    CarryingRating
    
    Designation
    
    Cost
    
    Value
    
    Value
    
    Value1
    
    
    AAA
    
    $
    2,883
    
    
    $
    2,998
    
    
    $
    2,995
    
    
    
    13.2
    %1
    
    
    AA
    
    
    1,925
    
    
    
    2,056
    
    
    
    2,044
    
    
    
    9.01
    
    
    A
    
    
    7,516
    
    
    
    8,000
    
    
    
    7,934
    
    
    
    34.82
    
    
    BBB
    
    
    7,983
    
    
    
    8,384
    
    
    
    8,313
    
    
    
    36.53
    
    
    BB
    
    
    897
    
    
    
    929
    
    
    
    926
    
    
    
    4.14
    
    
    B
    
    
    469
    
    
    
    476
    
    
    
    476
    
    
    
    2.15
    
    
    CCC and lower
    
    
    46
    
    
    
    46
    
    
    
    46
    
    
    
    0.26
    
    
    In or near default
    
    
    11
    
    
    
    13
    
    
    
    12
    
    
    
    0.1Total
    
    $
    21,730
    
    
    $
    22,902
    
    
    $
    22,746
    
    
    
    100.0
    %
  CarryingCreditor
    
    Sector
    
    ValueWachovia
    
    Financial Institutions
    
    $
    158JP Morgan Chase
    
    Financial Institutions
    
    
    128HSBC Holdings PLC
    
    Financial        Institutions
    
    
    121General Electric Co
    
    Capital Goods
    
    
    108Goldman Sachs Group
    
    Financial Institutions
    
    
    107Weingarten Realty Investors
    
    Financial Institutions
    
    
    105Cargill Inc
    
    Consumer, Noncyclical
    
    
    104National Rural Utilities
    
    Utilities
    
    
    104US Bancorp
    
    Financial Institutions
    
    
    100Burlington Northern Santa Fe
    
    Transportation
    
    
    99
  36




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##### Table of Contents



GrossAmortized
    
    Carrying
    
    UnrealizedCreditor
    
    Sector
    
    Cost
    
    Value
    
    Gain/ (Loss)El Paso Corp
    
    Utilities
    
    $
    48
    
    
    $
    49
    
    
    $
    1Ahold, Royal
    
    Consumer Noncyclical
    
    
    45
    
    
    
    49
    
    
    
    4Kerr-McGee Corp
    
    Energy
    
    
    37
    
    
    
    38
    
    
    
    1Nova Chem Ltd/Nova Chem
    
    Basic Materials
    
    
    36
    
    
    
    36
    
    
    
    Rite Aid Corp
    
    Consumer Cyclicals
    
    
    33
    
    
    
    34
    
    
    
    1Thomas & Betts Co
    
    Technology
    
    
    31
    
    
    
    32
    
    
    
    1General Motors Corp
    
    Consumer Cyclicals
    
    
    32
    
    
    
    31
    
    
    
    (1
    )Homer City Funding LLC
    
    Utilities
    
    
    24
    
    
    
    28
    
    
    
    4Williams Cos Inc
    
    Utilities
    
    
    26
    
    
    
    27
    
    
    
    1Avis Europe PLC
    
    Consumer Cyclicals
    
    
    27
    
    
    
    27
    
    
    
    
   Impairment Review
  
    
    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
  37




---



##### Table of Contents




    
    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
    GrossAmortized
    
    
    
    
    
    Unrealized
    
    CarryingCost
    
    Fair Value
    
    Losses
    
    ValueDue in one year or less
    
    $
    24
    
    
    $
    23
    
    
    $
    (1
    )
    
    $
    23Due after one year through five years
    
    
    1,069
    
    
    
    1,053
    
    
    
    (16
    )
    
    
    1,056Due after five years through ten years
    
    
    1,440
    
    
    
    1,409
    
    
    
    (31
    )
    
    
    1,414Due after ten years through twenty years
    
    
    540
    
    
    
    529
    
    
    
    (11
    )
    
    
    528Due after twenty years
    
    
    247
    
    
    
    237
    
    
    
    (10
    )
    
    
    237Amounts not due at a single maturity
date
    
    
    75
    
    
    
    71
    
    
    
    (4
    )
    
    
    71Subtotal
    
    
    3,395
    
    
    
    3,322
    
    
    
    (73
    )
    
    
    3,329Redeemable preferred stocks
    
    
    4
    
    
    
    4
    
    
    
    
    
    
    
    4Total
    
    $
    3,399
    
    
    $
    3,326
    
    
    $
    (73
    )
    
    $
    3,333
 38




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##### Table of Contents



Gross
    
    % of GrossSVO
    
    S&P or Equivalent
    
    Amortized
    
    Fair
    
    % of
    
    Unrealized
    
    Unrealized
    
    CarryingRating
    
    Designation
    
    Cost
    
    Value
    
    Fair Value
    
    Losses
    
    Losses
    
    Value1
    
    
    AAA/AA/A
    
    $
    1,517
    
    
    $
    1,494
    
    
    
    44.9
    %
    
    $
    (23
    )
    
    
    31.5
    %
    
    $
    1,4962
    
    
    BBB
    
    
    1,518
    
    
    
    1,486
    
    
    
    44.8
    
    
    
    (32
    )
    
    
    43.8
    
    
    
    1,4893
    
    
    BB
    
    
    192
    
    
    
    184
    
    
    
    5.5
    
    
    
    (8
    )
    
    
    11.0
    
    
    
    1854
    
    
    B
    
    
    143
    
    
    
    134
    
    
    
    4.0
    
    
    
    (9
    )
    
    
    12.3
    
    
    
    1355
    
    
    CCC and lower
    
    
    28
    
    
    
    27
    
    
    
    0.8
    
    
    
    (1
    )
    
    
    1.4
    
    
    
    276
    
    
    In or near default
    
    
    1
    
    
    
    1
    
    
    
    0.0
    
    
    
    
    
    
    
    0.0
    
    
    
    1Total
    
    $
    3,399
    
    
    $
    3,326
    
    
    
    100.0
    %
    
    $
    (73
    )
    
    
    100.0
    %
    
    $
    3,333
   Gross
    
    % of GrossFair
    
    Unrealized
    
    Unrealized
    
    CarryingValue
    
    Losses
    
    Losses
    
    ValueMore than 1 year
    
    $
    1,566
    
    
    $
    (40
    )
    
    
    54.8
    %
    
    $
    1,5726 months  1 year
    
    
    621
    
    
    
    (9
    )
    
    
    12.3
    
    
    
    622Less than 6 months
    
    
    1,139
    
    
    
    (24
    )
    
    
    32.9
    
    
    
    1,139Total
    
    $
    3,326
    
    
    $
    (73
    )
    
    
    100.0
    %
    
    $
    3,333
   39




---



##### Table of Contents



Realized Losses  Write-downs and Sales
    Mortgage-Backed Securities
  June 30,
    
    December 31,2005
    
    2004Federal agency issued mortgage-backed securities
    
    $
    1,492
    
    
    $
    1,670Corporate private-labeled mortgage-backed securities
    
    
    1,008
    
    
    
    688Total
    
    $
    2,500
    
    
    $
    2,358
   Mortgage Loans
  40




---



##### Table of Contents



Derivative Instruments
   Market Risk Exposures
  External Trends
  Forward Looking Information
    41




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls over Financial Reporting
  42




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
 Issuer Purchases of Equity Securities
 Total Number of
    
    MaximumShares
    
    Number ofAverage
    
    Purchased
    
    Shares thatTotal
    
    Price
    
    as Part
    
    May Yet BeNumber
    
    Paid
    
    of Publicly
    
    Purchasedof Shares
    
    per
    
    Announced
    
    Under thePeriod
    
    Purchased
    
    Share
    
    Plans
    
    PlansApril 1, 2005 to April 30, 2005
    
    
    688,400
    
    
    $
    48.46
    
    
    
    688,400
    
    
    
    2,368,000May 1, 2005 to May 31, 2005
    
    
    408,100
    
    
    
    49.63
    
    
    
    408,100
    
    
    
    1,959,900June 1, 2005 to June 30, 2005
    
    
    227,900
    
    
    
    49.86
    
    
    
    227,900
    
    
    
    1,732,000Total
    
    
    1,324,400
    
    
    $
    49.06
    
    
    
    1,324,400
   1.
    
    A domestic Rabbi Trust buys shares with directors fee deferrals and with dividends
received on
shares held in the Trust. This arrangement is disclosed in our proxy statement. Trust
purchases in
the second quarter 2005 were: April, none; May, 3,194 shares, average price $49.69; and
June, 574
shares, average price $50.16.2.
    
    Under our stock option plans, an optionee may exercise options by certifying to the
Company that
the optionee owns sufficient common shares of the Company to pay the exercise price for the
option shares being exercised. We then issue to the optionee common shares equal to the
spread
(profit) on the exercise, less required withholding taxes if the optionee so designates. The
number of
shares so used to pay option exercise prices in the second quarter 2005 were: April, none;
May, 4,557
shares, average price $50.01; and June, 55,307 shares, average price $50.17.
 
 Item 6. Exhibits
  43




---



##### Table of Contents



SIGNATURES
   
  
  44




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    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 2002.31.2
    
    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