##### 



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 March 31, 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 March 31, 2003 |  |  | 142,105,162 | 





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##### 



JEFFERSON-PILOT CORPORATION

INDEX

|                                    |  |                                                                                                        |  |             
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | ------------
|                                    |  |                                                                                                        |  | - Page No. -
|                                    |  |                                                                                                        |  |             
|Part I                              |  | Financial Information                                                                                  |  |             
|                                    |  |                                                                                                        |  |             
|Item 1.                             |  | Consolidated Unaudited Condensed Balance Sheets
- March 31, 2003 and December 31, 2002                 |  | 3           
|                                    |  |                                                                                                        |  |             
|                                    |  | Consolidated Unaudited Condensed Statements of Income
- Three Months ended March 31, 2003 and 2002     |  | 4           
|                                    |  |                                                                                                        |  |             
|                                    |  | Consolidated Unaudited Condensed Statements of Cash Flows
- Three Months ended March 31, 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                  |  | 11          
|                                    |  |                                                                                                        |  |             
|Item 3.                             |  | Quantitative and Qualitative Disclosures about Market Risk                                             |  | 39          
|                                    |  |                                                                                                        |  |             
|Item 4.                             |  | Controls and Procedures                                                                                |  | 39          
|                                    |  |                                                                                                        |  |             
|Part II                             |  | Other Information                                                                                      |  |             
|                                    |  |                                                                                                        |  |             
|Item 1.                             |  | Legal Proceedings                                                                                      |  | 40          
|                                    |  |                                                                                                        |  |             
|Item 5.                             |  | Other Information                                                                                      |  | 40          
|                                    |  |                                                                                                        |  |             
|Item 6.                             |  | Exhibits and Reports on Form 8-K                                                                       |  | 40          
|                                    |  |                                                                                                        |  |             
|Signatures                          |  |                                                                                                        |  | 41          
|                                    |  |                                                                                                        |  |             
|Certifications                      |  |                                                                                                        |  | 42          
|                                    |  |                                                                                                        |  |             
|Exhibit Index, followed by
Exhibits |  | 44                                                                                                    

2



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##### 



PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |             |        |        |        | 
|------------------------------------------------------------------------------------------ | -------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------------------------------------------ | ------ | ------------------ | ------ | ----------- | ------ | ------ | ------ | 
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        | March 31           |        | December 31
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        | 2003               |        | 2002       
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        | (Dollar Amounts in
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        | Millions Except   
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        | Share Information)
|ASSETS                                                                                    
|Investments:                                                                               |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                | Debt securities available for sale, at fair value
(amortized cost $15,868 and $15,591)                                                                              |                          | $                                          | 16,813 |                    |        | $           | 16,465 |       
|                                                                                           |                                                                | Debt securities held to maturity, at amortized cost
(fair value $3,140 and $3,225)                                                                                  |                          |                                            | 2,942  |                    |        |             | 3,036  |       
|                                                                                           |                                                                | Equity securities available for sale, at fair value
(cost $46 and $46)                                                                                              |                          |                                            | 393    |                    |        |             | 409    |       
|                                                                                           |                                                                | Mortgage loans on real estate                                                                                                                                       |                          |                                            | 3,289  |                    |        |             | 3,294  |       
|                                                                                           |                                                                | Policy loans                                                                                                                                                        |                          |                                            | 904    |                    |        |             | 909    |       
|                                                                                           |                                                                | Real estate                                                                                                                                                         |                          |                                            | 132    |                    |        |             | 133    |       
|                                                                                           |                                                                | Other investments                                                                                                                                                   |                          |                                            | 28     |                    |        |             | 33     |       
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                |                                                                                                                                                                     |                          | Total investments                          |        |                    | 24,501 |             |        |        | 24,279 | 
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|Cash and cash equivalents                                                                  |                                                                |                                                                                                                                                                     | 53                       |                                            |        |                    | 67     |            
|Accrued investment income                                                                  |                                                                |                                                                                                                                                                     | 306                      |                                            |        |                    | 302    |            
|Due from reinsurers                                                                        |                                                                |                                                                                                                                                                     | 1,369                    |                                            |        |                    | 1,375  |            
|Deferred policy acquisition costs and value
of business acquired                           |                                                                |                                                                                                                                                                     | 2,068                    |                                            |        |                    | 2,027  |            
|Goodwill                                                                                   |                                                                |                                                                                                                                                                     | 312                      |                                            |        |                    | 312    |            
|Assets held in separate accounts                                                           |                                                                |                                                                                                                                                                     | 1,710                    |                                            |        |                    | 1,785  |            
|Other assets                                                                               |                                                                |                                                                                                                                                                     | 486                      |                                            |        |                    | 462    |            
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | Total assets             |                                            | $      | 30,805             |        |             | $      | 30,609 |       
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|LIABILITIES AND STOCKHOLDERS EQUITY                                                      
|Policy liabilities:                                                                        |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           | Future policy benefits                                         |                                                                                                                                                                     | $                        | 2,613                                      |        |                    | $      | 2,592       |       
|                                                                                           | Policyholder contract deposits                                 |                                                                                                                                                                     |                          | 19,780                                     |        |                    |        | 19,545      |       
|                                                                                           | Dividend accumulations and other policyholder funds on deposit |                                                                                                                                                                     |                          | 247                                        |        |                    |        | 248         |       
|                                                                                           | Policy and contract claims                                     |                                                                                                                                                                     |                          | 153                                        |        |                    |        | 161         |       
|                                                                                           | Other                                                          |                                                                                                                                                                     |                          | 616                                        |        |                    |        | 586         |       
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | Total policy liabilities |                                            |        | 23,409             |        |             |        | 23,132 |       
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|Commercial paper and revolving credit borrowings                                           |                                                                |                                                                                                                                                                     | 373                      |                                            |        |                    | 453    |            
|Securities sold under repurchase agreements                                                |                                                                |                                                                                                                                                                     | 497                      |                                            |        |                    | 499    |            
|Currently payable income taxes                                                             |                                                                |                                                                                                                                                                     | 74                       |                                            |        |                    | 46     |            
|Deferred income tax liabilities                                                            |                                                                |                                                                                                                                                                     | 391                      |                                            |        |                    | 385    |            
|Liabilities related to separate accounts                                                   |                                                                |                                                                                                                                                                     | 1,710                    |                                            |        |                    | 1,785  |            
|Accounts payable, accruals and other liabilities                                           |                                                                |                                                                                                                                                                     | 449                      |                                            |        |                    | 469    |            
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | Total liabilities        |                                            |        | 26,903             |        |             |        | 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 2003-142,105,162 shares;
2002-142,798,768 shares |                          |                                            | 178    |                    |        |             | 180    |       
|                                                                                           |                                                                | Retained earnings                                                                                                                                                   |                          |                                            | 2,785  |                    |        |             | 2,750  |       
|                                                                                           |                                                                | Accumulated other comprehensive income                                                                                                                              |                          |                                            | 639    |                    |        |             | 610    |       
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                |                                                                                                                                                                     | 3,602                    |                                            |        |                    | 3,540  |            
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            
|                                                                                           |                                                                |                                                                                                                                                                     |                          | Total liabilities and stockholders equity |        | $                  | 30,805 |             |        | $      | 30,609 | 
|                                                                                           |                                                                |                                                                                                                                                                     |                          |                                            |        |                    |        |            

See Notes to Consolidated Financial Statements

3



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##### 



JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF INCOME

|                                                                                    |                             |   |                    |     |      |   |       |     | 
|----------------------------------------------------------------------------------- | --------------------------- | - | ------------------ | --- | ---- | - | ----- | --- | 
|                                                                                    |                             |   | Three Months Ended
|                                                                                    |                             |   | March 31          
|                                                                                    |                             |   |                   
|                                                                                    |                             |   | 2003               |     | 2002
|                                                                                    |                             |   |                    |     |     
|                                                                                    |                             |   | (Dollar Amounts in
|                                                                                    |                             |   | Millions Except   
|                                                                                    |                             |   | Share Information)
|Revenue:                                                                            |                             |   |                    |     |      |   |       |    
|Premiums and other considerations                                                   |                             | $ | 426                |     |      | $ | 372   |    
|Net investment income                                                               |                             |   | 407                |     |      |   | 404   |    
|Realized investment (losses) gains                                                  |                             |   | (19                | )   |      |   | 34    |    
|Communications sales                                                                |                             |   | 50                 |     |      |   | 48    |    
|Other                                                                               |                             |   | 24                 |     |      |   | 27    |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    | Total revenue               |   |                    | 888 |      |   |       | 885 | 
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Benefits and Expenses:                                                              |                             |   |                    |     |      |   |       |    
|Insurance and annuity benefits                                                      |                             |   | 521                |     |      |   | 486   |    
|Insurance commissions, net of deferrals                                             |                             |   | 25                 |     |      |   | 31    |    
|General and administrative expenses, net of deferrals                               |                             |   | 52                 |     |      |   | 53    |    
|Amortization of policy acquisition costs and value of
business acquired             |                             |   | 82                 |     |      |   | 63    |    
|Communications operations                                                           |                             |   | 35                 |     |      |   | 34    |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    | Total benefits and expenses |   |                    | 715 |      |   |       | 667 | 
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Income before income taxes                                                          |                             |   | 173                |     |      |   | 218   |    
|Income taxes                                                                        |                             |   | 58                 |     |      |   | 72    |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Net income before dividends on Capital Securities                                   |                             |   | 115                |     |      |   | 146   |    
|Dividends on Capital Securities                                                     |                             |   | (6                 | )   |      |   | (6    | )  
|                                                                                    |                             |   |                    |     |      |   |       |    
|Net income available to common stockholders                                         |                             | $ | 109                |     |      | $ | 140   |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Net income available to common stockholders, before dividends
on Capital Securities |                             |   | 115                |     |      |   | 146   |    
|Other comprehensive income                                                          |                             |   | 29                 |     |      |   | (105  | )  
|                                                                                    |                             |   |                    |     |      |   |       |    
|Comprehensive income                                                                |                             | $ | 144                |     |      | $ | 41    |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Average number of shares outstanding                                                |                             |   | 142.8              |     |      |   | 150.1 |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Net Income Per Share of Common Stock:                                               |                             |   |                    |     |      |   |       |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Net income available to common stockholders                                         |                             | $ | 0.76               |     |      | $ | 0.93  |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Net income available to common stockholders -
assuming dilution                     |                             | $ | 0.76               |     |      | $ | 0.92  |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|                                                                                    |                             |   |                    |     |      |   |       |    
|Dividends declared per common share                                                 |                             | $ | 0.303              |     |      | $ | 0.303 |    
|                                                                                    |                             |   |                    |     |      |   |       |    

See Notes to Consolidated Financial Statements

4



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##### 



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

|                                                 |  |                    |      |      |  |   |      |  
|------------------------------------------------ |  | ------------------ | ---- | ---- |  | - | ---- | -
|                                                 |  | Three Months Ended
|                                                 |  | March 31          
|                                                 |  |                   
|                                                 |  | 2003               |      | 2002
|                                                 |  |                    |      |     
|                                                
|Net cash provided by operations                  |  | $                  | 95   |      |  | $ | 67   |  
|                                                 |  |                    |      |      |  |   |      |  
|                                                 |  |                    |      |      |  |   |      |  
|Cash Flows from Investing Activities:            |  |                    |      |      |  |   |      |  
|Investments purchased, net                       |  |                    | (184 | )    |  |   | (455 | )
|Other investing activities                       |  |                    | 3    |      |  |   | (3   | )
|                                                 |  |                    |      |      |  |   |      |  
|Net cash used in investing activities            |  |                    | (181 | )    |  |   | (458 | )
|                                                 |  |                    |      |      |  |   |      |  
|                                                 |  |                    |      |      |  |   |      |  
|Cash Flows from Financing Activities:            |  |                    |      |      |  |   |      |  
|Policyholder contract deposits, net              |  |                    | 637  |      |  |   | 625  |  
|Policyholder contract withdrawals, net           |  |                    | (405 | )    |  |   | (325 | )
|Net short-term borrowings                        |  |                    | (83  | )    |  |   | 54   |  
|Issuance (repurchase) of common shares, net      |  |                    | (30  | )    |  |   | 3    |  
|Cash dividends paid                              |  |                    | (49  | )    |  |   | (47  | )
|Other financing activities                       |  |                    | 2    |      |  |   | 2    |  
|                                                 |  |                    |      |      |  |   |      |  
|Net cash provided by financing activities        |  |                    | 72   |      |  |   | 312  |  
|                                                 |  |                    |      |      |  |   |      |  
|                                                 |  |                    |      |      |  |   |      |  
|Decrease in cash and cash equivalents            |  |                    | (14  | )    |  |   | (79  | )
|Cash and cash equivalents at beginning of period |  |                    | 67   |      |  |   | 139  |  
|                                                 |  |                    |      |      |  |   |      |  
|Cash and cash equivalents at end of period       |  | $                  | 53   |      |  | $ | 60   |  
|                                                 |  |                    |      |      |  |   |      |  
|                                                 |  |                    |      |      |  |   |      |  
|Supplemental Cash Flow Information:              |  |                    |      |      |  |   |      |  
|Income taxes paid                                |  | $                  | 41   |      |  | $ | 19   |  
|                                                 |  |                    |      |      |  |   |      |  
|Interest paid                                    |  | $                  | 3    |      |  | $ | 9    |  
|                                                 |  |                    |      |      |  |   |      |  

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 three-month period
ended March 31, 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 proforma
information as if the Company had adopted SFAS 123 for its employee and
director stock option awards:

|                                                                                                                                            |  |                    |      |      |  |   |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | ---- |  | - | ---- | 
|                                                                                                                                            |  | Three Months Ended
|                                                                                                                                            |  | March 31          
|                                                                                                                                            |  |                   
|                                                                                                                                            |  | 2003               |      | 2002
|                                                                                                                                            |  |                    |      |     
|                                                                                                                                           
|Net income, as reported                                                                                                                     |  | $                  | 109  |      |  | $ | 140  | 
|Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
related tax effects |  |                    | 3    |      |  |   | 5    | 
|                                                                                                                                            |  |                    |      |      |  |   |      | 
|Pro forma net income available to common stockholders                                                                                       |  | $                  | 106  |      |  | $ | 135  | 
|                                                                                                                                            |  |                    |      |      |  |   |      | 
|Earnings per share available to common stockholders, as reported                                                                            |  | $                  | 0.76 |      |  | $ | 0.93 | 
|Pro forma earnings per share available to common stockholders                                                                               |  | $                  | 0.75 |      |  | $ | 0.90 | 
|Earnings per share available to common stockholders  assuming
dilution, as reported                                                        |  | $                  | 0.76 |      |  | $ | 0.92 | 
|Pro forma earnings per share available to common stockholders 
assuming dilution                                                           |  | $                  | 0.74 |      |  | $ | 0.89 | 

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:

|       |                     |              |   |          |        |             |   |        |        | 
|------ | ------------------- | ------------ | - | -------- | ------ | ----------- | - | ------ | ------ | 
|       |                     |              |   | March 31 |        | December 31
|       |                     |              |   | 2003     |        | 2002       
|       |                     |              |   |          |        |            
|Assets |                     |              |   |          |        |             |   |       
|       | Individual Products |              | $ | 16,829   |        |             | $ | 16,671 |       
|       | AIP                 |              |   | 9,412    |        |             |   | 9,397  |       
|       | Benefit Partners    |              |   | 945      |        |             |   | 909    |       
|       | Communications      |              |   | 200      |        |             |   | 204    |       
|       | Corporate & other   |              |   | 3,419    |        |             |   | 3,428  |       
|       |                     |              |   |          |        |             |   |       
|       |                     | Total assets |   | $        | 30,805 |             |   | $      | 30,609 | 
|       |                     |              |   |          |        |             |   |       

7



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##### 



|                                                                                                                  |                                                |                                             |     |                    |     |      |     |     |     | 
|----------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------- | --- | ------------------ | --- | ---- | --- | --- | --- | 
|                                                                                                                  |                                                |                                             |     | Three Months Ended
|                                                                                                                  |                                                |                                             |     | March 31          
|                                                                                                                  |                                                |                                             |     |                   
|                                                                                                                  |                                                |                                             |     | 2003               |     | 2002
|                                                                                                                  |                                                |                                             |     |                    |     |     
|Revenues                                                                                                          |                                                |                                             |     |                    |     |      |     |    
|                                                                                                                  | Individual Products                            |                                             | $   | 466                |     |      | $   | 447 |    
|                                                                                                                  | AIP                                            |                                             |     | 170                |     |      |     | 170 |    
|                                                                                                                  | Benefit Partners                               |                                             |     | 197                |     |      |     | 163 |    
|                                                                                                                  | Communications                                 |                                             |     | 50                 |     |      |     | 48  |    
|                                                                                                                  | Corporate & Other                              |                                             |     | 24                 |     |      |     | 23  |    
|                                                                                                                  |                                                |                                             |     |                    |     |      |     |    
|                                                                                                                  |                                                |                                             | 907 |                    |     |      | 851 |    
|                                                                                                                  | Realized investment (losses) gains, before tax |                                             |     | (19                | )   |      |     | 34  |    
|                                                                                                                  |                                                |                                             |     |                    |     |      |     |    
|                                                                                                                  |                                                | Total revenues                              |     | $                  | 888 |      |     | $   | 885 | 
|                                                                                                                  |                                                |                                             |     |                    |     |      |     |    
|                                                                                                                  |                                                |                                             |     |                    |     |      |     |    
|Reportable segments results and reconciliation to
net income available to common stockholders
Individual Products |                                                | $                                           | 76  |                    |     | $    | 70  |    
|                                                                                                                  | AIP                                            |                                             |     | 21                 |     |      |     | 21  |    
|                                                                                                                  | Benefit Partners                               |                                             |     | 12                 |     |      |     | 13  |    
|                                                                                                                  | Communications                                 |                                             |     | 7                  |     |      |     | 7   |    
|                                                                                                                  | Corporate & Other                              |                                             |     | 5                  |     |      |     | 7   |    
|                                                                                                                  |                                                |                                             |     |                    |     |      |     |    
|                                                                                                                  |                                                | Total reportable segment results            |     |                    | 121 |      |     |     | 118 | 
|                                                                                                                  | Realized investment (losses) gains, net of tax |                                             |     | (12                | )   |      |     | 22  |    
|                                                                                                                  |                                                |                                             |     |                    |     |      |     |    
|                                                                                                                  |                                                | Net income available to common stockholders |     | $                  | 109 |      |     | $   | 140 | 
|                                                                                                                  |                                                |                                             |     |                    |     |      |     |    

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
|                                       |                                                                                                                           |               |      | March 31          
|                                       |                                                                                                                           |               |      |                   
|                                       |                                                                                                                           |               |      | 2003               |         | 2002
|                                       |                                                                                                                           |               |      |                    |         |     
|Numerator:                             |                                                                                                                           |               |      |                    |         |      |      |            
|                                       | Net income before dividends on Capital Securities                                                                         |               | $    | 115                |         |      | $    | 146         |          
|                                       | Dividends on Capital Securities and preferred stock                                                                       |               |      | (6                 | )       |      |      | (6          | )        
|                                       |                                                                                                                           |               |      |                    |         |      |      |            
|                                       | Numerator for earnings per share and earnings per
share  assuming dilution  Net income available
to common stockholders |               | $    | 109                |         |      | $    | 140         |          
|                                       |                                                                                                                           |               |      |                    |         |      |      |            
|Denominator:                           |                                                                                                                           |               |      |                    |         |      |      |            
|                                       | Denominator for earnings per share 
weighted-average shares outstanding                                                  |               |      | 142,804,138        |         |      |      | 150,099,358 |          
|                                       | Effect of dilutive securities:                                                                                            |               |      |                    |         |      |      |             |          
|                                       |                                                                                                                           | Stock options |      |                    | 858,199 |      |      |             | 1,705,380 | 
|                                       |                                                                                                                           |               |      |                    |         |      |      |            
|                                       | Denominator for earnings per share assuming
dilution  adjusted weighted-average shares
outstanding                       |               |      | 143,662,337        |         |      |      | 151,804,738 |          
|                                       |                                                                                                                           |               |      |                    |         |      |      |            
|                                       |                                                                                                                           |               |      |                    |         |      |      |            
|Earnings per share                     |                                                                                                                           | $             | 0.76 |                    |         | $    | 0.93 |            
|                                       |                                                                                                                           |               |      |                    |         |      |      |            
|                                       |                                                                                                                           |               |      |                    |         |      |      |            
|Earnings per share  assuming dilution |                                                                                                                           | $             | 0.76 |                    |         | $    | 0.92 |            
|                                       |                                                                                                                           |               |      |                    |         |      |      |            

9



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##### 



5. Contingent Liabilities

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

In the normal course of business, the Company and its subsidiaries are parties
to various lawsuits, 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 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, except for the
provisions of the Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, certain provisions relating to forward purchases or sales
of when-issued securities or other securities that do not yet exist, should be
applied to existing contracts as well as new contracts entered into after June
30, 2003. The adoption of SFAS 149 is not expected to impact the Companys
financial position or results of operation.

10



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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 months ended March 31, 2003,
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
|                    |  | March 31          
|                    |  |                   
|                    |  | 2003               |    | 2002
|                    |  |                    |    |     
|Individual Products |  |                    | 51 | %    |  |  | 53 | %
|AIP                 |  |                    | 19 | %    |  |  | 20 | %
|Benefit Partners    |  |                    | 22 | %    |  |  | 19 | %
|Communications      |  |                    | 5  | %    |  |  | 5  | %
|Corporate and Other |  |                    | 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 quarter. Legal proceedings are discussed in Note 4 to the
Consolidated Condensed Financial Statements.

11



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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
|                                                                    |                                                                     |   | March 31          
|                                                                    |                                                                     |   |                   
|                                                                    |                                                                     |   | 2003               |       | 2002
|                                                                    |                                                                     |   |                    |       |     
|Consolidated
Summary of Income                                      |                                                                     |   |                    |       |      |   |       |     
|Total reportable segment results                                    |                                                                     | $ | 121.5              |       |      | $ | 117.7 |     
|Realized investment (losses) gains (net of applicable income taxes) |                                                                     |   | (12.4              | )     |      |   | 21.9  |     
|                                                                    |                                                                     |   |                    |       |      |   |       |     
|Net income available to common stockholders                         |                                                                     | $ | 109.1              |       |      | $ | 139.6 |     
|                                                                    |                                                                     |   |                    |       |      |   |       |     
|                                                                    |                                                                     |   |                    |       |      |   |       |     
|Consolidated
Earnings Per Share                                     |                                                                     |   |                    |       |      |   |       |     
|Basic:                                                              |                                                                     |   |                    |       |      |   |       |     
|                                                                    | Total reportable segment results                                    |   |                    | 0.85  |      |   | $     | 0.78 | 
|                                                                    | Realized investment (losses) gains (net of applicable income
taxes) |   |                    | (0.09 | )    |   |       | 0.15 | 
|                                                                    |                                                                     |   |                    |       |      |   |       |     
|                                                                    | Net income available to common stockholders                         |   | $                  | 0.76  |      |   | $     | 0.93 | 
|                                                                    |                                                                     |   |                    |       |      |   |       |     
|Fully-diluted:                                                      |                                                                     |   |                    |       |      |   |       |     
|                                                                    | Total reportable segment results                                    |   | $                  | 0.85  |      |   | $     | 0.78 | 
|                                                                    | Realized investment (losses) gains (net of applicable income
taxes) |   |                    | (0.09 | )    |   |       | 0.14 | 
|                                                                    |                                                                     |   |                    |       |      |   |       |     
|                                                                    | Net income available to common stockholders                         |   | $                  | 0.76  |      |   | $     | 0.92 | 
|                                                                    |                                                                     |   |                    |       |      |   |       |     

|                                                         |  |                    |             |      |  |  |             | 
|-------------------------------------------------------- |  | ------------------ | ----------- | ---- |  |  | ----------- | 
|                                                         |  | Three Months Ended
|                                                         |  | March 31          
|                                                         |  |                   
|                                                         |  | 2003               |             | 2002
|                                                         |  |                    |             |     
|Average number of shares outstanding                     |  |                    | 142,804,138 |      |  |  | 150,099,358 | 
|                                                         |  |                    |             |      |  |  |             | 
|Average number of shares
outstanding  assuming dilution |  |                    | 143,662,337 |      |  |  | 151,804,738 | 
|                                                         |  |                    |             |      |  |  |             | 

Compared to first quarter 2002, net income available to common stockholders
decreased 21.8% due primarily to net investment losses we experienced on other
than temporary bond impairments. We did not realize gains from sales of
equities. We make decisions on harvesting gains based upon economic and market
conditions, and we did not see compelling reasons to sell stocks. Total
reportable segment results increased 3.2%, and reportable segment results per
share increased 9.0%, due primarily to increased product charges and improved
interest margins in our Individual Products segment combined with growth in our
Communications segment. Our Benefit Partners segment

12



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##### 



experienced adverse mortality fluctuations in the life business causing a
decline in results from first quarter 2002 for that segment, despite strong
sales growth.

Earnings per share amounts were more favorable than the absolute earnings
amounts due to share repurchases. The average of diluted shares outstanding
declined 5.4% from first quarter 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 little immediate impact on results for these two segments as
described in the segment discussions below.

Results by Reportable Segment

|                                            |  |                    |       |      |  |   |       | 
|------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                            |  | Three Months Ended
|                                            |  | March 31          
|                                            |  |                   
|                                            |  | 2003               |       | 2002
|                                            |  |                    |       |     
|Individual Products                         |  | $                  | 76.0  |      |  | $ | 69.7  | 
|AIP                                         |  |                    | 21.2  |      |  |   | 21.4  | 
|Benefit Partners                            |  |                    | 11.9  |      |  |   | 12.9  | 
|Communications                              |  |                    | 7.1   |      |  |   | 6.5   | 
|Corporate and Other                         |  |                    | 5.3   |      |  |   | 7.2   | 
|                                            |  |                    |       |      |  |   |       | 
|Total reportable segment results            |  |                    | 121.5 |      |  |   | 117.7 | 
|Net realized investment (losses) gains      |  |                    | (12.4 | )    |  |   | 21.9  | 
|                                            |  |                    |       |      |  |   |       | 
|Net income available to common stockholders |  | $                  | 109.1 |      |  | $ | 139.6 | 
|                                            |  |                    |       |      |  |   |       | 

Segment Assets

We assign invested assets backing insurance liabilities to our segments in
relation to policyholder funds and reserves. We assign net DAC and VOBA,
reinsurance receivables and communications assets to the respective segments
where those assets originate. We also assign invested assets to back capital
allocated to each segment in relation to our philosophy for managing business
risks, reflecting appropriate conservatism. We assign the remainder of
invested and other assets, including all impaired securities, to the Corporate
and Other segment.

|                    |              |   |          |        |      |   |        |        | 
|------------------- | ------------ | - | -------- | ------ | ---- | - | ------ | ------ | 
|                    |              |   | March 31
|                    |              |   |         
|                    |              |   | 2003     |        | 2002
|                    |              |   |          |        |     
|Individual Products |              | $ | 16,829   |        |      | $ | 16,283 |       
|AIP                 |              |   | 9,412    |        |      |   | 8,904  |       
|Benefit Partners    |              |   | 945      |        |      |   | 824    |       
|Communications      |              |   | 200      |        |      |   | 197    |       
|Corporate and Other |              |   | 3,419    |        |      |   | 3,119  |       
|                    |              |   |          |        |      |   |        |       
|                    | Total assets |   | $        | 30,805 |      |   | $      | 29,327 | 
|                    |              |   |          |        |      |   |        |       

13



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##### 



Individual Products

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

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

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

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

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

Segment results were:

|                                               |  |                    |       |      |  |   |       | 
|---------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                               |  | Three Months Ended
|                                               |  | March 31          
|                                               |  |                   
|                                               |  | 2003               |       | 2002
|                                               |  |                    |       |     
|Traditional premiums and other considerations  |  | $                  | 44.2  |      |  | $ | 47.2  | 
|UL and investment product charges              |  |                    | 193.2 |      |  |   | 168.2 | 
|Net investment income                          |  |                    | 227.0 |      |  |   | 229.9 | 
|Other income                                   |  |                    | 1.4   |      |  |   | 1.8   | 
|                                               |  |                    |       |      |  |   |       | 
|Total revenues                                 |  |                    | 465.8 |      |  |   | 447.1 | 
|                                               |  |                    |       |      |  |   |       | 
|Policy benefits                                |  |                    | 274.3 |      |  |   | 271.3 | 
|Expenses                                       |  |                    | 74.6  |      |  |   | 68.6  | 
|                                               |  |                    |       |      |  |   |       | 
|Total benefits and expenses                    |  |                    | 348.9 |      |  |   | 339.9 | 
|                                               |  |                    |       |      |  |   |       | 
|Reportable segment results before income taxes |  |                    | 116.9 |      |  |   | 107.2 | 
|Provision for income taxes                     |  |                    | 40.9  |      |  |   | 37.5  | 
|                                               |  |                    |       |      |  |   |       | 
|Reportable segment results                     |  | $                  | 76.0  |      |  | $ | 69.7  | 
|                                               |  |                    |       |      |  |   |       | 

Individual Products reportable segment results increased 9.0% over the first
three months of 2002 reflecting higher product charge margins and a flat
interest margin on increased interest-sensitive fund balances, both of which
more than offset higher DAC amortization.

14



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

|                                           |                                 |   |                    |         |      |   |        |         | 
|------------------------------------------ | ------------------------------- | - | ------------------ | ------- | ---- | - | ------ | ------- | 
|                                           |                                 |   | Three Months Ended
|                                           |                                 |   | March 31          
|                                           |                                 |   |                   
|                                           |                                 |   | 2003               |         | 2002
|                                           |                                 |   |                    |         |     
|Annualized life insurance premium sales:   |                                 |   |                    |         |      |   |        |        
|                                           | Sales excluding large case BOLI |   | $                  | 61      |      |   | $      | 61      | 
|                                           | Large case BOLI                 |   | $                  |        |      |   | $      |        | 
|                                           |                                 |   |                    |         |      |   |        |        
|Average UL policyholder fund balances      |                                 | $ | 10,351             |         |      | $ | 9,559  |        
|Average VUL separate account assets        |                                 |   | 1,106              |         |      |   | 1,332  |        
|                                           |                                 |   |                    |         |      |   |        |        
|                                           |                                 | $ | 11,457             |         |      | $ | 10,891 |        
|                                           |                                 |   |                    |         |      |   |        |        
|Average face amount of insurance in force: |                                 |   |                    |         |      |   |        |        
|                                           | Total                           |   | $                  | 163,794 |      |   | $      | 160,061 | 
|                                           | UL-type policies                |   | $                  | 122,245 |      |   | $      | 118,577 | 
|                                           |                                 |   |                    |         |      |   |        |        
|Average assets                             |                                 | $ | 16,750             |         |      | $ | 16,219 |        

Core agency channel sales were $54.2 and $36.7 for the first three months of
2003 and 2002, which represented 88.2% and 59.9% of annualized life insurance
premium sales excluding large case bank-owned life insurance (BOLI). Single
premium products targeted to smaller banks and sold through our target
marketing channel (TMD) provided 8.8% of life sales in first quarter 2003, a
decrease from 36.8% in first quarter 2002. As we price our TMD business off of
portfolio rates, we decided not to take in large dollars of new premiums, which
if invested at current rates, would reduce the yield on our portfolio of TMD
assets. Sales from our core agency channels as a result of our Premier
Partnering strategic initiative and the continued demand for several UL
products that we introduced in 2002 offset these lower TMD sales. For large
case BOLI, our business strategy is to respond to individual sales
opportunities when the market accommodates our required returns. Thus, BOLI
sales could vary widely between periods.

Revenues include traditional insurance premiums and policy charges, net of
reinsurance, and net investment income. Individual traditional premiums
decreased 2.8% from first quarter 2002 due to the decline in our traditional
business in force as we are focusing our efforts towards UL-type products. UL
and investment product charges increased 14.9% from first quarter 2002. The UL
product charges grew faster than the average UL policyholder fund balances due
to increased mortality charges consistent with growth in this segment and
certain recent product designs involving larger up-front expense charges. The
increase in up-front expense charges is largely offset by an increase in
unearned revenue reserves accounted for as policy benefits in the year of
issuance, and these deferred product charges are then taken into income over
time.

Net investment income decreased 1.3% from first quarter 2002, reflecting a
decline in investment yields despite growth in business. The average
investment spread on fixed UL products (calculated as the difference between
portfolio yields earned on invested assets less interest credited to
policyholder funds, included in policy benefits) remained constant at 1.94% for
first quarter 2003 and 2002. Interest spreads are affected by portfolio yields
and our crediting rates, and also may vary over time due to our competitive
strategies and changes in product design. In response to a decline in
portfolio yields, we have applied appropriate crediting rate reductions. The
average crediting rate for first quarter 2003 was 5.14% compared to 5.64% for
first quarter 2002. After these reductions our crediting rates are
approximately 70 basis points on average in excess of our

15



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##### 



minimum guaranteed rates at March 31, 2003. Continued declines in general
market interest rates may impact further profitability to the extent that these
declines can not be recovered through policy crediting rate reductions. During
first 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 first three months of 2003, the effect
of these prepayments was to increase net investment income in this segment by
$5.5, which is down significantly from levels experienced in the second half of
2002. We continue to invest the proceeds from these prepayments at current
market yields, which are lower than our portfolio yields.

Total policy benefits increased only slightly from first quarter 2002 in
connection with the growth in this business and increases in deferred revenue,
partially offset by reduced crediting rates. 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 124.3% of premiums in the first three months
of 2003 compared to 137.0% in the first three months of 2002, reflecting
decreased mortality levels and surrenders in the current year. 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 represented 7.7% of average
policyholder funds and separate accounts in the first three months of 2003 and
2002. Interest credited declined 2.3%, despite an increase in average UL fund
balances of 8.3%, reflecting the crediting rate reductions described above.
The change in deferred revenue reserves increased $7.5 over the first three
months of 2002 due to increased sales of products with higher up-front expense
charges.

Death benefits constitute a significant portion of policy benefits. UL death
benefits for first quarter 2003 have increased over first quarter 2002 in line
with the increase in the growth of business and 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 $2.30
and $2.16 for the first three months of 2003 and 2002. However, the growth in
mortality charges on UL-type products has exceeded the increase in the death
benefits. Mortality policy charges per thousand dollars of face amount of
insurance in force were $4.10 and $3.94 for the first three months of 2003 and
2002, again reflecting the growth in business and an increase in the average
age of our insureds.

Total expenses (including the net deferral and amortization of DAC and VOBA)
increased 8.7% from first quarter 2002. The expense details are as follows:

|                                                 |  |                    |       |      |  |   |       |  
|------------------------------------------------ |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                                 |  | Three Months Ended
|                                                 |  | March 31          
|                                                 |  |                   
|                                                 |  | 2003               |       | 2002
|                                                 |  |                    |       |     
|Commissions                                      |  | $                  | 79.2  |      |  | $ | 63.1  |  
|General and administrative  acquisition related |  |                    | 23.1  |      |  |   | 21.1  |  
|General and administrative  maintenance related |  |                    | 7.0   |      |  |   | 9.3   |  
|Taxes, licenses and fees                         |  |                    | 14.9  |      |  |   | 14.7  |  
|                                                 |  |                    |       |      |  |   |       |  
|Total commissions and expenses incurred          |  |                    | 124.2 |      |  |   | 108.2 |  
|Less commissions and expenses capitalized        |  |                    | (95.2 | )    |  |   | (75.2 | )
|Amortization of DAC and VOBA                     |  |                    | 45.6  |      |  |   | 35.6  |  
|                                                 |  |                    |       |      |  |   |       |  
|Total expense                                    |  | $                  | 74.6  |      |  | $ | 68.6  |  
|                                                 |  |                    |       |      |  |   |       |  

16



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##### 



The increase in expenses reflects higher amortization of DAC and VOBA,
partially offset by higher capitalization and improved maintenance expenses.
Recent years sales growth in the Individual Products segment is the primary
contributor to this increase in amortization. The expense amounts we
capitalize as DAC include first year commissions, as well as deferrable
acquisition expenses. We generally limit our capitalization of deferrable
acquisition expenses to the lower of product specific pricing allowables or our
actual deferrable acquisition costs. As our sales have increased, pricing
allowables have covered a greater amount of capitalizable acquisition expenses
other than commissions. Increased sales resulted in higher capitalization of
these expenses of $3.9 in first quarter 2003.

Average Individual Products assets grew 3.3% over first quarter 2002, primarily
due to sales of fixed UL products and growth in existing UL policyholder fund
balances, partially offset by declines in the market values of separate account
assets of variable products. Average VUL separate account assets decreased
17.0% in first quarter 2003. Adjusting for the decrease in market value, net
of dividends, separate account balances would have increased by approximately
2.7% and total fund balances would have grown by 7.4% over first quarter 2002.

Our financial and operating risks for this segment include, among others,
interest spread risks, mortality risks, changes in the underlying assumptions
of DAC and VOBA, 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
|                                                  |  | March 31          
|                                                  |  |                   
|                                                  |  | 2003               |       | 2002
|                                                  |  |                    |       |     
|Policy charges, premiums and other considerations |  | $                  | 2.0   |      |  | $ | 3.6   | 
|Net investment income                             |  |                    | 145.5 |      |  |   | 140.6 | 
|Concession and other income                       |  |                    | 22.2  |      |  |   | 25.4  | 
|                                                  |  |                    |       |      |  |   |       | 
|Total revenues                                    |  |                    | 169.7 |      |  |   | 169.6 | 
|                                                  |  |                    |       |      |  |   |       | 
|Policy benefits                                   |  |                    | 103.6 |      |  |   | 100.4 | 
|Expenses                                          |  |                    | 33.4  |      |  |   | 36.4  | 
|                                                  |  |                    |       |      |  |   |       | 
|Total benefits and expenses                       |  |                    | 137.0 |      |  |   | 136.8 | 
|                                                  |  |                    |       |      |  |   |       | 
|Reportable segment results before income taxes    |  |                    | 32.7  |      |  |   | 32.8  | 
|Provision for income taxes                        |  |                    | 11.5  |      |  |   | 11.4  | 
|                                                  |  |                    |       |      |  |   |       | 
|Reportable segment results                        |  | $                  | 21.2  |      |  | $ | 21.4  | 
|                                                  |  |                    |       |      |  |   |       | 

17



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##### 



AIP reportable segment results were essentially flat when compared to first
quarter 2002 as detailed in the following discussion.

The following table summarizes key information for AIP:

|                                                                    |  |                    |       |      |  |   |       |  
|------------------------------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                                                    |  | Three Months Ended
|                                                                    |  | March 31          
|                                                                    |  |                   
|                                                                    |  | 2003               |       | 2002
|                                                                    |  |                    |       |     
|Fixed annuity premium sales                                         |  | $                  | 115   |      |  | $ | 186   |  
|Variable annuity premium sales                                      |  |                    | 1     |      |  |   | 5     |  
|                                                                    |  |                    |       |      |  |   |       |  
|                                                                    |  | $                  | 116   |      |  | $ | 191   |  
|                                                                    |  |                    |       |      |  |   |       |  
|                                                                    |  |                    |       |      |  |   |       |  
|Investment product sales                                            |  | $                  | 615   |      |  | $ | 744   |  
|                                                                    |  |                    |       |      |  |   |       |  
|                                                                    |  |                    |       |      |  |   |       |  
|Average policyholder fund balances                                  |  | $                  | 8,242 |      |  | $ | 7,532 |  
|Average separate account policyholder fund balances                 |  |                    | 335   |      |  |   | 493   |  
|                                                                    |  |                    |       |      |  |   |       |  
|                                                                    |  | $                  | 8,577 |      |  | $ | 8,025 |  
|                                                                    |  |                    |       |      |  |   |       |  
|                                                                    |  |                    |       |      |  |   |       |  
|Effective investment spreads for fixed annuities                    |  |                    | 1.89  | %    |  |   | 1.84  | %
|Fixed annuity surrenders as a percentage of
beginning fund balances |  |                    | 7.9   | %    |  |   | 9.2   | %
|                                                                    |  |                    |       |      |  |   |       |  
|Average assets                                                      |  | $                  | 9,404 |      |  | $ | 8,835 |  

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 $0.8 as a result of lower surrender charge income
due to historically low surrenders and as our product mix focuses more on
products that derive most of their earnings from investment spreads rather than
from policy charges. Net investment income grew 3.5% over first quarter 2002,
which was lower than the growth in average policyholder fund balances of 9.4%,
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 by $5.0 in the first quarter through
acceleration of the accretion of discount on our mortgage backed portfolio.
Fixed annuity premium sales decreased 38.2% from first quarter 2002 reflecting
the continued competitive fixed annuity market and our unwillingness to match
our competitors crediting rates, especially in the bank channel. Consistent
with a decrease in investment product sales, JPSCs concession and other income
decreased 12.6% from first quarter 2002.

Fixed annuity surrenders as a percentage of beginning fund balances declined to
7.9% from 9.2% on an annualized basis in first quarter 2002. The lower lapse
rates reflect the effects of increased surrender charge protection on our
in-force block of business, the lower interest rate environment and the
increasing percentage of our annuity block with multi-year crediting rate
guarantees. The surrender rate in the AIP segment is influenced by many other
factors such as: 1) the portion of the business that has low or no remaining
surrender charges; 2) competition 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 54% at March 2003 compared to
47% a year
earlier.

18



---



##### 



Policy benefits, which are mainly comprised of interest credited to
policyholder accounts, increased 3.2% over first quarter 2002, reflecting
growth in average fund balances partially offset by lower crediting rates.

Effective investment spreads on fixed annuities increased to 1.89% from 1.84%
in first quarter 2002, as we began to realize the effects of crediting rate
reductions we made in late 2002, and due to the effects of the increased
amortization of discount on mortgage backed securities mentioned earlier. The
average crediting rate on the portfolio was 5.17% for first quarter 2003
compared to 5.50% for first quarter 2002. We have approximately $4 billion of
policyholder fund balances with crediting rates on an annual reset basis.
Also, approximately $3 billion of policyholder fund balances have multi-year
guaranteed rates, which begin to expire in about eighteen months.

The expense details for the AIP segment are as follows:

|                                                 |  |                    |      |      |  |   |       |  
|------------------------------------------------ |  | ------------------ | ---- | ---- |  | - | ----- | -
|                                                 |  | Three Months Ended
|                                                 |  | March 31          
|                                                 |  |                   
|                                                 |  | 2003               |      | 2002
|                                                 |  |                    |      |     
|Commissions  insurance companies                |  | $                  | 6.0  |      |  | $ | 11.2  |  
|Commissions  broker/dealer                      |  |                    | 18.1 |      |  |   | 21.5  |  
|General and administrative  acquisition related |  |                    | 3.7  |      |  |   | 3.7   |  
|General and administrative  maintenance related |  |                    | 2.7  |      |  |   | 3.1   |  
|Taxes, licenses and fees                         |  |                    | 0.7  |      |  |   | 0.7   |  
|                                                 |  |                    |      |      |  |   |       |  
|Total commissions and expenses incurred          |  |                    | 31.2 |      |  |   | 40.2  |  
|Less commissions and expenses capitalized        |  |                    | (9.3 | )    |  |   | (14.6 | )
|Amortization of DAC and VOBA                     |  |                    | 11.5 |      |  |   | 10.8  |  
|                                                 |  |                    |      |      |  |   |       |  
|Total expense                                    |  | $                  | 33.4 |      |  | $ | 36.4  |  
|                                                 |  |                    |      |      |  |   |       |  

Total AIP expenses decreased 8.2% from first quarter 2002, due primarily to
lower commission expenses of JPSC. However, we continue to tightly manage the
maintenance related general and administrative expenses, which declined $0.4
from first quarter 2002.

JPSC earnings were $1.2 for first quarter 2003 compared to $1.0 in first
quarter 2002.

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
further constrain 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.

19



---



##### 



Benefit Partners

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

|                                               |  |                    |       |      |  |   |       | 
|---------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | 
|                                               |  | Three Months Ended
|                                               |  | March 31          
|                                               |  |                   
|                                               |  | 2003               |       | 2002
|                                               |  |                    |       |     
|Premiums and other considerations              |  | $                  | 181.8 |      |  | $ | 148.4 | 
|Investment income, net of expenses             |  |                    | 15.9  |      |  |   | 15.0  | 
|                                               |  |                    |       |      |  |   |       | 
|Total revenues                                 |  |                    | 197.7 |      |  |   | 163.4 | 
|                                               |  |                    |       |      |  |   |       | 
|Policy benefits                                |  |                    | 137.7 |      |  |   | 109.2 | 
|Expenses                                       |  |                    | 41.7  |      |  |   | 34.3  | 
|                                               |  |                    |       |      |  |   |       | 
|Total benefits and expenses                    |  |                    | 179.4 |      |  |   | 143.5 | 
|                                               |  |                    |       |      |  |   |       | 
|Reportable segment results before income taxes |  |                    | 18.3  |      |  |   | 19.9  | 
|Provision for income taxes                     |  |                    | 6.4   |      |  |   | 7.0   | 
|                                               |  |                    |       |      |  |   |       | 
|Reportable segment results                     |  | $                  | 11.9  |      |  | $ | 12.9  | 
|                                               |  |                    |       |      |  |   |       | 

Benefit Partners reportable segment results decreased 7.8% compared to first
quarter 2002 as discussed below.

The following table summarizes key information for Benefit Partners:

|                                    |                  |   |                    |      |      |   |      |      |  
|----------------------------------- | ---------------- | - | ------------------ | ---- | ---- | - | ---- | ---- | -
|                                    |                  |   | Three Months Ended
|                                    |                  |   | March 31          
|                                    |                  |   |                   
|                                    |                  |   | 2003               |      | 2002
|                                    |                  |   |                    |      |     
|Life, Disability, and Dental:       |                  |   |                    |      |      |   |      |     
|                                    | Annualized sales |   | $                  | 73   |      |   | $    | 56   |  
|                                    | Loss ratio       |   |                    | 74.1 | %    |   |      | 71.7 | %
|                                    |                  |   |                    |      |      |   |      |     
|Total expenses, % of premium income |                  |   | 23.0               | %    |      |   | 23.1 | %   
|                                    |                  |   |                    |      |      |   |      |     
|Average assets                      |                  | $ | 927                |      |      | $ | 807  |     

Benefit Partners revenues increased $34.3 over first quarter 2002 and
annualized new sales for the core life, disability and dental lines grew 30.4%
over first quarter 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 26.1% over first quarter 2002 driven by growth in the
business coupled with adverse claims fluctuation in first quarter 2003 in the
life product line. Our life, disability and dental incurred loss ratio
increased in the first three months of 2003 to 74.1% versus 71.7% in first
quarter 2002, which is above our expected range due to adverse mortality
experienced in the life product line. The adverse life mortality arose
primarily due to higher than expected incidence, and slightly higher severity
of claims (i.e., those claims with greater than $100,000 death benefit).
Thorough review of the life experience thus far has found nothing that suggests
any systemic problems in the management of the business. In contrast to the
life business, both short-term and

20



---



##### 



long-term disability loss ratios were favorable and the dental loss ratio was
in line with expectations for first quarter 2003. While we closely monitor the
loss ratio, we feel we have retained underwriting and pricing discipline in a
competitive market, and some fluctuations are inherent in this segment.

Total expenses for the Benefit Partners segment increased 21.6% over first
quarter 2002, due to overall growth in the business. As a percentage of
premium income, total expenses were 23.0% for first quarter 2003 versus 23.1%
for first quarter 2002.

The expense details are as follows:

|                                          |  |                    |       |      |  |   |       |  
|----------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                          |  | Three Months Ended
|                                          |  | March 31          
|                                          |  |                   
|                                          |  | 2003               |       | 2002
|                                          |  |                    |       |     
|Commissions                               |  | $                  | 20.8  |      |  | $ | 17.7  |  
|General and administrative                |  |                    | 19.5  |      |  |   | 16.8  |  
|Taxes, licenses and fees                  |  |                    | 5.3   |      |  |   | 4.0   |  
|                                          |  |                    |       |      |  |   |       |  
|Total commissions and expenses incurred   |  |                    | 45.6  |      |  |   | 38.5  |  
|Less commissions and expenses capitalized |  |                    | (28.3 | )    |  |   | (21.1 | )
|Amortization of DAC                       |  |                    | 24.4  |      |  |   | 16.9  |  
|                                          |  |                    |       |      |  |   |       |  
|Total expense                             |  | $                  | 41.7  |      |  | $ | 34.3  |  
|                                          |  |                    |       |      |  |   |       |  

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 first three 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.

21



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##### 



Communications

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

|                                              |  |                    |      |      |  |   |      | 
|--------------------------------------------- |  | ------------------ | ---- | ---- |  | - | ---- | 
|                                              |  | Three Months Ended
|                                              |  | March 31          
|                                              |  |                   
|                                              |  | 2003               |      | 2002
|                                              |  |                    |      |     
|Communications revenues (net)                 |  | $                  | 50.5 |      |  | $ | 48.6 | 
|Operating costs and expenses                  |  |                    | 34.7 |      |  |   | 33.7 | 
|                                              |  |                    |      |      |  |   |      | 
|Broadcast cash flow                           |  |                    | 15.8 |      |  |   | 14.9 | 
|Depreciation and amortization                 |  |                    | 2.1  |      |  |   | 1.9  | 
|Corporate general and administrative expenses |  |                    | 1.5  |      |  |   | 1.3  | 
|Net interest expense                          |  |                    | 0.6  |      |  |   | 0.8  | 
|                                              |  |                    |      |      |  |   |      | 
|Operating revenue before income taxes         |  |                    | 11.6 |      |  |   | 10.9 | 
|Provision for income taxes                    |  |                    | 4.5  |      |  |   | 4.4  | 
|                                              |  |                    |      |      |  |   |      | 
|Reportable segment results                    |  | $                  | 7.1  |      |  | $ | 6.5  | 
|                                              |  |                    |      |      |  |   |      | 

Reportable segment results increased 9.2% over first quarter 2002, primarily
due to increased demand for advertising, increased share in our Television and
Radio markets and effective ongoing operating expense management, partially
offset by disappointing first quarter results in our Sports operation.

Combined revenues for Radio and Television increased 5.1% over first quarter
2002, reflecting solid increases in demand for local advertising in television
and national advertising in radio. Revenues from our Sports operation
decreased 2.6% from first quarter 2002, due to a continued hesitancy of the
market to enter into the longer-term structure of Sports advertising contracts.

Broadcast cash flow increased 6.0% over first quarter 2002 due to improved
profitability at our Radio and TV properties, though these increases were
partially offset by weak results in our Sports basketball product.

Total expenses, excluding interest expense, increased 3.8% over the first three
months of 2002. However, as a percent of communication revenues, these
expenses were 75.8% and 75.9% in first quarter 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.

22



---



##### 



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
|                                                                  |  | March 31          
|                                                                  |  |                   
|                                                                  |  | 2003               |       | 2002
|                                                                  |  |                    |       |     
|Earnings on investments                                           |  | $                  | 21.6  |      |  | $ | 21.0 |  
|Interest expense on debt and Exchangeable Securities              |  |                    | 2.5   |      |  |   | 2.4  |  
|Operating expenses                                                |  |                    | 6.3   |      |  |   | 4.9  |  
|Provision for income tax expense                                  |  |                    | 1.4   |      |  |   | 0.4  |  
|                                                                  |  |                    |       |      |  |   |      |  
|Total expenses                                                    |  |                    | 10.2  |      |  |   | 7.7  |  
|                                                                  |  |                    |       |      |  |   |      |  
|Reportable segment results before dividends on
Capital Securities |  |                    | 11.4  |      |  |   | 13.3 |  
|Dividends on Capital Securities                                   |  |                    | (6.1  | )    |  |   | (6.1 | )
|                                                                  |  |                    |       |      |  |   |      |  
|Reportable segment results                                        |  |                    | 5.3   |      |  |   | 7.2  |  
|Realized investment (losses) gains, net                           |  |                    | (12.4 | )    |  |   | 21.9 |  
|                                                                  |  |                    |       |      |  |   |      |  
|Reportable segment results, including realized
(losses) gains     |  | $                  | (7.1  | )    |  | $ | 29.1 |  
|                                                                  |  |                    |       |      |  |   |      |  

Reportable segment results excluding realized gains (losses) decreased $1.9
from the first quarter of 2002. Several items impacted results, including an
increase in earnings on investments due to increased default charge income that
was offset by increased 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 were $6.9 and $5.2 for first quarter 2003 and 2002 and are calculated
as a percentage of the invested assets. Earnings on investments in this
segment can fluctuate based upon opportunistic repurchases of common stock, the
amount of excess capital generated by the operating segments and lost
investment income on bonds impaired or sold at a loss.

Operating expenses increased $1.4 from first quarter 2002 primarily due to the
expensing of stock options granted to agents that were expensed in the
Individual Products segment in prior years. As agents are not employees of the
Company, we expense these options in accordance with SFAS 123 as discussed in
more detail in Footnote 2 in our Form 10-K. Operating expenses vary with the
level of corporate activities and strategies.

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

23



---



##### 



Realized investment gains and losses were as follows:

|                              |             |   |                    |     |      |   |       |       |  
|----------------------------- | ----------- | - | ------------------ | --- | ---- | - | ----- | ----- | -
|                              |             |   | Three Months Ended
|                              |             |   | March 31          
|                              |             |   |                   
|                              |             |   | 2003               |     | 2002
|                              |             |   |                    |     |     
|Bonds gains                   |             | $ | 14.3               |     |      | $ | 2.7   |      
|Bond losses                   |             |   | (2.8               | )   |      |   | (5.0  | )    
|Bond impairment charges       |             |   | (29.0              | )   |      |   | (13.3 | )    
|Stock gains (net)             |             |   |                   |     |      |   | 51.8  |      
|Other losses                  |             |   | (1.6               | )   |      |   | (2.5  | )    
|                              |             |   |                    |     |      |   |       |      
|Gross realized (losses) gains |             |   | (19.1              | )   |      |   | 33.7  |      
|                              | Less: taxes |   |                    | 6.7 |      |   |       | (11.8 | )
|                              |             |   |                    |     |      |   |       |      
|Net realized (losses) gains   |             | $ | (12.4              | )   |      | $ | 21.9  |      
|                              |             |   |                    |     |      |   |       |      

As mentioned earlier, we did not realize gains during first quarter 2003 from
sales of equities. Approximately one third of the gains reported in our bond
portfolio this quarter consisted of make whole premiums, which we account for
as realized capital gains rather than operating income.

The following table summarizes assets assigned to this segment.

|                                                                                                 |       |   |          |       |      |   |       |       | 
|------------------------------------------------------------------------------------------------ | ----- | - | -------- | ----- | ---- | - | ----- | ----- | 
|                                                                                                 |       |   | March 31
|                                                                                                 |       |   |         
|                                                                                                 |       |   | 2003     |       | 2002
|                                                                                                 |       |   |          |       |     
|Parent company, passive investment companies and
Corporate line assets of insurance subsidiaries |       | $ | 844      |       |      | $ | 1,080 |      
|Unrealized gain on fixed interest investments                                                    |       |   | 634      |       |      |   | 15    |      
|Co-insurance receivables on acquired blocks                                                      |       |   | 1,045    |       |      |   | 1,076 |      
|Employee benefit plan assets                                                                     |       |   | 316      |       |      |   | 368   |      
|Goodwill arising from insurance acquisitions                                                     |       |   | 270      |       |      |   | 270   |      
|Other                                                                                            |       |   | 310      |       |      |   | 310   |      
|                                                                                                 |       |   |          |       |      |   |       |      
|                                                                                                 | Total |   | $        | 3,419 |      |   | $     | 3,119 | 
|                                                                                                 |       |   |          |       |      |   |       |      

Total assets for the Corporate and Other segment increased 9.6% over first
quarter 2002 due primarily to unrealized gains on fixed interest investments.
Unrealized gains and losses on all available-for-sale fixed income securities
are assigned to this segment, and increased $619.

Risks for this segment include investment impairments due to continuing
economic weakness or further economic decline, the risk of rising interest
rates on our short-term debt, the ability to replace existing debt agreements
with comparable terms, an additional decline in the value of our equity
securities which would limit our potential for 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 are
dependent upon regulatory approval above certain limits.

24



---



##### 



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 $196 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, including first year commissions, first year bonus
interest or day one premium bonuses on annuities, certain costs of underwriting
and issuing policies plus agency office expenses, referred to as DAC. We limit
our capitalization of acquisition costs other than commissions to the lower of
product specific pricing allowables or the actual deferrable acquisition costs.
When we acquire new business through an acquisition, we allocate a portion of
the purchase price to a separately identifiable intangible asset, referred to
as VOBA. We initially establish VOBA as the actuarially determined present
value of future gross profits of each business acquired. Both DAC and VOBA are
amortized through expenses as revenues are recognized in the future. Some of
the assumptions regarding future experience that can affect the carrying value
of DAC and VOBA balances include mortality, interest spreads, lapse rates and
policy fees earned. Significant changes in these assumptions can impact the
carrying balance of DAC and VOBA and therefore produce changes that must be
reflected in earnings. These changes can be positive or negative.

We amortize DAC and VOBA on traditional products in proportion to premium
revenue recognized. The DAC and VOBA balances on these products were $205.0 or
8.6% of the gross balances at March 31, 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.

We consider the following assumptions to be most significant to UL-type
products: 1) estimated mortality; 2) estimated interest spreads; and 3)
estimated future policy lapses. DAC and VOBA on

25



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##### 



UL-type products were $1,763.5 or 74.0% of the gross balances at March 31, 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 three 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. DAC and VOBA
on these products were $354.1 or 14.9% of the gross balances at March 31, 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 three 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
EGP.

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, and we concluded that there had been no
impairments in 2002. Goodwill was $312 at March 31, 2003 or 8.7% as a
percentage of stockholders equity at this date. 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 three months of 2003. When considered impaired, the carrying
amounts are written down to a value determined by using a combination of fair
value and discounted cash flows.

Other

At March 31, 2003 and December 31, 2002, we had reinsurance receivables of $879
and $889 and policy loans of $134 and $135, which are related to the businesses
of JP Financial that are coinsured with Household International (HI),
affiliates. HI has provided payment, performance and capital maintenance
guarantees with respect to the balances receivable. We regularly evaluate the
financial condition of our reinsurers and monitor concentrations of credit risk
related to reinsurance activities. We have not suffered any significant credit
losses from reinsurance activities in the last three years.

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At March 31, 2003, the fair values of the assets related to the defined benefit
pension plans were $316 compared to $331 at December 31, 2002. The drop in
plan assets of $15 was driven primarily by a decrease in fair value of the
equity 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. Both the decline in the fair values of the
invested assets and the lowering of the discount rate utilized in the
calculation of the PBO will eventually lead to a higher pension expense over
time.

Capital Resources

Stockholders Equity

The following table shows our capital adequacy.

|                                                               |  |          |        |             |  |   |        |  
|-------------------------------------------------------------- |  | -------- | ------ | ----------- |  | - | ------ | -
|                                                               |  | March 31 |        | December 31
|                                                               |  | 2003     |        | 2002       
|                                                               |  |          |        |            
|Total assets less separate accounts                            |  | $        | 29,095 |             |  | $ | 28,824 |  
|Total stockholders equity                                     |  |          | 3,602  |             |  |   | 3,540  |  
|Ratio of stockholders equity to assets less
separate accounts |  |          | 12.4   | %           |  |   | 12.3   | %

The ratio of equity to assets less separate accounts has remained relatively
constant. Unrealized gains on available-for-sale securities, which are
included as a component of stockholders equity, increased $29 from year-end
2002, reflecting lower interest rates partially offset by increased credit
spreads.

During the first three months of 2003, we repurchased one million of our common
shares at an average cost of $37.85 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. We have two revolving
credit agreements, currently aggregating $525, half available for five years
and half available for 364 days. The credit agreements principally support our
issuance of commercial paper. Outstanding commercial paper has various
maturities, with none at March 31, 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. The weighted-average interest rates for commercial
paper borrowings outstanding of $373 and $453 at March 31, 2003 and December
31, 2002 were 1.31% and 1.44%.

27



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The maximum amount outstanding during the first three months of 2003 was $374
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 March 31, 2003 and December 31,
2002, repurchase agreements, including accrued interest, were $497 and $499.
The securities involved had a fair value and amortized cost of $466 and $532 at
March 31, 2003 versus $433 and $493 at December 31, 2002. The maximum
principal amounts outstanding were $597 during the first three months of 2003
compared to $636 for the year ended December 31, 2002.

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 first quarter 2003 and 2002 was $95 and $68.
The primary reason for the increase was the swing in realized (losses) gains
from $33.6 for the first three months of 2002 to $(19.1) for first quarter 2003
which serves as an adjustment to cash generated from operations, partially
offset by a $24.4 decrease in the net amount credited to policyholder accounts.

Net cash used in investing activities was $181 and $459 for the first three
months of 2003 and 2002. The first quarter 2002 included the investment of
approximately $208 of single premiums received in late 2001.

Net cash provided by financing activities was $72 and $312 for first quarter
2003 and 2002, including cash inflows from policyholder contract deposits net
of withdrawals of $232 and $300, reflecting the processing of the premiums
received in late 2001. Net borrowings declined in 2003 as funds were used to
pay down debt levels rather than for investing purposes. Also, funds were used
in first quarter 2003 to repurchase common shares.

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 quarter of $76 and $94
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

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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 $53 and $67 at March 31, 2003 and December 31,
2002. The parent company and non-regulated subsidiaries held equity and fixed
income securities of $405 and $424 at these dates. We consider these
securities to be sources of liquidity to support our strategies.

Total debt and equity securities available-for-sale at March 31, 2003 and
December 31, 2002 were $17,206 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 March 31, 2003 was $14 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 $402 as of March 31, 2003, payable through the year 2011. We
have commitments to sell a portion of the sports programming rights to other
entities for $250 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 March 31 2003 and December 31, 2002 approximated $78 and $73.
These commitments will be funded through cash flows from operations and
investment maturities.

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

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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.

|                                |                          |   |          |        |             |  |      |       |   |   |        |        |  |  |      |       |  
|------------------------------- | ------------------------ | - | -------- | ------ | ----------- |  | ---- | ----- | - | - | ------ | ------ |  |  | ---- | ----- | -
|                                |                          |   | March 31 |        | December 31
|                                |                          |   | 2003     |        | 2002       
|                                |                          |   |          |        |            
|Publicly-issued bonds           |                          | $ | 15,401   |        |             |  | 62.7 | %     |   | $ | 15,239 |        |  |  | 62.6 | %    
|Privately-placed bonds          |                          |   | 4,329    |        |             |  | 17.6 |       |   |   | 4,238  |        |  |  | 17.4 |      
|                                |                          |   |          |        |             |  |      |       |   |   |        |        |  |  |      |      
|                                | Subtotal bonds           |   |          | 19,730 |             |  |      | 80.3  |   |   |        | 19,477 |  |  |      | 80.0  |  
|Redeemable preferred stock      |                          |   | 25       |        |             |  | 0.1  |       |   |   | 24     |        |  |  | 0.1  |      
|                                |                          |   |          |        |             |  |      |       |   |   |        |        |  |  |      |      
|                                | Subtotal debt securities |   |          | 19,755 |             |  |      | 80.4  |   |   |        | 19,501 |  |  |      | 80.1  |  
|Mortgage loans on real property |                          |   | 3,289    |        |             |  | 13.4 |       |   |   | 3,294  |        |  |  | 13.5 |      
|Common stock                    |                          |   | 391      |        |             |  | 1.6  |       |   |   | 407    |        |  |  | 1.7  |      
|Non-redeemable preferred stock  |                          |   | 2        |        |             |  | 0.1  |       |   |   | 2      |        |  |  | 0.0  |      
|Policy loans                    |                          |   | 904      |        |             |  | 3.7  |       |   |   | 909    |        |  |  | 3.7  |      
|Real estate                     |                          |   | 132      |        |             |  | 0.5  |       |   |   | 133    |        |  |  | 0.6  |      
|Other                           |                          |   | 28       |        |             |  | 0.1  |       |   |   | 33     |        |  |  | 0.1  |      
|Cash and equivalents            |                          |   | 53       |        |             |  | 0.2  |       |   |   | 67     |        |  |  | 0.3  |      
|                                |                          |   |          |        |             |  |      |       |   |   |        |        |  |  |      |      
|                                | Total                    |   | $        | 24,554 |             |  |      | 100.0 | % |   | $      | 24,346 |  |  |      | 100.0 | %
|                                |                          |   |          |        |             |  |      |       |   |   |        |        |  |  |      |      

Subsequent to March 31, 2003, we increased our non-insurance subsidiaries
investments in common stocks that pay dividends by approximately $200.

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 March 31, 2003 the
average quality rating of our bond portfolio was A. We monitor the overall
credit quality of our portfolio within internal investment guidelines. This
table describes our debt security portfolio by credit rating at March 31, 2003.

|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |      |       |   |  | 
|------ |  | ------------------ |  | --------- | ------ | ----- |  | -------- | ------ | -------- |  | - | ------ |  |  | ---- | ----- | - |  | 
|       |  | S&P or             |  |           |        |       |  |          |        |          |  |   |        |  |  | % of
|SVO    |  | Equivalent         |  | Amortized |        | Fair  |  | Carrying |        | Carrying
|Rating |  | Designation        |  | Cost      |        | Value |  | Value    |        | Value   
|       |  |                    |  |           |        |       |  |          |        |         
|1      |  | AAA                |  | $         | 4,649  |       |  | $        | 4,943  |          |  | $ | 4,939  |  |  |      | 25.0  | %
|1      |  | AA                 |  |           | 1,832  |       |  |          | 1,988  |          |  |   | 1,969  |  |  |      | 10.0  | %
|1      |  | A                  |  |           | 4,945  |       |  |          | 5,374  |          |  |   | 5,279  |  |  |      | 26.7  | %
|2      |  | BBB                |  |           | 5,894  |       |  |          | 6,287  |          |  |   | 6,193  |  |  |      | 31.3  | %
|3      |  | BB                 |  |           | 736    |       |  |          | 685    |          |  |   | 693    |  |  |      | 3.5   | %
|4      |  | B                  |  |           | 509    |       |  |          | 475    |          |  |   | 475    |  |  |      | 2.4   | %
|5      |  | CCC and lower      |  |           | 164    |       |  |          | 128    |          |  |   | 132    |  |  |      | 0.7   | %
|6      |  | In or near default |  |           | 81     |       |  |          | 73     |          |  |   | 75     |  |  |      | 0.4   | %
|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |      |       |   |  | 
|       |  | Total              |  | $         | 18,810 |       |  | $        | 19,953 |          |  | $ | 19,755 |  |  |      | 100.0 | %
|       |  |                    |  |           |        |       |  |          |        |          |  |   |        |  |  |      |       |   |  | 

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Limiting our bond exposure to any one creditor is another way we manage credit
risk. The following table lists our ten largest exposures to an individual
creditor in our bond portfolio as of March 31, 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.

|                             |  |                |  |                |    | 
|---------------------------- |  | -------------- |  | -------------- | -- | 
|Creditor                     |  | Sector         |  | Carrying Value
|                             |  |                |  |               
|General Electric             |  | Capital Goods  |  | $              | 93 | 
|Bank of America              |  | Banks          |  |                | 90 | 
|Wachovia                     |  | Banks          |  |                | 89 | 
|National Rural Utilities     |  | Utilities      |  |                | 88 | 
|U. S. Bancorp                |  | Banks          |  |                | 88 | 
|Citigroup                    |  | Banks          |  |                | 87 | 
|Scana                        |  | Utilities      |  |                | 86 | 
|Burlington Northern Santa Fe |  | Transportation |  |                | 86 | 
|Verizon Communications       |  | Communications |  |                | 85 | 
|Wells Fargo & Company        |  | Banks          |  |                | 85 | 

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.

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.

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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.

Below Investment Grade Securities

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

The following table shows the ten largest below investment grade debt security
exposures by individual issuer at March 31, 2003.

|                           |  |                   |  |      |    |           |  |             |    |            |  |  |     |       |  | 
|-------------------------- |  | ----------------- |  | ---- | -- | --------- |  | ----------- | -- | ---------- |  |  | --- | ----- |  | 
|                           |  |                   |  |      |    |           |  |             |    |            |  |  |     | Gross
|                           |  |                   |  |      |    | Amortized |  | Carrying    |    | Unrealized
|Creditor                   |  | Sector            |  | Cost |    | Value     |  | Gain/(Loss)
|                           |  |                   |  |      |    |           |  |            
|El Paso                    |  | Utilities         |  | $    | 65 |           |  | $           | 56 |            |  |  | ($9 | )    
|Rite Aid                   |  | Consumer Cyclical |  |      | 49 |           |  |             | 43 |            |  |  | (6  | )    
|Ahold, Royal               |  | Consumer Cyclical |  |      | 45 |           |  |             | 40 |            |  |  | (6  | )    
|Qwest Communications       |  | Communications    |  |      | 44 |           |  |             | 37 |            |  |  | (7  | )    
|Williams Companies         |  | Utilities         |  |      | 35 |           |  |             | 34 |            |  |  | (1  | )    
|Intertape Polymer Group    |  | Basic Materials   |  |      | 35 |           |  |             | 33 |            |  |  | (2  | )    
|Thomas & Betts Company     |  | Capital Goods     |  |      | 28 |           |  |             | 27 |            |  |  | (1  | )    
|Carolina Tractor Equipment |  | Capital Goods     |  |      | 25 |           |  |             | 26 |            |  |  | 2   |      
|American Airlines          |  | Transportation    |  |      | 25 |           |  |             | 25 |            |  |  | 0   |      
|Allied Waste               |  | Utilities         |  |      | 25 |           |  |             | 22 |            |  |  | (3  | )    

Bonds of these issuers 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 March 31, 2003 and December 31, 2002, below investment grade bonds were
$1,373 or 7.0% and $1,285 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.

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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.

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 March 31, 2003.

|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |        | 
|---------------------------------------------------------------------------------------------------- | ------------------------- | - | --------- | ------ | ---------- | - | ---------- | ----- | ----- | - | -------- | ---- | - | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                                     |                           |   |           |        |            |   | Gross      |       | Gross |   |          |      |   |   |        |        | 
|                                                                                                     |                           |   | Amortized |        | Unrealized |   | Unrealized |       | Fair  |   | Carrying
|                                                                                                     |                           |   | Cost      |        | Gains      |   | Losses     |       | Value |   | Value   
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |         
|Available-for-sale, carried at fair
value:                                                           |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|US Treasury obligations and direct
obligations of US Government
agencies                             |                           | $ | 330       |        |            | $ | 28         |       |       | $ |         |      |   | $ | 358    |        |  | $ | 358    |       
|Federal agency mortgage backed
securities (including collateralized
mortgage obligations)            |                           |   | 3,013     |        |            |   | 193        |       |       |   |         |      |   |   | 3,206  |        |  |   | 3,206  |       
|Obligations of states and political
subdivisions                                                     |                           |   | 78        |        |            |   | 6          |       |       |   |         |      |   |   | 84     |        |  |   | 84     |       
|Corporate obligations                                                                                |                           |   | 10,825    |        |            |   | 821        |       |       |   | (190     | )    |   |   | 11,456 |        |  |   | 11,456 |       
|Corporate private-labeled mortgage
backed securities (including
collateralized mortgage obligations) |                           |   | 1,598     |        |            |   | 89         |       |       |   | (3       | )    |   |   | 1,684  |        |  |   | 1,684  |       
|Redeemable preferred stock                                                                           |                           |   | 24        |        |            |   | 1          |       |       |   |         |      |   |   | 25     |        |  |   | 25     |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|                                                                                                     | Subtotal, debt securities |   |           | 15,868 |            |   |            | 1,138 |       |   |          | (193 | ) |   |        | 16,813 |  |   |        | 16,813 | 
|Non-redeemable preferred stock                                                                       |                           |   | 1         |        |            |   | 1          |       |       |   |         |      |   |   | 2      |        |  |   | 2      |       
|Common stock                                                                                         |                           |   | 45        |        |            |   | 349        |       |       |   | (3       | )    |   |   | 391    |        |  |   | 391    |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Securities available-for-sale                                                                        |                           |   | 15,914    |        |            |   | 1,488      |       |       |   | (196     | )    |   |   | 17,206 |        |  |   | 17,206 |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Held-to-maturity, carried at
amortized cost:                                                         |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Obligations of state and political
subdivisions                                                      |                           |   | 10        |        |            |   | 1          |       |       |   |         |      |   |   | 11     |        |  |   | 10     |       
|Corporate obligations                                                                                |                           |   | 2,932     |        |            |   | 232        |       |       |   | (35      | )    |   |   | 3,129  |        |  |   | 2,932  |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Debt securities held-to-maturity                                                                     |                           |   | 2,942     |        |            |   | 233        |       |       |   | (35      | )    |   |   | 3,140  |        |  |   | 2,942  |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       
|Total AFS and HTM securities                                                                         |                           | $ | 18,856    |        |            | $ | 1,721      |       |       | $ | (231     | )    |   | $ | 20,346 |        |  | $ | 20,148 |       
|                                                                                                     |                           |   |           |        |            |   |            |       |       |   |          |      |   |   |        |        |  |   |        |       

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 will impact values we ultimately realize.
Gross unrealized gains and losses at December 31, 2002 were $1,716 and $(290).

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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 March 31, 2003:

|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |       |        | 
|---------------------------------------------------------------------------- | --------------------- | ----- | ----- | --------- | ------ | ---------- | --- | ---------- | ----- | ----- | --- | -------- | ---- | - | ----- | ----- | ------ |  | ----- | ----- | ------ | 
|                                                                             |                       |       |       |           |        |            |     | Gross      |       | Gross |     |          |      |   |       |       |        | 
|                                                                             |                       |       |       | Amortized |        | Unrealized |     | Unrealized |       | Fair  |     | Carrying
|                                                                             |                       |       |       | Cost      |        | Gains      |     | Losses     |       | Value |     | Value   
|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |         
|Industrials                                                                  |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |      
|                                                                             | Basic Materials       |       | $     | 1,135     |        |            | $   | 68         |       |       | $   | (20      | )    |   | $     | 1,183 |        |  | $     | 1,163 |       
|                                                                             | Capital Goods         |       |       | 891       |        |            |     | 60         |       |       |     | (11      | )    |   |       | 940   |        |  |       | 932   |       
|                                                                             | Communications        |       |       | 516       |        |            |     | 45         |       |       |     | (17      | )    |   |       | 544   |        |  |       | 537   |       
|                                                                             | Consumer Cyclical     |       |       | 1,944     |        |            |     | 141        |       |       |     | (29      | )    |   |       | 2,056 |        |  |       | 2,018 |       
|                                                                             | Consumer Non-Cyclical |       |       | 1,194     |        |            |     | 100        |       |       |     | (4       | )    |   |       | 1,290 |        |  |       | 1,269 |       
|                                                                             | Energy                |       |       | 1,132     |        |            |     | 73         |       |       |     | (12      | )    |   |       | 1,193 |        |  |       | 1,185 |       
|                                                                             | Technology            |       |       | 145       |        |            |     | 9          |       |       |     | (1       | )    |   |       | 153   |        |  |       | 148   |       
|                                                                             | Transportation        |       |       | 724       |        |            |     | 66         |       |       |     | (49      | )    |   |       | 741   |        |  |       | 735   |       
|                                                                             | Other Industrials     |       |       | 465       |        |            |     | 41         |       |       |     |         |      |   |       | 506   |        |  |       | 503   |       
|Utilities                                                                    |                       |       | 2,833 |           |        |            | 215 |            |       |       | (59 | )        |      |   | 2,989 |       |        |  | 2,950 |      
|Financials                                                                   |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |      
|                                                                             | Banks                 |       |       | 1,640     |        |            |     | 159        |       |       |     | (13      | )    |   |       | 1,786 |        |  |       | 1,760 |       
|                                                                             | Insurance             |       |       | 369       |        |            |     | 25         |       |       |     | (2       | )    |   |       | 392   |        |  |       | 389   |       
|                                                                             | Other Financials      |       |       | 1,210     |        |            |     | 88         |       |       |     | (8       | )    |   |       | 1,290 |        |  |       | 1,276 |       
|Mortgage Backed Securities
(including Commercial Mortgage Backed
Securities) |                       |       | 4,612 |           |        |            | 281 |            |       |       | (3  | )        |      |   | 4,890 |       |        |  | 4,890 |      
|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |      
|                                                                             |                       | Total |       | $         | 18,810 |            |     | $          | 1,371 |       |     | $        | (228 | ) |       | $     | 19,953 |  |       | $     | 19,755 | 
|                                                                             |                       |       |       |           |        |            |     |            |       |       |     |          |      |   |       |       |        |  |       |      

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 March 31, 2003. The fair values of these
securities could fluctuate over the respective periods to maturity or any sale.

|                                          |          |       |     |           |       |       |     |            |       |          |     |      |      |   |     |       |       | 
|----------------------------------------- | -------- | ----- | --- | --------- | ----- | ----- | --- | ---------- | ----- | -------- | --- | ---- | ---- | - | --- | ----- | ----- | 
|                                          |          |       |     |           |       |       |     | Gross      |       |         
|                                          |          |       |     | Amortized |       | Fair  |     | Unrealized |       | Carrying
|                                          |          |       |     | Cost      |       | Value |     | Losses     |       | Value   
|                                          |          |       |     |           |       |       |     |            |       |         
|Due in one year or less                   |          | $     | 51  |           |       | $     | 42  |            |       | $        | (9  | )    |      | $ | 43  |      
|Due after one year through five years     |          |       | 399 |           |       |       | 359 |            |       |          | (40 | )    |      |   | 371 |      
|Due after five years through ten years    |          |       | 613 |           |       |       | 566 |            |       |          | (47 | )    |      |   | 576 |      
|Due after ten years through twenty years  |          |       | 643 |           |       |       | 548 |            |       |          | (95 | )    |      |   | 557 |      
|Due after twenty years                    |          |       | 297 |           |       |       | 272 |            |       |          | (25 | )    |      |   | 274 |      
|Amounts not due at a single maturity
date |          |       | 81  |           |       |       | 70  |            |       |          | (11 | )    |      |   | 70  |      
|                                          |          |       |     |           |       |       |     |            |       |          |     |      |      |   |     |      
|                                          | Subtotal |       |     | 2,084     |       |       |     | 1,857      |       |          |     | (227 | )    |   |     | 1,891 |      
|Redeemable preferred stocks               |          |       | 4   |           |       |       | 3   |            |       |          | (1  | )    |      |   | 4   |      
|                                          |          |       |     |           |       |       |     |            |       |          |     |      |      |   |     |      
|                                          |          | Total |     | $         | 2,088 |       |     | $          | 1,860 |          |     | $    | (228 | ) |     | $     | 1,895 | 
|                                          |          |       |     |           |       |       |     |            |       |          |     |      |      |   |     |      

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

|           |  |                    |  |           |       |       |  |            |       |            |  |            |       |          |  |       |      |            |  |  |       |   |  |   |       |  |  | 
|---------- |  | ------------------ |  | --------- | ----- | ----- |  | ---------- | ----- | ---------- |  | ---------- | ----- | -------- |  | ----- | ---- | ---------- |  |  | ----- | - |  | - | ----- |  |  | 
|           |  | S&P or             |  |           |       |       |  |            |       |            |  |            |       |          |  | Gross |      | % of Gross |  |  |       |  
|           |  | Equivalent         |  | Amortized |       | Fair  |  | % of       |       | Unrealized |  | Unrealized |       | Carrying
|SVO Rating |  | Designation        |  | Cost      |       | Value |  | Fair Value |       | Losses     |  | Losses     |       | Value   
|           |  |                    |  |           |       |       |  |            |       |            |  |            |       |         
|1          |  | AAA/AA/A           |  | $         | 417   |       |  | $          | 388   |            |  |            | 20.9  | %        |  | $     | (29  | )          |  |  | 12.7  | % |  | $ | 392   | 
|2          |  | BBB                |  |           | 668   |       |  |            | 623   |            |  |            | 33.5  | %        |  |       | (45  | )          |  |  | 19.8  | % |  |   | 632   | 
|3          |  | BB                 |  |           | 464   |       |  |            | 398   |            |  |            | 21.4  | %        |  |       | (66  | )          |  |  | 28.9  | % |  |   | 410   | 
|4          |  | B                  |  |           | 348   |       |  |            | 304   |            |  |            | 16.3  | %        |  |       | (44  | )          |  |  | 19.3  | % |  |   | 309   | 
|5          |  | CCC and lower      |  |           | 154   |       |  |            | 119   |            |  |            | 6.4   | %        |  |       | (35  | )          |  |  | 15.4  | % |  |   | 122   | 
|6          |  | In or near default |  |           | 37    |       |  |            | 28    |            |  |            | 1.5   | %        |  |       | (9   | )          |  |  | 3.9   | % |  |   | 30    | 
|           |  |                    |  |           |       |       |  |            |       |            |  |            |       |          |  |       |      |            |  |  |       |   |  |   |       |  |  | 
|           |  | Total              |  | $         | 2,088 |       |  | $          | 1,860 |            |  |            | 100.0 | %        |  | $     | (228 | )          |  |  | 100.0 | % |  | $ | 1,895 | 
|           |  |                    |  |           |       |       |  |            |       |            |  |            |       |          |  |       |      |            |  |  |       |   |  |   |       |  |  | 

The following table shows the bonds of individual creditors that have
unrealized losses of $10 or greater as of March 31, 2003. Bonds of the same
creditors that have unrealized gains are not included.

|                     |  |                |  |           |    |          |  |            |    |  |  |   |     |  
|-------------------- |  | -------------- |  | --------- | -- | -------- |  | ---------- | -- |  |  | - | --- | -
|                     |  |                |  | Amortized |    | Carrying |  | Unrealized
|Creditor             |  | Sector         |  | Cost      |    | Value    |  | Loss      
|                     |  |                |  |           |    |          |  |           
|P G & E              |  | Utilities      |  | $         | 27 |          |  | $          | 13 |  |  | $ | (14 | )
|Continental Airlines |  | Transportation |  |           | 36 |          |  |            | 28 |  |  |   | (13 | )
|Delta Airlines       |  | Transportation |  |           | 35 |          |  |            | 25 |  |  |   | (13 | )
|US Airways           |  | Transportation |  |           | 33 |          |  |            | 21 |  |  |   | (12 | )

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   |       | $ | 1,042 |       |            | $ | (155       | )    |            |  | 67.9 | %     |   | $ | 909 |      
|6 months  1 year  |       |   | 202   |       |            |   | (25        | )    |            |  | 11.0 | %     |   |   | 185 |      
|Less than 6 months |       |   | 844   |       |            |   | (48        | )    |            |  | 21.1 | %     |   |   | 801 |      
|                   |       |   |       |       |            |   |            |      |            |  |      |       |   |   |     |      
|                   | Total |   | $     | 2,088 |            |   | $          | (228 | )          |  |      | 100.0 | % |   | $   | 1,895 | 
|                   |       |   |       |       |            |   |            |      |            |  |      |       |   |   |     |      

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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 $228 gross
unrealized losses in the table above, approximately $85 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   |       | $ | 19    |     |            | $ | (6         | )   |            |  | 7.1  | %     |   | $ | 19 |    
|6 months  1 year  |       |   | 78    |     |            |   | (50        | )   |            |  | 58.8 | %     |   |   | 87 |    
|Less than 6 months |       |   | 71    |     |            |   | (29        | )   |            |  | 34.1 | %     |   |   | 72 |    
|                   |       |   |       |     |            |   |            |     |            |  |      |       |   |   |    |    
|                   | Total |   | $     | 168 |            |   | $          | (85 | )          |  |      | 100.0 | % |   | $  | 178 | 
|                   |       |   |       |     |            |   |            |     |            |  |      |       |   |   |    |    

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
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 ended March 31, 2003, we had other-than-temporary impairments
on bonds of $29 as compared to $13 for first quarter 2002. The individual
impairments in excess of $10, how they were measured, the circumstances giving
rise to the losses, and the impact those circumstances have on other material
investments we held at the time are as follows:



| |  |  | $16.6 write down related to passenger airline equipment
trust certificates due to continued difficulties in this industry. We are closely
monitoring all of our positions in the passenger airline industry
for indications that a loss in value could be other than
temporary.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The remainder of the write downs resulting from other-than-temporary
impairments ranged from $6 to less than $1.

For first quarter 2003, we incurred losses of $3 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.

36



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Mortgage Backed Securities

Mortgage backed securities (including Commercial Mortgage Backed Securities) at
March 31, 2003 and December 31, 2002, all of which are included in debt
securities available-for-sale, were as follows:

|                                                     |       |   |       |       |      |   |       |       | 
|---------------------------------------------------- | ----- | - | ----- | ----- | ---- | - | ----- | ----- | 
|                                                     |       |   | 2002  |       | 2001
|                                                     |       |   |       |       |     
|Federal agency issued mortgage backed securities     |       | $ | 3,206 |       |      | $ | 3,449 |      
|Corporate private-labeled mortgage backed securities |       |   | 1,684 |       |      |   | 1,938 |      
|                                                     |       |   |       |       |      |   |       |      
|                                                     | Total |   | $     | 4,890 |      |   | $     | 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. In first quarter 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 effect of these prepayments was an increase in investment income
in the first three months of 2003 by $7.5 after tax. 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 calculate our specific loan loss reserve. At March 31, 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 March 31, 2003 has been
limited to managing well-defined interest rate risks. Interest rate swaps
utilized in our asset/liability management strategy with a current notional
value of $321 and $278 were open as of March 31, 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.

37



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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. During the first three months of 2003, 10 year U.S. Treasury
rates decreased slightly.

External Trends and Forward Looking Information

With respect to external trends, general economic conditions, interest rate
risks, credit risks, environmental liabilities and 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 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 tax proposals on
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.

38



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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

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

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

39



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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, and there are no new material proceedings to report here.

Item 5. Other Information

Section 202 of the Sarbanes-Oxley Act of 2002 includes a requirement that we
disclose any pre-approval during the reporting period by our Audit committee of
any non-audit services to be performed by Ernst & Young LLP (E&Y), our external
auditor. Non-audit services are defined generally in the law as services other
than those provided in connection with an audit or a review of our financial
statements. It is not clear whether this section has yet become effective, but
we are providing the following information: No pre-approval of any non-audit
services to be performed by E&Y was given by our Audit Committee during the
first quarter of 2003.

E&Y also is performing limited other ongoing non-audit services.

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits. See Exhibit Index on
page 44.                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Reports on Form 8-K                                                                                                                                                                                                                                               
|   
|    |  | On April 29, 2003, Jefferson Pilot filed a report on Form 8-K, which
furnished under items 7 and 9 the press release, issued
April 28, 2003, reporting financial results for the first
quarter of 2003. The press release was filed as an exhibit to
the Form 8-K.

40



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##### 



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 May 15, 2002
| | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | By (Signature) /s/Reggie D. Adamson
(Name and Title) Reggie D. Adamson, Senior Vice President  Finance (Principal Accounting Officer)
Date May 15, 2002
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

41



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##### 



CERTIFICATION OF CEO PURSUANT TO RULE 13A-14 OR 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Stonecipher, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of
Jefferson-Pilot Corporation;                                                                                                                                                                                                                                         
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                  



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



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



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



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

/s/ David A. Stonecipher

David A. Stonecipher
Chief Executive Officer
May 15, 2003

42



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##### 



CERTIFICATION OF CFO PURSUANT TO RULE 13A-14 OR 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Theresa M. Stone, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of
Jefferson-Pilot Corporation;                                                                                                                                                                                                                                            
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                   
|
| | 4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



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



| | d) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | e) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



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

/s/ Theresa M. Stone

Theresa M. Stone
Chief Financial Officer
May 15, 2003

43



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##### 



EXHIBIT INDEX

ExhibitNumber
    
    Description99
    
    Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


44