UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the Fiscal Year Ended Commission File Number
December 31, 1993 1-5955
JEFFERSON-PILOT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
North Carolina 56-0896180
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
100 North Greene Street
Greensboro, North Carolina 27401
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, Including Area Code 910-691-3441
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on Which
Title of Each Class Registered
Common Stock (Par Value New York Stock Exchange
$1.25 per share) Midwest Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. Yes X No
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $2,300,158,000 at March 1, 1994.
Indicate the number of shares outstanding of each of the issuer's classes of
stock:
Class Outstanding at March 1, 1994
Common Stock (Par Value $1.25 per share) 48,809,713
(continued)
Documents Incorporated by Reference
Part I
Item 1. Business
(b) Financial Information about
Industry Segments Pages 48-49 of Annual Report to
Shareholders for the year
ended December 31, 1993.
Item 3. Legal Proceedings
Litigation Page 49 of Annual Report to
Shareholders for the year ended
December 31, 1993.
Part II.
Item 8. Financial Statements and
Supplementary Data Pages 29-49 of Annual Report
to Shareholders for the year
ended December 31, 1993.
Part III
Item 10. Directors and Executive
Officers of the Registrant
(a) Identification of Directors Information under the heading
"Election of Directors" of the
Proxy Statement to Shareholders
for the Annual Meeting to be
held May 2, 1994 (the "Proxy
Statement").
(e) Business Experience Information under the heading
"Election of Directors" of the
Proxy Statement.
Compliance with Section
16(a) (Insider Filings) Information under the heading
"Election of Directors" of the
Proxy Statement.
Item 11. Executive Compensation Information under the heading
"Executive Compensation" of
the Proxy Statement.
(continued)
Documents Incorporated by Reference (continued)
Item 12. Security Ownership of Certain
Beneficial Owners and
Management
(a) Security Ownership of Certain
Beneficial Owners Information under the heading
"Principal Shareholders" of the
Proxy Statement.
(b) Security Ownership by
Management Information under the heading
"Election of Directors" of the
Proxy Statement.
Item 13. Certain Relationships and Information under the heading
Related Transactions "Compensation Committee Inter-
locks and Insider Participation"
of the Proxy Statement.
Part IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on
Form 8-K
(a) 1. Financial Statements Pages 29-49 of Annual Report
to Shareholders for the year
ended December 31, 1993.
2. Financial Statement
Schedules Pages 35-49 of Annual Report
to Shareholders for the year
ended December 31, 1993.
3.(c) Exhibits Articles of Incorporation and
amendments thereto included in
Form 10-K for the year ended
December 31, 1991.
By-laws included in Form 10-K
for the year ended
December 31, 1992.
Rights Agreement dated August 1,
1988 included as Exhibit 1 to
Form 8-K dated August 5, 1988.
(continued)
Documents Incorporated by Reference (continued)
3.(c) Exhibits (continued) Employment contracts between
the Registrant and W. Roger Soles,
David A. Stonecipher, and
Kenneth C. Mlekush, included in
Form 10-K for the year ended
December 31, 1992.
Information under the heading
"Incentive and Reward" of the
Proxy Statement.
(continued)
TABLE OF CONTENTS
Part I -Page-
Item 1. Business I-1
Item 2. Properties I-11
Item 3. Legal Proceedings I-12
Item 4. Submission of Matters to a Vote
of Security Holders I-12
Part II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters II-1
Item 6. Selected Financial Data II-2
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations II-4
Item 8. Financial Statements and Supplementary
Data II-9
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure II-10
Part III
Item 10. Directors and Executive Officers of
Registrant III-1
Item 11. Executive Compensation III-4
Item 12. Security Ownership of Certain Beneficial
Owners and Management III-4
Item 13. Certain Relationships and Related
Transactions III-5
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K IV-1
Undertakings IV-1
Signatures IV-2
PART I
Item 1. Business.
(a) General Development of Business
Registrant was incorporated under the business laws of the State of North
Carolina in 1968 for the purpose of serving as a holding company with broad
powers to engage in business and to make investments. Registrant's principal
subsidiaries are: Jefferson-Pilot Life Insurance Company, Jefferson-Pilot
Fire & Casualty Company, Jefferson-Pilot Title Insurance Company and
Jefferson-Pilot Communications Company, all of Greensboro, North Carolina.
Through these and other subsidiaries, Registrant is primarily engaged in the
business of writing life, annuity, accident and health, property and casualty,
and title insurance, and in the business of operating radio and television
facilities.
Various states, including North Carolina, have enacted insurance holding
company legislation which requires the registration of, and periodic reporting
by insurance companies licensed to transact business within their respective
jurisdictions and which are controlled by other corporations. All of the
common stock of Jefferson-Pilot Life Insurance Company, Jefferson-Pilot Fire &
Casualty Company and Jefferson-Pilot Title Insurance Company is owned by
Jefferson-Pilot Corporation. They are, therefore, by statutory definition,
members of an "insurance holding company system", and have registered as such
under all applicable state statutes. In many instances, these state statutes
require prior approval by state insurance regulators of inter-corporate
transfers of assets (including prior approval of payment of extraordinary
dividends by insurance subsidiaries) within the holding company system.
I-1
(b) Financial Information about Industry Segments
Industry segment information is presented in Note 13, Segment Information
of the Notes to Consolidated Financial Statements, which note is incorporated
herein by reference.
Premiums derived from the principal products and services of Registrant's
insurance subsidiaries and revenues from the Communications segment for the
years ended December 31, 1993, 1992, and 1991 are as follows (in thousands):
1993 1992 1991
Life insurance segment:
Individual life and
annuity premiums $ 106,073 $ 99,431 $ 93,231
Group life premiums 64,337 65,741 65,664
Interest-sensitive
product considerations 63,353 57,954 55,133
Other considerations 6,433 6,908 16,341
Life premiums and other
considerations $ 240,196 $ 230,034 $ 230,369
Accident and health premiums 386,608 383,552 382,624
$ 626,804 $ 613,586 $ 612,993
========= ========= =========
Other insurance segment,
casualty and title
insurance premiums $ 43,044 $ 44,815 $ 45,270
========= ========= =========
Communications segment,
broadcast and media
services revenue $ 144,961 $ 129,734 $ 125,045
========= ========= =========
(c) Narrative Description of Business
The following is a brief description of the principal wholly-owned
subsidiaries of Registrant with a description of the principal products
provided and services rendered and the markets for, and methods of,
distribution of such products and services.
I-2
INSURANCE COMPANY SUBSIDIARIES
Jefferson-Pilot Life Insurance Company
Jefferson-Pilot Life was organized under the insurance laws of North
Carolina in 1890 and commenced business operations in 1903. It is authorized
to write insurance in 43 states, the District of Columbia, the Virgin Islands
and Puerto Rico.
The Company is primarily engaged in the writing of whole life, term, and
endowment policies on an individual ordinary basis and group life and group
accident and health insurance. Accident and health insurance is also written
on an individual basis. Approximately 13% of the ordinary life insurance in
force is on a participating basis; all group life is written on a non-
participating basis.
Life Insurance. Life policies offered include continuous and limited-pay
life and endowment policies, universal life-type and annuity contracts,
retirement income plans, and level and decreasing term insurance. On most
policies, accidental death and disability benefits are available in the form
of riders. At times, sub-standard risks are accepted at higher premiums. At
December 31, 1993, approximately 4.4% of the ordinary insurance in force,
including reinsurance ceded, was represented by sub-standard risks.
The Company markets its individual products through a general agency type
system utilizing career agents and home service agents, and through Individual
Marketing Organizations (IMO's). IMO's are intermediaries that sell financial
products and services through agents they have recruited. Thirty IMO's have
been appointed representing approximately 3,300 life insurance agents. Group
products are marketed through group brokers, career agents, and home service
agents. Individual health products are marketed through all of the Company's
sales forces and brokers.
I-3
The following table sets forth for the years ended December 31, 1993,
1992, and 1991, certain information relating to the life insurance operations
of Jefferson-Pilot Life:
1993 1992 1991
(Percent)
Voluntary terminations to mean
amount of life insurance policies
in force:
Whole life, endowment and term 8.1 8.9 10.5
Group life 19.4 4.2 13.3
Industrial life 3.1 3.4 3.5
Actual to expected mortality:
Whole life, endowment and term 38.4 36.7 38.0
Group life 95.9 90.8 85.4
Industrial life 45.4 45.7 48.7
Life insurance underwriting expense
(1) to premium income (2):
Industrial 84.9 89.1 81.6
Ordinary Life (4) 34.8 37.0 37.8
Annuities (4) 7.4 7.6 7.6
Credit life (3) N/A N/A 43.7
Group life 11.3 9.5 10.3
Group A & H 15.9 15.2 14.2
Credit A & H (3) N/A N/A 40.4
Other A & H 44.9 48.0 44.8
(1) Underwriting expense consists of commissions, general insurance
expenses, insurance taxes (other than income), licenses and fees,
and increase in loading on due and deferred premiums. NAIC basis.
(2) Does not include amounts received for supplementary contracts or
considerations for deposit administration funds. NAIC basis.
(3) The company no longer writes any form of credit insurance.
(4) 1991 percentages have been restated to report ordinary life and
annuity amounts separately.
I-4
Accident and Health Insurance. Jefferson-Pilot Life writes a major part
of its accident and health policies on a group basis. Of the individuals
covered during 1993, approximately 92.7% were written on a group basis and
7.3% on an individual basis. Group insurance is generally issued to employers
covering their employees and to associations covering their members.
The following table sets forth certain information on the NAIC basis with
regard to the operating results of the accident and health business of
Jefferson-Pilot Life for the years ended December 31, 1993, 1992, and 1991.
The allocation of net investment income and general expenses to accident and
health business has been made by the management of Jefferson-Pilot Life using
allocation methods believed reasonable:
1993 1992 1991
(In Thousands)
Premium Income:
Individual $ 28,248 $ 25,781 $ 24,022
Group 358,360 357,771 358,602
Total 386,608 $383,552 $382,624
Allocated Net Investment Income:
Individual $ 3,564 $ 3,216 $ 2,883
Group 26,982 26,811 26,467
Total 30,546 $ 30,027 $ 29,350
Claims and Reserve Increase:
Individual $ 17,772 $ 15,895 $ 13,955
Group 288,049 301,955 311,801
Total 305,821 $317,850 $325,756
Underwriting Expenses:
Individual $ 11,461 $ 11,164 $ 9,779
Group 55,935 53,218 47,650
Total 67,396 $ 64,382 $ 57,429
Net Income Before Income Taxes:
Individual $ 2,579 $ 1,938 $ 3,171
Group 41,358 29,409 25,618
Total $ 43,937 $ 31,347 $ 28,789
I-5
The following table sets forth certain underwriting information with
regard to the accident and health business of Jefferson-Pilot Life for the
years ended December 31, 1993, 1992 and 1991, on the NAIC basis:
1993 1992 1991
(Dollar Amounts In Thousands)
Net premiums written $387,084 $383,114 $388,994
Net premiums earned $387,000 $384,677 $386,892
Ratio of loss and
loss adjustment
expenses incurred to
earned premiums 79.11% 82.91% 84.26%
Ratio of underwriting
expenses incurred to
premiums written 17.42% 16.82% 15.80%
Combined loss and
expense ratio 96.53% 99.73% 100.06%
Underwriting margins $ 13,391 $ 1,320 $( 560)
Jefferson-Pilot Fire & Casualty Company
and
Jefferson-Pilot Title Insurance Company
Jefferson-Pilot Fire & Casualty Company, a North Carolina corporation
with its home office in Greensboro, North Carolina, and its wholly-owned
subsidiaries, Southern Fire & Casualty Company, a Tennessee corporation and
Jefferson-Pilot Property Insurance Company, a North Carolina Corporation, both
with their home offices in Greensboro, North Carolina, offer a full line of
fire, and property and casualty insurance, including homeowners, commercial
multiple peril, inland marine, worker's compensation, automobile and general
liability. Jefferson-Pilot Fire & Casualty Company is licensed in 14 states;
Southern Fire & Casualty Company is licensed in 13 states, and Jefferson-Pilot
Property Insurance Company is licensed in 4 states.
Jefferson-Pilot Title Insurance Company, Greensboro, North Carolina,
incorporated under the laws of North Carolina in 1962, is engaged in the
business of writing title insurance. It is licensed in 7 states.
I-6
Other Information Regarding Insurance Company Subsidiaries
Regulation. Jefferson-Pilot Life, Jefferson-Pilot Fire & Casualty,
Southern Fire & Casualty, Jefferson-Pilot Property and Jefferson-Pilot Title,
in common with other insurance companies, are subject to regulation and
supervision in the States in which they do business. Although the extent of
such regulation varies from state to state, generally the insurance laws of
the States concerned establish supervisory agencies with broad administrative
powers relating to the granting and revocation of licenses to transact
business, the licensing of agents, the approval of the forms of policies used,
the form and content of required financial statements, reserve requirements,
and, in general, the conduct of all insurance activities.
The Companies are also required under these laws to file detailed
annual reports with the supervisory agencies in the various states in which
they do business, and their business and accounts are subject to examination
at any time by such agencies. Under the rules of the National Association of
Insurance Commissioners and the laws of the State of North Carolina, these
Companies are examined periodically (usually at three-year intervals) by the
supervisory agencies of one or more of the states in which they do business.
Competition. All insurance subsidiaries of Registrant operate in a highly
competitive field which consists of a large number of stock, mutual and other
types of insurers. A large number of established insurance companies compete
in the states in which the Companies transact business. Many of these
competing companies are mutual companies, which are considered by some to have
an advantage because of the fact that such companies write participating
policies exclusively, under which profits may inure to the benefit of the
policyholder. Jefferson-Pilot Life provides participating policies which are
believed to be generally competitive with analogous policies offered by mutual
companies.
I-7
Employees. As of December 31, 1993, the insurance subsidiaries of the
Registrant employed approximately 3,000 agents and employees, in addition to
the 3,300 IMO agents mentioned previously.
COMMUNICATIONS COMPANY SUBSIDIARIES
Jefferson-Pilot Communications Company is a wholly-owned subsidiary of
Registrant and is a corporation organized under the laws of North Carolina,
with principal offices at 100 North Greene Street in Greensboro, North
Carolina. The Company owns and operates (i) VHF television station WBTV and
radio stations WBT and WBT-FM in Charlotte, North Carolina, (ii) radio
stations WQXI in Atlanta and WSTR-FM in Smyrna, Georgia, (iii) radio stations
KYGO and KYGO-FM in Denver and KWMX and KWMX-FM in Lakewood, Colorado, (iv)
radio stations WMRZ in South Miami, WLYF-FM in Miami, and WMXJ-FM in Pompano
Beach, Florida, (v) radio stations KSON and KSON-FM in San Diego, California,
(vi) a sports production and syndication business, and (vii) a co-op
advertising consulting business.
Jefferson-Pilot Communications Company of Virginia, a Virginia
corporation with principal offices at 5710 Midlothian Turnpike, Richmond,
Virginia, is a wholly-owned subsidiary of Jefferson-Pilot Communications Company
that owns and operates VHF television station WWBT in Richmond, Virginia.
WCSC, Inc., a South Carolina corporation with principal offices at
485 East Bay Street, Charleston, South Carolina, is a wholly-owned subsidiary
of Jefferson-Pilot Communications Company that owns and operates VHF television
station WCSC in Charleston, South Carolina.
Jefferson-Pilot Data Services, Inc., a North Carolina corporation, with
principal offices at 785 Crossover Lane, Memphis, Tennessee, is a wholly-owned
subsidiary of Registrant, and is engaged in data processing services and in
providing computer equipment, software, and services to broadcast stations,
advertising agencies, and station national sales representative clients.
I-8
Television Operations
The television stations owned and operated by Jefferson-Pilot
Communications Company and its subsidiaries are WBTV, Charlotte, North
Carolina; WWBT, Richmond, Virginia; and WCSC, Charleston, South Carolina.
WBTV, Channel 3, Charlotte, is affiliated with CBS under a Network
Affiliation Agreement expiring on December 31, 1998. Absent cancellation by
either party, the Agreement will be renewed for successive two-year periods.
An estimated 769,000* television homes view WBTV each week within the
Charlotte Television Market, which is ranked as the 30th* television market in
the nation by the Arbitron Ratings Company. Four other commercial television
stations are licensed to the Charlotte metropolitan area.
WWBT, Channel 12, Richmond, is affiliated with NBC under a Network
Affiliation Agreement expiring August 15, 1995. Absent cancellation by either
party, the Agreement will be renewed for successive two-year periods. An
estimated 475,000* television homes view WWBT each week within the Richmond
Television Market, which is ranked as the 61st* television market in the
nation. Four other commercial television stations are licensed to that market.
WCSC, Channel 5, Charleston, is affiliated with CBS under a Network
Affiliation Agreement expiring on December 31, 1998. Absent cancellation by
either party, the Agreement will be renewed for successive two-year periods.
An estimated 279,000* television homes view WCSC each week within the
Charleston Television Market, which is ranked as the 106th* television market
in the nation. Four other commercial television stations are licensed to
that market.
*Arbitron Ratings/Television, November, 1993.
I-9
Radio Operations
Jefferson-Pilot Communications Company owns and operates WBT and WBT-FM
in Charlotte, WQXI in Atlanta and WSTR-FM in Smyrna, KYGO and KYGO-FM in
Denver, KWMX and KWMX-FM in Lakewood (a Denver suburb), KSON and KSON-FM in
San Diego, WMRZ in South Miami, WLYF in Miami and WMXJ-FM in Pompano Beach.
Each of these stations is authorized to operate 24 hours a day, and all
normally operate for the full 24 hours.
Other Information Regarding Communications Companies
Competition. The radio and television stations of Jefferson-Pilot
Communications Company and its subsidiaries, Jefferson-Pilot Communications
Company of Virginia, and WCSC, Inc., compete for revenues with other radio
and television stations in their respective market areas as well as with other
advertising media. Jefferson-Pilot Communications Company's non-broadcast
divisions compete with other vendors of similar products and services.
Employees. As of December 31, 1993, Jefferson-Pilot Communications
Company and its subsidiaries employed approximately 625 persons full time,
and Jefferson-Pilot Data Services, Inc. employed approximately 225 persons.
Federal Regulation. Television and radio broadcasting operations are
subject to the jurisdiction of the Federal Communications Commission ("FCC")
under the Communications Act of 1934 (the "Act"). The Act empowers the FCC,
among other things, to issue, revoke or modify broadcasting licenses, to
assign frequencies, to determine the locations of stations, to regulate the
apparatus used by stations, to establish areas to be served, to adopt such
regulations as may be necessary to carry out the provisions of the Act, and to
impose certain penalties for violation of such regulations. The Act, and
Regulations issued thereunder, prohibit the transfer of a license, or of
I-10
control of a licensee without prior approval of the FCC; restrict in various
ways the common and multiple ownership of broadcast facilities; restrict alien
ownership of licenses; and impose various other strictures on ownership and
operation.
Broadcasting licenses are granted for a period of five years for
television and seven years for radio and, upon application therefor and in the
absence of conflicting applications or adverse claims as to the licensee's
qualifications or performance, are normally renewed by the FCC for an
additional term. The licenses currently in effect will expire as follows:
WBTV 12/1/96; WBT and WBT-FM 12/1/95; WQXI and WSTR-FM 4/1/96; KYGO AM/FM and
KWMX AM/FM 4/1/97; WMRZ, WLYF and WMXJ 2/1/96; KSON-AM/FM 12/1/97; WWBT
10/1/96; and WCSC 12/1/96.
(d) Foreign Operations
Substantially all of Registrant's and subsidiaries operations are
conducted within the United States.
Item 2. Properties
Registrant utilizes space and personnel of its wholly-owned subsidiary,
Jefferson-Pilot Life.
Jefferson-Pilot Life's home office consists of a 20-story building and
an adjacent 17-story building. These structures house insurance operations
and provide a substantial amount of space for commercial leasing.
Jefferson-Pilot Life also owns a supply and printing facility, a parking deck,
and a computer center, all located on nearby properties. The life insurance
company also owns 278 acres in Guilford County, North Carolina, near
Greensboro. This was the former home office of Pilot Life Insurance Company.
In addition, Jefferson-Pilot Life owns an Employees' Club located in north-
western Guilford County, North Carolina, with approximately 500 acres of land
surrounding the Club.
I-11
Jefferson-Pilot Communications Company owns its radio and television
studios and office buildings in Charlotte, North Carolina. It also owns the
radio studios and office buildings in Denver, Colorado and Miami, Florida.
The radio studios and offices are leased in Atlanta, Georgia and San Diego,
California, as are the television studios and offices in Charleston, South
Carolina. Jefferson-Pilot Communications Company of Virginia owns a television
studio and office building in Richmond, Virginia.
Item 3. Legal Proceedings
Environmental Proceedings
There are no material administrative proceedings against the Company
involving environmental matters.
Litigation
The Registrant is involved in various claims and lawsuits incidental to
its business. In the opinion of management, the ultimate liability will not
have a material effect on the financial condition of the Company.
Note 14, Commitments and Contingent Liabilities of the Notes to
Consolidated Financial Statements, contains further information and is
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
I-12
Part II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
(a) Market Information
Shares of Jefferson-Pilot Corporation are traded on the New York, Midwest,
and Pacific Stock Exchanges under the symbol JP. High and low sales
prices for the past three years are listed below.
1993 1992 1991
First Quarter 57 7/8 - 45 1/2 39 1/4 - 33 1/4 29 3/8 - 22 7/8
Second Quarter 57 3/4 - 46 44 - 35 1/2 29 7/8 - 27 5/8
Third Quarter 57 7/8 - 48 5/8 43 - 38 1/2 34 3/8 - 28 3/8
Fourth Quarter 54 - 45 3/4 49 1/2 - 37 1/8 39 1/8 - 32 1/2
(b) Number of Security Holders
As of March 2, 1994, the Registrant had 9,819 shareholders.
(c) Dividend History
1993 1992 1991 1990 1989
Cash dividends paid: $ 75,986 $ 66,310 $ 56,120 $ 53,139 $ 50,610
======== ======== ======== ======== ========
Cash dividends
paid per share:
First Quarter .34 .28 .25 .23 .21
Second Quarter .39 .34 .28 .25 .23
Third Quarter .39 .34 .28 .25 .23
Fourth Quarter .39 .34 .28 .25 .23
Total $ 1.51 $ 1.30 $ 1.09 $ .98 $ .90
======== ======== ======== ======== ========
II-1
Item 6. Selected Financial Data
SUMMARY OF SELECTED FINANCIAL DATA
(In Thousands Except Per Share Information)
1993 1992 1991 1990 1989
Operating income
before effect of
initial application
of FAS 106 $ 181,952 $ 171,240 $ 153,128 $ 138,962 $ 126,264
Accumulated post-
retirement benefit
obligation at
1-1-93, net (24,109) 0 0 0 0
Operating income 157,843 171,240 153,128 138,962 126,264
Realized investment
gains, net of appli-
cable income taxes 37,329 31,998 22,559 18,675 11,427
Net income $ 195,172 $ 203,238 $ 175,687 $ 157,637 $ 137,691
=========== =========== =========== =========== ===========
Income per share
of common stock:
Operating income
before effect of
initial application
of FAS 106 $ 3.62 $ 3.36 $ 2.98 $ 2.59 $ 2.23
Effect of initial
application of
FAS 106 (.48) .00 .00 .00 .00
Realized investment
gains, net of taxes .74 .63 .44 .35 .20
Net income $ 3.88 $ 3.99 $ 3.42 $ 2.94 $ 2.43
=========== =========== =========== =========== ===========
Average shares
outstanding 50,251,676 50,952,147 51,319,143 53,636,223 56,588,878
=========== =========== =========== =========== ===========
Total assets $ 5,640,621 $ 5,256,762 $ 4,945,396 $ 4,474,523 $ 4,543,474
=========== =========== =========== =========== ===========
Stockholders'
equity $ 1,733,071 $ 1,668,210 $ 1,544,461 $ 1,334,434 $ 1,456,109
=========== =========== =========== =========== ===========
Stockholders'
equity per share
of common stock $ 35.04 $ 33.07 $ 30.11 $ 25.77 $ 25.98
=========== =========== =========== =========== ===========
II-2
Selected Financial Data (continued)
Total assets prior to 1993 were adjusted to reflect the adoption of Financial
Accounting Standard (FAS) 113 "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts." The amounts shown for 1992 to
1989 were increased by $20,925,000, $20,176,000, $19,615,000, and $13,886,000,
respectively, compared to amounts previously reported.
Stockholders' equity was adjusted to reflect adoption of FAS 109 "Accounting
for Income Taxes." The amounts shown for 1992 to 1989 were all decreased by
$18,555,000 compared to amounts previously reported. Stockholders' equity per
share reflects these adjustments, also.
REVENUE BY SOURCES
(In Thousands)
1993 1992 1991 1990 1989
Life and accident and
health insurance $ 986,972 $ 965,862 $ 956,426 $ 946,262 $ 936,599
Casualty and
title insurance 51,462 53,907 53,472 55,164 50,307
Communications 144,961 129,734 125,045 127,330 126,990
Other 6,282 4,656 4,570 5,656 9,074
Realized investment
gains 56,947 48,170 33,963 28,201 17,228
Revenues $1,246,624 $1,202,329 $1,173,476 $1,162,613 $1,140,198
========== ========== ========== ========== ==========
NET INCOME BY SOURCES
(In Thousands)
1993 1992 1991 1990 1989
Life and accident and
health insurance $ 158,242 $ 156,588 $ 146,205 $ 128,153 $ 109,329
Casualty and
title insurance 7,957 7,027 2,554 6,232 4,927
Communications 17,335 14,169 10,327 10,019 12,505
Other ( 1,582) ( 6,544) ( 5,958) ( 5,442) ( 497)
Realized investment
gains, net of taxes 37,329 31,998 22,559 18,675 11,427
Accumulated post-
retirement benefit
obligation, net ( 24,109) 0 0 0 0
Net income $ 195,172 $ 203,238 $ 175,687 $ 157,637 $ 137,691
========== ========== ========== ========== ==========
II-3
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity
The Company's liquidity requirements are met primarily by cash flows
from the operations of Jefferson-Pilot Life Insurance Company (JPLIFE) and
other consolidated subsidiaries. Primary sources of cash from subsidiary
operations are premiums, other insurance considerations, investment income and
communications revenue. Primary uses of cash in subsidiary operations include
payment of insurance benefits, operating expenses and costs related to
acquiring new insurance business. Net cash provided by operations on a
consolidated basis approximated $160 million, $156 million and $177 million in
1993, 1992 and 1991, respectively.
Dividends paid to the parent company approximated $103 million in 1993,
$128 million in 1992 and $129 million in 1991. While all significant
subsidiaries generally pay dividends to the parent company, JPLIFE continues
to be its primary source of dividends, and therefore of cash. Dividends that
the insurance subsidiaries may pay without prior regulatory approval are
subject to statutory limitation. In addition, life insurance companies became
subject to risk-based capital requirements beginning in 1993. Neither of
these factors are expected to represent practical restrictions on the dividend
payment practices or other activities of the parent company in the foreseeable
future.
Proceeds from maturities, redemptions and sales of debt securities,
mortgage loan repayments and proceeds from sales of equity securities are the
primary sources of cash from investing activities. Continuing a trend related
to overall interest rate declines, issuer calls and prepayments increased in
1993. This circumstance, combined with scheduled maturities and sales of
certain debt securities expected to be called, resulted in cash proceeds from
debt securities transactions approximating $940 million in 1993, compared to
$375 million in 1992 and $266 million in 1991. Scheduled maturities for 1994
are less than the levels experienced in the three most recent years. While
prediction of future calls and prepayments is complicated by interest rate
uncertainties, the Company expects them to continue at some level during 1994.
Net cash used in investing activities approximated $400 million in 1993,
$221 million in 1992 and $228 million in 1991. Reflected for each year are
reinvestment of the proceeds from investment transactions, investment of net
proceeds from JPLIFE's policyholder contract deposits and investment of net
cash provided by current operating activities over that used to pay
stockholder dividends and reacquire the Company's common stock. During 1993,
the Company also redirected certain short-term investments, primarily cash
equivalents, into longer duration investments.
The Company continues to select investments based on a disciplined
strategy focused on long-term performance objectives. Consistent with that
strategy, investments acquired during 1993 consisted primarily of investment
II-4
grade debt securities, mortgage loans of quality and diversification
comparable to those previously held, and common stock issues offering
acceptable relationships between risk and potential total return. Continuing
a three-year trend, the Company increased its investment in new mortgage loans
during 1993 to approximately $86 million, compared to $60 million in 1992 and
$41 million in 1991. The trend reflects an increase in lending opportunities
that are acceptable under the Company's standards. The cost of common stock
investments acquired in 1993 approximated $65 million. This increase over
1992 and 1991 levels is primarily due to a dividend-roll program. Provision
has been made for declines in value of debt securities considered other than
temporary and for estimated unrecoverable amounts related to the mortgage loan
portfolio. Debt securities and mortgage loans representing credit problems
continue to fall below industry averages.
The Company's overall investment management strategy encompasses both
internal objectives and external circumstances. Its business plan emphasizes
growth of the life insurance and other core businesses, achievement of which
will require investment of liquid resources. The Company monitors and
evaluates securities market conditions and specific external circumstances
that may impact individual investment holdings. Asset/liability management
strategies may require action in response to such factors as interest rate
changes and the effect thereof on prepayment risk. The above-described
factors may result in future sales of selected debt securities prior to
maturity. In connection with a process begun in 1993, and continuing into
1994, the Company expects that a significant portion of its debt securities
will be designated as available for sale in response to these factors. In the
first quarter of 1994, the Company will adopt SFAS 115. Under SFAS 115, all
equity securities and debt securities classified as available for sale will be
stated at value in the consolidated balance sheets. Since classification of
the Company's debt securities is not complete, the effect of SFAS 115 on the
stated amount of debt securities and the corresponding effects on deferred
income tax liabilities, equity and other balance sheet amounts have not yet
been determined. Adoption of SFAS 115 will increase the stated amount of
equity securities held by the parent company as of January 1, 1994 by $70
million, with associated increases of $28 million in deferred income tax
liabilities and $42 million in stockholders' equity.
During 1993, the Company utilized an uncommitted bank line of credit in
application of its asset/liability management strategies. The line permits the
Company to request aggregate advances totaling up to $100 million until
October 1994. Maximum utilization of the line approximated $40 million during
the year and interest expense was not material. Management expects to
increase the utilization of external financing sources as considered
appropriate and consistent with its investment management and growth
strategies.
The Company has historically reacquired its own common stock whenever
management considers it prudent. Cash used in connection with that strategy
approximated $51 million in 1993, $36 million in 1992 and $18 million in 1991.
The Company expects to continue reacquiring its common stock when considered
appropriate, with the extent of those acquisitions to be determined based on
securities market conditions and other relevant factors.
II-5
Capital Resources
Consolidated stockholders' equity as of December 31, 1993 amounted to
$1.733 billion, compared to $1.668 billion in 1992 and $1.544 billion in 1991
as restated for the effect of adopting SFAS 109 on deferred income tax
liabilities. After tax unrealized gains on equity securities included in the
preceding amounts approximated $332 million in 1993, $335 million in 1992 and
$311 in 1991. The Company regards the regulatory capital status of its
insurance subsidiaries, with due consideration to the risk-based capital
requirements which became effective for life insurance companies in 1993, to
be extremely strong. Management considers existing capital resources to be
adequate for the Company's present needs and its business plan places
priority on redirecting capital resources presently considered under-utilized
into more productive business activities.
The Company has no outstanding long-term debt and is not a party to an
agreement under which significant long-term financing might be provided by an
outside party in the future. The Company leases data processing equipment and
field office locations, generally under noncancelable lease terms of three to
five years. Financing and capital resources considerations are not critical
to the decision making process involving leasing activities.
Cash dividends to stockholders amounted to $78.1 million in 1993, $69.1
million in 1992 and $57.4 million in 1991. The Company has consistently
returned cash dividends to its stockholders and expects to continue to do so
in the future. Capital resources requirements are not expected to represent
practical restrictions on future dividend payment plans.
Results of Operations - 1993 Compared to 1992
Premiums and other insurance considerations increased by $11.4 million
in 1993, to approximately $670 million. The 1993 growth is attributable to
individual life premiums and related considerations which increased by 8% over
1992 amounts and improved upon a recent annual growth trend of less than 2%
per year. The increase results from implementation of various aspects of the
Company's current business plan. Accident and health and casualty and title
premiums remained substantially stable during 1993, with the former increasing
and the latter decreasing modestly. Net investment income increased by $8.7
million (2.4%) during 1993, with the increase in the debt securities
investment base offsetting the effects of a lower interest rate environment.
Communications revenue increased by $15.2 million over 1992, to about $145
million, due primarily to a combination of the improved economic environment
and measures taken to strengthen the market position of certain broadcast
properties, including acquisitions in new and previously existing markets.
Realized investment gains increased to $56.9 million in 1993, compared to
$48.2 million in 1992, with call premiums and gains from sales of debt
securities expected to be called more than offsetting a provision for other
than temporary decline in value of certain debt securities ($8 million) and
reduced gains on sales of common stocks.
Life insurance benefits and other credits to policyholders increased
from $279 million in 1992 to $296 million in 1993 (6%), with much of the
II-6
increase attributable to interest credited on interest-sensitive products.
Accident and health benefits continued to decline, decreasing from
approximately $318 million in 1992 to approximately $306 million in 1993 and
reflect the continued emphasis on underwriting and claims management
effectiveness. Casualty and title claims decreased by about $2 million in
1993, as reinsurance recoveries on incurred losses more than offset an
increase in incurred losses before reinsurance.
Expenses other than those related to communications operations remained
basically flat in 1993 as compared to 1992, reflecting the ongoing benefit of
the Company's containment program. A significant consolidation of field
offices undertaken in 1993 helped to reduce field office expenses for the year
in addition to improving marketing efficiency. Expenses of the communications
businesses increased by approximately $12 million due primarily to promotional
expenses incurred to strengthen market position, charges related to aged
syndicated programming and operating costs of newly acquired properties.
Income taxes as a percent of before tax income increased to 31.9% in
1993, compared to 28.8% in 1992. The increase resulted from a combination of
an increase in the federal tax rate (from 34% to 35%) prescribed by the 1993
Act and the beneficial effect on 1992 income taxes of recoveries and
reductions of previously provided amounts related to prior tax assessments.
Consolidated net income for 1993 reflects a charge of $24.1 million, net
of deferred tax benefit, for the cumulative effect of adopting SFAS 106, which
required the Company to provide for the cost of postretirement health care and
life insurance benefits provided to retirees during the period of their
service to the Company instead of on a cash basis after their retirement. The
amount of this charge is consistent with the Company's previously reported
estimate.
Before the cumulative effect charge, consolidated after-tax income
increased by approximately $16 million during 1993, to $219.3 million. Each
of the Company's significant business activities made some contribution to the
current year increase. Approximate increases by major business activity,
exclusive of realized investment gains were as follows: life and accident and
health insurance $2 million, casualty and title insurance $1 million,
communications $3 million, and corporate level activities $5 million
(primarily through expense reductions). The balance of the 1993 increase in
consolidated pre-SFAS 106 income ($5 million) is attributable to the increase
in realized investment gains.
Results of Operations - 1992 Compared to 1991
Premiums and other insurance considerations were $658 million in both
1992 and 1991, with revenue from life, accident and health and other insurance
products remaining substantially stable. Net investment income for 1992
increased by $8.1 million over 1991, due primarily to increased investment in
debt securities. Revenue from communications operations increased by $4.7
million, to $129.7 million during 1992 due to overall improvement in
advertising market conditions and the 1992 elections. Call premiums on debt
securities and an increase of $20.3 million in gains from sales of common
stocks contributed to a net increase in realized investment gains of $14.2
million, to $48.2 million, during 1992.
II-7
Insurance benefits decreased 2.4% from $642.5 million in 1991 to $627.1
million in 1992. The primary contributing factors were a reduction in
surrender benefits of $8.7 million and a reduction in casualty benefits of
$6.6 million. The reduction in surrender benefits during 1992 continued a
trend which began in 1985, and was favorably affected by declining interest
rates. The reduction in casualty benefits reflects an improvement in loss
experience, which was due in part to more selective underwriting practices.
Increases in general and administrative expenses of the insurance businesses
and communications operating expenses during 1992 were modest, reflecting
ongoing aggressive expense management. Effective income tax rates for 1992
and 1991 were consistent, with each year benefitting from recoveries of
amounts paid and reductions of amounts previously provided for prior year tax
assessments.
On a consolidated basis, net income increased from $175.7 million in
1991 to $203.2 million in 1992 ($27.5 million). Each of the Company's
principal business activities contributed to the increase in net income, with
net income from the core business of life and accident and health insurance
increasing by $10.4 million, net income from other insurance operations
increasing by $4.5 million and net income from communications operations
increasing by $3.8 million. The balance of the increase in net income during
1992 is attributable to realized investment gains.
II-8
Item 8. Financial Statements and Supplementary Data
<TABLE>
MANAGEMENT'S PRESENTATION OF QUARTERLY FINANCIAL DATA
Jefferson-Pilot Corporation and Subsidiaries
(In Thousands Except Per Share Information)
<CAPTION>
1993
March June September December
31 30 30 31
<S> <C> <C> <C> <C>
Revenues, including net investment income
and realized gains on investments $306,716 $308,060 $302,672 $329,176
Benefits and expenses 234,805 231,351 223,818 234,619
Provision for income taxes 21,976 24,468 26,380 29,926
Accumulated postretirement benefit
obligation, net (24,109) 0 0 0
Net income $ 25,826 $ 52,241 $ 52,474 $ 64,631
======== ======== ======== ========
Per share $ .51 $ 1.04 $ 1.04 $ 1.30
======== ======== ======== ========
1992
March June September December
31 30 30 31
Revenues, including net investment income
and realized gains on investments $299,985 $296,146 $299,609 $306,589
Benefits and expenses 230,961 229,156 229,143 227,443
Provision for income taxes 19,765 18,730 21,406 22,487
Net income $ 49,259 $ 48,260 $ 49,060 $ 56,659
======== ======== ======== ========
Per share $ .96 $ .94 $ .96 $ 1.12
======== ======== ======== ========
1991
March June September December
31 30 30 31
Revenues, including net investment income
and realized gains on investments $290,964 $290,756 $289,989 $301,768
Benefits and expenses 234,207 228,563 232,420 233,520
Provision for income taxes 15,224 18,520 15,170 20,167
Net income $ 41,533 $ 43,673 $ 42,399 $ 48,081
======== ======== ======== ========
Per share $ .81 $ .85 $ .83 $ .94
======== ======== ======== ========
</TABLE>
II-9
Financial statements and notes included on pages 29 through 49 of
the Annual Report of Jefferson-Pilot Corporation to its shareholders for
the year ended December 31, 1993, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
II-10
Part III
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors
The information included under the heading "Election of Directors,"
of the Proxy Statement of Jefferson-Pilot Corporation to its shareholders,
in connection with the Annual Meeting to be held on May 2, 1994 (the "Proxy
Statement"), is incorporated herein by reference. Louis C. Stephens, Jr.,
age 72, whose term as a director will expire at the May 2, 1994 Annual
Meeting of Shareholders (the "Annual Meeting"), has served as a director
since 1970. Mr. Stephens is not currently serving in another position or
office with Jefferson-Pilot Corporation. There are no arrangements or
understandings between any director and any other person pursuant to which
such director was or is to be selected as a director or nominee.
(b) Identification of Executive Officers
The following is a list of Jefferson-Pilot Corporation executive
officers, their ages and positions, as of March 7, 1994:
Name Age Position (Date elected to position)
David A. Stonecipher 52 President and Chief Executive Officer
(March 1, 1993); Director
William E. Blackwell 61 Executive Vice President
(May 5, 1986); Director
C. Randolph Ferguson 48 Senior Vice President
(May 1, 1989); Director
Dennis R. Glass 44 Senior Vice President, Chief
Financial Officer and Treasurer
(October 18, 1993)
John D. Hopkins 56 Senior Vice President and General
Counsel (April 19, 1993);
Secretary (January 1, 1994)
III-1
Kenneth C. Mlekush 55 Senior Vice President
(February 8, 1993)
John T. Still, III 46 Senior Vice President - Corporate
Development (May 5, 1986)
E. Jay Yelton 54 Senior Vice President
(October 18, 1993)
Dean F. Chatlain 43 Vice President and Tax Counsel
(February 13, 1989)
Gary L. McGuirk 49 Vice President - Internal Auditing
(January 1, 1992)
Jimmy W. Shoffner 55 Vice President and Assistant
Treasurer (May 4, 1992)
J. Allen Wyatt 48 Vice President - Corporate Planning
(May 1, 1989)
There are no arrangements or understandings between any executive officer
and any other person pursuant to which such executive officer was or is to
be selected as an officer. All executive officers hold office at the will
of the Board.
(c) Identification of Certain Significant Employees
None.
(d) Family Relationships
There are no family relationships among the officers, directors or
nominees.
(e) Business Experience
Directors and Nominees - The information included under the heading
"Election of Directors," of the Proxy Statement is incorporated herein by
reference. Louis C. Stephens, Jr., whose term as a director will expire
at the Annual Meeting, has been retired since December, 1986. Prior
thereto, he served as Vice President of Jefferson-Pilot Corporation and
President of Pilot Life Insurance Company.
III-2
Executive Officers - Messrs. Blackwell, Ferguson, Still, Chatlain,
and McGuirk have served in various executive capacities with
Jefferson-Pilot Corporation over the past five years. Information on
Mr. Stonecipher, set forth under the heading "Election of Directors" of
the Proxy Statement, is incorporated herein by reference. For the past
five years, Mr. Wyatt has served in various executive capacities with
either Jefferson-Pilot Corporation or Jefferson-Pilot Life Insurance
Company (wholly-owned by Jefferson-Pilot Corporation). For the past five
years, Mr. Shoffner has served in various executive capacities with
Jefferson-Pilot Life Insurance Company. Mr. Glass joined Jefferson-Pilot
Corporation in October, 1993. From 1991 to October, 1993, he was associated
with Protective Life Corp., having last served as Executive Vice President
and CFO of that company. From 1983 to 1991, he was associated with
The Portman Companies, having last served that company as Executive Vice
President and CFO. Mr. Hopkins joined Jefferson-Pilot Corporation in
April, 1993 and for more than five years prior thereto was a partner in the
Atlanta law firm of King & Spalding. Mr. Mlekush joined Jefferson-Pilot
Corporation in January, 1993. From February, 1989 until December, 1992,
he was associated with Southland Life Insurance Company and its parent,
GeorgiaUS, having last served as President and Chief Operating Officer
of Southland Life and Executive Vice President of GeorgiaUS. Prior to
February, 1989, he was associated with Sun Life Insurance Company of
America, Inc., having last served as Senior Vice President-Marketing.
Mr. Yelton joined Jefferson-Pilot Corporation in October, 1993 and for
more than five years prior thereto was President of The Investment Centre.
III-3
(f) Involvement in Certain Legal Proceedings
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability or integrity of any executive officer, director or nominee during the
past five years.
Compliance With Section 16(a)
Information under the heading "Election of Directors," of the Proxy
Statement, relating to delinquent filers under Section 16(a) of the Exchange
Act of 1934, is incorporated herein by reference.
Item 11. Executive Compensation
The information included under the heading "Executive Compensation" of
the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The information included under the heading "Principal Shareholders" of
the Proxy Statement is incorporated herein by reference.
(b) Security Ownership by Management
Information included under the heading "Election of Directors" of the
Proxy Statement is incorporated herein by reference. In addition, the
following table sets forth information regarding the ownership of Jefferson-
Pilot Corporation's common stock, as of March 7, 1994, by named executive
officers who are not currently acting as directors:
III-4
Name of Beneficial Amount and Nature of
Owner Beneficial Ownership Percent of Class
W. Roger Soles 113,943 **
Kenneth C. Mlekush 25,420* **
John D. Hopkins 25,500* **
Thomas Fee 41,286 **
*The number of shares owned for each of Messrs. Mlekush and Hopkins assumes
that options held by each of them covering shares of common stock in the
following amounts, which are exercisable within 60 days of March 7, 1994,
have been exercised: Mr. Mlekush - 25,000; Mr. Hopkins - 22,500.
**Less than one percent (1%) of the Corporation's outstanding common stock.
(c)Change in Control
The Company knows of no contractual arrangements which may at a
subsequent date result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions
The information included under the heading "Compensation Committee
Interlocks and Insider Participation" of the Proxy Statement is incorporated
herein by reference.
III-5
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) -- The responses to these portions of Item 14
are submitted as a separate section of this report. (See F-1.)
(3) - See List and Index of Exhibits on page F-18 of this report.
(b) There were no reports on Form 8-K for the three months ended
December 31, 1993.
(c) Exhibits are submitted as a separate section of this report.
(See F-18.)
(d) Financial Statement Schedules -- The response to this portion of
Item 14 is submitted as a separate section of this report. (See
F-1.)
Undertakings
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall
be incorporated by reference into registrant's Registration Statements on
Form S-8 Nos. 2-36778 (filed March 23, 1970) and 2-56410 (filed May 12, 1976)
and 33-30530 (filed August 15, 1989), and in outstanding effective
registration statements on Form S-16 included in such S-8 filings:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
IV-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JEFFERSON-PILOT CORPORATION
(Registrant)
BY (SIGNATURE) David A. Stonecipher
(NAME AND TITLE) David A. Stonecipher, President
(Principal Executive Officer)
BY (SIGNATURE) Dennis R. Glass
(NAME AND TITLE) Dennis R. Glass, Senior Vice
President and Treasurer
(Principal Financial Officer)
March 29, 1994
(DATE)
BY (SIGNATURE) Thomas M. Belk
(NAME AND TITLE) Thomas M. Belk, Director
DATE March 29, 1994
BY (SIGNATURE) William E. Blackwell
(NAME AND TITLE) William E. Blackwell, Director
DATE March 29, 1994
BY (SIGNATURE) Edwin B. Borden
(NAME AND TITLE) Edwin B. Borden, Director
DATE March 29, 1994
BY (SIGNATURE) William H. Cunningham
(NAME AND TITLE) William H. Cunningham, Director
DATE March 29, 1994
BY (SIGNATURE) C. Randolph Ferguson
(NAME AND TITLE) C. Randolph Ferguson, Director
DATE March 29, 1994
BY (SIGNATURE) Robert G. Greer
(NAME AND TITLE) Robert G. Greer, Director
DATE March 29, 1994
IV-2
SIGNATURES
(continued)
BY (SIGNATURE) A. Linwood Holton, Jr.
(NAME AND TITLE) A. Linwood Holton, Jr., Director
DATE March 29, 1994
BY (SIGNATURE)
(NAME AND TITLE) Hugh L. McColl, Jr., Director
DATE March 29, 1994
BY (SIGNATURE) Charles W. McCoy
(NAME AND TITLE) Charles W. McCoy, Director
DATE March 29, 1994
BY (SIGNATURE) E. S. Melvin
(NAME AND TITLE) E. S. Melvin, Director
DATE March 29, 1994
BY (SIGNATURE)
(NAME AND TITLE) William P. Payne, Director
DATE March 29, 1994
BY (SIGNATURE) Donald S. Russell, Jr.
(NAME AND TITLE) Donald S. Russell, Jr., Director
DATE March 29, 1994
BY (SIGNATURE) Robert H. Spilman
(NAME AND TITLE) Robert H. Spilman, Chairman
DATE March 29, 1994
BY (SIGNATURE) Louis C. Stephens, Jr.
(NAME AND TITLE) Louis C. Stephens, Jr., Director
DATE March 29, 1994
BY (SIGNATURE) Martha A. Walls
(NAME AND TITLE) Martha A. Walls, Director
DATE March 29, 1994
IV-3
List of Financial Statements and Financial Statement Schedules
Financial Statements:
The following financial statements and independent auditor's report
included in the Annual Report of Jefferson-Pilot Corporation to its
shareholders for the year ended December 31, 1993 are incorporated herein
by reference. With the exception of the aforementioned information and
the information incorporated by reference in Items 1 (b), 3, 8 and
14 (a) 1 and 2 herein, the 1993 Annual Report to shareholders is not
deemed to be filed as part of this report.
Annual Report
-Pages-
Independent Auditor's Report 29
Consolidated Balance Sheets as of December 31, 1993
and 1992 30 - 31
Consolidated Statements of Income for the Years Ended
December 31, 1993, 1992 and 1991 32
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1993, 1992 and 1991 33
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1993, 1992 and 1991 34
Notes to Consolidated Financial Statements 35 - 49
Financial Statement Schedules:
Form 10-K
-Pages-
Independent Auditor's Report on Schedules F-2
Schedule I - Summary of Investments - Other Than
Investments in Related Parties F-3 - F-4
Schedule III - Financial Statements of
Jefferson-Pilot Corporation:
Balance Sheets as of December 31, 1993 and 1992 F-5 - F-6
Statements of Income for the Years Ended December 31,
1993, 1992, and 1991 F-7
Statements of Cash Flows for the Years Ended
December 31, 1993, 1992, and 1991 F-8
Notes to Financial Statements F-9 - F-12
Schedule V - Supplementary Insurance Information F-13 - F-14
Schedule VI - Reinsurance F-15 - F-16
Schedule IX - Short Term Borrowings F-17
List and Index of Exhibits F-18 - F-20
All other schedules provided for in the applicable accounting regulations of
the Securities and Exchange Commission have been omitted because either they
pertain to items which are not applicable or to items which are not signifi-
cant or to items for which the required disclosures have been included in
the financial statements or notes thereto.
F-1
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
To the Board of Directors
Jefferson-Pilot Corporation
Greensboro, North Carolina
In connection with our audits of the consolidated financial statements
of Jefferson-Pilot Corporation and subsidiaries as of December 31, 1993 and
1992 and for each of the three years in the period ended December 31, 1993,
which are referred to in our report dated February 4, 1994 and incorporated
herein by reference, we also audited schedules I, III, V, VI and IX contained
herein.
In our opinion, these schedules present fairly, in all material
respects, the information required to be set forth therein in conformity
with generally accepted accounting principles.
McGLADREY & PULLEN
Greensboro, North Carolina
February 4, 1994
F-2
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1993
<CAPTION>
Column A Column B Column C Column D
Amount at Which
Shown in the
Consolidated
Type of Investment Cost (a) Value Balance Sheet
<S> <C> <C> <C>
Debt securities:
Bonds and other debt instruments:
United States Government and
government agencies,
corporations, and authorities $1,348,906,087 $1,442,601,414 $1,348,906,087
States, municipalities and
political subdivisions 85,267,453 93,430,272 85,267,453
Public utilities 702,102,765 747,169,000 702,102,765
All other corporate (b) 1,064,475,236 1,138,299,314 1,060,082,297
Redeemable preferred stocks (b) 25,901,021 25,500,000 25,519,682
Total debt securities $3,226,652,562 $3,447,000,000 $3,221,878,284
==============
Equity securities:
Common stocks:
Public utilities $ 132,815,305 $ 280,023,316 $ 280,023,316
Banks, trust, and insurance
companies 58,414,623 316,921,371 316,921,371
Industrial and all other (c) 79,341,815 246,282,702 176,182,639
Nonredeemable preferred stocks 55,098,317 60,312,559 60,312,559
Total equity securities $ 325,670,060 $ 903,539,948 $ 833,439,885
==============
Mortgage loans on real estate (b) $ 585,144,890 $ 583,644,890
Real estate acquired by foreclosure(b) $ 10,803,340 $ 8,473,555
Other real estate held for investment $ 22,485,727 $ 22,485,727
Policy loans $ 214,602,913 $ 214,602,913
Other long-term investments $ 29,347,089 $ 29,347,089
Short-term investments, other
than cash equivalents $ 3,065,000 $ 3,065,000
Total investments $4,417,771,581 $4,916,937,343
============== ==============
</TABLE>
(Continued)
F-3
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES (CONTINUED)
December 31, 1993
(a) Cost of debt securities is original cost, reduced by repayments and
adjusted for amortization of premiums and accrual of discounts. Cost
of equity securities is original cost. Cost of mortgage loans on real
estate and policy loans represents aggregate outstanding balances.
Cost of real estate acquired by foreclosure is the originally
capitalized amount, reduced by applicable depreciation. Cost of
other real estate held for investment is depreciated original cost.
(b) Differences between cost reflected in Column B and amounts at which
shown in the consolidated balance sheet reflected in Column D result
from valuation allowances and declines in value that are other than
temporary.
(c) This line includes common stocks held by the parent company which are
stated in the consolidated balance sheet at cost of $4,653,937 and have
a market value of $74,754,000.
F-4
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS OF JEFFERSON-PILOT CORPORATION
December 31, 1993 and 1992
SCHEDULE III
ASSETS 1993 1992
Cash and investments:
Cash and cash equivalents $ 10,174 $ 110,287,387
Short-term investments $ 3,065,000 $ 42,248,230
Debt securities (Note 2) $ 140,660,581 $ -
Equity securities (Note 2) $ 4,653,937 $ 5,349,112
Investments in subsidiaries (Note 2):
Jefferson-Pilot Life Insurance Company $1,434,964,119 $1,369,488,992
Jefferson-Pilot Fire & Casualty Company 68,219,638 62,715,522
Jefferson-Pilot Title Insurance Company 25,778,108 24,761,516
Jefferson-Pilot Communications Company 54,656,615 47,985,284
Jefferson-Pilot Data Services, Inc. 14,728,420 16,918,145
Other subsidiaries
$1,606,261,034 $1,527,085,481
Other investments $ 1,625,729 $ 996,995
Total cash and investments $1,756,276,455 $1,685,967,205
Amounts due from subsidiaries 38,374,033 3,311,263
Other assets $ 11,649,353 $ 2,367,321
$1,806,299,841 $1,691,645,789
============== ==============
See Notes to Condensed Financial Statements.
(Continued)
F-5
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS OF JEFFERSON-PILOT CORPORATION (continued)
December 31, 1993 and 1992 SCHEDULE III
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
Liabilities:
Notes payable (Note 3) $ 39,700,000 $ -
Accounts payable and accrued expenses 14,238,466 $ 6,283,997
Dividends payable 19,291,000 17,152,000
Total liabilities $ 73,229,466 $ 23,435,997
Commitments and contingent liabilities (Note 4)
Stockholders' equity (Notes 2, 5 and 6):
Common stock, par value $1.25 per share,
authorized 150,000,000 shares; issued
1993 49,464,495 shares; 1992 50,438,907
shares $ 61,830,619 $ 63,048,634
Retained earnings, including equity in
undistributed net income of subsidiaries
1993 $1,220,151,215; 1992 $1,133,356,587 1,339,671,590 1,270,342,008
Equity in net unrealized gains on equity
securities held by insurance
subsidiaries less deferred income taxes
1993 $176,201,659; 1992 $170,852,455 331,568,166 334,819,150
$1,733,070,375 $1,668,209,792
$1,806,299,841 $1,691,645,789
============== ==============
See Notes to Condensed Financial Statements.
F-6
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME OF JEFFERSON-PILOT CORPORATION
Years Ended December 31, 1993, 1992 and 1991 SCHEDULE III
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Income:
Dividends from subsidiaries:
Jefferson-Pilot Life Insurance
Company $ 91,256,674 $ 116,051,951 $ 105,034,831
Jefferson-Pilot Fire & Casualty
Company 4,300,000 - 4,000,000
Jefferson-Pilot Title Insurance
Company 1,800,000 1,500,000 1,500,000
Jefferson-Pilot Communications Company 5,000,000 10,000,000 25,979,137
Other subsidiaries 400,000 387,000 695,000
$ 102,756,674 $ 127,938,951 $ 137,208,968
Other investment income, including
interest from subsidiaries (Note 7) 7,451,363 5,614,534 4,708,306
Realized investment gains 11,134,594 402,169 4,238,922
$ 121,342,631 $ 133,955,654 $ 146,156,196
Expenses 11,512,825 17,470,089 15,226,453
Income before income taxes (benefits)
and equity in undistributed earnings
of subsidiaries $ 109,829,806 $ 116,485,565 $ 130,929,743
Income taxes (benefits) (Note 8) 1,452,456 (5,491,839) (3,269,959)
Income before equity in undistributed
earnings of subsidiaries $ 108,377,350 $ 121,977,404 $ 134,199,702
Equity in undistributed net income
of subsidiaries:
Jefferson-Pilot Life Insurance Company $ 72,942,220 71,919,386 $ 60,117,543
Jefferson-Pilot Fire & Casualty Company 2,909,525 6,597,763 ( 2,543,293)
Jefferson-Pilot Title Insurance Company 200,038 542,363 747,140
Jefferson-Pilot Communications Company 6,671,329 1,664,967 ( 16,497,960)
Other subsidiaries, net 4,071,516 536,172 ( 336,380)
$ 86,794,628 $ 81,260,651 $ 41,487,050
Net income $ 195,171,978 $ 203,238,055 $ 175,686,752
============== ============= =============
</TABLE>
See Notes to Condensed Financial Statements.
F-7
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS OF JEFFERSON-PILOT CORPORATION
Years Ended December 31, 1993, 1992 and 1991 SCHEDULE III
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 195,171,978 $ 203,238,055 $ 175,686,752
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in undistributed net
income of subsidiaries (86,794,628) (81,260,651) (41,487,050)
Realized investment gains (11,134,594) (402,169) (4,238,922)
Change in accrued items and
other adjustments, net 677,280 (3,160,617) 685,772
Net cash provided by operating
activities $ 97,920,036 $ 118,414,618 $ 130,646,552
CASH FLOWS FROM INVESTING ACTIVITIES
Sales (purchases) of short-
term investments, net $ 39,183,230 $ (34,057,070) $ 5,077,588
Purchases of investments in debt
securities (200,511,406) - -
Proceeds from sales of investments 71,937,217 1,865,571 4,588,369
Proceeds from retirement of
subsidiary's preferred stock 4,200,000 - -
Collection of notes receivable 1,793,224 1,432,002 4,394,270
Acceptance of notes receivable
from subsidiaries (36,500,000) (480,000) (1,060,000)
Other, net 1,861,111 (9,597) (717,388)
Net cash provided by (used in)
investing activities $(118,036,624) $ (31,249,094) $ 12,282,839
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings $ 39,700,000 $ - $ -
Cash dividends (78,125,073) (69,100,414) (57,429,771)
Common stock reacquired (50,680,048) (36,125,110) (17,845,454)
Other (1,055,504) 5,341,571 3,556,415
Net cash (used in) financing
activities $ (90,160,625) $ (99,883,953) $ (71,718,810)
Net increase (decrease) in cash
and cash equivalents $(110,277,213) $ (12,718,429) $ 71,210,581
Cash and cash equivalents:
Beginning 110,287,387 123,005,816 51,795,235
Ending $ 10,174 $ 110,287,387 $ 123,005,816
============= ============= =============
</TABLE>
See Notes to Condensed Financial Statements.
F-8
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS OF JEFFERSON-PILOT CORPORATION
SCHEDULE III
Note 1. Basis of Presentation and Significant Accounting Policies
The accompanying financial statements comprise a condensed
presentation of the financial position, results of operations,
and cash flows of Jefferson-Pilot Corporation (the "Company")
on a separate-company basis. These condensed financial statements
do not include the accounts of the Company's majority-owned sub-
sidiaries, but instead include the Company's investment in those
subsidiaries, stated at amounts which are substantially equal to
the Company's equity in the subsidiaries' net assets. Therefore
the accompanying financial statements are not those of the primary
reporting entity. The consolidated financial statements of the
Company and its subsidiaries are included in the Jefferson-Pilot
Corporation Annual Report to Shareholders for the year ended
December 31, 1993.
Short-term investments are stated at cost which approximates value.
Debt securities are stated at amortized cost, and equity securities
are stated at cost. Other significant accounting policies of the
Company and its subsidiaries are as set forth in Note 1 to the
consolidated financial statements of Jefferson-Pilot Corporation and
subsidiaries which are included in the Annual Report to Shareholders
for the year ended December 31, 1993.
Note 2. Investment Information
Debt securities held by the Company consist of U.S. Treasury notes
maturing in the years 2000 through 2003 and have aggregate fair value
approximating $139,000,000.
Equity securities held by the Company have aggregate market value
approximating $74,754,000 in 1993 and $56,900,000 in 1992, resulting
in unrealized gains of $70,100,000 and $51,551,000, respectively.
Since the equity securities are stated at cost, related unrealized
gains are not reflected in the accompanying balance sheets.
Net unrealized gains on equity securities held by insurance
subsidiaries, reduced by the subsidiaries' related deferred income
tax liabilities, are included in the carrying amount of the Company's
investments in those subsidiaries with corresponding credits included
in stockholders' equity.
Note 3. Notes Payable
Information about notes payable is contained in Note 5 to the
consolidated financial statements of Jefferson-Pilot Corporation and
subsidiaries which are included in the Annual Report to Shareholders
for the year ended December 31, 1993.
F-9
Note 4. Commitments and Contingent Liabilities
Information about commitments and contingent liabilities involving
the Company and its subsidiaries is contained in Notes 11 and 14 to
the consolidated financial statements of Jefferson-Pilot Corporation
and subsidiaries which are included in the Annual Report to
Shareholders for the year ended December 31, 1993.
Note 5. Common Stock and Stock Options
Information about common stock and stock options is contained in
Note 6 to the consolidated financial statements of Jefferson-Pilot
Corporation and subsidiaries which are included in the Annual Report
to Shareholders for the year ended December 31, 1993.
Note 6. Retained Earnings
Information about certain limitations affecting the amount of dividends
that the insurance subsidiaries may pay to the Company without the
approval of the Insurance Commissioner of the State of North Carolina
is contained in Note 7 to the consolidated financial statements of
Jefferson-Pilot Corporation and subsidiaries which are included in the
Annual Report to Shareholders for the year ended December 31, 1993.
Note 7. Other Investment Income
Other investment income consists principally of interest on cash
equivalents, short-term investments, and debt securities and dividends
on investments in common stocks. Interest from subsidiaries included
in other investment income was not material in any year presented.
Note 8. Income Taxes (Benefits)
During 1993, the Company and its subsidiaries adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes"
(SFAS 109). Information about the requirements of SFAS 109 is contained
in Note 9 to the consolidated financial statements of Jefferson-Pilot
Corporation and subsidiaries which are included in the Annual Report to
Shareholders for the year ended December 31, 1993.
As disclosed in the above-mentioned consolidated financial statements,
the Company and its subsidiaries elected to restate prior year financial
statements to give retroactive effect to the new income tax accounting
standards under SFAS 109. Accordingly, retained earnings as of
December 31, 1992, as reported in the accompanying balance sheet, has
been reduced by $18,555,593, with corresponding reductions in the
carrying amount of investments in subsidiaries and deferred income tax
assets (included with other assets) of $16,858,938 and $1,696,655,
respectively. Statements of income for 1992 and 1991 have not been
restated because the SFAS 109 standards had negligible effect on net
income for those years.
F-10
Income taxes (benefits) as reported in the statements of income differ
from the amounts which result from applying the maximum federal income
tax rates of 35% in 1993 and 34% in 1992 and 1991 to income before
income taxes and equity in undistributed earnings of subsidiaries.
The predominant reason for the difference is elimination of dividends
from subsidiaries in arriving at income subject to income taxes. Net
deferred income tax assets as of December 31, 1993 and 1992 are not
material and have been included with other assets. The deferred
components of income taxes (benefits) was not material in any year
presented.
The Company pays the federal income taxes indicated on its consolidated
federal income tax return and collects from subsidiaries the amounts
which the subsidiaries would have paid had they filed separate returns
(or pays to them the benefits resulting from including their losses in
the return).
Information about untaxed life insurance company income and the status
of the Company and its subsidiaries with respect to federal income tax
return examinations is contained in Note 9 to the consolidated financial
statements of Jefferson-Pilot Corporation and subsidiaries which are
included in the Annual Report to Shareholders for the year ended
December 31, 1993.
Note 9. Postretirement Benefit Plans
Information about postretirement benefit plans sponsored by the Company
and its subsidiaries is contained in Note 10 to the consolidated
financial statements of Jefferson-Pilot Corporation and subsidiaries
which are included in the Annual Report to Shareholders for the year
ended December 31, 1993.
The effect of adopting SFAS 106 "Employers' Accounting for Post-
retirement Benefits Other Than Pensions" during 1993 is reflected
primarily in equity in undistributed net income of subsidiaries, as
are substantially all postretirement benefits expenses.
Note 10. New Accounting Standards
Information about accounting standards issued during 1993 which will,
or may have, an effect on the Company's financial statements and those
of its subsidiaries when adopted is contained in Note 2 to the
consolidated financial statements of Jefferson-Pilot Corporation and
subsidiaries which are included in the Annual Report to Shareholders
for the year ended December 31, 1993.
One of the new standards is SFAS 115 "Accounting for Certain Investments
in Debt and Equity Securities", which will be effective for the
Company's 1994 financial statements. Among the requirements of SFAS 115
will be that the Company's equity securities be stated at market value.
Adoption of SFAS 115 as of January 1, 1994 will increase the stated
F-11
amount of equity securities held by the Company by $70,100,000,
with corresponding credits of approximately $28,040,000 to deferred
income tax liabilities and $42,060,000 to stockholders' equity.
The effect of adopting SFAS 115 on the carrying amounts of debt
securities and investments in subsidiaries has not yet been
determined since the required classification of debt securities
held by the Company and its subsidiaries is not complete.
F-12
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION
For the Years Indicated
<CAPTION>
Column A Column B Column C Column D Column E Column F
Deferred
Future Policy Revenue
Deferred Benefits and Other Policy Premiums
Policy and Policy- Premiums Claims and and Other
Acquisition holder Contract Collected Benefits Consider-
Segment(a) Costs Deposits(b) in Advance Payable(c) ations
<S> <C> <C> <C> <C> <C>
As of or Year Ended
December 31, 1993
All Lines $277,731,000 $2,954,247,000 $21,680,000 $478,386,000 $669,848,000
============ ============== =========== ============ ============
As of or Year Ended
December 31, 1992
All Lines $260,162,000 $2,731,357,000 $21,280,000 $463,624,000 $658,401,000
============ ============== =========== ============ ============
As of or Year Ended
December 31, 1991
All Lines $248,627,000 $2,562,303,000 $20,278,000 $463,885,000 $658,263,000
============ ============== =========== ============ ============
Column A Column G Column H Column I Column J Column K
Benefits, Amortization
Claims, of Deferred
Net Losses and Policy Other
Investment Settlement Acquisition Operating Premiums
Segment(a) Income Expenses(d) Costs Expenses(e) Written(f)
As of or Year Ended
December 31, 1993
All Lines $369,575,000 $629,819,000 $25,083,000 $153,116,000 $ 42,702,000
============ ============ =========== ============ ============
As of or Year Ended
December 31, 1992
All Lines $360,882,000 $627,136,000 $ 22,603,000 $162,052,000 $ 44,116,000
============ ============ ============ ============ ============
As of or Year Ended
December 31, 1991
All Lines $352,772,000 $642,531,000 $ 23,719,000 $156,393,000 $ 44,202,000
============ ============ ============ ============ ============
</TABLE>
(continued)
F-13
SCHEDULE V - CONTINUED
(a) The life insurance segment is the Company's only insurance industry
segment which meets the criteria for segment information disclosure
contained in SFAS 14 "Financial Reporting for Segments of a Business
Enterprise." Therefore, information related to other insurance
operations (property and casualty and title insurance) has been
combined with information related to life insurance operations for
purposes of this schedule.
(b) Future policy benefits include a provision for liabilities related
to life and annuity and accident and health business. Future
policy benefits as of December 31, 1992 and 1991 have been
restated and increased by $12,993,000 and $11,100,000, respectively,
to reflect the adoption of SFAS 113 "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts" during
1993.
(c) Other policy claims and benefits payable include dividend accumu-
lations and other policyholder funds on deposit, policy and
contract claims (life and annuity and accident and health),
dividends for policyholders, casualty insurance unearned premiums
and losses payable, and other policy liabilities. Other policy
claims and benefits payable as of December 31, 1992 and 1991
have been restated and increased by $7,932,000 and $9,076,000
respectively, to reflect the adoption of SFAS 113 during 1993.
(d) Benefits, claims, losses, and settlement expenses for 1992 and
1991 have been increased by $16,997,000 and $16,598,000,
respectively, to reflect the reclassification of dividends to
participating policyholders for conformity with 1993 presenta-
tion.
(e) Expenses related to the management and administration of
investments have been netted with investment income in the
determination of net investment income. Such expenses amounted
to $10,945,000 in 1993, $10,553,000 in 1992 and $10,285,000
in 1991.
Other operating expenses for 1992 and 1991 have been reduced
by $16,997,000 and $16,598,000, respectively, to reflect the
reclassification of dividends to participating policyholders
to Column H "Benefits, Claims, Losses, and Settlement Expenses"
for conformity with 1993 presentation.
(f) Consists of net premiums written on property and casualty
insurance only. Does not apply to life insurance or title
insurance.
F-14
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE VI - REINSURANCE
For the Years Indicated
<CAPTION>
Column A Column B Column C Column D Column E Column F
Percentage
Ceded to Assumed of amount
Other From Other assumed to
Gross Amount Companies Companies Net Amount net(b)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993:
Life insurance
in force at
end of year $ 41,574,012,000 $2,216,681,000 $ 17,114,000 $39,374,445,000 -
================ ============== ============= ===============
Premiums: (a)
Life insurance $ 219,805,000 $ 8,948,000 $ 161,000 $ 211,018,000 .1%
Accident and
health insurance 395,767,000 9,016,000 (143,000) 386,608,000 -
Total Premiums $ 615,572,000 $ 17,964,000 $ 18,000 $ 597,626,000 -
================ ============== ============= ===============
Year Ended
December 31, 1992:
Life insurance
in force at
end of year $ 40,816,896,000 $1,970,154,000 $ 26,293,000 $38,873,035,000 .1%
================ ============== ============= ===============
Premiums: (a)
Life insurance $ 208,044,000 $ 6,761,000 $ 384,000 $ 201,667,000 .2%
Accident and
health insurance 391,502,000 7,998,000 48,000 383,552,000 -
Total Premiums $ 599,546,000 $ 14,759,000 $ 432,000 $ 585,219,000 .1%
================ ============== ============= ===============
Year Ended
December 31, 1991:
Life insurance
in force at
end of year $ 38,411,661,000 $1,792,369,000 $ 48,554,000 $36,667,846,000 .1%
================ ============== ============= ===============
Premiums: (a)
Life insurance $ 199,992,000 $ 7,789,000 $ 557,000 $ 192,760,000 .3%
Accident and
health insurance 389,063,000 7,871,000 1,432,000 382,624,000 .4%
Total Premiums $ 589,055,000 $ 15,660,000 $ 1,989,000 $ 575,384,000 .4%
================ ============== ============= ===============
</TABLE>
(continued)
F-15
SCHEDULE VI - CONTINUED
(a) Included with life insurance premiums are premiums on ordinary
life insurance products and mortality charges on interest-
sensitive products.
(b) Percentage of amount assumed to net is computed by dividing the
amount in Column D by the amount in Column E.
F-16
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
December 31, 1993
<CAPTION>
Column A Column B Column C Column D Column E Column F
Category of Maximum Average Weighted
Aggregate Weighted Amount Amount Average
Short-Term Balance at Average Outstanding Outstanding Interest Rate
Borrowings End of Period Interest Rate During Period During Period During Period
<S> <C> <C> <C> <C> <C>
Notes payable
(a) $ 39,700,000 3.45% $ 41,200,000 $ 2,812,500(b) 3.33%(c)
============= ============ ============= ============= =============
</TABLE>
(a) Notes payable represent unsecured bank borrowings under an uncommitted
line of credit established in 1993. The Company may request aggregate
advances of up to $100 million through October 1994.
(b) The average amount outstanding during the period was computed on the
basis of daily balances.
(c) The weighted average interest rate during the period was computed by
dividing actual interest expense by the average amount outstanding during
the period.
F-17
List and Index of Exhibits
Reference
Number Per
Exhibit Table Description of Exhibit -Page-
(3) (i) Articles of Incorporation and amendments -
thereto were included in Form 10-K for
the year ended December 31, 1991. Such
Form is incorporated herein by reference.
(ii) By-laws as currently in effect were -
included in Form 10-K for the year
ended December 31, 1992. Such Form
is incorporated herein by reference.
(4) Rights Agreement dated as of August 1, 1988 -
between Jefferson-Pilot Corporation and
First Union National Bank (incorporated by
reference to Exhibit 1 to Report on Form
8-K dated August 5, 1988).
(10) The following contracts and plans:
(i) Employment contract, as amended to -
date, between the Registrant and
W. Roger Soles, a former officer of
Registrant, was included in Form 10-K
for the year ended December 31, 1992,
and incorporated herein by reference.
(ii) Employment contract, between the -
Registrant and David A. Stonecipher,
an officer of the Registrant, was
included in Form 10-K for the year
ended December 31, 1992, and is
incorporated herein by reference.
(iii) Employment contract, between the -
Registrant and Kenneth C. Mlekush,
an officer of the Registrant, was
included in Form 10-K for the year
ended December 31, 1992, and is
incorporated herein by reference.
F-18
List and Index of Exhibits (continued)
(iv) Incentive Compensation 1993 was -
included in Form 10-K for the
year ended December 31, 1992,
and is incorporated herein by
reference.
(v) The summary of the long term -
incentive plan payments included
under the heading "Incentive and
Reward" of the Proxy Statement
is incorporated herein by reference.
(vi) Employment contract between the F-21 - F-22
Registrant and John D. Hopkins, an
officer of the Registrant (Provided
as part of the electronic filing).
(vii) Employment contract between the F-23 - F-24
Registrant and Dennis R. Glass, an
officer of the Registrant (Provided
as part of the electronic filing).
(viii) Employment contract between the F-25 - F-26
Registrant and E. J. Yelton, an
officer of the Registrant (Provided
as part of the electronic filing).
(11) Basis For Computation of Per Share Earnings F-27
(Provided as part of the electronic filing).
(13) Portion of Annual Report to Shareholders F-28 - F-61
(Provided as part of the electronic filing).
F-19
List and Index of Exhibits (continued)
(21) Subsidiaries of the Registrant F-62 - F-63
(Provided as part of the electronic filing).
(23) Accountant's Consent (Provided as part of F-64
the electronic filing).
F-20
JEFFERSON-PILOT CORPORATION
MATERIAL CONTRACTS
EXHIBIT 10
March 8, 1993
Mr. John Hopkins
2847 Dover Road NW
Atlanta, Georgia 30327
Dear John:
We are very excited at the prospect of you and Laurie joining the
Jefferson-Pilot Corporation. As you are aware, the potential for the
development of the company is enormous, and you can play a key role in
achieving that end! I have outlined below the terms of our proposed
agreement, and if you find them acceptable, please sign and return one
copy for our files. Should there be questions, please call me at the
number above, or at home.
1. Starting Date: Either 4-12-93, or 4-19-93.
2. Title: Executive Vice President and General Counsel of JP Life,
and Senior Vice President and General Counsel of JP Corporation.
3. Reports/Duties: Responsible for all legal activities and legal
staff (SEC, Corporate Secretary, EEO, Tax, Investments, Insurance,
Acquisitions, etc.). Membership on the Senior Management Committee
assisting CEO in strategic development of the corporation. Other
functional reports as assigned after the initial indoctrination.
4. Compensation:
a. Base salary of $265,000 per annum subject to annual review for
increases. (With satisfactory performance, every effort will
be made to reach $300,000 by the end of two years.)
b. Annual Bonus - Consistent with plan for key employees with
range of -
16% for minimum performance
32% for target performance
48% for maximum performance
We will guarantee you a bonus of at least 30% of earned salary
for the 1993 plan year, as a transition year. (See plan
attached).
F-21
Page 2
John Hopkins
Agreement
c. Stock Options:
On employment - 15,000 shares
1994 - 7,500 shares
1995 - 7,500 shares
5. Other:
a. Transition Expenses: A payment of $35,000 for transition
expenses at employment.
b. Benefit Plans: The customary Jefferson-Pilot group life,
health, and retirement benefits for executives will be provided
and we will waive waiting periods and service requirements for
all benefits. Four weeks of vacation will be provided per annum.
A Golf Club initiation fee will also be paid.
c. Home Purchase/Moving Expenses: After reviewing the two
appraisals provided of you present home, we are prepared to
purchase it for $600,000 (with no realty commission). Other
aspects of the relocation and moving expenses are covered in
the material previously furnished to you. A furnished
apartment (up to $1050 per month) will be provided in Greensboro
for up to 6 months as needed for the relocation.
John, the compensation outlined above is guaranteed for a period of three
years except in the event of death, disability or retirement (in which
case plan provisions apply).
Finally, we encourage you to retain you Board memberships with the Rock Tenn
and Columbus Mill as we discussed.
This agreement is subject to final referencing as we discussed. We also
need a written statement from you that you are in good health to the best
of your knowledge and belief.
Best personal regards.
Sincerely,
/s/David A. Stonecipher
David A. Stonecipher
F-22
September 20, 1993
Mr. Dennis Glass
4210 Old Leads Road
Birmingham, Alabama 38212
Dear Dennis:
We are very excited at the prospect of you and Deborah joining the
Jefferson-Pilot Corporation. As you are aware, the potential for the
development of the company is enormous, and you will play a key role in
achieving that end! I have outlined below the terms of our proposed
agreement, and if you find them acceptable, please sign and return one
copy for our files. Should there be questions, please call me at the
number above, or at home.
1. Starting Date: In October 1993, as determined.
2. Title: Executive Vice President and Chief Financial Officer of
JP Life, and Senior Vice President and Chief Financial Officer
of JP Corporation.
3. Reports/Duties: Responsible for all Chief Financial Officer
activities and staff as follows:
- SVP/Chief Accounting Officer and Corporate Accounting staff.
- SVP/Corporate Development-Investor Relations and Data Services
Company.
- SVP/Information Services - Information Services staff.
- SVP/Corporate Planning & Corporate Actuary - Strategic Planning
and Development.
- Real Estate Development.
Membership on the Finance Committee. You will also be proposed for
membership on the Life Company Board.
4. Compensation:
a. Base salary of $300,000 per annum subject to annual review for
increases.
b. Annual Bonus - Consistent with plan for key employees with
range of -
16% for minimum performance
32% for target performance
48% for maximum performance
We will guarantee you a bonus of at least $125,000 for the 1994 plan
year, as a transition year.
F-23
Page 2
Dennis Glass
Agreement
c. Long Term Incentive Plan - Participation in plan at 3 times
CGR in EPS subject to terms of plan. First pay out after
1994 plan year.
d. Stock Options - Ten year options, vested upon receipt, and priced
at stock price on date granted, equal to:
On employment - 25,000 shares
1994 - 7,500 shares
1995 - 7,500 shares
5. Other:
a. Transition Expenses: A payment of $25,000 for transition
expenses at employment, plus reimbursement of $130,000
(payable $100,000 at employment and $30,000 in March 1994)
for 1993 bonus lost from your present employer because of
your early departure.
b. Benefit Plans: The customary Jefferson-Pilot group life,
health, and retirement benefits for executives will be provided
and we will waive waiting periods and service requirements for
the Group Medical, Supplemental and Dependent Life and LTD plans
subject to a statement of good health from your current
physician. Four weeks of vacation will be provided per annum.
A Golf Club initiation fee will also be paid.
c. Relocation: We will review the two appraisals provided on
your present home and make every effort to purchase it for the
indicated appraised value (with no realty commission). Other
aspects of the relocation and moving expenses are covered in
the material previously furnished to you.
The compensation outlined above is guaranteed for a period of three
years except in the event of death, disability or retirement (in which
case plan provisions apply).
Again, let me say how pleased I am to have the opportunity of building
a great company together.
Best personal regards.
Sincerely,
/s/David A. Stonecipher
David A. Stonecipher
F-24
September 20, 1993
Mr. Jay Yelton
The Investment Centre, Inc.
300 Galleria Parkway - Suite 1200
Atlanta, Georgia 30339
Dear Jay:
We are very excited at the prospect of you and Susan joining the
Jefferson-Pilot Corporation. As you are aware, the potential for the
development of the company is enormous, and you will play a key role in
achieving that end! I have outlined below the terms of our proposed
agreement, and if you find them acceptable, please sign and return one
copy for our files. Should there be questions, please call me at the
number above, or at home.
1. Starting Date: In October 1993, as determined.
2. Title: Executive Vice President - Investments of JP Life,
and Senior Vice President - Investments of JP Corporation.
3. Reports/Duties: Responsible for all investments activities
(excluding Treasury functions and any new Real Estate Development)
and investment staff (bonds, stocks, mortgage loans, real estate
management, mutual funds, etc.) Membership on the Senior Management
Committee assisting CEO in strategic development of the corporation.
Membership on the Finance Committee. You will also be proposed for
membership on the Life Company Board.
4. Compensation:
a. Base salary of $250,000 per annum subject to annual review for
increases.
b. Annual Bonus - Consistent with plan for key employees with
range of -
16% for minimum performance
32% for target performance
48% for maximum performance
We will guarantee you a bonus of at least 30% of earned salary
for the 1994 plan year, as a transition year.
c. Long Term Incentive Plan - Participation in plan at 3 times
CGR in EPS subject to terms of plan. First pay out after
1994 plan year.
F-25
Page 2
E. J. Yelton
Agreement
d. Stock Options - Ten year options, vested upon receipt, and priced
at stock price on date granted, equal to:
On employment - 15,000 shares
1994 - 7,500 shares
1995 - 7,500 shares
5. Other:
a. Transition Expenses: A payment of $25,000 for transition
expenses at employment, plus reimbursement of $75,000 for
1993 bonus lost from your present employer because of your
early departure.
b. Benefit Plans: The customary Jefferson-Pilot group life,
health, and retirement benefits for executives will be provided
and we will waive waiting periods and service requirements
for the Group Medical, Supplemental and Dependent Life and
LTD plans subject to a statement of good health from your
current physician. Four weeks of vacation will be provided
per annum. A Golf Club initiation fee will also be paid.
c. Relocation: Aspects of the relocation and moving expenses
are covered in the material previously furnished to you.
The compensation outlined above is guaranteed for a period of three
years except in the event of death, disability or retirement (in which
case plan provisions apply).
Again, let me say how pleased I am to have the opportunity of building
a great company together.
Best personal regards.
Sincerely,
/s/David A. Stonecipher
David A. Stonecipher
F-26
<TABLE>
JEFFERSON-PILOT CORPORATION
BASIS FOR COMPUTATION OF PER SHARE EARNINGS
Five Years Ended December 31, 1993
EXHIBIT 11
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Shares Outstanding
beginning of year 50,438,907 51,291,936 51,784,614 56,053,722 57,821,898
Add: Shares issued
under stock
option plan:
January 7,698 7,500 - 15 -
February 7,086 10,165 18,714 3,841 -
March 11,028 1,583 3,460 396 -
April 26,211 1,445 525 109 -
May 11,413 5,118 148,950 199,500 -
June 15,825 4,425 81 3,638 -
July 9,099 805 500 779 -
August 5,540 4,226 - 3,372 -
September 3,186 1 4,029 7,617 2,280
October 2,286 1,962 2,024 35 -
November 2,266 11,586 7,950 - -
December 7,884 29,365 - 150 624
Less: Shares
reacquired:
January - ( 448) ( 340,412) ( 174,300) ( 76,506)
February ( 1,650) - ( 3,306) ( 218,100) ( 870,150)
March ( 4,760) - - ( 539,400) ( 52,350)
April ( 9,913) ( 2,192) ( 306,900) ( 1,011,675) ( 101,349)
May ( 11,032) ( 129,924) ( 10,635) ( 340,806) ( 12,293)
June ( 183,415) ( 140,500) ( 11,550) ( 367,716) ( 307,668)
July - - - ( 57,900) -
August - ( 93,493) - ( 329,556) -
September ( 1,091) ( 309,400) ( 1,026) ( 454,157) ( 1,264)
October - ( 207,000) ( 484) ( 639,150) -
November ( 676,100) ( 42,112) ( 4,598) ( 355,800) ( 274,050)
December ( 195,973) 6,141) - - ( 75,450)
Shares Outstanding
end of year 49,464,495 50,438,907 51,291,936 51,784,614 56,053,722
========== ========== ========== ========== ==========
Average of 12 month -
end balances - used to
determine E.P.S. 50,251,676 50,952,147 51,319,143 53,636,223 56,588,878
========== ========== ========== ========== ==========
</TABLE>
Notes:
All of the above share amounts have been adjusted to give retroactive effect
to a three-for-two common stock split authorized by the Company's Board of
Directors on February 10, 1992, paid on April 15, 1992, to stockholders of
record on March 27, 1992.
Options granted under the Company's stock option plan do not have a materially
dilutive effect since the options were less than three percent (3%) of average
shares outstanding before any reduction to an incremental share basis under
the treasury stock method.
F-27
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
EXHIBIT 13
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
and Stockholders
Jefferson-Pilot Corporation
Greensboro, North Carolina
We have audited the accompanying consolidated balance sheets of
Jefferson-Pilot Corporation and subsidiaries as of December 31, 1993 and 1992,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Jefferson-Pilot Corporation and subsidiaries as of December 31, 1993 and 1992,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As disclosed in Note 9 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 by adopting
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes". As disclosed in Note 10 to the consolidated financial statements, the
Company changed its method of accounting for postretirement health care and
life insurance benefits in 1993 by adopting Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement Benefits Other
Than Pensions". As disclosed in Note 11 to the consolidated financial
statements, the Company changed its method of reporting the effects of
reinsurance contracts in 1993 by adopting Statement of Financial Accounting
Standards No. 113 "Accounting and Reporting for Reinsurance of Short-Duration
and Long-Duration Contracts".
McGLADREY & PULLEN
Greensboro, North Carolina
February 4, 1994
F-28
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts in Thousands Except Per Share Information)
December 31,
ASSETS 1993 1992
Cash and investments:
Cash and cash equivalents $ 31,563 $ 155,669
Short-term investments 3,065 42,248
Debt securities (Note 2) 3,221,878 2,773,826
Equity securities (Note 2) 833,440 837,936
Mortgage loans on real estate (Note 2) 583,645 560,985
Policy loans 214,603 220,666
Real estate, less accumulated depreciation
1993 $21,018; 1992 $20,550 (Note 2) 30,959 28,830
Other investments 29,347 28,976
Total cash and investments 4,948,500 4,649,136
Accrued investment income 69,327 67,478
Accounts receivable and agents' balances 60,526 41,267
Due from reinsurers 25,793 21,009
Property and equipment, less accumulated
depreciation 1993 $102,960; 1992 $91,295 98,434 92,649
Deferred policy acquisition costs, net
of amortization (Note 3) 277,731 260,162
Goodwill and other intangibles related to
communications operations, net of
accumulated amortization 1993 $14,244;
1992 $12,992 39,128 28,445
Assets held in separate account 84,225 67,088
Other assets 36,957 29,528
$5,640,621 $5,256,762
See Notes to Consolidated Financial Statements.
F-29
December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
Policy liabilities:
Future policy benefits (Note 4) $1,378,793 $1,358,540
Policyholder contract deposits (Note 4) 1,575,454 1,372,817
Dividend accumulations and other
policyholder funds on deposit 177,199 173,761
Policy and contract claims 177,807 172,426
Dividends for policyholders 17,779 17,830
Deferred revenue and premiums
collected in advance 21,680 21,280
Casualty insurance unearned premiums
and losses payable 62,793 59,792
Other 42,808 39,815
Total policy liabilities 3,454,313 3,216,261
Notes payable (Note 5) 39,700 -
Currently payable income taxes 15,133 17,974
Deferred income tax liabilities (Note 9) 169,162 184,556
Accounts payable and accrued expenses 40,767 37,456
Unearned investment income 5,020 5,082
Obligation for postretirement benefits
other than pensions (Note 10) 36,127 -
Liabilities related to separate account 84,225 67,088
Other liabilities 63,103 60,135
Total liabilities 3,907,550 3,588,552
Commitments and contingent liabilities
(Notes 11 and 14)
Stockholders' equity (Notes 6, 7 and 8)
Common stock, par value $1.25 per
share, authorized 150,000,000 shares;
issued 1993 49,464,495 shares;
1992 50,438,907 shares 61,831 63,049
Retained earnings 1,339,672 1,270,342
Net unrealized gains on equity securities,
less deferred income taxes 1993 $176,202;
1992 $170,853 (Note 2) 331,568 334,819
1,733,071 1,668,210
$5,640,621 $5,256,762
F-30
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollar Amounts in Thousands Except Per Share Information)
Year Ended
December 31,
1993 1992 1991
Revenue:
Life premiums and other considerations $ 240,196 $ 230,034 $ 230,369
Accident and health premiums 386,608 383,552 382,624
Casualty and title premiums 43,044 44,815 45,270
Total premiums and other
considerations 669,848 658,401 658,263
Net investment income (Note 2) 369,575 360,882 352,772
Realized investment gains (Note 2) 56,947 48,170 33,963
Communications operations 144,961 129,734 125,045
Other 5,293 5,142 3,433
1,246,624 1,202,329 1,173,476
Benefits, claims and expenses:
Life benefits and other credits to
policyholders 296,078 279,326 280,377
Accident and health benefits 305,648 317,785 325,497
Casualty and title claims 28,093 30,025 36,657
Total benefits and claims 629,819 627,136 642,531
Insurance commissions 62,247 56,589 57,237
General and administrative 124,592 126,294 124,470
Insurance taxes, licenses and fees 25,404 24,660 24,351
Net (deferral) of policy acquisition
costs (Note 3) (17,569) (11,536) (12,214)
Communications operations 100,100 93,560 92,334
924,593 916,703 928,709
Income before income taxes and
cumulative effect of change in
accounting principle 322,031 285,626 244,767
Income taxes (Note 9) 102,750 82,388 69,080
Income before cumulative effect
of change in accounting principle 219,281 203,238 175,687
Cumulative effect of change in accounting
principle on years prior to 1993, net
of income tax benefit (Note 10) (24,109) - -
Net income $ 195,172 $ 203,238 $ 175,687
Income per share (Note 6):
Income before cumulative effect of
change in accounting principle $ 4.36 $ 3.99 $ 3.42
Cumulative effect of change in
accounting principle (.48) - -
Net income $ 3.88 $ 3.99 $ 3.42
See Notes to Consolidated Financial Statements.
F-31
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar Amounts in Thousands Except Per Share Information)
Net Unreal-
Capital in ized Gains Total
Common Excess of Retained on Equity Stockholders'
Stock Par Value Earnings Securities Equity
Balance, December 31,
1990, as previously
reported $ 43,154 $ - $1,103,047 $ 206,788 $ 1,352,989
Restatement resulting
from change in
accounting principle
applicable to income
taxes (Note 9) - - (18,555) - (18,555)
Balance, December 31,
1990, as restated $ 43,154 $ - $1,084,492 $ 206,788 $ 1,334,434
Net income - - 175,687 - 175,687
Cash dividends
$1.12 per share - - (57,430) - (57,430)
Common stock issued
under stock option
plan 155 4,929 - - 5,084
Common stock reacquired (566) (4,929) (12,203) - (17,698)
Increase during year,
net of deferred
income tax effect - - - 104,384 104,384
Balance, December 31,
1991 $ 42,743 $ - $1,190,546 $ 311,172 $ 1,544,461
Net income - - 203,238 - 203,238
Cash dividends $1.36
per share - - (69,100) - (69,100)
Common stock issued
under stock option
plan 90 2,419 - - 2,509
Common stock reacquired (1,161) (2,419) (32,890) - (36,470)
Three-for-two stock
split (Note 6) 21,377 - (21,452) - (75)
Increase during year,
net of deferred
income tax effect - - - 23,647 23,647
Balance, December 31,
1992 $ 63,049 $ - $1,270,342 $ 334,819 $ 1,668,210
Net income - - 195,172 - 195,172
Cash dividends $1.56
per share - - (78,125) - (78,125)
Common stock issued
under stock option
plan 137 2,982 - - 3,119
Common stock reacquired (1,355) (2,982) (47,717) - (52,054)
Decrease during year,
net of deferred
income tax effect - - - (3,251) (3,251)
Balance, December 31,
1993 $ 61,831 $ - $1,339,672 $ 331,568 $ 1,733,071
See Notes to Consolidated Financial Statements.
F-32
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
Year Ended
December 31,
1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 195,172 $ 203,238 $ 175,687
Adjustments to reconcile net income
to net cash provided by operating
activities:
Change in policy liabilities other
than policyholder contract
deposits 35,415 1,944 18,750
Amortization of deferred
acquisition costs 25,083 22,603 23,719
Policy acquisition costs deferred (42,652) (34,138) (35,933)
Depreciation, including amounts
related to real estate investments,
and amortization of intangibles 16,929 14,846 16,290
Change in accrued investment
income, receivables and other
assets (45,063) (6,485) (11,284)
Change in income taxes payable,
accounts payable and accrued
expenses, and other liabilities 11,788 5,698 21,156
Cumulative effect of change in
accounting principle, net of
income tax benefit 24,109 - -
Realized investment gains (56,947) (48,170) (33,963)
Other (3,668) (3,639) 2,263
Net cash provided by
operating activities 160,166 155,897 176,685
CASH FLOWS FROM INVESTING ACTIVITIES
Bonds and other debt instruments
sold, redeemed or matured 940,345 375,378 266,150
Bonds and other debt instruments
purchased (1,377,593) (590,600) (515,746)
Preferred and common stocks sold 111,399 85,685 40,876
Preferred and common stocks purchased (65,246) (37,897) (26,319)
Repayments of mortgage loans
on real estate 63,399 35,334 36,726
Mortgage loans on real estate (85,678) (59,603) (41,142)
Reduction of policy loans, net 6,063 7,279 3,838
Real estate sold 2,265 4,374 3,560
Additions to real estate and property
and equipment (26,244) (7,384) (8,892)
Other investing activities, net 31,741 (33,382) 13,059
Net cash used in investing
activities $ (399,549)$ (220,816)$ (227,890)
F-33
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
Year Ended
December 31,
1993 1992 1991
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder contract deposits $ 290,243 $ 254,145 $ 251,055
Withdrawals of policyholder
contract deposits (87,606) (86,294) (84,179)
Proceeds from short-term borrowings 39,700 - -
Cash dividends to stockholders (78,125) (69,100) (57,430)
Common stock reacquired (50,680) (36,125) (17,845)
Common stock issued under stock
option plan 1,745 1,268 1,054
Net cash provided by
financing activities 115,277 63,894 92,655
Net increase (decrease) in cash
and cash equivalents (124,106) (1,025) 41,450
Cash and cash equivalents:
Beginning 155,669 156,694 115,244
Ending $ 31,563 $ 155,669 $ 156,694
Supplemental cash flow information,
cash paid during the year for
income taxes $ 114,000 $ 95,000 $ 70,000
See Notes to Consolidated Financial Statements.
F-34
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Significant Accounting Policies
Nature of Operations
The Company's most significant operations are in the life insurance
industry. Other substantial business activities include property
and casualty insurance, title insurance and communications opera-
tions. Information about reportable business segments is presented
in Note 13 to the consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of
Jefferson-Pilot Corporation and all of its majority-owned
subsidiaries. All material intercompany accounts and transactions
have been eliminated.
Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles. The
insurance subsidiaries also submit financial reports to insurance
industry regulatory authorities. Those financial reports are
prepared on the basis of statutory accounting practices and are
significantly different from financial statements prepared in
accordance with generally accepted accounting principles.
A comparison of statutory basis net income and equity capital of
the principal life insurance subsidiary and the nonlife insurance
subsidiaries in the aggregate to the amounts included in the
consolidated financial statements is presented in Note 7.
Cash and Cash Equivalents
The Company includes with cash and cash equivalents its holdings
of highly liquid investments which either mature within three months
of the date of acquisition or contain an investor put option which
can be exercised at par within 90-day intervals. The carrying
amount of cash and cash equivalents approximates fair value due to
their short-term availability or maturity. The Company routinely
maintains cash deposits with financial institutions in amounts that
exceed federally-insured limits, but has not experienced any loss of
principal related to such deposits.
Short-term Investments
Short-term investments consist primarily of debt securities of
certain states and political subdivisions, including special revenue
obligations. Short-term investments are considered to be trading
assets because the Company purchased the securities with the
intention of selling them in the near future. The cost and market
value of short-term investments are approximately equal.
F-35
Investments
Investments in debt securities include bonds, other debt instruments
and redeemable preferred stocks. Debt securities are stated at
aggregate amortized cost reduced by allowances for estimated declines
in value that are considered to be other than temporary, which is less
than the aggregate estimated fair value of the securities. The Company
has generally applied a consistent practice of holding investments in
debt securities until maturity. While ongoing monitoring and evaluation
of individual issues in the portfolio and overall securities market
conditions has, on occasion, resulted in sales of selected debt
securities prior to maturity, such sales did not occur in 1992 or 1991.
During 1993, sales of debt securities prior to maturity consisted
primarily of selected issues for which calls or prepayments were
expected to occur in the near future.
The Company is engaged in a process that is expected to result in
refinement of its investment strategies in response to a continuing
increase in the proportion of interest-sensitive insurance products.
As a part of that process, which is continuing into 1994, the Company
expects that a significant portion of its debt securities portfolio
will be designated as available for sale in response to its asset/
liability management strategies or other factors. If the designation of
debt securities available for sale had been completed during 1993, the
Company believes that the stated amount of those securities as of
December 31, 1993 would have been unaffected.
Equity securities held by insurance subsidiaries include non-redeemable
preferred stocks and common stocks, which are stated at market. Equity
securities held by other companies are stated at the lower of aggregate
cost or aggregate market.
Mortgage loans on real estate are stated at unpaid balances, net of
allowances for unrecoverable amounts. Policy loans are stated at their
unpaid balances. Real estate which was not acquired by foreclosure is
stated at cost less accumulated depreciation. Real estate acquired by
foreclosure is stated at the lower of depreciated cost or fair value
minus estimated costs to sell. Other investments are stated at equity,
or the lower of cost or market, as appropriate.
Unrealized gains and losses on equity securities are included net of
deferred income taxes in a separate stockholders' equity account.
Realized gains and losses on disposal of investments, determined for
debt and equity securities by the specific-identification method,
are included in net income. Allowances for estimated decline in
value that is other than temporary and for estimated unrecoverable
amounts are also included in net income.
F-36
Real estate is depreciated principally by the straight-line method
over estimated useful lives which generally range from 30 to 40
years for buildings. Expenditures for betterments are capitalized
and maintenance and repairs are charged to expense as incurred.
Fair values of the Company's debt and equity securities have been
determined using values supplied by independent pricing services.
Prior to 1993, the valuation approach applied to debt securities
for financial reporting purposes generally used amortized cost to
approximate fair values of infrequently traded and private placement
securities of high quality. The estimated fair values of debt
securities held on December 31, 1992 are presented on a basis
consistent with that applied in 1993.
The fair value of the mortgage loan portfolio has been estimated by
discounting expected future cash flows using the interest rate
currently offered for such loans, which are substantially similar as
to characteristics. The fair value of policy loans approximates
carrying amount, since the average interest rate of the loans
outstanding approximates the rate currently offered. The fair
value of other investments in financial instruments approximates
their carrying amounts.
Property and Equipment
Property and equipment are stated at cost and depreciated
principally by the straight-line method over their estimated
useful lives (generally 30 to 50 years for buildings and
approximately 10 years for other property and equipment).
Deferred Policy Acquisition Costs
The costs of acquiring new business (principally commissions),
certain costs of underwriting and issuing policies (including
medical examinations and inspection reports) and certain agency
office expenses, all of which vary with and are primarily related
to the production of new business, have been deferred.
For traditional life insurance policies, these costs are being
amortized over the premium paying periods of the related contracts
using the same assumptions about anticipated premium revenue that
are used to compute liabilities for future policy benefits. For
universal life and annuity products, these costs are amortized at
a constant rate based on the present value of the estimated future
gross profits to be realized over the terms of the contracts, not
to exceed 25 years.
Deferred policy acquisition costs are reviewed to determine that the
unamortized portion does not exceed expected recoverable amounts.
F-37
Goodwill and Other Intangibles
Goodwill and other intangibles related to communications operations
consist principally of the excess of cost over the value of
identifiable net assets obtained in acquisitions of radio and
television properties and electronic data services operations.
Goodwill which arose in acquisitions completed after October 31,
1970 is being amortized on a straight-line basis over periods of
15 to 40 years.
Separate Account
The separate account represents funds for which investment income
and investment gains and losses accrue directly to the policy-
holders. The assets of the separate account are carried at market
value and are not subject to any claims which may arise out of any
other business of the Company.
Recognition of Revenue
Premiums on traditional life insurance products are reported as
revenue when received unless received in advance of the due date.
Benefits and expenses are provided against earned premium revenue
in a manner which recognizes profits over the estimated lives of
the insurance contracts.
Premiums on accident and health insurance and casualty insurance
are reported as earned, over the contract period. A reserve is
provided for the portion of premiums written which relate to
unexpired coverage terms.
Revenue from universal life-type and annuity products consists of
charges for the cost of insurance, for initiation and administration
of the policy, and for surrender of the policy. Revenue from these
products is recognized in the year assessed to the policyholder,
except that any portion of an assessment which relates to services
to be provided in future years is deferred and recognized over the
period during which services are provided, based on the same
assumptions and factors used to amortize deferred policy acquisition
costs.
Future Policy Benefits
Liabilities for future policy benefits on traditional life and
accident and health insurance are computed by the net level premium
valuation method based on assumptions about future investment yield,
mortality, morbidity and termination. Estimates about future
circumstances are based principally on the Company's own historical
experience and provide for possible unfavorable deviations.
F-38
Policyholder Contract Deposits
Policyholder contract deposits consist of policy values that accrue
to holders of universal life-type and other interest-sensitive
products. The liability is determined using the retrospective
deposit method and does not include a provision for possible future
assessments against policyholders.
Annuity contracts issued by the Company do not generally have defined
maturities. Fair values of the Company's liabilities under annuity
contracts, the carrying amounts of which are included with
policyholder contract deposits in the consolidated balance sheets,
have been estimated to equal the cash surrender values of the
underlying contracts as of the consolidated balance sheet dates. The
estimated fair values of liabilities under supplementary contracts
not involving life contingencies, which are included in the
consolidated balance sheets with dividend accumulations and other
policyholder funds on deposit, approximate carrying amount.
Recognition of Benefits and Expenses
Benefits and expenses, other than deferred policy acquisition costs,
related to traditional life and accident and health insurance
products are recognized when incurred in a manner designed to match
them with related premiums and spread income recognition over
expected policy lives. For universal life-type and annuity products,
benefits include interest credited to policyholders' accounts, which
is recognized as it accrues.
Policy and Contract Claims
The liability for policy and contract claims consists of the
estimated amount payable for claims reported but not yet settled,
claims incurred during the year but reported subsequent to the date
of the consolidated balance sheet, and an estimate of claims incurred
but not reported which is based on the Company's historical
experience adjusted for trends and circumstances. Management
believes that the recorded liability is sufficient to provide for
the associated claims adjustment expenses.
Casualty Insurance Losses Payable
The liability for casualty insurance losses payable includes
provisions for individual case estimates for reported losses,
estimated amounts of unreported losses based on historical experience
modified for current trends, and estimated expenses of investigating
and settling claims.
F-39
Reinsurance Balances and Transactions
Reinsurance receivables include amounts related to paid benefits
and claims and estimated amounts related to unpaid benefits, unpaid
claims and future policy benefits that are covered by reinsurance
contracts. The cost of reinsurance is accounted for over the terms
of the underlying reinsured policies using assumptions consistent
with those used to account for the policies.
Participating Policies
Participating life policies approximate the following percentages
of ordinary life insurance in force and ordinary life insurance
premium revenue as of December 31, 1993, 1992 and 1991 and for the
years then ended:
1993 1992 1991
Ordinary life insurance
in force 13% 13% 13%
Ordinary life premium revenue 23% 24% 23%
The amount of dividends to be paid on participating policies is
determined annually by the Board of Directors. Anticipated
dividends are accounted for as a planned contractual benefit in
computing the value of future policy benefits. Estimated amounts
of policy dividends for the succeeding twelve months are based on
the current scale, while estimated dividends applicable to later
years are based on the dividend scale which was in effect when the
policies were issued.
Income Taxes
The parent company and all of its subsidiaries file a consolidated
life/nonlife federal income tax return. Deferred income taxes are
recorded on the differences between the tax bases of assets and
liabilities and the amounts at which they are reported in the
consolidated financial statements. Recorded amounts are adjusted
to reflect changes in income tax rates and other tax law provisions
as they become enacted.
Net Income Per Share of Common Stock
Net income per share of common stock is based on the weighted
average number of common shares outstanding. The weighted average
number of shares outstanding was 50,251,676 in 1993, 50,952,147 in
1992 and 51,319,143 in 1991.
Reclassifications
The Company's policy is to reclassify certain amounts reported in
prior years' consolidated financial statements when necessary for
conformity with classifications adopted in the current year. These
reclassifications do not have a material effect on the prior year
consolidated financial statements.
F-40
Note 2. Investment Information
Aggregate amortized cost, aggregate estimated fair value, and gross
unrealized gains and losses pertaining to debt securities as of
December 31, 1993 and 1992 are as follows (in thousands):
December 31, 1993
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
U. S. Treasury
obligations and
direct obligations
of U. S. Government
corporations $ 892,959 $ 73,107 $ (12)$ 966,054
Mortgage-backed
securities issued
by U. S. Government
corporations 455,947 21,744 (1,143) 476,548
Obligations of states
and political
subdivisions,
including special
revenue obligations 85,267 8,326 (163) 93,430
Corporate obligations
including collateralized
obligations and mortgage
backed securities 1,762,185 132,568 (9,285) 1,885,468
Redeemable preferred
stocks 25,520 1,183 (1,203) 25,500
$3,221,878 $ 236,928 $ (11,806)$3,447,000
December 31, 1992
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
U. S. Treasury
obligations and
direct obligations
of U. S. Government
corporations $ 705,988 $ 58,953 $ - $ 764,941
Mortgage-backed
securities issued
by U. S. Government
corporations 271,492 19,941 - 291,433
Obligations of states
and political
subdivisions,
including special
revenue obligations 83,166 6,164 (311) 89,019
Corporate obligations
including collateralized
obligations and mortgage
backed securities 1,678,827 133,419 (6,639) 1,805,607
Redeemable preferred
stocks 34,353 1,115 (1,468) 34,000
$2,773,826 $ 219,592 $ (8,418)$2,985,000
F-41
Aggregate amortized cost and aggregate estimated fair value of the
portfolio of debt securities as of December 31, 1993, according to
contractual maturity date, are as indicated below (in thousands).
Actual future maturities will differ from the contractual maturities
shown because the issuers of certain of the debt securities have the
right to call or prepay the amounts due the Company, with or without
penalty.
Estimated
Amortized Fair
Cost Value
Amounts due in one year or less $ 14,337 $ 14,993
Amounts due after one year through
five years 384,799 425,714
Amounts due after five years
through ten years 1,616,312 1,733,859
Amounts due after ten years through
twenty years 825,084 877,478
Amounts due after twenty years 355,826 369,456
3,196,358 3,421,500
Redeemable preferred stocks 25,520 25,500
$3,221,878 $3,447,000
Aggregate market value, aggregate cost and gross unrealized
gains and losses pertaining to equity securities held by
insurance subsidiaries, which are stated at market in the
consolidated balance sheets, are as follows (in thousands):
December 31,
1993 1992 1991
Aggregate market value $ 828,786 $ 832,587 $ 778,641
Aggregate cost 321,016 326,915 308,740
Net unrealized gains $ 507,770 $ 505,672 $ 469,901
Gross unrealized gains $ 510,024 $ 512,817 $ 477,625
Gross unrealized losses (2,254) (7,145) (7,724)
Net unrealized gains,
as above $ 507,770 $ 505,672 $ 469,901
Increase in net
unrealized gains
during the year $ 2,098 $ 35,771 $ 158,448
Aggregate market value, aggregate cost and gross unrealized gains
pertaining to equity securities held by the parent company, which
are stated at cost in the consolidated balance sheets, are as follows
(in thousands):
December 31,
1993 1992 1991
Aggregate market value $ 74,754 $ 56,900 $ 42,560
Aggregate cost 4,654 5,349 5,349
Gross unrealized gains $ 70,100 $ 51,551 $ 37,211
F-42
The Company's investments in debt and equity securities consist primarily
of a diversified portfolio which includes approximately 750 issuers, with
only one issuer other than the U.S. Government representing more than one-
percent of the aggregate reported amounts of these investments. Included
with equity securities is common stock of NationsBank Corporation stated
at $256,706,000 (6.3%) and $267,360,000 (7.4%) as of December 31, 1993 and
1992, substantially all of which is at market. Debt securities considered
less than investment grade approximated 3% of aggregate carrying amount as
of December 31, 1993. The stated amount of debt securities considered in
default approximated $14 million, substantially all of which have defaulted
as to scheduled principal payment but not as to interest. Debt securities
stated at $16 million are on deposit with or for states in which sub-
sidiaries conduct insurance operations.
The estimated fair value of mortgage loans on real estate approximated
$645 million and $610 million as of December 31, 1993 and 1992. The loans
consist primarily of traditional real estate mortgages collateralized by
retail, hotel and office properties. Approximately 69% of stated mortgage
loan balances as of December 31, 1993 involve borrowers in South Atlantic
and East South Central states, with another 14% due from borrowers in West
South Central states. As of December 31, 1993, the Company had provided
allowances of $1.5 million against delinquent loans approximating
$10 million. Real estate acquired by foreclosure is stated at
$8.5 million, net of allowances approximating $2.3 million.
The details of consolidated investment income, net of investment expenses,
for the three years ended December 31, 1993 follow (in thousands):
Year Ended December 31,
1993 1992 1991
Interest on bonds and other
debt instruments $243,384 $235,234 $225,333
Dividends on preferred stocks 7,409 9,769 11,324
Dividends on common stocks 26,890 26,229 25,983
Interest on mortgage loans 57,139 54,807 54,886
Interest on policy loans 12,978 13,298 13,493
Real estate income 9,642 8,503 8,292
Other investment income 6,462 8,352 10,270
Investment income for
life insurance companies 363,904 356,192 349,581
Investment income for other
companies 16,616 15,243 13,476
Total investment income 380,520 371,435 363,057
Investment expenses (10,945) (10,553) (10,285)
Net investment income $369,575 $360,882 $352,772
F-43
Investment expenses include salaries, taxes, expenses of
maintaining and operating investment real estate,
depreciation and other allocated costs of investment
management and administration.
The details of realized investment gains (losses) for the
three years ended December 31, 1993 follow (in thousands):
Year Ended December 31,
1993 1992 1991
Bonds and other debt
instruments $ 16,829 $ 6,848 $ 1,920
Preferred stocks 4,574 1,107 563
Common stocks 32,841 43,065 22,753
Other 2,703 (2,850) 8,727
Realized investment gains $ 56,947 $ 48,170 $ 33,963
While the Company generally holds investments in debt securities
to maturity, declining interest rates have increased issuer
calls and prepayments. During 1993, the Company sold selected
debt securities when calls or prepayments were considered likely.
Proceeds from these sales represented $109 million of the
$170 million total proceeds from sales of debt securities during
the year. Most of the realized gains on debt securities in 1993,
and substantially all in 1992 and 1991, represent call premiums.
Realized gains on debt securities for 1993 and 1992 are stated
net of losses approximating $8 million and $1.2 million,
respectively, resulting from declines in value considered other
than temporary.
In 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115)
which will be effective for the Company's 1994 financial
statements. SFAS 115 applies to equity securities having readily
determinable fair values and to debt securities. It will require
securities under its scope to be classified for reporting
purposes as either 1) securities held to maturity and stated at
amortized cost, 2) trading securities stated at fair value with
unrealized gains and losses reflected in income, or 3) securities
available for sale and stated at fair value with net unrealized
gains and losses included in stockholders' equity.
SFAS 115 establishes criteria under which securities should be
classified as trading or held to maturity and states that
securities not otherwise classified should be accounted for as
available for sale. Equity securities within the scope of
SFAS 115 must be classified as either trading or available for
sale. When individual securities classified as either held to
maturity or available for sale experience an other than temporary
decline in fair value below amortized cost, SFAS 115 requires
adjustment to cost basis with a corresponding charge to income.
Upon adoption of SFAS 115 as of January 1, 1994, the carrying
amounts of debt securities classified as available for sale
F-44
and equity securities held by the parent company will be adjusted
to value. Since classification of the Company's debt securities is
not complete, the effect of SFAS 115 on the stated amount of debt
securities and the corresponding effects on deferred income tax
liabilities and stockholders' equity have not yet been determined.
For the same reason, the amounts of any related effects on deferred
policy acquisition costs and policy liabilities have not been
determined. Adoption of SFAS 115 will increase the stated amount of
equity securities held by the parent company as of January 1, 1994 by
$70 million, with corresponding increases of $28 million in deferred
income tax liabilities and $42 million in stockholders' equity.
Also in 1993, the FASB issued SFAS 114 "Accounting by Creditors for
Impairment of a Loan" which will be effective for the Company's 1995
financial statements. SFAS 114 will apply primarily to the Company's
mortgage loans and will require loans for which it is probable that
the Company will not collect all principal and interest due in
accordance with applicable terms to be stated at the present value
of expected future cash flows. The Company does not presently
expect adoption of SFAS 114 to have a material effect on its
consolidated financial statements.
Note 3. Deferred Policy Acquisition Costs
The following reflects the amounts of policy acquisition costs
deferred and amortized, with amounts deferred and amortized by the
nonlife insurance subsidiaries netted (in thousands):
Year Ended December 31,
1993 1992 1991
Balance, beginning $260,162 $248,627 $236,413
Policy acquisition costs
deferred:
Life contracts:
Commissions 26,651 23,606 26,136
Other 14,034 9,705 8,829
40,685 33,311 34,965
Accident and health
and all other 1,967 827 968
42,652 34,138 35,933
Amortization charged to
expenses 25,083 22,603 23,719
Balance, ending $277,731 $260,162 $248,627
======== ======== ========
F-45
Note 4. Policy Liability Information
The liability for future life policy benefits has been determined
using interest rate assumptions which vary by year of issue and
range from 3% to 9.9% for participating individual ordinary life
policies, remaining level for all durations. For nonparticipating
policies, assumed interest rates grade uniformly over 20 to 30
years with initial rates ranging from 3% to 9.75% and ultimate
rates ranging from 3% to 6%. Interest rate assumptions for weekly
premium, monthly debit ordinary and group life insurance generally
fall within the same ranges as those pertaining to individual
ordinary life.
Credited interest rates for universal life-type products
approximated 6.5%, 7.0% and 7.8% during 1993, 1992 and 1991,
respectively. Credited rates for annuity products generally ranged
from 5.0% to 6.25% during 1993, 5.5% to 6.75% during 1992 and 5.5%
to 7.75% during 1991.
Assumed mortality rates are generally based on experience multiples
applied to select and ultimate tables commonly used in the
industry.
Withdrawal assumptions for individual life insurance issued from
1948 to 1972 are based on the experience of the principal life
insurance subsidiary and generally range between Linton's A and B
tables. For business issued in 1972 and later, withdrawal rates
are based on experience and vary by issue age, type of coverage and
policy duration.
The stated amount and estimated fair value of the Company's
liability under annuity contracts in the accumulation phase,
exclusive of amounts related to retirement plans sponsored by the
Company and its subsidiaries, totaled $887 million and $853
million, respectively, as of December 31, 1993 ($753 million and
$725 million as of December 31, 1992). The estimated fair value of
the Company's liability under supplementary contracts not involving
life contingencies approximated its carrying amount of $23 million
in 1993 and $21 million in 1992.
Note 5. Notes Payable
Notes payable consist of unsecured borrowings drawn against an
uncommitted bank line of credit established in 1993. The Company
may request aggregate advances of up to $100 million through
October 1994. Interest rates and maturities are bilaterally
determined for each borrowing. The interest rate as of December 31,
1993 was 3.45% and the maximum amount outstanding during the year
approximated the $39.7 million balance on that date. Due to the
short duration of the Company's borrowings, interest expense was
not material.
F-46
Note 6. Stockholders' Equity and Stock Option Plans
On February 10, 1992, the Company's Board of Directors authorized a
three-for-two common stock split which was effected on April 15,
1992 to stockholders of record as of March 27, 1992. The split-
adjusted value of all fractional shares was paid in cash. The par
value of additional shares issued, which totaled $21,377,000, was
reclassified from retained earnings to common stock during 1992.
All share and per share information in the consolidated financial
statements has been adjusted to give retroactive effect to the
stock split.
Changes in the number of shares outstanding during each of the
three years in the period ended December 31, 1993 are as follows:
Year Ended December 31,
1993 1992 1991
Shares outstanding,
beginning 50,438,907 51,291,936 51,784,614
Shares issued under
stock option plan 109,522 78,181 186,233
Shares reacquired (1,083,934)( 931,210)( 678,911)
Shares outstanding,
ending 49,464,495 50,438,907 51,291,936
In May 1989, the Company's stockholders approved a stock option
plan under which 1,223,982 shares of common stock are reserved as
of December 31, 1993. The plan is administered by the Compensation
Committee of the Board of Directors (the Committee). The Committee
determines the participation criteria and approves all grants of
options under the plan. An option granted may be an incentive
stock option or a nonstatutory stock option at the determination of
the Committee. The plan also permits the Committee to grant stock
appreciation rights to eligible employees. All grants of stock
options and stock appreciation rights under the plan are required
to be at option prices which are not less than the market value of
the Company's common stock on the date of grant. The periods
during which stock options and stock appreciation rights are
exercisable is fixed by the Committee at the time of grant, but is
not to exceed ten years from the date of the grant. The plan
permits shares received upon exercise of stock options and those
which are subject to an option that expires or otherwise terminates
without exercise to again be subjected to option under the plan.
Participants are required to pay cash, previously acquired common
stock of the Company, or a combination of both equal to the full
option price of the common stock received upon exercise of options.
During 1989, the Committee approved a grant of options to purchase
the Company's common stock to each employee and full-time life
insurance agent who met certain specified
F-47
requirements. The number of options offered to individual employees and
agents was determined based on current compensation. During 1992, the
Committee approved a grant of options to those employees who met
requirements similar to those applied in the 1989 grant and were not
eligible to participate in the 1989 grant. The employees and agents who
received grants in 1989 and 1992 have established stock purchase savings
accounts with the Company, the proceeds of which are applied to the
option price of stock acquired upon exercise of options. The Committee
also approved grants of options and stock appreciation rights to certain
officers in 1989, 1990, 1992 and 1993.
During 1990, the Company's stockholders approved an amendment to the
stock option plan which authorized the Committee to make grants of the
Company's common stock to selected officers and to make one-time common
stock grants to current and future nonemployee directors. The Committee
granted certain executive officers of the Company an aggregate of 138,000
shares in 1991 and 174,000 shares in 1990. Certain of the officers'
interests in the common stock granted became vested over two years
following the date of grant. As of December 31, 1993, all such grants
were vested or forfeited. Nonemployee directors were granted an
aggregate of 4,500 shares in 1993, 2,250 shares in 1992 and 1991 and
24,750 shares in 1990. The grants to nonemployee directors vest over two
years. Compensation expense related to the grants of common stock was
not material in 1993 and approximated $1,165,000 in 1992 and $4,847,000
in 1991.
Summarized information about outstanding stock options, exercisable
options and shares available for grant under the stock option plan as
amended is as follows:
Average
Option Price Outstanding Exercisable Available
Per Share Options Options Shares
Balances,
January 1, 1991 $23.06 624,702 258,181 941,143
Shares granted - - - (140,250)
Options becoming
exercisable $26.47 - 10,602 -
Options exercised $22.92 (45,982) (45,982) -
Options terminated $22.92 (39,656) (2,100) 39,656
Balances,
December 31, 1991 $23.09 539,064 220,701 840,549
Options granted $40.04 119,820 - (119,820)
Shares granted - - - (2,250)
Options becoming
exercisable $37.03 - 50,438 -
Options exercised $23.04 (71,630) (71,630) 9,637
Options terminated $24.23 (28,524) (750) 28,524
Balances,
December 31, 1992 $26.67 558,730 198,759 756,640
Options granted $51.16 95,000 - (95,000)
F-48
Average
Option Price Outstanding Exercisable Available
Per Share Options Options Shares
Shares granted - - - (4,500)
Options becoming
exercisable $45.14 - 119,299 -
Options exercised $24.12 (105,022) (105,022) 18,134
Options terminated $37.33 (28,521) - 28,521
Balances,
December 31, 1993 $31.07 520,187 213,036 703,795
Of the options that are not yet exercisable, approximately 254,000 become
exercisable in 1994 at $22.92 and approximately 53,000 become exercisable
in 1997 at $40.25. Earlier exercise is permitted only in the event of
termination of employment due to death, disability or retirement. All
stock appreciation rights were exercised during 1992, resulting in the
issuance of 4,300 shares of common stock.
Note 7. Statutory Reporting Information
Net income and stockholder's equity (statutory equity capital) of
Jefferson-Pilot Life Insurance Company on the statutory basis used to
report to regulatory authorities and on the basis of generally accepted
accounting principles included in the consolidated financial statements
follow (in thousands). Amounts related to years prior to 1993 have been
restated, where appropriate, for the effect of the 1993 change in
accounting principle applicable to income taxes.
Statutory Reporting
1993 1992 1991
Net income for the year
ended December 31 $ 138,893 $ 157,753 $ 137,642
Statutory equity
capital at December 31 $ 945,157 $ 926,537 $ 860,577
Generally Accepted
Accounting Principles
1993 1992 1991
Net income for the year
ended December 31 $ 164,199 $ 187,972 $ 165,152
Stockholder's equity
at December 31 $1,435,098 $1,368,818 $1,273,323
Net income of the nonlife insurance subsidiaries, as determined on the
basis of generally accepted accounting principles, approximated $9.2
million in 1993, $8.6 million in 1992 and $3.7 million in 1991.
F-49
Stockholder's equity of the nonlife insurance subsidiaries totaled
approximately $94 million, $87 million and $80 million as of December 31,
1993, 1992 and 1991, respectively. Statutory net income of these
subsidiaries did not differ materially from that determined under
generally accepted accounting principles and their statutory equity
capital exceeded stockholder's equity, primarily because deferred income
taxes are not recorded on unrealized gains for statutory reporting.
The General Statutes of North Carolina contain certain limitations
affecting the amount of dividends that the insurance subsidiaries may pay
to the parent company without the approval of the State's Insurance
Commissioner. The Company's insurance subsidiaries have approximately
$100 million available for distribution to the parent company during 1994
without obtaining approval. The Company believes that neither statutory
dividend limitations nor risk-based capital requirements imposed on life
insurance companies beginning in 1993 present any practical restrictions
on its future dividend payment plans.
Note 8. Stockholders' Rights Plan
During 1988, the Company's Board of Directors declared a dividend of one
common share purchase right for each outstanding share of common stock.
The rights detach and become exercisable ten days after a person or group
publicly announces the acquisition of 20% or more of the Company's common
stock, or ten business days after a person or group announces an offer
which, if consummated, would result in the offeror owning 20% or more of
the common stock.
If and when the rights become exercisable, a holder would be entitled to
buy from the Company one share of common stock for each right held at a
price of $56.67. If the Company is acquired in a merger or other
business combination, or 50% or more of its consolidated assets or
earning power are sold, the rights entitle a holder to buy, at the
exercise price, stock of the acquiring Company having a market value of
twice the exercise price.
In the event that any person or group acquires 30% or more of the
Company's common stock, otherwise than pursuant to a cash tender offer
for all shares in which such person or group increases its holdings of
the common stock from less than 20% to 80% or more of the outstanding
common stock, the holder will be entitled to purchase for each right held
a number of additional shares of the Company's common stock having a
market value of twice the exercise price.
Following an acquisition by any person or group of 30% or more of the
Company's common stock, but only prior to the acquisition by a person or
group of a 50% stake in the common stock, the Board of Directors will
also have the ability to exchange one share of the Company's common stock
for each right held by holders other than the acquiring person or group.
F-50
The rights expire on August 12, 1998 and are redeemable, upon action by
the Board of Directors at a price of $.01 per right any time before they
become exercisable.
Note 9. Income Taxes
In 1993, the Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires
application of an asset and liability approach to accounting for the
expected future income tax effects of existing differences between the
tax bases of assets and liabilities and the amounts at which they are
reported in financial statements. SFAS 109 requires adjustment of
recorded deferred tax assets and liabilities in response to changes in
tax rates and other changes in applicable tax law in the period those
changes become enacted.
As permitted by SFAS 109, the Company has elected to restate prior year
consolidated financial statements to give retroactive effect to the new
income tax accounting standards. Accordingly, retained earnings as of
December 31, 1990 has been reduced by $18,555,000 in the accompanying
1991 consolidated statement of stockholders' equity. Consolidated
statements of income for 1992 and 1991 have not been restated because the
SFAS 109 standards had negligible effect on net income for those years.
Income taxes as reported in the consolidated statements of income were
comprised of the following components (in thousands):
Year Ended December 31,
1993 1992 1991
Current expense $110,730 $ 88,889 $ 77,839
Deferred benefit (7,980) (6,501) (8,759)
$102,750 $ 82,388 $ 69,080
======== ======== ========
A reconciliation of the maximum federal income tax rates of 35% in 1993
and 34% in 1992 and 1991 to the effective income tax rate for each year
follows:
Percent of Income Before
Income Taxes as Reported in
Consolidated Statements
of Income
1993 1992 1991
Maximum federal income
tax rate 35.0% 34.0% 34.0%
Reconciling items:
Tax exempt interest and
dividends received
deduction (2.9) (3.4) (3.9)
Recoveries and reductions
of amounts previously
provided for prior
years' tax assessments (.4) (2.3) (2.1)
Other increases, net .2 .5 .2
Effective income tax rates 31.9% 28.8% 28.2%
======== ======== ========
F-51
The tax effects of temporary differences that result in
significant deferred tax assets and deferred tax liabilities
as of December 31, 1993 and 1992 are as follows (in thousands):
December 31
1993 1992
Deferred tax assets:
Policy liabilities $ 90,237 $ 81,945
Capitalization of acquisition
costs for income tax purposes,
net of amortization 15,817 10,725
Obligation for postretirement
benefits other than pensions 13,634 -
Total deferred tax assets $ 119,688 $ 92,670
Deferred tax liabilities:
Net unrealized gains on equity
securities $ 176,202 $ 170,853
Deferral of policy acquisition
costs for financial reporting
purposes, net of amortization 97,320 88,566
Other basis differences,
including depreciation 15,328 17,807
Total deferred tax liabilities $ 288,850 $ 277,226
Net deferred tax liabilities
included in consolidated
balance sheets $(169,162) $(184,556)
Federal income tax returns for all years through 1987 have been
examined by the Internal Revenue Service and are closed.
Examinations of the 1988 through 1990 returns are in process, and
management has not been notified of the existence of significant
issues. Settlements and other resolutions during 1993, 1992 and
1991 resulted in the recovery of taxes and interest previously paid
for years through 1987 and reductions of amounts provided for
potential assessments involving subsequent years. In the opinion
of management, recorded income tax liabilities adequately provide
for all open years.
Under prior federal income tax law, one-half of the excess of a
life insurance company's income from operations over its taxable
investment income was not taxed, but was set aside in a special tax
account designated as "Policyholders' Surplus". The Company has
approximately $91,000,000 of untaxed "Policyholders' Surplus" on
which no payment of federal income taxes will be required unless it
is distributed as a dividend, or under other specified conditions.
The Company does not believe that any significant portion of the
account will be taxed in the foreseeable future and no related
deferred tax liability has been recognized. If the entire balance
of the account became taxable under the current federal rate the
tax would approximate $32,000,000.
F-52
The Omnibus Budget Reconciliation Act of 1993 increased the Company's
maximum federal income tax rate for 1993 from 34% to 35%. The change
in federal income tax rate increased income taxes charged to 1993
earnings by approximately $3 million, most of which is currently
payable and increased the liability for deferred income taxes on net
unrealized gains on equity securities by approximately $5 million.
Note 10. Retirement Benefit Plans
The Company and its subsidiaries have defined benefit pension plans
covering substantially all employees and full-time life insurance
agents. The plans are noncontributory and are funded through deposit
administration contracts issued by Jefferson-Pilot Life Insurance
Company, the Company's principal life insurance subsidiary.
The plans provide benefits based on annual compensation and years of
service. The funding policy is to contribute annually no more than
the maximum amount that can be deducted for federal income tax
purposes. The assets of the plans are those of the related
contracts, which are deposited in the general accounts of Jefferson-
Pilot Life Insurance Company.
The components of pension expense were as follows (in thousands):
Year Ended December 31,
1993 1992 1991
Service cost, benefits
earned during the year $ 7,259 $ 5,779 $ 8,015
Interest cost on projected
benefit obligation 11,414 11,098 9,905
Actual return on plan assets (11,235) (11,940) (15,525)
Net amortization and deferral (4,947) (2,505) 66
$ 2,491 $ 2,432 $ 2,461
The following table sets forth the funded status of the
plans and amounts recognized in the consolidated balance
sheets (in thousands):
December 31,
1993 1992
Actuarial present value of benefit
obligation:
Vested benefit obligation $196,066 $166,513
Accumulated benefit obligation $199,363 $169,536
Projected benefit obligation $219,236 $193,191
Plan assets at fair value 226,828 220,275
Plan assets in excess of projected
benefit obligation $ 7,592 $ 27,084
Unrecognized net gain (1,295) (19,894)
Unrecognized net asset amount (23,173) (25,363)
Unrecognized prior service cost 10,738 11,710
Accrued pension cost $ (6,138)$ (6,463)
F-53
Certain assumptions used in determining the funded status of the
plans were as follows:
1993 1992 1991
Discount rate 6.50% 6.90% 7.00%
Expected long-term rate of
return on plan assets 8.00% 7.20% 7.50%
Rate of increase in
compensation levels 4.25% 4.00% 5.00%
Benefits provided to retirees by annuity contracts issued by
Jefferson-Pilot Life Insurance Company approximated $10.0 million
in 1993, $8.8 million in 1992 and $8.2 million in 1991.
The Company sponsors contributory health care and life insurance
benefit plans for eligible retired employees, qualifying retired
agents and certain surviving spouses. Substantially all of the
Company's employees and qualifying agents may become eligible for
these benefits if they reach retirement age or become disabled
while employed by the Company and meet certain years-of-service
requirements.
Most of the postretirement health care and life insurance benefits
are provided through Jefferson-Pilot Life Insurance Company and,
until December 1993, were funded as payments were made to retirees
or their beneficiaries. In December 1993, the Company began
contributing to a welfare benefit trust from which future benefits
will be paid.
Prior to 1993, the cost of providing postretirement health care and
life insurance benefits was recognized in the year paid. During
1993, the Company adopted Statement of Financial Accounting
Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106). SFAS 106 requires
accrual of the cost of providing postretirement benefits during the
employees' active service periods and covers all postretirement
benefits other than pensions that an employer expects to provide to
current and former employees.
The Company elected to immediately recognize the accumulated
obligation for postretirement benefits under SFAS 106, which
represents the actuarial present value of future benefits
attributable to the service of eligible employees through January
1, 1993. Accordingly, the consolidated statement of income for
1993 includes a charge in the amount of $24,109,000, representing
initial recognition of the accumulated benefit obligation of
$37,035,000, net of deferred tax benefit of $12,926,000. Aside
from initial recognition of the accumulated benefit obligation,
application of SFAS 106 increased nonpension postretirement benefit
cost for 1993 by approximately $900,000, to $2,161,000. Nonpension
postretirement benefit cost for 1993 as determined under SFAS 106
was comprised primarily of interest cost on the accumulated benefit
obligation. The cost of postretirement health care and life
insurance benefits paid and expensed in 1992 and 1991 approximated
$1.5 million.
F-54
The following table sets forth the funded status of the Company's
postretirement health care and life insurance plans as of December
31, 1993 and 1992 (in thousands):
Health Care Life Insurance
Benefits Benefits
1993 1992 1993 1992
Plan assets at fair
value $ 810 $ - $ 1,035 $ -
Accumulated
postretirement
benefit obligation:
Retirees and
surviving spouses $ 9,777 $ 12,480 $ 8,254 $ 6,740
Fully eligible
active participants 952 3,124 1,462 2,408
Other active
participants 2,584 8,686 1,902 3,597
$ 13,313 $ 24,290 $ 11,618 $ 12,745
Excess of accumulated
benefit obligation
over plan assets $(12,503)$(24,290)$(10,583)$(12,745)
Transition
obligation
recorded in 1993 - 24,290 - 12,745
Unrecognized
negative prior
service cost (10,719) - (3,765) -
Unrecognized net
(gain) loss (547) - 1,990 -
Accrued postretirement
benefit cost $(23,769)$ - $(12,358)$ -
Accumulated postretirement benefit obligations were computed using
assumed discount rates of 7% as of December 31, 1993 and 8.5% as of
December 31, 1992. The expected long-term rate of return on plan
assets as of December 31, 1993 was 7%.
Effective April 1, 1993, the Company changed the eligibility
criteria of its postretirement health care and life insurance plans
to require employees and qualifying agents to complete 15 years of
service after the age of 45 to be eligible for these benefits.
Employees and agents hired before January 1, 1994 who were age 50
or older when hired will continue to be eligible for these benefits
after 10 years of service. Future health care cost trend rates in
excess of 4% have been assumed in determining the related
postretirement benefit obligation as of December 31, 1993.
Effective January 1, 1994 the Company changed its postretirement
health care plan to limit annual benefit increases to a maximum
rate of 4%. Therefore future cost increases exceeding 4% per year
will have no effect on the Company's obligations. The preceding
F-55
changes resulted in the establishment of negative prior service
cost during 1993, which is being amortized on a straight-line basis
over the average remaining period of service to full eligibility of
active employees who are not fully eligible.
Note 11. Reinsurance
The Company generally reinsures with other insurance companies the
portion of an individual life insurance risk that exceeds
$1,000,000, with an additional $250,000 for accidental death
benefits. The Company also attempts to reduce its exposure to
losses that may result from unfavorable events or circumstances by
reinsuring certain levels and types of life, accident and health
and property and casualty risks underwritten. The Company assumes
portions of life and other risks underwritten by certain other
insurers on a limited basis, and amounts related to assumed
reinsurance are not material to the consolidated financial
statements.
Reinsurance contracts do not relieve the Company from its primary
obligation to policyholders and failure of reinsurers to discharge
their obligations could result in losses to the Company. The
Company regularly evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk related to
its reinsurance activities. No significant credit losses resulted
from the Company's reinsurance activities during the three years
presented.
In 1993, the Company adopted Statement of Financial Accounting
Standards No. 113 "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts" (SFAS 113). Among
other things, SFAS 113 requires that reinsurance receivables be
reported at gross amounts, which include amounts related to paid
benefits and claims and estimated amounts related to unpaid
benefits and claims and future policy benefits. Prior to 1993,
reinsurance receivables were reported net of the related reserve
liabilities. The consolidated balance sheet as of December 31,
1992 has been restated to conform with SFAS 113.
Aggregate receivables related to life and accident and health
reinsurance contracts totaled $17.5 million and $15 million as of
December 31, 1993 and 1992. Premiums ceded under these contracts
totaled $18 million in 1993, $15 million in 1992 and $16 million in
1991. Reinsurance recoveries related to incurred losses totaled
$9.2 million in 1993, $5.5 million in 1992 and $7.7 million in
1991.
Individual term life insurance approximating $1.5 billion, $1.5
billion, and $1.3 billion, and group insurance approximating $700
million, $500 million, and $500 million had been ceded to other
companies as of December 31, 1993, 1992, and 1991, respectively.
Life insurance ceded represented 5.3%, 4.8%, and 4.7% of life
insurance in force as of December 31, 1993, 1992, and 1991,
respectively, and 4.1%, 3.3%, and 3.9% of life insurance premium
revenue for the years then ended. Accident and health insurance
ceded represented 2.0% of related premium revenue for each of the
three years.
F-56
Aggregate receivables related to short-duration property and
casualty reinsurance contracts totaled $8.3 million and $6 million
as of December 31, 1993 and 1992. As a result of reinsurance
activities, gross property and casualty premiums earned exceeded
net reported premium revenue by approximately $7 million in 1993,
$5 million in 1992 and $4.4 million in 1991. The effect of
reinsurance on written premiums approximated that on earned
premiums. Reinsurance recoveries related to incurred property and
casualty losses totaled $7.6 million in 1993, $2.7 million in 1992
and $5.4 million in 1991.
Note 12. Condensed Separate Company Financial Information
Condensed balance sheets, statements of income and cash flow
information of Jefferson-Pilot Corporation (parent company only)
are presented below (in thousands). Amounts related to years prior
to 1993 have been restated, where appropriate, for the effect of
the 1993 change in accounting principle applicable to income taxes.
CONDENSED BALANCE SHEETS
December 31,
1993 1992
Assets:
Cash and investments other than
subsidiary companies $ 150,015 $ 158,882
Investment in subsidiaries, at
equity 1,606,261 1,527,085
Other assets, including amounts due
from subsidiaries 1993 $38,374;
1992 $3,311 50,024 5,679
$1,806,300 $1,691,646
Liabilities and stockholders' equity:
Notes payable $ 39,700 $ -
Other liabilities 33,529 23,436
Stockholders' equity 1,733,071 1,668,210
$1,806,300 $1,691,646
CONDENSED STATEMENTS OF INCOME
Year Ended December 31
1993 1992 1991
Net investment income,
principally dividends
from subsidiaries $121,343 $133,955 $146,156
Expenses, principally
general and administrative 11,513 17,470 15,226
109,830 116,485 130,930
F-57
Year Ended December 31
1993 1992 1991
Income taxes (benefits) 1,453 (5,492) (3,270)
108,377 121,977 134,200
Equity in undistributed net
income of subsidiaries 86,795 81,261 41,487
Net income $195,172 $203,238 $175,687
The parent company's principal source of cash during all years
presented was dividends from subsidiaries. Its principal uses of
cash during those years included investment acquisitions, payment of
cash dividends to stockholders and purchases of its common stock in
the open market.
The only significant subsidiaries that do not engage in insurance
operations are Jefferson-Pilot Communications Company (JPCC) and
Jefferson-Pilot Data Services, Inc. (JPDS). JPCC is engaged in
radio, television and media services operations. JPDS is a provider
of data processing services to the media industry. Combined
condensed financial statements of JPCC and JPDS are presented below
(in thousands). Amounts related to years prior to 1993 have been
restated, where appropriate, for the effect of the 1993 change in
accounting principle applicable to income taxes.
COMBINED CONDENSED BALANCE SHEETS
December 31,
1993 1992
Assets:
Cash and cash equivalents $ 6,814 $ 11,133
Receivables 33,539 21,970
Property and equipment, net 41,696 33,588
Goodwill and other assets 43,353 33,247
$ 125,402 $ 99,938
Liabilities and stockholder's equity:
Trade obligations $ 32,965 $ 23,555
Debt obligations to affiliate 17,835 4,755
Income taxes 5,217 6,725
Total liabilities 56,017 35,035
Stockholder's equity 69,385 64,903
$ 125,402 $ 99,938
F-58
COMBINED CONDENSED STATEMENTS OF INCOME
Year Ended December 31,
1993 1992 1991
Revenue $144,961 $129,734 $125,045
Expenses 117,379 105,472 107,022
27,582 24,262 18,023
Income taxes 10,246 10,093 7,696
Income before cumulative
effect of change in
accounting principle 17,336 14,169 10,327
Cumulative effect of change
in accounting principle
applicable to postretirement
benefits other than pensions,
net of income tax benefit (3,654) - -
Net income $ 13,682 $ 14,169 $ 10,327
======== ======== ========
Net cash provided by operating activities amounted to $21 million
in 1993, $21 million in 1992 and $23 million in 1991. Net cash of
$29 million in 1993, $4 million in 1992 and $3 million in 1991 was
used in investing activities. Investing activities in 1993
included the acquisition of broadcast properties by JPCC. Other
investing activities during the three years consisted primarily of
the purchase of property and equipment. Net cash of $4 million was
provided by financing activities in 1993. Financing activities
during 1992 and 1991 resulted in net uses of cash amounting to
$13.5 million and $21 million. Financing activities during all
three years related primarily to borrowings from affiliates and
payment of dividends to the parent company.
Note 13. Segment Information
The Company's operations are conducted principally through the
following three business segments:
Life insurance - Life insurance operations include individual
and group life insurance, annuity and accident and health
policies.
Other insurance - Other insurance operations consist of property
and casualty insurance, including commercial and personal lines,
and title insurance.
Communications - Communications operations consist principally
of radio and television broadcasting, televised sports program
production and electronic data processing services.
F-59
Information about each major operating segment for 1993, 1992 and
1991 follows (in thousands). Amounts related to years prior to
1993 have been restated, where appropriate, for the effect of the
1993 change in accounting principle applicable to reinsurance
receivables. All operations which do not constitute reportable
business segments have been combined with consolidating adjustments
and realized investment gains in the line described as "Other,
net".
1993 1992 1991
Revenue:
Life insurance $ 986,972 $ 965,862 $ 956,426
Other insurance 51,462 53,907 53,472
Communications 144,961 129,734 125,045
Other, net 63,229 52,826 38,533
Consolidated $1,246,624 $1,202,329 $1,173,476
Income before income taxes
and cumulative effect
of change in accounting
principle:
Life insurance $ 232,961 $ 217,635 $ 202,349
Other insurance 8,860 7,820 919
Communications 27,582 24,262 18,023
Other, net 52,628 35,909 23,476
Consolidated $ 322,031 $ 285,626 $ 244,767
Identifiable assets at
December 31:
Life insurance $5,194,478 $4,831,189 $4,552,072
Other insurance 175,670 165,959 154,051
Communications 125,402 99,938 102,836
Other, net 145,071 159,676 136,437
Consolidated $5,640,621 $5,256,762 $4,945,396
Depreciation and
amortization:
Life insurance $ 5,940 $ 6,055 $ 5,741
Other insurance 178 194 209
Communications 10,757 8,425 10,013
Other, net 54 172 327
Consolidated $ 16,929 $ 14,846 $ 16,290
The cumulative effect of the 1993 change in accounting principle
applicable to postretirement benefits other than pensions
approximated $37 million on a pretax basis and related primarily to
the life insurance segment ($30 million) and the communications
segment ($6 million). Additions to real estate and property and
equipment approximated $26 million in 1993, $7 million in 1992 and
$9 million in 1991. Included in the preceding amounts are
additions related to the communications industry segment totaling
$17.6 million, $4.7 million and $3.4 million in 1993, 1992 and
1991, respectively. Other additions to real estate and property
F-60
and equipment related primarily to the life insurance segment
during all three years. Expenditures for goodwill and other
intangibles by the communications segment totaled $11.9 million in
1993 and resulted from the acquisition of broadcast properties.
Note 14. Commitments and Contingent Liabilities
The Company routinely enters into commitments to extend credit in
the form of mortgage loans and to purchase certain debt instruments
for its investment portfolio in private placement transactions.
All such commitments outstanding at December 31, 1993 were in the
normal course of the Company's investment activities and pertained
to future investments which are similar in nature to those it
currently holds.
The Company leases electronic data processing equipment and field
office space under noncancelable operating lease agreements. The
lease terms generally range from three to five years. Annual rent
expense approximated $7 million in 1993 and $8 million in 1992 and
1991. Future annual rental commitments are expected to be
consistent with current year expense.
The Company is involved in certain matters of litigation which
arose out of the normal course of its insurance operations. The
Company's practice is to vigorously defend itself against claims
brought by other parties through the efforts of its internal legal
department and outside counsel. Based on consultation with the
Company's legal advisers, management is of the opinion that
adequate provision has been made for all such matters which are
likely to result in the incurrence of a loss, and that resolution
of other pending litigation will not have a material adverse effect
on the Company's financial condition.
The Kentucky Insurance Commissioner has submitted to the Circuit
Court of Franklin County, Kentucky a proposed plan of
rehabilitation for Kentucky Central Life Insurance Company, which
was seized in February 1993. Under the proposed plan, Jefferson-
Pilot Life Insurance Company would assume most of Kentucky
Central's life insurance and annuity business. Kentucky Central
reported statutory basis life reserves and deposit liabilities
totaling approximately $1 billion as of December 31, 1992. While
negotiations are in progress, the outcome of the proposed plan
depends not only upon the Circuit Court ruling, but also upon the
resolution of other significant issues. If a transaction is
completed, the Company would expect returns comparable to those it
realizes on new business sold through its normal distribution
system.
F-61
JEFFERSON-PILOT CORPORATION
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21
Subsidiaries included in Consolidated Financial Statements:
% of Voting
Securities
State of Owned by
Name and Address Organization Registrant
Jefferson-Pilot Life Insurance Company North Carolina 100
100 North Greene Street, Greensboro, NC
Jefferson-Pilot Fire & Casualty Company North Carolina 100
100 North Greene Street, Greensboro, NC
Jefferson-Pilot Title Insurance Company North Carolina 100
100 North Greene Street, Greensboro, NC
Jefferson-Pilot Investments, Inc. North Carolina 100
100 North Greene Street, Greensboro, NC
JP Investment Management Company North Carolina 100
100 North Greene Street, Greensboro, NC
Jefferson-Pilot Investor Services, Inc. North Carolina 100
100 North Greene Street, Greensboro, NC
Jefferson-Pilot Pension Life Insurance North Carolina 100
Company, 100 North Greene Street,
Greensboro, NC
Jefferson-Pilot Health Care Delivery North Carolina 100
Systems, Inc.
100 North Greene Street, Greensboro, NC
Jefferson Standard Life Insurance North Carolina (1)
Company, 100 North Greene Street,
Greensboro NC
F-62
Subsidiaries included in Consolidated Financial Statements (continued):
% of Voting
Securities
State of Owned by
Name and Address Organization Registrant
Southern Fire & Casualty Company Tennessee (2)
100 North Greene Street, Greensboro, NC
Jefferson-Pilot Property Insurance North Carolina (2)
Company, 100 North Greene Street
Greensboro, NC
Jefferson-Pilot Communications North Carolina 100
Company, 100 North Greene Street
Greensboro, NC
Jefferson-Pilot Communications Virginia (3)
Company of Virginia,
5710 Midlothian Turnpike,
Richmond, VA
WCSC, Inc. South Carolina (3)
485 East Bay Street
Charleston, SC
Jefferson-Pilot Data Services, Inc. North Carolina 100
785 Crossover Lane
Memphis, TN
(1) 100% owned by Jefferson-Pilot Life Insurance Company.
(2) 100% owned by Jefferson-Pilot Fire & Casualty Company.
(3) 100% owned by Jefferson-Pilot Communications Company.
F-63
EXHIBIT 23
ACCOUNTANT'S CONSENT
We consent to the incorporation by reference in Post Effective Amendments
to outstanding effective registration statements numbers 2-36778, 2-56410 and
33-30530 on Form S-8, and in outstanding effective registration statements on
Form S-16 included in such S-8 filings, of our report dated February 4, 1994
on the consolidated financial statements of Jefferson-Pilot Corporation and
subsidiaries, which appears on page 29 of the Annual Report to Shareholders and
is incorporated by reference into the Report on Form 10-K of Jefferson-Pilot
Corporation for the year ended December 31, 1993.
McGLADREY & PULLEN
Greensboro, North Carolina
March 29, 1994
F-64
