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, 1994 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: $2,762,062,000 at March 1, 1995.
Indicate the number of shares outstanding of each of the issuer's classes of
stock:
Class Outstanding at March 1, 1995
Common Stock (Par Value $1.25 per share) 48,457,231
(continued)
<PAGE>
Documents Incorporated by Reference
Part I
Item 1. Business
(b) Financial Information about Pages 55-56 of Annual Report
Industry Segments to Shareholders for the year
ended December 31, 1994.
Item 3. Legal Proceedings Page 58 of Annual Report to
Litigation Shareholders for the year
ended December 31, 1994.
Part II.
Item 8. Financial Statements and Pages 36-59 of Annual Report
Supplementary Data to Shareholders for the year
ended December 31, 1994.
Part III
Item 10. Directors and Executive
Officers of the Registrant
Identification of Directors Information under the heading
and their Business Experience "Election of Directors" of the
Proxy Statement to Shareholders
for the Annual Meeting to be
held May 1, 1995 (the "Proxy
Statement").
Compliance with Section Information under the heading
16(a) - Insider Filings "Security Ownership" of the
Proxy Statement.
Item 11. Executive Compensation Information under the heading
"Executive Compensation" of
the Proxy Statement.
Item 12. Security Ownership of Information under the heading
Certain Beneficial "Security Ownership" of the
Owners and Management Proxy Statement.
Item 13. Certain Relationships and Information under the heading
Related Transactions "Compensation Committee Inter-
locks and Insider Participation"
of the Proxy Statement.
(continued)
<PAGE>
Documents Incorporated by Reference (continued)
Part IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on
Form 8-K
(a) 1. Financial Statements Pages 36-59 of Annual Report to
Shareholders for the year ended
December 31, 1994.
(c) Exhibits Plan of Acquisition - Life and
Health Agreement in Connection
with the Rehabilitation of
Kentucky Central Life Insurance
Company included as Exhibit 2
to Form 10-Q for the period
ended September 30, 1994.
Bylaws of the Corporation
included as Exhibit 3 to
Form 8-K dated November 14, 1994.
Amended and Restated Rights
Agreement dated November 7, 1994
included as Exhibit 4 to
Form 8-K dated November 14, 1994.
Employment contracts between the
Registrant and David A. Stonecipher
and Kenneth C. Mlekush, included
in Form 10-K for the year ended
December 31, 1992.
Employment contracts between the
Registrant and John D. Hopkins,
Dennis R. Glass, and E.J. Yelton,
included in Form 10-K for the year
ended December 31, 1993.
Long Term Stock Incentive Plan
included as Exhibit 2 to the
Proxy Statement.
Non-employee Directors' Stock
Option Plan included as Exhibit 3
to the Proxy Statement.
(d) Financial Statement Notes to Schedule II incorporate
Schedules information from the Notes on
pages 41-58 of Annual Report to
Shareholders for the year ended
December 31, 1994.
<PAGE>
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
Executive Officers of the Registrant 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-23
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure II-24
Part III
Item 10. Directors and Executive Officers of
Registrant III-1
Item 11. Executive Compensation III-1
Item 12. Security Ownership of Certain Beneficial
Owners and Management III-1
Item 13. Certain Relationships and Related
Transactions III-1
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K IV-1
Undertakings IV-1
Signatures IV-2
<PAGE>
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 and Jefferson-Pilot
Communications Company, both of Greensboro, North Carolina. Through these and
other subsidiaries, Registrant is primarily engaged in the business of writing
life insurance, annuity policies, and accident and health insurance, and in
the business of operating radio and television facilities, and producing
sports programming. Further detail is provided in Management's Discussion and
Analysis of Financial Condition and Results of Operation.
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. Jefferson-Pilot
Life Insurance Company, as a member of an "insurance holding company system",
has registered as such under all applicable state statutes. In many instances,
these 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.
On December 30, 1994, Jefferson-Pilot Title Insurance Company, a wholly-
owned subsidiary of Registrant, entered into a reinsurance agreement with a
purchaser to assume the obligations and liabilities of policies in force.
The purchaser subsequently purchased the stock of Jefferson-Pilot Title.
On December 23, 1994, Registrant agreed to sell Jefferson-Pilot Fire and
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Casualty Company, subject to regulatory approval. The Company believes that
closing should occur during the first half of 1995. The operations of these
companies, formerly classified as the "Other Insurance Segment", are disclosed
as "Discontinued Operations" in the accompanying Consolidated Financial
Statements.
(b) Financial Information about Industry Segments
Industry segment information is presented in Note 14, 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
continuing insurance subsidiaries and revenues from the Communications segment
for the years ended December 31, 1994, 1993, and 1992 are as follows (in
thousands):
1994 1993 1992
Life insurance segment:
Individual life and
annuity premiums $ 103,617 $ 106,097 $ 99,459
Group life premiums 69,261 64,313 65,713
Interest-sensitive
product considerations 68,793 63,353 57,954
Other considerations 14,566 7,233 7,708
Life premiums and other
considerations $ 256,237 $ 240,996 $ 230,834
Accident and health premiums 399,065 386,608 383,552
$ 655,302 $ 627,604 $ 614,386
========= ========= =========
Communications segment,
broadcast and media
services revenue $ 172,501 $ 144,961 $ 129,734
========= ========= =========
(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
<PAGE>
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 47 states, the District of Columbia, the Virgin Islands,
and Puerto Rico.
The Company is primarily engaged in the writing of whole life, term,
annuity and endowment policies on an individual ordinary basis and group life
and group accident and health insurance policies. Accident and health
insurance is also written on an individual basis. Approximately 12% 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, 1994, approximately 4.5% 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 Independent
Marketing Organizations (IMO's). IMO's are intermediaries that sell financial
products and services through agents they have recruited. Forty-eight IMO's
have been appointed representing approximately 9,200 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
<PAGE>
The following table sets forth for the years ended December 31, 1994,
1993, and 1992, certain information relating to the life insurance operations
of Jefferson-Pilot Life:
1994 1993 1992
(Percent)
Voluntary terminations to mean
amount of life insurance policies
in force:
Whole life, endowment and term 8.1 8.1 8.9
Group life 6.9 19.4 4.2
Industrial life 2.7 3.1 3.4
Actual to expected mortality:
Whole life, endowment and term 46.7 38.4 36.7
Group life 95.2 95.9 90.8
Industrial life 46.4 45.4 45.7
Life insurance underwriting expense
(1) to premium income (2):
Industrial 82.4 84.9 89.1
Ordinary Life 36.2 34.8 37.0
Annuities 7.2 7.4 7.6
Group life 8.6 11.3 9.5
Group A & H 16.3 15.9 15.2
Other A & H 48.5 44.9 48.0
(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.
I-4
<PAGE>
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 1994, approximately 93.1% were written on a group basis and
6.9% 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, 1994, 1993, and 1992.
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.
1994 1993 1992
(In Thousands)
Premium Income:
Individual $ 27,607 $ 28,248 $ 25,781
Group 371,458 358,360 357,771
Total $399,065 $386,608 $383,552
Allocated Net Investment Income:
Individual $ 3,870 $ 3,564 $ 3,216
Group 27,663 26,982 26,811
Total $ 31,533 $ 30,546 $ 30,027
Claims and Reserve Increase:
Individual $ 19,755 $ 17,772 $ 15,895
Group 289,695 288,049 301,955
Total $309,450 $305,821 $317,850
Underwriting Expenses:
Individual $ 11,757 $ 11,461 $ 11,164
Group 59,688 55,935 53,218
Total $ 71,445 $ 67,396 $ 64,382
Net Income Before Income Taxes:
Individual $( 35) $ 2,579 $ 1,938
Group 49,738 41,358 29,409
Total $ 49,703 $ 43,937 $ 31,347
I-5
<PAGE>
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, 1994, 1993, and 1992, on the NAIC basis:
1994 1993 1992
(In Thousands)
Net premiums written $400,213 $387,084 $383,114
Net premiums earned $399,030 $387,000 $384,677
Ratio of loss and
loss adjustment
expenses incurred to
earned premiums 77.52% 79.11% 82.91%
Ratio of underwriting
expenses incurred to
premiums written 17.87% 17.42% 16.82%
Combined loss and
expense ratio 95.39% 96.53% 99.73%
Underwriting margins $ 18,170 $ 13,391 $ 1,320
Other Information Regarding Insurance Company Subsidiaries
Regulation. Jefferson-Pilot Life, in common with other insurance
companies, is subject to regulation and supervision in the states in which
it does business. Although the extent of such regulation varies from state
to state, generally the insurance laws 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 Company is also required under these laws to file detailed
annual reports with the supervisory agencies in the various states in which
it does business, and its business and accounts are subject to examination
I-6
<PAGE>
at any time by such agencies. Under the rules of the National Association
of Insurance Commissioners (NAIC) and the laws of the State of North Carolina,
the Company is examined periodically (usually at three-year intervals) by the
supervisory agencies of one or more of the states in which they do business.
Competition. The 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.
Employees. As of December 31, 1994, the insurance subsidiaries of the
Registrant employed approximately 3,600 agents and employees, in addition to
the 9,200 IMO agents mentioned previously.
I-7
<PAGE>
COMMUNICATIONS COMPANY SUBSIDIARIES
Jefferson-Pilot Communications Company, a wholly-owned subsidiary of
the Registrant, is a corporation organized under the laws of North Carolina.
The principal offices are 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
KKFN and KYGO-FM in Denver and KYGO and KWMX-FM in Lakewood, Colorado, (iv)
radio stations WAXY 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), Jefferson-Pilot Sports, a production and syndication business, and (vii)
Co-Opportunities, a co-op advertising consulting business.
Jefferson-Pilot Communications Company of Virginia, a wholly-owned
subsidiary of Jefferson-Pilot Communications Company, owns and operates
VHF television station WWBT in Richmond, Virginia. WCSC, Inc., is a wholly-
owned subsidiary of Jefferson-Pilot Communications Company that owns and
operates VHF television station WCSC in Charleston, South Carolina.
At December 31, 1994, Jefferson-Pilot Data Services, Inc. was a wholly-
owned subsidiary of Registrant. On February 14, 1995, substantially all of the
assets and operations of Jefferson-Pilot Data Services, Inc. were sold.
Television Operations
The television stations owned and operated by Jefferson-Pilot
Communications Company are WBTV, Charlotte, North Carolina; WWBT, Richmond,
Virginia; and WCSC, Charleston, South Carolina.
I-8
<PAGE>
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 819,000* television homes view WBTV each week within the
Charlotte Television Market, which is ranked as the 28th* television market in
the nation by the Nielsen Station Index. Six 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 459,000* television homes view WWBT each week within the Richmond
Television Market, which is ranked as the 54th* 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 277,000* television homes view WCSC each week within the
Charleston Television Market, which is ranked as the 105th* television market
in the nation. Four other commercial television stations are licensed to
that market.
Radio Operations
Jefferson-Pilot Communications Company owns and operates WBT and WBT-FM
in Charlotte, WQXI in Atlanta, WSTR-FM in Smyrna, KKFN and KYGO-FM in
Denver, KYGO and KWMX-FM in Lakewood (a Denver suburb), KSON and KSON-FM in
San Diego, WAXY in South Miami, WLYF-FM 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.
*Nielsen Station Index
I-9
<PAGE>
Other Information Regarding Communications Companies
Competition. The radio and television stations of Jefferson-Pilot
Communications Company and its subsidiaries, compete for programming,
talent, and revenues with other radio and television stations in their
respective market areas as well as with other advertising and entertainment
media. Jefferson-Pilot Communications Company's non-broadcast divisions
compete with other vendors of similar products and services.
Employees. As of December 31, 1994, Jefferson-Pilot Communications
Company and its subsidiaries employed approximately 665 persons full time.
Federal Regulation. Television and radio broadcasting operations are
subject to the jurisdiction of the Federal Communications Commission ("FCC")
under the Communications Act of 1934 (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
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
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<PAGE>
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,
KKFN, and KWMX FM 4/1/97; WAXY, 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 Jefferson-Pilot Life.
Jefferson-Pilot Life owns its home office consisting of a 20-story
building and an adjacent 17-story building. These structures house insurance
operations and provide 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. It also owns 233 acres in Guilford
County, North Carolina, formerly home office of Pilot Life Insurance Company,
and an Employees' Club located in north-western Guilford County, with
approximately 500 acres of land surrounding the Club.
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.
I-11
<PAGE>
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 17, 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.
Executive Officers of the Registrant
David A. Stonecipher, President and Chief Executive Officer, joined
Jefferson-Pilot Corporation as President-Elect and CEO-Elect in September 1992,
and became President and CEO in March 1993. Prior to September 1992, he was
associated with the Life Insurance Company of Georgia and Southland Life
Insurance Company, and their parent company, GeorgiaUS, having last served as
President and CEO of Life Insurance Company of Georgia and Southland Life
Insurance Company, and President of GeorgiaUS.
Dennis R. Glass, Senior Vice President, Chief Financial Officer and
Treasurer, joined the Registrant in October 1993. From 1991 to October
1993, he was associated with Protective Life Corporation, having last served
as Executive Vice President and CFO of the company. From 1983 to 1991, he was
associated with the Portman Companies, having last served as Executive Vice
President and CFO.
I-12
<PAGE>
Kenneth C. Mlekush, Senior Vice President, joined Jefferson-Pilot
Corporation in January 1993. From 1989 through 1992, he was associated with
Southland Life Insurance Company and its parent, GeorgiaUS, last serving as
President and Chief Operating Officer of Southland Life, and Executive Vice
President of GeorgiaUS. E. Jay Yelton, Senior Vice President - Investments,
joined Jefferson-Pilot Corporation in October 1993, and for more than five
years prior thereto was President of the Investment Centre. John D. Hopkins,
Senior Vice President and General Counsel, 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. William E. Blackwell, Executive Vice
President, and C. Randolph Ferguson, Senior Vice President, have served in
various executive capacities with Jefferson-Pilot Corporation over the past
five years.
There are no agreements or understandings between any executive officer
and any other person pursuant to which such executive officer was or is to be
selected as an officer. Executive officers hold office at the will of the
Board, subject to their rights under employment agreements listed as exhibits
to this Form 10-K.
I-13
<PAGE>
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 as reported in the
consolidated transactions systems are listed below.
1994 1993 1992
First Quarter 50 - 43 3/8 57 7/8 - 45 1/2 39 1/4 - 33 1/4
Second Quarter 51 3/8 - 46 5/8 57 3/4 - 46 44 - 35 1/2
Third Quarter 55 1/8 - 48 1/4 57 7/8 - 48 5/8 43 - 38 1/2
Fourth Quarter 54 3/4 - 50 3/8 54 - 45 3/4 49 1/2 - 37 1/8
(b) Number of Security Holders
As of March 29, 1995, the Registrant had 10,671 shareholders of record.
(c) Dividend History
1994 1993 1992 1991 1990
Cash dividends paid: $ 81,814 $ 75,986 $ 66,310 $ 56,120 $ 53,139
======== ======== ======== ======== ========
Cash dividends
paid per share:
First Quarter .39 .34 .28 .25 .23
Second Quarter .43 .39 .34 .28 .25
Third Quarter .43 .39 .34 .28 .25
Fourth Quarter .43 .39 .34 .28 .25
Total $ 1.68 $ 1.51 $ 1.30 $ 1.09 $ .98
======== ======== ======== ======== ========
Dividends to the Registrant from its insurance subsidiaries are subject
to state regulation, as more fully described in Item 7.
II-1
<PAGE>
Item 6. Selected Financial Data
<TABLE>
SUMMARY OF SELECTED FINANCIAL DATA
(In Thousands Except Per Share Information)
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Operating income before
initial FAS 106 appli-
cation and gain from
sales of investments:
Continuing operations $ 190,977 $ 173,995 $ 164,213 $ 150,574 $ 132,730
Discontinued operations 9,247 7,957 7,027 2,554 6,232
Operating income 200,224 181,952 171,240 153,128 138,962
Gain from sales of
investments, net of
taxes:
Continuing operations 38,921 35,565 30,385 21,409 18,658
Discontinued operations 92 1,764 1,613 1,150 17
Gain from sales of investments 39,013 37,329 31,998 22,559 18,675
Income before initial
FAS 106 application 239,237 219,281 203,238 175,687 157,637
Initial effect of FAS 106 0 ( 24,109) 0 0 0
Net income $ 239,237 $ 195,172 $ 203,238 $ 175,687 $ 157,637
========== ========== ========== ========== ==========
Income per share of
common stock:
Operating income before
initial FAS 106 appli-
cation and gain from
sales of investments:
Continuing operations $ 3.93 $ 3.46 $ 3.22 $ 2.93 $ 2.47
Discontinued operations .19 .16 .14 .05 .12
Operating income 4.12 3.62 3.36 2.98 2.59
Gain from sales of
investments, net of
taxes:
Continuing operations .80 .71 .60 .42 .35
Discontinued operations .00 .03 .03 .02 .00
Gain from sales of investments .80 .74 .63 .44 .35
Income before initial
FAS 106 application 4.92 4.36 3.99 3.42 2.94
Initial effect of FAS 106 .00 ( .48) .00 .00 .00
Net income $ 4.92 $ 3.88 $ 3.99 $ 3.42 $ 2.94
========== ========== ========== ========== ==========
Average shares outstanding 48,641,880 50,251,676 50,952,147 51,319,143 53,636,223
========== ========== ========== ========== ==========
Total assets $6,140,336 $5,640,621 $5,256,762 $4,945,396 $4,474,523
========== ========== ========== ========== ==========
Stockholders' equity $1,732,543 $1,733,071 $1,668,210 $1,544,461 $1,334,434
========== ========== ========== ========== ==========
Stockholders' equity per
share of common stock $ 35.76 $ 35.04 $ 33.07 $ 30.11 $ 25.77
========== ========== ========== ========== ==========
</TABLE>
II-2
<PAGE>
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
1990 were increased by $20,925,000, $20,176,000, and $19,615,000, 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 1990 were all decreased by
$18,555,000 compared to amounts previously reported. Stockholders' equity per
share reflects these adjustments also.
Discontinued operations of the Registrant are discussed in Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations,
below.
REVENUE BY SOURCES
(In Thousands)
1994 1993 1992 1991 1990
Life and accident and
health insurance $1,025,672 $ 986,972 $ 965,862 $ 956,426 $ 946,262
Communications 172,501 144,961 129,734 125,045 127,330
Other 9,211 6,282 4,656 4,570 5,656
Realized investment
gains 61,426 54,234 45,726 32,220 28,174
Revenues, continuing
operations $1,268,810 $1,192,449 $1,145,978 $1,118,261 $1,107,422
Discontinued operations 64,862 54,175 56,351 55,215 55,191
Total revenues $1,333,672 $1,246,624 $1,202,329 $1,173,476 $1,162,613
========== ========== ========== ========== ==========
NET INCOME BY SOURCES
(In Thousands)
1994 1993 1992 1991 1990
Life and accident and
health insurance $ 168,460 $ 158,242 $ 156,588 $ 146,205 $ 128,153
Communications 21,986 17,335 14,169 10,327 10,019
Other 531 ( 1,581) ( 6,544) ( 5,958) ( 5,442)
Realized investment
gains, net of taxes 38,919 35,565 30,385 21,409 18,657
Net income, continuing
operations $ 229,896 $ 209,561 $ 194,598 $ 171,983 $ 151,387
Discontinued operations 9,341 9,720 8,640 3,704 6,250
Accumulated post-
retirement benefit
obligation, net 0 ( 24,109) 0 0 0
Net income $ 239,237 $ 195,172 $ 203,238 $ 175,687 $ 157,637
========== ========== ========== ========== ==========
II-3
<PAGE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following is management's discussion and analysis of financial condition
and results of operations for the three years ended December 31, 1994. It is
intended to analyze the results of operations, consolidated financial
condition, liquidity and capital resources of Jefferson-Pilot Corporation and
consolidated subsidiaries (J-P or Company). The discussion should be read in
conjunction with the consolidated financial statements and notes.
RESULTS OF OPERATIONS
Jefferson-Pilot Corporation is a holding company. Its major subsidiary,
Jefferson-Pilot Life Insurance Company (J-P Life), offers a wide range of
life, health and annuity products which are sold in the Individual and Group
markets. Individual insurance products are offered through career general
agents, independent marketing organizations and home service agents. Annuity
products are offered through these distribution systems and are sold through
financial institutions. J-P Life has experienced substantial growth in its
individual life insurance sales, primarily due to the expansion of its
independent marketing organization distribution channel. It has also
emphasized the sale of single-premium deferred annuities, increasing the sales
of this product. Group insurance products are issued to employers covering
their employees and to associations covering their members. Jefferson-Pilot
Communications Company (J-P Communications) owns and operates three network
television and thirteen radio broadcast stations. J-P Communications
operations originate from the sale of advertising and other related services
through its television and radio stations. J-P's revenues are derived
approximately 80% from Life insurance, 13% from Communications and 7% from
parent company and other investments.
J-P's Consolidated Net Income was $239.2 million, $195.2 million and $203.2
million in 1994, 1993 and 1992, respectively. 1993's results included a charge
of $24.1 million to record the cumulative effect of adopting SFAS 106
"Employers' Accounting for Post Retirement Benefits Other Than Pensions".
Excluding the effect of adopting SFAS 106, 1994's Net Income increased 9.1%
and 1993's Net Income increased 7.9%. At year-end 1994, J-P had either sold
or reached agreement to sell two of its subsidiaries, Jefferson-Pilot Fire &
Casualty and Jefferson-Pilot Title Insurance Company. Operating results of
these subsidiaries, net of related income taxes, were previously included in
the "Other Insurance Segment". For the current report, the results of this
segment are segregated as Income from Discontinued Operations. Excluding
these results from all years, Net Income increased 9.7% in 1994 and 7.7% in
1993.
II-4
<PAGE>
Included in Net Income are realized investment gains from sale of investments.
The following table illustrates J-P's results before and after the inclusion
of realized investment gains:
1994 1993 1992
(In millions)
Income before effect of initial
application of SFAS 106 and
realized investment gains:
Continuing operations $191.0 $174.0 $164.2
Discontinued operations 9.2 8.0 7.0
Operating income 200.2 182.0 171.2
Realized investment gains (net
of applicable income taxes):
Continuing operation 38.9 35.6 30.4
Discontinued operations .1 1.7 1.6
39.0 37.3 32.0
SFAS 106 - (24.1) -
Net Income $239.2 $195.2 $203.2
====== ====== ======
Income before investment gains (operating income) and the initial application
of SFAS 106 increased 10.0% in 1994 and 6.3% in 1993. Income from continuing
operations was 9.8% higher in 1994 and 6.0% higher in 1993. Income from
discontinued operations increased 16.2% in 1994 and 14.3% in 1993.
Investment gains for 1994 relate primarily to securities that have been
classified as "available for sale" since the adoption of SFAS 115," Accounting
for Certain Investments in Debt and Equity Securities". The following table
illustrates the sources of realized gains and (losses) for the last three
years:
1994 1993 1992
(In millions)
Common stocks $ 65.7 $ 32.8 $ 40.8
Bonds and other debt instruments (9.5) 16.8 6.8
Other 5.2 4.6 (1.9)
Sub-total 61.4 54.2 45.7
Less applicable federal and state taxes (22.4) (16.9) (13.7)
As reported $ 39.0 $ 37.3 $ 32.0
====== ====== ======
II-5
<PAGE>
J-P holds a sizable portfolio of equity securities, which may continue
to produce future realized capital gains. J-P also holds a portfolio of
debt securities which, beginning in 1994, are partly categorized as
"available for sale". The cost and fair value of these "available for
sale" portfolios were as follows:
1994 1993 1992
(In millions)
Cost of equity securities held $290.4 $325.7 $332.3
Fair value $718.0 $903.5 $889.5
Amortized cost of "available for sale"
debt securities $1,692 N/A N/A
Fair value $1,607 N/A N/A
The following table illustrates earnings per share for the years
reported:
1994 1993 1992
Income before effect of initial
application of SFAS 106 and
realized investment gains:
Continuing operations $ 3.93 $ 3.46 $ 3.22
Discontinued operations .19 .16 .14
Operating income 4.12 3.62 3.36
Realized investment gains
(net of applicable federal
and state income taxes):
Continuing operations .80 .71 .60
Discontinued operations - .03 .03
.80 .74 .63
SFAS 106 - (.48) -
Net Income $ 4.92 $ 3.88 $ 3.99
====== ====== ======
J-P has periodically reacquired shares of its stock and issued
additional shares under incentive option programs. The following
table analyzes changes in the Company's outstanding shares and the
average shares outstanding for each year reported:
1994 1993 1992
(In millions)
Shares outstanding, beginning of year 49.5 50.4 51.3
Issued 0.3 0.1 -
Purchased (1.3) (1.0) (.9)
Shares outstanding, end of year 48.5 49.5 50.4
===== ===== =====
Average shares outstanding 48.6 50.3 51.0
===== ===== =====
II-6
<PAGE>
Earnings per share increased 26.8% in 1994 and decreased 2.8% in 1993.
Earnings per share excluding the effects of adopting SFAS 106 and net realized
investment gains increased 13.8 % in 1994 and 7.7% in 1993, partly due to
improved earnings and partly due to the impact of share repurchases.
Earnings per share from continuing operations improved 13.6% in 1994 and 7.5%
in 1993.
Revenues increased 6.4% to $1,269 million in 1994 and 4.1% to $1,192 million
in 1993. Excluding realized investment gains, revenues increased 6.1% in 1994
and 3.5% in 1993. Premiums and considerations (excluding discontinued
operations) increased 4.4% in 1994 to $655.3 million and 2.2% in 1993 to
$627.6 million. Life premiums and considerations increased 6.3% in 1994 to
$256.2 million and 4.4% in 1993 to $241.0 million. The growth in life
premiums and considerations is attributable to J-P's successful implementation
of its Individual line business plan over the last two years and to increases
in Group life contracts in force. The Individual line business plan focuses
on improvement in the productivity of J-P's career life agents and on
developing new relationships with independent producers. This focus has
resulted in growth in premium receipts from traditional products as well as
universal life and annuity products exceeding 25% in 1994 and 12% in 1993.
Receipts on universal life and most annuity products do not flow through
income in the year of receipt but are included in the liability for
policyholder contract deposits. Accident and health premiums increased 3.2%
in 1994 to $399.1 million and 0.8% in 1993 to $386.6 million. Premium growth
for such years was modest due to the Company's emphasis on larger-case self-
insured coverages and a moderation in the rate of medical inflation in the
most recent two years.
Net investment income, which is included in operating income, grew 4.0% in
1994 to $375.2 million and 2.6% in 1993 to $360.8 million in spite of lower
investment yields beginning in 1992 and continuing throughout most of 1994.
Such decline is represented by the following table that presents Yield at Cost
on bonds and mortgages:
1994 1993 1992
March 31 8.08% 8.95% 9.58%
June 30 8.06 8.95 9.52
September 30 8.03 8.58 9.40
December 31 8.10 8.24 9.27
Growth in investment income was achieved by growth in invested assets arising
from policyholder contract deposits related to universal life and annuity
products. During 1994, these deposits increased 17.2% to $1,846 million, of
which annuity funds comprised $1,081 million, an increase of 22.0%. During
1993, policyholder contract deposits increased 14.8% to $1,575 million with
annuities increasing 17.8% to $887 million.
Revenues from the Communications segment increased 19.0% in 1994 to $172.5
million and 11.7% in 1993 to $145.0 million due to acquisitions, market share
increases and a favorable economic environment. All of these events favorably
influenced advertising receipts, the Company's primary component of
Communications revenues.
II-7
<PAGE>
Total benefits, claims and expenses increased 4.4% in 1994 to $921.2 million
and 1.3% in 1993 to $882.0 million. Life benefits and credits to policyholder
accounts increased 7.7% in 1994 and 6.0% in 1993, reflecting the growth in
life business in force. Accident and health benefits were 1.1% higher in 1994
and 3.8% lower in 1993, indicative of strategic moves as well as moderate
growth in medical inflation and utilization. Net life insurance expenses
(after deferral of policy acquisition costs) declined 3.1% in 1994 and
increased 0.1% in 1993. This result was achieved as the Company improved the
economies of its Individual distribution systems. Cost of Communications
operations increased 20.7% in 1994 to $120.8 million and 7.0% in 1993 to
$100.1 million as a result of acquisitions of television and radio properties
as well as costs associated with higher overall revenues. As the result of
expense controls, the rate of growth in operating income exceeded the rate of
growth in revenues.
Income taxes from continuing operations increased $16.8 million or 16.7% in
1994 and $20.1 million or 24.9% in 1993. Effective tax rates were as follows:
1994 1993 1992
Income taxes as a percent of
before-tax income 33.9% 32.5% 29.3%
1994's effective tax rate increased as a result of a reduction in the
percentage of tax-favored investments. 1993's effective tax rate increased
because of recoveries and reductions of prior years' taxes recorded in 1992, a
reduction in the percentage of tax-favored investments and an increase in the
federal income tax rate in 1993 from 34% to 35%.
OPERATING EARNINGS BY BUSINESS SEGMENT
J-P's continuing business segments include Life Insurance and Communications.
The Other Insurance Segment, included in prior years, is reported as
"Discontinued Operations". Operating income of the business segments
includes investment income but excludes net realized investment gains.
Operating income and losses of the parent company, consolidation entries and
net realized investment gains are included in the "other" category.
Currently, all corporate capital is allocated to the business segments.
The following table illustrates operating income by segments:
1994 1993 1992
(In millions)
Life insurance:
Individual $124.2 $117.1 $117.2
Group 44.2 41.1 39.4
168.4 158.2 156.6
Communications 22.0 17.3 14.2
Discontinued operations 9.2 8.0 7.0
Other 0.6 (1.5) (6.6)
Operating income 200.2 182.0 171.2
Net realized investment gains 39.0 37.3 32.0
Income before cumulative effect of
change in accounting principle $239.2 $219.3 $203.2
====== ====== ======
II-8
<PAGE>
Operating income from all business segments increased $18.2 million or 10% in
1994 and $10.8 million or 6.3% in 1993. Product lines contributing to the
increase were as follows:
Incr. (Decr.)
1994 1993
(In millions)
Life insurance:
Individual $ 7.1 $ (0.1)
Group 3.1 1.7
10.2 1.6
Communications 4.7 3.1
Other 2.1 5.1
Sub-total, before discontinued operations 17.0 9.8
Discontinued operations 1.2 1.0
Total $ 18.2 $ 10.8
====== ======
LIFE INSURANCE
The Life insurance segment is comprised of operations conducted by the
Individual and Group distribution systems.
Individual Insurance
The Individual Insurance distribution system offers a wide array of life
insurance, annuity, health and investment products through a career agency
force, independent marketing organizations, home service agents, individual
health sales and service offices and financial institutions. A summary of
this unit's operating results for each of the years presented is as follows:
1994 1993 1992 1991 1990
(In thousands)
Premiums and other
considerations $203,736 $196,100 $182,232 $178,244 $175,046
Net investment income 321,097 311,120 304,477 299,234 290,233
Other income 4,352 4,543 4,053 3,076 2,636
Total revenues 529,185 511,763 490,762 480,554 467,915
Policy benefits 275,052 260,598 246,803 245,272 243,226
Expenses 69,581 78,501 81,006 78,802 82,841
Total benefits
and expenses 344,633 339,099 327,809 324,074 326,067
Operating income before
income taxes 184,552 172,664 162,953 156,480 141,848
Provision for income
taxes 60,307 55,528 45,777 43,430 40,722
Operating income $124,245 $117,136 $117,176 $113,050 $101,126
======== ======== ======== ======== ========
II-9
<PAGE>
Individual operating income improved 6.1% in 1994 to $124.2 million. 1993's
results were flat at $117.1 million. As a percentage of Total revenues,
operating income for the Individual unit was 23.5% in 1994, 22.9% in 1993 and
23.9% in 1992. 1994's results improved on the strength of expense savings.
Expenses represented 13.1% of Total revenues in 1994, 15.3% in 1993 and 16.5%
in 1992. Expenses also declined in 1993; however, on a comparable basis,
1993 operating income did not improve due to federal income tax refunds and
recoveries which were received in 1992. Effective tax rates have increased
since 1992, not only because of the federal tax recoveries, but also due to an
increase in the statutory rate and the Company's emphasis on fully-taxable
securities.
Premiums and other considerations increased 3.9% in 1994 and 7.6% in 1993.
Premium receipts on universal life and most annuity contracts are reported as
additions to policyholder accounts rather than premium income. 1993's
increase is reflective of the Company's business plan which focuses on agent
productivity and recruitment of new distribution sources. Policy benefits
increased 5.5% in 1994 and 5.6% in 1993, reflective of the growth of business
in force. Death benefits in 1994 were 7.5% higher than the prior year at
$64.0 million. Mortality experience fluctuates from period to period and the
Company does not expect that this experience is indicative of a negative
long-term trend. Death benefits for 1993 were up 2.3% to $59.6 million.
Expenses improved 11.4% in 1994 and 3.1% in 1993. The efficiencies were
achieved through improved economies in the Career and Home Service
distribution channels and as a result of the increase in the proportion of
expenses related to new business sales, and thus deferred.
Individual premiums and receipts for policyholder accounts are illustrated
below:
1994 1993 1992
(In millions)
First year life insurance premiums $ 43.3 $ 29.0 $ 25.4
Renewal and other life insurance premiums 169.2 165.7 162.1
Annuity premiums 250.0 174.7 140.3
Accident and health 27.5 28.3 25.8
$490.0 $397.7 $353.6
====== ====== ======
First year life insurance premiums grew 49.2% in 1994 and 14.2% in 1993 as the
Company's business plan was implemented. Annuity premium receipts were up
43.1% in 1994 and 24.5% in 1993.
Individual life insurance written (as measured by face amount) increased
48.7% in 1994 to $3,706 million and 15.0% in 1993 to $2,492 million. Sales
gains were a result of improved productivity in the career agency force and
an increase in independent agents contracted, growing to 9,000 agents at the
end of 1994 versus 3,500 at the beginning of the year.
II-10
<PAGE>
Group Insurance
The Group Department is a Southeastern and Southwestern-focused provider of a
wide range of Group insurance products for employers and their employees. It
offers conventionally insured and alternatively funded medical benefits, as
well as a variety of life, disability income, dental and retirement plans. A
summary of this unit's operations follows:
1994 1993 1992 1991 1990
(In thousands)
Premiums and other
considerations $451,566 $431,504 $432,154 $434,684 $439,152
Net investment income 44,921 43,396 42,588 40,685 37,884
Other income - 308 358 503 1,311
Total revenues 496,487 475,208 475,100 475,872 478,347
Policy benefits 352,810 341,126 350,306 360,577 372,335
Expenses 78,040 73,785 70,112 69,426 68,135
Total benefits
and expenses 430,850 414,911 420,418 430,003 440,470
Operating income before
income taxes 65,637 60,297 54,682 45,869 37,877
Provision for income
taxes 21,422 19,191 15,270 12,714 10,850
Operating income $ 44,215 $ 41,106 $ 39,412 $ 33,155 $ 27,027
Premiums and premium
equivalents $748,015 $704,310 $728,795 $686,463 $674,979
Group operating income improved 7.6% in 1994 and 4.3% in 1993. As a
percentage of Premiums and other considerations, Operating income for the
Group Department was 9.8% in 1994, 9.5% in 1993 and 9.1% in 1992. Group life
results have declined over the last two years primarily due to adverse
mortality experience while health results have improved, as indicated by the
following chart:
1994 1993 1992
(In millions)
Operating income:
Group life $ 10.4 $ 12.9 $ 18.4
Group health 33.8 28.2 21.0
$ 44.2 $ 41.1 $ 39.4
====== ====== ======
Premiums and equivalents, which include the equivalent premiums on cases
administered by the Group Department on an uninsured basis, increased 6.2% in
1994 as the Company has focused on expanding its managed care capabilities.
They declined 3.4% in 1993 as a result of the loss of a large case. Policy
benefits on fully-insured coverages increased 3.4% in 1994 but declined 2.6%
in 1993. Death benefits in 1994 were 10.6% higher than the prior year at
$52.9 million. The Group Department experienced unusually high mortality in
1994, particularly in its large case business. Death benefits for 1993 were
up 2.4% to $47.9 million. Expenses increased 5.8% in 1994 and 5.2% in 1993.
The majority of the increases were attributable to managed care, network
access fees and other expenses that are passed through to customers. These
increased as a result of more widespread use of managed care provider
networks.
II-11
<PAGE>
COMMUNICATIONS
Communications operations are conducted by Jefferson-Pilot Communications
Company through television and radio broadcast properties as well as
production and syndication of sports and entertainment programming. A summary
of this unit's operations follows:
1994 1993 1992 1991 1990
(In thousands)
Communications
revenues $172,501 $144,961 $129,734 $125,045 $127,330
Operating costs 120,833 100,100 93,561 92,334 95,356
Depreciation and
amortization 10,139 10,757 8,303 9,642 9,980
General expenses 5,297 6,522 3,608 5,046 5,092
Total expenses 136,269 117,379 105,472 107,022 110,428
Operating income before
income taxes 36,232 27,582 24,262 18,023 16,902
Provision for income taxes 14,246 10,247 10,093 7,696 6,883
Operating income $ 21,986 $ 17,335 $ 14,169 $ 10,327 $ 10,019
Operating income from the Communications segment increased 26.8% in 1994 and
22.3% in 1993. 1994's increase is attributable to: market share increases,
particularly among radio properties; a favorable sales environment in the
broadcast media business; acquisitions in new and existing markets; and
increases in sports production business. 1993's increase is also attributable
to an improved economic environment and increased market shares.
Revenues improved 19.0% in 1994. J-P Communications' business strategy includes
acquisitions of under-performing properties which can be enhanced through
management's efforts. Acquisition expenditures of $19.6 million in 1994,
$21.6 million in 1993 and $0 in 1992 contributed to the revenue growth as
exhibited by the following:
1994 1993 1992
(In millions)
Revenues attributable to newly-
acquired properties $ 19.2 $ 4.3 -
Total segment revenues $172.5 $145.0 $129.7
During 1994, television revenues improved 22.6%, radio 29.9% and sports and
entertainment 58.9%. Television improved as a result of acquisition activity,
political advertising and improved economic conditions. Radio benefitted from
very favorable advertising conditions, acquisitions and improved market shares.
The majority of the sports and entertainment increase was related to special
programming events occurring during 1994.
1993 revenues improved 11.7% with television increasing 3.0%, radio 20.6%
and sports and entertainment 4.9%. Television gains were attributable to
acquisitions, partly offset by a decline in political spending from 1992
levels. Radio growth came from improved market shares as well as acquisitions.
Stronger collegiate sports revenues contributed to growth in the sports and
entertainment business in both 1994 and 1993.
II-12
<PAGE>
Total expenses, as a percentage of revenues, improved to 79.0% in 1994 versus
81.0% in 1993 and 81.3% in 1992. This favorable trend resulted from higher
sales associated with improved market shares and a strong business environment
as well as special sports programming events. The marginal profits on
improved sales were more than sufficient to overcome lower margins on recent
acquisitions.
Effective tax rates of 39.3% in 1994, 37.1% in 1993 and 41.6% in 1992 were
influenced favorably by receivables recorded for refundable Federal income
taxes and interest in 1993.
On February 14, 1995, substantially all of the assets and the media services
operations of Jefferson-Pilot Data Services, Inc. (J-P DS) were sold for
aggregate consideration approximating $33 million. The Company expects to
realize an after-tax gain of approximately $11.5 million as a result of the
sale. Net income of J-P DS of $2.6 million in 1994, $2.0 million in 1993 and
$2.5 million in 1992 is included in operating income of the Communications
segment for the years reported. It is expected that income on reinvestment of
sale proceeds will be included in parent company results in the future and that
consolidated results will not be materially affected as a result of the sale.
DISCONTINUED OPERATIONS AND OTHER
Discontinued operations include the operations of Jefferson-Pilot Fire &
Casualty (J-P F & C) and Jefferson-Pilot Title Insurance Company (J-P Title).
These subsidiaries formerly comprised the "Other insurance" segment. On
December 23, 1994, J-P agreed to sell the stock of J-P F & C, subject to
regulatory approval. The Company believes that regulatory approval will be
given and that closing will occur during the first half of 1995. At or before
closing, it is expected that the Company will receive a dividend in partial
liquidation and that the purchaser will subsequently buy the stock of J-P F &
C. The amount of the dividend to be received is subject to adjustment through
closing. A gain is expected to result from the sale of the stock.
On December 30, 1994, J-P Title entered into a reinsurance agreement with the
purchaser to assume the obligations and liabilities of policies in-force. A
dividend in partial liquidation was paid to J-P and the purchaser subsequently
purchased the stock of J-P Title. A small gain was recorded on the sale of the
stock.
The operations of both subsidiaries are segregated as "Discontinued Operations"
in the accompanying financial statements. Operating income attributable to
Discontinued Operations increased 16.2% in 1994 to $9.2 million and 14.3% in
1993 to $8.0 million. It is expected that the reinvestment of net proceeds
from liquidating dividends and sale of these subsidiaries will replace the
operating income included as a component of Discontinued Operations.
Other
Operating results categorized as "other" include earnings on investments held
in the parent company as reduced by expenses of the corporation. These results
improved in 1994 and in 1993 due to a reduction of expenses associated with
shareholder litigation and income from options written on equity securities
held by the parent company totaling $2.5 million in 1994.
II-13
<PAGE>
CONSOLIDATED FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
J-P's resources are primarily represented by investments related to its Life
insurance segment, properties and other assets used in its Life insurance and
Communications segments and investments backing corporate capital. The
Investments section reviews the Company's investment portfolio and key
strategies.
Total assets were $6,140 million and $5,641 million at December 31, 1994 and
1993 - an increase of $500 million or 8.9%. Primary sources for asset growth
were increases in policyholder contract deposits (primarily annuities and
universal life contracts), proceeds from securities sold under repurchase
agreements and cash provided by operating activities. These sources were offset
by cash dividends paid to shareholders and net acquisitions of J-P shares
outstanding. Asset values were also reduced by declines in the market values
of assets held in the "available for sale" category. These declines were the
direct result of increases in market interest rate yields.
J-P's Life insurance segment defers the costs of acquiring new business,
including commissions, certain costs of underwriting and issuing policies and
certain agency office expenses. Such amounts deferred were $329.1 million and
$277.7 million at December 31, 1994 and 1993 - an increase of $51.4 million or
18.5 %. The increase is primarily related to the incidence of Individual first
year premiums, which have grown significantly in recent years. Deferred policy
acquisition costs are reviewed periodically to determine that the unamortized
portion does not exceed expected recoverable amounts.
Goodwill and other intangible assets relate to acquisitions of communication
properties and are being amortized over periods ranging from 5 to 40 years,
with a dollar-weighted average amortization period of approximately 30 years.
Capital Resources
J-P's financial strength is among the highest of its peer companies.
Consolidated shareholders' equity was $1,733 million at December 31, 1994 and
1993 and no long-term debt was outstanding at either date. Shareholders'
equity includes net unrealized gains on securities available for sale at
December 31, 1994 of $230.8 million and net unrealized gains on equity
securities at December 31, 1993 of $331.6 million. The Company adopted SFAS
115 as of January 1, 1994, as more particularly described in Note 2 to the
Consolidated Financial Statements. This resulted in a net increase in
shareholder's equity on that date of $101.4 million. During 1994, fair values
of securities classified as available for sale, net of deferred taxes,
decreased by $202.1 million . The net effect on shareholders' equity during
the year was a decline of $100.7 million or 5.8% from the December 31, 1993
balance.
J-P considers existing capital resources to be more than adequate to support
the current level of its business activities. The Company's business plan
places priority on redirecting certain capital resources now invested in bonds
and stocks into its core businesses, which businesses would be expected to
produce higher returns over time. As part of its plan to effectively use its
capital resources, the Company may continue to purchase its own common stock
from time to time. Management believes that acquisitions and other strategic
II-14
<PAGE>
opportunities can be funded using a prudent balance of capital and debt
financing. Currently, the Company does not have any long-term debt outstanding
and, while it has made no commitments for obtaining such financing, limited
amounts of long-term debt may be used to finance acquisitions or for other
corporate purposes in the future. Its capital adequacy is illustrated by the
following table:
1994 1993 1992 1991 1990
(In millions)
Total assets $6,140 $5,641 $5,257 $4,945 $4,475
Total shareholders' equity $1,733 $1,733 $1,668 $1,544 $1,334
Ratio of shareholders' equity
to assets 28.2% 30.7% 31.7% 31.2% 29.8%
The Company's ratio of capital to assets declined during 1994 due to growth in
policyholder contract deposits as well as securities sold under repurchase
agreements which are accounted for as financing arrangements.
J-P considers the capital requirements of its business segments in determining
the level of capital available for strategic development. The Life insurance
segment, which employs the larger level of required capital, is subject to
regulatory constraints. Capital employed in J-P Life is measured in accordance
with statutory accounting practices (SAP) which differ from generally accepted
accounting principles (GAAP), as illustrated by the following analysis:
1994 1993
(In millions)
Statutory capital and surplus at December 31 $ 971.6 $ 945.2
Adjustments:
Deferred policy acquisition costs 312.7 272.3
Asset valuation reserves 205.2 263.2
Future policy benefits 103.1 102.4
Fair value adjustment on debt securities (58.5) -
Deferred income taxes (96.5) (154.5)
All other, net (8.1) 6.5
Shareholders' equity on GAAP basis $1,429.5 $1,435.1
======== ========
The bases for valuation of GAAP assets and liabilities are described more
thoroughly in Note 1 to the Consolidated Financial Statements. J-P Life has
not previously ceded business under "surplus relief" reinsurance arrangements
nor has statutory capital and surplus been enhanced by any transaction or item
that is either (1) not included in GAAP shareholders' equity or (2) eliminated
in the preparation of the Company's Consolidated Financial Statements.
II-15
<PAGE>
Effective for year-end 1993, the National Association of Insurance
Commissioners (NAIC) adopted risk-based capital (RBC) levels for life insurers.
RBC requires the maintenance of minimum levels of statutory capital and surplus
based on formulas related to investment credit risk, insurance risk, interest
rate risk and general business risk. For purposes of determining compliance
with this new requirement, J-P Life compares its minimum capital requirement
(authorized control level) with adjusted statutory capital (includes statutory
capital and surplus, asset valuation reserves and other adjustments).
Regulatory authorities require that J-P Life maintain adjusted capital and
surplus positions up to twice the authorized control level. The Company
currently holds surplus levels substantially in excess of amounts needed to
comply with the new requirements.
J-P Life has been assigned the highest ratings by the following agencies:
A.M. Best A++
Standard & Poor's (claims paying) AAA
Weiss A+
J-P management believes that the superior ratings assignments are a result of
its overall capital position, stability of life insurance earnings, high
quality investment portfolio and competitive position within the market.
In managing its capital position, J-P Life measures required capital for each
of its major product lines similar to methods utilized by regulatory
authorities for risk-based capital requirements. Capital is allocated to
product lines in amounts which management believes are prudent and necessary
to cover all risks inherent in the book of business. Management also focuses
on investment quality and other indications of capital adequacy, such as
operating leverage, capital and surplus ratios and the ratio of higher risk
assets as a percentage of statutory capital and surplus. Management believes
that these ratios are more conservative than those prevailing in the life
insurance industry.
Liquidity
J-P's liquidity requirements are met primarily by cash flows from the
operations of J-P Life and other consolidated subsidiaries. The Company has
historically posted positive cash flows from operating activities of its Life
Insurance and Communications segments. Management believes that its overall
sources of liquidity will continue to be sufficient to satisfy its operating
requirements.
Net cash provided by operations on a consolidated basis was $117.1 million,
$160.2 million and $155.9 million for 1994, 1993 and 1992. Cash flows
provided from increases in policyholder contract deposits were $270.6 million,
$202.6 million, and $167.9 million in 1994, 1993 and 1992. Net proceeds from
short-term borrowing and securities sold under repurchase agreements were
$256.5 million, $39.7 million and -0- in 1994, 1993 and 1992. These sources of
funds were used to purchase net investments of $513.9 million, $399.5 million
and $220.8 million; pay dividends to shareholders of $83.4 million, $78.1
million and $69.1 million; and to make net acquisitions of shares outstanding
of $55.7 million, $48.9 million and $34.9 million in 1994, 1993 and 1992.
II-16
<PAGE>
Primary sources of cash from its Life Insurance segment are premiums, other
insurance considerations, receipts for policyholder accounts, investment sales
and maturities and investment income. Primary uses of cash include payment of
insurance benefits, operating expenses, withdrawals from policyholder accounts,
costs related to acquiring new business, income taxes and investment purchases.
Primary sources of cash from the Communications segment are revenues from
advertising and sports and entertainment production. Primary uses of cash
include payment of agency commissions, cost of sales, operating expenses and
income taxes.
Dividends paid to the parent company from its subsidiaries were $128.0 million
in 1994, $102.8 million in 1993 and $127.9 million in 1992. J-P Life is the
primary source of dividends to the parent company. J-P Life is subject to
North Carolina laws which limit the amount of dividends that may be paid
without first obtaining the approval of the State's Insurance Commissioner.
J-P Life has approximately $97 million available for distribution to the parent
company during 1995 without obtaining prior approval.
During 1994 and 1993, the Company utilized uncommitted bank lines of credit to
manage parent company cash flows, primarily due to timing differences between
receipt of dividends from subsidiaries versus dividends paid to shareholders
and purchase of its outstanding shares. The maximum amounts outstanding at any
time approximated $90.0 million during 1994 and $40.0 million during 1993. The
maximum combined availability of all uncommitted lines as of December 31, 1994
is $375.0 million. Additionally, during 1994 the Company sold U.S. Treasury
obligations under repurchase agreements involving various counterparties.
Proceeds from such sales were used to purchase securities with longer durations
as an asset / liability management strategy. The repurchase agreements were
accounted for as a financing arrangement. The maximum amount outstanding
during the year approximated the year-end liability of $266.8 million.
Cash and short-term investments on hand were $22.8 million and $34.6 million
at December 31, 1994 and 1993. Additionally, debt and equity securities of
the parent company with carrying amounts of $188.0 million and $145.3 million
at December 31, 1994 and 1993 are considered to be sources of liquidity to
support the Company's strategies. Proceeds from the sale of J-P F&C and J-P
Data Services of approximately $100 million are expected to increase parent
company liquid resources. Total debt and equity securities available for sale
at December 31, 1994 are $2,324.9 million.
INVESTMENTS
J-P's strategy for managing its investment portfolio is to dependably meet its
pricing assumptions while achieving the highest possible after-tax returns over
the long term. Operating structures are in place to require that credit and
interest rate risks are prudently managed and that sufficient liquidity is
maintained. Management focuses on option-adjusted yields as a measure of
anticipated performance and on option-adjusted durations of assets and
liabilities as a measure of interest rate risk.
II-17
<PAGE>
Cash flows from operations are invested primarily in fixed income securities,
including publicly-issued bonds, privately-placed notes and bonds and
commercial mortgage loans. The nature and quality of the various types of
investments held by insurance subsidiaries must comply with the statutes and
regulations imposed by the states in which they are licensed.
J-P held the following carrying amounts of investments at each of the dates
reported:
December 31, 1994 % January 1, 1994 %
(In millions)
Publicly-issued bonds $ 2,564 49 $ 2,461 48
Privately-placed bonds 961 18 840 16
Commercial mortgage loans 681 13 584 11
Common stock 670 13 843 17
Policy loans 206 4 215 4
Preferred stock 69 1 86 2
Real estate 31 1 31 1
Cash, other invested assets 61 1 64 1
Total $ 5,243 100 $ 5,124 100
Privately-placed bonds and commercial mortgage loans have increased as a
percentage of invested assets while common stocks have decreased. Near-term
strategies include identification of fixed income market sectors and niches
that provide investment opportunities to enhance the Company's product flow,
quality and yield. The Company anticipates that the recent expansion of
private placement and commercial mortgage loan production will continue. The
Company will also continue to hold common stock as an investment of corporate
capital and surplus to enhance the long-term value of the Company and to
provide opportunities for tax efficient portfolio management strategies.
However, it is expected that the percentage of common stocks will decline as
new cash flows from policyholder account balances are invested in fixed
interest securities.
J-P's Investment Policy Statement requires an average quality fixed income
portfolio of "A" or higher. Currently, the average quality is "Aa3",
excluding mortgage loans. The Policy Statement also imposes limits on the
amount of lower quality investments and requires diversification by issuer
and asset type. The Company monitors investments which are considered to
be "higher risk" for compliance with the Investment Policy Statement and
for proper valuation. Securities that experience other than temporary
declines in value are adjusted to net realizable values through a charge
to earnings. Commercial mortgage loans in default are carried at the net
present value of expected future cash flows. Other investments are carried
at the lower of cost or net realizable value, as appropriate.
II-18
<PAGE>
Carrying amounts of investments categorized as "higher risk" assets were as
follows at year-end:
1994 % 1993 %
(In millions)
Bonds near or in default $ - - $ - -
Bonds below investment grade 122.3 2.3 100.2 2.0
Mortgage loans 60 days delinquent
or in foreclosure 0.9 - 13.3 0.3
Mortgage loans restructured 13.5 0.3 6.4 0.1
Foreclosed properties 7.8 0.2 8.4 0.2
Sub-total, "higher risk assets" 144.5 2.8 128.3 2.6
All other investments 5,098.9 97.2 4,820.1 97.4
Total cash and investments $5,243.4 100.0 $4,948.4 100.0
The Company's investment guidelines allow investments in below investment
grade bonds up to a stated percentage of adjusted statutory capital and
surplus, which amount currently approximates $200 million. In making
acquisitions of this nature, the Company attempts to identify well structured
private placements offering enhanced yields. Also, the highest tier of public
non-investment grade bonds which have the potential to be upgraded ("crossover
credits") are considered for acquisition. It is expected that the level of
non-investment grade bonds may increase; however, the Company will continue to
manage its credit risks in a prudent fashion with due regard to regulatory
constraints and efficient utilization of surplus.
During 1994 and 1993, J-P sold call options on selected common stock holdings
classified as available for sale to reduce the price volatility of its equity
investments and as an additional source of investment returns. Option
premiums received are applied to reduce the basis of the shares called or are
recorded as investment income upon expiry. Total option premiums received were
$4.9 million in 1994 and $2.4 million in 1993. The Company's Investment Policy
Statement authorizes an investment up to $50 million in trading securities
shares for the primary purpose of writing covered call options in expectation
of enhanced total returns from option premiums, market appreciation and
dividends received. The Company has not utilized derivative financial
instruments other than mortgage-backed securities (MBS), collateralized
mortgage obligations (CMO)and covered call options and has no current plans to
do so. As discussed in the Liquidity section, the Company sold securities
under repurchase agreements as an asset / liability management strategy.
J-P held the following MBS's and CMO's at the dates reported:
1994 1993
(In millions)
Available for sale, at fair value:
Federal agency issued CMO's $ 366.8 $ -
Corporate private-labeled CMO's 87.0 -
Held to maturity at amortized cost:
Federal agency issued CMO's 509.7 -
Debt securities at amortized cost:
Federal agency issued CMO's - 373.7
Corporate private-labeled CMO's - 165.3
Mortgage-backed pass-through securities - 60.6
Total $ 963.5 $ 599.6
II-19
<PAGE>
The Company's investment strategy with respect to CMO's focuses on actively-
traded, less volatile issues that produce relatively stable cash flows. CMO
holdings for the years under report consist predominately of the least volatile
Planned Amortization Classes and sequential tranches of federal agency issuers.
During 1994, the Company liquidated its holdings of mortgage pass-through
securities and reinvested the proceeds into less volatile CMO's with longer
durations. Due to the high quality and liquid nature of these investments, the
Company believes that the impairment risks associated with these securities are
no greater than those applicable to direct agency or corporate issues.
Asset/Liability Management
The asset/liability management process focuses primarily on the management of
interest rate risk. One measure of this risk is to compare asset and liability
durations. Duration measures the sensitivity of asset and liability values to
changes in interest rates. J-P monitors the durations of insurance liabilities
for comparison to the durations of assets backing the insurance lines. In
1994, the Company established the Asset/Liability Management Committee, which
is made up of Finance, Investment and Actuarial senior management. This group
is charged with continually monitoring and refining the Company's position in
an attempt to prudently balance profit-ability and risk for each insurance
line, and for the Company in the aggregate.
Separate asset portfolios have been established for each insurance line.
Various sophisticated modeling and analytical systems are employed in analyzing
the assets and liabilities which make up each of these lines. Option-adjusted
liability durations have been developed using stochastic actuarial projections
of liability cash flows. In addition, the Investment Department's models
measure the assets' effective duration, as well as other analytics necessary
for portfolio management. The Company also considers the timing of the cash
flows arising from the assets and liabilities under different interest rate
scenarios. It is the intention of management that option-adjusted durations
for interest sensitive portfolios such as universal life and annuities remain
very closely matched. A wider tolerance is permissible for the non-interest
sensitive (traditional) portfolios. At December 31, 1994, 39.7% of J-P Life's
invested assets at amortized cost were held for interest-sensitive portfolios
and 60.3% were held for traditional portfolios and corporate capital and
surplus.
EXTERNAL TRENDS, ECONOMIC FACTORS AND ACCOUNTING PRONOUNCEMENTS
Inflation and Interest Rate Risks
Reflecting a concern for inflationary pressures in the U.S. economy, the
Federal Reserve raised interest rates significantly during 1994. Since J-P's
assets and liabilities are largely monetary in nature, the Company's financial
position is impacted by changes in the general interest rate environment.
Interest rate increases during 1994 contributed to the decrease in unrealized
gains on securities available for sale, net of deferred taxes, of $202.1
million during the year. Interest rate changes can affect the Company's net
worth either positively or negatively since fixed income securities available
for sale are recorded at fair values but corresponding liabilities are not
adjusted to fair values.
II-20
<PAGE>
The Company's recent growth in assets and liabilities is largely attributable
to sales of interest sensitive products. Because J-P earns profits on the
basis of investment spreads, changes in interest rates may also affect results
of operations. In a rising interest rate environment, competitive pressures
may make it difficult for the Company to sustain the spreads on its interest
sensitive portfolio of insurance products. Durations of the Company's assets
and liabilities may also be adversely impacted by changes in interest rates.
To protect against the negative impact of interest rate risk, J-P focuses on
measuring option-adjusted durations of its assets and manages the risk of
mismatch between assets and liabilities. The Company also adjusts interest
crediting rates on a frequent basis reflecting the yield of its investment
portfolio and assumptions for pricing and profitability.
Medical inflation and utilization affects the profitability of health products
offered through the Individual and Group distribution systems. In the event
that premium rates are not adjusted in anticipation of medical trends,
profitability of health insurance products may be adversely affected.
Environmental Liabilities
J-P is exposed to environmental regulation and litigation as a result of
ownership of investment real estate, property and casualty and Communications
subsidiaries. The Company's actual loss experience has been minimal and
exposure to environmental losses is considered by the Company to be
insignificant.
Accounting Pronouncements
J-P adopted the provisions of SFAS 115 "Accounting for Certain Investments in
Debt and Equity Securities" as of January 1, 1994. This statement applies to
equity securities having readily-determinable fair values as well as debt
securities and requires classification of securities as either 1) securities
held to maturity stated at amortized cost; 2) trading securities at fair value
with unrealized gains and losses reflected in income currently; or 3)
securities available for sale stated at fair value with unrealized gains and
losses, net of deferred income tax effect, included in a separate component of
stockholders' equity.
In connection with the adoption of SFAS 115, the Company classified debt
securities that it has both the positive intent and ability to hold until
maturity as held to maturity. Other debt securities and all holdings of equity
securities were classified as available for sale. Approximately 53% (at
amortized cost) of the Company's debt securities were classified as available
for sale and 47% as held-to-maturity. Debt securities classified as available
for sale were adjusted to aggregate fair value as of January 1, 1994. Equity
securities held by the parent company, which were previously stated at the
lower of aggregate cost or market, were adjusted to market value. Equity
securities held by the insurance subsidiaries were stated at market prior to
adoption of SFAS 115 and therefore were not adjusted. The adjustment to
available for sale debt securities and parent company equity securities
increased shareholders' equity by $101.4 million as of January 1, 1994.
II-21
<PAGE>
SFAS 114," Accounting by Creditors for Impairment of a Loan" will be effective
for the Company's 1995 consolidated financial statements. SFAS 114, as amended
by SFAS 118, requires that certain impaired loans be reported at the net
present value of expected future cash flows, the loan's observable market price
or the fair value of the underlying collateral. Adoption of SFAS 114 is not
expected to have a significant effect on the consolidated financial statements
for 1995.
Potential Acquisition of Kentucky Central Life Insurance Company
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, J-P Life 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,
1993. On August 18, 1994, the Circuit Court entered a final but appealable
order that approved the plan. The Circuit Court's order was subsequently
appealed by Kentucky Central's stockholders. The outcome of the proposed plan
is dependent upon resolution of the appeal of the Circuit Court's order.
II-22
<PAGE>
Item 8. Financial Statements and Supplementary Data
MANAGEMENT'S PRESENTATION OF QUARTERLY FINANCIAL DATA
Jefferson-Pilot Corporation and Subsidiaries
(In Thousands Except Per Share Information)
1994
March June September December
31 30 30 31
Revenues, including net investment
income and realized gains on
investments $307,248 $314,466 $ 312,455 $334,640
Benefits and expenses 228,067 228,615 225,892 238,633
Provision for income taxes 26,782 29,569 29,659 31,696
Income from continuing operations $ 52,399 $ 56,282 $ 56,904 $ 64,311
Discontinued operations, net of
income taxes 1,865 2,088 1,895 3,493
Net income $ 54,264 $ 58,370 $ 58,799 $ 67,804
======== ======== ========= ========
Per share $ 1.11 $ 1.20 $ 1.21 $ 1.40
======== ======== ========= ========
1993
March June September December
31 30 30 31
Revenues, including net investment
income and realized gains on
investments $293,736 $293,298 $ 289,564 $315,851
Benefits and expenses 224,040 220,846 213,025 224,079
Provision for income taxes 21,779 23,579 26,105 29,436
Income from continuing operations $ 47,917 $ 48,873 $ 50,434 $ 62,336
Discontinued operations, net of
income taxes 2,018 3,368 2,040 2,295
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
======== ======== ========= ========
(continued)
II-23
<PAGE>
Item 8. Financial Statements and Supplementary Data (Continued)
MANAGEMENT'S PRESENTATION OF QUARTERLY FINANCIAL DATA
1992
March June September December
31 30 30 31
Revenues, including net investment
income and realized gains on
investments $286,907 $281,050 $ 285,512 $292,510
Benefits and expenses 219,051 217,168 217,875 216,523
Provision for income taxes 19,864 18,183 21,042 21,675
Income from continuing operations $ 47,992 $ 45,699 $ 46,595 $ 54,312
Discontinued operations, net of
income taxes 1,267 2,561 2,465 2,347
Net income $ 49,259 $ 48,260 $ 49,060 $ 56,659
======== ======== ========= ========
Per share $ .96 $ .94 $ .96 $ 1.12
======== ======== ========= ========
Financial statements and notes included on pages 36 through 59 of the
Annual Report of Jefferson-Pilot Corporation to its shareholders for the year
ended December 31, 1994, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
II-24
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The information included under the heading "Election of Directors," of
the Registrant's definitive Proxy Statement for the Annual Meeting to be held
on May 1, 1995 (the "Proxy Statement") is incorporated herein by reference.
Executive Officers are described in Part I.
Information under the heading "Security Ownership", of the Proxy
Statement relating to a delinquent filer 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
The information included under the heading "Security Ownership" of
the Proxy Statement is incorporated herein by reference.
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-1
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The response to this portion of Item 14 is submitted as a separate
section of this report. (See F-1.) List and Index of Exhibits
included on page F-16 of this report.
(b) The Registrant filed a report on Form 8-K on November 14, 1994,
describing its Amended and Restated Rights Agreement adopted by
the Board of Directors on November 7, 1994.
(c) Exhibits are submitted as a separate section of this report.
(See F-16.)
(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
<PAGE>
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 and Director
(Also signing as Principal
Executive Officer)
DATE March 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
BY (SIGNATURE) Dennis R. Glass
(NAME AND TITLE) Dennis R. Glass, Senior Vice
President and Treasurer
(Principal Financial Officer)
DATE March 28, 1995
BY (SIGNATURE) Reggie D. Adamson
(NAME AND TITLE) Reggie D. Adamson,
Senior Vice President, Finance
(Principal Accounting Officer)
DATE March 28, 1995
BY (SIGNATURE) Thomas M. Belk *
(NAME AND TITLE) Thomas M. Belk, Director
DATE March 28, 1995
BY (SIGNATURE) William E. Blackwell
(NAME AND TITLE) William E. Blackwell, Director
DATE March 28, 1995
BY (SIGNATURE) Edwin B. Borden *
(NAME AND TITLE) Edwin B. Borden, Director
DATE March 28, 1995
BY (SIGNATURE) William H. Cunningham *
(NAME AND TITLE) William H. Cunningham, Director
DATE March 28, 1995
IV-2
<PAGE>
SIGNATURES
(continued)
BY (SIGNATURE) C. Randolph Ferguson
(NAME AND TITLE) C. Randolph Ferguson, Director
DATE March 28, 1995
BY (SIGNATURE) Robert G. Greer *
(NAME AND TITLE) Robert G. Greer, Director
DATE March 28, 1994
BY (SIGNATURE) A. Linwood Holton, Jr. *
(NAME AND TITLE) A. Linwood Holton, Jr., Director
DATE March 28, 1995
BY (SIGNATURE) Hugh L. McColl, Jr. *
(NAME AND TITLE) Hugh L. McColl, Jr., Director
DATE March 28, 1995
BY (SIGNATURE) Charles W. McCoy *
(NAME AND TITLE) Charles W. McCoy, Director
DATE March 28, 1995
BY (SIGNATURE) E. S. Melvin
(NAME AND TITLE) E. S. Melvin, Director
DATE March 28, 1995
BY (SIGNATURE) William P. Payne *
(NAME AND TITLE) William P. Payne, Director
DATE March 28, 1995
BY (SIGNATURE) Donald S. Russell, Jr. *
(NAME AND TITLE) Donald S. Russell, Jr., Director
DATE March 28, 1995
BY (SIGNATURE) Robert H. Spilman *
(NAME AND TITLE) Robert H. Spilman, Chairman
DATE March 28, 1995
BY (SIGNATURE) Martha A. Walls *
(NAME AND TITLE) Martha A. Walls, Director
DATE March 28, 1995
* BY Robert A. Reed
Attorney in fact
IV-3
<PAGE>
List of Financial Statements and Financial Statement Schedules
Financial Statements:
The following consolidated 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, 1994 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 1994 Annual Report to shareholders is not
deemed to be filed as part of this report.
Annual Report
-Pages-
Consolidated Balance Sheets as of December 31, 1994
and 1993 36 - 37
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992 38
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1994, 1993 and 1992 39
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 1993 and 1992 40
Notes to Consolidated Financial Statements 41 - 58
Independent Auditor's Report 59
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 II - Financial Statements of
Jefferson-Pilot Corporation:
Condensed Balance Sheets as of
December 31, 1994, and 1993 F-5
Condensed Statements of Income for the Years Ended
December 31, 1994, 1993, and 1992 F-6
Condensed Statements of Cash Flows for the Years
Ended December 31, 1994, 1993, and 1992 F-7
Notes to Condensed Financial Statements F-8 - F-11
Schedule III - Supplementary Insurance Information F-12 - F-13
Schedule IV - Reinsurance F-14 - F-15
List and Index of Exhibits F-16 - F-18
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
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
To the Board of Directors
Jefferson-Pilot Corporation
Greensboro, North Carolina
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedules I, II, III, and IV are presented for purposes
of complying with the Securities and Exchange Commission's rules and
are not a part of the basic consolidated financial statements. These
schedules have been subjected to the auditing procedures applied in
our audits of the basic consolidated financial statements and, in our
opinion, are fairly stated in all material respects in relation to the
basic consolidated financial statements taken as a whole.
As disclosed in the notes to consolidated financial statements, the
Company changed its method of accounting for investments in debt and
marketable equity securities effective January 1, 1994 by adopting
Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting
for Certain Investments in Debt and Equity Securities". As also
disclosed in the notes to consolidated financial statements, the Company
adopted the provisions of SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in 1993.
/s/ McGLADREY & PULLEN, LLP
Greensboro, North Carolina
February 7, 1995, except for Note 19 to
the consolidated financial statements as
to which the date is February 14, 1995
F-2
<PAGE>
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1994
<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 obligations
and direct obligations of U.S.
Government agencies $ 573,528,767 $ 552,094,661 $ 552,094,661
Federal agency issued collateralized
mortgage obligations (b) 904,596,652 818,487,852 876,515,569
Obligations of states, municipalities
and political subdivisions (b) 93,631,364 91,793,452 92,384,063
Obligations of public utilities (b) 784,494,703 723,141,791 765,261,358
Corporate obligations (b) 1,164,309,146 1,110,853,986 1,152,026,678
Corporate private-labeled
mortgage obligations 87,592,110 86,976,560 86,976,560
Redeemable preferred stocks 23,867,148 21,651,878 21,651,878
Total debt securities $3,632,019,890 $3,405,000,180 $3,546,910,767
Equity securities:
Common stocks:
Public utilities $ 121,557,505 $ 224,265,414 $ 224,265,414
Banks, trust, and insurance companies 59,113,163 285,756,672 285,756,672
Industrial and all other 59,178,543 160,386,863 160,386,863
Nonredeemable preferred stocks 50,520,983 47,614,338 47,614,338
Total equity securities $ 290,370,194 $ 718,023,287 $ 718,023,287
Mortgage loans on real estate (c) $ 682,299,847 $ 680,624,847
Real estate acquired by foreclosure(c) $ 9,308,024 $ 7,890,230
Other real estate held for investment(c)$ 23,579,023 $ 22,997,317
Policy loans $ 206,360,597 $ 206,360,597
Other long-term investments $ 37,860,826 $ 37,860,826
Short-term investments, other than
cash equivalents $ - $ -
Total investments $4,881,798,401 $5,220,667,871
</TABLE>
(Continued)
F-3
<PAGE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES (CONTINUED)
December 31, 1994
(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 amounts reflected in Column B or Column C and
amounts at which shown in the consolidated balance sheet reflected
in Column D result from the adoption of SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." A portion
of bonds and debt securities are recorded as investments held to
maturity at amortized cost and a portion are recorded as investments
available for sale at fair value.
(c) Differences between cost reflected in Column B and amounts at which
shown in the consolidated balance sheet reflected in Column D result
from valuation allowances and declines in value that are other than
temporary.
F-4
<PAGE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS OF JEFFERSON-PILOT CORPORATION
December 31, 1994 and 1993
SCHEDULE II
ASSETS 1994 1993
Cash and investments (Note 2)
Cash and cash equivalents $ 1,864,097 $ 10,174
Short-term investments - 3,065,000
Debt securities available for sale 135,952,327 -
Debt securities, at amortized cost - 140,660,581
Equity securities available for sale 52,093,483 -
Equity securities, at cost - 4,653,937
Investment in continuing subsidiaries 1,522,393,224 1,512,263,288
Investment in discontinued subsidiaries 65,039,937 93,997,746
Other investments 1,980,599 1,625,729
Total cash and investments 1,779,323,667 1,756,276,455
Amounts due from subsidiaries 8,480,428 38,374,033
Deferred income taxes - 1,225,936
Other assets 11,276,486 10,423,417
$1,799,080,581 $1,806,299,841
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable (Note 3) $ 29,350,000 $ 39,700,000
Payables and accruals 3,556,764 9,443,910
Dividends payable 20,834,000 19,291,000
Income taxes payable 3,824,458 4,794,556
Deferred income tax liabilities 8,972,756 -
Total liabilities 66,537,978 73,229,466
Commitments and contingent liabilities (Note 4)
Stockholders' equity (Notes 2, 5 and 6):
Common stock, par value $1.25 per share,
authorized 100,000,000 shares; issued
1994 48,450,898 shares; 1993 49,464,495
shares 60,563,623 61,830,619
Retained earnings, including equity in
undistributed net income of subsidiaries
1994 $1,318,265,897; 1993 $1,220,151,215 1,441,132,441 1,339,671,590
Net unrealized gains on securities available
for sale, less deferred income taxes
$121,988,542 230,846,539 -
Net unrealized gains on equity securities
held by insurance subsidiaries, less
deferred income taxes $176,201,659 - 331,568,166
Total stockholders' equity 1,732,542,603 1,733,070,375
$1,799,080,581 $1,806,299,841
============== ==============
See Notes to Condensed Financial Statements.
F-5
<PAGE>
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF INCOME OF JEFFERSON-PILOT CORPORATION
Years Ended December 31, 1994, 1993 and 1992
SCHEDULE II
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Income:
Dividends from continuing subsidiaries:
Jefferson-Pilot Life Insurance Company $ 94,500,000 $ 91,256,674 $ 116,051,951
Jefferson-Pilot Communications Company 4,000,000 5,000,000 10,000,000
Other subsidiaries 4,200,000 400,000 387,000
102,700,000 96,656,674 126,438,951
Dividends from discontinued subsidiaries:
Jefferson-Pilot Fire & Casualty Company 5,170,000 4,300,000 -
Jefferson-Pilot Title Insurance Company 20,161,426 1,800,000 1,500,000
25,331,426 6,100,000 1,500,000
Other investment income, including
interest from subsidiaries, net (Note 7) 11,227,132 7,451,363 5,614,534
Realized investment gains 20,565,037 11,134,594 402,169
Total income 159,823,595 121,342,631 133,955,654
Expenses 11,182,580 11,512,825 17,470,089
Income before income taxes
and equity in undistributed net
income of subsidiaries 148,641,015 109,829,806 116,485,565
Income taxes (benefit) (Note 8) 7,518,026 1,452,456 (5,491,839)
Income before equity in undistributed
net income of subsidiaries 141,122,989 108,377,350 121,977,404
Equity in undistributed net income
of continuing subsidiaries:
Jefferson-Pilot Life Insurance Company 99,835,640 72,942,220 71,919,386
Jefferson-Pilot Communications Company 15,361,598 6,671,329 1,664,967
Other subsidiaries, net (1,091,957) 4,071,516 536,172
114,105,281 83,685,065 74,120,525
Equity in undistributed net income
of discontinued subsidiaries:
Jefferson-Pilot Fire & Casualty Company 1,937,398 2,909,525 6,597,763
Jefferson-Pilot Title Insurance Company,
reflects special dividend of
$18,538,916 in 1994 (17,927,995) 200,038 542,363
(15,990,597) 3,109,563 7,140,126
Net income $ 239,237,673 $ 195,171,978 $ 203,238,055
============= ============= =============
</TABLE>
See Notes to Condensed Financial Statements.
F-6
<PAGE>
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CASH FLOWS OF JEFFERSON-PILOT CORPORATION
Years Ended December 31, 1994, 1993 and 1992
SCHEDULE II
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 239,237,673 $ 195,171,978 $ 203,238,055
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net
income of subsidiaries (98,114,684) (86,794,628) (81,260,651)
Noncash dividends received from
subsidiaries (18,270,501) - -
Realized investment gains (20,565,037) (11,134,594) (402,169)
Change in accrued items and other
adjustments, net 13,806,030 677,280 (3,160,617)
Net cash provided by operating
activities 116,093,481 97,920,036 118,414,618
CASH FLOWS FROM INVESTING ACTIVITIES
Sales (purchases) of short-term
investments, net 3,065,000 39,183,230 (34,057,070)
Purchases of investments in debt
securities - (200,511,406) -
Proceeds from sales of investments 22,354,569 71,937,217 1,865,571
Collection of notes receivable 15,500,000 1,793,224 1,432,002
Acceptance of notes receivable - (36,500,000) (480,000)
Proceeds from retirement of
subsidiary's preferred stock - 4,200,000 -
Other, net (2,277,098) 1,861,111 (9,597)
Net cash provided by (used in)
investing activities 38,642,471 (118,036,624) (31,249,094)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends (83,356,860) (78,125,073) (69,100,414)
Common stock reacquired (55,686,956) (50,680,048) (36,125,110)
Proceeds from borrowings - 39,700,000 -
Repayment of borrowings (10,350,000) - -
Other (3,488,213) (1,055,504) 5,341,571
Net cash used in financing
activities (152,882,029) (90,160,625) (99,883,953)
Net increase (decrease) in cash
and cash equivalents 1,853,923 (110,277,213) (12,718,429)
Cash and cash equivalents:
Beginning 10,174 110,287,387 123,005,816
Ending $ 1,864,097 $ 10,174 $ 110,287,387
============= ============= =============
See Notes to Condensed Financial Statements.
</TABLE>
F-7
<PAGE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS OF JEFFERSON-PILOT CORPORATION
SCHEDULE II
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, 1994.
The Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" effective January 1,
1994. SFAS 115 applies to equity securities having readily
determinable fair values and to debt securities. Securities under
its scope must be classified for financial reporting purposes as
either 1) securities held to maturity 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 stated at fair value with net unrealized gains and losses
included in a separate component of stockholders' equity, net of
deferred income tax effect.
SFAS 115 establishes criteria for classifying debt securities as
held to maturity or trading and requires debt securities not other-
wise classified to be accounted for as available for sale. Equity
securities with readily determinable fair values are required to
be classified as either trading or available for sale. Individual
securities classified as either held to maturity or available for
sale that experience other-than-temporary declines in value to
amounts less than amortized cost must be adjusted to a new cost
basis, with a corresponding charge to earnings.
In connection with the adoption of SFAS 115, the Company classified
its debt and equity securities as available for sale and adjusted
their carrying amount to aggregate fair value as of January 1, 1994.
Prior to adopting SFAS 115, the Company's debt securities were
stated at amortized cost less allowances for declines in value
considered to be other than temporary and equity securities held
directly by the Company were stated at the lower of aggregate cost
or market.
Additional information about accounting policies pertaining to
investments and other significant accounting policies applied by
the Company and its subsidiaries are as set forth in Note 1 to the
F-8
<PAGE>
consolidated financial statements of Jefferson-Pilot Corporation
and subsidiaries which are included in the Annual Report to Share-
holders for the year ended December 31, 1994.
Note 2. Investment Information
The effect of adopting SFAS 115 on the carrying amount of debt and
equity securities held directly by the Company and the separate
component of stockholders' equity as of January 1, 1994 follows:
Net Unrealized Gains (Losses)
Debt Equity
Securities Securities Total
Effect of adopting SFAS 115 as
of January 1, 1994:
Increase in stated amount
of securities $ 151,607 $ 70,103,916 $ 70,255,523
Increase in deferred income
tax liabilities (52,000) (28,102,946) (28,154,946)
Increase in net unrealized gains
included in stockholders' equity 99,607 42,000,970 42,100,577
Changes during year ended
December 31, 1994:
Decrease in stated amount
of securities (15,593,429) (28,221,111) (43,814,540)
Decrease in deferred income
tax liabilities 6,151,909 11,815,851 17,967,760
Increase/(Decrease) in net
unrealized gains included in
stockholders' equity $ (9,341,913) $ 25,595,710 $ 16,253,797
============ ============ ============
Net unrealized gains on securities available for sale included in the
accompanying condensed balance sheet as of December 31, 1994 includes
approximately $215 million of net unrealized gains pertaining to
securities held by insurance subsidiaries, net of deferred income tax
effect of approximately $112 million. Since debt and equity securities
held directly by the Company as of December 31, 1993 were stated at
amortized cost or cost, as appropriate, related unrealized gains are not
reflected in the accompanying condensed balance sheet as of that date.
Debt securities held directly by the Company, stated at fair value of
$135,952,327 as of December 31, 1994, had an aggregate amortized cost
of approximately $151 million. Such securities consisted primarily of
U.S. Treasury obligations maturing in the years 2000 through 2003 with
approximately $15 million of gross unrealized holding losses. Equity
securities held directly by the Company were stated at market value of
$52,093,483 and had aggregate cost approximating $10 million, with
approximately $42 million of gross unrealized holding gains.
As of December 31, 1993, debt securities held directly by the Company
were stated at amortized cost of $140,660,581 and had aggregate fair
value approximating cost. Equity securities held directly by the
Company as of December 31, 1993 had aggregate market value approximating
$74,758,000, with unrealized holding gains of $70,103,916.
F-9
<PAGE>
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, 1994.
Note 4. Commitments and Contingent Liabilities
Information about commitments and contingent liabilities involving the
Company and its subsidiaries is contained in Notes 11, 12 and 17 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, 1994.
Note 5. Common Stock and Stock Options
Information about common stock and stock options is contained in
Notes 7 and 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, 1994.
Note 6. Retained Earnings
Information about certain limitations affecting the amount of
dividends that Jefferson-Pilot Life Insurance Company (the Company's
largest subsidiary) may pay to the Company without the approval of
the Insurance Commissioner of the State of North Carolina is contained
in Note 8 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, 1994.
Note 7. Other Investment Income
Other investment income consists principally of interest on debt
securities and dividends on investments in common stocks. Realized
investment gains resulted from sales of common stocks in 1994 and from
sales of common stocks and dispositions of other investments in 1993.
Note 8. Income Taxes (Benefit)
Income taxes (benefit) as reported in the statements of income differ
from the amounts which result from applying the maximum federal income
tax rates of 35% in 1994 and 1993 and 34% in 1992 to income before
income taxes and equity in undistributed income 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 liabilities as of December 31, 1994 relate
primarily to unrealized gains on securities available for sale.
Other asset and liability basis differences resulted in deferred
income tax assets approximating $1.2 million as of December 31, 1994
(netted with deferred income tax liabilities) and 1993. The deferred
components of income taxes (benefit) was not material in any year
presented.
F-10
<PAGE>
The Company pays the total amount of federal income taxes indicated on
its consolidated federal income tax return and collects from subsid-
iaries 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 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, 1994.
Note 9. Postretirement Benefit Plans
Information about postretirement benefit plans sponsored by the Company
and its subsidiaries is contained in Note 11 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, 1994.
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. Discontinued Operations and Subsequent Event
Information about discontinued operations, which includes the property
and casualty and title insurance subsidiaries that formerly comprised
the other insurance business segment reflected in the consolidated
financial statements of the Company and its subsidiaries is contained
in Note 16 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, 1994.
On February 14, 1995, substantially all of the assets and the media
services operations of Jefferson-Pilot Data Services, Inc. were sold.
Information about the sale is included in Note 19 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, 1994.
F-11
<PAGE>
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE III - 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 and Other Policy Premiums
Policy Policyholder Premiums Claims and and Other
Acquisition Contract Collected Benefits Consider-
Segment Costs Deposits in Advance Payable(b) ations
<S> <C> <C> <C> <C> <C>
As of or Year Ended
December 31, 1994
Life insurance $323,015,000 $3,125,021,000 $23,321,000 $414,722,000 $655,302,000
Discontinued ============
operations (a) 6,124,000 - - 70,699,000
Total $329,139,000 $3,125,021,000 $23,321,000 $485,421,000
============ ============== =========== ============
As of or Year Ended
December 31, 1993
Life insurance $272,314,000 $2,954,247,000 $21,680,000 $415,593,000 $627,604,000
Discontinued ============
operations (a) 5,417,000 - - 62,793,000
Total $277,731,000 $2,954,247,000 $21,680,000 $478,386,000
============ ============== =========== ============
As of or Year Ended
December 31, 1992
Life insurance $254,787,000 $2,731,357,000 $21,280,000 $403,832,000 $614,386,000
Discontinued ============
operations (a) 5,374,000 - - 59,792,000
Total $260,161,000 $2,731,357,000 $21,280,000 $463,624,000
============ ============== =========== ============
</TABLE>
(continued)
F-12
<PAGE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
(continued)
Column A Column G Column H Column I Column J
Benefits, Amortization
Claims, of Deferred
Net Losses and Policy Other
Investment Settlement Acquisition Operating
Segment Income Expenses Costs Expenses(c)
As of or Year Ended
December 31, 1994
Life insurance $375,196,000 $ 627,862,000 $ 22,265,000 $136,585,000
============ ============== ============ ============
As of or Year Ended
December 31, 1993
Life insurance $360,800,000 $ 601,726,000 $ 25,083,000 $138,607,000
============ ============== ============ ============
As of or Year Ended
December 31, 1992
Life insurance $351,721,000 $ 597,111,000 $ 21,757,000 $146,836,000
============ ============== ============ ============
(a) Balance sheet information for discontinued operations relates to
operations classified in prior years as the "other insurance" segment.
(b) Other policy claims and benefits payable include dividend accumulations
and other policyholder funds on deposit, policy and contract claims
(life and annuity and accident and health), dividends for policyholders,
casualty insurance unearned premiums and losses payable and other policy
liabilities.
(c) 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 $22,917,000 in 1994, $10,897,000 in
1993, and $10,504,000 in 1992.
F-13
<PAGE>
<TABLE>
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
<CAPTION>
For the Years Indicated
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, 1994:
Life insurance in
force end of year $ 45,048,825,000 $2,738,735,000 $ 9,657,000 $42,319,747,000 -
Premiums: (a)
Life insurance $ 226,830,000 $ 9,250,000 $ 194,000 $ 217,774,000 .1%
Accident and
health insurance 404,869,000 5,757,000 (47,000) 399,065,000 -
Total Premiums $ 631,699,000 $ 15,007,000 $ 147,000 $ 616,839,000 -
Year Ended
December 31, 1993:
Life insurance in
force 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 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%
</TABLE>
(continued)
F-14
<PAGE>
SCHEDULE IV - 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-15
<PAGE>
List and Index of Exhibits
Reference
Per Exhibit
Table Description of Exhibit -Page-
(2) Plan of acquisition - Life and Health
Agreement in Connection with the
Rehabilitation of Kentucky Central
Life Insurance Company was included
in Form 10-Q for the period ended
September 30, 1994, and is incorporated
herein by reference. -
(3) (i) Articles of Incorporation including
amendments thereto that have been
approved by shareholders. (Provided
as part of the electronic filing.) F-19 - F-30
(ii) By laws as currently in effect
were included in Form 8-K dated
November 14, 1994, and are
incorporated herein by reference. -
(4) Amended and Restated Rights Agreement
dated November 7, 1994 between Jefferson-
Pilot Corporation and First Union National
Bank of North Carolina, as Rights Agent,
was included in Form 8-K dated November 14,
1994, and is incorporated herein by reference. -
(10) The following contracts and plans:
(i) Employment contract, between the
Registrant and David A. Stonecipher,
an executive officer of the Registrant,
was included in Form 10-K for the year
ended December 31, 1992, and is
incorporated herein by reference. -
(ii) Employment contract, between the
Registrant and Kenneth C. Mlekush,
an executive officer of the Registrant,
was included in Form 10-K for the year
ended December 31, 1992, and is
incorporated herein by reference. -
F-16
<PAGE>
List and Index of Exhibits (continued)
(iii) Employment contract between the
Registrant and John D. Hopkins,
an executive officer of the Registrant,
was included in Form 10-K for the year
ended December 31, 1993, and
incorporated herein by reference. -
(iv) Employment contract between the
Registrant and Dennis R. Glass,
an executive officer of the Registrant,
was included in Form 10-K for the year
ended December 31, 1993, and
incorporated herein by reference. -
(v) Employment contract between the
Registrant and E. J. Yelton,
an executive officer of the Registrant,
was included in Form 10-K for the
year ended December 31, 1993, and
incorporated herein by reference. -
(vi) Long Term Stock Incentive Plan,
included as Exhibit 2 to the
March 24, 1995 Proxy Statement
and incorporated herein by reference. -
(vii) 1995 Non-employee Directors Stock
Option Plan, included as Exhibit 3
to the March 24, 1995 Proxy Statement
and incorporated herein by reference. -
(viii) Jefferson-Pilot Life Insurance
Company Supplemental Benefit Plan
and Executive Special Supplemental
Benefit Plan. (Provided as part
of the electronic filing.) F-31 - F-36
(ix) Management Incentive Compensation
Plan for Jefferson-Pilot Corporation
and its insurance subsidiaries.
(Provided as part of the electronic
filing.) F-37 - F-38
(x) Deferred Fee Plan for Non-Employee
Directors. (Provided as part of the
electronic filing.) F-39 - F-41
(11) Basis For Computation of Per Share Earnings
(Provided as part of the electronic filing). F-42
F-17
<PAGE>
List and Index of Exhibits (continued)
(13) Portion of Annual Report to Shareholders
(Provided as part of the electronic filing.) F-43 - F-81
(21) Subsidiaries of the Registrant
(Provided as part of the electronic filing.) F-82 - F-83
(23) Accountant's Consent (Provided as part of
the electronic filing.) F-84
(24) Power of Attorney (Provided as part of
the electronic filing.) F-85 - F- 95
(27) Financial Data Schedule (Provided as part
of the electronic filing.) F-96
F-18
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EXHIBIT 3
ARTICLES OF INCORPORATION
OF
JEFFERSON-PILOT CORPORATION
(Including amendments through May 1994)
We, the undersigned persons who are each over 21 years of age, do make
and acknowledge these Articles of Incorporation for the purpose of forming
a business corporation under and by virtue of the laws of the State of North
Carolina:
ARTICLE I
The name of the corporation shall be JEFFERSON-PILOT CORPORATION.
ARTICLE II
The period of duration of the corporation shall be perpetual.
ARTICLE III
The purposes for which the corporation is organized are:
(a) To exist, serve, act, and conduct business, as a holding
corporation;
(b) To acquire by purchase, subscription, exchange, or in any other
lawful manner, and to hold, receive, use, mortgage, pledge, sell, assign,
transfer, exchange, dispose of, and otherwise deal in and with securities
(which term, for the purpose of this Article III, includes, without
limitation of the generality thereof, shares of stock, other shares, bonds,
debentures, notes, mortgages, or other obligations, and certificates,
receipts, warrants, or other instruments representing rights or options to
receive, purchase or subscribe for any of the same, or representing any
other rights or interests therein or in any property or assets) created or
issued by any persons, firms, associations, trusts, partnerships,
corporations, joint ventures, syndicates, or governments or subdivisions
thereof; to pay for securities (as defined in this Article III) (1) in cash,
(ii) by exchange of stock of this corporation for such securities acquired,
(iii) in cash and by exchange of stock, or (iv) in any other lawful manner;
and to exercise, as owner or holder of any such securities as herein
defined, any and all rights, powers and privileges in respect thereof.
(c) To acquire by purchase, exchange, concession, easement, deed,
assignment, contract, lease or otherwise, and hold, own, use, control,
manage, improve, maintain and develop, mortgage, pledge, grant, sell,
convey, exchange, assign, divide, lease, sublease, otherwise encumber and
dispose of, and deal and trade in, tangible personal property, real estate
improved or unimproved, lands, leaseholds, options, concessions, easements,
tenements, hereditaments and interests in real, mixed, and personal
property, of every kind and description wheresoever situated, and any and
all rights therein.
(d) To manufacture, assemble, design, distribute, store, raise,
grow, market, process, repair, buy, sell, license, lease, improve, install
operate, exchange, import, export, and generally deal in and with, at
wholesale, retail or otherwise, as principal, partner, joint venturer,
agent, broker, factor, distributor, manufacturer's representative, jobber
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or otherwise, any type of property whether real or personal (including,
without limitation of the generality thereof, "securities" as defined in
Article III hereof, intangible personal property, goodwill, and franchises);
to extract and process natural resources; to transport freight or passengers
by land, sea or air, subject to acquisition of such licenses and permits as
may be required by applicable law, to collect, publish, and disseminate all
types of information, programs, news, or advertisements through any medium
whatsoever (including, without limitation of the generality thereof, the
media of radio, television, community antenna television, newspapers, and
magazines); to perform and render any personal service whatsoever; to render
investment advice and counsel and to perform investment services and
functions; to enter into or serve in any type of management, investigative,
advisory, promotional, protective, fiduciary or representative capacity or
relationship for any person, firm, association, trust, partnership, joint
venture, syndicate, organization, or corporation; to enter into contracts
of guaranty or suretyship for the benefit of any corporation, partnership,
joint venture, syndicate, organization, or corporation; to enter into
contracts of guaranty or suretyship for the benefit of any corporation,
partnership, joint venture, association, firm, syndicate, trust, or other
entity, in which this corporation may have some interest; to engage in any
lawful commercial, industrial, educational, agricultural and/or scientific
business, profession or activity whatsoever and to engage in, do, and
perform any enterprise, act, service or vocation which a natural person
might or could do or perform, subject to and in conformity with the laws of
the State of North Carolina; and to do any and all other acts and things
necessary, desirable or incident to carry out, observe, keep and perform the
objects and purposes for which this corporation is formed.
(e) The foregoing provisions of this Article III shall be construed
both as purposes and powers and each as an independent purpose and power.
The foregoing enumeration of specific purposes and powers shall not be held
to limit or restrict in any manner the purposes, powers, privileges and
rights of the corporation, and the corporation shall be authorized to
exercise and enjoy all the powers, rights and privileges granted to, or
conferred upon, corporations of a similar character by the laws of the State
of North Carolina now or hereafter in force.
ARTICLE IV
The corporation shall be authorized to issue One Hundred Million
(100,000,000) shares of common stock with a par of One and 25/100 ($1.25)
Dollars per share.
ARTICLE V
The minimum amount of consideration to be received by the corporation
for its shares before it shall commence business is Twenty Million
($20,000,000) Dollars in cash, or in property, tangible or intangible, of
equivalent value.
ARTICLE VI
The address of the initial Registered Office of the corporation in
North Carolina is Jefferson Standard Building, 101 North Elm Street,
Greensboro, Guilford County, North Carolina; and, the name of the initial
Registered Agent at such office is D. E. Hughes.
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ARTICLE VII
The number of Directors constituting the initial Board of Directors
shall be Twenty (20), and the names and addresses of the persons who are to
serve as Directors until the first meeting of the shareholders, or until
their successors are elected and qualify, are:
Name Address
Thornton H. Brooks 415 Sunset Drive
Greensboro, North Carolina
J. M. Bryan 711 Sunset Drive
Greensboro, North Carolina
Mrs. Kathleen Price Bryan 711 Sunset Drive
(Mrs. Joseph M. Bryan) Greensboro, North Carolina
W. Colquitt Carter 52 W. Wesley Road, N.E.
Atlanta, Georgia
W. L. Carter, Jr. 1012 Country Club Drive
Greensboro, North Carolina
George K. Cavenaugh 2026 Saint Andrews Road
Greensboro, North Carolina
W. G. Clark, Jr. Saint Patrick Street
Tarboro, North Carolina
C. McD. Davis Porters Neck Plantation
Route 1, Box 621
Wilmington, North Carolina
Joseph C. Eagles, Jr. 1100 W. Nash Street
Wilson, North Carolina
S. Marcus Greer 3506 Del Monte
Houston, Texas
Howard Holderness 2000 Granville Road
Greensboro, North Carolina
D. E. Hudgins 1606 Nottingham Road
Greensboro, North Carolina
R. O. Huffman 315 Union Street
Drexel, North Carolina
John Van Lindley 304 Irving Place
Greensboro, North Carolina
A. G. Myers 211 W. Second Avenue
Gastonia, North Carolina
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Charles F. Myers, Jr. 2005 Granville Road
Greensboro, North Carolina
Pierce C. Rucker 303 Wentworth Drive
Greensboro, North Carolina
Julius C. Smith 1300 Galleon Drive
Naples, Florida
W. Roger Soles 604 Kimberly Drive
Greensboro, North Carolina
O. F. Stafford 5307 Wayne Road
Greensboro, North Carolina
ARTICLE VIII
The names and addresses of the Incorporators are:
Name Address
W. Roger Soles 604 Kimberly Drive
Greensboro, North Carolina
Howard Holderness 2000 Granville Road
Greensboro, North Carolina
George K. Cavenaugh 2026 Saint Andrews Road
Greensboro, North Carolina
D. E. Hudgins 1606 Nottingham Road
Greensboro, North Carolina
ARTICLE IX
Section 1. Number.
The business and affairs of the Corporation shall be managed under
the direction of a Board of Directors consisting of no less than
eleven and no more than fifteen directors, with the exact number of
directors to be established from time to time by the Board of
Directors.
Section 2. Classification.
The Directors of the Corporation shall be divided into three classes,
designated Class I, Class II and Class III. Each Class shall
consist, as nearly as possible, of one-third of the total number of
Directors consisting of the entire Board of Directors. In the
elevation of Directors at the 1986 Annual Meeting of Shareholders,
the Class I Directors shall be elected to hold office for a term to
expire at the first annual meeting of shareholders thereafter; the
Class II Directors shall be elected to hold office for a term to
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expire at the second annual meeting of shareholders thereafter; and
the Class III Directors shall be elected to hold office for a term to
expire at the third annual meeting of shareholders thereafter, and in
the case of Each Class, until their successors are elected and
qualified. At each annual meeting of shareholders held after the
1985 Annual Meeting of Shareholders, the Directors elected to succeed
those whose terms expire shall be identified as being of the same
Class as the Directors they succeed and shall be elected to hold
office for a term to expire at the third annual meeting of the
shareholders after their election, and until their successors are
elected and qualified.
Section 3. Advance Notice of Nomination.
Advance notice of shareholder nominations for the election of
Directors shall be given in the manner provided in Section 6 of this
Article IX.
Section 4. Vacancies.
Vacancies on the Board of Directors may be filled by the affirmative
vote of a majority of the remaining Directors then in office,
although less than a quorum or by a sole remaining Director. Any
Director elected in accordance with the preceding sentence shall hold
office for the full term of the Class of Directors in which the
vacancy occurred, and until such Director's successor shall have been
elected and qualified.
Section 5. Removal.
Any Director, or the entire Board of Directors, may be removed from
office at any time, with or without cause, by the affirmative vote of
the holders of 80% of the outstanding stock of the Corporation. Any
Director may also be removed from office at any time, for cause, by
the vote of a majority of the entire Board of Directors. The
provisions of this Section 5 are subject to the requirements of North
Carolina General Statutes 55-27 relating to cumulative voting and
shareholder suits until the same may be repealed.
Section 6. Nominations.
Nominations for the election of Directors may be made by the Board of
Directors or by a proxy committee appointed by the Board of Directors
or by any shareholder entitled to vote in the election of Directors
generally. However, any shareholder entitled to vote in the election
of Directors generally may nominate one or more persons for election
as Directors at a meeting only if written notice of such
shareholder's intent to make such nomination or nominations has been
given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not later than (1) with
respect to an election to be held at an annual meeting of
shareholders, 90 days in advance of such meeting, and (ii) with
respect to an election to be held at a special meeting of
shareholders for the election of Directors, the close of business on
the seventh day following the date on which notice of such meeting is
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<PAGE>
first given to shareholders. Each such notice shall set forth: (a)
the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) a
representation that the shareholder is a holder of record of stock of
the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (c) a description of all
arrangements or understandings between the shareholder and each
nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be
made by the shareholder; (d) such other information regarding each
nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission, had the nominee been
nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a Director of the
Corporation if so elected. The Chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
Section 7. Amendment or Repeal
Notwithstanding any other provisions of law, of these Articles of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that a lesser percentage may be specified by law, the
Charter or the By-Laws of the Corporation) the affirmative vote of
the holders of 80% or more of the outstanding shares of stock of the
Corporation shall be required to amend or repeal, or adopt any
provision inconsistent with or which relate to this Article IX.
ARTICLE X
Section 1. Vote Required for Certain Business Combinations
A. Higher Vote for Certain Business Combinations.
In addition to any affirmative vote required by law, and except as
otherwise expressly provided in Section 2 of this Article X:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested
Shareholder (as hereinafter defined) or (b) any other
corporation (whether or not itself an Interested Shareholder)
which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested
Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Shareholder or any
Affiliate of any Interested Shareholder of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value of $50,000,000 or more; or
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(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of
any securities of the Corporation or any Subsidiary to any
Interested Shareholder or any Affiliate of any Interested
Shareholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market
Value of $50,000,000 or more; or
(iv) the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of
an Interested Shareholder or any Affiliate of any Interested
Shareholder; or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or
into or otherwise involving an Interested Shareholder) which
has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by an
Interested Shareholder or any Affiliate of any Interested
Shareholder;
shall require the affirmative vote of the holders of at least 80% of
the voting power of the outstanding shares of common stock of the
Corporation entitled to vote generally in the election of directors
(the "Voting Stock"). Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
B. Definition of "Business Combination".
The term "Business Combination" as used in this Article X shall mean
any transaction which is referred to in any one or more of clauses
(i) through (v) of paragraph A of this Section 1.
Section 2. When Higher Vote is Not Required
The provisions of Section 1 of this Article X shall not be applicable
to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law and
any other provision of these Articles of Incorporation, if all of the
conditions specified in either of the following paragraphs A or B are
met or, in the case of a Business Combination not involving the
payment of consideration to Shareholders, if the condition specified
in the following paragraph A is met:
A. Approval by Disinterested Directors.
The Business Combination shall have been approved by a majority of
the Disinterested Directors (as hereinafter defined).
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B. Price and Procedure Requirements.
All of the following conditions shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value (as
hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash to be received
per share by holders of Voting Stock in such Business Combination
shall be at least equal to the highest of the following:
(a) (if applicable) the highest per share price (including any
brokerage commission, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder for any shares of
Voting Stock acquired by it (1) within the two-year period
immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date")
or (2) in the transaction in which it became an Interested
Shareholder, whichever is higher;
(b) the Fair Market Value per share of Voting Stock on the
Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (such latter date
is referred to in this Article X as the "Determination Date")
whichever is higher.
(ii) The consideration to be received by holders of Voting Stock
shall be in cash or in the same form as the Interested Shareholder
has previously paid for shares of such Stock. If the Interested
Shareholder has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration for such
Stock shall be either cash or the form used to acquire the largest
number of shares of such Stock previously acquired by it.
(iii) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business
Combination: (a) except as approved by a majority of the
Disinterested Directors, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends on
the outstanding Common Stock; (b) there shall have been (1) no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested Directors, and
(2) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has
the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is approved
by a majority of the Disinterested Directors; and (c) such Interested
Shareholder shall have not become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction
which results in such Interested Shareholder becoming an Interested
Shareholder.
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(iv) After such Interested Shareholder has become Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
(v) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to shareholders of the Corporation at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in a
prominent place, any statement as to the advisability (or
inadvisability) of the Business Combination that the Disinterested
Directors, or any of them, may choose to make and, if deemed
advisable by a majority of the Disinterested Directors, the opinion
of an investment banking firm selected by a majority of the
Disinterested Directors as to the fairness (or nor) of the terms of
the Business Combination from a financial point of view to the
holders of the outstanding shares of Voting Stock other than the
Interested Shareholder and its Affiliates or Associates, such
investment banking firm to be paid a reasonable fee for its services
by the Corporation.
Section 3. Certain Definitions.
For the purposes of this Article X:
A. A "person" shall mean any individual, firm, corporation or other
entity.
B. "Interested Shareholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of more
than 20% of the voting power of the outstanding Voting Stock;
or
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of 20% or
more of the voting power of the then outstanding Voting Stock;
or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two-
year period immediately prior to the date in question
beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of
a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
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C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or
indirectly; or
(ii) which such person or any of its Affiliates or Associates
has (a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (b) the right to vote pursuant to any agreement,
arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
D. For the purposes of determining whether a person is an Interested
Shareholder pursuant to paragraph B of this Section 3, the number of
shares of Voting Stock deemed owned through application of paragraph
C of this Section 3 but shall not include any other shares of Voting
Stock which may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect
on January 1, 1986.
F. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Interested Shareholder set forth in paragraph B of this
Section 3, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is owned, directly
or indirectly, by the Corporation.
G. "Disinterested Director" means any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with
the Interested Shareholder and was a member of the Board prior to the
time that the Interested Shareholder became an Interested
Shareholder, and any successor of a Disinterested Director who is
unaffiliated with the Interested Shareholder and is recommended to
succeed a Disinterested Director by a majority of Disinterested
Directors then on the Board.
H. "Fair Market Value" means: (i) in the case of stock, the highest
closing price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for New
York Stock Exchange-listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or if such stock
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<PAGE>
is not listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange Act of
1934 on which such stock is listed, or, if such stock is not listed
on any such exchange, the highest closing bid quotation with respect
to a share of such stock during the 30-day period preceding the date
in question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such
quotations are available, the Fair Market Value on the date in
question of a share of such stock as determined by the Board in good
faith; and (ii) in the case of property other than cash or stock, the
Fair Market Value of such property on the date in question as
determined by the Board in good faith.
I. In the event of any Business Combination in which the Corporation
survives, the reference to "consideration other than cash" as used in
paragraph B(i) of Section 2 of this Article X shall include the
shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holder of such shares.
Section 4. Power of the Board of Directors.
A majority of the directors of the Corporation shall have the power
and duty to determine for the purposes of this Article X, on the
basis of information known to them after reasonable inquiry, (A)
whether a person is an Interested Shareholder, (B) the number of
shares of Voting Stock beneficially owned by any person, (C) whether
a person is an Affiliate or Associate of another, (D) whether the
assets which are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of
securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $50,000,000 or
more.
Section 5. No Effect on Fiduciary Obligations of Interested Shareholders.
Nothing contained in this Article X shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
Section 6. Fiduciary Obligations of Directors.
The fact that any Business Combination complies with the provisions
of Section 2 of this Article X shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business
Combination or recommend its adoption or approval of the shareholders
of the Corporation, nor shall such compliance limit, prohibit or
otherwise restrict in any manner the Board of Directors or any member
thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
Section 7. Amendment or Repeal.
Notwithstanding any other provisions of these Articles of
Incorporation (and notwithstanding the fact that a lesser percentage
may be specified by law, these Articles of Incorporation or the By-
Laws of the Corporation), the affirmative vote of the holders of 80%
or more of the outstanding shares of Voting Stock shall be required
to amend or repeal, or adopt any provisions inconsistent with or
related to this Article X.
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ARTICLE XI
To the maximum extent now and hereafter permitted by applicable law,
the personal liability of each Director of the Corporation arising out of
an action whether by or in the right of the Corporation or otherwise for
monetary damages for breach of his duty as a Director is eliminated. No
amendment, modification or repeal of this Article or the adoption of any
provision of the Articles of Incorporation inconsistent with this Article
shall eliminate or diminish or otherwise adversely affect any rights or
protection provided by this Article to a Director of the Corporation with
respect to any case of action, claim, suit or proceeding that is based on
any alleged action or failure to act prior to the effective date of such
amendment, modification or repeal or the adoption of any provision in the
Articles of Incorporation inconsistent with this Article.
IN WITNESS WHEREOF, we have hereunto set our hands and seals this the
3rd day of January, 1968.
/s/ W. Roger Soles (SEAL)
W. Roger Soles
/s/ Howard Holderness (SEAL)
Howard Holderness
/s/ George K. Cavenaugh (SEAL)
George K. Cavenaugh
/s/ D. E. Hudgins (SEAL)
D. E. Hudgins
F-30
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EXHIBIT 10
JEFFERSON-PILOT LIFE INSURANCE COMPANY
SUPPLEMENTAL BENEFIT PLAN
WHEREAS, Jefferson-Pilot Life Insurance Company (the "Employer") has
previously adopted retirement plans for the benefit of its eligible
employees and agents, and
WHEREAS, the previously adopted retirement plans are required to
impose limitations on compensation recognized for plan benefit purposes, on
contributions and on benefits in order to maintain qualification under the
Internal Revenue Code, and
WHEREAS, the Employer desires to exercise greater flexibility in
providing retirement benefits to eligible employees and agents than is
permitted by the qualified retirement plans,
NOW, THEREFORE, the Employer adopts this Supplemental Benefit Plan to
provide additional retirement benefits, as set forth below:
1. Interpretation and Intent. This Supplemental Benefit Plan is
established and intended to provide benefits to eligible employees
and agents as an unfunded excess benefit plan, as defined in 29
U.S.C. Section 1002 (36), and as an unfunded employee benefit plan
maintained by the Employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees or agents.
2. Definitions. For purposes of this Supplemental Benefit Plan, the
following definitions shall apply:
(a) "Basic Plan" means the Employer's qualified retirement plan, or
plans, in which an eligible employee or agent is participating.
(b) "Participant" means any employee or full-time agent of the
Employer who is entitled to a Supplemental Benefit by virtue of
the application of the formula set forth in section 3 of this
Plan, or who is granted a Special Supplement Benefit under
section 4 of this Plan. "Participant" will, when necessary,
also include a spouse or designated beneficiary.
(c) The term "Code" means the Internal Revenue Code of 1986, as
amended.
(d) All other terms used in this Plan shall, unless the context
indicates otherwise, have the same meaning as used in the
applicable Basic Plan.
3. Supplemental Benefit. The term "Supplemental Benefit" shall mean,
with respect to any Participant, the excess, if any, of the amount
determined in subparagraph (a) over the amount determined in
subparagraph (b).
(a) The amount of retirement benefits or other benefits which would
have been payable to such person under the Basic Plan at the
time such benefits commence without regard to the limitations
imposed on such amount as a result of the limitations on
retirement benefits under Section 415 of the Code, the
limitation on compensation that may be taken into consideration
under Section 404(1) of the Code, or any subsequent statute or
regulation of similar import. Provided, however, that the
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amount determined under this subparagraph (a) shall be reduced
to the extent, if any, that the limitations under Section 415
of the Code apply because of voluntary contributions made by
the Participant under the Basic Plan.
(b) The amount of retirement benefits or other benefits actually
payable to such person at the time such benefits commence under
the Basic Plan.
4. Special Supplemental Benefit. The Salary Committee of the Board of
Directors of Jefferson-Pilot Life Insurance Company may, in its sole
discretion, identify eligible employees or agents for a Special
Supplemental Benefit. Without limiting the discretion of the
Committee, such special benefits may include deferred bonuses or
compensation, early retirement incentives, or benefits based on
vesting or participation standards different from the identified
employee's or agent's Basic Plan. The award of a Special
Supplemental Benefit to a Participant with regard to any time period
shall not vest in such employee or agent any right to entitlement to
participation during any subsequent time period, except as
specifically authorized by the Salary Committee.
5. Time and Form of Payment of Plan Benefits. Any benefit payable to a
Participant, Spouse or Beneficiary under this Plan shall be paid to
such person beginning on his/her benefit commencement date in the
same form as the benefit payable to such person under the Basic Plan.
Provided, however, that the Salary Committee of the Board of
Directors of the Company may, in its sole discretion, require or
permit an eligible employee or agent to take a lump sum distribution
of the benefits provided by this Plan.
6. Employer's Determination. The Employer's determination in good faith
of the amount of any benefit credited or payable to any Participant,
to the Spouse or any Participant or to any Beneficiary hereunder
shall be final and binding for all purposes with respect to the
benefits payable to such Participant, Spouse or Beneficiary.
7. Termination.
(a) The Employer reserves the right to terminate this Supplemental
Benefit Plan, provided, however, that the portion of any
benefit accrued for any Participant to the time of such
termination which would have constituted a supplemental benefit
as defined herein at the time payments would have commenced
hereunder had this Plan not been terminated shall nonetheless
be paid as if this Plan were still in existence.
(b) Termination of a Participant's Basic Plan shall automatically
terminate this Supplemental Benefit Plan as to that Participant
but upon such termination the portion of any supplemental
benefit otherwise payable in accordance with subparagraph (a)
shall be paid.
(c) Any benefits under this Paragraph 7 shall be payable at the
same time and in the same manner as benefits under the Basic
Plan.
F-32
<PAGE>
8. Funding of Plan. This Supplemental Benefit Plan shall be unfunded
and all benefits payable hereunder shall be paid by the Employer.
The Employer shall have no obligation to establish any fund or
purchase any annuity or other contract to provide the monies required
by the Employer to pay benefits hereunder. If any such fund is
established or any such contract is purchased, such fund or contract
shall be the sole property of the Employer, and no Participant shall
receive or be entitled to any rights with respect to such fund or
contract but shall rely solely on the general obligations and credit
of the Employer to carry out the terms of this Supplemental Benefit
Plan.
9. No Assignment. A Participant's rights and interests under this Plan
may not be assigned or transferred.
10. No Employment Rights. No employee, agent or other person shall have
any claim or right to be granted participation or benefits in this
Plan. Nor shall this Plan be construed as giving any employee or
agent any right to retain employment, or to remain under contract,
with the Company.
11. Future Services. Subject only to the rights reserved to the Employer
in this Plan, this Supplemental Benefit Plan shall constitute a
binding obligation of the Employer to each person entitled to
benefits hereunder and is entered into by the Employer in
consideration of the anticipated future services of its employees and
agents.
F-33
<PAGE>
EXECUTIVE SPECIAL SUPPLEMENTAL BENEFIT
Pursuant to authority granted the Compensation Committee under the terms of
the Jefferson-Pilot Life Insurance Company Supplemental Benefit Plan, the
Committee believes it is in the best interest of the Company from time to
time to identify key members of management who have materially contributed,
or who are expected to materially contribute, to the success and
profitability of the Company, and to provide these selected individuals
(hereinafter called "Participants") with enhanced retirement benefits under
the terms and conditions set forth herein. This benefit shall be designated
the Executive Special Supplemental Benefit under the terms of the Company's
Supplemental Benefit Plan, which Executive Special Supplemental Benefit will
be effective December 1, 1993 and shall thereafter continue in force unless
and until terminated by the Company.
Eligibility:
The Committee intends to consider as eligible candidates for an Executive
Special Supplemental Benefit those individual officers holding the position
of Senior Vice President and above in the hierarchy of the Company. Officer
candidates chosen to receive this benefit will be approved by a majority of
the members of the Compensation Committee at a regularly scheduled meeting
or at a special or consent meeting called for that purpose. Executive
officers selected as Participants shall be so informed and provided a copy
of the terms of this Executive Special Supplemental Benefit.
Amount:
The amount of the Executive Special Supplemental Benefit payable to a
Participant will be the monthly retirement benefit as computed under (1)
below reduced by the monthly retirement benefit as computed under (2) below.
If the benefit provided by (2) is larger than (1), then no Executive Special
Supplemental Benefit is payable.
(1) The monthly retirement benefit provided by multiplying (a) 2.5% for
each year of service, with years of service limited to twenty (and
thus the percentage derived therefrom limited to 50%) by (b) the
Participant's final average monthly earnings for the five-year period
ending with the Participant's retirement date. For this purpose,
final average monthly earnings means salary and incentive
compensation paid under the terms of the Company's Annual Incentive
Bonus Plan (but the latter shall be limited to incentive compensation
attributable to fiscal year 1993 and thereafter). Earnings shall not
include long-term incentive compensation or the value of any stock
grants, stock options or other extraordinary forms of compensation.
Years of services shall be computed from date of employment; partial
years shall be recognized proportionately based on a 365-day year.
Example: The Participant retires on his/her 65th birthday with 13.4
years of service. The monthly benefit computed under this paragraph
would be 13.4 x 2.5%, or a monthly benefit of 33.5% of final average
monthly compensation.
F-34
<PAGE>
(2) The sum of the monthly retirement benefits provided the Participant
by the Company's Basic Plan and the monthly retirement benefits
provided the Participant as a Supplemental Benefit (as the same are
defined in the Company's Supplemental Benefit Plan).
All benefits described in (1) and (2) above are expressed in terms of a
monthly life only annuity benefit beginning on the Participant's normal
benefit commencement date, which is the first of the month following the
Participant's 65th birthday.
Minimum Service Conditions:
1. If the Participant's service is terminated, voluntarily or
involuntarily, prior to the Participant's 60th birthday, no benefits
are payable as an Executive Special Supplemental Benefit.
2. If the Participant's service is terminated, voluntarily or
involuntarily, on or after the Participant's 60th birthday, but
before being credited with five years of service, no benefit shall be
payable to the Participant as an Executive Special Supplemental
Benefit.
3. If the Participant's service is terminated, voluntarily or
involuntarily, on or after his or her 60th birthday and before his or
her 65th birthday, and after completion of at least five years of
service, the Executive Special Supplemental Benefit payable to the
Participant shall be reduced by 3% for each year (and by a
proportionate amount for any partial year based on a 365-day year) by
which the benefit commencement date precedes the Participant's normal
benefit commencement date (the first of the month following his or
her 65th birthday).
Example: The Participant retires on his/her 62nd birthday with 8.0
years of service. The monthly benefit is computed by multiplying 8.0
x 2.5% with a result of 20%, and further reducing this by 3% per year
(or partial year) for early benefit commencement. Thus, the benefit
is 91% of 20%, or 18.2% of final average monthly earnings (with this
benefit further reduced by any benefits payable under the Company's
Basic Plan and as a Supplemental Benefit).
Death:
1. Should the Participant die prior to his or her 60th birthday, no
benefits are payable as an Executive Special Supplemental Benefit.
2. Should the Participant die on or after his or her 60th birthday and
before his or her 65th birthday while actively employed by the
Company, the Participant's surviving spouse shall be entitled to
receive a survivor annuity equal to the amount which would have been
payable had the Participant terminated service on the day prior to
death and elected payment of the Executive Special Supplemental
Benefit in the form of a joint and 50% survivor annuity commencing on
the first of the month following the date of death. Entitlement to
F-35
<PAGE>
benefits under this Subparagraph 2 shall be computed without regard
to the five years of service requirement. Should a Participant die
without a surviving spouse, no Executive Special Supplemental Benefit
will be payable.
3. Should the Participant die after commencement of payment of any
Executive Special Supplemental Benefit, the form of payment elected
will determine whether there are any survivor benefits payable and,
if there are, the amount and extent thereof.
Forfeiture:
Benefits which would otherwise be payable as an Executive Special
Supplemental Benefit will be forfeited if:
1. The Participant elects to work past his or her 65th birthday.
2. The Participant, while employed with the Company or after his or her
termination or retirement:
a. Is convicted of or pleads guilty to any act of fraud or
embezzlement,
b. Engages in any conduct or activity involving moral turpitude
which is materially damaging to the property, business or
reputation of the Company,
c. Misappropriates any property of the Company or appropriates for
his or her personal gain any corporate opportunity of the
Company,
d. Divulges Company proprietary information to competitors, or
e. Assumes a position with a competitor of the Company as an
employee or consultant which, in the opinion of the Committee,
would be detrimental to the interest of the Company or would
place the Participant in a likely conflict of interest.
Time and Form of Payment:
Any benefit payable to a Participant, spouse or beneficiary under this
Executive Special Supplemental Benefit shall be paid to such person
beginning on his/her benefit commencement date in the same form as the
benefit payable to such person under the Basic Plan. Provided, however,
that the Compensation Committee may, in its sole discretion, require or
permit a Participant to take a lump sum distribution.
Intent and Purpose:
The Committee intends that this Executive Special Supplemental Benefit
constitute a Special Supplemental Benefit as defined in the Jefferson-Pilot
Life Insurance Company Supplemental Benefit Plan and the same shall be
subject to the additional terms and conditions of that Plan which are
applicable to a Special Supplemental Benefit.
F-36
<PAGE>
JEFFERSON-PILOT CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN
PURPOSE
The purpose of the annual Management Incentive Compensation Plan is to
improve shareholder value by relating a portion of executive compensation
to the attainment of predefined performance goals. The Plan serves to focus
executive attention on specific business unit and individual objectives
which, when attained, will meet or exceed shareholder expectations. The
Plan is intended also to assist in securing and retaining highly qualified
individuals.
The Plan applies for Jefferson-Pilot Corporation and all of its insurance
subsidiaries.
ELIGIBILITY/BONUS POTENTIAL LEVEL
Individuals in the following classifications will be eligible to participate
in the Plan:
Chief Executive Officer
Executive Vice Presidents
Senior Vice Presidents
Vice Presidents
Second Vice Presidents
Participation by individuals not in the above classifications requires the
approval of the Chief Executive Officer of the Corporation, and of the
Compensation Committee for individuals whose salaries require approval of
that Committee.
Bonus potential levels are as follows, expressed as fractions of annualized
salary at the beginning of the bonus year:
Bonus Range
Classification Level Minimum Target Superior
Chief Executive Officer Group 1 .20 .35 .50
Executive Vice Presidents Group 2 .16 .32 .48
Senior Vice Presidents Group 3 .12 .24 .36
Vice Presidents Group 4 .08 .16 .24
Second Vice Presidents Group 5 .05 .10 .15
Participation at levels other than those defined above requires the approval
of the Chief Executive Officer, and of the Compensation Committee for
individuals whose salaries require approval of that Committee.
Participation by individuals hired or promoted after the February
Compensation Committee meeting in the bonus year requires the approval of
the Chief Executive Officer.
F-37
<PAGE>
PERFORMANCE CRITERIA
The Chief Executive Officer shall recommend to the Compensation Committee
for approval annually, performance criteria which support the Corporation's
strategic goals and annual operating plans and which will be used in
determining individual incentive compensation payments.
Actual performance against such criteria shall be determined as soon as
practicable after year end and verified by the Internal Auditing Department.
Any adjustments to exclude extraordinary, unusual or non-recurring items
shall be called to the attention of the Compensation Committee prior to its
approval of awards for the year.
INDIVIDUAL PERFORMANCE ADJUSTMENT
The basic bonus calculated above is then adjusted for each individual by
multiplying it by the individual's performance evaluation factor:
Low Performance Rating = .5 factor
Standard Performance Rating = 1.0 factor
High Performance Rating = 1.5 factor
This evaluation is based on the unit head's review of performance during the
year against a pre-selected group of 3 to 5 personal objectives. Once all
bonuses have been factored in this fashion, the resulting distribution
determines each participant's share of the total bonus dollars to be paid.
In effect, this process is designed not to increase or decrease the total
bonuses, but to redistribute some bonus dollars from those with lower
ratings to those individuals with the highest performance rating. In no
event will this adjustment process to allowed to lower or raise an
individuals bonus by more than 25%.
VESTING
Incentive payments are not earned or vested until approved and paid, with
the exception of death, disability, or retirement, in which case a prorata
payment shall be earned. An eligible participant must be actively employed
on the date of payment in order to receive an incentive payment, with the
exceptions listed above or under special circumstances approved by the Chief
Executive Officer, and by the Compensation Committee for individuals whose
salaries require approval of that Committee.
PAYMENT
At the February Compensation Committee meeting, the Chief Executive Officer
will present for review and approval a list of individual recommendations
for incentive payment for those officers whose salaries require the approval
of the Compensation Committee, together with an estimate of the aggregate
payments to others under the Plan.
Payments will be disbursed as soon as practicable after that Committee
meeting.
F-38
<PAGE>
JEFFERSON-PILOT CORPORATION
DEFERRED FEE PLAN FOR NON-EMPLOYEE DIRECTORS
(Revised February 13, 1995)
1. Eligibility.
Each member of the Board of Directors of Jefferson-Pilot Corporation
(the "Corporation") who is not an employee of the Corporation or any of its
subsidiaries ("Eligible Director") is eligible to participate in this
Deferred Fee Plan for Non-Employee Directors (the "Plan").
2. Participation.
(a) An Eligible Director may elect, or modify a prior election, at
a time specified in Section 2(b), to defer the receipt of all or part of the
fees which would otherwise have been payable currently for services as a
Director (including retainer and meeting fees for Board and committee
service). Deferrals shall be credited to a deferred fee account (a
bookkeeping account) subject to the terms of the Plan.
(b) An election to defer fees must be made as follows:
i. Any person who is not a Director but who as a Director would be
eligible may elect in advance to commence participation at the
time he or she becomes a Director.
ii. An Eligible Director may elect at any time to commence
participation effective on the first day of any February, May,
August or November after the election is received.
(c) An election to defer fees must be made on a form provided by the
Corporation and filed with the Secretary of the Corporation (the
"Secretary"), and shall remain in effect until the Director ceases to be a
Director, or until the election is modified or terminated by written notice
received by the Secretary. Termination shall be effective only as to fees
for periods or meetings after such receipt. In the event a Director
terminates a deferral election, the amount already deferred cannot be paid
until the Director ceases to be a Director.
(d) A Director who has filed a revocation of an election to
participate in the Plan may thereafter again file an election to
participate, in accordance with Section (2)(b)(ii).
3. Deferred Fee Accounts.
(a) Deferred amounts shall be held in the general funds of the
Corporation. The amounts thereof shall be credited to the Director's
account as of the date such amounts otherwise would have been paid to the
Director, except that fees for committee meetings not held on the date of
a Board meeting shall be credited on the date of the next Board meeting.
F-39
<PAGE>
(b) The Director shall designate the portion of his or her deferrals
to be "invested" in one or both investment options, an interest rate option
and a phantom stock option.
(c) Deferrals under the interest rate option shall be credited with
interest for each year at a rate equal to the average of the rate of
interest on seven year U.S. Treasury obligations as of the end of each of
the twenty-four months prior to such year.
(d) Deferrals under the phantom stock option shall be credited to
the Director's account in full and fractional units based on the fair market
value of the common stock of the Corporation on the crediting date. One
phantom unit has the same value as one share of common stock on a given day.
Additional phantom units shall be credited equivalent to dividends paid on
the common stock, based on the fair market value on the dividend payment
date. Equitable adjustments shall be made to reflect any stock split, stock
dividend, recapitalization, merger, consolidation, combination or exchange
of shares or other similar corporate change affecting the common stock. For
purposes of the Plan, fair market value means the closing price of the
common stock based upon its consolidated trading as generally reported for
a given date, or if there is no reported trading for that date, such closing
price for the next preceding trading day.
4. Payment.
(a) All payments with respect to a Director's deferred account shall
be made in cash, and no Director or beneficiary shall have the right to
demand payment in shares of common stock or in any other medium. Phantom
units shall be valued at fair market value on the payment date.
(b) The value of a Director's deferred account shall be paid out in
ten annual installments, unless otherwise elected. The amount of each
installment shall be a fraction of the value of the account at the end of
the preceding year, the numerator of which is one and the denominator of
which is the total number of installments minus the number previously paid.
(c) A Director may elect to receive payment in a lump sum or in some
other number of equal annual installments not exceeding ten. Such election
must be made at least one year prior to the date on which the Director
ceases to be a Director.
(d) The first installment or the lump sum payment shall be paid on
the first business day of the calendar year following the year in which the
Director ceases to be a Director, and any subsequent installments shall be
paid on the first business day of each succeeding calendar year until the
entire account value is paid.
(e) If a Director dies before full payment of the account value, the
balance shall be paid to the Director's estate or to a beneficiary or
beneficiaries designated in writing by the Director, as the case may be, on
the first business day of the calendar year following death.
F-40
<PAGE>
(f) Each participating Director may designate from time to time any
person or persons, natural or otherwise, as his beneficiary or beneficiaries
to whom the amounts credited to his or her deferred account are to be paid
if he or she dies before all such amounts have been paid. Each beneficiary
designation shall be made on a form prescribed by the Corporation and shall
be effective only when received by the Secretary during the participant's
lifetime. Each beneficiary designation received by the Secretary shall
revoke all beneficiary designations previously made. The revocation of a
designation shall not require the consent of any beneficiary. In the
absence of an effective beneficiary designation or if payment can be made
to no beneficiary, payment shall be made to the participant's estate.
5. Administration.
The Plan shall be administered by a Committee consisting of the Chief
Executive Officer and the Secretary of the Corporation. The Committee shall
have authority to adopt rules and regulations for carrying out the Plan and
to interpret, construe and implement its provisions. Decisions of the
Committee shall be final and binding. Routine administration may be
delegated by the Committee.
6. Miscellaneous.
(a) The right of a Director to his or her account under the Plan
shall not be subject to assignment, alienation or pledge by the Director.
(b) The Corporation shall not be required to reserve, or otherwise
set aside, funds for the payment of its obligations under the Plan.
(c) The Director and his or her designated beneficiary or
beneficiaries shall not have any property interest whatsoever in a deferred
account or in any specific assets of the Corporation. The right to receive
payments from the account shall be a claim against the general assets of the
Corporation as a general creditor.
(d) All notices to the Corporation under the Plan shall be in
writing and shall be given to the Secretary or to an agent or other person
designated by the Secretary.
(e) The Plan shall be construed in accordance with and governed by
the laws of the State of North Carolina, excluding any choice of law
provisions which may indicate the application of the laws of another
jurisdiction.
F-41
<PAGE>
<TABLE>
JEFFERSON-PILOT CORPORATION
BASIS FOR COMPUTATION OF PER SHARE EARNINGS
Five Years Ended December 31, 1994
EXHIBIT 11
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Shares Outstanding
beginning of year 49,464,495 50,438,907 51,291,936 51,784,614 56,053,722
Add: Shares issued
under stock
option plan:
January 14,393 7,698 7,500 - 15
February 4,265 7,086 10,165 18,714 3,841
March 4,246 11,028 1,583 3,460 396
April 283,186 26,211 1,445 525 109
May 19,375 11,413 5,118 148,950 199,500
June - 15,825 4,425 81 3,638
July - 9,099 805 500 779
August 244 5,540 4,226 - 3,372
September - 3,186 1 4,029 7,617
October 200 2,286 1,962 2,024 35
November 250 2,266 11,586 7,950 -
December - 7,884 29,365 - 150
Less: Shares
reacquired:
January ( 33,000) - ( 448) ( 340,412) ( 174,300)
February ( 640,440) ( 1,650) - ( 3,306) ( 218,100)
March ( 62,916) ( 4,760) - - ( 539,400)
April ( 23,267) ( 9,913) ( 2,192) ( 306,900) ( 1,011,675)
May ( 519,133) ( 11,032) ( 129,924) ( 10,635) ( 340,806)
June ( 41,000) ( 183,415) ( 140,500) ( 11,550) ( 367,716)
July ( 20,000) - - - ( 57,900)
August - - ( 93,493) - ( 329,556)
September - ( 1,091) ( 309,400) ( 1,026) ( 454,157)
October - - ( 207,000) ( 484) ( 639,150)
November - ( 676,100) ( 42,112) ( 4,598) ( 355,800)
December - ( 195,973) ( 6,141) - -
Shares Outstanding
end of year 48,450,898 49,464,495 50,438,907 51,291,936 51,784,614
========== ========== ========== ========== ==========
Average of 12 month -
end balances - used
to determine E.P.S. 48,641,880 50,251,676 50,952,147 51,319,143 53,636,223
========== ========== ========== ========== ==========
</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-42
<PAGE>
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, 1994 and 1993, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1994.
These consolidated 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, 1994 and
1993, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As disclosed in the notes to consolidated financial statements, the Company
changed its method of accounting for investments in debt and marketable
equity securities effective January 1, 1994 by adopting Statement of
Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". As also disclosed in the
notes to consolidated financial statements, the Company adopted the
provisions of SFAS No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" in 1993.
/s/ McGladrey & Pullen, LLP
Greensboro, North Carolina
February 7, 1995, except for Note 19
as to which the date is February 14, 1995
F-43
<PAGE>
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1994 and 1993
Dollar Amounts in Thousands Except Per Share Information
ASSETS 1994 1993
Cash and investments:
Cash and cash equivalents $ 22,774 $ 31,563
Short-term investments - 3,065
Debt securities available for sale, at fair
value (amortized cost $1,691,974) (Note 2) 1,606,865 -
Debt securities held to maturity, at amortized
cost (fair value $1,798,135) (Note 2) 1,940,046 -
Debt securities, at amortized cost
(fair value $3,447,000) (Note 2) - 3,221,878
Equity securities available for sale, at
market value (cost $290,370) (Note 2) 718,023 -
Equity securities, principally at
market value (cost $325,670) (Note 2) - 833,440
Mortgage loans on real estate (Note 2) 680,625 583,645
Policy loans 206,361 214,603
Real estate, less accumulated depreciation
1994 $21,160; 1993 $21,018 30,888 30,959
Other investments 37,861 29,347
Total cash and investments 5,243,443 4,948,500
Accrued investment income 67,371 69,327
Accounts receivable and agents' balances 64,191 60,526
Due from reinsurers 30,036 25,793
Property and equipment, less accumulated
depreciation 1994 $100,184; 1993 $102,960 100,672 98,434
Deferred policy acquisition costs,
net of amortization (Note 3) 329,139 277,731
Goodwill and other intangibles related to
communications operations, net of accumulated
amortization 1994 $16,411; 1993 $14,244 54,058 39,128
Assets held in separate accounts 210,225 84,225
Other assets 41,201 36,957
$ 6,140,336 $ 5,640,621
See Notes to Consolidated Financial Statements.
F-44
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
1994 1993
Policy liabilities:
Future policy benefits (Note 4) $ 1,278,978 $ 1,378,793
Policyholder contract deposits (Note 4) 1,846,043 1,575,454
Dividend accumulations and other
policyholder funds on deposit 176,519 177,199
Policy and contract claims 172,216 177,807
Dividends for policyholders 18,350 17,779
Deferred revenue and premiums
collected in advance 23,321 21,680
Casualty insurance unearned premiums
and losses payable 70,699 62,793
Other 47,637 42,808
Total policy liabilities 3,633,763 3,454,313
Notes payable (Note 5) 29,350 39,700
Securities sold under repurchase
agreements (Note 6) 266,838 -
Currently payable income taxes - 15,133
Deferred income tax liabilities (Note 10) 122,253 169,162
Accounts payable and accrued expenses 48,515 40,767
Unearned investment income 4,959 5,020
Obligation for postretirement benefits
other than pensions (Note 11) 33,707 36,127
Liabilities related to separate accounts 210,225 84,225
Other liabilities 58,183 63,103
Total liabilities 4,407,793 3,907,550
Commitments and contingent liabilities
(Notes 11, 12 and 17)
Stockholders' equity (Notes 7, 8 and 9):
Common stock, par value $1.25 per share,
authorized 100,000,000 shares; issued 1994
48,450,898 shares; 1993 49,464,495 shares 60,564 61,831
Retained earnings 1,441,132 1,339,672
Net unrealized gains on securities available
for sale, less deferred income taxes
$121,989 (Note 2) 230,847 -
Net unrealized gains on equity securities,
less deferred income taxes $176,202 (Note 2) - 331,568
1,732,543 1,733,071
$ 6,140,336 $ 5,640,621
F-45
<PAGE>
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Statements of Income
Years Ended December 31, 1994, 1993 and 1992
Dollar Amounts in Thousands Except Per Share Information
1994 1993 1992
Revenue:
Life premiums and other
considerations $ 256,237 $ 240,996 $ 230,834
Accident and health premiums 399,065 386,608 383,552
Total premiums and
other considerations 655,302 627,604 614,386
Net investment income (Note 2) 375,196 360,800 351,721
Realized investment gains (Note 2) 61,426 54,234 45,726
Communications operations 172,501 144,961 129,734
Other 4,385 4,850 4,411
1,268,810 1,192,449 1,145,978
Benefits and expenses:
Life benefits and other credits
to policyholders 318,913 296,078 279,326
Accident and health benefits 308,949 305,648 317,785
Total benefits 627,862 601,726 597,111
Insurance commissions 71,752 55,189 48,775
General and administrative 117,819 119,029 120,731
Insurance taxes, licenses and fees 23,351 23,474 22,820
Net (deferral) of policy
acquisition costs (Note 3) (40,410) (17,527) (12,381)
Communications operations 120,833 100,100 93,560
921,207 881,991 870,616
Income from continuing
operations before income taxes 347,603 310,458 275,362
Income taxes (Note 10) 117,707 100,897 80,764
Income from continuing operations 229,896 209,561 194,598
Income from discontinued operations,
net of income taxes (Note 16) 9,341 9,720 8,640
Income before cumulative effect
of change in accounting principle 239,237 219,281 203,238
Cumulative effect of change in
accounting principle on years
prior to 1993, net of income tax
benefit (Note 11) - (24,109) -
Net income $ 239,237 $ 195,172 $ 203,238
(Continued)
F-46
<PAGE>
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Statements of Income (Continued)
Years Ended December 31, 1994, 1993 and 1992
Dollar Amounts in Thousands Except Per Share Information
1994 1993 1992
Income per share (Note 7):
Income from continuing operations $ 4.73 $ 4.17 $ 3.82
Income from discontinued operations 0.19 0.19 0.17
4.92 4.36 3.99
Cumulative effect of change in
accounting principle - (0.48) -
Net income $ 4.92 $ 3.88 $ 3.99
See Notes to Consolidated Financial Statements.
F-47
<PAGE>
<TABLE>
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1994, 1993 and 1992
Dollar Amounts in Thousands Except Per Share Information
<CAPTION>
Net Net Unreal-
Unrealized ilized Gains
Capital in Gains on on Securities Total
Common Excess of Retained Equity Available Stockholders'
Stock Par Value Earnings Securities For Sale Equity
<S> <C> <C> <C> <C> <C> <C>
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 7) 21,377 - (21,452) - - (75)
Increase during year - - - 23,647 - 23,647
Balance, December 31, 1992 63,049 - 1,270,342 - - 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 - - - (3,251) - (3,251)
Balance, December 31, 1993 61,831 - 1,339,672 331,568 - 1,733,071
Change in accounting principle
effective January 1, 1994 (Note 2) - - - (331,568) 432,972 101,404
Net income 239,237 - - 239,237
Cash dividends, $1.72 per share - - (83,357) - - (83,357)
Common stock issued under stock
option plan 408 7,343 - - - 7,751
Common stock reacquired (1,675) (7,343) (54,420) - - (63,438)
Decrease during year - - - - (202,125) (202,125)
Balance, December 31, 1994 $ 60,564 $ - $ 1,441,132 $ - $ 230,847 $ 1,732,543
</TABLE>
See Notes to Consolidated Financial Statements.
F-48
<PAGE>
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992
Dollar Amounts in Thousands
1994 1993 1992
Cash Flows From Operating Activities
Net income $ 239,237 $ 195,172 $ 203,238
Adjustments to reconcile net income to
cash provided by operating activities:
Change in policy liabilities other than
deposits (15,696) 35,415 1,944
Policy acquisition costs deferred, net (41,117) (17,570) (11,535)
Depreciation and amortization 16,222 16,929 14,724
Deferred income taxes (benefit) 7,304 (7,980) (6,501)
Change in receivables and asset accruals (10,350) (45,063) (6,485)
Change in payables and expense accruals (10,065) 19,768 12,199
Cumulative effect of change in accounting
principle, net - 24,109 -
Realized investment gains (61,569) (56,947) (48,170)
Other (6,872) (3,667) (3,517)
Net cash provided by
operating activities 117,094 160,166 155,897
Cash Flows From Investing Activities
Securities available for sale:
Sales 778,976 - -
Maturities, calls and redemptions 98,243 - -
Purchases (817,464) - -
Securities held to maturity:
Sales 7,431 - -
Maturities, calls and redemptions 122,589 - -
Purchases (577,121) - -
Debt securities:
Sales, maturities, calls and redemptions - 951,899 396,613
Purchases - (1,377,593) (595,175)
Equity securities:
Sales - 99,845 64,450
(Continued)
F-49
<PAGE>
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 1994, 1993 and 1992
Dollar Amounts in Thousands
1994 1993 1992
Purchases $ - $ (65,246) $ (33,322)
Repayments of mortgage loans 71,114 63,399 35,334
Mortgage loans originated (173,139) (85,678) (59,603)
Additions to property and equipment (16,847) (20,620) (7,109)
Acquisition of communications intangibles (17,097) (11,934) -
Other investing activities, net 9,399 46,379 (22,004)
Net cash used in
investing activities (513,916) (399,549) (220,816)
Cash Flows From Financing Activities
Policyholder contract deposits 387,191 290,243 254,145
Withdrawals of policyholder contract
deposits (116,602) (87,606) (86,294)
Increase (decrease) in notes payable (10,350) 39,700 -
Proceeds from securities sold under
repurchase agreements 584,225 - -
Payments for securities sold under
repurchase agreements (317,387) - -
Cash dividends to stockholders (83,357) (78,125) (69,100)
Common stock transactions, net (55,687) (48,935) (34,857)
Net cash provided by
financing activities 388,033 115,277 63,894
Net decrease in cash
and cash equivalents (8,789) (124,106) (1,025)
Cash and cash equivalents, beginning 31,563 155,669 156,694
Cash and cash equivalents, ending $ 22,774 $ 31,563 $ 155,669
See Notes to Consolidated Financial Statements.
F-50
<PAGE>
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 continuing operations are in the life
insurance and communications industries. Business segment information is
presented in Note 14 to the consolidated financial statements. Consolidated
statements of income for 1993 and 1992 have been restated to present results
of operations of the discontinued other insurance segment as discontinued
operations.
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 consolidated financial statements
have been prepared in accordance with generally accepted accounting principles.
The insurance subsidiaries also submit financial statements to insurance
industry regulatory authorities. Those financial statements 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 capital and surplus of the
principal life insurance subsidiary to the amounts included in the
consolidated financial statements is presented in Note 8.
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 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.
Investments in debt and equity securities: The Company's investments in
debt securities include notes, bonds, collateralized mortgage obligations,
convertible and other debt instruments, and redeemable preferred stocks.
Investments in equity securities include common and nonredeemable preferred
stocks.
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" effective January 1, 1994. SFAS 115 applies to equity
securities having readily determinable fair values and to debt securities.
Securities under its scope must be classified for financial reporting
purposes as either 1) securities held to maturity 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 stated at fair
value with net unrealized gains and losses included in a separate component
of stockholders' equity, net of deferred income tax effect.
SFAS 115 establishes criteria for classifying debt securities as held to
maturity or trading and requires debt securities not otherwise classified
to be accounted for as available for sale. Equity securities with readily
determinable fair values are required to be classified as either trading
or available for sale. Individual securities classified as either held to
maturity or available for sale that experience other-than-temporary declines
in value to amounts less than amortized cost must be adjusted to a new cost
basis, with a corresponding charge to earnings.
F-51
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
In connection with the adoption of SFAS 115, the Company classified debt
securities that it has both the positive intent and ability to hold until
maturity as held to maturity. Other debt securities and all holdings of
equity securities were classified as available for sale. Prior to adopting
SFAS 115, all of the Company's debt securities were stated at amortized
cost less allowances for declines in value considered to be other than
temporary. Debt securities classified as available for sale were adjusted
to aggregate fair value as of January 1, 1994 as required by SFAS 115.
Equity securities held by the parent company, which were previously stated
at the lower of aggregate cost or market, were adjusted to market value.
Equity securities held by the insurance subsidiaries were stated at market
prior to adoption of SFAS 115 and therefore were not adjusted.
Amortization of premiums and accrual of discounts on investments in debt
securities are reflected in earnings over the contractual terms of the
investments in a manner that produces a constant effective yield. Realized
gains and losses on dispositions of securities are determined by the
specific-identification method.
Fair values of debt and equity securities have been determined using values
obtained from independent pricing services and discounted cash flow techniques,
as considered appropriate based on consideration of relevant investment
characteristics.
Mortgage and policy loans: Mortgage loans on real estate are stated at
unpaid balances, net of allowances for unrecoverable amounts. Policy loans
are stated at their unpaid balances.
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan" will be effective for the Company's 1995
consolidated financial statements. SFAS 114, as amended by SFAS 118, requires
that certain impaired loans be reported at the net present value of expected
future cash flows, the loan's observable market price or, for collateral
dependent loans, the fair value of the underlying collateral. Adoption of
SFAS 114 is not expected to have a significant effect on the consolidated
financial statements for 1995.
Real estate and other investments: Real estate not acquired by foreclosure
is stated at cost less accumulated depreciation. Real estate acquired by
foreclosure is stated at the lower of depreciated cost or fair value minus
estimated costs to sell. Real estate is depreciated principally by the
straight-line method over estimated useful lives generally ranging from
30 to 40 years for buildings. Other investments are stated at equity, or
the lower of cost or market, as appropriate.
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,
including commissions, certain costs of underwriting and issuing policies
and certain agency office expenses, all of which vary with and are primarily
related to the production of new business, have been deferred.
F-52
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
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. Effective with the adoption of SFAS 115 as of January 1,
1994, the carrying amount of deferred policy acquisition costs is adjusted
for amounts that would have been recognized if net unrealized holding gains
or losses on debt securities classified as available for sale had actually
been realized.
Deferred policy acquisition costs are reviewed periodically to determine that
the unamortized portion does not exceed expected recoverable amounts.
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 5 to 40 years.
The carrying amount of goodwill is regularly reviewed for indications of
value impairment, with consideration given to the financial performance of
acquired properties and other relevant factors.
Separate accounts: Separate accounts are assets and liabilities associated
with certain contracts for which investment income and investment gains and
losses accrue directly to the contract holders. The assets of the separate
accounts are stated at 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 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 includes 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-53
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
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.
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.
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 rein-
surance 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, 1994, 1993 and 1992 and for the years then
ended:
1994 1993 1992
Ordinary life insurance in force 12% 13% 13%
Ordinary life premium revenue 22% 23% 24%
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.
F-54
<PAGE>
Note 1. Nature of Operations and Significant Accounting Policies (Continued)
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 48,641,880 in 1994,
50,251,676 in 1993 and 50,952,147 in 1992.
Reclassifications: The Company's policy is to reclassify certain amounts
reported in prior years' consolidated financial statements when necessary
to conform with the classifications adopted in the current year. These
reclassifications have no effect on net income or stockholders' equity of
the prior years.
Note 2. Investment Information
The effect of adopting SFAS 115 as of January 1, 1994 and the changes during
1994 in amounts affecting net unrealized gains included in the separate
component of stockholders' equity, reduced by deferred income taxes, are as
follows (in thousands):
Net Unrealized Gains (Losses)
Debt Equity
Securities Securities Total
Effect of adopting SFAS 115 as of January 1, 1994:
Increase in stated amount of securities $ 106,624 $ 70,104 $ 176,728
Reduction of deferred policy acquisition
costs (15,235) - (15,235)
Increase in deferred income tax
liabilities (31,986) (28,103) (60,089)
Increase in net unrealized gains
included in stockholders' equity 59,403 42,001 101,404
Changes during year ended December 31, 1994:
Decrease in stated amount of securities (191,733) (150,220) (341,953)
Increase in deferred policy acquisition
costs 25,526 - 25,526
Decrease in deferred income tax liabilities 52,022 62,280 114,302
Decrease in net unrealized gains
included in stockholders' equity (54,782) (45,939) (100,721)
Net unrealized gains on equity securities
held by insurance subsidiaries as of
December 31, 1993 - 331,568 331,568
Net unrealized gains (losses) on securities
available for sale as of December 31, 1994 $ (54,782) $ 285,629 $ 230,847
F-55
<PAGE>
Note 2. Investment Information (Continued)
Aggregate amortized cost, aggregate fair value (stated amount), and gross
unrealized gains and losses pertaining to securities classified as available
for sale as of December 31, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
U. S. Treasury obligations and
direct obligations of U. S.
Government agencies $ 573,529 $ 8,417 $ (29,851) $ 552,095
Federal agency issued
collateralized mortgage
obligations 394,855 229 (28,310) 366,774
Obligations of states and political
subdivisions, including special
revenue obligations 61,927 1,271 (2,518) 60,680
Corporate obligations 550,204 2,242 (33,758) 518,688
Corporate private-labeled
collateralized mortgage
obligations 87,592 2,385 (3,001) 86,976
Redeemable preferred stocks 23,867 301 (2,516) 21,652
Subtotal, debt securities 1,691,974 14,845 (99,954) 1,606,865
Equity securities 290,370 439,700 (12,047) 718,023
Securities available for sale $ 1,982,344 $ 454,545 $ (112,001) $ 2,324,888
</TABLE>
F-56
<PAGE>
Note 2. Investment Information (Continued)
Aggregate amortized cost (stated amount), aggregate fair value and gross
unrealized gains and losses pertaining to debt securities classified as held
to maturity as of December 31, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Held to Maturity
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
Federal agency issued
collateralized mortgage
obligations $ 509,741 $ - $ (58,027) $ 451,714
Obligations of states and political
subdivisions, including special
revenue obligations 31,705 684 (1,275) 31,114
Corporate obligations 1,398,600 13,524 (96,817) 1,315,307
Debt securities held to maturity $ 1,940,046 $ 14,208 $ (156,119) $ 1,798,135
</TABLE>
Aggregate amortized cost (stated amount), aggregate fair value and
gross unrealized gains and losses pertaining to debt securities as
of December 31, 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
U. S. Treasury obligations and
direct obligations of U. S.
Government agencies $ 892,959 $ 73,107 $ (12) $ 966,054
Federal agency issued
collateralized mortgage
obligations 373,650 15,297 (1,142) 387,805
Obligations of states and political
subdivisions, including special
revenue obligations 85,267 8,653 (163) 93,757
Corporate obligations 1,596,924 121,690 (9,285) 1,709,329
Corporate private-labeled
collateralized mortgage
obligations 165,260 10,879 - 176,139
Mortgage-backed pass-through
securities 60,617 5,110 (1) 65,726
Other debt securities 47,201 2,192 (1,203) 48,190
Debt securities $3,221,878 $ 236,928 $ (11,806) $3,447,000
</TABLE>
F-57
<PAGE>
Note 2. Investment Information (Continued)
Aggregate amortized cost and aggregate fair value of debt securities as of
December 31, 1994, 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 debt securities
have the right to call or prepay the amounts due the Company, with or without
penalty.
Available for Sale Held to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year or less $ 34,379 $ 34,896 $ - $ -
Due after one year through
five years 172,489 176,963 3,913 4,060
Due after five years through
ten years 786,929 737,454 162,229 147,161
Due after ten years through
twenty years 186,947 177,070 303,632 261,240
Due after twenty years 4,916 5,079 - -
Amounts not due at single
maturity date 482,447 453,751 1,470,272 1,385,674
1,668,107 1,585,213 1,940,046 1,798,135
Redeemable preferred stocks 23,867 21,652 - -
$1,691,974 $1,606,865 $1,940,046 $1,798,135
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 sheet as of December 31, 1993,
are as follows (in thousands):
Aggregate market value $ 828,786
Aggregate cost 321,016
Net unrealized gains $ 507,770
===============
Gross unrealized gains $ 510,024
Gross unrealized losses (2,254)
Net unrealized gains, as above $ 507,770
===============
Increase in net unrealized gains during the year $ 2,098
===============
F-58
<PAGE>
Note 2. Investment Information (Continued)
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 as of December 31, 1993, are as follows
(in thousands):
Aggregate market value $ 74,758
Aggregate cost 4,654
Gross unrealized gains $ 70,104
==============
The Company's investment policy requires it to maintain a diversified,
high average quality debt securities portfolio and imposes limits on
holdings of lower quality securities, including those with heightened
risk-reward exposure. Credit exposure is regularly monitored on an overall
basis and from industry, geographic and individual issuer perspectives.
Exposure limits are reduced as credit quality declines. When credit quality
declines to the extent that limits are violated, the affected holdings must
be promptly conformed to limits or Finance Committee approval must be sought.
Current investment policy limits Jefferson-Pilot Life Insurance Company's
investments in equity securities and real estate to a prescribed percentage
of statutory surplus plus asset valuation reserve. Duration/cash flow
characteristics of fixed income investments are compared with those of
insurance liabilities to ascertain that durations are prudently managed.
Only fixed income investments back the Company's life insurance liabilities
and cash flow tests are regularly performed.
While the Company's investment policy permits the use of derivative financial
instruments such as futures contracts and interest rate swaps in conjunction
with specific direct investments, the Company does not generally employ such
instruments to alter investment or liability positions. The Company's
investment policy with respect to collateralized mortgage obligations (CMOs)
focuses on actively traded, less volatile issues that produce relatively
stable cash flows. CMO holdings as of December 31, 1994 consist predominately
of the least volatile PAC and sequential tranches of federal agency issues.
During 1994, the Company liquidated its holdings of mortgage-backed pass-
through securities and reinvested the proceeds into less volatile CMOs with
longer durations. Due to the high quality and liquid nature of the CMO
portfolio, the Company believes the impairment risks associated with these
securities are no greater than those applicable to direct agency or corporate
issues.
Investments in debt and equity securities include approximately 775 issuers,
with only one corporate issuer 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 value of
$236.6 million (5.5%) and $256.7 million (6.3%) as of December 31, 1994
and 1993. Debt securities considered less than investment grade approximated
3.5% of the debt securities portfolio as of December 31, 1994. Debt securities
with fair value approximating $16 million are on deposit with or for states in
which subsidiaries conduct insurance operations.
F-59
<PAGE>
Note 2. Investment Information (Continued)
The Company's mortgage loan portfolio is comprised primarily of conventional
real estate mortgages collateralized by retail, hotel and office properties.
Mortgage loan underwriting standards emphasize the credit status of a
prospective borrower, quality of the underlying collateral and conservative
loan-to-value relationships. Speculative lending arrangements presenting
heightened risk-reward exposure comprise an insignificant percentage of the
portfolio. About 69% of stated mortgage loan balances as of December 31,
1994 are due from borrowers in South Atlantic and East South Central states,
with another 14% due from borrowers in West South Central states. Delinquent
loans outstanding as of December 31, 1994 approximated $900 thousand and the
Company has provided a valuation allowance of $1.7 million against the
portfolio. Real estate acquired by foreclosure is carried at $8 million,
net of allowances of $2 million.
The details of investment income, net of investment expenses, for the three
years ended December 31, 1994 follow (in thousands):
Year Ended December 31
1994 1993 1992
Interest on bonds and other
debt instruments $ 260,130 $ 243,384 $ 235,234
Dividends on preferred stocks 5,050 7,409 9,769
Dividends on common stocks 28,025 26,890 26,229
Interest on mortgage loans 62,599 57,139 54,807
Interest on policy loans 12,498 12,978 13,298
Real estate income 9,099 9,642 8,503
Other investment income 8,563 6,462 8,352
Investment income of life
insurance operations 385,964 363,904 356,192
Investment income of other companies 12,149 7,793 6,033
Total investment income 398,113 371,697 362,225
Investment expenses (22,917) (10,897) (10,504)
Net investment income $ 375,196 $ 360,800 $ 351,721
Investment expenses include salaries, taxes, interest, expenses of maintaining
and operating investment real estate, 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, 1994 follow (in thousands):
Year Ended December 31
1994 1993 1992
Bonds and other debt instruments $ (9,478) $ 16,786 $ 6,840
Preferred stocks 834 1,904 931
Common stocks 65,671 32,841 40,770
Other 4,399 2,703 (2,815)
Realized investment gains $ 61,426 $ 54,234 $ 45,726
F-60
<PAGE>
Note 2. Investment Information (Continued)
Information about proceeds and gross realized gains and losses
on securities transactions during 1994 follows (in thousands):
Available Held to
for Sale Maturity
Proceeds:
From sales $ 778,976 $ 7,431
From maturities, calls and redemptions 98,243 122,589
$ 877,219 $ 130,020
=========== ===========
Gross realized:
Gains $ 60,860 $ 1,709
Losses (23,520) (329)
Net realized gains $ 37,340 $ 1,380
=========== ===========
Held to maturity securities with amortized cost of $7.76 million were sold
at a loss of $329 thousand during 1994 due to significant declines in the
creditworthiness of the issuers. Realized gains on held to maturity
securities represent call premiums. During 1994, Jefferson-Pilot Life
Insurance Company transferred securities classified as available for sale
to the Company's defined benefit pension plans. The transfer included
debt securities with amortized cost of $48.9 million and equity securities
with cost of $7.8 million. The securities transferred had an aggregate value
of $75 million on the date of transfer and therefore a gain of $18.3 million
was recognized. There were no significant transfers of securities between
SFAS 115 classifications during 1994.
During 1993, the Company sold selected debt securities when calls or
prepayments were considered likely. Proceeds from such sales represented
$109 million of the $170 million total proceeds from sales of debt securities
during 1993. Most of the realized gains on debt securities in 1993, and
substantially all in 1992, 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, related to declines in value considered other
than temporary.
F-61
<PAGE>
Note 3. Deferred Policy Acquisition Costs
Information about deferred policy acquisition costs and their effect on
income and stockholders' equity for the three years ended December 31, 1994
follows (in thousands):
Year Ended December 31
1994 1993 1992
Beginning balance, life
insurance operations $ 272,314 $ 254,787 $ 242,406
Policy acquisition costs deferred:
Commissions 43,369 27,737 24,020
Other 19,306 14,873 10,118
62,675 42,610 34,138
Policy acquisition costs amortized (22,265) (25,083) (21,757)
Net deferral of policy acquisition
costs reflected in current income 40,410 17,527 12,381
Adjustment related to application
of SFAS 115 reflected in stock-
holders' equity (Note 2) 10,291 - -
Ending balance, life insurance operations 323,015 272,314 254,787
Amounts related to discontinued
property and casualty insurance
operations 6,124 5,417 5,374
Ending balance, consolidated $ 329,139 $ 277,731 $ 260,161
Note 4. Policy Liabilities 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% during 1994 and 1993 and 7.0% during 1992.
Credited rates for annuity products generally ranged from 5.0% to 6.5%
during 1994, 5.0% to 6.25% during 1993 and 5.5% to 6.75% during 1992.
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 Company's experience and generally range between Linton's A and B
tables. For business issued in 1972 and later, withdrawal rates are based
on Company experience and vary by issue age, type of coverage and policy
duration.
F-62
<PAGE>
Note 4. Policy Liabilities Information (Continued)
Policy and contract claims liabilities totaled $172.2 million, $177.8 million,
$172.4 million and $179.8 million as of December 31, 1994, 1993, 1992 and
1991, respectively. Related reinsurance recoverables were not material.
Amounts incurred for life and accident and health claims totaled $427.2
million in 1994, $412.4 million in 1993 and $430.1 million in 1992. No
significant adjustments in the provision for insured events of prior fiscal
years is reflected in the incurred amounts. Payments for life and accident
and health claims amounted to $434.2 million in 1994, $408 million in 1993
and $435.9 million in 1992. Payments related to incurred claims of prior
fiscal years approximated $100 million in 1994, $92.5 million in 1993 and
$102 million in 1992.
Note 5. Notes Payable
Notes payable consist of borrowings under unsecured bank lines of
credit providing a maximum combined availability of $375 million as
of December 31, 1994 at interest rates and maturities bilaterally
determined at the time of an advance. Weighted average interest rates
were 6.23% on borrowings outstanding as of December 31, 1994 and 4.5%
on borrowings during 1994. The maximum amount outstanding during 1994
approximated $90 million ($40 million during 1993). Interest expense
totaled $1.7 million on average outstanding borrowing of $37.7 million
in 1994 and was not significant in 1993.
Note 6. Securities Sold Under Repurchase Agreements
During 1994, Jefferson-Pilot Life Insurance Company sold U.S. Treasury
obligations under repurchase agreements involving various counterparties.
The repurchase agreements are accounted for as financing transactions and
the related obligations, together with accrued interest, have been included
with liabilities in the 1994 consolidated balance sheet.
As of December 31, 1994, securities carried at fair value of $266 million
(amortized cost approximating $273 million) were subject to open repurchase
agreements having initial maturities of 120 days and weighted average
remaining maturities of 68 days. The maximum repurchase liability at any
month-end during 1994 approximated the year-end balance. The weighted average
interest rate on repurchase liabilities as of December 31, 1994 was 5.8%.
Interest expense totaled $9.6 million on average month-end repurchase
liabilities of $221 million.
Note 7. 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 for 1992 gives retroactive effect to the stock split.
F-63
<PAGE>
Note 7. Stockholders' Equity and Stock Option Plans (Continued)
Changes in the number of shares outstanding during each of the three years
in the period ended December 31, 1994 are as follows:
Year Ended December 31
1994 1993 1992
Shares outstanding, beginning 49,464,495 50,438,907 51,291,936
Shares issued under stock option plan 326,159 109,522 78,181
Shares reacquired (1,339,756) (1,083,934) (931,210)
Shares outstanding, ending 48,450,898 49,464,495 50,438,907
In May 1989, the Company's stockholders approved a stock option plan under
which 908,000 shares of common stock are reserved as of December 31, 1994.
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 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 approved
grants of options and stock appreciation rights to certain officers in 1989
and grants of options to certain officers in 1990 and each of the years
1992 through 1994.
F-64
<PAGE>
Note 7. Stockholders' Equity and Stock Option Plans (Continued)
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
senior 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 vested over two years. 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 common stock grants approximated $1,165,000
in 1992.
Summarized information about outstanding stock options, exercisable options
and shares available for grant under the stock option plan is as follows:
<TABLE>
<CAPTION>
Option Price Outstanding Exercisable Available
Per Share Options Options Shares
<S> <C> <C> <C> <C>
Balances, January 1, 1992 $22.92 - $28.50 539,064 220,701 840,549
Options granted $39.25 - $40.25 119,820 - (119,820)
Shares granted - - - (2,250)
Options becoming exercisable $22.92 - $40.25 - 50,438 -
Options exercised $22.92 - $25.17 (71,630) (71,630) 9,637
Options terminated $22.92 - $40.25 (28,524) (750) 28,524
Balances, December 31, 1992 $22.92 - $40.25 558,730 198,759 756,640
Options granted $48.25 - $56.00 95,000 - (95,000)
Shares granted - - - (4,500)
Options becoming exercisable $22.92 - $56.00 - 119,299 -
Options exercised $22.92 - $40.25 (105,022) (105,022) 18,134
Options terminated $22.92 - $40.25 (28,521) - 28,521
Balances, December 31, 1993 $22.92 - $56.00 520,187 213,036 703,795
Options granted $45.13 - $52.13 129,000 - (129,000)
Options becoming exercisable $22.92 - $45.13 - 329,659 -
Options exercised $22.92 - $40.25 (326,159) (326,159) 10,416
Options terminated $22.92 - $40.25 (13,841) - 13,841
Balances, December 31, 1994 $25.67 - $56.00 309,187 216,536 599,052
</TABLE>
F-65
<PAGE>
Note 7. Stockholders' Equity and Stock Option Plan (Continued)
Of the options that are not yet exercisable, 23,666 become exercisable in
1995 and 1996 at $45.13, and 44,667 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. Stock appreciation rights granted in
1989 were exercised during 1992, resulting in the issuance of 4,300 shares of
common stock.
Note 8. Statutory Reporting Information
Net income and stockholder's equity (statutory capital and surplus) of
Jefferson-Pilot Life Insurance Company on the basis of accounting practices
prescribed by regulatory authorities and on the basis of generally accepted
accounting principles included in the consolidated financial statements follow
(in thousands):
Statutory Reporting
1994 1993 1992
Net income for the year ended December 31 $ 158,298 $ 138,893 $ 157,753
Statutory capital and surplus at December 31 $ 971,553 $ 945,157 $ 926,537
Generally Accepted Accounting Principles
1994 1993 1992
Net income for the year ended December 31 $ 194,502 $ 64,199 $ 187,972
Stockholder's equity at December 31 $1,429,541 $1,435,098 $1,368,818
The General Statutes of North Carolina contain certain limitations affecting
the amount of dividends that insurance companies may pay without first obtain-
ing the approval of the State's Insurance Commissioner. Jefferson-Pilot Life
Insurance Company has approximately $97 million available for distribution to
the parent company during 1995 without obtaining approval. The Company believes
that statutory dividend limitations present no practical restrictions on its
future dividend payment plans.
Risk-based capital (RBC) requirements promulgated by the National Association
of Insurance Commissioners became effective for life insurance companies in
1993. RBC requires life insurers to maintain minimum capitalization levels
that are determined based on formulas incorporating credit risk pertaining to
its investments, insurance risk, interest rate risk and general business risk.
As of December 31, 1994, the Company's adjusted capital and surplus
substantially exceeded its authorized control level RBC. The Company does not
expect RBC requirements to present practical restrictions on the ability of
Jefferson-Pilot Life Insurance Company to pay dividends to the parent company.
F-66
<PAGE>
Note 9. Stockholders' Rights Plan
Under a stockholders' rights plan established in 1988 (the plan), the
Company's Board of Directors declared a dividend of one common share purchase
right for each outstanding share of the Company's common stock. The plan was
amended and restated during 1994. Under the amended and restated plan, the
rights detach and become exercisable ten days after a person or group publicly
announces the acquisition of 15% 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 15% or more of the common
stock. In the event that a person or group inadvertently exceeds the 15%
threshold and promptly reduces its holdings to less than 15% of the common
stock, the Board of Directors is authorized to exempt such an occurrence
from triggering the plan's provisions. If and when the rights become
exercisable, a holder would be entitled to purchase from the Company one
share of common stock for each right held at a price of $185 per share.
The exercise price, number of shares covered by each right and number of
rights outstanding are subject to adjustment upon the occurrence of certain
events described in the amended and restated plan.
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 (other than the acquiring person or group) 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 15% or
more of the Company's common stock, a holder (other than the acquiring person
or group) 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 15%
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 may
also authorize the exchange of one share of the Company's common stock for each
right held by holders other than the acquiring person or group.
The rights expire on November 7, 2004 and are redeemable upon action by the
Board of Directors at a price of $.01 per right at any time before they become
exercisable.
Note 10. Income Taxes
Income taxes as reported in the consolidated statements of income are
comprised of the following components (in thousands):
Years Ended December 31
1994 1993 1992
Current expense $ 109,794 $ 108,738 $ 86,324
Deferred expense (benefit) 7,913 (7,841) (5,560)
Income taxes $ 117,707 $ 100,897 $ 80,764
========== ========== ==========
F-67
<PAGE>
Note 10. Income Taxes (Continued)
A reconciliation of the federal income tax rate to the Company's effective
tax rate for each year follows:
Percent of Income From Continuing Operations
Before Income Taxes as Reported in
Consolidated Statements of Income
1994 1993 1992
Federal income tax rate 35.0 % 35.0 % 34.0 %
Reconciling items:
Tax exempt interest and
dividends received deduction (1.9) (2.3) (2.8)
Recoveries and reductions of
amounts provided for prior
years' tax assessments - (0.5) (2.4)
Other increases, net 0.8 0.3 0.5
Effective income tax rates 33.9 % 32.5 % 29.3 %
The tax effects of temporary differences that result in significant deferred
tax assets and deferred tax liabilities are as follows (in thousands):
December 31
1994 1993
Deferred tax assets:
Policy liabilities $ 101,534 $ 90,237
Capitalization of acquisition costs
for income tax purposes,
net of amortization 20,353 15,817
Obligation for postretirement
benefits other than pensions 12,021 13,634
Total deferred tax assets 133,908 119,688
Deferred tax liabilities:
Net unrealized gains on securities
available for sale 121,989 -
Net unrealized gains on equity securities - 176,202
Deferral of policy acquisition costs for
financial reporting purposes, net of
amortization 111,656 97,320
Other basis adjustments, including depreciation 22,516 15,328
Total deferred tax liabilities 256,161 288,850
Net deferred tax liabilities included
in consolidated balance sheets $ (122,253) $ (169,162)
========== ==========
F-68
<PAGE>
Note 10. Income Taxes (Continued)
Federal income tax returns for all years through 1990 have been examined by
the Internal Revenue Service and are closed. Settlements and other resolutions
during 1993 and 1992 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 remaining open years.
Under prior federal income tax law, one-half of the excess of a life insurance
company's income from operations over its taxable investment income was not
taxed, but was set aside in a special tax account designated as "Policyholders'
Surplus". The Company has approximately $91 million 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 recog-
nized. If the entire balance of the account became taxable under the current
federal rate the tax would approximate $32 million.
Note 11. 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 group annuity contracts with
Jefferson-Pilot Life Insurance Company. 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 deductible for federal income tax
purposes. The assets of the plans are those of the related contracts,
approximately $105 million of which are on deposit in the general accounts of
Jefferson-Pilot Life Insurance Company as of December 31, 1994. Plan assets
approximating $127 million are held in separate accounts established by
Jefferson-Pilot Life Insurance Company in 1994 by the transfer of cash and
debt and equity securities.
The components of pension expense were as follows (in thousands):
Year Ended December 31
1994 1993 1992
Service cost, benefits earned during the year $ 6,320 $ 7,259 $ 5,779
Interest cost on projected benefit obligation 12,557 11,414 11,098
Actual return on plan assets (13,135) (11,235) (11,940)
Net amortization and deferral (3,697) (4,947) (2,505)
Pension expense $ 2,045 $ 2,491 $ 2,432
======== ======== =========
F-69
<PAGE>
Note 11. Retirement Benefit Plans (Continued)
The following table sets forth the funded status of the plans and amounts
recognized in the consolidated balance sheets (in thousands):
December 31
1994 1993
Actuarial present value of benefit obligation:
Vested benefit obligation $ 186,405 $ 196,066
========== ==========
Accumulated benefit obligation $ 188,681 $ 199,363
========== ==========
Projected benefit obligation $ 207,403 $ 219,236
Plan assets at fair value 231,943 226,828
Plan assets in excess of projected
benefit obligation 24,540 7,592
Unrecognized net gain (17,836) (1,295)
Unrecognized net asset (20,984) (23,173)
Unrecognized prior service cost 10,176 10,738
Accrued pension cost $ (4,104) $ (6,138)
========== ==========
Certain assumptions used in determining the funded status of the plans were
as follows:
1994 1993 1992
Discount rate 7.75% 6.50% 6.90%
Expected long-term rate of return on plan assets 8.00% 8.00% 7.20%
Rate of increase in compensation levels 5.75% 4.25% 4.00%
Benefits provided to retirees by annuity contracts issued by Jefferson-Pilot
Life Insurance Company approximated $11.2 million in 1994, $10.0 million in
1993 and $8.8 million in 1992.
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.
F-70
<PAGE>
Note 11. Retirement Benefit Plans (Continued)
Prior to 1993, the cost of providing postretirement health care and life
insurance benefits was recognized in the year paid. The cost of postretirement
health care and life insurance benefits paid and expensed in 1992 approximated
$1.5 million. During 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions". 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 to January 1, 1993.
Accordingly, the consolidated statement of income for 1993 includes a charge
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.
The components of nonpension postretirement benefits expense for 1994 and 1993
were as follows (in thousands):
Health Care Life Insurance
Benefits Benefits
1994 1993 1994 1993
Service cost, benefits earned
during the year $ 433 $ 492 $ 320 $ 402
Interest cost on accumulated
benefit obligation 892 1,314 789 890
Actual return on plan assets (57) - (72) -
Net amortization and deferral (1,023) (768) (293) (173)
Nonpension benefits expense $ 245 $ 1,038 $ 744 $ 1,119
======= ======= ======= =======
F-71
<PAGE>
Note 11. Retirement Benefit Plans (Continued)
The following table sets forth the funded status of the Company's post-
retirement health care and life insurance plans as of December 31, 1994
and 1993 (in thousands):
Health Care Life Insurance
Benefits Benefits
1994 1993 1994 1993
Plan assets at fair value $ 1,557 $ 810 $ 2,053 $ 1,035
Accumulated postretirement
benefit obligation:
Retirees and surviving spouses 8,656 9,777 7,465 8,254
Fully eligible active participants 650 952 1,055 1,462
Other active participants 2,851 2,584 1,720 1,902
12,157 13,313 10,240 11,618
Accumulated postretirement
benefit obligation in excess
of plan assets (10,600) (12,503) (8,187) (10,583)
Unrecognized negative prior
service cost (9,696) (10,719) (3,403) (3,765)
Unrecognized net (gain) loss (2,061) (547) 240 1,990
Accrued postretirement
benefit cost $(22,357) $(23,769) $(11,350) $(12,358)
======== ======== ======== ========
Accumulated postretirement benefit obligations were computed using assumed
discount rates of 8% as of December 31, 1994, 7% as of December 31, 1993
and 8.5% as of January 1, 1993. The expected long-term rate of return on
plan assets was 9% as of December 31, 1994 and 7% as of December 31, 1993.
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 be permitted to quality for
these benefits at age 65 with 10 years of service. Effective January 1, 1994
the Company changed its postretirement health care plan to limit annual benefit
increases to a maximum rate of 4%. Since future health care cost trend rates
in excess of 4% have been assumed in determining the accumulated postretirement
benefit obligation as of December 31, 1994, future health care cost increases
exceeding 4% per year will have no effect on the Company's obligation. The
preceding 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.
F-72
<PAGE>
Note 12. 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 and accident and health risks
underwritten. The Company assumes portions of life and accident and health
risks underwritten by certain other insurers on a limited basis, but 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.
Aggregate receivables related to life and accident and health reinsurance
contracts totaled $20.1 million and $17.5 million as of December 31, 1994 and
1993. Premiums ceded under these contracts totaled $15 million in 1994,
$18 million in 1993 and $15 million in 1992. Reinsurance recoveries related
to incurred losses totaled $13.9 million in 1994, $9.2 million in 1993 and
$5.5 million in 1992.
Individual term life insurance approximating $1.9 billion, $1.5 billion and
$1.5 billion, and group insurance approximating $850 million, $700 million and
$500 million was ceded to other companies as of December 31, 1994, 1993, and
1992, respectively. Life insurance ceded represented 6.1%, 5.3% and 4.8% of
life insurance in force as of December 31, 1994, 1993, and 1992, respectively,
and 4.1%, 4.1% and 3.3% of life insurance premium revenue for the years then
ended. Accident and health insurance ceded represented 1.4%, 2.3% and 2.0%
of related premium revenue for the years ended December 31, 1994, 1993 and
1992, respectively.
The Company also used reinsurance in management of the risks associated with
its discontinued property and casualty insurance operations. Aggregate
receivables related to property and casualty reinsurance contracts totaled
$9.9 million and $8.3 million as of December 31, 1994 and 1993. Gross
property and casualty premiums earned exceeded net premium revenue by approx-
imately $9 million in 1994, $7 million in 1993 and $5 million in 1992, with
the effect on written premiums approximating that on earned premiums.
Reinsurance recoveries on incurred property and casualty losses totaled
$6.5 million in 1994, $7.6 million in 1993 and $2.7 million in 1992.
F-73
<PAGE>
Note 13. 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):
CONDENSED BALANCE SHEETS
December 31
1994 1993
Assets:
Cash and short-term investments $ 1,864 $ 3,075
Debt securities available for sale,
at fair value (amortized cost $151,126) 135,952 -
Debt securities, at amortized cost
(fair value $139,000) - 140,661
Equity securities available for sale,
at market value (cost $10,210) 52,094 -
Equity securities, at cost
(market value $74,758) - 4,654
Investment in continuing subsidiaries,
at equity 1,522,393 1,512,263
Investment in discontinued subsidiaries,
at equity 65,040 93,998
Other investments 1,981 1,626
Total cash and investments 1,779,324 1,756,277
Due from subsidiaries 8,480 38,374
Other assets 11,276 11,649
$ 1,799,080 $ 1,806,300
=========== ===========
Liabilities and Stockholders' Equity:
Notes payable $ 29,350 $ 39,700
Other liabilities 37,187 33,529
Stockholders' equity 1,732,543 1,733,071
$ 1,799,080 $ 1,806,300
=========== ===========
F-74
<PAGE>
Note 13. Condensed Separate Company Financial Information (Continued)
CONDENSED STATEMENTS OF INCOME
Year Ended December 31
1994 1993 1992
Revenue, principally dividends
from subsidiaries $ 159,824 $ 121,343 $ 133,955
Expenses, principally general
and administrative 11,183 11,513 17,470
148,641 109,830 116,485
Income taxes (benefit) 7,518 1,453 (5,492)
141,123 108,377 121,977
Equity in undistributed net
income of subsidiaries 98,114 86,795 81,261
Net income $ 239,237 $ 195,172 $ 203,238
========== ========= ==========
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 parent company's
stockholders' equity as of December 31, 1994 includes $1.318 billion of equity
in undistributed net income of subsidiaries ($1.22 billion as of December 31,
1993) and $215 million of equity in net unrealized gains on subsidiaries'
securities available for sale, after deferred income tax effect.
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):
COMBINED CONDENSED BALANCE SHEETS
December 31
1994 1993
Assets:
Cash and cash equivalents $ 9,647 $ 6,814
Receivables 35,325 33,539
Property and equipment, net 45,591 41,696
Goodwill and other assets 58,115 43,353
$ 148,678 $ 125,402
========== ==========
Liabilities and Stockholder's Equity:
Trade obligations $ 35,693 $ 32,965
Debt obligations to affiliate 25,405 17,835
Income taxes 4,209 5,217
Total liabilities 65,307 56,017
Stockholder's equity 83,371 69,385
$ 148,678 $ 125,402
========== ==========
F-75
<PAGE>
Note 13. Condensed Separate Company Financial Information (Continued)
COMBINED CONDENSED STATEMENTS OF INCOME
Year Ended December 31
1994 1993 1992
Revenue $ 172,501 $ 144,961 $ 129,734
Expenses 136,269 117,379 105,472
36,232 27,582 24,262
Income taxes 14,246 10,247 10,093
Income before cumulative effect of
change in accounting principle 21,986 17,335 14,169
Cumulative effect of change in accounting
principle applicable to postretirement
benefits other than pensions, net of
income tax benefit - (3,653) -
Net income $ 21,986 $ 13,682 $ 14,169
========== ========== ==========
Net cash provided by operating activities approximated $31.6 million in 1994,
$21 million in 1993 and $21 million in 1992. Net cash of $28.3 million in
1994, $29 million in 1993 and $4 million in 1992 was used in investing
activities. Investing activities in 1994 and 1993 reflect acquisitions of
broadcast properties by JPCC. Other investing activities during the three
years consisted primarily of the purchase of property and equipment and
related expenditures. Net cash used in financing activities approximated
$0.5 million in 1994 and $13.5 million in 1992. Net cash approximating
$4 million was provided by financing activities in 1993. In connection with
its acquisitions of broadcast properties, JPCC obtained term financing from
Jefferson-Pilot Life Insurance Company in amounts totaling $10 million in
1994 and $16.6 million in 1993. Repayments to Jefferson-Pilot Life
Insurance Company approximated $2.5 million in 1994 and $3.5 million in
1993 and 1992. JPCC and JPDS paid cash dividends to the parent company
totaling $8 million in 1994, $5 million in 1993 and $10 million in 1992.
JPDS redeemed preferred stock from the parent company in 1993 at a cost
of $4.2 million.
Note 14. Segment Information
The Company's continuing operations are conducted principally through the
following business segments:
Life insurance - Life insurance operations include individual and group life
insurance, annuity and accident and health policies.
Communications - Communications operations consist principally of radio and
television broadcasting, televised sports program production and electronic
data processing services.
F-76
<PAGE>
Note 14. Segment Information (Continued)
Information about each major operating segment for 1994, 1993 and 1992
follows (in thousands). Amounts related to the Company's discontinued
insurance operations are not included in segment information pertaining
to results of operations. All operations which do not constitute report-
able business segments have been combined with consolidating adjustments
and realized investment gains in the lines described as "Other, net".
1994 1993 1992
Revenue
Life insurance $ 1,025,672 $ 986,971 $ 965,862
Communications 172,501 144,961 129,734
Other, net 70,637 60,517 50,382
Consolidated $ 1,268,810 $ 1,192,449 $ 1,145,978
Income from continuing operations
before income taxes and cumulative
effect of change in accounting
principle
Life insurance $ 250,189 $ 232,961 $ 217,635
Communications 36,232 27,582 24,262
Other, net 61,182 49,915 33,465
Consolidated $ 347,603 $ 310,458 $ 275,362
Identifiable assets at December 31
Life insurance $ 5,654,372 $ 5,194,478 $ 4,831,189
Communications 148,678 125,402 99,938
Discontinued operations 146,444 175,670 165,959
Other, net 190,842 145,071 159,676
Consolidated $ 6,140,336 $ 5,640,621 $ 5,256,762
Depreciation and amortization
Life insurance $ 5,811 $ 5,940 $ 6,055
Communications 10,139 10,757 8,303
Other, net 88 54 172
Consolidated $ 16,038 $ 16,751 $ 14,530
F-77
<PAGE>
Note 14. Segment Information (Continued)
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 property and
equipment approximated $17 million in 1994, $21 million in 1993 and $7 million
in 1992. Included in the preceding amounts are additions related to the
communications industry segment totaling $13.6 million, $17.6 million and
$4.7 million in 1994, 1993 and 1992, respectively. Other additions to property
and equipment related primarily to the life insurance segment. Expenditures
for goodwill and other intangibles by the communications segment totaled
$17.1 million in 1994 and $11.9 million in 1993 and resulted from acquisitions
of broadcast properties.
Note 15. Disclosures About Fair Value of Financial Instruments
The fair values of cash, cash equivalents, short-term investments and balances
due on account from agents, reinsurers and others approximate their carrying
amounts as reflected in the consolidated balance sheets due to their short-term
availability or maturity.
The fair values of debt and equity securities have been determined using values
supplied by independent pricing services and discounted cash flow techniques
and are disclosed together with carrying amounts in Note 2.
The fair value of the mortgage loan portfolio, carried at $680.6 million
and $583.6 million as of December 31, 1994 and 1993, has been estimated by
discounting expected future cash flows using the interest rate currently
offered for similar loans. The estimated fair value of mortgage loans
approximated $698 million and $645 million as of December 31, 1994 and 1993.
The fair value of policy loans outstanding as of December 31, 1994, carried
at $206.4 million, has been estimated as approximately $190 million, using a
current risk-free interest rate applied to expected future loan repayments
projected based on historical repayment patterns. As of December 31, 1993,
the fair value of policy loans approximated their carrying amount of $214.6
million since the average interest rate of outstanding loans was approximately
equal to the current interest rate on that date.
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, are estimated to equal the cash surrender
values of the underlying contracts. The stated amount and estimated fair
value of the Company's liability under annuity contracts in the accumulation
phase totaled $1.081 billion and $1.039 billion as of December 31, 1994
($887 million and $853 million as of December 31, 1993).
The fair values of dividend accumulations, experience-rated refund liabilities
and other policyholder funds on deposit approximate their aggregate carrying
amount of $202 million and $197 million as of December 31, 1994 and 1993 since
they are either subject to current withdrawal or are of a relatively short-term
nature. The estimated fair value of liabilities under supplementary contracts
not involving life contingencies, which are combined with dividend accumula-
tions and other policyholder funds on deposit, are estimated to approximate
carrying amount of $22 million in 1994 and $23 million in 1993.
F-78
<PAGE>
Note 15. Disclosures About Fair Value of Financial Instruments (Continued)
The fair values of notes payable approximate their carrying amounts of
$29.35 million and $39.7 million as of December 31, 1994 and 1993 due to
their short-term nature and interest rates approximating those currently
available. Similarly, the fair value of the liability for securities sold
under repurchase agreements approximates its carrying amount of $266.8 million,
which includes accrued interest, as of December 31, 1994.
The fair value of outstanding commitments to fund mortgage loans and to acquire
debt securities in private placement transactions as of December 31, 1994,
which are not reflected in the consolidated balance sheet, approximates the
$65 million aggregate amount of the commitments.
Note 16.Discontinued Operations
Discontinued operations include the property and casualty and title insurance
subsidiaries which formerly comprised the Company's other insurance business
segment.
On December 30, 1994, Jefferson-Pilot Title Insurance Company (JPT) entered
into a reinsurance agreement with First American Title Insurance Company
(First American) under which JPT ceded to First American its obligations and
liabilities on all policies issued through that date. After the reinsurance
agreement became effective, substantially all of JPT's cash and investments
were transferred to the parent company and the parent company then sold 100%
of JPT's common stock to First American for cash and a note totaling
approximately $1.3 million. No material gain was realized on the transactions
which resulted in the disposition of JPT.
On December 23, 1994, the Company signed a definitive agreement to sell 100%
of the common stock of Jefferson-Pilot Fire & Casualty Company (JPF&C) to
Southern Guaranty Insurance Company, a subsidiary of Winterthur U.S. Holdings.
The proposed transaction is subject to regulatory approval, but is expected
to close during the first half of 1995. The Company expects JPF&C to transfer
a substantial amount of its investments to the parent company immediately
before the closing. The amounts to be transferred are subject to adjustment
based on statutory surplus as of the closing date. A gain is expected to
result from the subsequent stock sale.
F-79
<PAGE>
Note 16. Discontinued Operations (Continued)
Financial information relative to discontinued operations follows (in
thousands). Asset and liability information as of December 31, 1994
relates entirely to JPF&C.
December 31
1994 1993
Assets
Cash and cash equivalents $ 2,857 $ 4,652
Investments available for sale 108,870 140,190
Receivables and other 34,717 30,943
146,444 175,785
Liabilities
Losses payable 42,595 38,131
Unearned premiums 28,104 24,662
Deferred income taxes and other 10,705 18,994
81,404 81,787
Net assets $ 65,040 $ 93,998
========= ========
Year Ended December 31
1994 1993 1992
Revenue $ 64,862 $ 54,175 $ 56,351
Income, net of tax before
cumulative effect of change
in accounting principle 9,341 9,720 8,640
Cumulative effect of change in
accounting principle, net of
tax benefit - 510 -
Net income 9,341 9,210 8,640
Dividends to parent company 25,331 6,100 1,500
Aggregate income taxes reflected
in net income 1,603 1,590 1,624
Note 17. 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, 1994 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.
F-80
<PAGE>
Note 17. Commitments and Contingent Liabilities (Continued)
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
$6 million in 1994 and $8 million in 1993 and 1992. Future rental commitments
are expected to be consistent with current year amounts.
The Company is involved in certain litigation which arose out of the normal
course of its business. 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 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 insurance reserves and deposit liabilities totaling approximately
$1 billion as of December 31, 1993. On August 18, 1994, the Circuit Court
entered a final but appealable order that approved the plan. The Circuit
Court's order was subsequently appealed by Kentucky Central's stockholders.
The outcome of the proposed plan is dependent upon resolution of the appeal
of the Circuit Court's order.
Note 18. Supplemental Cash Flow Information
Cash payments for interest on financing arrangements totaled $9,140,000 in
1994 and $90,000 in 1993. Cash payments for income taxes totaled $127 million,
$114 million and $95 million in 1994, 1993 and 1992, respectively.
Note 19. Subsequent Event
On February 14, 1995, substantially all of the assets and the media services
operations of Jefferson-Pilot Data Services, Inc. (JPDS) were sold. Aggregate
consideration, which is subject to adjustment based on a determination of
working capital as of the closing date, is expected to approximate $33 million.
The Company expects to realize an after-tax gain approximating $11.5 million
as a result of the sale. Net income of JPDS amounting to $2,625,000 in 1994,
$2,010,000 in 1993 and $2,505,000 in 1992 is included in the consolidated
statements of income. Net income of JPDS for 1993 reflects a net-of-tax charge
of $575,000 resulting from the adoption of SFAS 106 (see Note 11).
F-81
<PAGE>
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 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
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
F-82
<PAGE>
Subsidiaries included in Consolidated Financial Statements (continued):
% of Voting
Securities
State of Owned by
Name and Address Organization Registrant
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-83
<PAGE>
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 7, 1995,
except for Note 19 as to which the date is February 14, 1995, on the consol-
idated financial statements of Jefferson-Pilot Corporation and subsidiaries,
which appears on page 59 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, 1994.
McGLADREY & PULLEN,LLP
Greensboro, North Carolina
March 30, 1995
F-84
<PAGE>
JEFFERSON-PILOT CORPORATION
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 27th day of March 1995.
/s/ Thomas M. Belk (SEAL)
Name: Thomas M. Belk
F-85
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 24th day of March 1995.
/s/ Edwin B. Borden (SEAL)
Name: Edwin B. Borden
F-86
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 27th day of March 1995.
/s/ William H. Cunningham (SEAL)
Name: William H. Cunningham
F-87
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 27th day of March 1995.
/s/ Robert G. Greer (SEAL)
Name: Robert G. Greer
F-88
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 27th day of March 1995.
/s/ A. Linwood Holton, Jr. (SEAL)
Name: A. Linwood Holton, Jr.
F-89
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 24th day of March 1995.
/s/ Hugh L. McColl, Jr. (SEAL)
Name: Hugh L. McColl, Jr.
F-90
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 24th day of March 1995.
/s/ Charles W. McCoy (SEAL)
Name: Charles W. McCoy
F-91
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 25th day of March 1995.
/s/ William Porter Payne (SEAL)
Name: William Porter Payne
F-92
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 24th day of March 1995.
/s/ Donald S. Russell, Jr. (SEAL)
Name: Donald S. Russell, Jr.
F-93
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 29th day of March 1995.
/s/ Robert H. Spilman (SEAL)
Name: Robert H. Spilman
F-94
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of Jefferson-Pilot Corporation, a North Carolina
holding company, does hereby constitute and appoint Robert A. Reed,
John D. Hopkins and J. Gregory Poole, and each of them, with full
power of substitution to appoint any other Senior Officer, Vice
President, Secretary or Assistant Secretary of the Company, as his
true and lawful attorney and agent, to do any and all acts and
things and to execute any and all instruments which said attorney
and agent may deem necessary or advisable to enable the said
corporation to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing of the annual report for the year 1994
on Form 10-K, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to the Form 10-K or
to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as part of, as
an exhibit to or in connection with, said Form 10-K or amendment;
and the undersigned does hereby ratify and confirm as his own act
and deed all that said attorney and agent (or the substitute) shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 24th day of March 1995.
/s/ Martha Ann Walls (SEAL)
Name: Martha Ann Walls
F-95
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655,302
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