Exhibit 99
Jefferson Pilot Reports Third-Quarter Earnings Before Realized Investment
Gains Up 5 Percent
GREENSBORO, N.C., Oct. 27 /PRNewswire-FirstCall/ -- Jefferson-Pilot
Corporation (NYSE: JP), parent of the Jefferson Pilot Financial companies and
one of the nation's leading providers of life insurance, annuities, employee
benefits, and broadcast communications, today reported net income of $0.97 per
share for the third quarter of 2004, versus $0.88 for the third quarter of
2003. Earnings before realized investment gains increased 5 percent to $0.96
per share versus earnings of $0.91 per share before realized investment losses
in the third quarter of 2003.
For the nine months, Jefferson Pilot's net income per share increased to
$2.87 from $2.62 for the first nine months of 2003. Earnings before realized
investment gains, and excluding the cumulative effect of a change in
accounting principle (SOP 03-1), increased 6 percent to $2.81 per share versus
earnings before realized investment losses of $2.64 in the same period of
2003.
All per-share results are on a diluted basis.
Sales of individual life insurance in Jefferson Pilot's Individual
Products segment totaled $50.1 million in the third quarter. Sales were
approximately flat compared to the third quarter a year ago, reflecting the
highly competitive market environment and Jefferson Pilot's continued focus on
profitability in individual life products. Average individual life
policyholder fund balances grew 6 percent for the quarter to $12.7 billion.
Jefferson Pilot's Individual Products business earned $75.3 million in the
third quarter, versus $78.6 million in the third quarter of 2003. For the
nine months, Individual Products earnings totaled $225.5 million versus
$228.9 million in the first nine months of 2003.
During the third quarter, Jefferson Pilot adopted newly issued
implementation guidance pertaining to SOP 03-1, which addresses accounting for
non-traditional long-duration contracts. The additional liability recorded as
a result of SOP 03-1 reduced Individual Product segment earnings by
approximately $3.4 million in the third quarter. Also in the quarter, an
unlocking of deferred acquisition costs and unearned revenue in certain
universal life book of business augmented segment earnings by approximately
$6.6 million, resulting in a net after-tax contribution from these items of
approximately $3.2 million in the quarter.
Annuity and Investment Products enjoyed excellent sales in the third
quarter due to continued strong demand for Jefferson Pilot's equity indexed
annuities. Fixed annuity sales increased 66 percent to $312 million versus
$187.8 million in the year-earlier quarter, and fixed annuity average fund
balances grew 10 percent for the quarter to $9.3 billion from $8.4 billion a
year ago.
The Annuity and Investment Products segment earned $17.6 million in the
quarter, versus $20.0 million in the third quarter of 2003. Application of
derivative-related fair value adjustments (SFAS 133) in connection with
equity-indexed annuity products reduced third-quarter 2004 segment earnings by
$1.9 million. Although Jefferson Pilot hedges its economic exposure to
performance of the equity markets from equity-indexed annuity products,
reported segment results are affected by the volatility inherent in valuation
under SFAS 133.
For the nine months, Annuity and Investment Products earned $56.4 million
versus $62.7 million in the 2003 period.
Benefit Partners' group insurance sales increased to $46.7 million in the
third quarter from $38.5 million in the third quarter of 2003 and earnings
were excellent in the quarter, increasing 96 percent to $19.7 million versus
$10.0 million in the third quarter of 2003. The successful integration of the
non-medical group insurance business of Canada Life, acquired in the first
quarter of this year, contributed significantly to group insurance results.
The loss ratio for Benefit Partners' combined business lines improved to
72.9 percent versus 74.3 percent for the year-earlier quarter.
For the nine months, Benefit Partners' earnings increased 47 percent to
$50.8 million from $34.5 million in the first three quarters of 2003.
Jefferson-Pilot Communications also reported excellent results in the
third quarter as both television and radio operations performed well. Driven
by revenue growth of 12 percent and effective expense management,
Communications' earnings increased 19 percent to $13.5 million from
$11.4 million, while broadcast cash flow grew 16 percent to $27.3 million from
$23.6 million for the quarter.
For the nine months, Communications' earnings increased 26 percent to
$37.8 million from $30.0 million, and broadcast cash flow grew 22 percent to
$76.3 million from $62.5 million.
Earnings before realized investment gains in the Corporate and Other
segment totaled $5.5 million versus $10.0 million in the 2003 quarter,
reflecting in part higher interest expense due to capital employed to finance
the Canada Life group insurance acquisition. Realized investment gains of
$2.2 million brought total Corporate and Other earnings to $7.7 million for
the quarter, compared to $6.1 million, including realized investment losses of
$3.9 million, in the third quarter of 2003. Year-to-date segment earnings
before realized investment gains were $22.4 million, compared to $22.3 million
in the first nine months of 2003. Total year-to-date segment earnings
including realized investment gains were $46.5 million, versus
$19.2 million including realized investment losses for the same period a year
ago.
Average diluted shares outstanding decreased to 137.5 million for the
third quarter from 142.5 million in the third quarter of 2003.
Jefferson Pilot's return on equity remained very strong at 16.9 percent in
the third quarter.
Jefferson Pilot CEO Dennis Glass, commenting on the quarter, said
"Jefferson Pilot remains an industry leader in profitability and financial
strength. Throughout our financial services businesses, Jefferson Pilot has
built excellent distribution and industry-leading service platforms and
efficiency levels. Our Benefit Partners group insurance segment is enjoying
the profitable results of our successful integration of Canada Life's non-
medical group insurance businesses as that acquisition strengthens our group
insurance distribution and platform. Jefferson-Pilot Communications'
performance continues to be terrific, with good top-line growth translating
into excellent earnings performance."
Glass added, "Jefferson Pilot's overall performance this year - net income
per share up nearly 10 percent, ROE at 17 percent, and a 15 percent increase
in our cash dividend - demonstrates the value of our diversified portfolio of
businesses that allow us to make good progress despite the interest rate
related challenges we face."
************
Throughout this release, "reportable segment results" (also referred to as
"segment earnings" or "earnings before realized investment gains") is defined
as net income before realized investment gains and losses (and cumulative
effect of change in accounting principle, if applicable). Reportable segment
results is a non-GAAP measure. We believe reportable segment results provides
relevant and useful information to investors, as it represents the basis on
which we assess the performance of our business segments. We deem reportable
segment results to be a meaningful measure for this purpose because, except
for losses from other-than-temporary impairments, realized investment gains
and losses occur primarily at our sole discretion. Note that reportable
segment results as described above may not be comparable to similarly titled
measures reported by other companies.
************
A conference call for the investment community to discuss these results
will be held at 9:00 a.m. EDT October 28, 2004. The call will be broadcast
live on the Internet at http://www.jpfinancial.com, and will be archived.
************
Jefferson-Pilot Corporation, a holding company, is one of the nation's
largest shareholder-owned life insurance companies. Jefferson Pilot's life
insurance and annuity companies, principally Jefferson-Pilot Life Insurance
Company, Jefferson Pilot Financial Insurance Company, and Jefferson Pilot
LifeAmerica Insurance Company, together known as Jefferson Pilot Financial,
offer full lines of individual and group life insurance products as well as
annuity and investment products. Jefferson-Pilot Communications Company owns
and operates three network television stations and 18 radio stations, and
produces and syndicates sports programming. Additional information on
Jefferson Pilot can be found at http://www.jpfinancial.com.
************
This release includes forward-looking statements, and any forward-looking
statements may turn out to be wrong. They can be affected by inaccurate
assumptions or by known or unknown risks and uncertainties that could
significantly affect our actual results or financial condition. These risks
and uncertainties include, among others, general economic conditions, the
impact on the economy from any further terrorist activities or U.S. military
engagements, and interest rate levels, changes and fluctuations, all of which
can affect our sales, investment portfolios, and earnings. Other risks and
uncertainties include any failure to complete successfully the integration of
our recent group insurance acquisition; competitive factors, including pricing
pressures, technological developments, new product offerings, and the
emergence of new competitors; changes in federal and state taxes; changes in
generally accepted or statutory accounting principles or interpretations;
changes in the regulation of the insurance or the financial services industry;
or changes in other laws and regulations and their impact. We undertake no
obligation to publicly correct or update any forward-looking statements.
Readers are advised to consult any further disclosures we make on related
subjects in our press releases and filings with the SEC; in particular, see
the section entitled "External Trends and Forward Looking Information," and
other sections it may reference, in our most recent 10-K report to the SEC, as
it may be updated in our subsequent 10-Q and 8-K reports.
Jefferson-Pilot Corporation and Subsidiaries
2004 Report
Three Months Ended Nine Months Ended
Net Income Sept 30, Sept 30, Sept 30, Sept 30,
2004 2003 2004 2003
(Dollars in thousands)
Individual $75,282 $78,613 $225,528 $228,946
AIP 17,578 19,972 56,409 62,713
Benefit Partners 19,668 10,028 50,783 34,451
Communications 13,514 11,366 37,804 30,003
Corporate and Other 5,520 9,959 22,419 22,289
Total reportable
segment results 131,562 129,938 392,943 378,402
Realized investment
gains (losses), net
of taxes 2,236 (3,862) 24,101 (3,112)
Net income before
cumulative effect
of change in
accounting principle 133,798 126,076 417,044 375,290
Cumulative effect of
change in accounting
for long duration
contracts, net of
taxes(1) - - (16,589) -
Net income $133,798 $126,076 $400,455 $375,290
Per share information
Income before
realized gains
(losses) and
cumulative effect
of change in
accounting
principle $0.96 $0.92 $2.83 $2.66
Realized investment
gains (losses), net
of taxes 0.02 (0.03) 0.18 (0.02)
Income before
cumulative effect
in change in
accounting principle 0.98 0.89 3.01 2.64
Cumulative effect of
change in accounting
principle, net of
taxes(1) - - (0.12) -
Net income $0.98 $0.89 $2.89 $2.64
Per share
information -
assuming dilution
Income before
realized gains
(losses) and
cumulative effect
of change in
accounting
principle $0.96 $0.91 $2.81 $2.64
Realized investment
gains (losses), net
of taxes 0.01 (0.03) 0.18 (0.02)
Income before
cumulative effect
in change in accounting
principle 0.97 0.88 2.99 2.62
Cumulative effect of
change in accounting
principle, net of
taxes(1) - - (0.12) -
Net income $0.97 $0.88 $2.87 $2.62
Average number of
shares outstanding 136,485,685 141,365,238 138,470,054 142,063,945
Average number of
shares outstanding
- assuming dilution 137,499,865 142,522,449 139,731,025 143,074,780
(1) Nine months ended Sept 30, 2004 reflects a $3.7 million impact of
adoption of SOP 03-1 implementation guidance issued in the
third quarter of 2004.
Jefferson-Pilot Corporation and Subsidiaries
(Unaudited)
Consolidated Balance Sheets (In Thousands)
Sept 30, 2004 Dec 31, 2003
Assets:
Cash and investments $27,392,969 $25,823,574
Accrued investment income 350,165 326,073
Due from reinsurers 1,333,218 1,340,395
Deferred policy acquisition costs 1,932,013 1,771,174
Value of business acquired 454,058 459,270
Goodwill, net 311,894 311,894
Other assets 679,123 498,428
Separate account assets 2,192,263 2,165,524
$34,645,703 $32,696,332
Liabilities:
Policy liabilities $25,897,133 $24,369,234
Debt:
Commercial paper borrowings 174,074 654,232
Obligations under repurchase agreements 494,521 400,590
Long-term notes payable 599,641 -
Junior subordinated debentures 309,279 309,279
Income tax liabilities 629,514 471,922
Accrued expenses and other liabilities 520,292 519,654
Separate account liabilities 2,192,263 2,165,524
30,816,717 28,890,435
Stockholders' equity:
Common stock and paid in capital 172,424 175,762
Retained earnings 2,976,896 2,946,869
Accumulated other comprehensive
income - net unrealized gains on
securities 679,666 683,266
3,828,986 3,805,897
$34,645,703 $32,696,332
Components of Equity (Dollars in
thousands except share amounts)
Common stock and paid in capital $172,424 $175,762
Retained earnings 2,976,896 2,946,869
Net unrealized gains
Bonds, net of DAC, VOBA and taxes 411,683 390,230
Equities, net of taxes 267,983 293,036
Total unrealized gains 679,666 683,266
Stockholders' equity $3,828,986 $3,805,897
Shares outstanding 136,522,471 140,610,540
Per share $28.05 $27.07
Per share excluding unrealized gains $23.07 $22.21
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(Dollars in thousands except share amounts)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2004 2003 2004 2003
Revenue:
Premiums and
other
considerations $327,634 $237,629 $959,710 $707,405
UL & investment
product charges 179,069 180,106 544,204 519,504
Net investment
income(1) 406,587 413,265 1,226,256 1,238,058
Realized
investment
gains (losses) 3,480 (5,135) 37,119 (3,981)
Communications
sales 58,143 51,729 172,768 152,506
Other 27,171 28,206 94,033 76,421
Total revenue 1,002,084 905,800 3,034,090 2,689,913
Benefits and
Expenses:
Insurance and
annuity benefits 574,266 501,241 1,700,540 1,502,794
Insurance
commissions,
net of deferrals 61,955 31,333 189,013 80,926
General and
administrative
expenses, net
of deferrals 48,071 38,566 133,086 108,439
Insurance taxes,
licenses and
fees 16,426 19,298 53,491 58,907
Amortization of
policy acquisition
costs and value of
business acquired 56,509 91,375 198,154 254,565
Interest
expense(1) 12,504 8,159 34,980 25,425
Communications
operations 30,838 28,127 96,816 90,408
Total benefits
and expenses 800,569 718,099 2,406,080 2,121,464
Income before
income taxes
and cumulative
effect of change
in accounting
principle 201,515 187,701 628,010 568,449
Income taxes 67,717 61,625 210,966 193,159
Income before
cumulative
effect of change
in accounting
principle 133,798 126,076 417,044 375,290
Cumulative effect
of change in
accounting for
long-duration
contracts, net of
taxes(3) - - (16,589) -
Net income $133,798 $126,076 $400,455 $375,290
Average number
of shares
outstanding 136,485,685 141,365,238 138,470,054 142,063,945
Average number
of shares
outstanding -
assuming
dilution 137,499,865 142,522,449 139,731,025 143,074,780
Quarterly return
on equity(2) 16.9% 17.0% 16.7% 16.8%
Earnings Per
Share
Earnings per
share before
realized gains
(losses) and
cumulative effect
of change in
accounting
principle $0.96 $0.92 $2.83 $2.66
Realized
investment
gains (losses),
net of taxes 0.02 (0.03) 0.18 (0.02)
Earnings per
share before
cumulative
effect of
change in
accounting
principle 0.98 0.89 3.01 2.64
Cumulative
effect of
change in
accounting for
long-duration
contracts,
net of taxes(3) - - (0.12) -
Earnings per
share $0.98 $0.89 $2.89 $2.64
Earnings per
share before
realized gains
(losses) and
cumulative
effect of
change in
accounting
principle $0.96 $0.91 $2.81 $2.64
Realized
investment
gains (losses),
net of taxes 0.01 (0.03) 0.18 (0.02)
Earnings per
share before
cumulative
effect of
change in
accounting
principle -
dilution 0.97 0.88 2.99 2.62
Cumulative
effect of
change in
accounting for
long-duration
contracts,
net of taxes
- assuming
dilution(3) - - (0.12) -
Earnings per
share -
assuming
dilution $0.97 $0.88 $2.87 $2.62
(1) Prior year amounts have been restated to conform to presentation under
FIN 46.
(2) Return on equity is calculated utilizing reportable segment results as
the numerator and average equity excluding the impact of net
unrealized gains as the denominator.
(3) Nine months ended Sept 30, 2004 reflects a $3.7 million impact of
adoption of SOP 03-1 implementation guidance issued in the
third quarter of 2004.
Jefferson-Pilot Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
(In Thousands) 2004 2003 2004 2003
Cash Flows from Operating
Activities:
Net income(1) $133,798 $126,076 $400,455 $375,290
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Change in policy
liabilities 31,913 3,390 181,459 96,632
Net amount credited to
policyholder accounts 9,812 21,330 53,985 69,322
Net deferral of policy
acquisition costs and
sales inducements (70,735) (28,509) (213,729) (146,793)
Net amortization of value
of business acquired 14,669 6,333 18,476 37,214
Group coinsurance assumed 883 - 328,875 -
Other 46,301 105,492 44,394 10,589
Net cash provided by
operations 166,641 234,112 813,915 442,254
Cash Flows from Investing
Activities:
Securities and loans purchased
and sold (323,130) (365,601) (1,475,440) (842,079)
Other investing activities (22,032) (2,115) (127,565) (519)
Net cash used in investing
activities (345,162) (367,716) (1,603,005) (842,598)
Cash Flows from Financing
Activities:
Policyholder contract deposits 707,251 599,170 2,154,150 1,782,406
Policyholder contract
withdrawals (495,498) (334,063) (1,257,444)(1,082,415)
Net borrowings (repayments) (28,149) (49,988) 213,414 (98,727)
Net issuance (repurchase) of
common shares 1,415 (41,079) (225,712) (86,902)
Cash dividends to common and
preferred stockholders(1) (51,865) (46,584) (150,930) (136,728)
Other 382 3,191 8,350 5,034
Net cash provided by financing
activities 133,536 130,647 741,828 382,668
Decrease in cash and cash
equivalents (44,985) (2,957) (47,262) (17,676)
Cash and cash equivalents at
beginning of period 69,491 52,058 71,768 66,777
Cash and cash equivalents at
end of period $24,506 $49,101 $24,506 $49,101
Supplemental Cash Flow
Information:
Income taxes paid $36,000 $18,800 $29,816 $192,700
Interest paid on borrowed
money(1) $23,692 $14,864 $41,770 $34,716
(1) Prior year amounts have been restated to conform to presentation under
FIN 46.
Jefferson-Pilot Corporation and Subsidiaries
Business Segment Results
(Unaudited)
Individual Products (In Thousands)
The Individual Products distribution system offers a wide array of life
insurance products to individuals and employers through captive
agents (career and home service agency forces), independent agents
(recruited through independent marketing organizations and a
regional marketing network) and financial institutions. Reportable
segment results were:
Three Months Ended Nine Months Ended
Sept 30 Sept 30
2004 2003 2004 2003
UL-Type Products:
Net investment
income $185,267 $187,243 $553,839 $560,158
Interest credited
to policyholders (127,777) (130,497) (378,906) (385,532)
Interest
margin 57,490 56,746 174,933 174,626
Product charge
revenue:
Cost of
insurance
charges 137,007 134,913 405,443 383,726
Expense
charges 30,730 38,719 105,952 107,234
Surrender
charges 9,704 6,756 30,274 27,042
Total product
charge
revenue 177,441 180,388 541,669 518,002
Death benefits
and other
insurance
benefits (85,769) (71,949) (238,996) (209,298)
Expenses,
excluding
amortization of
DAC and VOBA (23,632) (25,306) (70,586) (75,727)
Amortization of
DAC and VOBA (34,245) (50,002) (131,781) (131,052)
Miscellaneous
expense (203) (17) (571) (1,256)
UL-type product
income before
taxes 91,082 89,860 274,668 275,295
Traditional
Products:
Premiums and other
considerations 37,171 41,253 115,297 128,667
Net investment
income 37,714 40,759 114,750 123,896
Benefits (41,788) (42,299) (130,051) (147,090)
Expenses, excluding
amortization of
DAC and VOBA (5,940) (6,787) (19,771) (17,442)
Amortization of
DAC and VOBA (4,310) (3,470) (11,872) (12,729)
Traditional
product income
before taxes 22,847 29,456 68,353 75,302
Income before
income taxes 113,929 119,316 343,021 350,597
Income taxes (38,647) (40,703) (117,493) (121,651)
Reportable
segment results $75,282 $78,613 $225,528 $228,946
Operating Measures
Annualized
equivalent life
insurance
premiums:
-Individual
Markets
Excl.
Community
Banks and
BOLI $47,825 $48,523 $147,567 $153,914
-Community
Banks and
BOLI 2,264 2,153 6,320 7,564
$50,089 $50,676 $153,887 $161,478
Average UL
policyholder
fund balances $11,138,652 $10,657,827 $11,073,162 $10,505,310
Average VUL
separate account
assets 1,524,765 1,277,027 1,515,206 1,183,063
Total $12,663,417 $11,934,854 $12,588,368 $11,688,373
Average Face
Amount of
Insurance In
Force:
- Total $165,527,000 $164,669,000 $165,770,000 $164,231,000
- UL-Type
Contracts $126,789,000 $123,497,000 $126,575,000 $122,871,000
Average assets $18,383,736 $17,244,613 $18,168,510 $16,990,596
Jefferson-Pilot Corporation and Subsidiaries
Business Segment Results
(Unaudited)
Annuity and Investment Products (In Thousands)
Annuity and Investment Products (referred to as AIP) offers fixed and
variable annuities and investment products through
proprietary and independent agents, financial institutions, investment
professionals and broker-dealers. Reportable segment
results were:
Three Months Ended Nine Months Ended
Sept 30 Sept 30
2004 2003 2004 2003
Investment product
charges and premiums $3,398 $1,645 $9,041 $6,151
Net investment income 137,218 145,591 425,403 438,456
Broker-dealer
concessions and other 25,541 26,489 84,471 71,769
Total revenue 166,157 173,725 518,915 516,376
Policy benefits
(including interest
credited) 100,257 101,203 307,592 308,470
Insurance expenses 14,622 17,005 45,412 44,645
Broker-dealer expenses 24,587 24,901 79,986 66,809
Total benefits and
expenses 139,466 143,109 432,990 419,924
Income before income
taxes 26,691 30,616 85,925 96,452
Income taxes 9,113 10,644 29,516 33,739
Reportable segment
results $17,578 $19,972 $56,409 $62,713
Operating Measures
Fixed annuity premium
sales $312,019 $187,780 $912,992 $435,455
Variable annuity
premium sales 74 213 343 1,843
Total $312,093 $187,993 $913,335 $437,298
Investment product
sales $1,037,911 $926,296 $3,767,488 $2,203,883
Average fund balances:
Fixed annuity $9,291,064 $8,428,312 $9,098,088 $8,329,951
Variable annuity 322,945 343,529 337,937 338,263
Total annuity $9,614,009 $8,771,841 $9,436,025 $8,668,214
Effective investment
spreads for fixed
annuities(1) 1.62% 1.96% 1.68% 1.92%
Effective investment
spreads for fixed
annuities, excluding
FAS 133 1.74% 1.94% 1.70% 1.90%
Fixed annuity
surrenders as a % of
beginning fund
balance 15.4% 8.5% 11.0% 8.1%
Fixed annuity general
and administrative
expenses as a % of
average invested assets 0.17% 0.15% 0.18% 0.16%
Average assets $10,461,869 $9,534,079 $10,315,852 $9,462,517
(1) Includes FAS 133
adjustment of: $(2,847) $517 $(1,281) $997
Jefferson-Pilot Corporation and Subsidiaries
Business Segment Results
(Unaudited)
Benefit Partners (In Thousands)
Benefit Partners offers group non-medical products such as term life,
disability and dental insurance to the employer marketplace. These non-
medical products are marketed primarily through a national distribution
system of regional group offices. These offices develop business through
employee benefit firms, brokers, third party administrators and other
employee benefit providers. Reportable segment results were:
Three Months Ended Nine Months Ended
Sept 30 Sept 30
2004 2003 2004 2003
Premiums and other
considerations $284,223 $190,313 $824,443 $563,427
Net investment income 23,646 15,879 65,259 48,275
Total revenue 307,869 206,192 889,702 611,702
Policy benefits 212,002 148,397 625,132 433,886
Expenses 65,609 42,368 186,442 124,815
Total benefits and expenses 277,611 190,765 811,574 558,701
Income before income taxes 30,258 15,427 78,128 53,001
Income taxes 10,590 5,399 27,345 18,550
Reportable segment results $19,668 $10,028 $50,783 $34,451
Operating Measures
Life, Disability and Dental:
Annualized sales $46,726 $38,530 $148,750 $151,255
Reportable segment results:
Life $7,145 $4,483 $18,925 $11,182
Disability 11,973 5,374 29,110 20,854
Dental 1,087 1,958 2,150 3,280
Other (537) (1,787) 598 (865)
Total $19,668 $10,028 $50,783 $34,451
Loss Ratios:
Life 75.0% 76.6% 75.3% 79.1%
Disability 69.6% 72.9% 71.2% 68.8%
Dental 76.6% 72.4% 78.1% 76.7%
Combined 72.9% 74.3% 73.9% 74.3%
Total expenses as a % of premium
income 23.1% 22.3% 22.7% 22.2%
Jefferson-Pilot Corporation and Subsidiaries
Business Segment Results
(Unaudited)
Communications (In Thousands)
Jefferson-Pilot Communications Company operates television and radio
broadcast properties and produces syndicated sports and entertainment
programming. Reportable segment results were:
Three Months Ended Nine Months Ended
Sept 30 Sept 30
2004 2003 2004 2003
Communications revenues, net $58,144 $51,729 $173,144 $152,881
Cost of sales 10,504 9,306 32,699 29,967
Operating expenses 20,334 18,821 64,117 60,441
Broadcast cash flow 27,306 23,602 76,328 62,473
Depreciation and amortization 2,109 1,994 6,522 6,184
Corporate general and
administrative expenses 1,684 1,697 5,245 4,342
Net interest expense and other 578 514 1,605 1,663
Income before income taxes 22,935 19,397 62,956 50,284
Income taxes 9,421 8,031 25,152 20,281
Reportable segment results $13,514 $11,366 $37,804 $30,003
Corporate and Other (In Thousands)
Activities of the parent company and passive investment affiliates,
surplus of the life insurance subsidiaries not otherwise allocated
to the reportable segments including earnings thereon, financing
expenses on corporate debt and debt securities, and federal and state
income taxes not otherwise allocated to business segments are reported in
the "Corporate and Other" category. Reportable segment results were:
Three Months Ended Nine Months Ended
Sept 30 Sept 30
2004 2003 2004 2003
Earnings on investments and other
income(1) $23,080 $24,307 $71,995 $68,540
Interest expense on debt(1) (12,504) (8,159) (34,980) (25,425)
Operating expenses (6,351) (8,065) (16,151) (21,019)
Income taxes 1,295 1,877 1,555 194
Reportable segment results 5,520 9,960 22,419 22,290
Realized investment gains, net of
taxes 2,236 (3,862) 24,101 (3,112)
Reportable segment results,
including net realized investment
gains $7,756 $6,098 $46,520 $19,178
(1) Prior year amounts have been restated to conform to presentation
under FIN 46.
Assets by Segment (In Millions)
Sept 30
2004 2003
Individual Products $18,484 $17,365
Annuity and Investment Products 10,479 9,581
Benefit Partners 1,797 1,032
Communications 219 202
Corporate and Other 3,667 3,816
Total assets $34,646 $31,996
Jefferson-Pilot Corporation and Subsidiaries
Quarterly Financial Results by Business Segment
(Unaudited)
Sept 30, June 30, Mar 31,
(In millions) 2004 2004 2004
Revenue:
Individual $437.4 $443.8 $443.8
AIP 166.2 177.4 175.3
Benefit Partners 307.9 331.0 250.9
Communications 58.7 55.9 58.1
Corporate and Other 28.5 28.9 33.3
Realized investment gains (losses) 3.4 10.2 23.4
Total revenues(1) $1,002.1 $1,047.2 $984.8
Reportable Segment Results:
Individual $75.3 $75.2 $75.0
AIP 17.6 19.8 19.1
Benefit Partners 19.7 19.7 11.4
Communications 13.5 13.7 10.6
Corporate and Other 5.5 6.5 10.4
Total reportable segment results 131.6 134.9 126.5
Realized investment gains (losses),
net of taxes 2.2 7.1 14.7
Net income before cumulative effect
of change in accounting principle 133.8 142.0 141.2
Cumulative effect of change in
accounting principle, net of taxes(2) - - (16.6)
Net income $133.8 $142.0 $124.6
Earnings Per Share
Earnings per share before realized
gains (losses) and cumulative
effect of change in accounting
principle $0.96 $0.98 $0.90
Realized investment gains (losses),
net of taxes 0.02 0.05 0.10
Earnings per share before cumulative
effect of change in accounting principle 0.98 1.03 1.00
Cumulative effect of change in
accounting principle for long-
duration contracts, net of taxes(2) - - (0.12)
Earnings per share $0.98 $1.03 $0.88
Earnings per share before realized
gains (losses) and cumulative
effect of change in accounting
principle $0.96 $0.97 $0.89
Realized investment gains (losses),
net of taxes 0.01 0.05 0.10
Earnings per share before cumulative
effect of change in accounting
principle - assuming dilution 0.97 1.02 0.99
Cumulative effect of change in
accounting principle for long-
duration contracts, net of taxes(2) - - (0.12)
Earnings per share - assuming
dilution $0.97 $1.02 $0.87
(1) Prior year amounts have been restated to conform to presentation
under FIN 46.
(2) 1Q04 reflects a $3.7 million impact of adoption of SOP 03-1
implementation guidance issued in 3Q04.
Jefferson-Pilot Corporation and Subsidiaries
Quarterly Financial Results by Business Segment
(Unaudited)
Dec 31, Sept 30, June 30, Mar 31,
(In millions) 2003 2003 2003 2003
Revenue:
Individual $444.3 $449.7 $437.2 $442.5
AIP 177.4 173.7 172.9 169.7
Benefit Partners 208.1 206.2 207.8 197.7
Communications 63.3 51.2 50.1 49.9
Corporate and Other 32.7 30.1 28.2 27.0
Realized investment gains (losses) (42.8) (5.1) 20.2 (19.1)
Total revenues(1) $883.0 $905.8 $916.4 $867.7
Reportable Segment Results:
Individual $80.4 $78.6 $74.3 $76.0
AIP 22.3 20.0 21.5 21.2
Benefit Partners 16.2 10.0 12.5 11.9
Communications 15.4 11.4 11.6 7.1
Corporate and Other 9.8 10.0 7.1 5.3
Total reportable segment results 144.1 130.0 127.0 121.5
Realized investment gains (losses),
net of taxes (27.8) (3.9) 13.1 (12.4)
Net income before cumulative effect
of change in accounting principle 116.3 126.1 140.1 109.1
Cumulative effect of change in
accounting principle, net of taxes(2) - - - -
Net income $116.3 $126.1 $140.1 $109.1
Earnings Per Share
Earnings per share before realized
gains (losses) and cumulative
effect of change in accounting
principle $1.02 $0.92 $0.90 $0.85
Realized investment gains (losses),
net of taxes (0.20) (0.03) 0.09 (0.09)
Earnings per share before cumulative
effect of change in accounting
principle 0.82 0.89 0.99 0.76
Cumulative effect of change in
accounting principle for long-
duration contracts, net of taxes(2) - - - -
Earnings per share $0.82 $0.89 $0.99 $0.76
Earnings per share before realized
gains (losses) and cumulative
effect of change in accounting
principle $1.01 $0.91 $0.89 $0.85
Realized investment gains (losses),
net of taxes (0.19) (0.03) 0.09 (0.09)
Earnings per share before cumulative
effect of change in accounting
principle - assuming dilution 0.82 0.88 0.98 0.76
Cumulative effect of change in
accounting principle for long-
duration contracts, net of taxes(2) - - - -
Earnings per share - assuming
dilution $0.82 $0.88 $0.98 $0.76
(1) Prior year amounts have been restated to conform to presentation
under FIN 46.
(2) 1Q04 reflects a $3.7 million impact of adoption of SOP 03-1
implementation guidance issued in 3Q04.
Jefferson-Pilot Corporation and Subsidiaries
Quarterly Financial Results by Business Segment
(Unaudited)
Dec 31, Sept 30,
(In millions) 2002 2002
Revenue:
Individual $436.7 $436.2
AIP 175.1 170.5
Benefit Partners 178.3 180.0
Communications 61.2 49.2
Corporate and Other 24.4 21.0
Realized investment gains (losses) (63.8) 3.8
Total revenues(1) $811.9 $860.7
Reportable Segment Results:
Individual $74.7 $73.9
AIP 20.7 18.9
Benefit Partners 12.8 9.2
Communications 13.0 9.8
Corporate and Other (12.5) 4.6
Total reportable segment results 108.7 116.4
Realized investment gains (losses),
net of taxes (42.1) 2.4
Net income before cumulative effect
of change in accounting principle 66.6 118.8
Cumulative effect of change in
accounting principle, net of taxes(2) - -
Net income $66.6 $118.8
Earnings Per Share
Earnings per share before realized
gains (losses) and cumulative effect
of change in accounting principle $0.76 $0.80
Realized investment gains (losses),
net of taxes (0.29) 0.02
Earnings per share before cumulative
effect of change in accounting principle 0.47 0.82
Cumulative effect of change in
accounting principle for long-
duration contracts, net of taxes(2) - -
Earnings per share $0.47 $0.82
Earnings per share before realized
gains (losses) and cumulative
effect of change in accounting principle $0.75 $0.80
Realized investment gains (losses),
net of taxes (0.29) 0.01
Earnings per share before cumulative
effect of change in accounting
principle - assuming dilution 0.46 0.81
Cumulative effect of change in
accounting principle for long-
duration contracts, net of taxes(2) - -
Earnings per share - assuming
dilution $0.46 $0.81
(1) Prior year amounts have been restated to conform to presentation
under FIN 46.
(2) 1Q04 reflects a $3.7 million impact of adoption of SOP 03-1
implementation guidance issued in 3Q04.
Jefferson-Pilot Corporation and Subsidiaries
Investment Summary (Unaudited)
(in Thousands)
September 30, 2004 December 31, 2003
Allocation of Invested Assets Amount Percent Amount Percent
Cash and cash equivalents $24,506 0.1% $71,768 0.3%
Bonds 21,985,875 80.2% 20,443,770 79.2%
Preferred stocks 14,886 0.1% 16,463 0.1%
Common stocks, unaffiliated 649,420 2.4% 753,958 2.9%
Mortgages loans, net 3,593,895 13.1% 3,472,340 13.4%
Real estate, net 125,802 0.5% 131,600 0.5%
Policy loans and other 998,585 3.6% 933,675 3.6%
Invested assets $27,392,969 100.0% $25,823,574 100.0%
Total Fixed Income Portfolio
Yield to Maturity 6.32% 6.52%
September 30, 2004 December 31, 2003
Bond Portfolio Amount Percent Amount Percent
U.S. Government $272,624 1.2% $267,847 1.3%
Mortgage-backed 2,469,011 11.2% 2,904,444 14.2%
Private placements 5,084,391 23.1% 4,504,954 22.0%
Public - corporates 14,159,849 64.5% 12,766,525 62.5%
Total bonds $21,985,875 100.0% $20,443,770 100.0%
Yield to maturity 6.13% 6.33%
Average life 7.69 yrs 7.36 yrs
Duration 5.33 5.08
Average quality A3 A2
September 30, 2004 December 31, 2003
Bond Portfolio Quality Amount Percent Amount Percent
NAIC Rating S&P
Equivalent
1 AAA - A $12,587,473 57.3% $11,707,882 57.3%
2 BBB 8,046,747 36.6% 7,284,384 35.6%
3-6 BB and lower 1,351,655 6.1% 1,451,504 7.1%
Total Bonds $21,985,875 100.0% $20,443,770 100.0%
Fixed Maturity Securities
Unrealized Gains (Losses) September 30, 2004 December 31, 2003
Gross unrealized gains $1,175,773 $1,179,211
Gross unrealized losses (83,905) (126,275)
Net unrealized gains $1,091,868 $1,052,936
Mortgage Loan Portfolio September 30, 2004 December 31, 2003
Yield to maturity 7.42% 7.63%
Average maturity 7.01 yrs 6.99 yrs
Total delinquent loans and
loans in foreclosure at
amortized cost $5,987 $10,984
Delinquent loans as a percent of
total ML 0.17% 0.32%
Net book value of real estate
acquired in satisfaction of mortgage
indebtedness $6,158 $6,276
Realized Investment
Gains/(Losses) Third Quarter 2004 Third Quarter 2003
Stock gains $18,748 $-
Stock losses (1,177) -
Bond gains 5,659 7,923
Bond losses from sales and calls (4,366) (13,253)
Bond losses from writedowns (16,398) (14,913)
Other gains (losses), net 4,377 (982)
Total pretax gains (losses) 6,843 (21,225)
Amortization of DAC/VOBA and
deferred sales inducements (3,364) 16,092
Income taxes (1,243) 1,271
Realized investment gains
(losses), net of taxes $2,236 $(3,862)
Jefferson-Pilot Corporation and Subsidiaries
Insurance Segments Expense Analysis
(In Thousands)
Three Months Ended Nine Months Ended
Sept 30 Sept 30
2004 2003 2004 2003
Individual Products
Commissions $68,857 $66,616 $198,243 $212,215
General and
administrative expenses 29,385 28,672 89,536 91,462
Taxes, licenses and fees 9,568 13,326 31,873 40,735
Total commissions and
expenses incurred 107,810 108,614 319,652 344,412
Less commissions and
expenses capitalized (78,238) (76,521) (229,295) (251,244)
Amortization of DAC and
VOBA 38,555 53,472 143,653 143,782
Net expense $68,127 $85,565 $234,010 $236,950
Annuity and Investment
Products
Insurance companies:
Commissions - insurance
companies $20,521 $8,634 $56,481 $21,643
General and administrative
expenses 5,171 4,299 15,203 12,941
Taxes, licenses and fees 539 441 1,784 1,374
Gross commissions and
expenses incurred 26,231 13,374 73,468 35,958
Less commissions and
expenses capitalized (22,519) (8,899) (62,620) (27,447)
Amortization of DAC and
VOBA 10,909 12,530 34,563 36,134
Net expense -
insurance companies 14,621 17,005 45,411 44,645
Broker/Dealer:
Commissions 21,774 22,001 71,355 59,262
Other 2,813 2,900 8,631 7,547
Net expense -
broker/dealer 24,587 24,901 79,986 66,809
Net expense $39,208 $41,906 $125,397 $111,454
Benefit Partners
Commissions $32,361 $21,825 $93,985 $64,185
General and
administrative expenses 29,591 18,247 81,597 55,903
Taxes, licenses and fees 6,321 5,060 18,620 15,384
Total commissions and
expenses incurred 68,273 45,132 194,202 135,472
Less commissions and
expenses capitalized (9,704) (28,134) (27,686) (85,295)
Amortization of DAC and
VOBA 7,040 25,370 19,926 74,638
Net expense $65,609 $42,368 $186,442 $124,815
Jefferson-Pilot Corporation and Subsidiaries
DAC and VOBA Balance Sheet Analysis
(In Thousands)
Three Months Ended Nine Months Ended
Sept 30 Sept 30
2004 2003 2004 2003
Balance, beginning of
period $2,486,679 $2,006,760 $2,230,444 $2,027,317
Cumulative effect of
change in accounting
principle - - 1,864 -
Group coinsurance
assumed 70 - 37,445 -
Amount capitalized 110,462 113,552 319,778 364,145
Amortization expense (56,509) (91,375) (198,154) (254,565)
Adjustment for capital
gains and losses (3,053) 16,092 876 13,172
Adjustment for FAS 115 (151,578) 66,276 (6,182) (38,764)
Balance, end of period $2,386,071 $2,111,305 $2,386,071 $2,111,305
Jefferson-Pilot Corporation and Subsidiaries
Shareholder Information
Listed NYSE: JP
Composite Stock Price and Dividends (Adjusted for 50% stock dividend
effected 04/09/01)
Cash
High Low Close Dividend
3Q04 50.20 47.01 49.66 0.380
2Q04 56.39 47.40 50.80 0.380
1Q04 55.08 48.97 55.01 0.330
2003 50.72 35.75 50.65 1.293
2002 53.00 36.35 38.11 1.184
2001 49.67 38.00 46.27 1.072
2000 50.59 33.25 49.83 0.960
1999 53.09 40.79 45.50 0.857
Transfer Agent and Dividend Reinvestment Agent
Wachovia Bank Phone: 800/829-8432
Dividend Reinvestment Service Fax: 704/590-7618
1525 West W.T. Harris Blvd., 3C3 Email: equityservices@wachovia.com
Charlotte, NC 28288-1153
Investor Relations
Jefferson-Pilot Corporation Phone: 336/691-3379
Investor Relations - Dept. 3607
P.O. Box 21008
Greensboro, NC 27420
investor.relations@jpfinancial.com
Corporate Website
http://www.jpfinancial.com
SOURCE Jefferson-Pilot Corporation
-0- 10/27/2004
/CONTACT: John Still, Investment Community, +1-336-691-3382, or Paul
Mason, News Media, +1-336-691-3313, both of Jefferson-Pilot Corporation/
/Photo: http://www.newscom.com/cgi-bin/prnh/20040601/JPFLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com /
/Web site: http://www.jpfinancial.com /
(JP)
CO: Jefferson-Pilot Corporation
ST: North Carolina
IN: FIN INS
SU: ERN CCA MAV