Exhibit 99.1
[LOGO OF JEFFERSON PILOT FINANCIAL]
PRESS RELEASE
For Immediate Release
Contact: John Still - 336/691-3382
JEFFERSON PILOT REPORTS EARNINGS BEFORE INVESTMENT GAINS UP
NINE PERCENT IN 2005
(Greensboro, NC - February 6, 2006) Jefferson-Pilot Corporation (NYSE: JP),
parent of the Jefferson Pilot Financial companies and one of the nation's
leading life insurance, annuity, employee benefits, and broadcast companies,
today reported earnings of $1.07 per share before realized investment gains for
the fourth quarter of 2005, versus $1.04 in the fourth quarter of 2004. Net
income for the quarter was $1.11 per share, including realized investment gains
of $0.04 per share, compared to $1.06, including $0.02 per share of investment
gains, in the year-earlier period.
For the year 2005, Jefferson Pilot's earnings per share before realized
investment gains increased 9 percent to $4.20 from $3.85 in 2004. Net income for
the year increased 5 percent to $4.25 from $4.04 excluding the cumulative effect
of a change in accounting principle in 2004.
All per-share results are on a diluted basis.
Our Individual Products business enjoyed strong sales results in 2005, with
annual growth of Individual Markets sales of 28 percent, including a gain of 7
percent in the fourth quarter. Average total UL and VUL fund balances grew a
healthy 5 percent for the quarter and year. Individual Products earnings
increased 5 percent for the year and 3 percent for the quarter, as good earnings
growth from UL products were offset somewhat by runoff in older traditional
individual life business.
Effective spread management in our Annuity and Investment Products business
contributed to good earnings progress of 8 percent for the quarter and year.
Despite a moderation in sales in the quarter, segment average fund balances
progressed to $10.0 billion from $9.7 billion for the fourth quarter of 2004.
Despite lower quarterly earnings due to elevated loss ratios, similar to those
experienced in the third quarter of 2005, Benefit Partners' earnings increased a
strong 23 percent in 2005, with excellent gains for the year in each line of
business. Benefit Partners' sales were excellent for the quarter and year.
Jefferson-Pilot Communications extended its strong long-term record and again
demonstrated its very favorable competitive position by producing a 7 percent
earnings gain for the quarter and record earnings of $57.6 million for the year
against a background of muted industry results.
Fourth quarter earnings were augmented by net litigation-related items in the
amount of $2.5 million after tax, primarily in the Corporate and Other segment.
With these good segment earnings, Jefferson Pilot's return on equity reached an
exceptional 17 percent for the year 2005.
In commenting on Jefferson Pilot's 2005 results, CEO Dennis Glass noted, "We
are very pleased with Jefferson Pilot's performance in 2005, and view it as a
highly successful year, particularly considering the challenges posed to the
life and annuity businesses by low interest rates. The momentum demonstrated by
Jefferson Pilot in 2005 positions us well for our imminent merger with Lincoln
National Corporation. We are confident that the combination of Lincoln and
Jefferson Pilot will provide a powerful platform to meet the challenges of the
ever-more-competitive financial services environment. Not least, we believe that
we are creating a dynamic industry leader capable of providing outstanding
results for shareholders."
************
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.
************
2
A conference call for the investment community to discuss these results will be
held at 9:00 a.m. EST February 7, 2006. The call will be broadcast live on the
Internet at www.jpfinancial.com, and will be archived.
************
Jefferson-Pilot Corporation ("Jefferson Pilot"), 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 www.jpfinancial.com.
In connection with the proposed transaction with Lincoln National Corporation ,
a registration statement on Form S-4 (Registration No. 333-130226), including a
joint proxy statement/prospectus, and other materials have been filed with the
SEC. WE URGE INVESTORS TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS
AND THESE OTHER DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE AND BEFORE MAKING
ANY VOTING OR INVESTMENT DECISIONS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors will be able to obtain
free copies of these materials (when available), as well as other filings
containing information about Lincoln and Jefferson Pilot, without charge, at the
Securities and Exchange Commission's website (www.sec.gov). In addition, free
copies of the definitive joint proxy statement/prospectus will be (when
available), and Jefferson Pilot's other SEC filings are, also available on
Jefferson Pilot's website (www.jpfinancial.com). Free copies of the definitive
joint proxy statement/prospectus will be (when available), and Lincoln's other
SEC filings are, also available on Lincoln's website (www.lfg.com).
Lincoln, Jefferson Pilot, their respective directors and officers and other
persons may be deemed, under SEC rules, to be participants in the solicitation
of proxies in respect of the proposed transaction. Information regarding
Lincoln's directors and executive officers is available in its Annual Report on
Form 10-K for the year ended December 31, 2004 and in its proxy statement filed
with the SEC on April 8, 2005, and information regarding Jefferson Pilot's
directors and executive officers is available in its Annual Report on Form 10-K
for the year ended December 31, 2004 and in its proxy statement filed with the
SEC on March 24, 2005. More detailed information regarding the identity of
potential participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise, is available
in the preliminary joint proxy statement/prospectus contained in the
above-referenced registration statement on Form S-4.
3
This release includes statements that constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are not historical facts, and 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 (including the uncertainty as to the duration and rate of the current
economic recovery), the impact on the economy from further terrorist activities
or US military engagements, and interest rate levels, changes and fluctuations,
all of which can impact our sales, investment portfolios, and earnings;
competitive factors, including pricing pressures, technological developments,
new product offerings and the emergence of new competitors; changes in federal
and state taxes (including recently proposed and future changes to general tax
rates, dividends, capital gains, retirement savings, and estate taxes); changes
in the regulation of the insurance industry or financial services industry;
changes in generally accepted or statutory accounting principles (such as
Actuarial Guideline 38 referred to as AXXX); or changes in other laws and
regulations and their impact.
Risks and uncertainties related to the transaction with Lincoln include, among
others: (1) the shareholders of Lincoln may not approve the issuance of shares
in connection with the merger and/or the Jefferson Pilot shareholders may not
approve and adopt the merger agreement and the transactions contemplated by the
merger agreement at the special shareholder meetings; (2) we may be unable to
obtain regulatory approvals required for the merger, or required regulatory
approvals may delay the merger or result in the imposition of conditions that
could have a material adverse effect on the combined company or cause us to
abandon the merger; (3) we may be unable to complete the merger or completing
the merger may be more costly than expected because, among other reasons,
conditions to the closing of the merger may not be satisfied; (4) problems may
arise with the ability to successfully integrate Lincoln's and Jefferson Pilot's
businesses, which may result in the combined company not operating as
effectively and efficiently as expected; (5) the combined company may not be
able to achieve the expected synergies from the merger or it may take longer
than expected to achieve those synergies; (6) the merger may involve unexpected
costs or unexpected liabilities, or the effects of purchase accounting may be
different from our expectations; (7) the credit and insurer financial strength
ratings of the combined company and its subsidiaries may be different from what
the companies expect; and (8) the combined company may be adversely affected by
future legislative, regulatory, or tax changes as well as other economic,
business and/or competitive factors.
The risks included here are not exhaustive. The Registration Statement referred
to above, as well as annual reports on Form 10-K, current reports on Form 8-K
and other documents filed by Lincoln and Jefferson Pilot with the SEC include
additional factors that could impact our businesses and financial performance.
Given these risks and uncertainties, you should not place undue reliance on
forward-looking statements as a prediction of actual results. In addition, we
disclaim any obligation to update any forward-looking statements to reflect
events or circumstances that occur after the date of this document, except as
may be required by law.
4
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(In Thousands, Except Share Information, Unaudited)
THREE MONTHS ENDED YEAR ENDED
-------------------------------- --------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
NET INCOME BY SOURCES
Individual Products $ 78,749 $ 76,466 $ 316,493 $ 301,994
Annuity and Investment Products 21,663 20,007 82,892 76,416
Benefit Partners 16,664 19,953 86,722 70,736
Communications 17,711 16,606 57,624 54,410
Corporate and Other 9,447 10,270 27,628 32,689
-------------- -------------- -------------- --------------
Total reportable segment results 144,234 143,302 571,359 536,245
Realized investment gains (losses), net of taxes 5,478 2,361 7,247 26,462
-------------- -------------- -------------- --------------
Income before cumulative effect of change in
accounting principle 149,712 145,663 578,606 562,707
Cumulative effect of change in accounting for
long-duration contracts, net of taxes - - - (16,589)
-------------- -------------- -------------- --------------
Net income $ 149,712 $ 145,663 $ 578,606 $ 546,118
============== ============== ============== ==============
SHARE INFORMATION - ASSUMING DILUTION
Average number of shares outstanding 135,407,087 137,669,310 136,057,094 139,213,034
============== ============== ============== ==============
Income before realized gains (losses) and
cumulative effect of change in accounting
principle $ 1.07 $ 1.04 $ 4.20 $ 3.85
Realized investment gains (losses), net of taxes 0.04 0.02 0.05 0.19
-------------- -------------- -------------- --------------
Income before cumulative effect in change in
accounting principle 1.11 1.06 4.25 4.04
Cumulative effect of change in accounting
principle, net of taxes - - - (0.12)
-------------- -------------- -------------- --------------
Net income $ 1.11 $ 1.06 $ 4.25 $ 3.92
============== ============== ============== ==============
PERFORMANCE RATIOS (Annualized)
Return on average equity (1) 16.9% 17.9% 17.0% 16.8%
============== ============== ============== ==============
Dividend yield (2) 3.0% 3.0% 3.1% 2.9%
============== ============== ============== ==============
(1) Calculated as total reportable segment results, divided by average equity
(excluding accumulated other comprehensive income).
(2) Calculated as dividend paid per share, divided by the average market price
per share.
5
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AND COMMON SHARE DATA
(In Thousands, Except Share Information, Unaudited)
12/31/05 12/31/04
-------------- --------------
ASSETS
Cash and investments $ 28,140,618 $ 27,654,982
Accrued investment income 344,976 341,559
Due from reinsurers 1,317,925 1,341,389
Deferred policy acquisition costs 2,346,012 1,957,843
Value of business acquired 476,039 472,150
Goodwill 311,894 311,894
Other assets 673,233 651,614
Assets held in separate accounts 2,467,560 2,373,385
-------------- --------------
Total assets $ 36,078,257 $ 35,104,816
============== ==============
LIABILITIES
Policy liabilities $ 27,092,222 $ 26,165,901
Debt:
Commercial paper borrowings 260,254 187,692
Obligations under repurchase agreements 451,627 468,287
Notes payable 599,680 599,649
Junior subordinated debentures 309,279 309,279
Income tax liabilities 537,738 619,900
Accounts payable, accruals and other liabilities 443,023 446,852
Liabilities related to separate accounts 2,467,560 2,373,385
-------------- --------------
Total liabilities 32,161,383 31,170,945
-------------- --------------
STOCKHOLDERS' EQUITY
Common stock and paid in capital 185,766 180,572
Retained earnings 3,293,293 3,070,525
Accumulated other comprehensive income:
Net unrealized gains:
Bonds, net of DAC, VOBA and taxes 178,472 402,508
Equities, net of taxes 271,990 289,928
Other (12,647) (9,662)
-------------- --------------
Total accumulated other comprehensive income 437,815 682,774
-------------- --------------
Total stockholders' equity 3,916,874 3,933,871
-------------- --------------
Total liabilities and stockholders' equity $ 36,078,257 $ 35,104,816
============== ==============
SHARE INFORMATION
Shares outstanding 134,378,258 136,819,214
============== ==============
Book value per share $ 29.15 $ 28.75
============== ==============
Book value per share, excluding accumulated other
comprehensive income $ 25.89 $ 23.76
============== ==============
6
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands, Except Share Information, Unaudited)
THREE MONTHS ENDED YEAR ENDED
------------------------------- -------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
REVENUE
Premiums and other considerations $ 341,080 $ 332,902 $ 1,355,668 $ 1,292,612
Universal life and investment product charges 197,776 188,152 783,224 732,356
Net investment income 428,903 445,264 1,690,432 1,671,520
Realized investment gains (losses) 8,642 3,631 11,150 40,750
Communications sales 69,302 67,974 246,196 240,742
Broker-dealer concessions and other 34,517 30,136 133,037 124,169
-------------- -------------- -------------- --------------
Total revenue 1,080,220 1,068,059 4,219,707 4,102,149
-------------- -------------- -------------- --------------
BENEFITS AND EXPENSES
Insurance and annuity benefits 597,844 586,089 2,317,504 2,286,629
Insurance commissions, net of deferrals 65,334 61,304 262,857 250,317
General and administrative expenses, net of deferrals 43,418 49,925 177,193 183,011
Insurance taxes, licenses and fees 18,008 19,856 81,600 73,347
Amortization of policy acquisition costs and
value of business acquired 79,765 89,274 318,035 287,428
Interest expense 16,439 13,201 60,166 48,181
Communications operations 36,227 36,193 135,750 133,009
-------------- -------------- -------------- --------------
Total benefits and expenses 857,035 855,842 3,353,105 3,261,922
-------------- -------------- -------------- --------------
Income before income taxes and cumulative effect of
change in accounting principle 223,185 212,217 866,602 840,227
Income taxes 73,473 66,554 287,996 277,520
-------------- -------------- -------------- --------------
Income before cumulative effect of change in
accounting principle 149,712 145,663 578,606 562,707
Cumulative effect of change in accounting for
long-duration contracts, net of taxes - - - (16,589)
-------------- -------------- -------------- --------------
Net income $ 149,712 $ 145,663 $ 578,606 $ 546,118
============== ============== ============== ==============
SHARE INFORMATION - ASSUMING DILUTION
Average number of shares outstanding 135,407,087 137,669,310 136,057,094 139,213,034
============== ============== ============== ==============
Earnings per share before realized gains (losses) and
cumulative effect of change in accounting principle $ 1.07 $ 1.04 $ 4.20 $ 3.85
Realized investment gains (losses), net of taxes 0.04 0.02 0.05 0.19
-------------- -------------- -------------- --------------
Earnings per share before cumulative effect of change
in accounting principle 1.11 1.06 4.25 4.04
Cumulative effect of change in accounting principle,
net of taxes - - - (0.12)
-------------- -------------- -------------- --------------
Net income $ 1.11 $ 1.06 $ 4.25 $ 3.92
============== ============== ============== ==============
7
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands, Unaudited)
THREE MONTHS ENDED YEAR ENDED
-------------------------------- --------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 149,712 $ 145,663 $ 578,606 $ 546,118
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in policy liabilities 90,932 69,162 168,356 250,621
Net amount credited to (deducted from)
policyholder accounts (13,834) 24,377 (42,954) 78,362
Net deferral of policy acquisition costs and sales
inducements (60,629) (19,033) (270,007) (232,762)
Net amortization of value of business acquired 6,154 (21,323) 51,696 (2,847)
Group coinsurance assumed - - - 328,875
Other 14,619 (21,537) (10,150) 22,857
-------------- -------------- -------------- --------------
Net cash provided by operating activities 186,954 177,309 475,547 991,224
-------------- -------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities and loans purchased and sold (118,569) (168,745) (932,173) (1,644,185)
Other investing activities, net (5,015) (14,200) (46,393) (141,765)
-------------- -------------- -------------- --------------
Net cash used in investing activities (123,584) (182,945) (978,566) (1,785,950)
-------------- -------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder contract deposits 698,901 751,180 2,849,880 2,905,330
Policyholder contract withdrawals (575,667) (626,698) (2,294,312) (1,884,142)
Funding agreements issuance - - 300,000 -
Net borrowings (repayments) (11,671) (12,608) 55,902 200,806
Net issuance (repurchase) of common shares 13,943 12,551 (131,194) (213,161)
Cash dividends paid (55,994) (51,890) (220,586) (202,820)
Other financing activities, net 3,244 (4,433) 6,250 3,917
-------------- -------------- -------------- --------------
Net cash provided by financing activities 72,756 68,102 565,940 809,930
-------------- -------------- -------------- --------------
Net change in cash and cash equivalents 136,126 62,466 62,921 15,204
Cash and cash equivalents, beginning of period 13,767 24,506 86,972 71,768
-------------- -------------- -------------- --------------
Cash and cash equivalents, end of period $ 149,893 $ 86,972 $ 149,893 $ 86,972
============== ============== ============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION
Federal income taxes paid $ 30,439 $ 53,456 $ 218,848 $ 83,272
============== ============== ============== ==============
Interest paid $ 8,715 $ 3,838 $ 67,896 $ 45,608
============== ============== ============== ==============
8
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
INDIVIDUAL PRODUCTS
(In Thousands, Unaudited)
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 and performance measures
were:
THREE MONTHS ENDED YEAR ENDED
-------------------------------- --------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
REPORTABLE SEGMENT RESULTS
UL-Type Products:
Net investment income $ 191,484 $ 192,739 $ 751,591 $ 746,578
Interest credited to policyholders (126,584) (128,167) (509,004) (507,073)
-------------- -------------- -------------- --------------
Interest margin 64,900 64,572 242,587 239,505
-------------- -------------- -------------- --------------
Product charge revenue:
Cost of insurance charges 141,053 133,762 583,392 539,205
Expense charges 47,236 42,802 162,267 148,754
Surrender charges 8,045 10,389 32,977 40,663
-------------- -------------- -------------- --------------
Total product charge revenue 196,334 186,953 778,636 728,622
-------------- -------------- -------------- --------------
Death benefits and other insurance benefits (95,048) (73,803) (350,425) (312,799)
Expenses, excluding amortization of DAC and VOBA (17,965) (26,471) (83,579) (97,057)
Amortization of DAC and VOBA (50,847) (58,526) (193,765) (190,307)
Miscellaneous income (expense) (194) (222) (709) (793)
-------------- -------------- -------------- --------------
UL-type product income before taxes 97,180 92,503 392,745 367,171
-------------- -------------- -------------- --------------
Traditional Products:
Premiums and other considerations 36,503 36,963 145,620 152,260
Net investment income 36,267 38,976 145,668 153,726
Benefits (40,308) (42,771) (164,011) (172,822)
Expenses, excluding amortization of DAC and VOBA (7,528) (5,525) (28,348) (25,296)
Amortization of DAC and VOBA (4,600) (4,807) (15,601) (16,679)
-------------- -------------- -------------- --------------
Traditional product income before taxes 20,334 22,836 83,328 91,189
-------------- -------------- -------------- --------------
Reportable segment results before income taxes 117,514 115,339 476,073 458,360
Income taxes (38,765) (38,873) (159,580) (156,366)
-------------- -------------- -------------- --------------
Reportable segment results $ 78,749 $ 76,466 $ 316,493 $ 301,994
============== ============== ============== ==============
PERFORMANCE MEASURES
Annualized life insurance premium sales:
Individual Markets excluding Community Banks and BOLI $ 67,944 $ 63,212 $ 268,983 $ 210,779
Community Banks and BOLI 1,692 2,748 2,557 9,068
-------------- -------------- -------------- --------------
$ 69,636 $ 65,960 $ 271,540 $ 219,847
============== ============== ============== ==============
Average UL policyholder fund balances $ 11,783,292 $ 11,305,673 $ 11,591,299 $ 11,131,061
Average VUL separate account assets 1,793,562 1,595,509 1,715,226 1,535,282
-------------- -------------- -------------- --------------
$ 13,576,854 $ 12,901,182 $ 13,306,525 $ 12,666,343
============== ============== ============== ==============
Average face amount of insurance in force:
Total $ 167,831,000 $ 165,454,000 $ 166,861,000 $ 165,762,000
============== ============== ============== ==============
UL-Type Contracts $ 130,537,000 $ 127,638,000 $ 129,466,000 $ 126,876,000
============== ============== ============== ==============
Average assets $ 19,555,326 $ 18,629,895 $ 19,197,126 $ 18,292,475
============== ============== ============== ==============
9
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
ANNUITY AND INVESTMENT PRODUCTS
(In Thousands, Unaudited)
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 and performance measures were:
THREE MONTHS ENDED YEAR ENDED
------------------------------- --------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
REPORTABLE SEGMENT RESULTS
Investment product charges and premiums $ 3,319 $ 3,111 $ 12,523 $ 12,152
Net investment income 152,037 167,504 594,865 592,907
Broker-dealer concessions and other 32,369 28,147 124,765 112,618
-------------- -------------- -------------- --------------
Total revenue 187,725 198,762 732,153 717,677
-------------- -------------- -------------- --------------
Policy benefits (including interest credited) 103,244 118,549 403,681 426,141
Insurance expenses 20,117 22,546 83,377 67,958
Broker-dealer expenses 31,481 27,217 119,226 107,203
-------------- -------------- -------------- --------------
Total benefits and expenses 154,842 168,312 606,284 601,302
-------------- -------------- -------------- --------------
Reportable segment results before income taxes 32,883 30,450 125,869 116,375
Income taxes 11,220 10,443 42,977 39,959
-------------- -------------- -------------- --------------
Reportable segment results $ 21,663 $ 20,007 $ 82,892 $ 76,416
============== ============== ============== ==============
PERFORMANCE MEASURES
Fixed annuity premium sales $ 230,052 $ 304,416 $ 1,027,906 $ 1,217,408
Variable annuity premium sales 27 118 160 461
-------------- -------------- -------------- --------------
Total $ 230,079 $ 304,534 $ 1,028,066 $ 1,217,869
============== ============== ============== ==============
Funding agreements issuance $ - $ - $ 300,000 $ -
============== ============== ============== ==============
Investment product sales $ 1,336,187 $ 1,012,867 $ 5,328,956 $ 4,780,355
============== ============== ============== ==============
Average fixed policyholder fund balances $ 9,446,514 $ 9,382,128 $ 9,467,448 $ 9,169,098
Average separate account policyholder fund balances 272,791 315,188 289,976 332,250
Average funding agreement balances 300,000 - 187,500 -
-------------- -------------- -------------- --------------
$ 10,019,305 $ 9,697,316 $ 9,944,924 $ 9,501,348
============== ============== ============== ==============
Effective investment spreads for fixed annuities and
funding agreements 2.00% 2.00% 1.96% 1.76%
============== ============== ============== ==============
Effective investment spreads for fixed annuities and
funding agreements, excluding gross FAS 133
impact 1.96% 1.81% 1.90% 1.73%
============== ============== ============== ==============
FAS 133 adjustment, net of DAC effect and income
taxes $ 337 $ 1,794 $ 1,745 $ 961
============== ============== ============== ==============
Fixed annuity surrenders as a % of beginning fund
balance 15.8% 15.8% 16.2% 12.3%
============== ============== ============== ==============
Fixed annuity general and administrative expenses
as a % of average invested assets 0.22% 0.21% 0.20% 0.18%
============== ============== ============== ==============
Average assets $ 10,813,729 $ 10,491,585 $ 10,682,804 $ 10,359,786
============== ============== ============== ==============
10
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
BENEFIT PARTNERS
(In Thousands, Unaudited)
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 and performance measures were:
THREE MONTHS ENDED YEAR ENDED
------------------------------- -------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
REPORTABLE SEGMENT RESULTS
Premiums and other considerations $ 295,605 $ 288,807 $ 1,181,978 $ 1,113,250
Net investment income 24,833 23,607 96,834 88,866
-------------- -------------- -------------- --------------
Total revenue 320,438 312,414 1,278,812 1,202,116
-------------- -------------- -------------- --------------
Policy benefits 223,613 215,596 861,259 840,728
Expenses 71,188 66,121 284,135 252,563
-------------- -------------- -------------- --------------
Total benefits and expenses 294,801 281,717 1,145,394 1,093,291
-------------- -------------- -------------- --------------
Reportable segment results before income taxes 25,637 30,697 133,418 108,825
Income taxes 8,973 10,744 46,696 38,089
-------------- -------------- -------------- --------------
Reportable segment results $ 16,664 $ 19,953 $ 86,722 $ 70,736
============== ============== ============== ==============
PERFORMANCE MEASURES
Life, Disability and Dental annualized sales $ 80,763 $ 54,126 $ 261,377 $ 202,876
============== ============== ============== ==============
Premiums and other considerations:
Life $ 106,186 $ 110,600 $ 426,858 $ 422,991
Disability 126,373 115,120 487,434 428,668
Dental 33,171 34,079 130,560 133,813
Other 29,875 29,008 137,126 127,778
-------------- -------------- -------------- --------------
Total $ 295,605 $ 288,807 $ 1,181,978 $ 1,113,250
============== ============== ============== ==============
Reportable segment results:
Life $ 4,479 $ 11,470 $ 38,820 $ 30,395
Disability 7,159 6,494 38,611 35,604
Dental 3,476 1,850 6,106 4,000
Other 1,550 139 3,185 737
-------------- -------------- -------------- --------------
Total $ 16,664 $ 19,953 $ 86,722 $ 70,736
============== ============== ============== ==============
Loss ratios:
Life 77.3% 68.5% 69.7% 73.5%
Disability 75.5 77.4 71.7 72.9
Dental 65.6 73.1 73.5 76.8
Combined 75.0 73.0 71.1 73.7
Gross general and administrative expenses as a %
of premium income 10.9 10.6 10.1 10.1
Total expenses as a % of premium income 24.1 23.0 24.1 22.7
11
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
COMMUNICATIONS AND CORPORATE AND OTHER
(In Thousands, Unaudited)
Jefferson-Pilot Communications Company ("Communications") operates television
and radio broadcast properties and produces syndicated sports and entertainment
programming.
The Corporate and Other Segment includes 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.
Reportable segment results for Communications and Corporate and Other were:
THREE MONTHS ENDED YEAR ENDED
------------------------------- -------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
REPORTABLE SEGMENT RESULTS - COMMUNICATIONS
Communications revenues, net $ 69,302 $ 67,973 $ 246,571 $ 241,117
Cost of sales 16,628 15,080 50,344 47,779
Operating expenses 19,599 21,113 85,406 85,230
-------------- -------------- -------------- --------------
Broadcast cash flow 33,075 31,780 110,821 108,108
Depreciation and amortization 2,011 2,311 8,334 8,833
Corporate general and administrative expenses 1,125 2,040 5,822 7,285
Net interest expense and other 464 510 1,941 2,115
-------------- -------------- -------------- --------------
Reportable segment results before income taxes 29,475 26,919 94,724 89,875
Income taxes 11,764 10,313 37,100 35,465
-------------- -------------- -------------- --------------
Reportable segment results $ 17,711 $ 16,606 $ 57,624 $ 54,410
============== ============== ============== ==============
REPORTABLE SEGMENT RESULTS - CORPORATE AND OTHER
Earnings on investments and other income $ 24,735 $ 22,946 $ 103,031 $ 94,941
Interest expense on debt (16,418) (13,198) (60,124) (48,178)
Operating expenses 715 (4,567) (17,541) (20,718)
Income taxes 415 5,089 2,262 6,644
-------------- -------------- -------------- --------------
Reportable segment results 9,447 10,270 27,628 32,689
Realized investment gains, net of taxes 5,478 2,361 7,247 26,462
-------------- -------------- -------------- --------------
Reportable segment results, including realized
investment gains $ 14,925 $ 12,631 $ 34,875 $ 59,151
============== ============== ============== ==============
ASSETS BY SEGMENT
(In Millions, Unaudited)
12/31/05 12/31/04
-------------- --------------
ASSETS BY SEGMENT
Individual Products $ 19,672 $ 18,776
Annuity and Investment Products 10,794 10,504
Benefit Partners 1,937 1,839
Communications 224 223
Corporate and Other 3,451 3,763
-------------- --------------
Total assets $ 36,078 $ 35,105
============== ==============
12
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(In Millions, Except Share Information, Unaudited)
THREE MONTHS ENDED
----------------------------------------------------------------------------
12/31/05 9/30/05 6/30/05 3/31/05 12/31/04 9/30/04
---------- ---------- ---------- ---------- ---------- ----------
REVENUE
Individual Products $ 460.4 $ 454.9 $ 449.6 $ 455.9 $ 455.4 $ 437.4
Annuities and Investment Products 187.7 191.5 184.3 168.6 198.8 166.2
Benefit Partners 320.4 310.9 334.2 313.3 312.4 307.9
Communications 69.4 60.5 56.7 60.4 67.5 58.7
Corporate and Other 33.7 28.7 34.0 33.5 30.4 28.5
Realized investment gains (losses) 8.6 (7.4) 4.4 5.5 3.6 3.4
---------- ---------- ---------- ---------- ---------- ----------
Total revenues $ 1,080.2 $ 1,039.1 $ 1,063.2 $ 1,037.2 $ 1,068.1 $ 1,002.1
========== ========== ========== ========== ========== ==========
REPORTABLE SEGMENT RESULTS
Individual Products $ 78.7 $ 77.5 $ 75.9 $ 84.3 $ 76.5 $ 75.3
Annuities and Investment Products 21.7 24.0 15.6 21.7 20.0 17.6
Benefit Partners 16.7 15.0 21.3 33.8 20.0 19.7
Communications 17.7 13.9 15.0 11.0 16.6 13.5
Corporate and Other 9.4 5.2 6.1 6.9 10.2 5.5
---------- ---------- ---------- ---------- ---------- ----------
Total reportable segment results 144.2 135.6 133.9 157.7 143.3 131.6
Realized investment gains (losses),
net of taxes 5.5 (4.7) 2.9 3.5 2.4 2.2
---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of change in
accounting principle 149.7 130.9 136.8 161.2 145.7 133.8
Cumulative effect of change in
accounting principle, net of
taxes (1) - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 149.7 $ 130.9 $ 136.8 $ 161.2 $ 145.7 $ 133.8
========== ========== ========== ========== ========== ==========
PER SHARE - ASSUMING DILUTION
Earnings before realized gains (losses)
and cumulative effect of change in
accounting principle $ 1.07 $ 1.00 $ 0.98 $ 1.15 $ 1.04 $ 0.96
Realized investment gains (losses),
net of taxes 0.04 (0.03) 0.02 0.02 0.02 0.01
---------- ---------- ---------- ---------- ---------- ----------
Earnings before cumulative effect
of change in accounting principle 1.11 0.97 1.00 1.17 1.06 0.97
Cumulative effect of change in
accounting principle, net of
taxes (1) - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 1.11 $ 0.97 $ 1.00 $ 1.17 $ 1.06 $ 0.97
========== ========== ========== ========== ========== ==========
PERFORMANCE MEASURES
Return on average equity (2) 16.9% 16.2% 16.1% 19.2% 17.9% 16.9%
========== ========== ========== ========== ========== ==========
Market price per share (period end) $ 56.93 $ 51.17 $ 50.42 $ 49.05 $ 51.96 $ 49.66
========== ========== ========== ========== ========== ==========
Dividends paid per share $ 0.42 $ 0.42 $ 0.42 $ 0.38 $ 0.38 $ 0.38
========== ========== ========== ========== ========== ==========
Dividend yield (3) 3.0% 3.2% 3.3% 3.0% 3.0% 2.9%
========== ========== ========== ========== ========== ==========
THREE MONTHS ENDED
-------------------------------------
6/30/04 3/31/04 12/31/03
---------- ---------- ----------
REVENUE
Individual Products $ 443.8 $ 443.8 $ 444.3
Annuities and Investment Products 177.4 175.3 177.4
Benefit Partners 331.0 250.9 208.1
Communications 55.9 58.1 63.3
Corporate and Other 28.9 33.3 32.7
Realized investment gains (losses) 10.2 23.4 (42.8)
---------- ---------- ----------
Total revenues $ 1,047.2 $ 984.8 $ 883.0
========== ========== ==========
REPORTABLE SEGMENT RESULTS
Individual Products $ 75.2 $ 75.0 $ 80.4
Annuities and Investment Products 19.8 19.1 22.3
Benefit Partners 19.7 11.4 16.2
Communications 13.7 10.6 15.4
Corporate and Other 6.5 10.4 9.8
---------- ---------- ----------
Total reportable segment results 134.9 126.5 144.1
Realized investment gains (losses),
net of taxes 7.1 14.7 (27.8)
---------- ---------- ----------
Income before cumulative
effect of change in
accounting principle 142.0 141.2 116.3
Cumulative effect of change in
accounting principle, net of
taxes (1) - (16.6) -
---------- ---------- ----------
Net income $ 142.0 $ 124.6 $ 116.3
========== ========== ==========
PER SHARE - ASSUMING DILUTION
Earnings before realized gains (losses)
and cumulative effect of change in
accounting principle $ 0.97 $ 0.89 $ 1.01
Realized investment gains (losses),
net of taxes 0.05 0.10 (0.19)
---------- ---------- ----------
Earnings before cumulative effect
of change in accounting principle 1.02 0.99 0.82
Cumulative effect of change in
accounting principle, net of
taxes (1) - (0.12) -
---------- ---------- ----------
Net income $ 1.02 $ 0.87 $ 0.82
========== ========== ==========
PERFORMANCE MEASURES
Return on average equity (2) 17.4% 16.2% 18.6%
========== ========== ==========
Market price per share (period end) $ 50.80 $ 55.01 $ 50.65
========== ========== ==========
Dividends paid per share $ 0.38 $ 0.33 $ 0.33
========== ========== ==========
Dividend yield (3) 2.8% 2.5% 2.7%
========== ========== ==========
(1) 1Q04 reflects a $3.7 million impact of adoption of SOP 03-1 implementation
guidance issued in 3Q04.
(2) Calculated as total reportable segment results (annualized), divided by
average equity (excluding accumulated other comprehensive income).
(3) Calculated as dividend paid per share (annualized), divided by the average
market price per share.
13
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
INVESTMENT PORTFOLIO ANALYSIS
(In Thousands, Unaudited)
12/31/05 12/31/04
---------------------------------- ----------------------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------- -------------- -------------- --------------
INVESTED ASSETS COMPOSITION
Cash and cash equivalents $ 149,893 0.5% $ 86,972 0.3%
Bonds 22,169,835 78.8 22,081,106 79.8
Preferred stocks 12,577 - 15,247 0.1
Common stocks, unaffiliated 617,909 2.2 647,941 2.3
Mortgages loans, net 3,981,960 14.2 3,667,291 13.3
Real estate, net 124,154 0.4 124,973 0.5
Policy loans and other 1,084,290 3.9 1,031,452 3.7
-------------- -------------- -------------- --------------
Total invested assets $ 28,140,618 100.0% $ 27,654,982 100.0%
============== ============== ============== ==============
TOTAL FIXED INCOME PORTFOLIO YIELD-TO-MATURITY 6.13% 6.25%
BOND PORTFOLIO COMPOSITION
U.S. government $ 246,639 1.1% $ 265,204 1.2%
Mortgage-backed 2,549,342 11.5 2,358,141 10.7
Private placements 5,108,980 23.0 5,126,255 23.2
Public - corporates 14,264,874 64.4 14,331,506 64.9
-------------- -------------- -------------- --------------
Total bonds $ 22,169,835 100.0% $ 22,081,106 100.0%
============== ============== ============== ==============
Yield-to-maturity 5.97% 6.04%
Average life 7.62yrs 7.55yrs
Duration 5.25 5.23
Average quality A3 A3
BOND PORTFOLIO QUALITY
NAIC Rating S&P Equivalent
----------- --------------
1 AAA - A $ 12,903,056 58.2% $ 12,472,670 56.5%
2 BBB 7,932,487 35.8 8,309,596 37.6
3-6 BB and lower 1,334,292 6.0 1,298,840 5.9
-------------- -------------- -------------- --------------
Total Bonds $ 22,169,835 100.0% $ 22,081,106 100.0%
============== ============== ============== ==============
FIXED MATURITY SECURITIES
Gross unrealized gains $ 713,180 $ 1,119,001
Gross unrealized losses (245,547) (65,951)
-------------- --------------
Net unrealized gains $ 467,633 $ 1,053,050
============== ==============
MORTGAGE LOAN PORTFOLIO
Yield-to-maturity 6.97% 7.29%
Average maturity 7.22yrs 7.09yrs
Total delinquent loans and loans in foreclosure,
at amortized cost $ - $ 5,987
Delinquent loans as a percentage of mortgage loans -% 0.16%
Net book value of real estate acquired in satisfaction
of mortgage indebtedness $ 5,967 $ 3,700
THREE MONTHS ENDED YEAR ENDED
-------------------------------- --------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
REALIZED INVESTMENT GAINS (LOSSES)
Stock gains $ - $ 13,200 $ 19,331 $ 95,563
Stock losses - (640) (1,223) (4,768)
Bond gains 7,512 5,671 35,425 36,808
Bond losses from sales and calls (5,619) (5,754) (19,726) (36,436)
Bond losses from writedowns (2,540) (9,741) (34,986) (58,463)
Other gains (losses), net 9,633 (216) 14,030 6,339
-------------- -------------- -------------- --------------
Total pretax gains (losses) 8,986 2,520 12,851 39,043
Amortization of DAC, VOBA and deferred sales inducements (344) 1,111 (1,701) 1,707
Income taxes (3,164) (1,270) (3,903) (14,288)
-------------- -------------- -------------- --------------
Realized investment gains (losses), net of taxes $ 5,478 $ 2,361 $ 7,247 $ 26,462
============== ============== ============== ==============
14
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
INSURANCE SEGMENTS' EXPENSE AND DAC AND VOBA ANALYSIS
(In Thousands, Unaudited)
THREE MONTHS ENDED YEAR ENDED
-------------------------------- --------------------------------
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- -------------- --------------
INSURANCE SEGMENT EXPENSE ANALYSIS
Individual Products:
Commissions $ 81,565 $ 78,460 $ 341,279 $ 276,703
General and administrative expenses 38,027 33,250 134,035 122,786
Taxes, licenses and fees 8,915 12,467 45,529 44,340
-------------- -------------- -------------- --------------
Total commissions and expenses incurred 128,507 124,177 520,843 443,829
Less: commissions and expenses capitalized (103,014) (92,181) (408,916) (321,476)
Amortization of DAC and VOBA 55,447 63,333 209,366 206,986
-------------- -------------- -------------- --------------
Net expense $ 80,940 $ 95,329 $ 321,293 $ 329,339
============== ============== ============== ==============
Annuity and Investment Products:
Insurance companies:
Commissions - insurance companies $ 15,358 $ 19,744 $ 65,183 $ 76,225
General and administrative expenses 8,247 6,089 26,081 21,292
Taxes, licenses and fees 723 999 2,844 2,783
-------------- -------------- -------------- --------------
Gross commissions and expenses incurred 24,328 26,832 94,108 100,300
Less: commissions and expenses capitalized (17,980) (22,778) (76,148) (85,398)
Amortization of DAC and VOBA 13,769 18,493 65,417 53,056
-------------- -------------- -------------- --------------
Net expense - insurance companies 20,117 22,547 83,377 67,958
-------------- -------------- -------------- --------------
Broker/Dealer:
Commissions 27,455 24,092 106,487 95,447
Other 4,026 3,125 12,739 11,756
-------------- -------------- -------------- --------------
Net expense - broker/dealer 31,481 27,217 119,226 107,203
-------------- -------------- -------------- --------------
Net expense $ 51,598 $ 49,764 $ 202,603 $ 175,161
============== ============== ============== ==============
Benefit Partners:
Commissions $ 32,553 $ 31,118 $ 134,971 $ 125,103
General and administrative expenses 32,222 30,635 118,797 112,232
Taxes, licenses and fees 7,924 7,361 30,743 25,981
-------------- -------------- -------------- --------------
Total commissions and expenses incurred 72,699 69,114 284,511 263,316
Less: commissions and expenses capitalized (12,057) (10,437) (43,619) (38,123)
Amortization of DAC and VOBA 10,546 7,444 43,243 27,370
-------------- -------------- -------------- --------------
Net expense $ 71,188 $ 66,121 $ 284,135 $ 252,563
============== ============== ============== ==============
DAC AND VOBA ANALYSIS
Balance, beginning of period $ 2,703,953 $ 2,386,071 $ 2,429,993 $ 2,230,444
Cumulative effect of change in accounting principle - - - 1,864
Group coinsurance assumed - - - 37,445
Amount capitalized 133,050 125,395 528,872 445,173
Amortization expense (79,765) (89,274) (318,035) (287,428)
Adjustment for realized capital gains and losses (329) 1,012 (1,647) 1,888
Adjustment for FAS 115 65,142 6,789 182,868 607
-------------- -------------- -------------- --------------
Balance, end of period $ 2,822,051 $ 2,429,993 $ 2,822,051 $ 2,429,993
============== ============== ============== ==============
15
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SHAREHOLDER INFORMATION
Listed NYSE: JP
- ---------------
Composite Stock Price and Dividends (Adjusted for 50% stock dividend effected
- -----------------------------------
04/09/01)
High Low Close Cash Dividend
-------- -------- -------- --------------
4Q05 $ 57.83 $ 50.59 $ 56.93 $ 0.418
3Q05 51.25 49.00 51.17 0.418
2Q05 51.39 47.11 50.42 0.418
1Q05 52.49 47.17 49.05 0.380
2004 56.39 46.00 51.96 1.470
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
- -----------------
www.jpfinancial.com
16