Item 1. Business.
(a) General Development of Business
Registrant was incorporated under the business laws of the State of North
Carolina in 1968 for the purpose of serving as a holding company with broad
powers to engage in business and to make investments. Registrant's principal
subsidiaries are: Jefferson-Pilot Life Insurance Company, Jefferson-Pilot
Fire & Casualty Company, Jefferson-Pilot Title Insurance Company and
Jefferson-Pilot Communications Company, all of Greensboro, North Carolina.
Through these and other subsidiaries, Registrant is primarily engaged in the
business of writing life, annuity, accident and health, property and casualty,
and title insurance, and in the business of operating radio and television
facilities.
Various states, including North Carolina, have enacted insurance holding
company legislation which requires the registration of, and periodic reporting
by insurance companies licensed to transact business within their respective
jurisdictions and which are controlled by other corporations. All of the
common stock of Jefferson-Pilot Life Insurance Company, Jefferson-Pilot Fire &
Casualty Company and Jefferson-Pilot Title Insurance Company is owned by
Jefferson-Pilot Corporation. They are, therefore, by statutory definition,
members of an "insurance holding company system", and have registered as such
under all applicable state statutes. In many instances, these state statutes
require prior approval by state insurance regulators of inter-corporate
transfers of assets (including prior approval of payment of extraordinary
dividends by insurance subsidiaries) within the holding company system.
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(b) Financial Information about Industry Segments
Industry segment information is presented in Note 13, Segment Information
of the Notes to Consolidated Financial Statements, which note is incorporated
herein by reference.
Premiums derived from the principal products and services of Registrant's
insurance subsidiaries and revenues from the Communications segment for the
years ended December 31, 1993, 1992, and 1991 are as follows (in thousands):
1993 1992 1991 Life insurance segment: Individual life and annuity premiums $ 106,073 $ 99,431 $ 93,231 Group life premiums 64,337 65,741 65,664 Interest-sensitive product considerations 63,353 57,954 55,133 Other considerations 6,433 6,908 16,341
Life premiums and other considerations $ 240,196 $ 230,034 $ 230,369
Accident and health premiums 386,608 383,552 382,624
$ 626,804 $ 613,586 $ 612,993 ========= ========= =========
Other insurance segment, casualty and title insurance premiums $ 43,044 $ 44,815 $ 45,270 ========= ========= =========
Communications segment, broadcast and media services revenue $ 144,961 $ 129,734 $ 125,045 ========= ========= =========
(c) Narrative Description of Business
The following is a brief description of the principal wholly-owned
subsidiaries of Registrant with a description of the principal products
provided and services rendered and the markets for, and methods of,
distribution of such products and services.
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INSURANCE COMPANY SUBSIDIARIES
Jefferson-Pilot Life Insurance Company
Jefferson-Pilot Life was organized under the insurance laws of North
Carolina in 1890 and commenced business operations in 1903. It is authorized
to write insurance in 43 states, the District of Columbia, the Virgin Islands
and Puerto Rico.
The Company is primarily engaged in the writing of whole life, term, and
endowment policies on an individual ordinary basis and group life and group
accident and health insurance. Accident and health insurance is also written
on an individual basis. Approximately 13% of the ordinary life insurance in
force is on a participating basis; all group life is written on a non-
participating basis.
Life Insurance. Life policies offered include continuous and limited-pay
life and endowment policies, universal life-type and annuity contracts,
retirement income plans, and level and decreasing term insurance. On most
policies, accidental death and disability benefits are available in the form
of riders. At times, sub-standard risks are accepted at higher premiums. At
December 31, 1993, approximately 4.4% of the ordinary insurance in force,
including reinsurance ceded, was represented by sub-standard risks.
The Company markets its individual products through a general agency type
system utilizing career agents and home service agents, and through Individual
Marketing Organizations (IMO's). IMO's are intermediaries that sell financial
products and services through agents they have recruited. Thirty IMO's have
been appointed representing approximately 3,300 life insurance agents. Group
products are marketed through group brokers, career agents, and home service
agents. Individual health products are marketed through all of the Company's
sales forces and brokers.
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The following table sets forth for the years ended December 31, 1993,
1992, and 1991, certain information relating to the life insurance operations
of Jefferson-Pilot Life:
1993 1992 1991
(Percent)
Voluntary terminations to mean amount of life insurance policies in force: Whole life, endowment and term 8.1 8.9 10.5 Group life 19.4 4.2 13.3 Industrial life 3.1 3.4 3.5
Actual to expected mortality: Whole life, endowment and term 38.4 36.7 38.0 Group life 95.9 90.8 85.4 Industrial life 45.4 45.7 48.7
Life insurance underwriting expense (1) to premium income (2): Industrial 84.9 89.1 81.6 Ordinary Life (4) 34.8 37.0 37.8 Annuities (4) 7.4 7.6 7.6 Credit life (3) N/A N/A 43.7 Group life 11.3 9.5 10.3 Group A & H 15.9 15.2 14.2 Credit A & H (3) N/A N/A 40.4 Other A & H 44.9 48.0 44.8
(1) Underwriting expense consists of commissions, general insurance expenses, insurance taxes (other than income), licenses and fees, and increase in loading on due and deferred premiums. NAIC basis.
(2) Does not include amounts received for supplementary contracts or considerations for deposit administration funds. NAIC basis.
(3) The company no longer writes any form of credit insurance.
(4) 1991 percentages have been restated to report ordinary life and annuity amounts separately.
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Accident and Health Insurance. Jefferson-Pilot Life writes a major part
of its accident and health policies on a group basis. Of the individuals
covered during 1993, approximately 92.7% were written on a group basis and
7.3% on an individual basis. Group insurance is generally issued to employers
covering their employees and to associations covering their members.
The following table sets forth certain information on the NAIC basis with
regard to the operating results of the accident and health business of
Jefferson-Pilot Life for the years ended December 31, 1993, 1992, and 1991.
The allocation of net investment income and general expenses to accident and
health business has been made by the management of Jefferson-Pilot Life using
allocation methods believed reasonable:
1993 1992 1991 (In Thousands)
Premium Income: Individual $ 28,248 $ 25,781 $ 24,022 Group 358,360 357,771 358,602 Total 386,608 $383,552 $382,624
Allocated Net Investment Income: Individual $ 3,564 $ 3,216 $ 2,883 Group 26,982 26,811 26,467 Total 30,546 $ 30,027 $ 29,350
Claims and Reserve Increase: Individual $ 17,772 $ 15,895 $ 13,955 Group 288,049 301,955 311,801 Total 305,821 $317,850 $325,756
Underwriting Expenses: Individual $ 11,461 $ 11,164 $ 9,779 Group 55,935 53,218 47,650 Total 67,396 $ 64,382 $ 57,429
Net Income Before Income Taxes: Individual $ 2,579 $ 1,938 $ 3,171 Group 41,358 29,409 25,618 Total $ 43,937 $ 31,347 $ 28,789
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The following table sets forth certain underwriting information with
regard to the accident and health business of Jefferson-Pilot Life for the
years ended December 31, 1993, 1992 and 1991, on the NAIC basis:
1993 1992 1991 (Dollar Amounts In Thousands)
Net premiums written $387,084 $383,114 $388,994 Net premiums earned $387,000 $384,677 $386,892 Ratio of loss and loss adjustment expenses incurred to earned premiums 79.11% 82.91% 84.26% Ratio of underwriting expenses incurred to premiums written 17.42% 16.82% 15.80% Combined loss and expense ratio 96.53% 99.73% 100.06% Underwriting margins $ 13,391 $ 1,320 $( 560)
Jefferson-Pilot Fire & Casualty Company and Jefferson-Pilot Title Insurance Company
Jefferson-Pilot Fire & Casualty Company, a North Carolina corporation
with its home office in Greensboro, North Carolina, and its wholly-owned
subsidiaries, Southern Fire & Casualty Company, a Tennessee corporation and
Jefferson-Pilot Property Insurance Company, a North Carolina Corporation, both
with their home offices in Greensboro, North Carolina, offer a full line of
fire, and property and casualty insurance, including homeowners, commercial
multiple peril, inland marine, worker's compensation, automobile and general
liability. Jefferson-Pilot Fire & Casualty Company is licensed in 14 states;
Southern Fire & Casualty Company is licensed in 13 states, and Jefferson-Pilot
Property Insurance Company is licensed in 4 states.
Jefferson-Pilot Title Insurance Company, Greensboro, North Carolina,
incorporated under the laws of North Carolina in 1962, is engaged in the
business of writing title insurance. It is licensed in 7 states.
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Other Information Regarding Insurance Company Subsidiaries
Regulation. Jefferson-Pilot Life, Jefferson-Pilot Fire & Casualty,
Southern Fire & Casualty, Jefferson-Pilot Property and Jefferson-Pilot Title,
in common with other insurance companies, are subject to regulation and
supervision in the States in which they do business. Although the extent of
such regulation varies from state to state, generally the insurance laws of
the States concerned establish supervisory agencies with broad administrative
powers relating to the granting and revocation of licenses to transact
business, the licensing of agents, the approval of the forms of policies used,
the form and content of required financial statements, reserve requirements,
and, in general, the conduct of all insurance activities.
The Companies are also required under these laws to file detailed
annual reports with the supervisory agencies in the various states in which
they do business, and their business and accounts are subject to examination
at any time by such agencies. Under the rules of the National Association of
Insurance Commissioners and the laws of the State of North Carolina, these
Companies are examined periodically (usually at three-year intervals) by the
supervisory agencies of one or more of the states in which they do business.
Competition. All insurance subsidiaries of Registrant operate in a highly
competitive field which consists of a large number of stock, mutual and other
types of insurers. A large number of established insurance companies compete
in the states in which the Companies transact business. Many of these
competing companies are mutual companies, which are considered by some to have
an advantage because of the fact that such companies write participating
policies exclusively, under which profits may inure to the benefit of the
policyholder. Jefferson-Pilot Life provides participating policies which are
believed to be generally competitive with analogous policies offered by mutual
companies.
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Employees. As of December 31, 1993, the insurance subsidiaries of the
Registrant employed approximately 3,000 agents and employees, in addition to
the 3,300 IMO agents mentioned previously.
COMMUNICATIONS COMPANY SUBSIDIARIES
Jefferson-Pilot Communications Company is a wholly-owned subsidiary of
Registrant and is a corporation organized under the laws of North Carolina,
with principal offices at 100 North Greene Street in Greensboro, North
Carolina. The Company owns and operates (i) VHF television station WBTV and
radio stations WBT and WBT-FM in Charlotte, North Carolina, (ii) radio
stations WQXI in Atlanta and WSTR-FM in Smyrna, Georgia, (iii) radio stations
KYGO and KYGO-FM in Denver and KWMX and KWMX-FM in Lakewood, Colorado, (iv)
radio stations WMRZ in South Miami, WLYF-FM in Miami, and WMXJ-FM in Pompano
Beach, Florida, (v) radio stations KSON and KSON-FM in San Diego, California,
(vi) a sports production and syndication business, and (vii) a co-op
advertising consulting business.
Jefferson-Pilot Communications Company of Virginia, a Virginia
corporation with principal offices at 5710 Midlothian Turnpike, Richmond,
Virginia, is a wholly-owned subsidiary of Jefferson-Pilot Communications Company
that owns and operates VHF television station WWBT in Richmond, Virginia.
WCSC, Inc., a South Carolina corporation with principal offices at
485 East Bay Street, Charleston, South Carolina, is a wholly-owned subsidiary
of Jefferson-Pilot Communications Company that owns and operates VHF television
station WCSC in Charleston, South Carolina.
Jefferson-Pilot Data Services, Inc., a North Carolina corporation, with
principal offices at 785 Crossover Lane, Memphis, Tennessee, is a wholly-owned
subsidiary of Registrant, and is engaged in data processing services and in
providing computer equipment, software, and services to broadcast stations,
advertising agencies, and station national sales representative clients.
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Television Operations
The television stations owned and operated by Jefferson-Pilot
Communications Company and its subsidiaries are WBTV, Charlotte, North
Carolina; WWBT, Richmond, Virginia; and WCSC, Charleston, South Carolina.
WBTV, Channel 3, Charlotte, is affiliated with CBS under a Network
Affiliation Agreement expiring on December 31, 1998. Absent cancellation by
either party, the Agreement will be renewed for successive two-year periods.
An estimated 769,000* television homes view WBTV each week within the
Charlotte Television Market, which is ranked as the 30th* television market in
the nation by the Arbitron Ratings Company. Four other commercial television
stations are licensed to the Charlotte metropolitan area.
WWBT, Channel 12, Richmond, is affiliated with NBC under a Network
Affiliation Agreement expiring August 15, 1995. Absent cancellation by either
party, the Agreement will be renewed for successive two-year periods. An
estimated 475,000* television homes view WWBT each week within the Richmond
Television Market, which is ranked as the 61st* television market in the
nation. Four other commercial television stations are licensed to that market.
WCSC, Channel 5, Charleston, is affiliated with CBS under a Network
Affiliation Agreement expiring on December 31, 1998. Absent cancellation by
either party, the Agreement will be renewed for successive two-year periods.
An estimated 279,000* television homes view WCSC each week within the
Charleston Television Market, which is ranked as the 106th* television market
in the nation. Four other commercial television stations are licensed to
that market.
*Arbitron Ratings/Television, November, 1993.
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Radio Operations
Jefferson-Pilot Communications Company owns and operates WBT and WBT-FM
in Charlotte, WQXI in Atlanta and WSTR-FM in Smyrna, KYGO and KYGO-FM in
Denver, KWMX and KWMX-FM in Lakewood (a Denver suburb), KSON and KSON-FM in
San Diego, WMRZ in South Miami, WLYF in Miami and WMXJ-FM in Pompano Beach.
Each of these stations is authorized to operate 24 hours a day, and all
normally operate for the full 24 hours.
Other Information Regarding Communications Companies
Competition. The radio and television stations of Jefferson-Pilot
Communications Company and its subsidiaries, Jefferson-Pilot Communications
Company of Virginia, and WCSC, Inc., compete for revenues with other radio
and television stations in their respective market areas as well as with other
advertising media. Jefferson-Pilot Communications Company's non-broadcast
divisions compete with other vendors of similar products and services.
Employees. As of December 31, 1993, Jefferson-Pilot Communications
Company and its subsidiaries employed approximately 625 persons full time,
and Jefferson-Pilot Data Services, Inc. employed approximately 225 persons.
Federal Regulation. Television and radio broadcasting operations are
subject to the jurisdiction of the Federal Communications Commission ("FCC")
under the Communications Act of 1934 (the "Act"). The Act empowers the FCC,
among other things, to issue, revoke or modify broadcasting licenses, to
assign frequencies, to determine the locations of stations, to regulate the
apparatus used by stations, to establish areas to be served, to adopt such
regulations as may be necessary to carry out the provisions of the Act, and to
impose certain penalties for violation of such regulations. The Act, and
Regulations issued thereunder, prohibit the transfer of a license, or of
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control of a licensee without prior approval of the FCC; restrict in various
ways the common and multiple ownership of broadcast facilities; restrict alien
ownership of licenses; and impose various other strictures on ownership and
operation.
Broadcasting licenses are granted for a period of five years for
television and seven years for radio and, upon application therefor and in the
absence of conflicting applications or adverse claims as to the licensee's
qualifications or performance, are normally renewed by the FCC for an
additional term. The licenses currently in effect will expire as follows:
WBTV 12/1/96; WBT and WBT-FM 12/1/95; WQXI and WSTR-FM 4/1/96; KYGO AM/FM and
KWMX AM/FM 4/1/97; WMRZ, WLYF and WMXJ 2/1/96; KSON-AM/FM 12/1/97; WWBT
10/1/96; and WCSC 12/1/96.
(d) Foreign Operations
Substantially all of Registrant's and subsidiaries operations are
conducted within the United States.
Item 2.
Item 2. Properties
Registrant utilizes space and personnel of its wholly-owned subsidiary,
Jefferson-Pilot Life.
Jefferson-Pilot Life's home office consists of a 20-story building and
an adjacent 17-story building. These structures house insurance operations
and provide a substantial amount of space for commercial leasing.
Jefferson-Pilot Life also owns a supply and printing facility, a parking deck,
and a computer center, all located on nearby properties. The life insurance
company also owns 278 acres in Guilford County, North Carolina, near
Greensboro. This was the former home office of Pilot Life Insurance Company.
In addition, Jefferson-Pilot Life owns an Employees' Club located in north-
western Guilford County, North Carolina, with approximately 500 acres of land
surrounding the Club.
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Jefferson-Pilot Communications Company owns its radio and television
studios and office buildings in Charlotte, North Carolina. It also owns the
radio studios and office buildings in Denver, Colorado and Miami, Florida.
The radio studios and offices are leased in Atlanta, Georgia and San Diego,
California, as are the television studios and offices in Charleston, South
Carolina. Jefferson-Pilot Communications Company of Virginia owns a television
studio and office building in Richmond, Virginia.
Item 3.
Item 3. Legal Proceedings
Environmental Proceedings
There are no material administrative proceedings against the Company
involving environmental matters.
Litigation
The Registrant is involved in various claims and lawsuits incidental to
its business. In the opinion of management, the ultimate liability will not
have a material effect on the financial condition of the Company.
Note 14, Commitments and Contingent Liabilities of the Notes to
Consolidated Financial Statements, contains further information and is
incorporated herein by reference.
Item 4.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
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Part II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
(a) Market Information
Shares of Jefferson-Pilot Corporation are traded on the New York, Midwest, and Pacific Stock Exchanges under the symbol JP. High and low sales prices for the past three years are listed below.
1993 1992 1991 First Quarter 57 7/8 - 45 1/2 39 1/4 - 33 1/4 29 3/8 - 22 7/8 Second Quarter 57 3/4 - 46 44 - 35 1/2 29 7/8 - 27 5/8 Third Quarter 57 7/8 - 48 5/8 43 - 38 1/2 34 3/8 - 28 3/8 Fourth Quarter 54 - 45 3/4 49 1/2 - 37 1/8 39 1/8 - 32 1/2
(b) Number of Security Holders
As of March 2, 1994, the Registrant had 9,819 shareholders.
(c) Dividend History
1993 1992 1991 1990 1989
Cash dividends paid: $ 75,986 $ 66,310 $ 56,120 $ 53,139 $ 50,610 ======== ======== ======== ======== ======== Cash dividends paid per share:
First Quarter .34 .28 .25 .23 .21 Second Quarter .39 .34 .28 .25 .23 Third Quarter .39 .34 .28 .25 .23 Fourth Quarter .39 .34 .28 .25 .23
Total $ 1.51 $ 1.30 $ 1.09 $ .98 $ .90 ======== ======== ======== ======== ========
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Item 6.
Item 6. Selected Financial Data
SUMMARY OF SELECTED FINANCIAL DATA (In Thousands Except Per Share Information)
1993 1992 1991 1990 1989 Operating income before effect of initial application of FAS 106 $ 181,952 $ 171,240 $ 153,128 $ 138,962 $ 126,264 Accumulated post- retirement benefit obligation at 1-1-93, net (24,109) 0 0 0 0
Operating income 157,843 171,240 153,128 138,962 126,264 Realized investment gains, net of appli- cable income taxes 37,329 31,998 22,559 18,675 11,427
Net income $ 195,172 $ 203,238 $ 175,687 $ 157,637 $ 137,691 =========== =========== =========== =========== ===========
Income per share of common stock:
Operating income before effect of initial application of FAS 106 $ 3.62 $ 3.36 $ 2.98 $ 2.59 $ 2.23 Effect of initial application of FAS 106 (.48) .00 .00 .00 .00 Realized investment gains, net of taxes .74 .63 .44 .35 .20
Net income $ 3.88 $ 3.99 $ 3.42 $ 2.94 $ 2.43 =========== =========== =========== =========== =========== Average shares outstanding 50,251,676 50,952,147 51,319,143 53,636,223 56,588,878 =========== =========== =========== =========== ===========
Total assets $ 5,640,621 $ 5,256,762 $ 4,945,396 $ 4,474,523 $ 4,543,474 =========== =========== =========== =========== ===========
Stockholders' equity $ 1,733,071 $ 1,668,210 $ 1,544,461 $ 1,334,434 $ 1,456,109 =========== =========== =========== =========== =========== Stockholders' equity per share of common stock $ 35.04 $ 33.07 $ 30.11 $ 25.77 $ 25.98 =========== =========== =========== =========== ===========
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Selected Financial Data (continued)
Total assets prior to 1993 were adjusted to reflect the adoption of Financial Accounting Standard (FAS) 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts." The amounts shown for 1992 to 1989 were increased by $20,925,000, $20,176,000, $19,615,000, and $13,886,000, respectively, compared to amounts previously reported.
Stockholders' equity was adjusted to reflect adoption of FAS 109 "Accounting for Income Taxes." The amounts shown for 1992 to 1989 were all decreased by $18,555,000 compared to amounts previously reported. Stockholders' equity per share reflects these adjustments, also.
REVENUE BY SOURCES (In Thousands)
1993 1992 1991 1990 1989 Life and accident and health insurance $ 986,972 $ 965,862 $ 956,426 $ 946,262 $ 936,599 Casualty and title insurance 51,462 53,907 53,472 55,164 50,307 Communications 144,961 129,734 125,045 127,330 126,990 Other 6,282 4,656 4,570 5,656 9,074 Realized investment gains 56,947 48,170 33,963 28,201 17,228
Revenues $1,246,624 $1,202,329 $1,173,476 $1,162,613 $1,140,198 ========== ========== ========== ========== ==========
NET INCOME BY SOURCES (In Thousands)
1993 1992 1991 1990 1989 Life and accident and health insurance $ 158,242 $ 156,588 $ 146,205 $ 128,153 $ 109,329 Casualty and title insurance 7,957 7,027 2,554 6,232 4,927 Communications 17,335 14,169 10,327 10,019 12,505 Other ( 1,582) ( 6,544) ( 5,958) ( 5,442) ( 497) Realized investment gains, net of taxes 37,329 31,998 22,559 18,675 11,427 Accumulated post- retirement benefit obligation, net ( 24,109) 0 0 0 0
Net income $ 195,172 $ 203,238 $ 175,687 $ 157,637 $ 137,691 ========== ========== ========== ========== ==========
II-3
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity
The Company's liquidity requirements are met primarily by cash flows from the operations of Jefferson-Pilot Life Insurance Company (JPLIFE) and other consolidated subsidiaries. Primary sources of cash from subsidiary operations are premiums, other insurance considerations, investment income and communications revenue. Primary uses of cash in subsidiary operations include payment of insurance benefits, operating expenses and costs related to acquiring new insurance business. Net cash provided by operations on a consolidated basis approximated $160 million, $156 million and $177 million in 1993, 1992 and 1991, respectively.
Dividends paid to the parent company approximated $103 million in 1993, $128 million in 1992 and $129 million in 1991. While all significant subsidiaries generally pay dividends to the parent company, JPLIFE continues to be its primary source of dividends, and therefore of cash. Dividends that the insurance subsidiaries may pay without prior regulatory approval are subject to statutory limitation. In addition, life insurance companies became subject to risk-based capital requirements beginning in 1993. Neither of these factors are expected to represent practical restrictions on the dividend payment practices or other activities of the parent company in the foreseeable future.
Proceeds from maturities, redemptions and sales of debt securities, mortgage loan repayments and proceeds from sales of equity securities are the primary sources of cash from investing activities. Continuing a trend related to overall interest rate declines, issuer calls and prepayments increased in 1993. This circumstance, combined with scheduled maturities and sales of certain debt securities expected to be called, resulted in cash proceeds from debt securities transactions approximating $940 million in 1993, compared to $375 million in 1992 and $266 million in 1991. Scheduled maturities for 1994 are less than the levels experienced in the three most recent years. While prediction of future calls and prepayments is complicated by interest rate uncertainties, the Company expects them to continue at some level during 1994.
Net cash used in investing activities approximated $400 million in 1993, $221 million in 1992 and $228 million in 1991. Reflected for each year are reinvestment of the proceeds from investment transactions, investment of net proceeds from JPLIFE's policyholder contract deposits and investment of net cash provided by current operating activities over that used to pay stockholder dividends and reacquire the Company's common stock. During 1993, the Company also redirected certain short-term investments, primarily cash equivalents, into longer duration investments.
The Company continues to select investments based on a disciplined strategy focused on long-term performance objectives. Consistent with that strategy, investments acquired during 1993 consisted primarily of investment
II-4
grade debt securities, mortgage loans of quality and diversification comparable to those previously held, and common stock issues offering acceptable relationships between risk and potential total return. Continuing a three-year trend, the Company increased its investment in new mortgage loans during 1993 to approximately $86 million, compared to $60 million in 1992 and $41 million in 1991. The trend reflects an increase in lending opportunities that are acceptable under the Company's standards. The cost of common stock investments acquired in 1993 approximated $65 million. This increase over 1992 and 1991 levels is primarily due to a dividend-roll program. Provision has been made for declines in value of debt securities considered other than temporary and for estimated unrecoverable amounts related to the mortgage loan portfolio. Debt securities and mortgage loans representing credit problems continue to fall below industry averages.
The Company's overall investment management strategy encompasses both internal objectives and external circumstances. Its business plan emphasizes growth of the life insurance and other core businesses, achievement of which will require investment of liquid resources. The Company monitors and evaluates securities market conditions and specific external circumstances that may impact individual investment holdings. Asset/liability management strategies may require action in response to such factors as interest rate changes and the effect thereof on prepayment risk. The above-described factors may result in future sales of selected debt securities prior to maturity. In connection with a process begun in 1993, and continuing into 1994, the Company expects that a significant portion of its debt securities will be designated as available for sale in response to these factors. In the first quarter of 1994, the Company will adopt SFAS 115. Under SFAS 115, all equity securities and debt securities classified as available for sale will be stated at value in the consolidated balance sheets. Since classification of the Company's debt securities is not complete, the effect of SFAS 115 on the stated amount of debt securities and the corresponding effects on deferred income tax liabilities, equity and other balance sheet amounts have not yet been determined. Adoption of SFAS 115 will increase the stated amount of equity securities held by the parent company as of January 1, 1994 by $70 million, with associated increases of $28 million in deferred income tax liabilities and $42 million in stockholders' equity.
During 1993, the Company utilized an uncommitted bank line of credit in application of its asset/liability management strategies. The line permits the Company to request aggregate advances totaling up to $100 million until October 1994. Maximum utilization of the line approximated $40 million during the year and interest expense was not material. Management expects to increase the utilization of external financing sources as considered appropriate and consistent with its investment management and growth strategies.
The Company has historically reacquired its own common stock whenever management considers it prudent. Cash used in connection with that strategy approximated $51 million in 1993, $36 million in 1992 and $18 million in 1991. The Company expects to continue reacquiring its common stock when considered appropriate, with the extent of those acquisitions to be determined based on securities market conditions and other relevant factors.
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Capital Resources
Consolidated stockholders' equity as of December 31, 1993 amounted to $1.733 billion, compared to $1.668 billion in 1992 and $1.544 billion in 1991 as restated for the effect of adopting SFAS 109 on deferred income tax liabilities. After tax unrealized gains on equity securities included in the preceding amounts approximated $332 million in 1993, $335 million in 1992 and $311 in 1991. The Company regards the regulatory capital status of its insurance subsidiaries, with due consideration to the risk-based capital requirements which became effective for life insurance companies in 1993, to be extremely strong. Management considers existing capital resources to be adequate for the Company's present needs and its business plan places priority on redirecting capital resources presently considered under-utilized into more productive business activities.
The Company has no outstanding long-term debt and is not a party to an agreement under which significant long-term financing might be provided by an outside party in the future. The Company leases data processing equipment and field office locations, generally under noncancelable lease terms of three to five years. Financing and capital resources considerations are not critical to the decision making process involving leasing activities.
Cash dividends to stockholders amounted to $78.1 million in 1993, $69.1 million in 1992 and $57.4 million in 1991. The Company has consistently returned cash dividends to its stockholders and expects to continue to do so in the future. Capital resources requirements are not expected to represent practical restrictions on future dividend payment plans.
Results of Operations - 1993 Compared to 1992
Premiums and other insurance considerations increased by $11.4 million in 1993, to approximately $670 million. The 1993 growth is attributable to individual life premiums and related considerations which increased by 8% over 1992 amounts and improved upon a recent annual growth trend of less than 2% per year. The increase results from implementation of various aspects of the Company's current business plan. Accident and health and casualty and title premiums remained substantially stable during 1993, with the former increasing and the latter decreasing modestly. Net investment income increased by $8.7 million (2.4%) during 1993, with the increase in the debt securities investment base offsetting the effects of a lower interest rate environment. Communications revenue increased by $15.2 million over 1992, to about $145 million, due primarily to a combination of the improved economic environment and measures taken to strengthen the market position of certain broadcast properties, including acquisitions in new and previously existing markets. Realized investment gains increased to $56.9 million in 1993, compared to $48.2 million in 1992, with call premiums and gains from sales of debt securities expected to be called more than offsetting a provision for other than temporary decline in value of certain debt securities ($8 million) and reduced gains on sales of common stocks.
Life insurance benefits and other credits to policyholders increased from $279 million in 1992 to $296 million in 1993 (6%), with much of the
II-6
increase attributable to interest credited on interest-sensitive products. Accident and health benefits continued to decline, decreasing from approximately $318 million in 1992 to approximately $306 million in 1993 and reflect the continued emphasis on underwriting and claims management effectiveness. Casualty and title claims decreased by about $2 million in 1993, as reinsurance recoveries on incurred losses more than offset an increase in incurred losses before reinsurance.
Expenses other than those related to communications operations remained basically flat in 1993 as compared to 1992, reflecting the ongoing benefit of the Company's containment program. A significant consolidation of field offices undertaken in 1993 helped to reduce field office expenses for the year in addition to improving marketing efficiency. Expenses of the communications businesses increased by approximately $12 million due primarily to promotional expenses incurred to strengthen market position, charges related to aged syndicated programming and operating costs of newly acquired properties.
Income taxes as a percent of before tax income increased to 31.9% in 1993, compared to 28.8% in 1992. The increase resulted from a combination of an increase in the federal tax rate (from 34% to 35%) prescribed by the 1993 Act and the beneficial effect on 1992 income taxes of recoveries and reductions of previously provided amounts related to prior tax assessments.
Consolidated net income for 1993 reflects a charge of $24.1 million, net of deferred tax benefit, for the cumulative effect of adopting SFAS 106, which required the Company to provide for the cost of postretirement health care and life insurance benefits provided to retirees during the period of their service to the Company instead of on a cash basis after their retirement. The amount of this charge is consistent with the Company's previously reported estimate.
Before the cumulative effect charge, consolidated after-tax income increased by approximately $16 million during 1993, to $219.3 million. Each of the Company's significant business activities made some contribution to the current year increase. Approximate increases by major business activity, exclusive of realized investment gains were as follows: life and accident and health insurance $2 million, casualty and title insurance $1 million, communications $3 million, and corporate level activities $5 million (primarily through expense reductions). The balance of the 1993 increase in consolidated pre-SFAS 106 income ($5 million) is attributable to the increase in realized investment gains.
Results of Operations - 1992 Compared to 1991
Premiums and other insurance considerations were $658 million in both 1992 and 1991, with revenue from life, accident and health and other insurance products remaining substantially stable. Net investment income for 1992 increased by $8.1 million over 1991, due primarily to increased investment in debt securities. Revenue from communications operations increased by $4.7 million, to $129.7 million during 1992 due to overall improvement in advertising market conditions and the 1992 elections. Call premiums on debt securities and an increase of $20.3 million in gains from sales of common stocks contributed to a net increase in realized investment gains of $14.2 million, to $48.2 million, during 1992.
II-7
Insurance benefits decreased 2.4% from $642.5 million in 1991 to $627.1 million in 1992. The primary contributing factors were a reduction in surrender benefits of $8.7 million and a reduction in casualty benefits of $6.6 million. The reduction in surrender benefits during 1992 continued a trend which began in 1985, and was favorably affected by declining interest rates. The reduction in casualty benefits reflects an improvement in loss experience, which was due in part to more selective underwriting practices. Increases in general and administrative expenses of the insurance businesses and communications operating expenses during 1992 were modest, reflecting ongoing aggressive expense management. Effective income tax rates for 1992 and 1991 were consistent, with each year benefitting from recoveries of amounts paid and reductions of amounts previously provided for prior year tax assessments.
On a consolidated basis, net income increased from $175.7 million in 1991 to $203.2 million in 1992 ($27.5 million). Each of the Company's principal business activities contributed to the increase in net income, with net income from the core business of life and accident and health insurance increasing by $10.4 million, net income from other insurance operations increasing by $4.5 million and net income from communications operations increasing by $3.8 million. The balance of the increase in net income during 1992 is attributable to realized investment gains.
II-8
Item 8.
Item 8. Financial Statements and Supplementary Data
II-9
Financial statements and notes included on pages 29 through 49 of
the Annual Report of Jefferson-Pilot Corporation to its shareholders for
the year ended December 31, 1993, are incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
II-10
Part III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors
The information included under the heading "Election of Directors,"
of the Proxy Statement of Jefferson-Pilot Corporation to its shareholders,
in connection with the Annual Meeting to be held on May 2, 1994 (the "Proxy
Statement"), is incorporated herein by reference. Louis C. Stephens, Jr.,
age 72, whose term as a director will expire at the May 2, 1994 Annual
Meeting of Shareholders (the "Annual Meeting"), has served as a director
since 1970. Mr. Stephens is not currently serving in another position or
office with Jefferson-Pilot Corporation. There are no arrangements or
understandings between any director and any other person pursuant to which
such director was or is to be selected as a director or nominee.
(b) Identification of Executive Officers
The following is a list of Jefferson-Pilot Corporation executive
officers, their ages and positions, as of March 7, 1994:
Name Age Position (Date elected to position)
David A. Stonecipher 52 President and Chief Executive Officer (March 1, 1993); Director
William E. Blackwell 61 Executive Vice President (May 5, 1986); Director
C. Randolph Ferguson 48 Senior Vice President (May 1, 1989); Director
Dennis R. Glass 44 Senior Vice President, Chief Financial Officer and Treasurer (October 18, 1993)
John D. Hopkins 56 Senior Vice President and General Counsel (April 19, 1993); Secretary (January 1, 1994)
III-1
Kenneth C. Mlekush 55 Senior Vice President (February 8, 1993)
John T. Still, III 46 Senior Vice President - Corporate Development (May 5, 1986)
E. Jay Yelton 54 Senior Vice President (October 18, 1993)
Dean F. Chatlain 43 Vice President and Tax Counsel (February 13, 1989)
Gary L. McGuirk 49 Vice President - Internal Auditing (January 1, 1992)
Jimmy W. Shoffner 55 Vice President and Assistant Treasurer (May 4, 1992)
J. Allen Wyatt 48 Vice President - Corporate Planning (May 1, 1989)
There are no arrangements or understandings between any executive officer
and any other person pursuant to which such executive officer was or is to
be selected as an officer. All executive officers hold office at the will
of the Board.
(c) Identification of Certain Significant Employees
None.
(d) Family Relationships
There are no family relationships among the officers, directors or
nominees.
(e) Business Experience
Directors and Nominees - The information included under the heading
"Election of Directors," of the Proxy Statement is incorporated herein by
reference. Louis C. Stephens, Jr., whose term as a director will expire
at the Annual Meeting, has been retired since December, 1986. Prior
thereto, he served as Vice President of Jefferson-Pilot Corporation and
President of Pilot Life Insurance Company.
III-2
Executive Officers - Messrs. Blackwell, Ferguson, Still, Chatlain,
and McGuirk have served in various executive capacities with
Jefferson-Pilot Corporation over the past five years. Information on
Mr. Stonecipher, set forth under the heading "Election of Directors" of
the Proxy Statement, is incorporated herein by reference. For the past
five years, Mr. Wyatt has served in various executive capacities with
either Jefferson-Pilot Corporation or Jefferson-Pilot Life Insurance
Company (wholly-owned by Jefferson-Pilot Corporation). For the past five
years, Mr. Shoffner has served in various executive capacities with
Jefferson-Pilot Life Insurance Company. Mr. Glass joined Jefferson-Pilot
Corporation in October, 1993. From 1991 to October, 1993, he was associated
with Protective Life Corp., having last served as Executive Vice President
and CFO of that company. From 1983 to 1991, he was associated with
The Portman Companies, having last served that company as Executive Vice
President and CFO. Mr. Hopkins joined Jefferson-Pilot Corporation in
April, 1993 and for more than five years prior thereto was a partner in the
Atlanta law firm of King & Spalding. Mr. Mlekush joined Jefferson-Pilot
Corporation in January, 1993. From February, 1989 until December, 1992,
he was associated with Southland Life Insurance Company and its parent,
GeorgiaUS, having last served as President and Chief Operating Officer
of Southland Life and Executive Vice President of GeorgiaUS. Prior to
February, 1989, he was associated with Sun Life Insurance Company of
America, Inc., having last served as Senior Vice President-Marketing.
Mr. Yelton joined Jefferson-Pilot Corporation in October, 1993 and for
more than five years prior thereto was President of The Investment Centre.
III-3
(f) Involvement in Certain Legal Proceedings
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability or integrity of any executive officer, director or nominee during the
past five years.
Compliance With Section 16(a)
Information under the heading "Election of Directors," of the Proxy
Statement, relating to delinquent filers under Section 16(a) of the Exchange
Act of 1934, is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation
The information included under the heading "Executive Compensation" of
the Proxy Statement is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The information included under the heading "Principal Shareholders" of
the Proxy Statement is incorporated herein by reference.
(b) Security Ownership by Management
Information included under the heading "Election of Directors" of the
Proxy Statement is incorporated herein by reference. In addition, the
following table sets forth information regarding the ownership of Jefferson-
Pilot Corporation's common stock, as of March 7, 1994, by named executive
officers who are not currently acting as directors:
III-4
Name of Beneficial Amount and Nature of Owner Beneficial Ownership Percent of Class
W. Roger Soles 113,943 **
Kenneth C. Mlekush 25,420* **
John D. Hopkins 25,500* **
Thomas Fee 41,286 **
*The number of shares owned for each of Messrs. Mlekush and Hopkins assumes
that options held by each of them covering shares of common stock in the
following amounts, which are exercisable within 60 days of March 7, 1994,
have been exercised: Mr. Mlekush - 25,000; Mr. Hopkins - 22,500.
**Less than one percent (1%) of the Corporation's outstanding common stock.
(c)Change in Control
The Company knows of no contractual arrangements which may at a
subsequent date result in a change in control of the Company.
Item 13.
Item 13. Certain Relationships and Related Transactions
The information included under the heading "Compensation Committee
Interlocks and Insider Participation" of the Proxy Statement is incorporated
herein by reference.
III-5
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) -- The responses to these portions of Item 14 are submitted as a separate section of this report. (See.) (3) - See List and Index of Exhibits on page of this report.
(b) There were no reports on Form 8-K for the three months ended December 31, 1993.
(c) Exhibits are submitted as a separate section of this report. (See.)
(d) Financial Statement Schedules -- The response to this portion of Item 14 is submitted as a separate section of this report. (See .)
Undertakings
For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statements on Form S-8 Nos. 2-36778 (filed March 23, 1970) and 2-56410 (filed May 12, 1976) and 33-30530 (filed August 15, 1989), and in outstanding effective registration statements on Form S-16 included in such S-8 filings:
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
IV-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JEFFERSON-PILOT CORPORATION (Registrant)
BY (SIGNATURE) David A. Stonecipher (NAME AND TITLE) David A. Stonecipher, President (Principal Executive Officer)
BY (SIGNATURE) Dennis R. Glass (NAME AND TITLE) Dennis R. Glass, Senior Vice President and Treasurer (Principal Financial Officer)
March 29, 1994 (DATE)
BY (SIGNATURE) Thomas M. Belk (NAME AND TITLE) Thomas M. Belk, Director DATE March 29, 1994
BY (SIGNATURE) William E. Blackwell (NAME AND TITLE) William E. Blackwell, Director DATE March 29, 1994
BY (SIGNATURE) Edwin B. Borden (NAME AND TITLE) Edwin B. Borden, Director DATE March 29, 1994
BY (SIGNATURE) William H. Cunningham (NAME AND TITLE) William H. Cunningham, Director DATE March 29, 1994
BY (SIGNATURE) C. Randolph Ferguson (NAME AND TITLE) C. Randolph Ferguson, Director DATE March 29, 1994
BY (SIGNATURE) Robert G. Greer (NAME AND TITLE) Robert G. Greer, Director DATE March 29, 1994
IV-2
SIGNATURES (continued)
BY (SIGNATURE) A. Linwood Holton, Jr. (NAME AND TITLE) A. Linwood Holton, Jr., Director DATE March 29, 1994
BY (SIGNATURE) (NAME AND TITLE) Hugh L. McColl, Jr., Director DATE March 29, 1994
BY (SIGNATURE) Charles W. McCoy (NAME AND TITLE) Charles W. McCoy, Director DATE March 29, 1994
BY (SIGNATURE) E. S. Melvin (NAME AND TITLE) E. S. Melvin, Director DATE March 29, 1994
BY (SIGNATURE) (NAME AND TITLE) William P. Payne, Director DATE March 29, 1994
BY (SIGNATURE) Donald S. Russell, Jr. (NAME AND TITLE) Donald S. Russell, Jr., Director DATE March 29, 1994
BY (SIGNATURE) Robert H. Spilman (NAME AND TITLE) Robert H. Spilman, Chairman DATE March 29, 1994
BY (SIGNATURE) Louis C. Stephens, Jr. (NAME AND TITLE) Louis C. Stephens, Jr., Director DATE March 29, 1994
BY (SIGNATURE) Martha A. Walls (NAME AND TITLE) Martha A. Walls, Director DATE March 29, 1994
IV-3
List of Financial Statements and Financial Statement Schedules
Financial Statements: The following financial statements and independent auditor's report included in the Annual Report of Jefferson-Pilot Corporation to its shareholders for the year ended December 31, 1993 are incorporated herein by reference. With the exception of the aforementioned information and the information incorporated by reference in Items 1 (b), 3, 8 and 14 (a) 1 and 2 herein, the 1993 Annual Report to shareholders is not deemed to be filed as part of this report.
Annual Report -Pages-
Independent Auditor's Report 29 Consolidated Balance Sheets as of December 31, 1993 and 1992 30 - 31 Consolidated Statements of Income for the Years Ended December 31, 1993, 1992 and 1991 32 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1993, 1992 and 1991 33 Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 34 Notes to Consolidated Financial Statements 35 - 49
Financial Statement Schedules: Form 10-K -Pages-
Independent Auditor's Report on Schedules
Schedule I - Summary of Investments - Other Than Investments in Related Parties -
Schedule III - Financial Statements of Jefferson-Pilot Corporation: Balance Sheets as of December 31, 1993 and 1992 - Statements of Income for the Years Ended December 31, 1993, 1992, and 1991 Statements of Cash Flows for the Years Ended December 31, 1993, 1992, and 1991 Notes to Financial Statements -
Schedule V - Supplementary Insurance Information -
Schedule VI - Reinsurance -
Schedule IX - Short Term Borrowings
List and Index of Exhibits -
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.
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
To the Board of Directors Jefferson-Pilot Corporation Greensboro, North Carolina
In connection with our audits of the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries as of December 31, 1993 and 1992 and for each of the three years in the period ended December 31, 1993, which are referred to in our report dated February 4, 1994 and incorporated herein by reference, we also audited schedules I, III, V, VI and IX contained herein.
In our opinion, these schedules present fairly, in all material respects, the information required to be set forth therein in conformity with generally accepted accounting principles.
McGLADREY & PULLEN
Greensboro, North Carolina February 4, 1994
(Continued)
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES (CONTINUED)
December 31, 1993
(a) Cost of debt securities is original cost, reduced by repayments and adjusted for amortization of premiums and accrual of discounts. Cost of equity securities is original cost. Cost of mortgage loans on real estate and policy loans represents aggregate outstanding balances. Cost of real estate acquired by foreclosure is the originally capitalized amount, reduced by applicable depreciation. Cost of other real estate held for investment is depreciated original cost.
(b) Differences between cost reflected in Column B and amounts at which shown in the consolidated balance sheet reflected in Column D result from valuation allowances and declines in value that are other than temporary.
(c) This line includes common stocks held by the parent company which are stated in the consolidated balance sheet at cost of $4,653,937 and have a market value of $74,754,000.
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS OF JEFFERSON-PILOT CORPORATION
December 31, 1993 and 1992 SCHEDULE III
ASSETS 1993 1992
Cash and investments: Cash and cash equivalents $ 10,174 $ 110,287,387
Short-term investments $ 3,065,000 $ 42,248,230
Debt securities (Note 2) $ 140,660,581 $ -
Equity securities (Note 2) $ 4,653,937 $ 5,349,112
Investments in subsidiaries (Note 2): Jefferson-Pilot Life Insurance Company $1,434,964,119 $1,369,488,992 Jefferson-Pilot Fire & Casualty Company 68,219,638 62,715,522 Jefferson-Pilot Title Insurance Company 25,778,108 24,761,516 Jefferson-Pilot Communications Company 54,656,615 47,985,284 Jefferson-Pilot Data Services, Inc. 14,728,420 16,918,145 Other subsidiaries
$1,606,261,034 $1,527,085,481
Other investments $ 1,625,729 $ 996,995
Total cash and investments $1,756,276,455 $1,685,967,205
Amounts due from subsidiaries 38,374,033 3,311,263
Other assets $ 11,649,353 $ 2,367,321
$1,806,299,841 $1,691,645,789 ============== ==============
See Notes to Condensed Financial Statements.
(Continued)
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS OF JEFFERSON-PILOT CORPORATION (continued)
December 31, 1993 and 1992 SCHEDULE III
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1992
Liabilities: Notes payable (Note 3) $ 39,700,000 $ - Accounts payable and accrued expenses 14,238,466 $ 6,283,997 Dividends payable 19,291,000 17,152,000
Total liabilities $ 73,229,466 $ 23,435,997
Commitments and contingent liabilities (Note 4)
Stockholders' equity (Notes 2, 5 and 6): Common stock, par value $1.25 per share, authorized 150,000,000 shares; issued 1993 49,464,495 shares; 1992 50,438,907 shares $ 61,830,619 $ 63,048,634 Retained earnings, including equity in undistributed net income of subsidiaries 1993 $1,220,151,215; 1992 $1,133,356,587 1,339,671,590 1,270,342,008 Equity in net unrealized gains on equity securities held by insurance subsidiaries less deferred income taxes 1993 $176,201,659; 1992 $170,852,455 331,568,166 334,819,150
$1,733,070,375 $1,668,209,792
$1,806,299,841 $1,691,645,789 ============== ==============
See Notes to Condensed Financial Statements.
See Notes to Condensed Financial Statements.
See Notes to Condensed Financial Statements.
JEFFERSON-PILOT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS OF JEFFERSON-PILOT CORPORATION
SCHEDULE III
Note 1. Basis of Presentation and Significant Accounting Policies
The accompanying financial statements comprise a condensed presentation of the financial position, results of operations, and cash flows of Jefferson-Pilot Corporation (the "Company") on a separate-company basis. These condensed financial statements do not include the accounts of the Company's majority-owned sub- sidiaries, but instead include the Company's investment in those subsidiaries, stated at amounts which are substantially equal to the Company's equity in the subsidiaries' net assets. Therefore the accompanying financial statements are not those of the primary reporting entity. The consolidated financial statements of the Company and its subsidiaries are included in the Jefferson-Pilot Corporation Annual Report to Shareholders for the year ended December 31, 1993.
Short-term investments are stated at cost which approximates value. Debt securities are stated at amortized cost, and equity securities are stated at cost. Other significant accounting policies of the Company and its subsidiaries are as set forth in Note 1 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
Note 2. Investment Information
Debt securities held by the Company consist of U.S. Treasury notes maturing in the years 2000 through 2003 and have aggregate fair value approximating $139,000,000.
Equity securities held by the Company have aggregate market value approximating $74,754,000 in 1993 and $56,900,000 in 1992, resulting in unrealized gains of $70,100,000 and $51,551,000, respectively. Since the equity securities are stated at cost, related unrealized gains are not reflected in the accompanying balance sheets.
Net unrealized gains on equity securities held by insurance subsidiaries, reduced by the subsidiaries' related deferred income tax liabilities, are included in the carrying amount of the Company's investments in those subsidiaries with corresponding credits included in stockholders' equity.
Note 3. Notes Payable
Information about notes payable is contained in Note 5 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
Note 4. Commitments and Contingent Liabilities
Information about commitments and contingent liabilities involving the Company and its subsidiaries is contained in Notes 11 and 14 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
Note 5. Common Stock and Stock Options
Information about common stock and stock options is contained in Note 6 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
Note 6. Retained Earnings
Information about certain limitations affecting the amount of dividends that the insurance subsidiaries may pay to the Company without the approval of the Insurance Commissioner of the State of North Carolina is contained in Note 7 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
Note 7. Other Investment Income
Other investment income consists principally of interest on cash equivalents, short-term investments, and debt securities and dividends on investments in common stocks. Interest from subsidiaries included in other investment income was not material in any year presented.
Note 8. Income Taxes (Benefits)
During 1993, the Company and its subsidiaries adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109). Information about the requirements of SFAS 109 is contained in Note 9 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
As disclosed in the above-mentioned consolidated financial statements, the Company and its subsidiaries elected to restate prior year financial statements to give retroactive effect to the new income tax accounting standards under SFAS 109. Accordingly, retained earnings as of December 31, 1992, as reported in the accompanying balance sheet, has been reduced by $18,555,593, with corresponding reductions in the carrying amount of investments in subsidiaries and deferred income tax assets (included with other assets) of $16,858,938 and $1,696,655, respectively. Statements of income for 1992 and 1991 have not been restated because the SFAS 109 standards had negligible effect on net income for those years.
Income taxes (benefits) as reported in the statements of income differ from the amounts which result from applying the maximum federal income tax rates of 35% in 1993 and 34% in 1992 and 1991 to income before income taxes and equity in undistributed earnings of subsidiaries. The predominant reason for the difference is elimination of dividends from subsidiaries in arriving at income subject to income taxes. Net deferred income tax assets as of December 31, 1993 and 1992 are not material and have been included with other assets. The deferred components of income taxes (benefits) was not material in any year presented.
The Company pays the federal income taxes indicated on its consolidated federal income tax return and collects from subsidiaries the amounts which the subsidiaries would have paid had they filed separate returns (or pays to them the benefits resulting from including their losses in the return).
Information about untaxed life insurance company income and the status of the Company and its subsidiaries with respect to federal income tax return examinations is contained in Note 9 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
Note 9. Postretirement Benefit Plans
Information about postretirement benefit plans sponsored by the Company and its subsidiaries is contained in Note 10 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
The effect of adopting SFAS 106 "Employers' Accounting for Post- retirement Benefits Other Than Pensions" during 1993 is reflected primarily in equity in undistributed net income of subsidiaries, as are substantially all postretirement benefits expenses.
Note 10. New Accounting Standards
Information about accounting standards issued during 1993 which will, or may have, an effect on the Company's financial statements and those of its subsidiaries when adopted is contained in Note 2 to the consolidated financial statements of Jefferson-Pilot Corporation and subsidiaries which are included in the Annual Report to Shareholders for the year ended December 31, 1993.
One of the new standards is SFAS 115 "Accounting for Certain Investments in Debt and Equity Securities", which will be effective for the Company's 1994 financial statements. Among the requirements of SFAS 115 will be that the Company's equity securities be stated at market value. Adoption of SFAS 115 as of January 1, 1994 will increase the stated
amount of equity securities held by the Company by $70,100,000, with corresponding credits of approximately $28,040,000 to deferred income tax liabilities and $42,060,000 to stockholders' equity. The effect of adopting SFAS 115 on the carrying amounts of debt securities and investments in subsidiaries has not yet been determined since the required classification of debt securities held by the Company and its subsidiaries is not complete.
(continued)
SCHEDULE V - CONTINUED
(a) The life insurance segment is the Company's only insurance industry segment which meets the criteria for segment information disclosure contained in SFAS 14 "Financial Reporting for Segments of a Business Enterprise." Therefore, information related to other insurance operations (property and casualty and title insurance) has been combined with information related to life insurance operations for purposes of this schedule.
(b) Future policy benefits include a provision for liabilities related to life and annuity and accident and health business. Future policy benefits as of December 31, 1992 and 1991 have been restated and increased by $12,993,000 and $11,100,000, respectively, to reflect the adoption of SFAS 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" during 1993.
(c) Other policy claims and benefits payable include dividend accumu- lations and other policyholder funds on deposit, policy and contract claims (life and annuity and accident and health), dividends for policyholders, casualty insurance unearned premiums and losses payable, and other policy liabilities. Other policy claims and benefits payable as of December 31, 1992 and 1991 have been restated and increased by $7,932,000 and $9,076,000 respectively, to reflect the adoption of SFAS 113 during 1993.
(d) Benefits, claims, losses, and settlement expenses for 1992 and 1991 have been increased by $16,997,000 and $16,598,000, respectively, to reflect the reclassification of dividends to participating policyholders for conformity with 1993 presenta- tion.
(e) Expenses related to the management and administration of investments have been netted with investment income in the determination of net investment income. Such expenses amounted to $10,945,000 in 1993, $10,553,000 in 1992 and $10,285,000 in 1991.
Other operating expenses for 1992 and 1991 have been reduced by $16,997,000 and $16,598,000, respectively, to reflect the reclassification of dividends to participating policyholders to Column H "Benefits, Claims, Losses, and Settlement Expenses" for conformity with 1993 presentation.
(f) Consists of net premiums written on property and casualty insurance only. Does not apply to life insurance or title insurance.
(continued)
SCHEDULE VI - CONTINUED
(a) Included with life insurance premiums are premiums on ordinary life insurance products and mortality charges on interest- sensitive products.
(b) Percentage of amount assumed to net is computed by dividing the amount in Column D by the amount in Column E.
(a) Notes payable represent unsecured bank borrowings under an uncommitted line of credit established in 1993. The Company may request aggregate advances of up to $100 million through October 1994.
(b) The average amount outstanding during the period was computed on the basis of daily balances.
(c) The weighted average interest rate during the period was computed by dividing actual interest expense by the average amount outstanding during the period.
List and Index of Exhibits
Reference Number Per Exhibit Table Description of Exhibit -Page-
(3) (i) Articles of Incorporation and amendments - thereto were included in Form 10-K for the year ended December 31, 1991. Such Form is incorporated herein by reference.
(ii) By-laws as currently in effect were - included in Form 10-K for the year ended December 31, 1992. Such Form is incorporated herein by reference.
(4) Rights Agreement dated as of August 1, 1988 - between Jefferson-Pilot Corporation and First Union National Bank (incorporated by reference to Exhibit 1 to Report on Form 8-K dated August 5, 1988).
(10) The following contracts and plans:
(i) Employment contract, as amended to - date, between the Registrant and W. Roger Soles, a former officer of Registrant, was included in Form 10-K for the year ended December 31, 1992, and incorporated herein by reference.
(ii) Employment contract, between the - Registrant and David A. Stonecipher, an officer of the Registrant, was included in Form 10-K for the year ended December 31, 1992, and is incorporated herein by reference.
(iii) Employment contract, between the - Registrant and Kenneth C. Mlekush, an officer of the Registrant, was included in Form 10-K for the year ended December 31, 1992, and is incorporated herein by reference.
List and Index of Exhibits (continued)
(iv) Incentive Compensation 1993 was - included in Form 10-K for the year ended December 31, 1992, and is incorporated herein by reference.
(v) The summary of the long term - incentive plan payments included under the heading "Incentive and Reward" of the Proxy Statement is incorporated herein by reference.
(vi) Employment contract between the - Registrant and John D. Hopkins, an officer of the Registrant (Provided as part of the electronic filing).
(vii) Employment contract between the - Registrant and Dennis R. Glass, an officer of the Registrant (Provided as part of the electronic filing).
(viii) Employment contract between the - Registrant and E. J. Yelton, an officer of the Registrant (Provided as part of the electronic filing).
(11) Basis For Computation of Per Share Earnings (Provided as part of the electronic filing).
(13) Portion of Annual Report to Shareholders - (Provided as part of the electronic filing).
List and Index of Exhibits (continued)
(21) Subsidiaries of the Registrant - (Provided as part of the electronic filing).
(23) Accountant's Consent (Provided as part of the electronic filing).