FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number 1-8052
TORCHMARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 63-0780404
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2001 3rd Avenue South, Birmingham, Alabama 35233
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 325-4200
NONE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No____
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT APRIL 30, 1995
Common Stock, $1.00 Par Value 71,568,887
<PAGE>
TORCHMARK CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Cash Flow
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
TORCHMARK CORPORATION
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
March 31, December 31
----------- -----------
1995 1994
Assets ----------- -----------
- - - - - - ------
Investments:
Fixed maturities, available for sale, at fair
value (amortized cost: 1995 - $4,661,683
1994 - $4,634,594) $4,581,028 $4,392,259
Equity securities, at fair value
(cost: 1995 - $35,783; 1994 - $35,985) 27,553 31,547
Mortgage loans, at cost (estimated fair
value: 1995 - $17,522; 1994 - $17,956) 17,562 17,997
Investment real estate, at depreciated cost 164,157 132,554
Policy loans 183,550 181,988
Energy investments 330,550 330,543
Other long-term investments (at fair value) 37,132 35,933
Short-term investments 110,885 112,776
----------- ----------
Total investments 5,452,417 5,235,597
Cash 7,066 2,758
Investment in unconsolidated subsidiaries 165,872 86,386
Accrued investment income 71,515 67,116
Other receivables 226,139 223,811
Deferred acquisition costs 1,032,336 1,017,467
Value of insurance purchased 265,771 274,124
Property and equipment 88,881 103,806
Goodwill 566,729 570,455
Other assets 49,651 106,911
Separate account assets 781,006 715,203
----------- ----------
Total assets $8,707,383 $8,403,634
=========== ==========
Liabilities and Shareholders' Equity
- - - - - - ------------------------------------
Liabilities:
Future policy benefits $4,301,261 $4,229,916
Unearned and advance premiums 90,927 90,871
Policy claims and other benefits payable 200,716 201,754
Other policyholders' funds 73,666 72,783
----------- ----------
Total policy liabilities 4,666,570 4,595,324
Accrued income taxes 319,128 235,124
Short-term debt 178,490 255,116
Long-term debt (estimated fair value:
1995 - $779,241; 1994 - $751,603) 792,851 792,763
Other liabilities 390,120 374,449
Separate account liabilities 781,006 715,203
----------- ----------
Total liabilities 7,128,165 6,967,979
Monthly income preferred securities (estimated
fair value: 1995 - $206,000; 1994 - $200,000) 193,063 193,063
Shareholders' equity:
Preferred stock 0 0
Common stock 73,784 73,784
Additional paid-in capital 139,162 139,045
Unrealized investment gains, net of tax (46,445) (140,756)
Retained earnings 1,315,258 1,267,545
Treasury stock, at cost (95,604) (97,015)
----------- ----------
Total shareholders' equity 1,386,155 1,242,603
----------- ----------
Total liabilities and shareholders' equity $8,707,383 $8,403,645
=========== ==========
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)
Three months ended
March 31,
--------------------
1995 1994
--------- ---------
Revenues:
Life premium $188,298 $143,964
Health premium 197,560 200,434
Other premium 4,976 3,750
--------- ---------
Total premium 390,834 348,148
Financial services revenue 34,774 36,544
Net investment income 87,782 83,801
Energy revenues 17,565 17,303
Realized investment gains (920) 12,595
Other income 193 290
--------- ---------
Total revenue 530,228 498,681
Benefits and expenses:
Life policy benefits 122,315 98,980
Health policy benefits 119,413 122,933
Other policy benefits 11,641 10,569
--------- ---------
Total policy benefits 253,369 232,482
Amortization of deferred
acquisition costs 50,185 49,822
Commissions and premium taxes 37,933 35,879
Financial services expense 8,810 11,340
Energy operations expense 5,442 1,790
Other operating expense 44,323 37,842
Goodwill 3,744 1,599
Interest expense 22,442 17,997
--------- ---------
Total benefits and expenses 426,248 388,751
--------- ---------
Pre-tax operating income 103,980 109,930
Income tax (34,711) (36,223)
Equity in earnings of
unconsolidated subsidiaries 1,925 1,865
Monthly income preferred
securities dividend (2,573) 0
--------- ---------
Net income $68,621 $75,572
========= =========
Net income per share $0.96 $1.03
========= =========
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(Amounts in thousands)
Three Months Ended
March 31,
---------------------
1995 1994
-------- ---------
Cash provided from operations $134,506 $62,413
Cash provided from (used for) investment activities:
Investments sold or matured:
Fixed maturities available for sale - sold 74,089 242,085
Fixed maturities available for sale - matured 68,284 317,229
Other long-term investments 1,887 24,974
--------- ---------
Total investments sold or matured 144,260 584,288
Investments acquired:
Fixed maturities (168,826) (637,610)
Other long-term investments (42,978) (39,749)
--------- ---------
Total investments acquired (211,804) (677,359)
Net decrease (increase) in short-term investments 1,891 30,267
Repayments of loans to affiliates 0 (14,643)
Acquisition of Gulf Canada (71,521) 0
Dispositions of properties held for sale 58,904 0
Disposition of properties 16,351 940
Additions to properties (7,289) 0
--------- ---------
Cash used for investment activities (69,208) (76,507)
Cash used for financing activities:
Issuance of common stock 540 299
Borrowings 0 34,650
Repayments of debt (76,686) (53)
Acquisition of treasury stock 0 (48,467)
Cash dividends paid to shareholders (20,030) (21,764)
Net receipts from deposit product operations 35,186 14,431
--------- ---------
Cash provided from (used for) financing activities (60,990) (20,904)
Net increase (decrease) in cash 4,308 (34,998)
Cash at beginning of year 2,758 53,408
--------- ---------
Cash balance at end of period $7,066 $18,410
========= =========
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
TORCHMARK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
NOTE A - Accounting Policies
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q, and, therefore,
do not include all disclosures required by generally accepted accounting
principles. However, in the opinion of management, these statements
include all adjustments, consisting of normal recurring accruals, which are
necessary for a fair presentation of the consolidated financial position at
March 31, 1995 and the consolidated results of operations for the periods
ended March 31, 1995 and 1994.
NOTE B - Sale of Energy Subsidiary
Torchmark has entered into a preliminary agreement to sell Torch Energy
Advisors Inc. ("TEAI"), its energy management subsidiary. The transaction
will result in total consideration of $115 million, of which $60 million is
in cash and the balance is in the form of subordinated debt, preferred
stock, and an equity interest of approximately 10% in TEAI. Torchmark will
retain certain productive assets and its interest in Nuevo Energy Company.
Torchmark's energy investments, which are not part of the transaction, will
continue to be managed by TEAI. It is anticipated that the transaction will
be completed in June, 1995.
Item 2. Management's Discussion of Financial Condition and Operating
Results
Operating Results
Torchmark Corporation's ("Torchmark's") net income per share was $.96
for the first quarter of 1995, declining from $1.03 per share for the same
quarter of 1994. Net income was $68.6 million in the 1995 quarter compared
to $75.6 million in the prior period, declining 9%. After exclusion of
realized investment gains in both periods, net of taxes and the related
deferred acquisition cost adjustment, per share earnings were $.97 in the
1995 first quarter compared to $.98 in 1994, a decline of 1%.
When comparing Torchmark's 1995 results to prior year results,
consideration should be given to the inclusion of the operations of American
Income Life Insurance Company ("American Income"), which was acquired on
November 3, 1994 for $552 million and has been consolidated since the
acquisition date. American Income added $37 million of life premium, $10
million of health premium, $56 million of total revenues, and $3.7 million
of net income (after acquisition expenses) or $.05 per share.
Torchmark's revenues grew $32 million or 6% to $530 million. Excluding
realized investment gains, revenues rose 9% to $531 million. Growth in life
premium accounted for the increase, gaining $44 million or 31%. Operating
expenses increased $8.6 million or 22% to $48 million. The inclusion of
American Income's expenses and the goodwill connected with the purchase
added $4.4 million of expense. There was also additional legal expense of
$1.2 million when compared to the prior year of which $475 thousand related
to Liberty National, and there was a one-time franchise tax charge of $1.3
million in 1995. Adjusted for the acquisition of American Income and the
additional above-mentioned expenses, operating expenses increased less than
5%. Interest expense rose 25% to $22 million, because of increased average
short-term borrowings during the first quarter of 1995 compared to the prior
year quarter combined with higher interest rates in 1995. In connection
with the American Income acquisition, $200 million face amount monthly
income preferred securities were issued in the fourth quarter of 1994.
Torchmark subsequently entered into a ten-year swap agreement to exchange
its 9.18% fixed dividend obligation for a variable rate, and a five-year cap
was acquired to prevent the variable rate from rising above 10.39%. The
after-tax dividend in the first quarter of 1995, for which the
fixed-obligation was $3.0 million, was reduced to $2.6 million after the
effects of the swap and cap. A discussion of Torchmark's operations follows
under the appropriate captions.
Life insurance. Life insurance premium rose 31% to $188 million in the
first quarter of 1995, from $144 million for the same quarter of the prior
year. Annualized life premium in force also rose 31% over the prior year
and stood at $815 million at March 31, 1995. Growth in premium and
annualized premium in force has been attributable to increased sales and
improved persistency of life products as well as the addition of American
Income's life products. Sales of life insurance as measured by annualized
premium issued grew 50% for the quarter, from $34 million in 1994 to $52
million in 1995. American Income accounted for $37 million of the $44
million increase in life premium income and $152 million of the $194
increase in life premium in force. In 1994, acquisition expense for life
insurance included a $5.8 million adjustment to deferred acquisition expense
in recognition of realized investment gains related to interest-sensitive
life insurance products. After exclusion of this adjustment, the percentage
of acquisition expense to premium was 15% in the 1994 period compared to 16%
in 1995. There was no such adjustment in 1995. Policy benefits as a
percentage of premium declined from 69% in 1994 to 65% in 1995, because of
the inclusion of American Income's life business which has a lower benefit
ratio.
Health insurance. Torchmark's health insurance premium declined 1% to
$198 million for the 1995 quarter. Annualized health insurance premium in
force declined to $794 million at March 31, 1995, or 2% from $813 million at
the same date in 1994. American Income health premium was $10 million for
the 1995 quarter and annualized premium in force was $37 million at March
31, 1995. Sales of health insurance, as measured by annualized premium
issued, declined 21% from $35 million in the first quarter of 1994 to $28
million in the 1995 quarter. However, first quarter 1995 health sales rose
7% over fourth quarter 1994 sales, representing the first increase over a
previous quarter since early 1992. Medicare Supplement annualized premium
in force of $562 million represented 71% of total annualized health premium
in force at March 31, 1995, compared to 73% at the same point in the prior
year. Sales of Medicare Supplement annualized premium of $19 million
declined 31% over the first quarter of 1994 but rose 10% over the fourth
quarter of 1994. Medicare Supplement sales declined during the past two
years because of confusion over the impact on Medicare of various health
care legislative initiatives, increased regulatory restraints, and increased
competition. Concern over proposed changes in health care legislation has
diminished at the present time, and Torchmark continues to obtain approval
in certain key states to write an attained-age Medicare Supplement product
to meet competition. Policy obligations and acquisition expense as a
percentage of premium improved 1.7% in 1995 to 69.6% from 71.3% in 1994.
The reduction was partially caused by the inclusion of American Income's
health products which have a lower benefit ratio.
Annuities. Torchmark sells annuities on both a fixed and variable
basis. Fixed annuities on deposit with Torchmark were $807 million at March
31, 1995, gaining 3% over the same date a year ago. The variable annuity
balance on deposit rose 31% to $756 million during the same period. Policy
charges for annuities were $3.8 million in the 1995 first quarter compared
to $2.6 million for the 1994 quarter, rising 49%. The gain resulted
primarily from the growth in variable annuities. These policy charges are
assessed against the annuity account balance periodically for insurance
risk, sales, administration, and surrender. Annuity collections were $48
million in the 1995 period, decreasing 7% from collections of $52 million in
the 1994 period.
Investment. Torchmark's investment income rose 5% for the 1995 first
quarter to $88 million from $84 million in the 1994 quarter. Mean invested
assets were $5.6 billion for the 1995 quarter, rising 4% over the prior
period. The inclusion of American Income's investments in 1995 resulted in
additional investment income of $10 million. This increase was partially
offset, however, by an estimated $3 million of investment income on $184
million of internal funds used to acquire the company. After adjusting for
the American Income acquisition, investment income declined approximately $3
million, caused partially by an increase in tax-exempt holdings.
Torchmark's holdings in tax-exempt securities represented 14% of total
investments at March 31, 1995, compared to 13% a year earlier. While pretax
returns on tax-exempts are lower than taxables and reduce investment income,
after-tax returns are higher and increase net income.
After increasing steadily throughout 1994, interest rates declined in
the first quarter of 1995. Even though rates declined, Torchmark made new
investment commitments of $169 million at an average taxable-equivalent
yield of 8.02% as contrasted with 6.91% during the same quarter of 1994.
New acquisitions were concentrated in high-quality, call-protected,
medium-term corporate obligations. Lower rates influenced the average life
of the portfolio during the 1995 quarter. The portfolio was estimated to
have an average life of 7.7 years at March 31, 1995, compared with 8.0 years
at year-end 1994 and 7.6 years a year ago. The decrease in rates also
created an improvement in the value of Torchmark's fixed investments,
reducing the unrealized loss from $242 million at year-end 1994 to $81
million at the end of the quarter.
Financial services. Financial services revenues declined 5% to $34.8
million in the first quarter of 1995, from $36.5 million in the prior-year
quarter. Lower commission revenues from investment product sales caused
this decline. Investment product sales were $255 million in the 1995
quarter compared to $346 million in the same quarter of 1994, a decrease of
26%. Sales of United Funds declined 27%, Waddell & Reed Funds were down
25%, and variable annuities were off 24%. Total commission revenues were
down 21% to $15.8 million. The decline in commissions was offset by an 8%
increase in asset management fees to $19.1 million. These fees are now the
largest component of financial services revenues and are based on the amount
of assets under management. Average assets under management for the period
rose 4% in the 1995 quarter versus the 1994 quarter. Assets under
management were $15.5 billion at March 31, 1995, $14.5 billion at year-end
1994, and $14.2 billion at March 31, 1994. Service fees rose 5% to $5.6
million. The sum of all revenue components is greater than the total of
financial services revenue because the portion of commission related to
sales of UILIC insurance products is eliminated in consolidation. Financial
services' expense margins improved in the 1995 period over the prior-year
period. As a percentage of financial services revenues, financial services
direct expenses coupled with general and administrative expenses declined
from 46% in 1994 to 43% in 1995.
Energy. Revenues for energy operations were $17.6 million for the 1995
first quarter, increasing slightly over $17.3 million in the 1994 period.
During the first quarter of 1994, a one-time gain relating to a gas sale in
the amount of $5 million boosted 1994 revenues and profits. Energy
operations expense rose from $1.8 million in 1994 to $5.4 million in 1995,
caused by increased depletion and operating expense relating to additional
properties acquired after the first quarter in 1994. Pretax operating
income for energy operations declined from $5.3 million in 1994 to $1.1
million in 1995 primarily because of the above-mentioned one-time
transaction.
Torchmark has entered into a preliminary agreement to sell Torch Energy
Advisors Inc. ("TEAI"), its energy management subsidiary, through a
management-led buy out. The transaction will result in total consideration
of $115 million, of which $60 million is in cash and the balance is in the
form of subordinated debt, preferred stock, and an equity interest in TEAI.
Torchmark will retain certain productive energy assets and its interest in
Nuevo Energy Company. Torchmark will also retain its energy investments,
including its Black Warrior development and interests in various
institutional limited partnerships. These energy investments will continue
to be managed by TEAI. It is anticipated that the transaction will be
completed in June, 1995.
Financial Condition
Liquidity. Torchmark has strong liquidity because of its positive cash
flow, marketable investments, and the availability of a line of credit
facility. Torchmark's cash inflows from operations, after deduction of
current operating requirements and including net cash inflows from deposit
product operations, were $170 million in the first quarter of 1995 compared
to $77 million in the same quarter of 1994. In addition, Torchmark received
$68 million in fixed-maturity repayments during the 1995 period that were
either scheduled maturities or unscheduled GNMA principal repayments.
Excess cash flow from operations and investment dispositions is generally
reinvested.
At March 31, 1995, Torchmark had $118 million in cash and short-term
investments, compared to $116 million at the end of the previous year. In
addition, Torchmark's entire portfolio of fixed-income and equity
securities, in the amount of $4.6 billion at market value on March 31, 1995,
is available for sale should a need arise.
Torchmark's line of credit facility, which is also designed as a backup
credit line for a commercial paper program, provides credit up to a maximum
amount of $400 million. Terms of the facility permit borrowing up to the
maximum amount at variable interest rates. Torchmark is subject to certain
covenants regarding capitalization and earnings, in which Torchmark was in
full compliance at March 31, 1995. At that date, Torchmark had outstanding
$178 million on the facility.
Capital resources. Torchmark's shareholders' equity was $1.4 billion
at March 31, 1995, increasing $144 million or 12% since 1994 year end. Book
value per share was $19.37 at quarter end, compared to $17.37 three months
earlier. Book value per share was $17.89 at March 31, 1994. Shareholders'
equity can be seriously affected by the impact of an accounting rule that
requires that equity be adjusted for the fluctuations in the market values
of fixed investments available for sale. These fluctuations are caused by
changes in interest rates in the financial markets. The rule further
requires that equity be adjusted for the impact of interest-rate movements
on the deferred acquisition costs relating to interest-sensitive products.
Adjusting shareholders' equity to remove these effects of rate fluctuations
on an after-tax basis resulted in an increase in shareholders' equity for
the 1995 quarter of 3.7% to $1.4 billion at March 31, 1995. The adjustment
also resulted in book value of $20.01 per share at 1995 quarter end,
compared to $19.31 at 1994 year end and $18.23 at March 31, 1994.
Torchmark's debt stood at $971 million at March 31, 1995, compared to
$1.05 billion at December 31, 1994. Debt as a percentage of total
capitalization was 37% at March 31, 1995, counting the Monthly Income
Preferred Securities as equity and excluding the effects on equity of the
above-mentioned accounting rule requiring market revaluation of fixed
securities. The debt-to-capitalization ratio was 40% at year-end 1994. The
3% decline in this ratio resulted from the repayment of $77 million in
short-term debt, accompanied by a rise in adjusted equity. Annualized
return on common equity was 19.5% for the 1995 quarter compared to 22.6% for
the same period of 1994.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Torchmark and its subsidiaries continue to be named as parties
to pending or threatened legal proceedings. These suits involve
tax matters, alleged breached of contract, torts, including bad
faith and fraud claims based on alleged wrongful or fraudulent acts
of agents of Torchmark's subsidiaries, employment discrimination,
and miscellaneous other causes of action. Many of these lawsuits
involve claims for punitive damages in the state courts of Alabama,
a jurisdiction particularly recognized for its large punitive
damage verdicts. Some of such actions involving Liberty National
Life Insurance Company ("Liberty") also name Torchmark as a
defendant. As a practical matter, a jury's discretion regarding
the amount of a punitive damage award is virtually unlimited under
Alabama law. Accordingly, the likelihood or extent of a punitive
damage award in any given case is virtually impossible to predict.
As of March 31, 1995 Liberty was a party to approximately 176
active lawsuits (excluding interpleaders and stayed cases), more
than 151 of which were Alabama proceedings in which punitive
damages were sought. Thirty-six of these cases were subject to a
pending settlement agreement at that time and have since been
concluded.
As previously reported, on October 25, 1993, a jury in the
Circuit Court for Mobile County, Alabama rendered a one million
dollar verdict ($1,000 actual damages) against Liberty in
McAllister v. Liberty National Life Insurance Company (Case No.:
CV-92-4085), one of approximately twenty-five suits involving
cancer policy exchanges which were filed prior to class
certification in the Barbour County litigation and therefore were
excluded from the Robertson cancer class action. The McAllister
decision was appealed to the Alabama Supreme Court, which affirmed
the judgment on February 25, 1995. A petition for rehearing was
filed by Liberty and was denied by the Alabama Supreme Court. A
petition for a writ of certiorari will be filed with the U.S.
Supreme Court in the coming weeks.
The Company has previously reported that purported class
action litigation was filed in December 1993, against Liberty in
the Circuit Court for Mobile County, Alabama asserting fraud and
misrepresentation in connection with exclusionary provisions of
accident and hospital accident policies sold to persons holding
multiple accident policies (Cofield v. Liberty National Life
Insurance Company, Case No.: CV-93-3667). This litigation has been
settled.
As previously reported, on March 17, 1994, litigation was
filed against Liberty, a subsidiary of Torchmark, certain officers
and present and former directors of Torchmark, and KPMG Peat
Marwick LLP, independent public accountants of Torchmark and its
subsidiaries, in the Circuit Court of Marion County, Alabama (Miles
v. Liberty National Life Insurance Company, Civil Action No. CV-94-
67). The lawsuit asserts that it is brought on behalf of a class
composed of the shareholders of Torchmark. The complaint alleges
a failure to timely and adequately report allegedly material
contingent liabilities arising out of insurance policy litigation
involving Liberty. Compensatory and punitive damages in an
unspecified amount are sought.
In April 1994, the complaint in Miles was amended to add an
additional shareholder plaintiff and to name Torchmark as a
defendant. A second similar action (Oakley v. Torchmark
Corporation Case No. CV-94-47) was filed on August 16, 1994 in the
Circuit Court for Bibb County, Alabama, but was dismissed by the
plaintiff without prejudice. Thereafter, a third such action was
filed in the United States District Court for the Southern District
of Alabama. (Dismukes v. Torchmark Corporation Case No.
94-1006-P-M). The Dismukes case was subsequently transferred to
the United States District Court for the Northern District of
Alabama. No class has been certified in any of these cases, all of
which seek punitive damages. Torchmark, Liberty and the individual
defendants intend to vigorously defend these actions.
Prior filings have reported that in July 1994, a purported
class action alleging fraudulent and deceitful practices in premium
billing and lapses of coverage on a payroll deduction insurance
plan was filed in the Superior Court for Gordon County, Georgia
against Liberty (Bryant v. Liberty National Life Insurance Company,
Civil Action No. 28979). The complaint alleges actual damages in
excess of $10 million and punitive damages of not less than $50
million as well as premium reimbursements. No class has been
certified and no proceedings of any materiality have occurred in
this case. Liberty removed this case to federal court, but the
case has subsequently been remanded to the state court.
Additionally, Liberty had filed a declaratory judgment action
essentially seeking an accounting in this matter in the U.S.
District Court for the Northern District of Georgia on the same day
Bryant was filed. Liberty intends to vigorously defend the Bryant
action.
Also as previously reported, in July 1994, a purported class
action (Bosarge v. Liberty National Life Insurance Company, Case
No.: CV-94-2177) was filed against Liberty and Torchmark in the
Circuit Court for Mobile County, Alabama which alleges that Liberty
agents have made misrepresentations in connection with converting
policyholder accounts to bank budget from other modes of premium
payment. The lawsuit claims that agents have represented that
insureds would receive additional "free insurance" if they changed
to bank budget payment while charges for such "free insurance" were
actually made through bank budget payments. Injunctive relieve and
unspecified actual and punitive damages are sought. This case has
been settled.
Provision has been made in the financial statements for
certain anticipated litigation costs. Based upon information
presently available, and in light of legal and other defenses
available to Torchmark and its subsidiaries, additional contingent
liabilities arising from threatened and pending litigation are not
presently considered by management to be material. It should be
noted, however, that the frequency of large punitive damage awards
bearing little or no relation to actual damages awarded by juries
in jurisdictions in which Torchmark has substantial business,
particularly Alabama, continues to increase universally, creating
the potential for unpredictable material adverse judgments in any
given punitive damage suit.
Item 5. Other Information
Litigation has recently been filed in the Circuit Court of
Houston County, Alabama against Liberty involving the sale of
health insurance coverage and the Omnibus Budget Reconciliation Act
of 1990 (Stewart v. Liberty National Life Insurance Company, Case
No. CV-95-345L; Tolar v. Liberty National Life Insurance Company,
Case No. CV-95-346J; Ingram v. Liberty National Life Insurance
Company, Case No. CV-95-348L; Burkett v. Liberty National Life
Insurance Company, Case No. CV-95-347H). Because these cases are
at an extremely preliminary stage, it is premature to assess their
potential materiality. Liberty intends to vigorously defend these
cases and its initial assessment is that it has valid defenses to
these claims.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(11) Statement regarding compensation of per share
earnings.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the First
Quarter of 1995.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
TORCHMARK CORPORATION
Date: 5/12/95 /s/ R. K. Richey
_________________________
R. K. Richey, Chairman and
Chief Executive Officer
Date: 5/12/95 /s/ Gary L. Coleman
__________________________
Gary L. Coleman, Vice President
and Chief Accounting Officer
Exhibit 11. Statement re computation of per share earnings.
TORCHMARK CORPORATION
COMPUTATION OF EARNINGS PER SHARE
Three months ended March 31,
1995 1994
------------- -------------
Net income $68,621,479 $75,571,884
Preferred dividends 0 (804,130)
------------- -------------
Net income available to common $68,621,479 $74,767,754
============= =============
Weighted average shares and common
stock equivalents outstanding 71,542,501 72,891,220
============= =============
Primary earnings per share:
Net income $0.96 $1.03
============= =============
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
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