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 June 30, 1996 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 JULY 31, 1996
Common Stock, $1.00 Par Value 71,773,560
<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 4. Submission of Matters to a Vote of Security Holders
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)
June 30, December 31
----------- -----------
1996 1995
Assets: ----------- ---------
- ------
Investments:
Fixed maturities, available for sale, at fair
value (amortized cost: 1996 - $5,094,208;
1995 - $4,984,223) $5,074,248 $5,210,224
Equity securities, at fair value
(cost: 1996 - $3,883; 1995 - $4,758) 7,871 10,551
Mortgage loans, at cost (estimated fair
value: 1996 - $55,197; 1995 - $50,686) 58,322 52,274
Investment real estate, at depreciated cost 142,324 143,356
Policy loans 200,189 193,877
Other long-term investments (at fair value) 98,231 95,744
Short-term investments 71,469 72,847
----------- ----------
Total investments 5,652,654 5,778,873
Cash 6,746 13,158
Investment in unconsolidated subsidiaries 82,415 76,101
Accrued investment income 83,636 82,006
Other receivables 115,952 122,108
Deferred acquisition costs 1,209,937 1,121,325
Value of insurance purchased 260,145 277,297
Property and equipment 46,904 47,185
Goodwill 548,029 555,517
Other assets 34,148 30,304
Discontinued operations assets 138,585 174,386
Separate account assets 1,234,215 1,085,844
----------- ----------
Total assets $9,413,366 $9,364,104
=========== ==========
Liabilities and Shareholders' Equity:
- ------------------------------------
Liabilities:
Future policy benefits $4,673,361 $4,566,850
Unearned and advance premiums 83,770 83,473
Policy claims and other benefits payable 216,120 209,773
Other policyholders' funds 78,870 77,039
----------- ----------
Total policy liabilities 5,052,121 4,937,135
Accrued income taxes 296,037 362,005
Short-term debt 73,619 189,372
Long-term debt (estimated fair value:
1996 - $793,660; 1995 - $860,258) 792,210 791,988
Other liabilities 209,136 215,712
Separate account liabilities 1,234,215 1,085,844
----------- ----------
Total liabilities 7,657,338 7,582,056
Monthly income preferred securities (estimated
fair value: 1996 - $210,000; 1995 - $217,040) 193,121 193,096
Shareholders' equity:
Common stock 73,784 73,784
Additional paid-in capital 140,206 139,754
Unrealized investment gains, net of tax (2,205) 140,338
Retained earnings 1,437,502 1,325,534
Treasury stock, at cost (86,380) (90,458)
----------- ----------
Total shareholders' equity 1,562,907 1,588,952
----------- ----------
Total liabilities and shareholders' equity $9,413,366 $9,364,104
=========== ==========
See accompanying Notes to Consolidated Financial Statements.
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Revenue:
Life premium $214,571 $191,551 $423,878 $379,849
Health premium 183,366 188,366 371,534 387,067
Other premium 5,597 4,842 10,310 8,677
--------- --------- --------- ---------
Total premium 403,534 384,759 805,722 775,593
Financial services revenue 47,157 37,223 91,494 71,997
Net investment income 100,700 92,883 200,117 185,691
Realized investment gains 379 304 5,092 (616)
Other income 213 428 381 620
--------- --------- --------- ---------
Total revenue 551,983 515,597 1,102,806 1,033,285
Benefits and expenses:
Life policy benefits 141,061 128,780 277,467 251,095
Health policy benefits 112,464 111,880 227,985 231,530
Other policy benefits 12,446 11,980 24,821 23,384
--------- --------- --------- ---------
Total policy benefits 265,971 252,640 530,273 506,009
Amortization of deferred
acquisition costs 54,277 49,936 109,734 100,121
Commissions and premium taxes 35,522 37,302 71,534 74,247
Financial services expense 12,960 9,123 25,246 18,921
Other operating expense 38,122 34,500 78,204 69,072
Amortization of goodwill 3,744 3,744 7,488 7,488
Interest expense 18,187 19,822 37,831 41,535
--------- --------- --------- ---------
Total benefits and expenses 428,783 407,067 860,310 817,393
--------- --------- --------- ---------
Income from continuing operations
before income taxes and equity
in earnings of unconsolidated
subsidiaries 123,200 108,530 242,496 215,892
Income tax (45,431) (39,979) (89,074) (78,360)
Equity in earnings of
unconsolidated subsidiaries 3,660 3,505 6,700 5,430
Monthly income preferred
securities dividend (2,390) (2,602) (4,809) (5,175)
--------- --------- --------- ---------
Net income from continuing
operations 79,039 69,454 155,313 137,787
Discontinued operations of
energy segment (after tax) 0 569 0 857
--------- --------- --------- ---------
Net income $79,039 $70,023 $155,313 $138,644
========= ========= ========= =========
Net income per share:
Continuing operations $1.10 $0.97 $2.17 $1.93
Discontinued operations of
energy segment 0.00 0.01 0.00 0.01
--------- --------- --------- ---------
Net income per share $1.10 $0.98 $2.17 $1.94
========= ========= ========= =========
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(Amounts in thousands)
Six Months Ended
June 30,
---------------------
1996 1995
-------- ---------
Cash provided from operations $183,819 $143,444
Cash provided from (used for) investment activities:
Investments sold or matured:
Fixed maturities available for sale - sold 70,688 124,109
Fixed maturities available for sale - matured 189,644 152,678
Other long-term investments 17,374 4,562
--------- ---------
Total investments sold or matured 277,706 281,349
Investments acquired:
Fixed maturities (364,052) (350,676)
Other long-term investments (27,988) (48,717)
--------- ---------
Total investments acquired (392,040) (399,393)
Net decrease (increase) in short-term investments 1,378 2,966
Dividend from discontinued affiliate 35,625 0
Disposition of properties 80 344
Additions to properties (2,556) (2,591)
--------- ---------
Cash used for investment activities (79,807) (117,325)
Cash provided from (used for) financing activities:
Issuance of common stock 2,326 1,037
Repayments of debt (115,817) (69,025)
Cash dividends paid to shareholders (41,592) (40,067)
Net receipts from deposit product operations 44,659 80,690
--------- ---------
Cash used for financing activities (110,424) (27,365)
Net increase (decrease) in cash (6,412) (1,246)
Cash at beginning of year 13,158 11,298
--------- ---------
Cash balance at end of period $6,746 $10,052
========= =========
See accompanying Notes to Consolidated Financial Statements.
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
June 30, 1996 and the consolidated results of operations for the periods
ended June 30, 1996 and 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results
For the first six months of 1996, Torchmark Corporation's
("Torchmark's") net income per share from continuing operations was
$155 million or $2.17 per share compared to $138 million or $1.93
per share for the same period of 1995. After exclusion of
realized investment gains or losses and the related adjustment to
deferred acquisition costs, net of taxes, earnings per share from
continuing operations were $2.12 in the 1996 period, compared with
$1.93 in the same period of 1995, an increase of 10%. Net income
per share, including discontinued operations, was also $2.17 versus
$1.94 for the same six-month periods.
Revenues rose $70 million or 7% to $1.1 billion in the 1996
period. Total premium increased 4% to $806 million. Growth in
life premium accounted for $44 million of the revenue growth,
gaining 12% to $424 million. Life premium comprised 53% of total
premium in the 1996 six months, compared with 49% in the 1995
period. Health premium declined $16 million, or 4%, to $372
million. The growth in life premium relative to total premium
underscores Torchmark's increased emphasis on life products.
Financial services revenues and net investment income also
contributed to revenue growth. Financial services revenues gained
27% or $19 million to $91 million, while net investment income rose
8% or $14 million to $200 million. Operating expense increased
$9.1 million or 13% to $78 million, caused primarily by an
increase in litigation expense of $7 million at Torchmark's
Alabama based insurer, Liberty National Life Insurance Company.
Excluding the increase in litigation expense, operating expense as
a percentage of revenues declined from the prior period. Interest
expense declined $4 million or 9% because of lower average short-
term debt, resulting from debt paydowns in the 1996 period. A
discussion of Torchmark's operations follows under the appropriate
captions.
Life insurance. Life insurance premium increased 12% to $424
million in the first half of 1996, from $380 million in the prior
period. Annualized life premium in force was $922 million at June
30, 1996, up 10% over life premium in force of $836 million a year
earlier. Included in the 1996 life premium in force is a block of
life insurance with annualized premium of $21 million that was
purchased effective January 1, 1996. Growth in premium and
annualized premium in force has been attributed to the emphasis on
new sales of life products and the above-mentioned purchase. For
the first six months of 1996, life sales were $110 million in terms
of annualized premium issued, increasing 3% over the comparable
1995 period. For the preceding twelve-month period, sales
increased 19% compared with the same period a year earlier.
Benefits as a percentage of premium declined to 65% in 1996 from
66% in 1995. Acquisition expense as a percentage of premium
increased from 16% in 1995 to 17% in 1996. The lower obligation
and higher acquisition expense ratios were a result of the increase
in the proportion of American Income's premium to total premium.
American Income has a higher acquisition expense ratio because
acquisition expense consists largely of the value of insurance
purchased, which has higher amortization relative to deferred
acquisition costs.
Health insurance. Torchmark's health insurance premium
declined 4% to $372 million for the 1996 six-month period.
Annualized health insurance premium in force declined to $755
million at June 30, 1996, or 4%, from $784 million at the same date
a year earlier. However, total annualized health premium in force
fell only .2% from the first quarter 1996 as compared to the second
quarter of 1996. This leveling of the decline of health premium in
force is due in part to Medicare supplement rate increases being
implemented during 1996. No Medicare supplement increases had been
taken for the previous two years. Sales of health insurance, as
measured by annualized premium issued, declined 11% from $55
million in the first six months of 1995 to $49 million in the 1996
period. Medicare Supplement annualized premium in force of $526
million represented 70% of total annualized health premium in force
at June 30, 1996. In the first six months of 1996, sales of
Medicare Supplement annualized premium of $32 million declined 11%
from those of the comparable six months of 1995. Declines in
Medicare Supplement sales were experienced during 1995 and early
1996 primarily because commissions available for the predominantly
agent-sold distribution system have been reduced due to mandated
increases in loss ratios and levelized commission rates, thus
reducing agents' incentive to sell Medicare supplements. Cancer
annualized premium in force grew 5% to $120 million at June 30,
1996 from $114 million a year earlier. Other non-Medicare
Supplement health insurance annualized premium in force has
declined 9% period-over-period, from $115 million at June 30, 1995
to $105 million at the same date in 1996.
Annuities. Torchmark's annuities consist of both fixed and
variable products. Fixed annuity collections were $42 million in
the 1996 period, declining 39% from the $69 million collected in
the 1995 period. Collections of variable annuities rose 54% from
$77 million in the 1995 period to $119 million in the 1996 six
months. Fixed annuities on deposit with Torchmark were $948
million at June 30, 1996, gaining 16% over the same date a year
ago. This increase was a result of stronger sales in 1996 and the
last half of 1995 relative to the preceding twelve months. The
variable annuity balance on deposit rose 37% to $1.2 billion during
the same period. Growth in the variable account balance was a
result of strong financial markets in 1995 and early 1996 as well
as additional collections. Policy charges for annuities rose 19%
to $10.3 million in the 1996 first six months, compared to $8.7
million for the 1995 period. Policy charges are assessed against
the annuity account balance periodically for insurance risk, sales,
administration, and surrender. The increase in policy charges
resulted primarily from the growth in variable annuities over the
prior-year period.
Investment. During the first six months of 1996, Torchmark's
investment income rose 8% to $200 million from $186 million during
the same 1995 period. The primary reason for the increase was a 6%
increase in mean invested assets, which stood at $5.65 billion at
the end of the 1996 second quarter.
While yields available on medium and longer term investments
declined steadily throughout 1995, the trend reversed during the
first half of 1996 as yields rose steadily throughout the period.
Although interest rates increased during the first six months of
1996 from the year-end level, new acquisitions during this period
were made at rates below the average portfolio yield and below the
level of a year ago. Investment acquisitions during 1996 totaled
$364 million and were made at an average yield of 7.04%, compared
with 1995 investment acquisitions of $351 million yielding 7.56%.
Acquisitions were primarily comprised of call protected corporate
obligations. Mortgage-backed holdings continue to decline, falling
to 27% of fixed income assets at June 30, 1996, compared with 30%
at year-end 1995 and 75% as recently as year-end 1992. At June 30,
1996, the average yield on the fixed-income portfolio was 7.60%,
compared to the year-end level of 7.66% and the year-ago level of
7.69%.
Increasing interest rates in 1996 also impacted both the
market value of fixed income assets and the estimated average life
of the portfolio. At June 30, 1996, the fixed income portfolio had
an estimated unrealized loss of $20 million, compared with an
estimated unrealized gain of $226 million at year-end 1995 and an
unrealized gain of $85 million at June 30, 1995. The portfolio's
estimated average life increased to 9.2 years at June 30, 1996,
compared with 8.8 years at year-end 1995 and 7.2 years one year
ago.
Financial services. Financial services revenues rose 27% to
$91 million for the first six months of 1996 over the prior period.
Asset management fees, which is the largest component of financial
services revenues, rose 27% to $50 million. These fees are based
on the amount of assets under management. Average assets under
management rose 20% in the 1996 period versus the same 1995 period.
Assets under management were $18.9 billion at June 30, 1996, $18.3
billion at year-end 1995, and $16.8 billion at June 30, 1995.
Commission revenues from investment product sales increased 42% to
$37 million for the 1996 six months from $26 million in the 1995
period. Investment product sales grew 51% to $805 million in the
1996 period, compared to $532 million in the same period of 1995.
Sales of United Funds grew 38%, Waddell & Reed Funds were up two
and a half times, and variable annuities gained 52%. Commissions
from the sale of insurance products increased 5% to $7 million.
Service fees increased 15% to $13 million. The sum of all
financial services revenue components is greater than total
financial services revenue because the portion of commission
related to the sales of the insurance products of United Investors
Life Insurance Company is eliminated in consolidation. Financial
services' pretax profit margins were 51% of revenues in the 1996
period, compared with 50% in the prior-year period.
Discontinued Energy Operations. As previously announced,
Torchmark intends to dispose of its energy operations, including
(1) Torch Energy Advisors Incorporated ("TEAI"), its energy
management subsidiary, and (2) its Black Warrior coalbed methane
development and certain other energy investments. Accordingly,
these operations were classified as discontinued operations at
December 31, 1995. In connection with the disposition, Torchmark
will reduce its $139 million of discontinued operations by
approximately $80 million through the distribution to Torchmark of
assets held by energy affiliates to facilitate the sale of the
remaining discontinued operations. These assets consist of
marketable securities currently held by TEAI and Section 29 tax
credits associated with the Black Warrior investment. Torchmark is
in the process of receiving proposals for the sale of these assets
and expects to complete this sale in the near future.
Financial Condition
Liquidity. Torchmark is very liquid, which is evidenced by
its positive cash flow, its marketable investments, and the
availability of a line of credit facility. Torchmark's cash
inflows from operations, after the deduction of current operating
requirements and including net cash inflows from deposit product
operations, were $228 million for the first six months of 1996.
These cash inflows compared with $224 million in the same period of
1995, resulting in a 2% growth. In addition to cash flows from
operations, Torchmark received $190 million in fixed-maturity
repayments during the 1996 six-month period that were either
scheduled maturities, called, or unscheduled GNMA principal
repayments.
At the end of June, 1996, Torchmark had $78 million in cash
and short-term investments, compared with $86 million at December
31, 1995. In addition, Torchmark's entire portfolio of fixed-
income and equity securities, in the amount of $5.1 billion at
market value on June 30, 1996, 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, with which Torchmark was in
full compliance at June 30, 1996. At that date, Torchmark had $73
million outstanding on the facility, compared with $189 million at
December 31, 1995.
Capital resources. Torchmark's debt stood at $866 million at
June 30, 1996, compared with $981 million at December 31, 1995 and
$973 million at June 30, 1995. Debt as a percentage of total
capitalization was 33% at June 30, 1996, counting the Monthly
Income Preferred Securities as equity and excluding the effects on
equity of an accounting rule requiring market revaluation of fixed
securities and an adjustment to deferred acquisition costs based on
changes in interest rates in the financial markets. The debt to
capitalization ratio was 37% at year-end 1995. The decline in
this ratio since year-end 1995 resulted from the paydown in short-
term debt of $116 million accompanied by an increase in adjusted
equity.
Shareholders' equity was $1.6 billion at June 30, 1996,
declining $26 million since 1995 year end. Book value per share
was $21.78 at June 30, 1996, compared with $22.17 at year-end
1995. Shareholders' equity is greatly impacted by the previously-
mentioned accounting rule that requires equity to be adjusted for
the fluctuations in the market values of fixed investments and
deferred acquisition costs based on changes in interest rates.
After adjusting shareholders' equity to remove the effects of rate
fluctuations on an after-tax basis, shareholders' equity for the
1996 period increased $116 million, or 8%, over year-end 1995 to
$1.6 billion at June 30, 1996. Shareholders' equity rose $88
million or 6% since June 30, 1995 on an adjusted basis. This 6%
growth was achieved in spite of the $130 million writedown of
Torchmark's Black Warrior investment in the fourth quarter of 1995.
The adjustment also resulted in book value of $21.92 per share at
the end of the second quarter of 1996, compared with $20.33 at
year-end 1995 and $20.75 at June 30, 1995. Annualized return on
common equity, adjusted to exclude the effects of the accounting
rule, was 20.5% for the 1996 six-month period, compared with 19.3%
for the same period of 1995.
In early 1996, Torchmark announced that it would explore a
strategic restructuring for the purpose of enhancing shareholder
value. Various alternatives were considered and evaluated,
including the possibility of splitting the operations into separate
publicly traded pieces and selling all or portions of its various
operations. After consideration, it was determined that none of
the reasonably achievable restructuring options provided sufficient
likelihood of creating more long term shareholder value than the
current balanced structure of complimentary life insurance and
asset management businesses.
In connection with its intent to enhance shareholder value,
Torchmark plans to proceed with the following activities: (1)
Torchmark will continue to pursue the sale of its energy operations
and is in the process of receiving sales proposals. (2) Depending
upon the financial markets, Torchmark plans to monetize a
portion of its holdings of approximately five million
shares of Vesta Insurance Group, Inc. by issuing a security
mandatorily exchangeable for Vesta stock at the option of
Torchmark. (3) Torchmark will renew its share repurchase program to
acquire its stock in open market purchases as conditions warrant,
provided that its debt to total capital ratio does not exceed 40%
and that no opportunities for acquisitions offering superior
returns are available. Torchmark will continue to evaluate viable
opportunities to enhance shareholder value.
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 lawsuits involve
tax matters, alleged breaches of contract, torts, including bad
faith and fraud claims based on alleged wrongful or fraudulent acts
of agents of Torchmark's insurance 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 also name Torchmark as a defendant. As a practical matter,
a jury's discretion regarding the amount of a punitive damage award
is not limited by any clear, objective criteria under Alabama law.
Accordingly, the likelihood or extent of a punitive damage verdict
in any given case is virtually impossible to predict. As of June
30, 1996, Liberty was a party to approximately 279 active lawsuits
(including 28 employment related cases and excluding interpleader
and stayed cases), approximately 247 of which were Alabama
proceedings in which punitive damages were sought. Liberty faces
trial settings in these cases on an on-going basis.
A purported class action was filed on August 8, 1995, against
Liberty in the Circuit Court of Jefferson County, Alabama on behalf
of Liberty cancer policyholders eligible for Medicare who submitted
claims during an approximately two month period in 1993 (Adkins v.
Liberty National Life Insurance Company, Case No. CV-95-5634).
Beginning in September 1993, in reliance on federal law concerning
the amount health care providers could collect from Medicare
eligible individuals, Liberty limited the payment of benefits to
such individuals to the amounts collectible by the providers under
federal law. In November, 1993, Liberty discontinued this practice
and recalculated and repaid all claims in full as it had prior to
September 1993 together with interest. The claims made in Adkins
are identical to the individual claims in Allen v. Liberty National
Life Insurance Company (Case No. CV-94-3634), a case in which the
Alabama Supreme Court will hear oral arguments regarding the
remitted verdict on August 20, 1996. A class certification order
was entered by the Court in Adkins on July 26, 1996. The order
does not address the merits of the litigation.
It has been previously reported that Liberty is a party to
individual lawsuits and one purported class action (Carlton v.
Liberty National Life Insurance Company, Class No. CV-96-22) in the
State of Alabama in which allegations are made that an interest
sensitive life insurance policy would become paid-up or self-
sustaining after a specified number of years. Currently, Liberty
is a party to 88 individual interest sensitive cases, 54 of which
were filed by a single lawyer in Chambers County, Alabama. Additionally,
Torchmark has previously reported the case of Lawson
v. Liberty National Life Insurance Company, filed in the Circuit
Court of Jefferson County, Alabama (Civil Action No.: CV-96-01119),
where the plaintiffs were seeking class certification on behalf of
persons who were induced to exchange life insurance policies or the
existing policy's cash value was depleted. On May 14, 1996, the
Circuit Court of Jefferson County, Alabama entered an order
conditionally certifying a plaintiffs claim in Lawson in order
to preserve the Court's jurisdiction over the class action question,
subject to a full evidentiary hearing on class certification at a
future date yet to be determined.
On April 19, 1996, $5 million punitive judgment was entered
against Liberty by a jury in Mobile, Alabama in Strickland
v. Liberty National Life Insurance Company (CV-95-1399). In the
Strickland case, the plaintiff, who was in his sixties, cancelled
several small life insurance policies and purchased a substantial
amount of new coverage. The plaintiff contended that certain
supplemental benefits which were present in the smaller policies
were not included in the new coverage (i.e. accidental death and
premium waiver). The trial judge held that Strickland was not
entitled to recover compensatory damages. Nevertheless, the jury
awarded $100 in nominal damages in addition to the punitive award.
Liberty has filed various motions for post-trial relief with the
Circuit Court.
A jury in Chambers County, Alabama Circuit Court returned a
verdict of $333,000 compensatory damages and $17.2 million in
punitive damages against Liberty on June 11, 1996, in McQuiston v.
Liberty National Life Insurance Company (CV-94-234). The case
arose out of a claim which had been denied due to an alleged
misrepresentation in the application. There was a recorded
telephone interview with the applicant in which a statement was
given which Liberty alleges was a misrepresentation of the health
of the proposed insured. After the litigation was filed, it was
learned that the signature on the application was not that of the
insured. Upon notice of this fact, Liberty had paid the $20,000
claim proceeds into court. Liberty has filed motions for post-
trial relief with the Court.
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 in Alabama,
continues to increase universally, creating the potential for
unpredictable material adverse judgments in any given punitive
damage suit.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Torchmark Corporation
was held April 25, 1996. At that meeting the following proposals
were voted upon:
Election of Directors
For Against Abstain
Directors 58,056,247 0 432,585
Individual
Nominee Withheld For Withheld
George J. Records 2,430 58,053,817 435,015
R. K. Richey 9,546 58,046,701 442,131
Keith A. Tucker 1,803 58,054,444 434,388
No Broker Non-Votes
Other Directors with Continuing Terms of Office: J. P. Bryan,
Joseph M. Farley, Louis T. Hagopian, C. B. Hudson, Joseph L.
Lanier, Jr., Harold T. McCormick, Yetta G. Samford, Jr.
David L. Boren was elected by the Board of Directors at their April
25, 1996 meeting immediately following the Annual Meeting of
Shareholders to fill a newly created directorship for a one-year
term.
Approval of Auditors
For Against Abstain
KPMG Peat Marwick LLP 58,371,113 57,215 60,504
No Broker Non-Votes
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(11) Statement re computation of per share earnings
(b) Reports on Form 8-K
A Form 8-K dated April 10, 1996 was filed to update
litigation against Torchmark's subsidiary, Liberty
National Life Insurance Company in the Harris, Carlton
and Lawson cases. No exhibits were required to be
filed.
A Form 8-K dated April 24, 1996 was filed to report the
Crichlow litigation against Torchmark, its subsidiaries
Globe Life And Accident Insurance Company and United
American Insurance Company and certain individual corporate
officers. No exhibits were required to be filed.
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: 8/12/96 /s/ William C. Barclift
___________________________________
William C. Barclift, Vice President
and General Counsel
Date: 8/12/96 /s/ Gary L. Coleman
___________________________________
Gary L. Coleman, Vice-President and
Chief Accounting Officer
(Principal Accounting Officer)
Exhibit 11. Statement re computation of per share earnings.
TORCHMARK CORPORATION
COMPUTATION OF EARNINGS PER SHARE
Three months ended June 30,
1996 1995
---------- ----------
Net income - continuing operations $79,038,432 $69,452,426
Discontinued operations 570,523
---------- ----------
Net income 79,038,432 70,022,949
Preferred dividends 0 0
---------- ----------
Net income available to common share $79,038,432 $70,022,949
========== ==========
Weighted average shares and common
stock equivalents outstanding 71,749,366 71,568,440
========== ==========
Primary earnings per share:
Net income - continuing operations $1.10 $0.97
Discontinued operations 0.00 0.01
---------- ----------
Net income $1.10 $0.98
========== ==========
Six months ended June 30,
1996 1995
----------- -----------
Net income - continuing operations $155,312,704 $137,787,326
Discontinued operations 857,102
----------- -----------
Net income 155,312,704 138,644,428
Preferred dividends 0 0
Net income available to ----------- -----------
common shareholders $155,312,704 $138,644,428
=========== ===========
Weighted average shares and common
stock equivalents outstanding 71,732,193 71,555,542
=========== ===========
Primary earnings per share:
Net income - continuing operations $2.17 $1.93
Discontinued operations 0.00 0.01
------------ -----------
Net income $2.17 $1.94
============ ===========
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