<PAGE>
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, 2000 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 3/rd/ 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 required
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 last practicable date.
CLASS OUTSTANDING AT April 28, 2000
Common Stock, 128,152,201
$1.00 Par Value
Index of Exhibits (Page 25)
Total number of pages included are 26.
<PAGE>
TORCHMARK CORPORATION
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet 1
Consolidated Statement of Operations 2
Consolidated Statement of Comprehensive Income 3
Consolidated Statement of Cash Flow 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 25
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TORCHMARK CORPORATION
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
March 31, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Assets (Unaudited)
Investments:
Fixed maturities, available for sale, at fair value
(amortized cost: 2000 - $6,050,944; 1999 - $5,954,697) $ 5,793,800 $ 5,679,795
Equity securities, at fair value (cost: 2000 - $37,121; 1999 - $37,121) 40,064 29,189
Mortgage loans, at cost (estimated fair value:
2000 - $98,963; 1999 - $94,716) 98,847 94,599
Investment real estate, at depreciated cost 16,402 16,379
Policy loans 246,064 244,607
Other long-term investments (at fair value) 21,247 23,054
Short-term investments 67,103 100,187
----------- -----------
Total investments 6,283,527 6,187,810
Cash 10,474 14,441
Accrued investment income 112,593 112,475
Other receivables 48,870 53,458
Deferred acquisition costs 1,791,855 1,741,570
Value of insurance purchased 146,798 151,752
Property and equipment 37,884 38,761
Goodwill 399,565 402,584
Other assets 25,962 15,138
Separate account assets 3,984,414 3,413,675
----------- -----------
Total assets $12,841,942 $12,131,664
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Future policy benefits $ 4,924,264 $ 4,869,241
Unearned and advance premiums 92,192 85,344
Policy claims and other benefits payable 221,944 215,923
Other policyholders' funds 81,147 81,919
----------- -----------
Total policy liabilities 5,319,547 5,252,427
Accrued income taxes 362,101 309,271
Short-term debt 406,546 418,394
Long-term debt (estimated fair value:
2000 - $386,812; 1999 - $378,046) 371,587 371,555
Other liabilities 173,517 179,681
Separate account liabilities 3,984,414 3,413,675
----------- -----------
Total liabilities 10,617,712 9,945,003
Monthly income preferred securities (estimated
fair value: 2000 - $193,000: 1999 - $193,040) 193,341 193,324
Shareholders' equity:
Preferred stock 0 0
Common stock 147,801 147,801
Additional paid-in capital 622,938 622,318
Accumulated other comprehensive income (157,411) (174,222)
Retained earnings 1,987,239 1,910,487
Treasury stock, at cost (569,678) (513,047)
----------- -----------
Total shareholders' equity 2,030,889 1,993,337
----------- -----------
Total liabilities and shareholders' equity $12,841,942 $12,131,664
=========== ===========
See accompanying Notes to Consolidated Financial Statements.
1
</TABLE>
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
-------- --------
<S> <C> <C>
Revenue:
Life premium $267,060 $251,341
Health premium 224,977 203,042
Other premium 11,016 8,381
-------- --------
Total premium 503,053 462,764
Net investment income 117,111 111,396
Realized investment losses (1,859) (7,116)
Other income 712 466
-------- --------
Total revenue 619,017 567,510
Benefits and expenses:
Life policyholder benefits 176,674 162,922
Health policyholder benefits 145,101 131,653
Other policyholder benefits 9,745 8,871
-------- --------
Total policyholder benefits 331,520 303,446
Amortization of deferred acquisition costs 66,357 59,570
Commissions and premium taxes 36,747 34,632
Other operating expense 29,655 29,226
Amortization of goodwill 3,018 3,018
Interest expense 13,810 12,576
-------- --------
Total benefits and expenses 481,107 442,468
Income before income taxes 137,910 125,042
Income taxes (46,639) (42,405)
Monthly income preferred securities dividend (net of
tax) (2,389) (2,289)
-------- --------
Net income before cumulative effect of change in
accounting principle 88,882 80,348
Cumulative effect of change in accounting principle
(net of tax of $8,661) 0 16,086
-------- --------
Net income $ 88,882 $ 96,434
======== ========
Basic earnings per share:
Net income before cumulative effect of change in
accounting principle $ 0.68 $ 0.59
Cumulative effect of change in accounting principle
(net of tax) 0.00 0.12
-------- --------
Net income $ 0.68 $ 0.71
======== ========
Diluted earnings per share:
Net income before cumulative effect of change in
accounting principle $ 0.68 $ 0.59
Cumulative effect of change in accounting principle
(net of tax) 0.00 0.12
-------- --------
Net income $ 0.68 $ 0.71
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
------- --------
<S> <C> <C>
Net income 88,882 96,434
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period 29,748 (145,238)
Less: reclassification adjustment for (gains)
losses on securities included in net income (103) 2,461
Less: reclassification adjustment for
amortization of discount and premium (634) (237)
Less: foreign exchange adjustment on securities
marked to market (377) (560)
-------- ---------
Unrealized gains (losses) on securities 28,634 (143,574)
Unrealized gains (losses) on other investments (70) 32
Unrealized gains (losses) adjustment to
deferred acquisition costs (2,172) 10,703
Foreign exchange translation adjustment (342) 623
-------- ---------
Other comprehensive income (loss), before tax 26,050 (132,216)
Income (tax) benefit related to other
comprehensive income (loss) (9,239) 45,902
-------- ---------
Other comprehensive income (loss) 16,811 (86,314)
-------- ---------
Comprehensive income $105,693 $ 10,120
======== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash provided from operations $ 143,529 $ 121,954
Cash provided from (used for) investment activities:
Investments sold or matured:
Fixed maturities available for sale - sold 52,101 146,719
Fixed maturities available for sale - matured, called, and repaid 50,418 97,806
Other long-term investments 553 3,620
--------- ---------
Total investments sold or matured 103,072 248,145
Investments acquired:
Fixed maturities (197,653) (331,470)
Other long-term investments (6,562) (4,114)
--------- ---------
Total investments acquired (204,215) (335,584)
Net decrease in short-term investments 33,107 39,536
Disposition of properties 134 23
Additions to properties (749) (1,141)
--------- ---------
Cash used for investment activities (68,651) (49,021)
Cash provided from (used for) financing activities:
Issuance of common stock 515 901
Additions to debt 0 57,630
Repayments of debt (11,848) (6,783)
Acquisition of treasury stock (57,638) (111,494)
Cash dividends paid to shareholders (12,479) (12,327)
Net receipts from deposit product operations 2,605 2,635
--------- ---------
Cash used for financing activities (78,845) (69,438)
Net increase (decrease) in cash (3,967) 3,495
Cash at beginning of year 14,441 4,920
--------- ---------
Cash at end of period $ 10,474 $ 8,415
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
TORCHMARK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Accounting Policies
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q. Therefore, they do not include
all of the 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, 2000, and the
consolidated results of operations and cash flow for the periods ended March 31,
2000 and 1999.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
Note B - Business Segments
Torchmark's segments are based on the insurance product lines it markets
and administers: life insurance, health insurance, and annuities. There is
also an investment segment, which manages the investment portfolio, debt, and
cash flow for the insurance segments and the corporate function. The measure of
profitability for insurance segments is underwriting income before other income
and administrative expenses. It represents the gross profit margin on insurance
products before administrative expenses and is calculated by deducting net
policy obligations, acquisition expenses, and commissions from premium revenue.
The measure of profitability for the investment segment is excess investment
income, which represents the income earned on the investment portfolio in excess
of net policy requirements and financing costs associated with debt and
Torchmark's Monthly Income Preferred Securities ("MIPS"). The tables below set
forth revenue (excluding realized investment losses) and measures of
profitability by segment as well as reconciliations from the total measures of
profitability to pretax operating income for the three-month periods ended March
31, 2000 and March 31, 1999, respectively.
<TABLE>
<CAPTION>
Selected Segment Information
(Amounts in thousands)
Three months ended March 31, 2000
------------------------------------------------------------------------------------------
Life Health Annuity Investment Other Adjustments Consolidated
--------- ---------- --------- ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Premium $267,060 $224,977 $11,016 $503,053
Net investment income $119,806 $(2,695) 117,111
Other income $1,247 (535) 712
Intersegment revenue -
required interest on
net policy obligations 35,823 540 8,884 (45,247) 0
-------- -------- ------- -------- ------ ------- --------
Total revenue* $302,883 $225,517 $19,900 $ 74,559 $1,247 $(3,230) $620,876
======== ======== ======= ======== ====== ======= ========
Measures of profitability:
Underwriting income
before other income and
administrative expense $ 66,181 $ 40,585 $ 6,375 $113,141
Excess investment income $ 57,074 57,074
-------- -------- ------- -------- ------ ------- --------
Total measures of
profitability $ 66,181 $ 40,585 $ 6,375 $ 57,074 $ 0 $ 0 $170,215
======== ======== ======= ======== ====== ======= ========
</TABLE>
* Excludes realized investment gains (losses)
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
Selected Segment Information
(Amounts in thousands)
Three months ended March 31, 1999
------------------------------------------------------------------------------------------
Life Health Annuity Investment Other Adjustments Consolidated
--------- ---------- --------- ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Premium $251,341 $203,042 $ 8,381 $462,764
Net investment income $114,152 $(2,756) 111,396
Other income $ 945 (479) 466
Intersegment revenue -
required interest on
net policy obligations 33,470 1,565 8,439 (43,474) 0
-------- -------- ------- -------- ------ ------- --------
Total revenue* $284,811 $204,607 $16,820 $ 70,678 $ 945 $(3,235) $574,626
======== ======== ======= ======== ====== ======= ========
Measures of profitability:
Underwriting income
before other income and
administrative expense $ 66,965 $ 35,910 $ 5,236 $108,111
Excess investment income $ 54,580 54,580
-------- -------- ------- -------- ------ ------- --------
Total measures of
profitability $ 66,965 $ 35,910 $ 5,236 $ 54,580 $ 0 $ 0 $162,691
======== ======== ======= ======== ====== ======= ========
</TABLE>
* Excludes realized investment gains (losses)
Reconciliation of Measures of Profitablity to Pretax Operating Income
(Amounts in thousands)
For the three months ended
March 31,
---------------------------
2000 1999
-------- --------
Total measures of profitablity $170,215 $162,691
Insurance administrative expense (27,255) (26,532)
Parent expense (2,400) (2,694)
Tax equivalent adjustment (2,695) (2,756)
Other income 1,247 945
Goodwill amortization (3,018) (3,018)
Realized losses (1,859) (7,116)
Add back pretax cost of MIPS 3,675 3,522
-------- --------
Operating income before taxes $137,910 $125,042
======== ========
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cautionary statements. Torchmark cautions readers regarding certain
forward-looking statements contained in the following discussion and elsewhere
in this document, and in any other statements made by, or on behalf of Torchmark
whether or not in future filings with the Securities and Exchange Commission.
Any statement that is not a historical fact, or that might otherwise be
considered an opinion or projection concerning Torchmark or its business,
whether express or implied, is meant as and should be considered a forward-
looking statement. Such statements represent management's opinions concerning
future operations, strategies, financial results or other developments.
Forward-looking statements are based upon estimates and assumptions that
are subject to significant business, economic and competitive uncertainties,
many of which are beyond Torchmark's control. If these estimates or assumptions
prove to be incorrect, the actual results of Torchmark may differ materially
from the forward-looking statements made on the basis of such estimates or
assumptions. Whether or not actual results differ materially from forward-
looking statements may depend on numerous foreseeable and unforeseeable events
or developments, which may be national in scope, related to the insurance
industry generally, or applicable to Torchmark specifically. Such events or
developments could include, but are not necessarily limited to:
1) Deteriorating general economic conditions leading to increased
lapses and/or decreased sales of Torchmark's policies;
2) Regulatory developments, including changes in governmental
regulations (particularly those impacting taxes and changes to the
Federal Medicare program that would affect Medicare Supplement
insurance);
3) Financial markets trends that adversely affect sales of Torchmark's
market-sensitive products;
4) Interest rate changes that adversely affect product sales and/or
investment portfolio yield;
5) Increased pricing competition;
6) Adverse litigation results;
7) Developments involving Vesta Insurance Group, Inc., ("Vesta");
8) The inability of Torchmark to achieve the anticipated levels of
administrative and operational efficiencies;
9) The customer response to new products and marketing initiatives;
10) Adverse levels of mortality, morbidity, and utilization of
healthcare services relative to Torchmark's assumptions; and
11) The inability of Torchmark to obtain timely and appropriate premium
rate increases for health insurance policies.
8
<PAGE>
Results of Operations
Torchmark management computes a classification of income called "net
operating income." Net operating income is the measure of income Torchmark's
management focuses on to evaluate the performance of the operations of the
company. It excludes unusual and nonrecurring income or loss items which distort
operating trends.
The following items were excluded from net income in the appropriate period
in order to compute net operating income:
1) Realized investment losses and the related adjustment to deferred
acquisition costs, net of tax;
2) The effect of a change in accounting principle in 1999, which modified
the accounting for an interest rate swap instrument.
The following table presents earnings and earnings per share data for
Torchmark.
Earnings and Earnings Per Share
(Dollar amounts in thousands, except for per share data)
For the three months ended
March 31,
-------------------------- %
2000 1999 Change
---------- -------- ------
Net operating income:
Amount $90,090 $84,974 6.0
Per Share:
Basic 0.69 0.63 9.5
Diluted 0.69 0.62 11.3
Net income:
Amount $88,882 $96,434 (7.8)
Per Share:
Basic 0.68 0.71 (4.2)
Diluted 0.68 0.71 (4.2)
Torchmark's operating revenues, which exclude realized investment gains and
losses, rose 8% to $621 million in the first quarter of 2000 over the same
period of 1999. Total premium increased 9% to $503 million and net investment
income rose 5% to $117
9
<PAGE>
million in the 2000 three-month period. Torchmark's operating expenses increased
1% to $30 million in 2000. However, operating expenses as a percentage of
operating revenues decreased to 4.8% in 2000 from 5.1% in 1999. As a percentage
of total premium, insurance administrative expenses were 5.4% in 2000 compared
with 5.7% in 1999.
The following table is a summary of Torchmark's net operating income from
continuing operations by component. Insurance underwriting income is premium
income less net policy obligations, commissions, acquisition expenses, and
insurance administrative expenses. Excess investment income is tax equivalent
net investment income reduced by the interest credited to net policy
liabilities, and the financing cost of Torchmark's debt and Monthly Income
Preferred Securities ("MIPS").
<TABLE>
<CAPTION>
Summary of Net Operating Income from Continuing Operations
(Dollar amounts in thousands)
Three months
Ended March, 31 Increase
--------------------------- -----------------------
2000 1999 Amount %
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Insurance underwriting income before
other income and administrative
expense:
Life $ 66,181 $ 66,965 $ (784) (1)
Health 40,585 35,910 4,675 13
Annuity 6,375 5,236 1,139 22
-------- -------- -------
Total 113,141 108,111 5,030 5
Other income 1,247 945 302 32
Administrative expense (27,255) (26,532) (723) 3
-------- -------- -------
Insurance underwriting income 87,133 82,524 4,609 6
Excess investment income 57,074 54,580 2,494 5
Corporate expense (2,400) (2,694) 294 (11)
Goodwill amortization (3,018) (3,018) 0 0
Tax equivalency adjustment (2,695) (2,756) 61 (2)
-------- -------- -------
Pretax insurance net operating income 136,094 128,636 7,458 6
Income tax (46,004) (43,662) (2,342) 5
-------- -------- -------
Net operating income from continuing operations $ 90,090 $ 84,974 $ 5,116 6
======== ======== ======= ====
Net operating income from continuing operations
per diluted share $0.69 $0.62 11
======== ======== ====
</TABLE>
10
<PAGE>
A discussion of Torchmark's operations by segment follows.
Life insurance. Torchmark's life insurance premium income rose 6% to $267
million in the first quarter of 2000. The following table presents Torchmark's
life insurance premium and policy charges by distribution method.
<TABLE>
<CAPTION>
Life Insurance
Premium by Distribution Method
(Dollar amounts in thousands)
Three months ended March 31,
-------------------------------------------------
2000 1999 Increase
--------------------- --------------------- ----------------
% of % of
Amount Total Amount Total Amount %
-------- ------- -------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Liberty National Exclusive Agency $ 73,294 27 $ 71,749 29 $ 1,545 2
Direct Response 66,954 25 61,146 24 5,808 9
American Income Exclusive Agency 56,730 21 52,891 21 3,839 7
United American Independent Agency 9,929 4 9,288 4 641 7
United American Exclusive Agency 4,850 2 4,782 2 68 1
Other 55,303 21 51,485 20 3,818 7
-------- --- -------- --- -------
Total life premium $267,060 100 $251,341 100 $15,719 6
======== === ======== === ======= =
</TABLE>
Annualized life premium in force was $1.15 billion at March 31, 2000,
rising 6% over $1.08 billion in force a year earlier. Life insurance sales, in
terms of annualized premium issued, were $72 million in the 2000 quarter,
increasing 11% over 1999 same-period sales of $65 million. The following table
presents Torchmark's life insurance sales and in force data by distribution
method.
11
<PAGE>
<TABLE>
<CAPTION>
Life Insurance
Annualized Premium Sales and In Force
(Dollar amounts in thousands)
Sales In Force
---------------------------------------------- ---------------------------------------------------
Three months
Ended March 31, Increase At March 31, Increase
----------------------- ------------------- -------------------------- ------------------
2000 1999 Amount % 2000 1999 Amount %
--------- -------- -------- ------- ---------- ---------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct Response $29,515 $27,057 $2,458 9 $ 290,393 $ 269,338 $21,055 8
Liberty National
Exclusive Agency 13,426 12,565 861 7 310,016 299,057 10,959 4
AI Exclusive Agency 13,221 12,415 806 6 233,785 218,931 14,854 7
UA Independent Agency 5,258 2,727 2,531 93 45,507 41,066 4,441 11
UA Exclusive Agency 1,088 1,278 (190) (15) 21,548 21,316 232 1
Other Distribution 9,708 9,037 671 7 249,774 231,364 18,410 8
------- ------- ------ ---------- ---------- -------
Total $72,216 $65,079 $7,137 11 $1,151,023 $1,081,072 $69,951 6
======= ======= ====== === ========== ========== ======= ==
</TABLE>
Torchmark's Direct Response operation is conducted through direct mail, co-
op mailings, television and consumer magazine advertising, and direct mail
solicitations endorsed by groups, unions and associations. Direct Response sales
increased 9% to $30 million in the first quarter of 2000, compared with $27
million in the same period of 1999. Annualized premium in force for this
distribution method rose 8% over the prior year to $290 million at March 31,
2000, and premium income grew 9% to $67 million in the 2000 quarter. The $6
million growth in Direct Response premium income and the $21 million increase in
annualized life premium in force were the largest increases of any Torchmark
distribution channel in terms of dollar amount. In addition to its own
production and premium growth, the Direct Response operation provides support to
other Torchmark marketing agencies by providing sales leads and assisting in
agent recruiting. This marketing support has contributed indirectly to premium
growth in those agencies.
The Liberty National Exclusive Agency distribution system represented 27%
of Torchmark's life premium and annualized life premium in force, the largest of
any component distribution system. Life premium was $73 million in the first
quarter of 2000, rising 2% over 1999 first quarter premium. Life insurance
sales for this agency grew 7% to $13 million of annualized premium issued in the
2000 quarter. Annualized life premium in force was $310 million at March 31,
2000, growing 4% over the prior year. The Liberty National agency serves
primarily low and middle-income customers in the Southeastern United States.
The American Income Agency markets to members of labor unions, credit
unions, and other associations. This agency produced premium income of $57
million in the first three months of 2000, an increase of 7%. Life sales for
this agency rose 6% in the 2000
12
<PAGE>
quarter to $13 million. Growth in sales of the American Income Agency was
largely attributable to the growth in the number of agents, which rose 13% to
1,307 at March 31, 2000 over the prior twelve months. Annualized life premium in
force rose 7% to $234 million at March 31, 2000.
Life sales for the United American Independent Agency almost doubled in the
2000 quarter to $5.3 million. Annualized premium in force was $46 million at
the end of March, 2000. This agency has benefited from Direct Response marketing
support.
Torchmark's other distribution systems include Military, United Investors,
and other miscellaneous. The 7% growth in premium income in other distribution
was a result of the 13% growth in Military Agency premium to $28 million. Sales
in this agency increased 22% to $5.3 million in the first quarter of 2000. This
agency also had a 13% increase in annualized life premium in force which was
$115 million at March 31, 2000. Contributing to the increases in premium and
annualized premium in force is the high level of persistency of this business.
This agency consists of former military officers who sell exclusively to
military officers and their families.
<TABLE>
<CAPTION>
Life Insurance
Summary of Results
(Dollar amounts in thousands)
Three months ended March 31,
---------------------------------------------
2000 1999 Increase
---------------------------------------------- ------------------
% to % to
Amount Total Amount Total Amount %
-------- ----- -------- ----- ------- --
<S> <C> <C> <C> <C> <C> <C>
Premium and policy charges $267,060 100 $251,341 100 $15,719 6
Net policy obligations 116,962 44 107,188 42 9,774 9
Commissions and
acquisition expense 83,917 31 77,188 31 6,729 9
-------- --- -------- --- -------
Insurance underwriting income before
other income and administrative
expense $ 66,181 25 $ 66,965 27 $ (784) (1)
======== === ======== === ======= ==
</TABLE>
Life insurance underwriting income before insurance administrative expenses
was $66 million in the first three months of 2000, declining slightly from the
same period of 1999. As a percentage of life premium, underwriting income was
25% in the three months of 2000, compared with 27% in the comparable 1999
period. This decline was primarily the result of an increase in life claims in
2000. Fluctuations in claims are common in life insurance and the first
quarter 2000 fluctuation is not considered to be indicative of a trend.
13
<PAGE>
Health insurance. Health insurance premium income rose 11% from $203
million in the first three months of 1999 to $225 million in the same period of
2000.The table below is an analysis of Torchmark's health premium by
distribution method.
<TABLE>
<CAPTION>
Health Insurance
Premium by Distribution Method
(Dollar amounts in thousands)
Three months ended March 31,
---------------------------------------------
2000 1999 Increase
---------------------------------------------- ------------------
% to % to
Amount Total Amount Total Amount %
-------- ----- -------- ----- ------- --
<S> <C> <C> <C> <C> <C> <C>
United American Independent Agency $113,504 50 $108,488 53 $ 5,016 5
United American Exclusive Agency 58,542 26 44,755 22 13,787 31
Liberty National Exclusive Agency 37,323 17 35,293 17 2,030 6
American Income Exclusive Agency 11,757 5 11,600 6 157 1
Direct Response 3,851 2 2,906 2 945 33
-------- --- -------- --- -------
Total health premium $224,977 100 $203,042 100 $21,935 11
======== === ======== === ======= ==
</TABLE>
The table below is a presentation of health insurance sales and in force
data.
Health Insurance Annualized Premium Sales and In Force
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Sales In Force
------------------------------------------ ----------------------------------------------
Three months
Ended March 31, Increase At March 31, Increase
-------------------- ---------------- ----------------------- -----------------
2000 1999 Amount % 2000 1999 Amount %
------- ------- ------- -- -------- -------- -------- --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UA Exclusive Agency $29,571 $23,629 $ 5,942 25 $248,566 $188,520 $ 60,046 32
UA Independent Agency 19,906 16,056 3,850 24 451,804 432,597 19,207 4
Liberty Exclusive Agency 2,401 2,492 (91) (4) 161,770 143,110 18,660 13
AI Exclusive Agency 2,033 1,835 198 11 45,237 44,235 1,002 2
Direct Response 1,874 1,703 171 10 15,303 11,499 3,804 33
------- ------- ------- -------- -------- --------
Total $55,785 $45,715 $10,070 22 $922,680 $819,961 $102,719 13
======= ======= ======= == ======== ======== ======== ==
</TABLE>
14
<PAGE>
Annualized health insurance premium in force grew 13% to $923 million at
March 31, 2000 over the prior twelve-month period. Sales of health insurance, as
measured by annualized premium issued, grew 22% to $56 million in the first
three months of 2000 over the same period a year earlier. Medicare Supplement
sales rose 18% in the 2000 period to $44 million, accounting for 66% of the
growth in Torchmark's total health sales. Medicare Supplement products are sold
by Torchmark's United American Independent and Exclusive Agencies. Both of
these agencies experienced growth in health sales and annualized health premium
in force when compared with the prior-year quarter. The United American
Exclusive Agency has experienced rapid growth during the past twelve months, as
the number of agents in this agency rose 49% to 2,832 at March 31, 2000. This
growth in the size of the agency contributed greatly to the growth in Medicare
Supplement premium sales and premium in force. Annualized Medicare Supplement
premium in force was $656 million at March 31, 2000, rising 14% from a year
earlier. Medicare Supplement represented 71% of Torchmark's total health
premium in force at the end of March, 2000.
Cancer sales, produced primarily by the Liberty National Agency, were $2.4
million in the 2000 quarter, flat with the prior-year period. Cancer annualized
premium in force rose 15% to $166 million. While new sales were a factor, the
primary cause of growth in annualized cancer premium was a result of premium
rate increases. Cancer business represented 18% of Torchmark's annualized health
premium in force at March 31, 2000. Other health product sales rose 56% to $10
million in the 2000 period. Other health annualized premium in force increased
3% to $100 million.
15
<PAGE>
The following table presents underwriting margin data for health insurance.
<TABLE>
<CAPTION>
Health Insurance
Summary of Results
(Dollar amounts in thousands)
Three months ended March 31,
---------------------------------------------
2000 1999 Increase
---------------------------------------------- ------------------
% to % to
Amount Total Amount Total Amount %
-------- ----- -------- ----- ------- --
<S> <C> <C> <C> <C> <C> <C>
Premium and policy charges $224,977 100 $203,042 100 $21,935 11
Net policy obligations 141,052 63 127,136 63 13,916 11
Commissions and acquisition expense 43,340 19 39,996 19 3,344 8
-------- --- -------- --- -------
Insurance underwriting income
before other income and
administrative expenses $ 40,585 18 $ 35,910 18 $ 4,675 13
======== === ======== === ======= ==
</TABLE>
Underwriting margins for health insurance increased 13% to $41 million in the
2000 period over the prior-year quarter. As a percentage of health premium,
underwriting margins rose slightly from 17.7% in 1999 to 18.0% in 2000.
Annuities. The following table presents collection and deposit balance
information about Torchmark's annuities.
<TABLE>
<CAPTION>
Annuities
Collections and Deposit Balances
(Dollar amounts in thousands)
Collections Deposit Balances
------------------------------------------ ----------------------------------------------
Three months
ended March 31, Increase At March 31, Increase
-------------------- ---------------- ----------------------- -----------------
2000 1999 Amount % 2000 1999 Amount %
------- ------- ------- -- -------- -------- -------- --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed $ 10,365 $11,115 $ (750) (7) $ 672,192 $ 646,652 $ 25,540 4
Variable 134,477 81,500 52,977 65 3,819,189 2,438,105 1,381,084 57
-------- ------- ------- ---------- ---------- ----------
Total $144,842 $92,615 $52,227 56 $4,491,381 $3,084,757 $1,406,624 46
======== ======= ======= == ========== ========== ========== ==
</TABLE>
16
<PAGE>
Annuities are sold on both a fixed and a variable basis. Fixed annuity
collections were $10 million in the first three months of 2000, declining 7%
from $11 million collected in the prior period. Fixed annuities on deposit with
Torchmark rose 4% to $672 million. Collections of variable annuities were $134
million in the first quarter of 2000, increasing 65% over variable collections
of $82 million in the first three months of 1999. The variable annuity balance
on deposit rose 57% during the past twelve months. This balance was $3.8 billion
at March 31, 2000, $3.3 billion at December 31, 1999, and $2.4 billion a year
ago. Strong financial markets in recent months have had a positive impact on the
variable account balance and have been a major factor in increased variable
annuity sales.
The following table presents underwriting margin data for Torchmark's
annuities.
<TABLE>
<CAPTION>
Annuities
Summary of Results
(Dollar amounts in thousands)
Three months
Ended March 31, Increase
---------------------- --------------------
2000 1999 Amount %
-------- --------- ------- ---------
<S> <C> <C> <C> <C>
Policy charges $11,016 $ 8,381 $2,635 31
Net policy obligations (960) (1,097) 137 (12)
Commissions and
acquisition expense 5,601 4,242 1,359 32
------- ------- -------
Insurance underwriting income before
other income and administrative
expenses $ 6,375 $ 5,236 $1,139 22
======= ======= ====== ===
</TABLE>
Policy charges for annuities for the first quarter of 2000 were $11.0
million, compared with $8.4 million for the 1999 period, an increase of 31%.
Policy charges are assessed against the annuity account balance periodically for
insurance risk, sales, administration, and cash surrender. Annuity underwriting
income improved 22% from $5.2 million in the 1999 three-month period to $6.4
million in the same period of 2000. Increases in both policy charges and
underwriting income resulted primarily from the growth in the variable annuity
balance over the prior-year period.
17
<PAGE>
Investment. The following table summarizes Torchmark's investment income
and excess investment income.
<TABLE>
<CAPTION>
Excess Investment Income
(Dollars in thousands)
Three months ended March 31, Increase
---------------------------- ----------------------
2000 1999 Amount %
---------------------------- -------- --
<S> <C> <C> <C> <C>
Net investment income $117,111 $111,396 $ 5,715 5
Tax equivalency adjustment 2,695 2,756 (61) (2)
-------- -------- ------- --
Tax equivalent investment income 119,806 114,152 5,654 5
Required interest on net insurance policy liabilities (45,247) (43,474) (1,773) 4
Financing costs (17,485) (16,098) (1,387) 9
-------- -------- ------- --
Excess investment income $ 57,074 $ 54,580 $ 2,494 5
======== ======== ======= ==
</TABLE>
On a tax equivalent basis, net investment income was $120 million in the
first quarter of 2000, increasing 5% from $114 million during the same 1999
period. The increase was caused primarily by the growth in the fixed-maturity
portfolio. Average fixed maturities were $6.0 billion in the 2000 three months
on an amortized cost basis, compared with $5.6 billion in the 1999 first
quarter. One factor in the increase in this portfolio was that real estate at a
value of $123 million was sold in the third and fourth quarters of 1999 with the
sales proceeds invested in fixed maturities. The real estate that was sold
yielded approximately 3% while the proceeds were invested at a yield exceeding
7%. An overall increase in average invested assets of $266 million was achieved
over the prior-year quarter even though share purchases of $122 million were
made under the share repurchase program and debt in the amount of $12 million
was repaid during the prior twelve months.
Excess investment income is tax-equivalent net investment income reduced by
the interest credited to net insurance policy liabilities and less Torchmark's
financing costs. Financing costs include interest on debt and the pretax
dividends on Torchmark's MIPS. Excess investment income for the 2000 quarter
rose 5% to $57 million from $55 million for the same period of 1999, due
primarily to the rise in investment income.
In view of Torchmark's share repurchase program, it would be more
appropriate to examine excess investment income on a per share basis. Excess
investment income per diluted share was $.44 in the 2000 first quarter, compared
with $.40 in the 1999 quarter, an increase of 10%.
18
<PAGE>
During the first quarter of 2000, Torchmark continued to emphasize
purchases of investment grade fixed-maturity bonds. Purchases totaled $198
million and had an average yield of 7.85%, equivalent to an effective annual
yield of 8.06%. For the comparable 1999 period, fixed-maturity acquisitions
totaled $331 million, and had average and effective annual yields of 7.21% and
7.33%, respectively. The reduced purchases resulted primarily from a $148
million decline in sales and maturities in the first quarter of 2000 compared
with the same period in 1999. Sales were much higher in the first quarter of
1999 because of the effort to generate capital losses to offset prior year
taxable capital gains. The average life of 2000 purchases was 8.7 years,
compared with 24.8 years for the first quarter of last year.
At the end of the first quarter, the fixed-maturity portfolio stood at
$6.05 billion at amortized cost and had an unrealized loss of $257 million. At
year-end 1999, the portfolio was $5.95 billion and the unrealized loss was $275
million. The reduction in unrealized loss reflected the quarter's slight
decline in yields on corporate bonds. At the end of the first quarter 1999, the
portfolio had an unrealized gain of $117 million.
At March 31, 2000, the portfolio had an estimated average life of 12.5
years and an average duration of 6.2 years. The overall quality of the
portfolio continues to be high, with an average quality rating of "A."
Approximately 95% of the portfolio was considered investment grade.
Financial Condition
Liquidity. Strong positive cash flow, marketable investments, and the
availability of a line of credit facility cause Torchmark to be very liquid.
Torchmark's insurance operations typically generate cash flows in excess of
immediate requirements. Torchmark's net cash inflows from operations were $144
million in the first three months of 2000, compared with $122 million in the
same period of 1999, an increase of 18%. In addition to cash flows from
operations, Torchmark received $50 million in investment maturities or
repayments during the first three months of 2000.
Torchmark's cash and short-term investments were $78 million at March 31,
2000, compared with $115 million of these assets at December 31, 1999. Cash and
short-term investments were $45 million at the end of March, 1999. In addition
to these liquid assets, Torchmark's entire portfolio of fixed-income and equity
securities, in the approximate amount of $5.8 billion at market value on March
31, 2000, is available for sale should any need arise.
Torchmark has in place a line of credit facility, which is also designed as
a backup credit line for a commercial paper program. This program provides
credit up to a maximum amount of $600 million, and permits Torchmark to borrow
from either the credit
19
<PAGE>
line or issue commercial paper at any time up to the combined facility maximum
of $600 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
March 31, 2000. At that date, Torchmark had commercial paper outstanding in the
face amount of $408 million and no borrowings on the line of credit. At December
31, 1999, $420 million face amount of commercial paper was outstanding.
Capital resources. Torchmark's total debt outstanding was $778 million at
March 31, 2000, compared with $790 million at December 31, 1999 and $790
million at March 31, 1999. Long-term debt was $372 million at March 31, 2000 and
December 31, 1999, decreasing from $377 million at March 31, 1999. The decrease
was a result of purchases during 1999 of Torchmark debt by insurance
subsidiaries on the open market. Debt as a percentage of total capitalization
was 24.7% at March 31, 2000, counting the MIPS as equity and excluding the
effects of fluctuations in security values based on changes in interest rates in
the financial markets. The debt to capitalization ratio was 25.2% at year-end
1999 and was 25.8% at March 31, 1999. Interest coverage was 11.0 times for the
first quarter of 2000, compared with 10.9 times also for the prior-year first
quarter.
Torchmark acquired 2.7 million of its shares on the open market during the
first three months of 2000. These share purchases were made at a cost of $58
million during the period. Share purchases were primarily funded by the sale of
investments. Torchmark intends to make additional purchases under its share
repurchase program on the open market when prices are attractive. However, share
purchases will not be made when such purchases jeopardize the excellent to
superior claims-paying ratings of its insurance subsidiaries.
Torchmark's shareholders' equity was $2.03 billion at March 31, 2000,
compared with $1.99 billion at 1999 year end and $2.15 billion one year ago.
Book value per share was $15.71 at March 31, 2000, compared with $15.10 at year-
end 1999 and $16.09 a year earlier. After adjusting shareholders' equity to
remove the effects of interest-rate fluctuations on the security portfolio on an
after-tax basis, shareholders' equity was $2.18 billion at March 31, 2000,
compared with $2.15 billion at 1999 year end and $2.08 billion a year ago. On a
per share basis, adjusted book value was $16.88 at the end of March 31, 2000,
compared with $16.32 at year-end 1999 and $15.57 at March 31, 1999. The year-
over-year growth in adjusted book value per share was 8.4%, and was achieved in
spite of $122 million in share buybacks in the last three quarters of 1999 and
the first quarter of 2000.
The annualized return on common equity, or net operating income from
continuing operations as a percentage of average equity excluding the effects of
securities at market value, was 16.6% for the first quarter of 2000. Return on
equity for the same 1999 period was 16.3%.
20
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no quantitative or qualitative changes with respect to
market risk exposure during the three months ended March 31, 2000.
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 subsidiaries,
employment discrimination, and miscellaneous other causes of action. Many of
these lawsuits involve claims for punitive damages in state courts of Alabama, a
jurisdiction particularly recognized for its large punitive damage verdicts. A
number of such actions involving Liberty also name Torchmark as a defendant.
The likelihood or extent of a punitive damage award in any given case is
currently impossible to predict. As of March 31, 2000, Liberty was a party to
approximately 112 active lawsuits (including 20 employment related cases and
excluding interpleaders and stayed cases), 88 of which were Alabama proceedings
in which punitive damages were sought. Liberty faces trial settings in these
cases on an on-going basis.
Based upon information presently available, and in light of legal and
other factual defenses available to Torchmark and its subsidiaries, contingent
liabilities arising from threatened and pending litigation are not presently
considered by management to be material. It should be noted, however, that
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, continue to occur, creating the potential for
unpredictable material adverse judgments in any given punitive damage suit.
It has been previously reported that Torchmark, its subsidiaries United
American and Globe and certain individual corporate officers are parties to
purported class action litigation filed in April, 1996 in the U.S. District
Court for the Northern District of Georgia (Crichlow v. Torchmark Corporation,
---------------------------------
Case No. 4:96-CV-0086-HLM) involving certain hospital and surgical insurance
policies issued by Globe and United American. In September 1997, the U.S.
District Court entered an order granting summary judgment against the plaintiffs
on certain issues and denying national class certification, although indicating
that plaintiffs could move for the certification of a state class of Georgia
policyholders. Discovery then proceeded on the remaining claims for breach of
contract and the duty of good faith arising from closure of the block of
business and certain post-claim matters as well as fraud and conspiracy relating
to pricing and delay in implementing rate increases.
On June 17, 1998, the U.S. District Court entered an order which denied the
plaintiff's motion to certify a Georgia policyholders class, denied
reconsideration of the previously entered motion for summary judgment on certain
issues, denied reconsideration of the denial of national certification of a
class of policyholders and severed and transferred claims of Mississippi
policyholders to the U.S. District Court for the Northern District of
Mississippi (Greco v. Torchmark Corporation, Case No. 1:98CV196-D-D). The U.S.
------------------------------
District Court
21
<PAGE>
granted defendants' motion for summary judgment on all remaining issues in
Crichlow on February 4, 1999. Plaintiffs in Greco then moved to certify
- -------- -----
a class of persons purchasing Globe hospital and surgical insurance
policies in Mississippi. On February 1, 1999, defendants filed a motion for
summary judgment in Greco. Defendants' motion for summary judgment on all
-----
remaining issues in Crichlow was granted by the District Court on February 4,
--------
1999. The Crichlow plaintiffs appealed and Crichlow defendants cross-appealed
-------- --------
various orders of the District Court to the United States Court of Appeals for
the Eleventh Circuit.
On October 29, 1999, the District Court dismissed all of the plaintiffs'
claims in Greco in their entirety and entered a final judgment dismissing Greco
----- -----
with prejudice. The October 29, 1999 order in Greco was appealed by plaintiffs
-----
to the Fifth Circuit Court of Appeals. The Crichlow and Greco cases were
-------- -----
settled and dismissed by the parties on April 17, 2000.
As previously reported, Liberty has been a party to two lawsuits alleging
that a class of persons were insured under Liberty policies when Liberty knew
that such persons were not entitled to retain any benefits under these policies,
one of which was filed in 1996 in the Circuit Court of Jefferson County, Alabama
(Harris v. Liberty National Life Insurance Company, Case No. CV-96-01836) and
-------------------------------------------------
the other in the Circuit Court of St. Clair County, Alabama (Gentry v. Liberty
-----------------
National Life Insurance Company, Case No. CV-97-61). The Gentry case was
- ------------------------------- ------
dismissed by the St. Clair County Circuit Court on June 16, 1998 and
subsequently the Harris case was amended to add former plaintiff Gentry as an
------
additional class representative in that case. On December 28, 1999, the
Jefferson County Circuit Court entered an order in Harris granting summary
------
judgment for Liberty on all plaintiffs' claims except unjust enrichment. The
only remaining claim in the Harris plaintiffs' motion for class certification,
------
one of unjust enrichment, was denied by the Circuit Court in an order denying
the motion for class certification entered February 10, 2000. On March 13,
2000, plaintiffs in Harris filed a motion to alter, amend or vacate the Circuit
------
Court's order denying class certification.
In 1978, the United States District Court for the Northern District of
Alabama entered a final judgment in Battle v. Liberty National Life Insurance
-----------------------------------------
Company, et AL (Case No. CV-70-H-752-S), class action litigation involving
- -------
Liberty, a class composed of all owners of funeral homes in Alabama and a class
composed of all insureds (Alabama residents only) under burial or vault policies
issued, assumed or reinsured by Liberty. The final judgment fixed the rights
and obligations of Liberty and the funeral directors authorized to handle
Liberty burial and vault policies as well as reforming the benefits available to
the policyholders under the policies. Although class actions are inherently
subject to subsequent collateral attack by absent class members, the Battle
------
decree remains in effect to date. A motion filed in February 1990 to challenge
the final judgment under Federal Rule of Civil Procedure 60(b) was rejected by
both the District Court in 1991 and the Eleventh Circuit Court of Appeals in
1992 and a Writ of Certiorari was denied by the U.S. Supreme Court in 1993.
22
<PAGE>
In November 1993, an attorney (purporting to represent the funeral
director class) filed a petition in the District Court seeking "alternative
relief" under the final judgment. This petition was voluntarily withdrawn on
November 8, 1995 by petitioners. On February 23, 1996, Liberty filed a petition
with the District Court requesting that it order certain contract funeral
directors to comply with their obligations under the Final Judgment in Battle
------
and their funeral service contracts. A petition was filed on April 8, 1996 on
behalf of a group of funeral directors seeking to modify the 1978 decree in
Battle in light of changed economic circumstances. All parties made extensive
- ------
submissions to the District Court and a hearing on the opposing petitions was
held by the District Court on February 9, 1999. On March 8, 1999, the District
Court entered an order granting Liberty's petition to enforce the obligations of
contract funeral directors under their funeral service contracts and denying the
funeral directors' petition for review of the Battle Final Judgment and
------
alternative relief. On July 29, 1999, the funeral director class filed an
appeal with the U.S. Court of Appeals of the Eleventh Circuit seeking to have
the March 8, 1999 order vacated on the merits. Liberty filed a joint motion in
the Eleventh Circuit Court seeking remand to the District Court for purposes of
appointment of class counsel for burial policyholders, who are currently not
formally represented in these proceedings. The Circuit Court issued an order
denying Liberty's joint motion on September 15, 1999 and the funeral director
class' appeal remained pending. On January 24, 2000, Liberty and the funeral
director class filed a joint motion for remand in order to allow the District
Court to evaluate a proposed settlement of the funeral directors' appeal. The
Eleventh Circuit Court granted the joint motion for remand on March 20, 2000.
On March 23, 2000, the District Court issued an order modifying its March 8,
1999 order to approve a settlement agreement between Liberty and the funeral
director class on certain issues.
On October 28, 1999, Liberty was served with a subpoena from the Florida
Department of Insurance in connection with that Department's investigation into
Liberty's sales practices and disclosures in the State of Florida regarding
industrial life insurance and low coverage life insurance policies.
Subsequently, on December 8, 1999, purported class action litigation was filed
against Liberty in the United States District Court for the Northern District of
Alabama (Moore v. Liberty National Life Insurance Company, Case No. CV-99-BU-
------------------------------------------------
3262-S), on behalf of all African-Americans who have or have had at the time of
policy termination an ownership interest in certain life insurance policies
($25,000 face amount or less) marketed by Liberty and certain of its former
subsidiaries. The alleged class period covers virtually the entire twentieth
century. Plaintiffs allege racial discrimination in Liberty's premium rates in
violation of 42 U.S.C. (S) 1981, breach of fiduciary duty in sales and
administrative practices, receipt of excessive and unreasonable premium payments
by Liberty, improper hiring, supervision, retention and failure to monitor
actions of officers, agents and employees, breach of contract in dismantling the
debit premium collection system, fraudulent inducement and negligent
misrepresentation. Unspecified compensatory and punitive damages are sought
together with a declaratory judgment and equitable and/or injunctive relief,
including establishment of a constructive trust for the benefit of class
members. Defendants filed a motion for judgment on the pleadings or in the
alternative for summary judgment on January 27, 2000. On April 7, 2000, the
District Court entered an order granting Liberty's motion for judgment on the
23
<PAGE>
pleadings and dismissing plaintiffs' claims under 42 U.S.C. (S) 1981 with
prejudice as time-barred and dismissing their state law claims without prejudice
to re-file in state court if desired. Plaintiffs have subsequently filed
motions with the District Court to reconsider its April 17, 2000 order and for
permission to file an amended complaint adding similar claims under 24 U.S.C.
(S) 1982. Liberty has opposed this motion and a ruling is expected shortly.
24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(11) Statement re computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the first quarter of 2000.
25
<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: May 11, 2000 /s/ C. B. Hudson
-----------------------------
C. B. Hudson, Chairman of the
Board, President, and Chief
Executive Officer
Date: May 11, 2000 /s/ Gary L. Coleman
-------------------------------------
Gary L. Coleman, Executive Vice
President and Chief Financial Officer
(Chief Accounting Officer)
26
<PAGE>
Exhibit 11. Statement re computation of per share earnings.
TORCHMARK CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net income before cumulative effect of change in
accounting principle $ 88,882,000 $ 80,348,000
Cumulative effect of change in accounting principle
(net of tax) 0 16,086,000
------------ ------------
Net income $ 88,882,000 $ 96,434,000
============ ============
Basic weighted average shares and
common stock equivalents outstanding 130,696,530 135,226,921
============ ============
Diluted weighted average shares and
common stock equivalents outstanding 130,822,957 136,135,425
============ ============
Net income before cumulative effect of change in
accounting principle $ 0.68 $ 0.59
Cumulative effect of change in accounting principle
(net of tax) 0.00 0.12
------------ ------------
Net income $ 0.68 $ 0.71
============ ============
Net income before cumulative effect of change in
accounting principle $ 0.68 $ 0.59
Cumulative effect of change in accounting principle
(net of tax) 0.00 0.12
------------ ------------
Net income $ 0.68 $ 0.71
============ ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 5,793,800
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 40,064
<MORTGAGE> 98,847
<REAL-ESTATE> 16,402
<TOTAL-INVEST> 6,283,527
<CASH> 10,474
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 1,938,653
<TOTAL-ASSETS> 12,841,942
<POLICY-LOSSES> 4,924,264
<UNEARNED-PREMIUMS> 92,192
<POLICY-OTHER> 221,944
<POLICY-HOLDER-FUNDS> 81,147
<NOTES-PAYABLE> 778,133
193,341
0
<COMMON> 147,801
<OTHER-SE> 1,883,088
<TOTAL-LIABILITY-AND-EQUITY> 12,841,942
503,053
<INVESTMENT-INCOME> 117,111
<INVESTMENT-GAINS> (1,859)
<OTHER-INCOME> 712
<BENEFITS> 331,520
<UNDERWRITING-AMORTIZATION> 66,357
<UNDERWRITING-OTHER> 83,230
<INCOME-PRETAX> 137,910
<INCOME-TAX> (46,639)
<INCOME-CONTINUING> 88,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,882
<EPS-BASIC> $.68
<EPS-DILUTED> $.68
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
