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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Torchmark Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[LOGO OF TORCHMARK CORPORATION APPEARS HERE]
March 23, 2000
To the Stockholders of
Torchmark Corporation:
Torchmark's 2000 annual meeting of stockholders will be held in the
auditorium at the executive offices of the Company, 2001 Third Avenue South,
Birmingham, Alabama at 10:00 a.m., Central Daylight Time, on Thursday, April
27, 2000.
The accompanying notice and proxy statement discuss proposals which will be
submitted to a stockholder vote. If you have any questions or comments about
the matters discussed in the proxy statement or about the operations of your
Company, we will be pleased to hear from you.
It is important that your shares be voted at this meeting. Please mark,
sign, and return your proxy or vote over the telephone or the Internet. If you
attend the meeting, you may withdraw your proxy and vote your stock in person
if you desire to do so.
We hope that you will take this opportunity to meet with us to discuss the
results and operations of the Company during 1999.
Sincerely,
/s/ C.B. Hudson
--------------------------------
C.B. Hudson
Chairman, President & Chief
Executive Officer
<PAGE>
---------------------------------
Notice of Annual Meeting of Stockholders
to be held April 27, 2000
---------------------------------
To the Holders of Common Stock of
Torchmark Corporation
The annual meeting of stockholders of Torchmark Corporation will be held at
the executive offices of the Company, 2001 Third Avenue South, Birmingham,
Alabama 35233 on Thursday, April 27, 2000 at 10:00 a.m., Central Daylight
Time. You will be asked to:
(1) Elect the nominees shown in the proxy statement as directors to
serve for their designated terms or until their successors have been duly
elected and qualified.
(2) Consider the appointment of Deloitte & Touche LLP as independent
auditors.
(3) Transact any other business that properly comes before the meeting.
These matters are more fully discussed in the accompanying proxy statement.
The close of business on Wednesday, March 1, 2000 is the date for
determining stockholders who are entitled to notice of and to vote at the
annual meeting. You are requested to mark, date, sign, and return the enclosed
form of proxy in the accompanying envelope, whether or not you expect to
attend the annual meeting in person. You may also choose to vote your shares
over the telephone or the Internet. You may revoke your proxy at any time
before it is voted at the meeting.
The annual meeting may be adjourned from time to time without further notice
other than by an announcement at the meeting or at any adjournment. Any
business described in this notice may be transacted at any adjourned meeting.
By Order of the Board of Directors
/s/ Carol A. McCoy
Carol A. McCoy
Associate Counsel & Corporate
Secretary
Birmingham, Alabama
March 23, 2000
<PAGE>
PROXY STATEMENT
Solicitation of Proxies
The Board of Directors of Torchmark Corporation solicits your proxy for use
at the 2000 annual meeting of stockholders and at any adjournment of the
meeting. The annual meeting will be held at the executive offices of the
Company, 2001 Third Avenue South, Birmingham, Alabama 35233 at 10:00 a.m.,
Central Daylight Time on Thursday, April 27, 2000. C.B. Hudson and Larry M.
Hutchison are named as proxies on the proxy/direction card. They have been
designated as directors' proxies by the Board of Directors.
If the enclosed proxy/direction card is returned, properly executed, and in
time for the meeting, your shares will be voted at the meeting. All proxies
will be voted in accordance with the instructions set forth on the
proxy/direction card. If proxies are executed and returned which do not
specify a vote on the proposals considered, those proxies will be voted FOR
such proposals. You have the right to revoke your proxy by giving written
notice of revocation addressed to the Secretary of the Company at the address
shown above at any time before the proxy is voted.
The card is considered to be voting instructions furnished to the respective
trustees each of the Torchmark Corporation Savings and Investment Plan, the
Waddell & Reed Financial, Inc. 401-K and Savings and Investment Plan, the
Liberty National Life Insurance Company 401(k) Plan and the Profit-Sharing and
Retirement Plan of Liberty National Life Insurance Company with respect to
shares allocated to individual's accounts under these plans. If the account
information is the same, participants in one or more of the plans who are also
shareholders of record will receive a single card representing all shares. If
a plan participant does not return a proxy/direction card to the Company, the
trustees of any plan in which shares are allocated to the participant's
individual account will vote those shares in the same proportion as the total
shares in that plan for which directions have been received.
A simple majority vote of the holders of the issued and outstanding common
stock of the Company represented in person or by proxy at the stockholders
meeting is required to elect directors and approve all other matters put to a
vote of stockholders. Abstentions are considered as shares present and
entitled to vote. Abstentions have the same legal effect as a vote against a
matter presented at the meeting. Any shares for which a broker or nominee does
not have discretionary voting authority under applicable New York Stock
Exchange rules will be considered as shares not entitled to vote and will not
be considered in the tabulation of the votes.
Record Date and Voting Stock
Each stockholder of record at the close of business on March 1, 2000 is
entitled to one vote for each share of common stock held on that date upon
each proposal to be voted on by the stockholders at the meeting. At the close
of business on March 1, 2000, there were 129,858,697 shares of common capital
stock of the Company outstanding (not including 152,385,585 shares held by the
Company and its subsidiaries which are non-voting while so held). There is no
cumulative voting of the common stock.
Principal Stockholders
The table below lists all persons known to be the beneficial owner of more
than five percent of the Company's outstanding common stock as of December 31,
1999.
<TABLE>
<CAPTION>
Name and Address Number of Shares(1) Percent of Class
---------------- ------------------- ----------------
<S> <C> <C>
AMVESCAP PLC 7,496,502 5.70%
11 Devonshire Square
London EC2M 4YR
England
</TABLE>
- --------
(1) All stock reported is held by holding companies (AVZ, Inc., AIM Management
Group, Inc., AMVESCAP Group Services, Inc., INVESCO, Inc. and INVESCO
North American Holdings, Inc.) and investment advisers (INVESCO Capital
Management, Inc. and INVESCO Asset Management Limited), which are
subsidiaries of AMVESCAP PLC. These entities share the voting and the
dispositive power over the shares and have disclaimed beneficial ownership
of such stock.
1
<PAGE>
PROPOSAL NUMBER 1
Election of Directors
The Company's By-laws provide that there will be not less than seven nor
more than fifteen directors with the exact number to be fixed by the Board of
Directors. In October, 1999, the number of directors was increased to ten
persons and Lamar C. Smith was elected to the newly created directorship.
The Board of Directors proposes the election of David L. Boren, Louis T.
Hagopian and Harold T. McCormick as directors, to hold office for a term of
three years, expiring at the close of the annual meeting of stockholders to be
held in 2003 or until their successors are elected and qualified and of R.K.
Richey as a director, to hold office for a term of one year, expiring at the
close of the annual stockholders meeting in 2001 or until his successor is
elected and qualified. Messrs. Boren, Hagopian, McCormick and Richey's current
terms expire in 2000. The term of office of the other six directors continues
until the close of the annual meeting of stockholders in the year shown in the
biographical information below.
Non-officer directors retire from the Board of Directors at the annual
meeting of stockholders which immediately follows their 75th birthday.
Directors who are officers of the Company retire from active service as
directors at the annual stockholders meeting immediately following their 65th
birthday, except that these directors may be elected annually to additional
one year terms not to continue beyond the annual meeting of stockholders
following the director's 75th birthday. The Chairman of the Executive
Committee serves at the pleasure of the Board on an annual basis until the
annual meeting following his 75th birthday.
If any of the nominees becomes unavailable for election, the directors'
proxies will vote for the election of any other person recommended by the
Board of Directors unless the Board reduces the number of directors.
The Board recommends that the stockholders vote FOR the nominees.
Profiles of Directors and Nominees(/1/)
David L. Boren (age 59) has been a director of the Company since April,
1996. He is a director of Waddell & Reed Financial, Inc., Phillips Petroleum
Corporation, AMR Corporation and Texas Instruments, Inc. Principal occupation:
President of The University of Oklahoma, Norman, Oklahoma since November,
1994.
Joseph M. Farley (age 72) has been a director of the Company since 1980. His
term expires in 2001. He is a director of Waddell & Reed Financial, Inc.
Principal occupation: Of Counsel at Balch & Bingham LLP, Attorneys and
Counselors, Birmingham, Alabama since November, 1992.
Louis T. Hagopian (age 74) has been a director of the Company since 1988. He
is a director of Waddell & Reed Financial, Inc. Principal occupation: Owner of
Meadowbrook Enterprises, Darien, Connecticut, an advertising and marketing
consultancy, since January, 1990. Vice Chairman, Partnership for a Drug-Free
America, New York, New York.
C. B. Hudson (age 54) has been a director since 1986. His term expires in
2001. Principal occupation: Chairman, President and Chief Executive Officer of
the Company since March, 1998. (Chairman of Insurance Operations of the
Company, January, 1993-March, 1998; Chairman of Liberty, United American and
Globe October, 1991-September, 1999 and Chief Executive Officer of Liberty
December, 1989-September, 1999, of United American November, 1982-September,
1999 and of Globe February, 1986-September, 1999).
2
<PAGE>
Joseph L. Lanier, Jr. (age 68) has been a director of the Company since
1980. His term expires in 2001. He is a director of Waddell & Reed Financial,
Inc., Dan River Incorporated, Flowers Industries, Inc., Dimon Inc. and
SunTrust Banks, Inc. Principal occupation: Chairman of the Board and Chief
Executive Officer of Dan River Incorporated, Danville, Virginia, a textile
manufacturer, since November, 1989.
Mark S. McAndrew (age 46) has been a director of the Company since July,
1998. His term expires in 2002. Principal occupation: Chairman and Chief
Executive Officer of United American, Globe and American Income since
September, 1999; President of United American and Globe since October, 1991
and of American Income since September, 1999; Executive Vice President of the
Company since September, 1999. (Vice President of the Company, April-
September, 1999).
Harold T. McCormick (age 71) has been a director since April, 1992. He is a
director of Waddell & Reed Financial, Inc. Principal occupation: Chairman and
Chief Executive Officer of Bay Point Yacht & Country Club, Panama City,
Florida, since March, 1988; Chairman, First Ireland Spirits Co., Ltd.,
Abbeyleix, Ireland, since February, 1996.
George J. Records (age 65) has been a director of the Company since April,
1993. His term expires in 2002. He is a director of Waddell & Reed Financial,
Inc. Principal occupation: Chairman of Midland Financial Co., Oklahoma City,
Oklahoma, a bank and financial holding company for retail banking and mortgage
operations, since 1982.
R. K. Richey (age 73) has been a director of the Company since 1980. He is a
director of Full House Resorts, Inc. and Waddell & Reed Financial, Inc. and a
Director Emeritus of the United Group of Mutual Funds, Waddell & Reed Funds,
Inc. and Target/United Funds, Inc. Principal occupation: Chairman of the
Executive Committee of the Board of Directors of the Company since March,
1998. (Chairman of the Company, August, 1986-March, 1998 and Chief Executive
Officer of the Company, December, 1984-March, 1998).
Lamar C. Smith (age 52) has been a director of the Company since October,
1999. His term expires in 2002. He is a director of Millers American Group,
Inc. Principal Occupation: Chairman since 1992 and Chief Executive Officer
since 1990 of United Services Planning Association, Inc., Independent Research
Agency for Life Insurance, Inc. and First Command Bank.
- --------
(1) Liberty, Globe, United American and American Income as used in this proxy
statement refer to Liberty National Life Insurance Company, Globe Life And
Accident Insurance Company, United American Insurance Company and American
Income Life Insurance Company, subsidiaries of the Company.
3
<PAGE>
PROPOSAL NUMBER 2
Approval of Auditors
A proposal to approve the appointment of the firm of Deloitte & Touche LLP
as the principal independent accountants of the Company to audit the financial
statements of the Company and its subsidiaries for the year ending December
31, 2000 will be presented to the stockholders at the annual meeting. Deloitte
& Touche served as the principal independent accountants of Torchmark,
auditing the financial statements of the Company and its subsidiaries for the
fiscal year ended December 31, 1999. The Audit Committee of the Board
recommends the appointment of Deloitte & Touche as the Company's principal
accountants for 2000.
KPMG Peat Marwick LLP served as the principal independent accountants of
Torchmark, auditing the financial statements of the Company and its
subsidiaries from 1981 through the fiscal year ended December 31, 1998. In
1998, senior management of the Company conducted extensive interviews with
several independent accounting firms and held discussions regarding the
selection of principal independent accountants with the members of the Audit
Committee of the Board. After deliberation, senior management recommended to
the Audit Committee that Deloitte & Touche be engaged as the Company's
principal accountants as of January 1, 1999, effective upon the issuance of
KPMG's reports on the consolidated financial statements of Torchmark and its
subsidiaries and the separately issued financial statements of Torchmark's
subsidiaries, unit investment trusts and benefit plans as of and for the year
ending December 31, 1998. (KPMG completed its engagement as Torchmark's
independent auditor on October 14, 1999, the date upon which the last of the
audit reports as of and for the year ended December 31, 1998 for the entities
noted above were issued.) Upon review, on October 21, 1998, the Audit
Committee approved the engagement of Deloitte & Touche.
The reports of KPMG on the financial statements of Torchmark for the fiscal
years ending December 31, 1997 and 1998 did not contain any adverse opinion or
disclaimer of opinion. KPMG's reports were not qualified or modified as to
uncertainty, audit scope or accounting principles except as follows: KPMG's
Auditor's Report on the Consolidated Financial Statements of Torchmark as of
and for the year ended December 31, 1997 refers to a change in accounting
principles to adopt the provisions of Statement of Financial Accounting
Standards Board's Statement of Financial Accounting Standard 121 "Accounting
for the Impairment of Long Lived Assets and for Long Lived Assets to be
Disposed Of". During such years and during the period between December 31,
1998 and the date of completion of KPMG's engagement, there was no
disagreement between KPMG and Torchmark on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of KPMG, would have
caused that firm to make reference to the subject matter of such disagreement
in connection with its report on the Company's financial statements.
A representative of Deloitte & Touche is expected to be present at the
meeting and available to respond to appropriate questions and, although the
firm has indicated that no statement will be made, an opportunity for a
statement will be provided.
If the stockholders do not approve the appointment of Deloitte & Touche LLP,
the selection of independent auditors will be reconsidered by the Board of
Directors.
The Board recommends that stockholders vote FOR the proposal.
OTHER BUSINESS
The directors are not aware of any other matters which may properly be and
are likely to be brought before the meeting. If any other proper matters are
brought before the meeting, the persons named in the proxy, or in the event no
person is named, C.B. Hudson and Larry M. Hutchison will vote in accordance
with their judgment on these matters.
4
<PAGE>
INFORMATION REGARDING DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Executive Officers
The following table shows certain information concerning each person deemed
to be an executive officer of the Company, except those persons also serving
as directors. Each executive officer is elected by the Board of Directors of
the Company or its subsidiaries annually and serves at the pleasure of that
board. There are no arrangements or understandings between any executive
officer and any other person pursuant to which the officer was selected.
<TABLE>
<CAPTION>
Principal Occupation
and Business Experience
Name Age for the Past Five Years(1)
---- --- --------------------------
<C> <C> <S>
Tony G. Brill............... 57 Executive Vice President and Chief
Administrative Officer of Company since
September, 1999. (Vice President of Company,
January, 1997-September, 1999; Managing
Partner, KPMG Peat Marwick LLP, Birmingham,
Alabama 1969-December, 1996).
Gary L. Coleman............. 47 Executive Vice President and Chief Financial
Officer of Company since September, 1999.
(Vice President and Chief Accounting Officer
of Company, July, 1994-September, 1999).
Larry M. Hutchison.......... 46 Executive Vice President and General Counsel
of Company since September, 1999; Vice
President, Secretary and General Counsel of
United American since May, 1994. (Vice
President and General Counsel of Company,
April, 1997-September, 1999).
Anthony L. McWhorter........ 50 Chairman and Chief Executive Officer of
Liberty and UILIC since September, 1999;
President of Liberty since December, 1994 and
of UILIC since September, 1998; Executive
Vice President of Company since September,
1999.
Rosemary J. Montgomery...... 50 Executive Vice President and Chief Actuary of
Company, United American and Globe since
September, 1999. (Senior Vice President and
Chief Actuary of United American, October,
1991-September, 1999 and of Globe, May, 1992-
September, 1999).
</TABLE>
5
<PAGE>
Stock Ownership
The following table shows certain information about stock ownership of the
directors, director nominees and executive officers of the Company as of
December 31, 1999.
<TABLE>
<CAPTION>
Company Common Stock
or Options Beneficially
Owned as of
December 31, 1999(1)
-------------------------
Name Directly(2) Indirectly(3)
---- ----------- -------------
<S> <C> <C>
David L. Boren....................................... 15,980 0
Norman, OK
Joseph M. Farley..................................... 135,810 4,800
Birmingham, AL
Louis T. Hagopian.................................... 137,218 0
Darien, CT
C. B. Hudson......................................... 2,018,328 40,755
Plano, TX
Joseph L. Lanier, Jr. ............................... 134,064 18,912
Lanett, AL
Mark S. McAndrew..................................... 172,380 6,053
McKinney, TX
Harold T. McCormick ................................. 42,253 7,200
Panama City, FL
George J. Records.................................... 48,942 0
Oklahoma City, OK
R. K. Richey......................................... 439,601 1,862,856
Horseshoe Bay, TX
Lamar C. Smith....................................... 0 0
Fort Worth, TX
Tony G. Brill........................................ 115,972 1,383
Frisco, TX
Gary L. Coleman...................................... 181,059 12,421
Richardson, TX
Larry M. Hutchinson.................................. 69,597 7,860
Duncanville, TX
Anthony L. McWhorter................................. 114,576 10,230
Birmingham, AL
Rosemary J. Montgomery............................... 151,950 1,531
Frisco, TX
All Directors, Nominees and Executive Officers as a
group:(4)............................................ 3,777,730 1,974,001
</TABLE>
- --------
(1) No directors, director nominees or executive officers other than R. K.
Richey (1.7%) and C.B. Hudson (1.5%) beneficially own 1% or more of the
common stock of the Company.
(2) Includes: for David L. Boren, 14,000 shares; for Joseph Farley, 66,400
shares; for Louis Hagopian, 85,325 shares; for Joseph Lanier, 80,195
shares; for Mark McAndrew, 76,300 shares; for Harold McCormick, 40,215
shares; for George Records, 35,784 shares; for R. K. Richey, 13,099
shares; for C. B. Hudson, 1,047,948 shares; for Tony Brill, 59,488 shares;
for Anthony McWhorter, 57,778 shares; for Gary Coleman, 96,218 shares; for
Larry Hutchison, 47,979 shares; for Rosemary Montgomery, 85,139 shares and
for all directors, executive officers and nominees as a group, 1,805,868
shares, that are subject to presently exercisable Company stock options.
Lamar Smith holds options on 11,594 shares. None of such options are
presently exercisable prior to July 3, 2000.
(3) Indirect beneficial ownership includes shares (a) owned by the director,
executive officer or spouse as trustee of a trust or executor of an
estate, (b) held in a trust in which the director, executive officer or a
family member living in his home has a beneficial interest, (c) owned by
the spouse or a family member living in the director's, executive
officer's or nominee's home or (d) owned by the director or executive
officer in a personal corporation or limited partnership. Indirect
beneficial ownership also includes approximately
6
<PAGE>
12,755 shares, 6,053 shares, 786 shares, 8,466 shares, 12,421 shares,
7,860 shares and 531 shares calculated based upon conversion of stock unit
balances held in the accounts of Messrs. Hudson, McAndrew, Brill,
McWhorter, Coleman and Hutchison and Ms. Montgomery, respectively, in the
Company Savings and Investment Plan to shares. Additionally, indirect
beneficial ownership includes for Mr. Richey 313,800 shares subject to
options held by Richey Capital Partners, Ltd., a family limited
partnership. Indirect ownership for Mr. McWhorter also includes
approximately 1,764 shares calculated based upon conversion of stock unit
balance in the Profit Sharing & Retirement Plan of Liberty (PS&R Plan) to
shares.
Mr. Lanier disclaims beneficial ownership of 16,512 shares owned by his
spouse and 2,400 shares owned by his children. Mr. Farley disclaims 4,800
shares held as trustee of a church endowment fund.
(4) All directors, nominees and executive officers as a group, beneficially
own 4.3% of the common stock of the Company.
During 1999, the Board of Directors met five times. In 1999, all of the
directors attended more than 75% of the meetings of the Board and the
committees on which they served.
Committees of the Board of Directors
The Board of Directors has the following committees: Audit-Messrs. Farley,
Hagopian, and McCormick; Compensation -- Messrs. Farley, Lanier and Hagopian;
Executive -- Messrs. Boren, Farley, Hagopian, Hudson, Lanier, McCormick,
Records and Richey; Finance -- Messrs. Farley, Lanier, McCormick and Records
and Nominating -- Messrs. Boren, Farley, Hagopian, Lanier, McCormick and
Records.
The audit committee recommends the independent auditors to be selected by
the Board; discusses the scope of the proposed audit with the independent
auditors and considers the audit reports; discusses the implementation of the
auditors' recommendations with management; reviews the fees of the independent
auditors for audit and non-audit services; reviews the adequacy of the
Company's system of internal accounting controls; reviews, before publication
or issuance, the annual financial statement and any annual reports to be filed
with the Securities and Exchange Commission and periodically reviews pending
litigation. Additionally, the audit committee meets with the Company's
independent accountants and internal auditors both with and without management
being present. The audit committee met twice in 1999.
The compensation committee determines the compensation of senior management
of the Company and its subsidiaries and affiliates. Additionally, the
compensation committee administers the stock incentive plans of the Company.
The compensation committee met three times in 1999.
The executive committee exercises all the powers of the Board of Directors
in the interim between Board meetings. The executive committee did not meet in
1999.
The finance committee serves as the pricing committee in connection with
capital financing by the Company. The finance committee did not meet in 1999.
The nominating committee reviews the qualifications of potential candidates
for the Board of Directors from whatever source received, reports its findings
to the Board and proposes nominations for Board membership for approval by the
Board of Directors and for submission to the stockholders for approval.
Recommendations of potential Board candidates may be directed to the
nominating committee in care of the Corporate Secretary of the Company at the
address stated herein. The nominating committee met once in 1999.
7
<PAGE>
COMPENSATION AND OTHER TRANSACTIONS WITH
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Summary Compensation Table
- ---------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
------------------------------------ -----------------------------
Awards
-----------------------------
(g)
(e) (f) Securities (i)
(a) (d) Other Annual Restricted Stock underlying All other
Name and (b) (c) Bonus Compensation Award(s) Options/SARs Compensation
Principal Position Year Salary ($) ($)(1) ($)(2) ($) (#)(4) ($)(5)
------------------ ---- ---------- ------- ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
C.B. Hudson 1999 800,000 0 0 151,734 5,910
Chairman, President 1998 800,000 0 0 259,740 5,772
and CEO 1997 800,000 400,000 0 557,181 5,806
Mark S. McAndrew 1999 575,000 150,000 0 153,198 4,800
Chairman, President 1998 525,000 150,000 1,687,500(3) 62,500 4,800
and CEO of United 1997 475,000 120,000 0 66,782 4,800
American, Globe and
American Income
Tony G. Brill 1999 500,016 100,000 0 115,813 4,800
Executive Vice President 1998 450,000 0 1,687,500(3) 63,258 4,800
and Chief 1997 400,000 85,000 0 116,825 0
Administrative Officer
Anthony L. McWhorter 1999 350,120 120,000 0 108,374 4,800
Chairman, President 1998 300,722 27,000 1,054,688(3) 47,505 4,800
and Chief Executive 1997 245,024 100,000 0 42,758 4,800
Officer of Liberty and
UILIC
Gary L. Coleman 1999 300,000 30,000 0 89,303 4,800
Executive Vice 1998 275,000 30,000 0 30,379 4,800
President and Chief 1997 250,000 60,000 0 91,007 4,800
Financial Officer
Charles B. Cooper 1999 515,000 0 0 0 265,595
President of 1998 515,000 50,000 527,344(3) 20,000 9,600
American Income until 1997 475,000 100,000 0 11,326 9,600
September 1999
Bernard Rapoport 1999 427,500 0 13,305 0 101,518 118,088
Chairman and CEO 1998 570,000 0 11,800 0 20,000 9.600
of American Income 1997 525,000 100,000 10,351 0 44,178 9,600
until September 1999
</TABLE>
- --------
(1) Messrs. Hudson and Coleman elected to defer $400,000 and $50,000,
respectively, of their 1999 bonuses and received therefor Company stock
options under the provisions of the Torchmark Corporation 1998 Stock
Incentive Plan (1998 Incentive Plan). Messrs. Hudson, Brill, McWhorter and
Coleman elected to defer $400,000, $100,000, $93,000 and $50,000,
respectively, of their 1998 bonuses pursuant to the executive deferred
compensation stock option provisions of the 1998 Incentive Plan.
(2) Includes for Mr. Rapoport--$13,305, $11,800 and $10,351 required to be
paid to him from the American Income Life Insurance Company Exempt
Employees 401K Profit Sharing Plan (American Income Profit Sharing Plan)
in 1999, 1998, and 1997, respectively, because of his continued active
employment and participation in such plan after age 70.
(3) At year end 1999, Messrs. McAndrew, McWhorter, Brill and Cooper held
33,600, 21,000, 33,600 and 1,875 restricted shares, respectively, valued
at $976,500, $610,313, $976,500 and $54,492 (based on a year-end closing
price of $29.0625 per share). Restricted stock (40,000 shares) awarded on
January 1, 1998 at $42.1875 per share to each of Messrs. McAndrew and
Brill vests as follows: 1-1-99 6,400 shares; 1-1-00 6,000 shares; 1-1-01
5,600 shares; 1-1-02 5,200 shares; 1-1-03 4,800 shares; 1-1-04 4,400
shares; 1-1-05 4,000 shares; and 1-1-06 3,600 shares. Restricted stock
(25,000 shares) awarded on January 1, 1998 at $42.1875 per share to
Mr. McWhorter vests as follows: 1-1-99 4,000 shares; 1-1-00 3,750 shares;
1-1-01
8
<PAGE>
3,500 shares; 1-1-02 3,250 shares; 1-1-03 3,000 shares; 1-1-04 2,750
shares; 1-1-05 2,500 shares. Restricted stock (12,500 shares) awarded on
January 1, 1998 at $42.1875 per share to Mr. Cooper was scheduled to vest
as follows: 1-1-99 2,000 shares; 1-1-00 1,875 shares; 1-1-01 1,750 shares;
1-1-02 1,625 shares; 1-1-03 1,500 shares; 1-1-04 1,375 shares; 1-1-05
1,250 shares; and 1-1-06 1,125 shares. Such shares scheduled to vest on 1-
1-01 and thereafter were forfeited to the Company by Mr. Cooper upon his
retirement. Cash dividends on all restricted stock are paid directly to
the stockholder at the same rate as on unrestricted stock. Messrs.
McAndrew, McWhorter, Brill and Cooper agreed as a condition of their
restricted stock awards to waive receipt of any shares of Waddell & Reed
Financial, Inc. (WDR) stock distributed by Torchmark to its common
shareholders in the WDR spin-off on November 6, 1998.
(4) In November 1999, Messrs. McAndrew, Brill, McWhorter, Coleman and Rapoport
elected to participate in a program under the TMK Incentive Plan whereby
they exercised existing Torchmark stock options and received restoration
options for 53,198, 40,813, 33,374, 22,836 and 91,518 Torchmark shares,
respectively. On December 21, 1999, Messrs. Hudson, McAndrew, Brill,
McWhorter, Coleman and Rapoport received stock option grants pursuant to
the TMK Incentive Plan on 100,000, 100,000, 75,000, 75,000, 60,000 and
10,000 Torchmark shares, respectively. Also, on that same date, Messrs.
Hudson and Coleman elected to receive 1999 bonus amounts of $400,000 and
$50,000, respectively, in the form of Torchmark stock options on 51,734
shares and 6,467 shares, respectively.
In December 1998, Messrs. Hudson, Rapoport, McAndrew, Cooper, McWhorter,
Coleman and Brill received stock option grants of 100,000, 20,000, 62,500,
20,000, 37,500, 25,000 and 52,500 shares, respectively, pursuant to the
1998 Incentive Plan. Also, in December 1998, Messrs. Hudson, Brill,
McWhorter and Coleman elected to receive 1998 bonus amounts of $400,000,
$93,000, $50,000 and $100,000 in the form of stock options on 43,031
shares, 10,005 shares, 5,379 shares and 10,758 shares pursuant to the
terms of the 1998 Incentive Plan. On November 6, 1998, pursuant to the
terms of each existing option plan, adjustments were made to all
outstanding stock options granted prior to that date to reflect the WDR
spin-off based upon each optionee's election to receive either Adjusted
Torchmark Options or a combination of Adjusted Torchmark Options and WDR
Conversion Options granted in WDR Class A common stock. Accordingly, all
shares reflected as underlying options granted prior to November 6, 1998
have been so adjusted.
On January 2, 1997, Mr Brill was granted options under the TMK Incentive
Plan on 116,825 Torchmark shares. On January 31, 1997, Mr. Hudson elected
to convert all his 1996 bonus amounts plus accrued interest of $1,151 held
in the TMK Executive Deferral Plan, subject to subsequently obtained
shareholder approval, to stock options on 89,881 Torchmark shares. In
1997, Messrs. Hudson, Rapoport, McAndrew, Cooper, McWhorter and Coleman
elected to participate in a program under the TMK Incentive Plan whereby
they exercised existing Torchmark stock options and received restoration
options for 467,183, 11,500, 51,300, 8,700, 42,758 and 76,988 Torchmark
shares, respectively. Messrs. Rapoport, McAndrew and Cooper received
options on 3,471, 15,482 and 2,626 WDR Class A shares as a November 6,
1998 spin-off adjustment to their Torchmark restoration options. Messrs.
Coleman and Rapoport also were awarded options pursuant to the TMK
Incentive Plan on 14,019 and 29,207 additional Torchmark shares in 1997.
Mr. Hudson was also granted options under the TMK Incentive Plan on 117
additional Torchmark shares in 1997 and on 116,709 Torchmark shares on
January 2, 1998.
(5) Includes Company contributions to Torchmark Corporation Savings and
Investment Plan, a funded, qualified defined contribution plan, for each
of Messrs. Hudson, McAndrew, Brill, McWhorter and Coleman of $4,800 in
1999, 1998 and 1997; interest only on prior contributions to the Torchmark
Corporation Supplemental Savings and Investment Plan, an unfunded, non-
qualified defined contribution plan, for Mr. Hudson of $1,110.31, $972.11,
and $1,006.00, respectively. Includes for Messrs. Rapoport and Cooper,
employer company contributions to the American Income Profit Sharing Plan,
a funded, qualified defined contribution plan, of $9,600.00 in 1999, 1998
and 1997. Includes for Mr. Cooper, $167,805 as payment for accrued but
unused vacation at the time of his retirement. Includes for Messrs. Cooper
and Rapoport, to close their American Income Profit Sharing Plan accounts,
$88,190 and $108,488 paid upon their respective retirements.
9
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------
Potential realizable
value at assumed annual rates
of stock price appreciation
Individual Grants for option term
--------------------------------------------- -------------------------------
% of
Number of total options Exercise
Securities granted to or
underlying employees base
options in price Expiration
Name granted(#) fiscal year ($/share) Date 5% ($) 10% ($)
(a)(1) (b)(1) (c)(2) (d) (e) 0% ($) (f) (g)
------ ---------- ------------- --------- ---------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
C.B. Hudson 51,734 3.1 27.8125 12-21-10 0 1,022,073 2,666,361
100,000 6.0 27.8125 12-23-09 0 1,749,114 4,432,595
Mark S. McAndrew 53,198 3.2 34.5000 11-17-09 0 1,154,230 2,925,044
100,000 6.0 27.8125 12-23-09 0 1,749,114 4,432,595
Tony G. Brill 40,813 2.4 34.5000 11-17-09 0 885,515 2,244,066
75,000 4.5 27.8125 12-23-09 0 1,311,836 3,324,446
Anthony L. McWhorter 33,374 2.0 34.5000 11-17-09 0 724,112 1,835,039
75,000 4.5 27.8125 12-23-09 0 1,311,836 3,324,446
Gary L. Coleman 22,836 1.4 34.5000 11-17-09 0 495,470 1,255,617
60,000 3.6 27.8128 12-23-09 0 1,049,469 2,659,557
6,467 0.4 27.8125 12-21-10 0 127,764 333,308
Bernard Rapoport 91,518 5.5 34.5000 11-17-09 0 1,985,655 5,032,035
10,000 0.6 27.8125 12-23-09 0 174,911 443,259
</TABLE>
- --------
(1) Charles B. Cooper retired September 30, 1999 and was not awarded any stock
options in 1999.
(2) Options expiring on 11-17-09 and 12-23-09 are non-qualified stock options
granted in Torchmark common stock pursuant to the 1998 Incentive Plan with
a ten year and two day term at an exercise price equal to the closing
price of the Company's common stock on the grant date. Options expiring on
12-23-09 are not exercisable during the first two years after the grant
date and vest on 50% of the shares two years after the grant date and on
the remaining 50% of the shares three years after the grant date. Options
expiring on 11-17-09 are first exercisable six months from the grant date
by persons subject to the SEC's Section 16 reporting requirements and are
exercisable at a grant by persons not subject to Section 16 reporting
requirements.
Options expiring on 12-21-10 are non-qualified stock options granted in
Torchmark stock with an eleven year term, an exercise price equal to the
closing price of the Company's common stock on the grant date and are
fully vested upon issuance, but only first exercisable as to 1/10 per year
commencing on the first anniversary of the grant date.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
(d) (e)
(b) (c) Number of Securities Value of unexercised
(a) Shares acquired Value underlying unexercised in-the-money options
Name on exercise (#)(1) Realized ($) options at FY-end (#) at FY-end ($)
----- ------------------ ------------ ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C.B. Hudson............. 0 0 980,605 479,132 $4,902,568 $ 686,802
Mark S. McAndrew........ 83,000 1,285,221 76,300 215,698 $ 193,893 $ 125,000
Tony G. Brill........... 58,413 758,985 30,282 207,201 $ 220,678 $ 314,428
Anthony L. McWhorter.... 51,403 818,402 57,778 154,878 $ 108,927 $ 93,750
Gary L. Coleman......... 35,048 526,644 96,218 126,153 $ 90,768 $ 83,084
Charles B. Cooper....... 0 0 123,700 0 $1,101,970 $ 0
Bernard Rapoport........ 140,000 2,090,787 152,225 10,000 $ 0 $ 12,500
</TABLE>
- --------
(1) Of the shares shown as acquired on exercise, Messrs. McAndrew, Brill,
McWhorter, Coleman and Rapoport retained 26,280, 12,969, 13,598, 8,999 and
35,725 shares, respectively, after cashless option exercises.
Pension Plans
Torchmark Corporation Pension Plan; Liberty National Life Insurance Company
Pension Plan for Non-Commissioned Employees. These plans are non-contributory
pension plans which cover all eligible employees who are 21 years of age or
older and have one or more years of credited service. The benefits at age 65
under the TMK Pension Plan are determined by multiplying the average of the
participant's earnings in the five consecutive years in which they were
highest during the ten years before the participant's retirement by a
percentage equal to 1% for each of the participant's first 40 years of
credited service plus 2% for each year of credited service up to 20 years
after the participant's 45th birthday and then reducing that result by a
Social Security offset and by other benefits from certain other plans of
affiliates. Benefits at age 65 under the LNL Pension Plan are determined by
multiplying the average of the participant's earnings in the five consecutive
years in which they were highest during the ten years before the participant's
retirement by a percentage equal to 2% for each of the participant's first 30
years of credited service plus 1% for each year of credited service in excess
of 30 years (up to a maximum of 10 years) and then reducing that result by a
Social Security offset and by other benefits from certain other plans of
affiliates. Earnings for purposes of both pension plans include compensation
paid by subsidiaries and affiliates, and do not include commissions,
directors' fees, expense reimbursements, employer contributions to retirement
plans, deferred compensation, or any amounts in excess of $160,000 (as
adjusted). Benefits under both pension plans vest 100% at five years. Upon the
participant's retirement, benefits under the plan are payable as an annuity or
in a lump sum. In 1999, covered compensation was $160,000 for Messrs. Hudson,
McAndrew, Brill and Coleman under the TMK Pension Plan and for Mr. McWhorter
under the LNL Pension Plan.
Vested benefits under the non-qualified Torchmark Supplemental Retirement
Plan, in which Messrs. Hudson, McAndrew, McWhorter and Coleman have
participated, were frozen as of December 31, 1994 and no additional benefits
accrue after that date pursuant to the supplementary retirement plan. Messrs.
Hudson, McAndrew, McWhorter and Coleman participate in the Torchmark
Supplementary Pension Plan. Mr. Brill does not participate in any
supplementary pension plan.
Messrs. Hudson, McAndrew, Brill and Coleman have 25 years, 20 years, three
years and 18 years of credited service under the TMK Pension Plan,
respectively. Mr. McWhorter has 25 years of credited service under the LNL
Pension Plan. Messrs. Rapoport and Cooper were not covered by any pension plan
prior to their retirements.
The following tables show the estimated annual benefits payable under the
TMK Pension Plan or LNL Pension Plan along with the TMK Supplemental
Retirement Plan (which was frozen in 1994) upon retirement of participants
with varying final average earnings and years of service. Primarily because of
the termination of the Supplemental Retirement Plan, the benefits shown below
as payable pursuant to the TMK Pension or LNL Pension Plans and the TMK
Supplemental Retirement Plan may in most cases exceed the actual amounts paid.
The benefits shown are offset as described above and the amounts are
calculated on the basis of payments for the life of a participant who is 65
years of age.
11
<PAGE>
Torchmark Pension and Supplemental Retirement Plans*
<TABLE>
<CAPTION>
Final Years of Credited Service
Average ---------------------------------------------------------------
Earnings 15 20 25 30 35
---------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$1,000,000 450,000 600,000 650,000 700,000 750,000
1,200,000 540,000 720,000 780,000 840,000 900,000
1,400,000 630,000 840,000 910,000 980,000 1,050,000
1,600,000 720,000 960,000 1,040,000 1,120,000 1,200,000
</TABLE>
- --------
* Benefits paid under a qualified defined benefit plan are limited by law in
1999 to $130,000 per year. The balance of the benefit payments shown above
thus comes from the Supplemental Retirement Plan. Because benefit accruals
under the Supplemental Retirement Plan ceased as of December 31, 1994,
Messrs. Hudson, McAndrew and Coleman have five years less of credited
service under the Supplemental Retirement Plan than under the TMK Pension
Plan.
LNL Pension and TMK Supplemental Retirement Plans*
<TABLE>
<CAPTION>
Final Years of Credited Service
Average ---------------------------------------------------------------------------
Earnings 15 20 25 30 35
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000 30,000 40,000 50,000 60,000 65,000
200,000 60,000 80,000 100,000 120,000 130,000
300,000 90,000 120,000 150,000 180,000 195,000
400,000 120,000 160,000 200,000 240,000 260,000
500,000 150,000 200,000 250,000 300,000 325,000
</TABLE>
- --------
* Benefits paid under a qualified defined benefit plan are limited by law in
1999 to $130,000 per year. The balance of the benefit payments shown above
thus comes from the Supplemental Retirement Plan. Because benefit accruals
under the Supplemental Retirement Plan ceased as of December 31, 1994, Mr.
McWhorter has five years less of credited service under the Supplemental
Retirement Plan than under the LNL Pension Plan.
Payments to Directors
Directors of the Company are currently compensated on the following basis:
(1) Directors who are not officers or employees of the Company or a
subsidiary of the Company (Outside Directors) receive a fee of $1,000 for
each attended Board meeting, a fee of $500 for each attended Board
committee meeting, and an annual retainer of $40,000, payable each January
for the entire year. They do not receive fees for the execution of written
consents in lieu of Board meetings and Board committee meetings. They
receive an allowance for their travel and lodging expenses if they do not
live in the area where the meeting is held.
Each Outside Director is automatically awarded annually non-qualified
stock options on 6,000 shares of Company common stock on the first day of
each calendar year in which stock is traded on the New York Stock Exchange.
The entire Board may, for calendar years commencing with 1996, award non-
qualified stock options on a non-formula basis to all or such individual
Outside Directors as it shall select. Such options may be awarded at such
times and for such number of shares as the Board in its discretion
determines. The price of such options may be fixed by the Board at a
discount not to exceed 25% of the fair market value on the grant date or at
the fair market value of the stock on the grant date.
Commencing with 1997 retainer and meeting and committee fees (assuming
attendance at all scheduled meetings), Outside Directors may annually elect
to make deferrals of such compensation for the following year into the
interest-bearing account of the Non-Employee Director Plan (for amounts
earned prior to 1999) and pursuant to the deferred compensation stock
option provisions of the 1998 Incentive Plan (for amounts earned in 1999
and in subsequent years). They may subsequently elect to convert such
balances to stock options with either fair market value or discounted
exercise prices. In December 1998, Messrs. Hagopian, Lanier, McCormick, and
Records chose to make such deferrals of 1999 compensation, which were
converted into options on 5,044, 4,938, 4,885 and 4,832 shares,
respectively, in 1999.
12
<PAGE>
(2) Beginning in January, 1993, directors who are officers or employees
of the Company or a subsidiary of the Company waived receipt of all fees
for attending Board meetings. They do not receive fees for the execution of
written consents in lieu of Board meetings. They also do not receive a fee
for attending Board committee meetings or an annual retainer. They are
reimbursed their travel and lodging expenses, if any.
(3) Compensation paid to the director serving as Chairman of the
Executive Committee is determined annually by the Compensation Committee in
their discretion.
Each person who served as a director on or prior to February 29, 2000 is
eligible to receive upon retirement from the Board a retirement benefit
payable annually, in an amount equal to $200 a year for each year of service
as a director or advisory director up to 25 years, but not less than $1,200 a
year. In determining this benefit, the number of years of service may include
years as a director of a subsidiary of the Company if the payment for such
years by the Company is in place of a payment which would otherwise be made by
the subsidiary. Directors who retired prior to the termination of this
retirement benefit program effective February 29, 2000 have been and will
continue to receive their retirement benefit payments in cash. Directors with
accrued but unpaid retirement benefits under this program on the date of
termination will be offered the opportunity to convert the present value of
such retirement benefits on that date to options in Company common stock.
Other Transactions
Robert Richey, Vice President of a Company subsidiary and son of R.K.
Richey, received compensation and fringe benefits from that Company subsidiary
in 1999 of $133,261.
In 1999, the Company paid MidFirst Bank $76,922 in fees as the servicing
agent for portions of the Company subsidiaries' commercial real estate
portfolios. George J. Records is an officer, director and 45.57% beneficial
owner of Midland Financial Co., the parent corporation of MidFirst Bank.
Lamar C. Smith is an officer, director and 15% owner of Independent Research
Agency for Life Insurance, Inc. (IRA), a life insurance general agency which
sells certain insurance products offered by Torchmark subsidiaries pursuant to
agency agreements. In 1999, that company, IRA, received commission payments of
$39,208,000 for sales of life insurance on behalf of Torchmark subsidiaries,
which comprised approximately 28% of IRA's 1999 revenues.
R.K. Richey is a 33 1/3% owner of Elgin Development Company, LLC (Elgin
Development). On October 1, 1999, Elgin Development and other investors
purchased certain investment real estate from Torchmark and its subsidiaries
for $ 97,400,000. Mr. Richey's financial interest in the purchase by the Elgin
Development group was $1.5 million.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, the Company's directors, its
executive officers, and any persons holding more than ten percent of the
Company's common stock are required to report their initial ownership of the
Company's common stock and other equity securities and any subsequent changes
in that ownership to the Securities and Exchange Commission and the New York
Stock Exchange and to submit copies of these reports to the Company. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports
were required, during the fiscal year ended December 31, 1999, all required
Section 16(a) filings applicable to its executive officers, directors, and
greater than ten percent beneficial owners were timely and correctly made
except that R.K. Richey amended his 1998 Form 5 to disclose an inadvertently
omitted gift of shares to a family member; Louis T. Hagopian filed a late Form
4 reporting a cashless option exercise transaction; Anthony L. McWhorter filed
a late Form 4 reporting a cashless option exercise transaction and one
additional sale; and Rosemary J. Montgomery amended her 1999 Form 5 to report
a change from direct to indirect holdings to reflect a gift of stock to her
spouse.
13
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation of senior executives of Torchmark and its subsidiaries and
affiliates is determined by the Compensation Committee of the Board of
Directors. The Compensation Committee, comprised entirely of outside
directors, meets to fix annual salaries in advance and bonuses for the current
year of executives earning more than $150,000, to review annual goals and
reward outstanding annual performance of executives, to grant stock options
pursuant to the 1998 Stock Incentive Plan and to determine senior executives
eligible to participate in the executive deferred compensation stock option
program under the 1998 Incentive Plan.
In 1993, the Compensation Committee employed an unaffiliated executive
compensation consulting firm, Towers Perrin, to assist it in reviewing
executive compensation policies and the payment of bonuses to executives. In
1997, the Compensation Committee utilized an unaffiliated executive
compensation consultant from KPMG Peat Marwick LLP to review certain of its
executive compensation policies and practices. The Compensation Committee met
on several occasions in 1999 with the Chairman to discuss the salaries and
bonuses of the five most highly compensated executives, including the
Chairman. Also, the Compensation Committee received written materials
discussing compensation of persons reporting to the five most highly
compensated executives, including the Chairman.
Compensation Principles
The business philosophy of the Company focuses on maintenance and
improvement of insurance operating margins and other operating margins through
the efficient management of assets and control of costs. The Company's
executive compensation program is based on principles which align compensation
with this business philosophy, company values and management initiative. The
program also takes into consideration competitive remuneration practices in
the insurance and financial services sectors. Torchmark's executive
compensation program seeks to attract and retain key executives necessary to
the long-term success of the Company, to mesh compensation with both annual
and long-term strategic plans and goals and to reward executives for their
efforts in the continued growth and success of the Company. Annual goals for
executive compensation focus on a number of factors, including but not limited
to, growth in earnings per share, return on equity and pre-tax operating
income for holding company executives and on insurance operating income,
underwriting income and premium growth for the executives of the Company's
insurance subsidiaries.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Compensation Committee considers
the anticipated tax treatment to the Company and to the executives of various
payments and benefits. Some types of compensation payments and their
deductibility depend upon the timing of an executive's vesting or exercise of
previously granted rights. Further, interpretations of and changes in the tax
laws and other factors beyond the Compensation Committee's control also affect
the deductibility of compensation. For these and other reasons, the
Compensation Committee will not necessarily and in all circumstances limit
executive compensation to that deductible under Section 162(m) of the Internal
Revenue Code. The Compensation Committee will consider various alternatives to
preserving the deductibility of compensation payments and benefits to the
extent reasonably practicable and to the extent consistent with its other
compensation objectives.
Salary and Bonus System
For some time the Company has used a system of salaries and bonuses to
reward executives of the Company and its subsidiaries for performance relative
to annual goals. These goals vary by operating company based upon that
particular company's current position. Annually, the Company's Chairman,
President and Chief Executive Officer calculates a proposed pool to fund
current year bonuses and subsequent year salaries for all executives whose
combined cash compensation exceeds $150,000 per year. The proposed
salary/bonus pool is determined based upon a formula within a range of
approximately 5% that takes into account prior year salaries and bonuses paid,
estimated and adjusted earnings per share and estimated return on equity,
adjusted for certain minimum tax-effected earnings per share and minimum
return on equity. The amount of the proposed pool is submitted to the
Compensation Committee for its review and approval. The Compensation
Committee, in consultation with the Company's Chairman, President and Chief
Executive Officer, then reviews each subsidiary's performance relative to the
goals and fixes salaries and bonuses for that operating subsidiary's
executives. The degree to which
14
<PAGE>
these executives have met their particular subsidiary's goals in turn
determines the amount of the bonus, if any, and whether senior executive
officers of the Company receive salary increases. Such executives do not
receive any cost of living salary adjustments.
Stock Option Program
The Company began awarding stock options to executives and key employees in
1984. The option plan under which options in Company common stock were awarded
in 1999 was adopted in April 1998. It has as its stated purpose attracting and
retaining employees who contribute to the Company's success and enabling those
persons to participate in that long-term success and growth through an equity
interest in the Company. To this end, the Compensation Committee, as
administrator of the 1998 Incentive Plan, grants non-qualified stock options
to officers and key employees at the market value of the Company's common
stock on the date of the grant, the size of the grant being based generally on
the current compensation of such officers or key employees. The five most
highly compensated executive officers are paid salaries and bonuses
commensurate with the level of their responsibilities and therefore they
typically are awarded a larger number of option shares than other employees
with lesser levels of compensation and responsibility. In 1999, for the five
most highly compensated executive officers (excluding Messrs. Cooper and
Rapoport), the options granted were in proportion to current compensation
adjusted by a subjective factor ranging from .083% to .160%.
Decisions regarding stock option grants are made annually and the number of
options previously awarded to an individual executive officer is not a
substantial consideration in determining the amount of options granted to that
officer in the future. Once an officer has been awarded options and becomes a
part of the stock option program, he or she will typically continue to be
eligible from year to year for stock options related to salary.
Stock options may be exercised using cash or previously-owned stock for
payment or through a simultaneous exercise and sale program. Such stock
options generally become first exercisable to the extent of 50% of the shares
on the second anniversary of the option grant date and on the remaining 50% of
the shares on the third anniversary of the option grant date.
Deferred Compensation Option Program
The Company's 1998 Incentive Plan, adopted in April, 1998, contains
provisions permitting designated executives to receive deferred compensation
stock options. The plan permits eligible executives to defer salary and/or
bonus on an annual basis into an interest-bearing account and subsequently on
a one time basis within a limited time period to elect to convert all or a
portion of their deferred compensation into Company stock options granted at
market value or at a discount not to exceed 25%. The Compensation Committee
did not designate any Company executives to participate in this program in
1999. However, Messrs. Hudson and Coleman elected to receive all or a portion
of their respective 1999 bonuses in the form of stock options under the
regular provisions of the 1998 Incentive Plan.
Compensation of Chief Executive Officer
C. B. Hudson joined the Company subsidiary Globe in 1974 as its Chief
Actuary and has served as a senior executive officer and director of the
Company's principal insurance subsidiaries since that time. During the period
1982 to 1991, he was elected as Chairman and Chief Executive Officer of United
American, Globe and Liberty, all principal insurance subsidiaries of the
Company. Mr. Hudson was elected to the Torchmark Board of Directors in 1986
and was named Chairman of Insurance Operations of the Company in January 1993.
He assumed the responsibilities of Chairman, President and Chief Executive
Officer of the Company on March 10, 1998. In the three-year period 1997-1999,
which is covered by the Summary Compensation Table on page 8, Torchmark's
diluted earnings per share (excluding a non-recurring charge in the fourth
quarter of 1999) grew from $1.67 per share to $2.55 per share. Return on
equity increased to 16.2% in 1999 from 15.1% in 1998, after declining from
18.2% in 1997 as a result of Torchmark's receipt of the proceeds of the
initial public offering of
15
<PAGE>
its former asset management subsidiary. Torchmark repurchased 10.9 million
shares in the 1997-1999 period, 7.8% of the outstanding shares at the
beginning of that period.
The Compensation Committee gave consideration to the factors discussed on
page 14 in the compensation principles section as well as to Mr. Hudson's
ability and determination and his vision and leadership in continuing to
enhance the long term value of the Company. Mr. Hudson was awarded a 1999
discretionary bonus of $400,000 from the pool by the Compensation Committee,
all of which he chose to receive in the form of Company stock options.
Mr. Hudson's base salary and any stock options awarded to him are not
directly tied to any one or a group of specific measures of corporate
performance. His base salary is determined by the Compensation Committee
considering his tenure of service with the Company and its subsidiaries and
affiliates, his current job responsibilities, the progression of
responsibilities and positions he has assumed in the Company over the course
of his career and a comparison of salaries paid at peer companies.
Any stock options awarded to Mr. Hudson are also not directly related to
specific measures of corporate performance. Such award is generally based on
his current compensation.
Compensation of Other Executives
The other executive officers listed in the Summary Compensation Table in the
Proxy Statement are compensated by salary and a discretionary bonus which may
be impacted by a number of factors, including but not limited to, growth in
earnings per share and return on equity at the Company and growth in insurance
operating income, underwriting income and premium of the various Company
subsidiaries, affiliates or areas of operation for which each is responsible.
The pool of funds available for determining their salaries and bonuses is
calculated based upon the formula described in the discussion of the salary
and bonus system. Determination of any salary increase or bonus award to such
an executive is then recommended by the Chairman, President and Chief
Executive Officer in his discretion based upon an evaluation of a number of
factors, including those listed above, to the Compensation Committee for its
decision.
Mr. McAndrew serves as the chief operating officer of the Company's
subsidiaries United American, Globe and American Income, holding the titles
Chairman, President and Chief Executive Officer in those companies. He is
responsible for the Company's direct response insurance marketing. Mr.
McAndrew was awarded a $150,000 discretionary bonus by the Compensation
Committee for 1999, which he chose to receive in cash.
Mr. Brill is the Executive Vice President and Chief Administrative Officer
in charge of insurance administration for Torchmark and all its insurance
subsidiaries. He is primarily responsible for the Company's Year 2000
compliance efforts. The Compensation Committee awarded Mr. Brill a $100,000
discretionary bonus for 1999, which he elected to take in cash.
Mr. McWhorter is the Chairman, President and Chief Executive Officer of
Liberty and UILIC, serving as the Chief Operating Officer of Liberty since
1994 and of UILIC since 1998. Mr. McWhorter was awarded a $120,000
discretionary bonus by the Compensation Committee for 1999, which he elected
to be paid in cash.
Mr. Coleman serves as Executive Vice President and Chief Financial Officer
of the Company. He has been responsible for the Company's accounting
operations since 1994 and is also in charge of all financial areas. The
Compensation Committee awarded Mr. Coleman an $80,000 bonus, $50,000 of which
he chose to take in Torchmark stock options and $30,000 of which he was paid
in cash.
Mr. Rapoport served for a number of years prior to his September 1999
retirement as the Chairman of the Board and Chief Executive Officer of
American Income. Mr. Cooper served as President and Chief Operating Officer of
American Income from 1977 until his retirement on September 30, 1999. Because
of their retirements, neither Mr. Rapoport nor Mr. Cooper received a bonus for
1999.
16
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Compensation and Company Performance
As indicated above, the annual aspect of executive compensation for holding
company executives of Torchmark centers on growth in the earnings per share
and return on equity as well as increases in pre-tax operating income and for
executives of the insurance subsidiaries on growth in underwriting income and
premium income. Over the last year, pre-tax operating income has increased 1%
from $490 million in 1998 to $494 million in 1999. Excluding a non-recurring
charge, pre-tax operating income increased 5% to $515 million in 1999. Diluted
earnings per share excluding the non-recurring charge grew from $2.29 per
share in 1998 to $2.55 per share in 1999, an 11% change. Return on equity
increased 7% from 15.1% in 1998 to 16.2% in 1999. Premium income, which made
up 85% of the company's total revenues, rose to $4.88 billion in 1999 from
$1.75 billion in 1998. Underwriting income comprised 63% of the Company's pre-
tax operating income for 1999. Underwriting income has decreased from $317
million to $313 million in 1999 over 1998.
The above performance resulted in compensation increases to certain of the
Company's executives as a group shown in the Summary Compensation Table on
page 8. Cash compensation paid persons who are listed in that table other than
Messrs. Cooper and Rapoport, who retired as executive officers of a Company
subsidiary in September 1999, increased 14% in 1999 over 1998, because Messrs.
McAndrew, Brill and McWhorter elected to be paid all of their bonuses in cash
and Mr. Coleman elected to receive stock options for only a portion of his
bonus, taking the balance as a cash payment.
The long-term portion of the executive compensation program centers on stock
value through the granting of stock options. Over the last three fiscal years
diluted earnings per share from continuing operations excluding realized
investment gains, the related acquisition cost adjustment, and the equity in
Vesta earnings have increased 53% and rose from $1.67 in 1996 to $2.55 in
1999.
Louis T. Hagopian, Chairman
Joseph M. Farley
Joseph L. Lanier, Jr.
The foregoing Compensation Committee Report on Executive Compensation shall
not be deemed "filed" with the Securities and Exchange Commission or subject
to the liabilities of Section 18 of the Securities Exchange Act of 1934.
17
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN AMONG
TORCHMARK CORPORATION
S&P 500 INDEX AND THE S&P INSURANCE (LIFE/HEALTH) INDEX
[LINE GRAPH]
12/94 12/95 12/96 12/97 12/98 12/99
----- ----- ----- ----- ----- -----
TORCHMARK CORP $100 $133 $152 $259 $255 $212
S & P 500 $100 $138 $169 $226 $290 $351
S & P INSURANCE
(LIFE & HEALTH) $100 $144 $175 $219 $232 $199
The line graph shown above compares the yearly percentage change in
Torchmark's cumulative total return on its common stock with the cumulative
total returns of the Standard and Poor's 500 Stock Index (S&P 500) and the
Standard and Poor's Insurance (Life/Health) Index (S&P Insurance
(Life/Health)). Torchmark is one of the companies whose stock is included
within both the S&P 500 and the S&P Insurance (Life/Health).
Information for graph produced by Research Data Group, Inc.
18
<PAGE>
MISCELLANEOUS INFORMATION
PROPOSALS OF STOCKHOLDERS
In order for a proposal by a stockholder of the Company to be eligible to be
included in the proxy statement and proxy form for the annual meeting of
stockholders in 2000, the proposal must be received by the Company at its home
office, 2001 Third Avenue South, Birmingham, Alabama 35233, on or before
November 25, 2000. If a stockholder proposal is submitted outside the proposal
process mandated by Securities and Exchange Commission rules, it will be
considered untimely if received after February 10, 2001.
GENERAL
The cost of this solicitation of proxies will be paid by the Company. The
Company is requesting that certain banking institutions, brokerage firms,
custodians, trustees, nominees, and fiduciaries forward solicitation material
to the underlying beneficial owners of the shares of the Company they hold of
record. The Company will reimburse all reasonable forwarding expenses.
THE ANNUAL REPORT OF THE COMPANY FOR 1999, WHICH ACCOMPANIES THIS PROXY
STATEMENT, INCLUDES A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999 AND THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. UPON REQUEST AND
PAYMENT OF COPYING COST, THE EXHIBITS TO THE FORM 10-K WILL BE FURNISHED.
THESE WRITTEN REQUESTS SHOULD BE DIRECTED TO INVESTOR RELATIONS DEPARTMENT,
TORCHMARK CORPORATION AT ITS ADDRESS STATED ABOVE.
By Order of the Board of Directors
/s/ Carol A. McCoy
-----------------------------
Carol A. McCoy
Associate Counsel & Corporate
Secretary
March 23, 2000
19
<PAGE>
- --------------------------------------------------------------------------------
TORCHMARK CORPORATION
Proxy/Direction Card for Annual Meeting on April 27, 2000
P R O X Y
This Proxy/Direction is solicited by the Board of Directors of The Company.
The undersigned hereby appoints C. B. Hudson and Larry M. Hutchison, jointly
and severally with full power of substitution, to vote all shares of common
stock which the undersigned holds of record and is entitled to vote at the An-
nual Meeting of Shareholders to be held at the offices of the Company, 2001
Third Avenue South, Birmingham, Alabama on the 27th day of April 2000 at 10:00
a.m. (CDT), or any adjournment thereof. All shares votable by the undersigned
including shares held of record by agents or trustees for the undersigned as a
participant in the Dividend Reinvestment Plan (DRP), Torchmark Corporation Sav-
ings and Investment Plan (TTP), Waddell & Reed Financial, Inc. 401-K and Sav-
ings and Investment Plan (WR 401K), Liberty National Life Insurance Company
401K Plan (LNL 401K) and the Profit Sharing and Retirement Plan of Liberty Na-
tional Life Insurance Company (LNL PS&R) will be voted in the manner specified
and in the discretion of the persons named above or such agents or trustees on
such other matters as may properly come before the meeting.
Election of Directors:
(01) David L. Boren, (02) Louis T.
Hagopian and (03) Harold T. McCormick
for three year terms and (04) R. K.
Richey for a one year term
(change of address/comments)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxy Committee
cannot vote your shares unless you sign and return this card.
SEE REVERSE
SIDE
FOLD AND DETACH HERE
Dividend Reinvestment: Torchmark maintains a Dividend Reinvestment Plan for
all holders of its common stock. Under the plan, shareholders may reinvest
all or part of their dividends in additional shares of common stock and may
also make periodic additional cash payments of up to $3,000 toward the
purchase of Torchmark stock. Participation is entirely voluntary. More
information on the plan can be obtained by calling 1-800-446-2617.
Direct Deposit of Dividends: Torchmark is now making direct deposit of cash
dividends available to its shareholders. To obtain information and materials
for participation in this service, please call 1-800-446-2617.
www.torchmarkcorp.com: Torchmark's web site, http://www.torchmarkcorp.com,
contains financial information about the company and information regarding
our insurance subsidiaries.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Please mark your ---- |
[X] votes as in this | | 4 9 3 7
example. |
-------------
This proxy when properly executed will be voted in the manner directed herein. If no direction is made, this proxy will be voted FOR
election of directors and FOR Proposal 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of [ ] [ ] [ ]
Directors Auditors
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------------
Change of Address shown
on reverse [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
------------------------------------------------------------
------------------------------------------------------------
SIGNATURE(S) DATE
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
Torchmark stockholders can now vote their shares over the telephone or the Internet. This eliminates the need to return the proxy
card.
To vote your shares over the telephone or the Internet you must have your proxy card and Social Security Number available. The Voter
Control Number that appears in the box just below the perforation must be used in order to vote by telephone or over the Internet.
These systems can be accessed 24 hours a day, seven days a week up until the day prior to the meeting.
1. To vote by telephone:
On a touch-tone telephone call Toll-free: 1-877-PRX-VOTE (1-877-779-8683).
2. To vote by Internet:
Log on to the Internet and go to the web site: http//www.eproxyvote.com/tmk
Your vote over the telephone or the Internet registers your vote in the same manner as if you marked, signed, dated and returned
your proxy card.
Do not return this Proxy Card if you are voting by telephone or the Internet.
Your vote is important. Thank you for voting.
</TABLE>
