<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 June 30, 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 3rd Avenue South, Birmingham, Alabama 35233
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205) 325-4200
NONE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports 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 July 31, 2000
Common Stock, 127,544,101
$1.00 Par Value
Index of Exhibits (Page 27)
Total number of pages included are 28.
<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 4
Consolidated Statement of Cash Flow 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market
Risk 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 6. Exhibits and Reports on Form 8-K 27
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TORCHMARK CORPORATION
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Assets (Unaudited)
Investments
Fixed maturities, available for sale, at fair value
(amortized cost: 2000 - $6,024,212;
1999 - $5,954,697) $ 5,685,674 $ 5,679,795
Equity securities, at fair value
(cost: 2000 - $11,983; 1999 - $37,121) 14,855 29,189
Mortgage loans, at cost (fair value:
2000 - $98,722; 1999 - $94,716) 98,607 94,599
Investment real estate, at depreciated cost 16,279 16,379
Policy loans 248,953 244,607
Other long-term investments (at fair value) 22,508 23,054
Short-term investments 92,545 100,187
----------- -----------
Total investments 6,179,421 6,187,810
Cash 16,948 14,441
Accrued investment income 114,687 112,475
Other receivables 60,857 53,458
Deferred acquisition costs 1,851,542 1,741,570
Value of insurance purchased 141,937 151,752
Property and equipment 40,460 38,761
Goodwill 396,547 402,584
Other assets 18,835 15,138
Separate account assets 3,790,254 3,413,675
----------- -----------
Total assets $12,611,488 $12,131,664
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Future policy benefits $ 4,985,176 $ 4,869,241
Unearned and advance premiums 90,064 85,344
Policy claims and other benefits payable 223,076 215,923
Other policyholders' funds 80,711 81,919
----------- -----------
Total policy liabilities 5,379,027 5,252,427
Accrued income taxes 356,862 309,271
Short-term debt 341,159 418,394
Long-term debt (fair value:
2000 - $373,444; 1999 - $378,046) 371,619 371,555
Other liabilities 166,103 179,681
Separate account liabilities 3,790,254 3,413,675
----------- -----------
Total liabilities 10,405,024 9,945,003
Monthly income preferred securities
(fair value: 2000 - $196,000; 1999 - $193,040) 193,359 193,324
Shareholders' equity:
Preferred stock 0 0
Common stock 147,801 147,801
Additional paid-in capital 623,130 622,318
Accumulated other comprehensive income (loss) (209,323) (174,222)
Retained earnings 2,058,704 1,910,487
Treasury stock, at cost (607,207) (513,047)
----------- -----------
Total shareholders' equity 2,013,105 1,993,337
----------- -----------
Total liabilities and shareholders' equity $12,611,488 $12,131,664
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -------------------------
2000 1999 2000 1999
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
Revenue:
Life premium $269,661 $255,357 $ 536,721 $ 506,698
Health premium 223,992 204,502 448,969 407,544
Other premium 13,181 10,151 24,197 18,532
-------- -------- ---------- ----------
Total premium 506,834 470,010 1,009,887 932,774
Net investment income 117,427 110,538 234,538 221,934
Realized investment gains (losses) (9,839) (78,803) (11,698) (85,919)
Other income 711 5,483 1,423 5,949
-------- -------- ---------- ----------
Total revenue 615,133 507,228 1,234,150 1,074,738
Benefits and expenses:
Life policyholder benefits 178,623 166,730 355,297 329,652
Health policyholder benefits 145,491 133,554 290,592 265,207
Other policyholder benefits 9,160 8,434 18,905 17,305
-------- -------- ---------- ----------
Total policyholder benefits 333,274 308,718 664,794 612,164
Amortization of deferred acquisition costs 67,277 62,082 133,634 121,652
Commissions and premium taxes 37,613 35,117 74,360 69,749
Other operating expense 30,007 28,371 59,662 57,597
Amortization of goodwill 3,019 3,019 6,037 6,037
Interest expense 14,169 12,750 27,979 25,326
-------- -------- ---------- ----------
Total benefits and expenses 485,359 450,057 966,466 892,525
Income from continuing operations before income
taxes and cumulative effect of change in
accounting principle 129,774 57,171 267,684 182,213
Income taxes (43,937) (18,640) (90,576) (61,045)
Monthly income preferred securities dividend
(net of tax) (2,543) (2,225) (4,932) (4,514)
-------- -------- ---------- ----------
Income from continuing operations before
cumulative effect of change in accounting
principle 83,294 36,306 172,176 116,654
Discontinued operations of Waddell & Reed:
Loss on disposal (tax) 0 (1,060) 0 (1,060)
-------- -------- ---------- ----------
Income before cumulative effect of change
in accounting principle 83,294 35,246 172,176 115,594
Cumulative effect of change in accounting
principle (less applicable tax of $8,661) 0 0 0 16,086
-------- -------- ---------- ----------
Net income $ 83,294 $ 35,246 $ 172,176 $ 131,680
======== ======== ========== ==========
</TABLE>
(Continued on following page)
2
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands except per share data)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -------------------------
2000 1999 2000 1999
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
Basic earnings per share:
Income from continuing operations $0.65 $ 0.27 $1.33 $ 0.87
Discontinued operations of Waddell & Reed:
Loss on disposal (tax) 0.00 (0.01) 0.00 (0.01)
----- ----- ----- -----
Net income before cumulative effect of change
in accounting principle 0.65 0.26 1.33 0.86
Cumulative effect of change in accounting
principle (less applicable tax) 0.00 0.00 0.00 0.12
----- ----- ----- -----
Net income $0.65 $0.26 $1.33 $0.98
===== ===== ===== =====
Diluted earnings per share:
Income from continuing operations $0.65 $ 0.27 $1.33 $ 0.86
Discontinued operations of Waddell & Reed:
Loss on disposal (tax) 0.00 (0.01) 0.00 (0.01)
----- ----- ----- -----
Net income before cumulative effect of change
in accounting principle 0.65 0.26 1.33 0.85
Cumulative effect of change in accounting
principle (less applicable tax) 0.00 0.00 0.00 0.12
----- ----- ----- -----
Net income $0.65 $0.26 $1.33 $0.97
===== ===== ===== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -------------------------
2000 1999 2000 1999
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
Net income $ 83,294 $ 35,246 $172,176 $131,680
Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized holding losses arising during period (105,247) (182,725) (75,499) (327,963)
Less: reclassification adjustment for losses
on securities included in net income 24,215 7,930 24,112 10,391
Less: reclassification adjustment for
amortization of discount and premium (940) (45) (1,574) (282)
Less: foreign exchange adjustment on
securities marked to market 503 (371) 126 (931)
--------- --------- -------- ---------
Unrealized losses on securities (81,469) (175,211) (52,835) (318,785)
Unrealized losses on other investments (5,260) (47) (5,330) (15)
Unrealized gains on deferred acquisition costs 6,574 16,469 4,402 27,172
Foreign exchange translation adjustments (583) 716 (925) 1,339
--------- --------- -------- ---------
Other comprehensive loss, before tax (80,738) (158,073) (54,688) (290,289)
Income tax benefit expense related to other
comprehensive loss 28,826 55,565 19,587 101,467
--------- --------- -------- ---------
Other comprehensive loss (51,912) (102,508) (35,101) (188,822)
--------- --------- -------- ---------
Comprehensive income (loss) $ 31,382 $ (67,262) $137,075 $ (57,142)
========= ========= ======== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited and in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash provided from operations $ 250,064 $ 192,420
Cash provided from (used for) investment activities:
Investments sold or matured:
Fixed maturities available for sale - sold 129,831 512,885
Fixed maturities available for sale - matured,
called, and repaid 104,576 242,041
Other long-term investments 25,698 29,809
--------- ---------
Total investments sold or matured 260,105 784,735
Investments acquired:
Fixed maturities (310,437) (886,730)
Other long-term investments (10,361) (35,359)
--------- ---------
Total investments acquired (320,798) (922,089)
Net decrease in short-term investments 7,736 35,135
Disposition of properties 216 6,586
Additions to properties (5,024) (5,233)
--------- ---------
Cash used for investment activities (57,765) (100,866)
Cash provided from (used for) financing activities:
Issuance of common stock 807 1,205
Additions to debt 0 42,920
Repayments of debt (77,235) (12,058)
Acquisition of treasury stock (95,622) (120,588)
Cash dividends paid to shareholders (23,692) (24,344)
Net receipts from deposit product operations 5,950 30,138
--------- ---------
Cash used for financing activities (189,792) (82,727)
Net increase in cash 2,507 8,827
Cash at beginning of year 14,441 4,920
--------- ---------
Cash at end of period $ 16,948 $ 13,747
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<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 June 30, 2000, and the
consolidated results of operations and cash flow for the periods ended June 30,
2000 and 1999.
6
<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, and acquisition expenses 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 six-month periods ended June 30, 2000 and June 30,
1999, respectively.
Selected Segment Information
(Amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30, 2000
------------------------------------------------------------------------------------
Life Health Annuity Investment Other Adjustments Consolidated
-------- ----------- ----------- ---------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Premium $536,721 $448,969 $24,197 $1,009,887
Net investment income $239,791 $ (5,253) 234,538
Other income $2,478 (1,055) 1,423
Intersegment revenue -
required interest on net
policy obligations 72,636 824 17,564 (91,024) 0
-------- -------- ------- -------- ------ -------- ----------
Total revenue* $609,357 $449,793 $41,761 $148,767 $2,478 $ (6,308) $1,245,848
========= ======== ======= ======== ====== ======== ==========
Measures of profitability:
Underwriting income
before other income and
administrative expenses $132,541 $80,089 $ 14,438 $ 227,068
Excess investment income $113,200 113,200
-------- ------- ------- -------- ------ -------- ----------
Total measures of
profitability $132,541 $80,089 $14,438 $113,200 $ 0 $ 0 $ 340,268
======== ======= ======= ======== ====== ======== ==========
</TABLE>
* Excludes realized investment gains (losses)
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
Selected Segment Information
(Amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30, 1999
------------------------------------------------------------------------------
Life Health Annuity Investment Other Adjustments Consolidated
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Premium $506,698 $407,544 $18,532 $ 932,774
Net investment income $227,448 $(5,514) 221,934
Other income $ 1,802 (956) 846
Intersegment revenue -
required interest on net
policy obligations 67,524 2,878 16,921 (87,323) 0
--------- ---------- ---------- --------- --------- ---------- ----------
Total revenue* $574,222 $410,422 $35,453 $140,125 $ 1,802 $(6,470) $1,155,554
======== ======== ======== ========= ======= ========== ==========
Measures of profitability:
Underwriting income
before other income and
administrative expense $133,148 $ 70,441 $11,987 $ 215,576
Excess investment income $107,854 107,854
-------- -------- ------- -------- ------- ---------- ----------
Total measures of
profitability $133,148 $ 70,441 $11,987 $107,854 $ 0 $ 0 $ 323,430
======== ======== ======== ========= ======= ========== ==========
</TABLE>
*Excludes realized investment losses
Reconciliation of Measures of Profitability to Pretax Operating Income
(Amounts in thousands)
<TABLE>
<CAPTION>
For the six months ended
June 30,
------------------------
2000 1999
---------- ------------
<S> <C> <C>
Total measures of profitability $340,268 $323,430
Insurance administrative expenses (54,924) (52,421)
Parent expense (4,738) (5,176)
Tax equivalent adjustment (5,253) (5,514)
Other income 2,478 1,802
Goodwill amortization (6,037) (6,037)
Realized losses (11,698) (85,919)
Gain on sale of equipment 0 5,103
Pretax cost of MIPS 7,588 6,945
-------- --------
Operating income before taxes $267,684 $182,213
======== ========
</TABLE>
8
<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) and regulatory
inquiries regarding industrial life 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) The inability of Torchmark to achieve the anticipated levels of
administrative and operational efficiencies;
8) The customer response to new products and marketing initiatives;
9) Adverse levels of mortality, morbidity, and utilization of healthcare
services relative to Torchmark's assumptions; and
10) The inability of Torchmark to obtain timely and appropriate premium
rate increases for health insurance policies.
9
<PAGE>
Results of Operations
Torchmark management computes a classification of income called "net
operating income." Torchmark's management focuses on net operating income 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) A one-time gain on the sale of equipment in 1999 (included in other
income) in the after-tax amount of $3.3 million;
3) Discontinued operations relating to Waddell & Reed;
4) 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 six months ended
June 30,
------------------------- %
2000 1999 Change
-------- -------- ------
Net operating income:
Amount $179,780 $169,184 6.3
Per Share:
Basic 1.39 1.26 10.3
Diluted 1.39 1.25 11.2
Net income:
Amount $172,176 $131,680 30.8
Per Share:
Basic 1.33 0.98 35.7
Diluted 1.33 0.97 37.1
10
<PAGE>
Torchmark's operating revenues exclude realized investment gains and losses
and also exclude the one-time gain in 1999 from the sale of corporate equipment
in the amount of $5.1 million. Operating revenues rose 8% to $1.2 billion in
the first six months of 2000 over the same period of 1999. Total premium
increased 8% to $1.0 billion and net investment income rose 6% to $235 million
in the first half of 2000. Torchmark's operating expenses increased 4% to $60
million in 2000. However, operating expenses as a percentage of operating
revenues decreased to 4.8% in 2000 from 5.0% in 1999. As a percentage of total
premium, insurance administrative expenses were 5.4% in 2000 compared with 5.6%
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").
Summary of Net Operating Income
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months
Ended June 30, Increase
-------------------- -----------
2000 1999 Amount %
---------- ------- -------- ---
<S> <C> <C> <C> <C>
Insurance underwriting income before
other income and administrative expense:
Life $132,541 $133,148 $ (607) 0
Health 80,089 70,441 9,648 14
Annuity 14,438 11,987 2,451 20
-------- -------- -------
Total 227,068 215,576 11,492 5
Other income 2,478 1,802 676 38
Administrative expense (54,924) (52,421) (2,503) 5
-------- -------- -------
Insurance underwriting income 174,622 164,957 9,665 6
Excess investment income 113,200 107,854 5,346 5
Corporate expense (4,738) (5,176) 438 (8)
Goodwill amortization (6,037) (6,037) 0 0
Tax equivalency adjustment (5,253) (5,514) 261 (5)
-------- -------- -------
Pretax insurance net operating income 271,794 256,084 15,710 6
Income tax (92,014) (86,900) (5,114) 6
-------- -------- -------
Net operating income $179,780 $169,184 $10,596 6
======== ======== ======= ==
Net operating income per diluted share $1.39 $1.25 11
======== ======== ==
</TABLE>
11
<PAGE>
A discussion of Torchmark's operations by segment follows.
Life insurance. Torchmark's life insurance premium income rose 6% to $537
million in the first half of 2000. The following table presents Torchmark's
life insurance premium and policy charges by distribution method.
Life Insurance
Premium by Distribution Method
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------------
2000 1999 Increase
------------------ ------------------ ---------------
% of % of
Amount Total Amount Total Amount %
--------- -------- -------- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Liberty National Exclusive Agency $147,160 27 $144,339 29 $ 2,821 2
Direct Response 133,763 25 123,675 24 10,088 8
American Income Exclusive Agency 114,102 21 107,069 21 7,033 7
United American Independent Agency 20,203 4 18,625 4 1,578 8
United American Exclusive Agency 9,722 2 9,654 2 68 1
Other 111,771 21 103,336 20 8,435 8
--------- ------ -------- ----- ------- ---
Total life premium $536,721 100 $506,698 100 $30,023 6
========= ====== ======== ===== ======= ===
</TABLE>
Annualized life premium in force was $1.17 billion at June 30, 2000, rising
7% over $1.10 billion in force a year earlier. Life insurance sales, in terms
of annualized premium issued, were $147 million in the 2000 six-month period,
increasing 14% over 1999 same-period sales of $129 million. The following table
presents Torchmark's life insurance sales and in force data by distribution
method.
12
<PAGE>
Life Insurance
Annualized Premium Sales and In Force
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Sales In Force
-------------------------------------- ---------------------------------------
Six months
Ended June 30, Increase At June 30, Increase
--------------------- --------------- -------------------- ---------------
2000 1999 Amount % 2000 1999 Amount %
---------- --------- -------- ---- -------- ---------- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct Response $ 60,169 $ 49,429 $10,740 22 $ 299,426 $ 274,902 $24,524 9
Liberty National
Exclusive Agency 26,988 26,314 674 3 312,166 306,595 5,571 2
AI Exclusive Agency 27,409 25,929 1,480 6 237,728 222,998 14,730 7
UA Independent Agency 10,491 5,634 4,857 86 46,552 41,473 5,079 12
UA Exclusive Agency 2,387 2,731 (344) (13) 21,496 21,714 (218) (1)
Other Distribution 19,278 19,073 205 1 257,086 232,893 24,193 10
-------- -------- ------- ---------- ---------- -------
Total $146,722 $129,110 $17,612 14 $1,174,454 $1,100,575 $73,879 7
======== ======== ======= === =========== ========== ======= ==
</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 22% to $60 million in the first six months of 2000, compared with $49
million in the same period of 1999. Annualized premium in force for this
distribution method rose 9% over the prior year to $299 million at June 30,
2000, and premium income grew 8% to $134 million in the 2000 period. The $10
million growth in Direct Response premium income and the $25 million increase in
annualized life premium in force were the largest increases of any Torchmark
distribution channel in terms of dollar amount. The $11 million growth in sales
was also Torchmark's greatest 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 $147 million in the first
half of 2000, rising 2% over 1999 premium. Life insurance sales for this
agency grew 3% to $27 million of annualized premium issued in the 2000 six
months. Annualized life premium in force was $312 million at June 30, 2000,
growing 2% over the prior-year period. The Liberty National agency serves
primarily low and middle-income customers in the Southeastern United States.
This agency grew 8% over the past twelve months, with 1,980 agents at June 30,
2000, compared with 1,826 a year earlier.
The American Income Agency markets to members of labor unions, credit
unions,
13
<PAGE>
and other associations. This agency produced premium income of $114 million in
the first six months of 2000, an increase of 7%. Life sales for this agency rose
6% in the 2000 six months to $27 million. Growth in sales of the American Income
Agency was largely attributable to the growth in the number of agents, which
rose 14% to 1,325 at June 30, 2000 over the prior twelve months. Annualized life
premium in force rose 7% to $238 million at June 30, 2000.
Life sales for the United American Independent Agency rose 86% in the 2000
six months to $10.5 million. Annualized premium in force was $47 million at the
end of June, 2000.
Torchmark's other distribution systems include the Military, United
Investors, and other less significant distribution channels. The 8% growth in
premium income in other distribution was a result of the 13% growth in Military
Agency premium to $57 million offset by lesser growth in other channels. Sales
in the Military Agency increased 16% to $10.3 million in the first six months
of 2000. This agency also had a 13% increase in annualized life premium in force
which was $119 million at June 30, 2000. This agency consists of former military
officers who sell exclusively to military officers and their families.
Life Insurance
Summary of Results
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30
--------------------------------
2000 1999 Increase
--------------- --------------- --------------
% to % to
Amount Total Amount Total Amount %
------ ------- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Premium and policy charges $536,721 100 $506,698 100 $30,023 6
Net policy obligations 234,436 44 217,129 43 17,307 8
Commissions and
acquisition expense 169,744 31 156,421 31 13,323 9
-------- ---- -------- --- -------
Insurance underwriting income before
other income and administrative
expense $132,541 25 $133,148 26 $ (607) 0
======== ==== ======== === ======= ==
</TABLE>
Life insurance underwriting income before insurance administrative expenses
was $133 million in the first six months of 2000, declining slightly from the
same period of 1999. As a percentage of life premium, underwriting income was
25% in the six months of 2000, compared with 26% in the comparable 1999 period.
This decline was primarily the result of an increase in policy obligations in
the other distribution category.
14
<PAGE>
Health insurance. Health insurance premium income rose 10% from $408
million in the first six months of 1999 to $449 million in the same period of
2000. The table below is an analysis of Torchmark's health premium by
distribution method.
Health Insurance
Premium by Distribution Method
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30
--------------------------------
2000 1999 Increase
--------------- --------------- --------------
% to % to
Amount Total Amount Total Amount %
------ ------- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
United American Independent Agency $222,743 49 $215,645 53 $ 7,098 3
United American Exclusive Agency 119,700 27 91,892 23 27,808 30
Liberty National Exclusive Agency 75,489 17 70,858 17 4,631 7
American Income Exclusive Agency 23,722 5 23,397 6 325 1
Direct Response 7,315 2 5,752 1 1,563 27
-------- --- -------- --- --------
Total health premium $448,969 100 $407,544 100 $41,425 10
======== === ======== === ======= ==
</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
----------------------------------- ---------------------------------
Six months
Ended June 30, Increase At June 30, Increase
------------------ --------------- -------------------- -----------
2000 1999 Amount % 2000 1999 Amount %
-------- ------- ------- ---- -------- -------- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UA Exclusive Agency $ 58,334 $47,270 $11,064 23 $259,902 $203,193 $56,709 28
UA Independent Agency 36,891 30,951 5,940 19 452,226 440,028 12,198 3
Liberty Exclusive Agency 4,995 5,045 (50) (1) 156,420 153,624 2,796 2
AI Exclusive Agency 4,317 3,883 434 11 45,541 44,438 1,103 2
Direct Response 2,397 2,396 1 0 15,545 12,205 3,340 27
-------- ------- ------- -------- -------- -------
Total $106,934 $89,545 $17,389 19 $929,634 $853,488 $76,146 9
======== ======= ======= == ======== ======== ======= ==
</TABLE>
15
<PAGE>
Annualized health insurance premium in force was $930 million at June 30,
2000, up 9% over the in force premium at June 30, 1999. Sales of health
insurance, as measured by annualized premium issued, grew 19% to $107 million in
the 2000 six months over the same period a year earlier. Medicare Supplement
sales rose 15% in the 2000 period to $82 million, accounting for 60% 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 period. The United American Exclusive
Agency has experienced rapid growth during the past twelve months, as the number
of agents rose 39% to 3,027 at June 30, 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 $666
million at June 30, 2000, rising 11% from a year earlier. Medicare Supplement
represented 72% of Torchmark's total health premium in force at the end of June,
2000.
Cancer sales, produced primarily by the Liberty National Agency, were $4.9
million in the 2000 period, declining 7% from the prior-year period. Cancer
annualized premium in force rose 3% to $161 million. Cancer business represented
17% of Torchmark's annualized health premium in force at June 30, 2000. Other
health product sales, consisting primarily of accident and limited-benefit
hospital and surgical policies, rose 57% to $20 million in the 2000 period.
Other health annualized premium in force increased 5% to $102 million.
16
<PAGE>
The following table presents underwriting margin data for health insurance.
Health Insurance
Summary of Results
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------------
2000 1999 Increase
--------------- --------------- -----------------
% of % of
Amount Total Amount Total Amount %
-------- ------ --------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Premium and policy charges $448,969 100 $407,544 100 $41,425 10
Net policy obligations 282,589 63 256,309 63 26,280 10
Commissions and
acquisition expense 86,291 19 80,794 20 5,497 7
-------- --- -------- --- -------
Insurance underwriting income before
other income and administrative
expenses $ 80,089 18 $ 70,441 17 $ 9,648 14
======== === ======== === ======= ==
</TABLE>
Underwriting margins for health insurance increased 14% to $80 million in the
2000 period over the prior-year period. As a percentage of health premium,
underwriting margins rose slightly from 17.3% in 1999 to 17.8% in 2000.
Annuities. The following table presents collection and deposit balance
information about Torchmark's annuities.
Annuities
Collections and Deposit Balances
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Collections Deposit Balances
----------------------------------- -----------------------------------------
Six Months
Ended June 30, Increase At June 30, Increase
------------------- -------------- ------------------------ ---------------
2000 1999 Amount % 2000 1999 Amount %
-------- -------- -------- --- ----------- ----------- ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed $ 21,919 $ 33,500 $(11,581) (35) $ 667,936 $ 657,732 $ 10,204 2
Variable 295,931 187,581 108,350 58 3,698,426 2,584,970 1,113,456 43
-------- -------- -------- ----------- ----------- -----------
Total $317,850 $221,081 $ 96,769 44 $4,366,362 $3,242,702 $1,123,660 35
======== ======== ======== === ============ =========== =========== ===
</TABLE>
17
<PAGE>
Annuities are sold on both a fixed and a variable basis. Fixed annuity
collections were $22 million in the first six months of 2000, declining 35%
from $34 million collected in the prior-year period. Fixed annuities on deposit
with Torchmark rose 2% to $668 million. Collections of variable annuities were
$296 million in the first half of 2000, increasing 58% over variable collections
of $188 million in the first six months of 1999. The variable annuity balance on
deposit rose 43% during the past twelve months. This balance was $3.7 billion at
June 30, 2000, $3.3 billion at December 31, 1999, and $2.6 billion a year ago.
Strong financial markets in recent months have had a positive impact on the
variable account balance although some weakening was experienced in the second
quarter of 2000. Strong market conditions have been a major factor in increased
variable annuity sales.
The following table presents underwriting margin data for Torchmark's
annuities.
Annuities
Summary of Results
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Six months
Ended June 30, Increase
------------------ --------------
2000 1999 Amount %
-------- -------- --------- ----
<S> <C> <C> <C> <C>
Policy charges $24,197 $18,532 $5,665 31
Net policy obligations (2,409) (2,743) 334 (12)
Commissions and
acquisition expense 12,168 9,288 2,880 31
------- ------- ------
Insurance underwriting income before
other income and administrative
expenses $14,438 $11,987 $2,451 20
======= ======= ====== ===
</TABLE>
Policy charges for annuities for the first six months of 2000 were $24.2
million, compared with $18.5 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 20% from $12.0 million in the 1999 six-month period to $14.4
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.
18
<PAGE>
Investment. The following table summarizes Torchmark's investment income
and excess investment income.
Excess Investment Income
(Dollars in thousands)
Six months
Ended June 30, Increase
------------------ --------------
2000 1999 Amount %
-------- -------- --------- ----
Net investment income $234,538 $221,934 $12,604 6
Tax equivalency adjustment 5,253 5,514 (261) (5)
-------- -------- ------- --
Tax equivalent investment income 239,791 227,448 12,343 5
Required interest on net insurance
policy liabilities (91,024) (87,323) (3,701) 4
Financing costs (35,567) (32,271) (3,296) 10
-------- -------- ------- --
Excess investment income $113,200 $107,854 $ 5,346 5
======== ======== ======= ==
On a tax equivalent basis, net investment income grew 5% to $240 million in
the first six months of 2000 from $227 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 six months on an
amortized cost basis, compared with $5.6 billion in the 1999 period. 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 had yielded
approximately 3% annually while the proceeds were invested at a yield exceeding
7%. An overall increase in average invested assets of $250 million was achieved
over the prior-year quarter even though share purchases of $150 million were
made under the share repurchase program in the previous twelve months and debt
in the net amount of $57 million was also 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 $113 million from $108 million for the same period of 1999, due
primarily to the rise in investment income.
19
<PAGE>
During the first six months of 2000, Torchmark continued to emphasize
purchases of investment grade fixed-maturity bonds. Purchases totaled $311
million and had an average yield of 8.06%, equivalent to an effective annual
yield of 8.28%. For the comparable 1999 period, fixed-maturity acquisitions
totaled $888 million, and had average and effective annual yields of 7.22% and
7.35%, respectively. The reduced purchases resulted primarily from a $383
million decline in investable proceeds from sales in the first half of 2000,
compared with the same period in 1999. Sales were much higher in 1999 because
of the effort to generate capital losses to offset prior year taxable capital
gains. The average life of 2000 purchases was 7.8 years, compared with 20.9
years for the same period of last year.
At the end of the second quarter, the fixed-maturity portfolio stood at
$6.0 billion at amortized cost and had an unrealized loss of $339 million. At
the same quarter-end 1999, the portfolio was $5.6 billion and the unrealized
loss was $58 million. The increase in unrealized loss reflects the impact of
interest rate changes on market values and results from an ongoing program to
capture investment gains for tax purposes where available.
At June 30, 2000, the portfolio had an estimated average life of 12.1 years
and an average duration of 6.1 years. The overall quality of the portfolio
continues to be high, with an average quality rating of "A-1." Approximately
94% of the portfolio was considered investment grade.
Torchmark sold 3.75 million shares of Vesta Insurance Group (Vesta) during
the second quarter of 2000. In early July, 2000, Torchmark sold the remaining
1.38 million shares of Vesta stock that it held. Proceeds from both sales were
$33 million. The sale resulted in an after-tax loss of $1.5 million, of which
$1 million was recorded in the second quarter of 2000. Torchmark no longer has
any ownership interest in Vesta.
Financial Condition
Liquidity. Torchmark's liquidity is based on its strong positive cash
flow, its marketable investments, and the availability of a line of credit
facility. Torchmark's insurance operations ordinarily generate cash flows in
excess of immediate requirements. Torchmark's net cash inflows from operations
including deposit product operations were $256 million in the first six months
of 2000, compared with $223 million in the same period of 1999, an increase of
15%. In addition to cash flows from operations, Torchmark received $105 million
in investment maturities or repayments during the first six months of 2000.
Torchmark's cash and short-term investments were $109 million at June 30,
2000, compared with $115 million of these assets at December 31, 1999. Cash and
short-term investments were $54 million at the end of June, 1999. In addition
to these liquid assets, Torchmark's entire portfolio of fixed-income and equity
securities, in the approximate
20
<PAGE>
amount of $5.7 billion at market value on June 30, 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 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 June 30, 2000. At that date, Torchmark had
commercial paper outstanding in the face amount of $342 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 $713 million at
June 30, 2000, compared with $790 million at December 31, 1999 and $770 million
at June 30, 1999. Long-term debt was $372 million at June 30, 2000 and December
31, 1999, and was $371 million at June 30, 1999, changing because of the
accretion of discount. Debt as a percentage of total capitalization was 22.9%
at June 30, 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 at June 30, 1999. If the MIPS were counted as debt, the debt to
capitalization ratio was 29.1% at June 30, 2000, compared with 31.3% at year-end
1999. Interest coverage was 10.6 times for the first half of 2000, compared with
8.2 times for the first half of 1999.
Torchmark acquired 4.4 million of its shares on the open market during the
first six months of 2000. These share purchases were made at a cost of $96
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 $2.01 billion at June 30, 2000,
compared with $1.99 billion at 1999 year end and $2.06 billion one year ago.
Book value per share was $15.77 at June 30, 2000, compared with $15.10 at year-
end 1999 and $15.46 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 $2.21 billion at June 30, 2000,
compared with $2.15 billion at 1999 year end and $2.09 billion a year ago. On a
per share basis, adjusted book value was $17.33 at the end of June, 2000,
compared with $16.32 at year-end 1999 and $15.71 at June 30, 1999. The year-
over-year growth in adjusted book value per share was 10.3%, and was achieved in
spite of $150 million in share buybacks in the last two quarters of 1999 and the
first half of 2000.
21
<PAGE>
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 16.5% for the first six months of 2000. Return
on equity for the same period in 1999 was 16.2%.
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 six months ended June 30, 2000.
22
<PAGE>
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 June 30, 2000, Liberty was a party to
approximately 110 active lawsuits (including 18 employment related cases and
excluding interpleaders and stayed cases), 84 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.
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. The motion to reconsider denial of
class certification in Harris was subsequently denied by the Circuit Court.
------
Only the individual unjust enrichment claims remain and no trial date for these
claims has been set.
23
<PAGE>
It has been previously reported that purported class action litigation was
filed on October 14, 1999 against United American Insurance Company in the
Circuit Court for Lee County, Florida (Eisenberg v. United American Insurance
--------------------------------------
Company, Case No. 99-7915CA WCM), on behalf of certain Florida purchasers of
-------
United American home health care insurance on an installment or bank draft
payment basis. The Eisenberg lawsuit alleged that United American acted as an
---------
unlicensed premium finance company and that its service charges, if authorized,
were unlawful and excessive. On July 21, 2000, the Eisenberg case was dismissed
---------
by the Circuit Court.
As previously reported, Liberty was served on October 28, 1999 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. Liberty has also received similar subpoenas from the
Alabama, Georgia, Kentucky, Texas, and South Carolina Insurance Departments
regarding its industrial life insurance and other low face-amount life insurance
policies sold in those states. Specific inquiry is made into the historical use
of race-based mortality, a practice discontinued by Liberty many years ago.
Liberty has been and continues responding to these subpoenas in a timely
fashion. In July 2000, the Florida and Georgia Insurance Departments issued
cease and desist orders to all companies reporting premium income from
industrial life insurance, including Liberty, stating that, to the extent that
any company is currently collecting any race-based insurance premiums from
Florida and Georgia residents, respectively, it immediately cease and desist
from collecting any premium differential based on the race of the policyholders.
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
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 subsequently filed motions
24
<PAGE>
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 opposed this motion. On June 22, 2000, purported class
action litigation with allegations comparable to those in the Moore case was
-----
filed against Liberty in the Circuit Court of Jefferson County, Alabama (Baldwin
-------
v. Liberty National Life Insurance Company, Case No. CV 00-684). On July 3,
------------------------------------------
2000, the District Court issued an order in the Moore case granting in part and
-----
denying in part the plaintiffs' motions. The District Court ordered the Moore
-----
plaintiffs to file an amended complaint setting forth their claims under 28
U.S.C. (S)(S) 1981 and 1982 and, if such claims are timely, any state law claims
for breach of contract related to the discontinuance of debit collections, and
dismissed with prejudice all remaining state law claims of the plaintiffs as
time-barred by the common law rule of repose. On July 14, 2000, plaintiffs
filed their amended complaint with the District Court and Liberty filed a motion
to alter or amend the District Court's July order or, in the alternative,
requested that the District Court certify for purposes of appeal the issue
whether the state law doctrine of repose should be applied to and bar
plaintiffs' actions under (S)(S) 1981 and 1982. The District Court entered
such an order on July 21, 2000 and stayed proceedings in Moore pending
-----
resolution of Liberty's petition to the U.S. Circuit Court of Appeals for the
Eleventh Circuit. Liberty filed a petition on July 30, 2000 with the Eleventh
Circuit seeking that Court's permission to appeal the portions of the District
Court's July order in Moore granting the plaintiffs the right to file the
-----
amended complaint.
25
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
At the Annual Meeting of Shareholders held April 27, 2000:
1. The following directors were re-elected to serve an additional term:
Director For Withheld
----------------------------------------------
David L. Boren 109,019,396 1,485,406
Louis T. Hagopian 108,978,957 1,525,845
Harold T. McCormick 108,946,112 1,558,690
R.K. Richey 108,995,576 1,509,226
Other directors whose terms continued after the meeting were Joseph M.
Farley, C. B. Hudson, Joseph L. Lanier, Jr., Mark S. McAndrew, George J.
Records and Lamar C. Smith.
2. Deloitte & Touche LLP were ratified as the Company's independent auditors
for 2000.
For Against Abstain
---------------------------------
109,867,970 197,260 439,572
26
<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 second quarter of 2000.
27
<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: August 9, 2000 /s/ C. B. Hudson
-----------------------------
C. B. Hudson, Chairman of the
Board, President, and Chief
Executive Officer
Date: August 9, 2000 /s/ Gary L. Coleman
------------------------------
Gary L. Coleman, Executive Vice
President and Chief Financial Officer
(Chief Accounting Officer)
28
