DELAWARE |
63-0780404 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
CLASS |
OUTSTANDING AT July 31, 2002 | |
Common Stock, |
119,178,913 | |
$1.00 Par Value |
June 30, 2002 |
December 31, 2001 |
|||||||
Assets |
(Unaudited) |
|||||||
Investments: |
||||||||
Fixed maturities, available for sale, at fair value (amortized cost: 2002$6,679,081; 2001$6,528,244)
|
$ |
6,742,143 |
|
$ |
6,526,429 |
| ||
Equity securities, at fair value (cost: 2002$10,260; 2001$666) |
|
10,133 |
|
|
571 |
| ||
Mortgage loans, at cost (fair value: 2002$118,198; 2001$111,407) |
|
117,254 |
|
|
112,135 |
| ||
Investment real estate, at depreciated cost |
|
13,651 |
|
|
14,133 |
| ||
Policy loans |
|
271,394 |
|
|
266,979 |
| ||
Other long-term investments, at fair value |
|
57,527 |
|
|
49,971 |
| ||
Short-term investments |
|
24,807 |
|
|
134,156 |
| ||
|
|
|
|
|
| |||
Total investments |
|
7,236,909 |
|
|
7,104,374 |
| ||
Cash |
|
3,068 |
|
|
3,714 |
| ||
Accrued investment income |
|
127,681 |
|
|
125,210 |
| ||
Other receivables |
|
74,975 |
|
|
67,549 |
| ||
Deferred acquisition costs |
|
2,126,018 |
|
|
2,066,423 |
| ||
Value of insurance purchased |
|
109,004 |
|
|
115,939 |
| ||
Property and equipment |
|
34,309 |
|
|
36,137 |
| ||
Goodwill |
|
378,436 |
|
|
378,436 |
| ||
Other assets |
|
12,133 |
|
|
28,087 |
| ||
Separate account assets |
|
1,988,871 |
|
|
2,502,284 |
| ||
|
|
|
|
|
| |||
Total assets |
$ |
12,091,404 |
|
$ |
12,428,153 |
| ||
|
|
|
|
|
| |||
Liabilities and Shareholders' Equity |
||||||||
Liabilities: |
||||||||
Future policy benefits |
$ |
5,499,416 |
|
$ |
5,348,929 |
| ||
Unearned and advance premiums |
|
94,712 |
|
|
93,624 |
| ||
Policy claims and other benefits payable |
|
250,087 |
|
|
248,333 |
| ||
Other policyholders' funds |
|
81,918 |
|
|
80,929 |
| ||
|
|
|
|
|
| |||
Total policy liabilities |
|
5,926,133 |
|
|
5,771,815 |
| ||
Accrued income taxes |
|
613,348 |
|
|
580,287 |
| ||
Short-term debt |
|
182,642 |
|
|
204,037 |
| ||
Long-term debt (fair value: 2002$583,861; 2001$543,275) |
|
540,753 |
|
|
536,152 |
| ||
Other liabilities |
|
130,784 |
|
|
191,894 |
| ||
Separate account liabilities |
|
1,988,871 |
|
|
2,502,284 |
| ||
|
|
|
|
|
| |||
Total liabilities |
|
9,382,531 |
|
|
9,786,469 |
| ||
Trust preferred securities (fair value: 2002$153,100; 2001$150,660) |
|
144,417 |
|
|
144,557 |
| ||
Shareholders' equity: |
||||||||
Preferred stock |
|
0 |
|
|
0 |
| ||
Common stock |
|
126,801 |
|
|
126,801 |
| ||
Additional paid-in capital |
|
553,974 |
|
|
552,634 |
| ||
Accumulated other comprehensive income (loss) |
|
32,178 |
|
|
(12,314 |
) | ||
Retained earnings |
|
2,116,857 |
|
|
1,978,903 |
| ||
Treasury stock, at cost |
|
(265,354 |
) |
|
(148,897 |
) | ||
|
|
|
|
|
| |||
Total shareholders' equity |
|
2,564,456 |
|
|
2,497,127 |
| ||
|
|
|
|
|
| |||
Total liabilities and shareholders' equity |
$ |
12,091,404 |
|
$ |
12,428,153 |
| ||
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2002 |
2001 |
2002 |
2001 |
|||||||||||||
Revenue: |
||||||||||||||||
Life premium |
$ |
306,537 |
|
$ |
288,768 |
|
$ |
604,881 |
|
$ |
569,920 |
| ||||
Health premium |
|
254,568 |
|
|
253,656 |
|
|
517,075 |
|
|
506,518 |
| ||||
Other premium |
|
10,431 |
|
|
18,794 |
|
|
20,821 |
|
|
31,646 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total premium |
|
571,536 |
|
|
561,218 |
|
|
1,142,777 |
|
|
1,108,084 |
| ||||
Net investment income |
|
128,075 |
|
|
122,864 |
|
|
256,278 |
|
|
243,551 |
| ||||
Realized investment gains (losses) |
|
(66,704 |
) |
|
4,288 |
|
|
(76,953 |
) |
|
10,832 |
| ||||
Other income |
|
573 |
|
|
660 |
|
|
1,052 |
|
|
1,329 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total revenue |
|
633,480 |
|
|
689,030 |
|
|
1,323,154 |
|
|
1,363,796 |
| ||||
Benefits and expenses: |
||||||||||||||||
Life policyholder benefits |
|
206,500 |
|
|
192,081 |
|
|
406,345 |
|
|
377,642 |
| ||||
Health policyholder benefits |
|
167,652 |
|
|
165,363 |
|
|
340,490 |
|
|
329,404 |
| ||||
Other policyholder benefits |
|
7,938 |
|
|
9,363 |
|
|
16,134 |
|
|
18,640 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total policyholder benefits |
|
382,090 |
|
|
366,807 |
|
|
762,969 |
|
|
725,686 |
| ||||
Amortization of deferred acquisition costs |
|
75,174 |
|
|
79,054 |
|
|
150,200 |
|
|
151,499 |
| ||||
Commissions and premium taxes |
|
41,716 |
|
|
40,477 |
|
|
84,223 |
|
|
80,670 |
| ||||
Other operating expense |
|
32,338 |
|
|
32,188 |
|
|
66,953 |
|
|
64,574 |
| ||||
Amortization of goodwill |
|
0 |
|
|
3,019 |
|
|
0 |
|
|
6,037 |
| ||||
Interest expense |
|
7,230 |
|
|
11,760 |
|
|
14,548 |
|
|
24,327 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total benefits and expenses |
|
538,548 |
|
|
533,305 |
|
|
1,078,893 |
|
|
1,052,793 |
| ||||
Income from continuing operations before income taxes, extraordinary item, and cumulative effect of change in accounting
principle |
|
94,932 |
|
|
155,725 |
|
|
244,261 |
|
|
311,003 |
| ||||
Income taxes |
|
(31,249 |
) |
|
(53,426 |
) |
|
(81,417 |
) |
|
(106,620 |
) | ||||
Preferred securities dividends (net of tax) |
|
(971 |
) |
|
(1,461 |
) |
|
(1,976 |
) |
|
(3,842 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income from continuing operations before extraordinary item and cumulative effect of change in accounting principle
|
|
62,712 |
|
|
100,838 |
|
|
160,868 |
|
|
200,541 |
| ||||
Loss from discontinued operations (net of applicable tax benefit of $1,766) |
|
0 |
|
|
0 |
|
|
0 |
|
|
(3,280 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income before extraordinary item and cumulative effect of change in accounting principle |
|
62,712 |
|
|
100,838 |
|
|
160,868 |
|
|
197,261 |
| ||||
Loss on redemption of debt (net of applicable tax benefit of $0, $582, $1, and $595, respectively) |
|
0 |
|
|
(1,080 |
) |
|
(2 |
) |
|
(1,105 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Income before cumulative effect of change in accounting principle |
|
62,712 |
|
|
99,758 |
|
|
160,866 |
|
|
196,156 |
| ||||
Cumulative effect of change in accounting principle (net of applicable tax benefit of $14,315) |
|
0 |
|
|
(26,584 |
) |
|
0 |
|
|
(26,584 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income |
$ |
62,712 |
|
$ |
73,174 |
|
$ |
160,866 |
|
$ |
169,572 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
2002 |
2001 |
2002 |
2001 |
|||||||||||
Basic earnings per share: |
||||||||||||||
Income from continuing operations before extraordinary item and cumulative effect of change in accounting principle
|
$ |
0.52 |
$ |
0.81 |
|
$ |
1.32 |
$ |
1.60 |
| ||||
Loss from discontinued operations (net of applicable tax benefit) |
|
0.00 |
|
0.00 |
|
|
0.00 |
|
(0.03 |
) | ||||
|
|
|
|
|
|
|
|
|
| |||||
Income before extraordinary item and cumulative effect of change in accounting principle |
|
0.52 |
|
0.81 |
|
|
1.32 |
|
1.57 |
| ||||
Loss on redemption of debt (net of applicable tax benefit) |
|
0.00 |
|
(0.01 |
) |
|
0.00 |
|
(0.01 |
) | ||||
|
|
|
|
|
|
|
|
|
| |||||
Income before cumulative effect of change in accounting principle |
|
0.52 |
|
0.80 |
|
|
1.32 |
|
1.56 |
| ||||
Cumulative effect of change in accounting principle (net of applicable tax benefit) |
|
0.00 |
|
(0.22 |
) |
|
0.00 |
|
(0.21 |
) | ||||
|
|
|
|
|
|
|
|
|
| |||||
Net income |
$ |
0.52 |
$ |
0.58 |
|
$ |
1.32 |
$ |
1.35 |
| ||||
|
|
|
|
|
|
|
|
|
| |||||
Diluted earnings per share: |
||||||||||||||
Income from continuing operations before extraordinary item and cumulative effect of change in accounting principle
|
$ |
0.52 |
$ |
0.80 |
|
$ |
1.32 |
$ |
1.59 |
| ||||
Loss from discontinued operations (net of applicable tax benefit) |
|
0.00 |
|
0.00 |
|
|
0.00 |
|
(0.03 |
) | ||||
|
|
|
|
|
|
|
|
|
| |||||
Income before extraordinary item and cumulative effect of change in accounting principle |
|
0.52 |
|
0.80 |
|
|
1.32 |
|
1.56 |
| ||||
Loss on redemption of debt (net of applicable tax benefit) |
|
0.00 |
|
(0.01 |
) |
|
0.00 |
|
(0.01 |
) | ||||
|
|
|
|
|
|
|
|
|
| |||||
Income before cumulative effect of change in accounting principle |
|
0.52 |
|
0.79 |
|
|
1.32 |
|
1.55 |
| ||||
Cumulative effect of change in accounting principle (net of applicable tax benefit) |
|
0.00 |
|
(0.21 |
) |
|
0.00 |
|
(0.21 |
) | ||||
|
|
|
|
|
|
|
|
|
| |||||
Net income |
$ |
0.52 |
$ |
0.58 |
|
$ |
1.32 |
$ |
1.34 |
| ||||
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2002 |
2001 |
2002 |
2001 |
|||||||||||||
Net income |
$ |
62,712 |
|
$ |
73,174 |
|
$ |
160,866 |
|
$ |
169,572 |
| ||||
Other comprehensive income (loss): |
||||||||||||||||
Unrealized gains (losses) on securities: |
||||||||||||||||
Unrealized holding gains (losses) arising during period |
|
107,484 |
|
|
(62,629 |
) |
|
(8,002 |
) |
|
95,846 |
| ||||
Less: reclassification adjustment for gains (losses) on securities included in net income |
|
76,941 |
|
|
(6,169 |
) |
|
78,669 |
|
|
(9,642 |
) | ||||
Less: reclassification adjustment for change in accounting principle |
|
0 |
|
|
40,899 |
|
|
0 |
|
|
40,899 |
| ||||
Less: reclassification adjustment for amortization of discount and premium |
|
(1,212 |
) |
|
(2,068 |
) |
|
(2,702 |
) |
|
(3,103 |
) | ||||
Less: foreign exchange adjustment on securities marked to market |
|
(2,308 |
) |
|
(1,636 |
) |
|
(2,792 |
) |
|
352 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Unrealized gains (losses) on securities |
|
180,905 |
|
|
(31,603 |
) |
|
65,173 |
|
|
124,352 |
| ||||
Unrealized gains (losses) on other investments |
|
534 |
|
|
(640 |
) |
|
1,160 |
|
|
(451 |
) | ||||
Unrealized gains (losses) on deferred acquisition costs |
|
(13,173 |
) |
|
2,618 |
|
|
(4,295 |
) |
|
(13,502 |
) | ||||
Foreign exchange translation adjustments |
|
3,806 |
|
|
1,130 |
|
|
4,165 |
|
|
(572 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other comprehensive income (loss), before tax |
|
172,072 |
|
|
(28,495 |
) |
|
66,203 |
|
|
109,827 |
| ||||
Income tax benefit (expense) related to other comprehensive income (loss) |
|
(58,891 |
) |
|
10,314 |
|
|
(21,711 |
) |
|
(38,636 |
) | ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other comprehensive income (loss) |
|
113,181 |
|
|
(18,181 |
) |
|
44,492 |
|
|
71,191 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Comprehensive income |
$ |
175,893 |
|
$ |
54,993 |
|
$ |
205,358 |
|
$ |
240,763 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
||||||||
2002 |
2001 |
|||||||
Cash provided from operations |
$ |
290,914 |
|
$ |
243,836 |
| ||
Cash provided from (used for) investment activities: |
||||||||
Investments sold or matured: |
||||||||
Fixed maturities available for salesold |
|
258,344 |
|
|
601,159 |
| ||
Fixed maturities available for salematured, called, and repaid |
|
132,127 |
|
|
134,608 |
| ||
Other long-term investments |
|
3,759 |
|
|
3,339 |
| ||
|
|
|
|
|
| |||
Total investments sold or matured |
|
394,230 |
|
|
739,106 |
| ||
Investments acquired: |
||||||||
Fixed maturities |
|
(614,950 |
) |
|
(845,354 |
) | ||
Other long-term investments |
|
(21,767 |
) |
|
(5,001 |
) | ||
|
|
|
|
|
| |||
Total investments acquired |
|
(636,717 |
) |
|
(850,355 |
) | ||
Net decrease in short-term investments |
|
109,349 |
|
|
13,166 |
| ||
Disposition of properties |
|
24 |
|
|
551 |
| ||
Additions to properties |
|
(1,085 |
) |
|
(1,976 |
) | ||
|
|
|
|
|
| |||
Cash used for investment activities |
|
(134,199 |
) |
|
(99,508 |
) | ||
Cash provided from (used for) financing activities: |
||||||||
Issuance of common stock |
|
3,500 |
|
|
3,338 |
| ||
Repayments of debt |
|
(21,470 |
) |
|
(31,279 |
) | ||
Redemption of MIPS |
|
0 |
|
|
(50,000 |
) | ||
Acquisition of treasury stock |
|
(121,077 |
) |
|
(54,481 |
) | ||
Cash dividends paid to shareholders |
|
(22,056 |
) |
|
(23,080 |
) | ||
Net receipts (withdrawals) from deposit product operations |
|
3,742 |
|
|
(18,845 |
) | ||
|
|
|
|
|
| |||
Cash used for financing activities |
|
(157,361 |
) |
|
(174,347 |
) | ||
Net decrease in cash |
|
(646 |
) |
|
(30,019 |
) | ||
Cash at beginning of year |
|
3,714 |
|
|
35,089 |
| ||
|
|
|
|
|
| |||
Cash at end of period |
$ |
3,068 |
|
$ |
5,070 |
| ||
|
|
|
|
|
|
Six months ended June 30, 2002 | ||||||||||||||||||||||
Life |
Health |
Annuity |
Investment |
Other |
Adjustments |
Consolidated | ||||||||||||||||
Revenue: |
||||||||||||||||||||||
Premium |
$ |
604,881 |
$ |
517,075 |
$ |
20,821 |
$ |
1,142,777 | ||||||||||||||
Net investment income |
$ |
258,194 |
$ |
(1,916 |
) |
|
256,278 | |||||||||||||||
Other income |
$ |
1,909 |
|
(857 |
) |
|
1,052 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total revenue* |
$ |
604,881 |
$ |
517,075 |
$ |
20,821 |
$ |
258,194 |
$ |
1,909 |
$ |
(2,773 |
) |
$ |
1,400,107 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Measure of profitability: |
||||||||||||||||||||||
Underwriting income before other income and administrative expense |
$ |
144,772 |
$ |
86,220 |
$ |
8,635 |
$ |
239,627 | ||||||||||||||
Excess investment income |
$ |
145,507 |
|
145,507 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total measure of profitability |
$ |
144,772 |
$ |
86,220 |
$ |
8,635 |
$ |
145,507 |
$ |
0 |
$ |
0 |
|
$ |
385,134 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2001 | ||||||||||||||||||||||
Life |
Health |
Annuity |
Investment |
Other |
Adjustments |
Consolidated | ||||||||||||||||
Revenue: |
||||||||||||||||||||||
Premium |
$ |
569,920 |
$ |
506,518 |
$ |
31,646 |
$ |
1,108,084 | ||||||||||||||
Net investment income |
$ |
245,930 |
$ |
(2,379 |
) |
|
243,551 | |||||||||||||||
Other income |
$ |
2,300 |
|
(971 |
) |
|
1,329 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total revenue* |
$ |
569,920 |
$ |
506,518 |
$ |
31,646 |
$ |
245,930 |
$ |
2,300 |
$ |
(3,350 |
) |
$ |
1,352,964 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Measure of profitability: |
||||||||||||||||||||||
Underwriting income before other income and administrative expense |
$ |
139,349 |
$ |
89,897 |
$ |
13,684 |
$ |
242,930 | ||||||||||||||
Excess investment income |
$ |
122,020 |
|
122,020 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total measure of profitability |
$ |
139,349 |
$ |
89,897 |
$ |
13,684 |
$ |
122,020 |
$ |
0 |
$ |
0 |
|
$ |
364,950 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, |
||||||||
2002 |
2001 |
|||||||
Total measure of profitability |
$ |
385,134 |
|
$ |
364,950 |
| ||
Other income |
|
1,909 |
|
|
2,300 |
| ||
Insurance administrative expense |
|
(61,496 |
) |
|
(59,466 |
) | ||
Parent expense |
|
(5,457 |
) |
|
(5,108 |
) | ||
Tax equivalent adjustment |
|
(1,916 |
) |
|
(2,379 |
) | ||
Goodwill amortization |
|
0 |
|
|
(6,037 |
) | ||
Realized investment gains/(losses) |
|
(76,953 |
) |
|
10,832 |
| ||
Pretax cost of Trust Preferred/MIPS dividends |
|
3,040 |
|
|
5,911 |
| ||
|
|
|
|
|
| |||
Operating income before taxes** |
$ |
244,261 |
|
$ |
311,003 |
| ||
|
|
|
|
|
|
TORCHMARK CORPORATION | ||||||||
Date: August 14, 2002 |
/s/ C. B.
HUDSON | |||||||
C. B. Hudson, Chairman of the Board and Chief Executive Officer |
Date: August 14, 2002 |
/s/ GARY L.
COLEMAN | |||||||
Gary L. Coleman, Executive Vice President and Chief Financial Officer (Chief Accounting Officer) |