-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UenB4Tj+rLxSg9DT6NhOLatoSp3AMVc3z6TiRi5SBtbtDmdcqxvm6DzY0vjzg9Ob DbNzsooVz8beV5ay7Mvp9Q== 0000931763-99-002125.txt : 19990722 0000931763-99-002125.hdr.sgml : 19990722 ACCESSION NUMBER: 0000931763-99-002125 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TORCHMARK CORP CENTRAL INDEX KEY: 0000320335 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 630780404 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-08052 FILM NUMBER: 99667877 BUSINESS ADDRESS: STREET 1: 2001 3RD AVE S CITY: BIRMINGHAM STATE: AL ZIP: 35233 BUSINESS PHONE: 2053254200 FORMER COMPANY: FORMER CONFORMED NAME: TORCHMARK CORP SAVINGS & INVESTMENT PLAN DATE OF NAME CHANGE: 19820825 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY NATIONAL INSURANCE HOLDING CO DATE OF NAME CHANGE: 19820701 10-Q/A 1 FORM 10-Q FORM 10-Q/A Amendment No. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1999 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 APRIL 30, 1999 Common Stock, 133,362,708 $1.00 Par Value Index of Exhibits (Page 27) Total number of pages included are 28. PART I - FINANCIAL INFORMATION Item 1. Financial Statements and Item 2. Management's Discussion and Analysis -------------------- --------------------------------------------- of Financial Condition and Result of Operations are amended to reflect a change - ----------------------------------------------- in accounting principle made to conform Torchmark's accounting for its interest rate swap contract to the method now preferred by the Securities and Exchange Commission. Effective January 1, 1999, the interest rate swap contract is no longer accounted for as a hedge of the Monthly Income Preferred Securities issued by a special purpose finance subsidiary and guaranteed by Torchmark. The change will result in the swap being recorded as an asset at its market value on the balance sheet with subsequent changes in its market value recorded as realized gains and losses. The accounting change had the following effect on the previously issued financial statements for March 31, 1999: As Previously Reported As Restated -------- ----------- (Amounts in thousands, except per share data) Balance Sheet: Other long-term investments (at fair value) $ 34,440 $ 54,548 Accrued income taxes 448,990 456,028 Retained earnings 1,778,550 1,791,620 Income Statement: Realized investment losses (2,477) (7,116) Income tax expense (44,028) (42,405) Income from continuing operations 83,364 80,348 Cumulative effect of a change in accounting principle, net of tax 0 16,086 Net income 83,364 96,434 Basic earnings per share: Net income from continuing operations 0.62 0.59 Net income 0.62 0.71 Diluted earnings per share: Net income from continuing operations 0.61 0.59 Net income 0.61 0.71 This change in accounting principle had no effect on "net operating income from continuing operations" as defined on page 9 of this Form 10-QA. Item 1. Financial Statements TORCHMARK CORPORATION CONSOLIDATED BALANCE SHEET (Amounts in thousands)
March 31, December 31, Assets: 1999 1998 ----------- ----------- (Unaudited) AS RESTATED SEE NOTE C Investments: Fixed maturities, available for sale, at fair value (amortized cost: 1999 - $5,603,257; 1998 - $5,519,772) $ 5,720,078 $ 5,768,447 Equity securities, at fair value (cost: 1999 - $33,766; 1998 - $2,256) 31,428 9,843 Mortgage loans, at cost (estimated fair value: 1999 - $124,960; 1998 - $124,191) 124,841 124,072 Investment real estate, at depreciated cost 164,477 164,644 Policy loans 234,776 233,765 Other long-term investments (at fair value) 54,548 35,976 Short-term investments 36,311 75,844 ----------- ----------- Total investments 6,366,459 6,412,591 Cash 8,415 4,920 Investment in unconsolidated subsidiaries - 31,510 Accrued investment income 102,748 99,279 Other receivables 132,894 130,279 Deferred acquisition costs 1,559,006 1,502,511 Value of insurance purchased 165,476 170,640 Property and equipment 38,903 39,080 Goodwill 411,639 414,658 Other assets 17,475 18,298 Separate account assets 2,526,989 2,425,262 ----------- ----------- Total assets $11,330,004 $11,249,028 =========== =========== Liabilities and Shareholders' Equity: Liabilities: Future policy benefits $ 4,655,033 $ 4,595,567 Unearned and advance premiums 87,456 85,923 Policy claims and other benefits payable 202,685 194,965 Other policyholders' funds 81,711 81,568 ----------- ----------- Total policy liabilities 5,026,885 4,958,023 Accrued income taxes 456,028 511,311 Short-term debt 412,948 355,392 Long-term debt (estimated fair value: 1999 - $421,759; 1998 - $430,431) 376,741 383,422 Other liabilities 189,194 162,831 Separate account liabilities 2,526,989 2,425,262 ----------- ----------- Total liabilities 8,988,785 8,796,241 Monthly income preferred securities (estimated fair value: 1999 - $203,520; 1998 - $205,040) 193,275 193,259 Shareholders' equity: Preferred stock 0 0 Common stock 147,801 147,801 Additional paid-in capital 611,843 610,925 Accumulated other comprehensive income 58,187 144,501 Retained earnings 1,791,620 1,707,933 Treasury stock, at cost (461,507) (351,632) ----------- ----------- Total shareholders' equity 2,147,944 2,259,528 ----------- ----------- Total liabilities and shareholders' equity $11,330,004 $11,249,028 =========== ===========
See accompanying Notes to Consolidated Financial Statements. 1 TORCHMARK CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited and in thousands except per share data)
Three Months Ended March 31, -------------------------- 1999 1998 -------- -------- AS RESTATED SEE NOTE C Revenue: Life premium $251,341 $236,211 Health premium 203,042 189,811 Other premium 8,381 6,995 -------- -------- Total premium 462,764 433,017 Net investment income 111,396 119,800 Realized investment gains (losses) (7,116) (3,173) Other income 466 388 -------- -------- Total revenue 567,510 550,032 Benefits and expenses: Life policyholder benefits 162,922 154,013 Health policyholder benefits 131,653 119,840 Other policyholder benefits 8,871 13,171 -------- -------- Total policyholder benefits 303,446 287,024 Amortization of deferred acquisition costs 59,570 57,334 Commissions and premium taxes 34,632 35,805 Other operating expense 29,226 30,714 Amortization of goodwill 3,018 3,018 Interest expense 12,576 18,338 -------- -------- Total benefits and expenses 442,468 432,233 Income before income taxes and equity in earnings of Vesta 125,042 117,799 Income taxes (42,405) (41,434) Equity in earnings of Vesta 0 4,258 Monthly income preferred securities dividend (2,289) (2,471) -------- -------- Net income from continuing operations 80,348 78,152 Discontinued operations of Waddell & Reed - Income from operations 0 14,766 -------- -------- Net income before cumulative effect of change 80,348 92,918 in accounting principle Cumulative effect of change in accounting principle (net of tax of $8,661) 16,086 0 -------- -------- Net income $ 96,434 $ 92,918 ======== ======== Basic earnings per share: Net income from continuing operations $ 0.59 $ 0.56 Discontinued operations of Waddell & Reed - Income from operations 0.00 0.10 -------- -------- Net income before cumulative effect of change in accounting principle 0.59 0.66 Cumulative effect of change in accounting 0.12 0.00 principle, net of tax -------- -------- Net income $ 0.71 $ 0.66 ======== ======== Diluted earnings per share: Net income from continuing operations $ 0.59 $ 0.55 Discontinued operations of Waddell & Reed - Income from operations 0.00 0.11 -------- -------- Net income before cumulative effect of change 0.59 0.66 in accounting principle Cumulative effect of change in accounting principle, net of tax 0.12 0.00 -------- -------- Net income $ 0.71 $ 0.66 ======== ========
See accompanying Notes to Consolidated Financial Statements. 2 TORCHMARK CORPORATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited and in thousands)
Three Months Ended March 31, ------------------------ 1999 1998 --------- --------- AS RESTATED SEE NOTE C Net income $ 96,434 $ 92,918 Other comprehensive income: Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during period (145,238) 5,406 Less: reclassification adjustment for (gains) losses on securities included in net income 2,461 2,156 Less: reclassification adjustment for amortization of discount and premium (237) (1,000) Less: foreign exchange adjustment on securities marked to market (560) - --------- --------- Unrealized gains (losses) on securities (143,574) 6,562 Unrealized gains (losses) on other investments 32 3,099 Unrealized gains (losses) on deferred acquisition costs 10,703 (140) Foreign exchange translation adjustments 623 198 --------- --------- Other comprehensive income (loss), before tax (132,216) 9,719 Income (tax) benefit related to other comprehensive income (loss) 45,902 (3,292) --------- --------- Other comprehensive income (loss) (86,314) 6,427 --------- --------- Comprehensive income $ (10,120) $ 99,345 ========= =========
See accompanying Notes to Consolidated Financial Statements. 3 TORCHMARK CORPORATION CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited and in thousands)
Three Months Ended March 31, -------------------------- 1999 1998 --------- --------- Cash provided from operations $ 121,954 $ 116,186 Cash provided from (used for) investment activities: Investments sold or matured: Fixed maturities available for sale - sold 146,719 51,565 Fixed maturities available for sale - matured, called, and repaid 97,806 101,139 Other long-term investments 3,620 3,849 --------- --------- Total investments sold or matured 248,145 156,553 Investments acquired: Fixed maturities (331,470) (545,571) Other long-term investments (4,114) (29,381) --------- --------- Total investments acquired (335,584) (574,952) Net decrease (increase) in short-term investments 39,536 (99,992) Disposition of properties 23 241 Additions to properties (1,141) (613) --------- --------- Cash used for investment activities (49,021) (518,763) Cash provided from (used for) financing activities: Issuance of common stock 901 2,046 Proceeds from W&R public offering 0 516,138 Offering proceeds retained by Waddell & Reed 0 (35,251) Additions to debt 57,630 0 Repayments of debt (6,783) (82,236) Acquisition of treasury stock (111,494) 0 Cash dividends paid to shareholders (12,327) (20,957) Net receipts from deposit product operations 2,635 12,394 --------- --------- Cash used for financing activities (69,438) 392,134 Net increase (decrease) in cash 3,495 (10,443) Cash at beginning of year 4,920 11,085 --------- --------- Cash at end of period $ 8,415 $ 642 ========= =========
See accompanying Notes to Consolidated Financial Statements. 4 TORCHMARK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) Note A - Accounting Policies The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the disclosures required by generally accepted accounting principles. However, in the opinion of management, these statements include all adjustments, consisting of normal recurring accruals, which are necessary for a fair presentation of the consolidated financial position at March 31, 1999, and the consolidated results of operations for the periods ended March 31, 1999 and 1998. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Note B - Business Segments Torchmark's segments are based on the insurance product lines it markets and administers: life insurance, health insurance, and annuities. There is also an investment segment, which manages the investment portfolio, debt, and cash flow for the insurance segments and the corporate function. The measure of profitability for insurance segments is underwriting income before other income and administrative expenses. It represents the gross profit margin on insurance products before administrative expenses and is calculated by deducting net policy obligations, acquisition expenses, and commissions from premium revenue. The measure of profitability for the investment segment is excess investment income, which represents the income earned on the investment portfolio in excess of net policy requirements and financing costs associated with debt and Torchmark's monthly income preferred securities (MIPS). The tables below set forth revenue (excluding realized investment losses) and measure of profitability by segment as well as reconciliations from the total measures of profitability to pretax operating income for the three-month periods ended March 31, 1999 and March 31, 1998, respectively. Selected Segment Information (Amounts in thousands)
Three months ended March 31, 1999 ------------------------------------------------------------------------------------------------- Life Health Annuity Investment Other Adjustments Consolidated -------- -------- -------- ---------- ------- ----------- ------------ Revenue: Premium $251,341 $203,042 $ 8,381 $462,764 Net investment income $114,152 $(2,756) 111,396 Other income $945 (479) 466 Intersegment revenue - required interest on net policy obligations 33,470 1,565 8,439 (43,474) 0 -------- -------- -------- -------- ---- ------- -------- Total revenue* $284,811 $204,607 $ 16,820 $ 70,678 $945 $(3,235) $574,626 ======== ======== ======== ======== ==== ======= ======== Measure of profitability: Underwriting income before other income and administrative expense $ 66,965 $ 35,910 $ 5,236 $108,111 Excess investment income $ 54,580 54,580 -------- -------- -------- -------- ---- ------- -------- Total measure of profitability $ 66,965 $ 35,910 $ 5,236 $ 54,580 $ 0 $ 0 $162,691 ======== ======== ======== ======== ==== ======= ========
* excludes realized investment gains (losses) 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED Selected Segment Information (Amounts in thousands)
Three months ended March 31, 1998 ------------------------------------------------------------------------------------------------- Life Health Annuity Investment Other Adjustments Consolidated -------- -------- -------- ---------- ------- ----------- ------------ Revenue: Premium $236,211 $189,811 $ 6,995 $433,017 Net investment income $122,475 $(2,675) 119,800 Other income $944 (556) 388 Intersegment revenue - required interest on net policy obligations 36,456 2,470 14,404 (53,330) 0 -------- -------- ------- ------- ---- ------- -------- Total revenue* $272,667 $192,281 $21,399 $69,145 $944 $(3,231) $553,205 ======== ======== ======= ======= ==== ======= ======== Measure of profitability: Underwriting income before other income and administrative expense $ 64,255 $ 35,881 $ 4,941 $105,077 Excess investment income $47,005 47,005 -------- -------- ------- ------- ---- ------- -------- Total measure of profitability $ 64,255 $ 35,881 $ 4,941 $47,005 $ 0 $ 0 $152,082 ======== ======== ======= ======= ==== ======= ========
Reconciliation of Measure of Profitability to Pretax Operating Income (Amounts in thousands) For the three months ended March 31, -------------------------- 1999 1998 -------- -------- Total measure of profitablity $162,691 $152,082 Administrative expense (26,532) (26,769) Parent expense (2,694) (3,394) Tax equivalent adjustment (2,756) (2,675) Other income adjustment 945 944 Goodwill amortization (3,018) (3,018) -------- -------- Operating income before taxes* $128,636 $117,170 ======== ======== - ------------ *excludes realized investment gains (losses) 7 Note C - Change in Accounting Principle Torchmark has in place a swap agreement with an unaffiliated party whereby Torchmark pays a variable dividend rate on its $200 million face amount outstanding Monthly Income Preferred Securities (MIPS) in exchange for payment of a 9.18% fixed dividend. Subsequent to the issuance of Torchmark's Quarterly Report on Form 10Q for the period ended March 31, 1999, Torchmark's management determined that it should change its method of accounting for this swap. Previously, Torchmark accounted for the swap using hedge accounting under Statement of Financial Accounting Standard No. 80, "Accounting for Futures Contracts ("SFAS 80")." In the second quarter of 1999, Torchmark changed its method of accounting for this swap agreement to recognize changes in its fair value, net of tax, as a component of net income, effective January 1, 1999. This method of accounting for such instruments is believed to be preferable under the guidance established by SFAS 80 and the Securities and Exchange Commission. The after-tax cumulative effect of this change amounted to $16.1 million at January 1, 1999. Future changes in the fair value of the swap will be accounted for as realized investment gains or losses. The effect of the change was to decrease first quarter 1999 restated income from continuing operations before the cumulative effect of the change in accounting principle by $3.0 million ($.02 per diluted share) and to increase first quarter 1999 restated net income by $13.1 million ($.10 per diluted share). As a result of the change in accounting principle, the financial statements as of and for the three months ended March 31, 1999 have been restated from amounts previously reported. A summary of the significant effects of the restatement are as follows:
As Previously Reported As Restated ------------- ------------ (Amounts in thousands except, per share data) At March 31, 1999: Other long-term investments (at fair value) $ 34,440 $ 54,548 Accrued income taxes 448,990 456,028 Retained earnings 1,778,550 1,791,620 For the three months ended March 31, 1999: Realized investment losses (2,477) (7,116) Income tax expense (44,028) (42,405) Income from continuing operations 83,364 80,348 Cumulative effect of a change in accounting principle, net of tax 0 16,086 Net income 83,364 96,434 Basic earnings per share: Net income from continuing operations 0.62 0.59 Cumulative effect of a change in accounting principle, net of tax 0.00 0.12 Net income 0.62 0.71 Diluted earnings per share: Net income from continuing operations 0.61 0.59 Cumulative effect of a change in accounting principle, net of tax 0.00 0.12 Net income 0.61 0.71
7A A summary of the pro forma effects for the three months ended March 31, 1999 and 1998 as if the change in accounting principle occurred prior to January 1, 1998 is as follows.
Three months ended March 31, 1999 March 31, 1998 ------------------ -------------- (Amounts in thousands, except per share data) Net income before cumulative effect of change in accounting principle $80,348 $92,990 Net income 80,348 92,990 Basic earnings per share: Net income before cumulative effect of change in accounting principle 0.59 0.66 Net income 0.59 0.66 Diluted earnings per share: Net income before cumulative effect of change in accounting principle 0.59 0.66 Net income 0.59 0.66
7B Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Cautionary statements. Torchmark cautions readers regarding certain forward-looking statements contained in the following discussion and elsewhere in this document, and in any other statements made by, or on behalf of Torchmark whether or not in future filings with the Securities and Exchange Commission. Any statement that is not a historical fact, or that might otherwise be considered an opinion or projection concerning Torchmark or its business, whether express or implied, is meant as and should be considered a forward- looking statement. Such statements represent management's opinions concerning future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond Torchmark's control. If these estimates or assumptions prove to be incorrect, the actual results of Torchmark may differ materially from the forward-looking statements made on the basis of such estimates or assumptions. Whether or not actual results differ materially from forward- looking statements may depend on numerous foreseeable and unforeseeable events or developments, which may be national in scope, related to the insurance industry generally, or applicable to Torchmark specifically. Such events or developments could include, but are not necessarily limited to: 1) Deteriorating general economic conditions leading to increased lapses and/or decreased sales of Torchmark's policies; 2) Regulatory developments, including changes in governmental regulations (particularly those impacting taxes and changes to the Federal Medicare program that would affect Medicare Supplement insurance); 3) Financial markets trends that adversely affect sales of Torchmark's market-sensitive products; 4) Interest rate changes that adversely affect product sales and/or investment portfolio yield; 5) Increased pricing competition; 6) Adverse litigation results; 7) Adverse Year 2000 compliance results; 8) Developments involving Vesta Insurance Group, Inc., ("Vesta"); 9) The inability of Torchmark to achieve the anticipated levels of administrative and operational efficiencies; 10) The customer response to new products and marketing initiatives; 11) Adverse levels of mortality, morbidity, and utilization of healthcare services relative to Torchmark's assumptions; and 12) The inability of Torchmark to obtain timely and appropriate premium rate increases. 8 Results of Operations Restatement: Subsequent to the issuance of Torchmark's Quarterly Report on Form 10Q for the period ended March 31, 1999, management determined that it should change its method of accounting for its swap agreement as explained in the Notes to the Financial Statements of this Form 10QA in Note C--Changes in Accounting Principle. This change in accounting principle had no effect on "net operating income from continuing operations" as defined below. Divestitures. In the analysis and comparison of Torchmark's operating results with the prior period, the divestitures of Waddell & Reed and Family Service in 1998 should be taken into account. Waddell & Reed, formerly a wholly- owned asset management subsidiary of Torchmark, completed an initial public offering in March, 1998 of approximately 36% of its shares. Offering proceeds to Torchmark were $481 million, net of amounts retained by Waddell & Reed. In November, 1998 Torchmark distributed to its shareholders the remaining 64% of the Waddell & Reed shares through a tax-free spin-off. As a result of this spin- off, Torchmark retained no further ownership interest in Waddell & Reed. The divestiture of Waddell & Reed was accounted for as the disposal of a segment. Therefore, Torchmark's share of the operating results of Waddell & Reed prior to its divestiture are included in discontinued operations of the disposed segment. Family Service is a preneed funeral insurer which was a wholly-owned subsidiary of Torchmark. It was sold on June 1, 1998 for $140 million in cash. Family Service's operations are included with Torchmark's until the date of sale. However, in the following discussion of operating segments, the insurance operating results of Family Service have been removed from Torchmark's ongoing insurance operations for comparability. Operating Results. Torchmark management computes a classification of income called "net operating income from continuing operations." Net operating income from continuing operations is the measure of income Torchmark's management focuses on to evaluate the performance of the operations of the company. It excludes unusual and nonrecurring income or loss items which distort operating trends. The following items were excluded from net income in order to compute net operating income from continuing operations: 1) Realized investment gains and losses and the related adjustment to deferred acquisition costs, net of tax; 2) The net income from the discontinued operations of Waddell & Reed; 3) Torchmark's pro rata share of the income or losses related to Vesta, and 4) Cumulative effect of a change in accounting principle, net of tax. 9 The following table presents earnings and earnings per share data for Torchmark. Earnings and Earnings Per Share (Dollar amounts in thousands, except for per share data) For the three months ended March 31, -------------------------- % 1999 1998 Change ------- ------- ------ Net operating income from continuing operations: Amount $84,974 $77,446 9.7 Per Share: Basic 0.63 0.55 14.5 Diluted 0.62 0.55 12.7 Net income: Amount 96,434 92,918 3.8 Per Share: Basic 0.71 0.66 7.6 Diluted 0.71 0.66 7.6 Operating revenues, or revenues excluding realized investment gains and losses, rose 4% to $575 million in the first quarter of 1999. Total premium increased 7% to $463 million and net investment income declined 7% to $111 million in the 1999 quarter. Torchmark's operating expense declined 5% to $29 million in 1999 in spite of the revenue growth. As a result, operating expense as a percentage of operating revenues decreased from 5.6% in 1998 to 5.1% in 1999. 10 The following table is a summary of Torchmark's net operating income from continuing operations by component. Net 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 MIPS. Summary of Net Operating Income from Continuing Operations (Dollar amounts in thousands)
Three months Ended March 31, Increase --------------------- ------------------ 1999 1998 Amount % -------- -------- -------- ---- Insurance underwriting income before other income and administrative expense: Life $ 66,965 $ 62,937 $ 4,028 6 Health 35,910 35,881 29 0 Annuity 5,236 4,878 358 7 -------- -------- -------- Total 108,111 103,696 4,415 4 Other income 945 944 1 0 Administrative expense (26,532) (26,170) (362) 1 -------- -------- -------- Insurance underwriting income excluding Family Service 82,524 78,470 4,054 5 Insurance underwriting income - Family Service 0 782 (782) (100) Excess investment income 54,580 47,005 7,575 16 Corporate expense (2,694) (3,394) 700 (21) Goodwill amortization (3,018) (3,018) 0 0 Tax equivalency adjustment (2,756) (2,675) (81) 3 -------- -------- -------- Pretax insurance net operating income 128,636 117,170 11,466 10 Income tax (43,662) (39,724) (3,938) 10 -------- -------- -------- Net operating income from continuing operations $ 84,974 $ 77,446 $ 7,528 10 ======== ======== Net operating income from continuing operations per diluted share $ 0.62 $ 0.55 13 ======== ========
A discussion of Torchmark's operations by segment follows. 11 Life insurance. Torchmark's life insurance premium income rose 7% to $251 million in the first three months of 1999. The following table presents Torchmark's life insurance premium and policy charges by distribution channel. Life Insurance Premium by Distribution Method (Dollar amounts in thousands)
Three months ended March 31, -------------------------------------------------------- 1999 1998 Increase ----------------------- ---------------------- -------------------- % of % of Amount Total Amount Total Amount % ------ ----- ------ ----- ------ --- Liberty National Exclusive Agency $ 70,849 28 $ 70,654 30 $ 195 0 Direct Response 61,146 24 53,377 23 7,769 15 American Income Exclusive Agency 52,891 21 49,889 21 3,002 6 Military Independent Agency 25,034 10 21,816 9 3,218 15 United Investors Agency 22,034 9 19,620 9 2,414 12 United American Independent Agency 9,288 4 9,365 4 (77) (1) United American Exclusive Agency 4,782 2 4,623 2 159 3 Other 5,317 2 5,301 2 16 0 -------- --- -------- --- ------- Total life premium excluding Family Service 251,341 100 234,645 100 16,696 7 Family Service 0 1,566 (1,566) -------- -------- ------- Total life premium including Family Service $251,341 $236,211 $15,130 6
12 Annualized life premium in force was $1.08 billion at March 31, 1999, rising 6% over $1.02 billion in force a year earlier. Life insurance sales, in terms of annualized premium issued, were $65 million in the 1999 three-month period, increasing 10% over 1998 same-period sales of $59 million. The following table presents Torchmark's life insurance sales and in force data by distribution method.
Life Insurance Annualized Premium Sales and In Force (Dollar amounts in thousands) Sales In Force --------------------------------------- ---------------------------------------- Three months Ended March 31, Increase At March 31, Increase ------------------- -------------- --------------------- --------------- 1999 1998 Amount % 1999 1998 Amount % ------- ------- -------- --- ------ ------ -------- --- Direct Response $27,057 $24,178 $2,879 12 $269,338 $242,330 $27,008 11 Liberty Exclusive Agency 12,565 10,439 2,126 20 299,057 298,184 873 0 AI Exclusive Agency 12,415 12,882 (467) (4) 218,931 206,245 12,686 6 Military Independent Agency 4,310 4,263 47 1 102,013 89,518 12,495 14 United Investors Agency 3,460 2,943 517 18 102,543 89,760 12,783 14 UA Independent Agency 2,727 2,157 570 26 41,066 41,752 (686) (2) UA Exclusive Agency 1,278 1,324 (46) (3) 21,316 20,888 428 2 Other Distribution 1,267 775 492 63 26,808 26,719 89 0 ------- ------- ------ ---------- ---------- ------- Total Life excluding Family Service 65,079 58,961 6,118 10 1,081,072 1,015,396 65,676 6 Family Service 0 0 0 0 0 5,813 (5,813) ------- ------- ------ ---------- ---------- ------- Total life including Family Service $65,079 $58,961 $6,118 10 $1,081,072 $1,021,209 $59,863 6
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 generated $27 million in annualized premium issued in the first quarter of 1999, compared with $24 million in the same period of 1998, an increase of 12%. Annualized premium in force for this distribution method rose 11% over the prior year to $269 million at March 31, 1999, and premium income grew 15% to $61 million in the 1999 first quarter. The $8 million growth in Direct Response premium income and the $27 million increase in annualized premium in force were the largest increases of any Torchmark distribution channel, respectively, in terms of dollar amount. In addition to sales and premium growth, the Direct Response operation provides support to other Torchmark marketing agencies by providing sales leads and agent recruiting, which has contributed indirectly to premium growth in those agencies. 13 The Liberty National Exclusive Agency distribution system represented the largest component of life premium at 28% or $71 million in the 1999 three-month period. Life insurance sales for this agency grew 20% to $13 million of annualized premium issued in the 1999 period. A primary factor in the growth in sales was the increase in the number of Liberty agents, which was 1,825 at March 31, 1999, compared with 1,773 a year earlier. Torchmark's Military Agency produced the greatest percentage increase in premium income at 15% to $25 million. It also recorded a 14% increase in annualized life premium in force which was $102 million at March 31, 1999. Military Agency sales rose 1% to $4.3 million in the 1999 period. This agency consists of former military officers who sell exclusively to military officers and their families. The American Income Agency focuses on members of labor unions, credit unions, and other associations. This agency produced premium income of $53 million in the 1999 quarter, an increase of 6%. While life sales were down 4% to $12 million for the period, annualized life premium in force rose 6% to $219 million at 1999 quarter end. The decline in sales is reflective of the decline in the number of agents which was 1,160 at March 31, 1999, down 218 from a year earlier. Management has begun restructuring the agency to focus on recruiting and retaining new agents. The United Investors Exclusive Agency had the largest percentage growth in annualized life premium in force for Torchmark life insurance operations at 14%. Annualized premium in force was $103 million at March 31, 1999. Annualized life premium issued rose 18% to $3.5 million. United Investors' products are marketed primarily through the Waddell & Reed sales force, as well as other Torchmark distribution channels. 14
Life Insurance Summary of Results (Dollar amounts in thousands) Three months ended March 31, --------------------------------------------- 1999 1998 Increase ----------------- -------------------- ----------------- % to % to Amount Total Amount Total Amount % ------ ----- ------ ----- ------ --- Premium and policy charges $251,341 100 $234,645 100 $16,696 7 Net policy obligations 107,188 42 97,999 42 9,189 9 Commissions and acquisition expense 77,188 31 73,709 31 3,479 5 -------- -------- ------ Insurance underwriting income before other income and administrative expenses, excluding Family Service $66,965 27 $62,937 27 $ 4,028 6 Family Service insurance underwriting income before other income and administrative expense 0 1,318 (1,318) -------- -------- ------ Insurance underwriting income before other income and administrative expense $66,965 $64,255 $ 2,710
Life insurance underwriting income before administrative expenses excluding Family Service was $67 million in the first three months of 1999, growing 6% over the same period in 1998. As a percentage of premium, underwriting income was 27% in both periods. 15 Health insurance. Health insurance premium income rose 7% from $190 million in the first quarter of 1998 to $203 million in the same period of 1999. The table below is an analysis of Torchmark's health premium by distribution method.
Health Insurance Premium by Distribution Method (Dollar amounts in thousands) Three months ended March 31, ------------------------------------------------------- 1999 1998 Increase ------------------------- ------------------------ -------------------- % to % to Amount Total Amount Total Amount % ------ ----- ------ ----- ------ --- United American Independent Agency $108,488 54 $107,224 56 $1,264 1 United American Exclusive Agency 44,755 22 35,242 19 9,513 27 Liberty National Exclusive Agency 35,293 17 33,649 18 1,644 5 American Income Exclusive Agency 11,600 6 11,437 6 163 1 Direct Response 2,906 1 2,259 1 647 29 -------- --- -------- --- ------- Total Premium $203,042 100 $189,811 100 $13,231 7
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) Sales In Force -------------------------------------- ----------------------------------------- Three months Ended March 31, Increase At March 31, Increase --------------- --------------- ------------------ --------------- 1999 1998 Amount % 1999 1998 Amount % ---- ---- ------ --- ---- ---- ------ --- UA Exclusive Agency $23,629 $12,733 $10,896 86 $188,520 $148,097 $40,423 27 UA Independent Agency 16,056 11,631 4,425 38 432,597 433,963 (1,366) 0 Liberty Exclusive Agency 2,492 2,618 (126) (5) 143,110 136,447 6,663 5 AI Exclusive Agency 1,835 2,295 (460) (20) 44,235 43,739 496 1 Direct Response 1,703 1,871 (168) (9) 11,499 9,063 2,436 27 ------- ------- ------- -------- -------- ------- Total Premium $45,715 $31,148 $14,567 47 $819,961 $771,309 $48,652 6
16 Annualized health insurance premium in force grew 6% to $820 million at March 31, 1999. Sales of health insurance, as measured by annualized premium issued, grew 47% to $46 million in the 1999 quarter. Medicare Supplement sales rose 70% in the 1999 period to $37 million, accounting for all of the growth in Torchmark's total health sales of $15 million. Medicare Supplement products are sold by Torchmark's United American Independent and Exclusive Agencies. Both of these agencies have experienced growth in agency size over the prior year. An additional factor in the increased Medicare Supplement sales was the support obtained from Torchmark's Direct Response operation in providing these agencies with leads and assistance in agent recruiting. Annualized Medicare Supplement premium in force was $578 million at March 31, 1999, rising 8% from a year earlier. Medicare Supplement represented 70% of total health premium in force at the end of the 1999 quarter, compared with 69% at the same date a year earlier. Cancer sales, produced primarily by the Liberty National Agency, were $2.5 million in the 1999 quarter, increasing 4% from the prior year quarter. Cancer annualized premium in force rose 6% to $145 million, primarily as a result of premium rate increases. Other health product sales declined 11% to $6.1 million in the 1999 period. The following table presents underwriting margin data for health insurance. Health Insurance Summary of Results (Dollar amounts in thousands)
Three months ended March 31, ----------------------------------------------------- 1999 1998 Increase -------------------- --------------------- --------------- % of % of Amount Total Amount Total Amount % ------ ----- ------ ----- ------ --- Premium and policy charges $203,042 100 $189,811 100 $13,231 7 Net policy obligations 127,136 62 114,573 60 12,563 11 Commissions and acquisition expense 39,996 20 39,357 21 639 2 -------- -------- ------- Insurance underwriting income before other income and administrative expenses $ 35,910 18 $ 35,881 19 $ 29 0
Underwriting margins for health insurance, or underwriting income as a percentage of premium, declined from 19% in the first quarter of 1998 to 18% in the same period of 1999 as a result of a 2% increase in policy obligation ratios due primarily to an increasing 17 loss ratio on a block of Liberty National's cancer insurance. Premium rate increases are being sought to offset these cost increases. A major rate increase went into effect in May, 1999. Requests for additional increases in future periods are possible to address the decline in margins. In Torchmark's Medicare Supplement business, underwriting income as a percentage of premium is restrained by Federally mandated loss ratios and market competition. Annuities. The following table presents collection and balance information about Torchmark's annuities, excluding Family Service. Annuities Collections and Deposit Balances (Dollar amounts in thousands)
Collections Deposit Balances ------------------------------------------- ----------------------------------------- Three Months Ended March 31, Increase At March 31, Increase ---------------------- --------------- ----------------------- ---------------- 1999 1998 Amount % 1999 1998 Amount % ------- ------- ------- --- ---------- ---------- --------- --- Fixed $11,115 $15,007 $(3,892) (26) $ 646,652 $ 859,942 $(213,290) (25) Variable 81,500 47,027 34,473 73 2,438,105 2,041,769 396,336 19 ------- ------- ------- ---------- ---------- --------- Total $92,615 $62,034 $30,581 49 $3,084,757 $2,901,711 $ 183,046 6
Annuities are sold on both a fixed and a variable basis. Fixed annuity collections were $11 million in the first three months of 1999, compared with $15 million collected in the prior period, a decline of 26%. Collections of variable annuities were over $81 million in the 1999 period, increasing 73% from variable collections of $47 million in the first quarter of 1998. Fixed annuities on deposit with Torchmark declined 25% to $647 million. The variable annuity balance on deposit rose 19% during the past twelve months. This balance was $2.4 billion at March 31, 1999, $2.3 billion at December 31, 1998, and $2.0 billion a year ago. The low interest environment which has resulted in strong financial markets in recent months has had a positive impact on the variable account balance and has been a major factor in increased variable annuity sales. On the other hand, as variable annuities and alternative investments have become more attractive, the fixed-annuity market has become more difficult. 18 The following table presents underwriting margin data for Torchmark's annuities.
Annuities Summary of Results (Dollar amounts in thousands) Three months Ended March 31, Increase ------------------------ -------------------------- 1999 1998 Amount % ------ ------ ------------- ---------- Policy charges $ 8,381 $ 6,777 $1,604 24 Net policy obligations (1,097) (1,945) 848 (44) Commissions and acquisition expense 4,242 3,844 398 10 ------- ------- ------ --- Insurance underwriting income before other income and administrative expenses, excluding Family Service 5,236 4,878 358 7 Family Service 0 63 (63) ------- ------- ------ Insurance underwriting income before other income and administrative expense $5,236 $4,941 $295
Policy charges for annuities for the 1999 quarter were $8.4 million, compared with $6.8 million for the 1998 period, an increase of 24%. Policy charges are assessed against the annuity account balance periodically for insurance risk, sales, administration, and cash surrender. The increase in policy charges resulted from the growth in variable annuities over the prior- year period. Annuity underwriting income excluding Family Service improved 7% from $4.9 million in the 1998 period to $5.2 million in 1999. 19 Investment. The following table summarizes Torchmark's insurance companies' investment income and excess investment income.
Insurance Operations Excess Investment Income (Dollars in thousands) Three months Ended March 31, Increase ----------------------- ------------- 1999 1998 Amount % -------- -------- ------- --- Net investment income $111,396 $119,800 $(8,404) (7) Tax equivalency adjustment 2,756 2,675 81 3 -------- -------- ------- -- Tax equivalent investment income 114,152 122,475 (8,323) (7) Required interest on net insurance policy liabilities (43,474) (53,330) 9,856 (18) Financing costs (16,098) (22,140) 6,042 (27) -------- -------- ------- -- Excess investment income $ 54,580 $ 47,005 $ 7,575 16
On a tax equivalent basis, net investment income from insurance operations was $114 million in the first quarter of 1999, declining 7% from $122 million during the same 1998 period. The 1998 amount includes $7 million in the first quarter on internal financing with Waddell & Reed related to the March, 1998 initial public offering. Also, 1998 investment income included $14 million attributable to Family Service on a tax-equivalent basis. 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 1999 first quarter rose 16% to $55 million from $47 million a year earlier. The increase resulted primarily from the reduction in Torchmark's borrowing cost due to the replacement of $360 million in long-term debt with short-term debt in the second quarter of 1998. Excess investment income also benefited from the increase in invested assets relative to net policy liabilities and a reduction in total debt. During the first quarter, Torchmark continued its program of acquiring primarily investment grade fixed maturity bonds. Purchases totaled $331 million, and had an average yield of 7.21%, equivalent to an effective compounded yield of 7.33%. For the first quarter of 1998, purchases, excluding Family Service, totaled $532 million with average and effective compounded yields of 7.24% and 7.38%, respectively. The fixed maturity 20 portfolio average yield was 7.40% during the first quarter, compared with 7.42% for the year 1998 and 7.47% for the year-ago quarter. At quarter end, the portfolio had an estimated average life of 10.3 years and an effective duration of 5.7 years. With the first quarter of 1999 increase in interest rates, the unrealized gain in the fixed-maturity portfolio decreased from $249 million at 1998 year end to $117 million at the end of March, 1999. The unrealized gain at the March, 1998 quarter end was $218 million. Volatility in carrying values should be expected as the maturity of the portfolio is lengthened and as interest rates fluctuate. The portfolio overall quality, however, remained high at an average quality rating of A and with less than 6% of holdings rated below investment grade. Financial Condition Liquidity. Torchmark's liquidity is represented by its positive cash flow, marketable investments, and the availability of a line of credit facility. Torchmark's insurance operations typically generate cash flows in excess of immediate requirements. Torchmark's net cash inflows from operations were $122 million in the first quarter of 1999, compared with $116 million in the same period of 1998, an increase of 5%. In addition to cash flows from operations, Torchmark received $102 million in investment maturities or repayments during the first quarter of 1999. Torchmark's cash and short-term investments were $45 million at the end of March, 1999, compared with $81 million of these assets at December 31, 1998. In addition to these liquid assets, Torchmark's entire portfolio of fixed-income and equity securities, in the approximate amount of $5.8 billion at market value on March 31, 1999, 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 March 31, 1999. At that date, Torchmark had commercial paper outstanding in the face amount of $415 million and no borrowings on the line of credit. At December 31, 1998, $357 million face amount of commercial paper was outstanding. Capital resources. Torchmark's total debt outstanding was $790 million at March 31, 1999, compared with $739 million at December 31, 1998 and $829 million at March 31, 1998. Long-term debt was $377 million at March 31, 1999, decreasing from $383 million at December 31, 1998 and from $394 million at March 31, 1998. During the first quarter 21 of 1999, Torchmark acquired $4.0 million of its 7 3/8% notes due 2013 in the open market at a cost of $4.1 million and acquired $2.5 million of its 7 7/8% notes due 2023 in the market at a cost of $2.6 million. It also acquired $11 million of its 7 7/8% notes late in 1998. Debt as a percentage of total capitalization was 26% at March 31, 1999, 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 24% at year-end 1998 and 25% at March 31, 1998. Interest coverage was 11.3 times for the 1999 quarter, compared with 7.4 times for the prior-year quarter, increasing due to the debt paydowns. Torchmark continued to acquire its shares on the open market during the first quarter of 1999. Purchases of 3.4 million shares were made at a cost of $111 million during the quarter. Share purchases were primarily funded by the sale of investments but borrowings on the line of credit were also made. Torchmark intends to make additional purchases under its share repurchase program on the open market when prices are attractive. Torchmark's shareholders' equity was $2.15 billion at March 31, 1999, compared with $2.26 billion at 1998 year end and $2.44 billion one year ago. Book value per share was $16.09 at March 31, 1999, compared with $16.51 at year- end 1998 and $17.39 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 $2.08 billion at March 31, 1999, compared with $2.11 billion at 1998 year end and $2.31 billion a year ago. On a per share basis, book value was $15.57 at the end of March, 1999, compared with $15.43 at year-end 1998 and $16.47 at March 31, 1998. The primary factor in the decline in adjusted shareholder equity for the 1999 quarter was the purchases of Torchmark shares. The decline in adjusted equity from a year earlier was impacted by the spin-off of Waddell & Reed, which accounted for a net reduction in equity of $174 million. The annualized return on common equity, excluding the effects of securities at market value, realized investment gains and losses, discontinued operations, and the earnings of Vesta, was 16.2% for the 1999 quarter. Return on equity for the same 1998 period was 14.6%. This increase was primarily a result of the share purchases. Vesta Insurance Group. Since 1993, Torchmark has held a passive investment in Vesta until December, 1998. This investment amounted to approximately 28% of the outstanding shares of Vesta. In December, 1998, Torchmark sold 680 thousand shares of Vesta, retaining 4.45 million Vesta shares or approximately 24% of the company at December 31, 1998 and March 31, 1999. During the first quarter of 1999, the two Torchmark directors who occupied seats on the Vesta Board of Directors resigned from those seats on the Vesta Board. It is Torchmark's intent to divest itself of Vesta and continue to sell Vesta shares under satisfactory terms. 22 Because of Torchmark's desire to reduce its investment in Vesta, the vacating of the board seats, and the absence of significant influence regarding Vesta, Torchmark has discontinued the equity method of accounting for its investment in Vesta and has included Vesta in equity securities on its March 31, 1999 balance sheet. Torchmark carried Vesta at a market value of $23 million at March 31, 1999. Vesta was carried at a value of $32 million at December 31, 1998. Year 2000 Compliance. As of May 1, 1999, Torchmark was on schedule to complete its corporate-wide Year 2000 compliance requirements. Business-critical testing has been completed. All non-critical computer software testing is scheduled to be completed during the third quarter of 1999. In addition, Torchmark is in the process of completing all of the verification and interface testing of its business-critical Year 2000 third-party interrelationships. Torchmark has also completed addressing its non-information technology Year 2000 concerns, which included correcting and replacing various systems. It is also finalizing its Year 2000 testing of its vendor supported computer software. Torchmark has used primarily its own employees to meet its Year 2000 project completion requirements. Through the end of first quarter 1999, Torchmark had spent approximately $5.5 million on its Year 2000 project, including Torchmark's internal computer hardware and software processing costs, internally-provided programming costs, the use of outside computer software contractors, the cost of testing its application software modifications, and all computer hardware and software replacement costs. These project costs have been expensed as they have been incurred. Total cost of the project is expected to be approximately $6 million at the time it is completed. Torchmark is establishing viable Year 2000 contingency plans for all business-critical areas. Management is currently in the process of developing and documenting Year 2000 contingency procedures throughout the corporation for its business-critical computer systems. Contingency procedures relating to critical third-party organizations have been completed. The contingency plans include possible manual operations, the use of outside staff, the redeployment of internal staff, and the implementation of alternative information processing procedures. 23 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: July 20, 1999 /s/ C. B. Hudson ------------------------------- C. B. Hudson, Chairman of the Board, President, and Chief Executive Officer Date: July 20, 1999 /s/ Gary L. Coleman ------------------------------- Gary L. Coleman, Vice President And Chief Accounting Officer 28 EX-11 2 COMPUTATION OF EARNINGS PER SHARE Exhibit 11. Statement re computation of per share earnings. TORCHMARK CORPORATION COMPUTATION OF EARNINGS PER SHARE Three months ended March 31, 1999 1998 ------------- ----------- AS RESTATED SEE NOTE C Net income from continuing operations $ 80,348,000 $ 78,152,000 Discontinued operations of Waddell & Reed: Net income from operations 0 14,766,000 ------------ ------------ Net income before cumulative effect of change in accounting principle 80,348,000 92,918,000 Cumulative effect of change in accounting principle 16,084,000 0 ------------ ------------ Net income $ 96,434,000 $ 92,918,000 ============ ============ Basic weighted average shares and common stock equivalents outstandin 135,226,921 140,204,774 Diluted weighted average shares and common stock equivalents outstandin 136,135,425 141,697,167 Net income from continuing operations $ 0.59 $ 0.56 Discontinued operations of Waddell & Reed: Net income from operations 0.00 0.10 ------------ ------------ Net income before cumulative effect of change in accounting principle 0.59 0.66 Cumulative effect of change in accounting principle 0.12 0.00 ------------ ------------ Net income $ 0.71 $ 0.66 ============ ============ Net income from continuing operations $ 0.59 $ 0.55 Discontinued operations of Waddell & Reed: Net income from operations 0.00 0.11 ------------ ------------ Net income before cumulative effect of change in accounting principle 0.59 0.66 Cumulative effect of change in accounting principle 0.12 0.00 ----------- ----------- Net income $ 0.71 $ 0.66 =========== =========== 1 EX-27 3 FINANCIAL DATA SCHEDULE
7 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 5,720,078 0 0 31,428 124,841 164,477 6,366,459 8,415 0 1,724,482 11,330,004 4,655,033 87,456 202,685 81,711 789,689 193,275 0 147,801 2,000,143 11,330,004 462,764 111,396 (7,116) 466 303,446 59,570 79,452 125,042 42,405 80,348 0 0 16,086 96,434 .71 .71 0 0 0 0 0 0 0
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