Business Segments (Tables)

6 Months Ended

Jun. 30, 2012

Schedule Of Adjustments For Difference In Interim Medicare Part D Results For Segment Purposes And Gaap Table

An analysis of the adjustments for the difference in the interim results as presented for segment purposes and GAAP for Medicare Part D is as follows:


	Six Months Ended
	June 30,
	2012			2011
Benefit costs deferred	$	32,640		$	17,903
Government risk-sharing premium adjustment		(11,274	)		(12,248	)

Pre-tax addition to segment interim period income	$	21,366		$	5,655

After tax amount	$	13,888		$	3,676

Reconciliation of Segment Operating Information to the Consolidated Statement of Operations

The following tables total the components of Torchmark’s operating segments and reconcile these operating results to its pretax income and each significant line item in its Consolidated Statements of Operations.

Reconciliation of Segment Operating Information to the Consolidated Statement of Operations


	For the six months ended June 30, 2012
	Life			Health			Annuity			Investment			Other & Corporate			Adjustments			Consolidated
Revenue:
Premium	$	902,828		$	509,676		$	279								$	11,274	⁽¹⁾	$	1,424,057
Net investment income										$	360,329						(11,032	)^(2,5)		349,297
Other income													$	865			(168	)⁽⁴⁾		697

Total revenue		902,828			509,676			279			360,329			865			74			1,774,051

Expenses:
Policy benefits		583,472			359,489			21,853									32,640	⁽¹⁾		997,454
Required interest on:
Policy reserves		(238,656	)		(18,700	)		(29,766	)		287,122									0
Deferred acquisition costs		81,814			9,196			1,177			(92,187	)								0
Amortization of acquisition costs		155,649			32,243			5,207												193,099
Commissions, premium taxes, and non-deferred acquisition costs		70,254			31,234			36									(168	)⁽⁴⁾		101,356
Insurance administrative expense ⁽³⁾														80,427						80,427
Parent expense														4,210						4,210
Stock compensation expense														11,237						11,237
Interest expense											39,188						132	⁽²⁾		39,320

Total expenses		652,533			413,462			(1,493	)		234,123			95,874			32,604			1,427,103

Subtotal		250,295			96,214			1,772			126,206			(95,009	)		(32,530	)		346,948
Nonoperating items																	21,366	⁽¹⁾		21,366
Amortization of low-income housing																	11,164	⁽⁵⁾		11,164

Measure of segment profitability (pretax)	$	250,295		$	96,214		$	1,772		$	126,206		$	(95,009	)	$	0			379,478

Deduct applicable income taxes																				(124,209	)

Segment profits after tax																				255,269
Add back income taxes applicable to segment profitability																				124,209
Add (deduct) realized investment gains (losses)																				9,667
Deduct Part D adjustment ⁽¹⁾																				(21,366	)
Deduct amortization of low-income housing ⁽⁵⁾																				(11,164	)

Pretax income from continuing operations per Consolidated Statement of Operations																			$	356,615

(1)	Medicare Part D items adjusted to GAAP from the segment analysis, which matches expected benefits with policy premium.

(2)	Reclassification of interest amount due to accounting rule requiring deconsolidation of Trust Preferred Securities. Management views the Trust Preferreds as consolidated debt.

(3)	Administrative expense is not allocated to insurance segments.

(4)	Elimination of intersegment commission.

(5)	Amortization of low-income housing expense, considered a component of income tax expense in the segment analysis.

Reconciliation of Segment Operating Information to the Consolidated Statement of Operations*


	For the six months ended June 30, 2011
	Life			Health			Annuity			Investment			Other & Corporate			Adjustments			Consolidated
Revenue:
Premium	$	864,230		$	475,475		$	298								$	12,248	⁽¹⁾	$	1,352,251
Net investment income										$	352,060						(7,309	)^(2.5)		344,751
Other income													$	1,240			(185	)⁽⁴⁾		1,055

Total revenue		864,230			475,475			298			352,060			1,240			4,754			1,698,057
Expenses:
Policy benefits		556,186			323,790			20,942									17,903	⁽¹⁾		918,821
Required interest on:
Policy reserves		(226,155	)		(18,245	)		(27,705	)		272,105									0
Deferred acquisitions costs		79,152			9,565			1,339			(90,056	)								0
Amortization of acquisition costs		148,004			31,601			4,522												184,127
Commissions, premium taxes, and non-deferred acquisition costs		78,901			32,767			34									(185	)⁽⁴⁾		111,517
Insurance administrative expense ⁽³⁾														77,909			6,979	^(6.7)		84,888
Parent expense														4,811						4,811
Stock compensation expense														7,002						7,002
Interest expense											38,739						132	⁽²⁾		38,871

Total expenses		636,088			379,478			(868	)		220,788			89,722			24,829			1,350,037

Subtotal		228,142			95,997			1,166			131,272			(88,482	)		(20,075	)		348,020
Nonoperating items																	12,634	^(1,6,7)		12,634
Amortization of low-income housing																	7,441	⁽⁵⁾		7,441

Measure of segment profitability (pretax)	$	228,142		$	95,997		$	1,166		$	131,272		$	(88,482	)	$	0			368,095

Deduct applicable income taxes																				(121,919	)

Segment profits after tax																				246,176


Add back income taxes applicable to segment profitability		121,919
Add (deduct) realized investment gains (losses)		8,549
Deduct Part D adjustment ⁽¹⁾		(5,655	)
Deduct amortization of low-income housing ⁽⁵⁾		(7,441	)
Deduct estimated state administrative settlement expense ⁽⁶⁾		(6,000	)
Deduct loss on sale of equipment ⁽⁷⁾		(979	)

Pretax income from continuing operations per Consolidated Statement of Operations	$	356,569

(1)	Medicare Part D items adjusted to GAAP from the segment analysis, which matches expected benefits with policy premium.

(2)	Reclassification of interest amount due to accounting rule requiring deconsolidation of Trust Preferred Securities. Management views the Trust Preferreds as consolidated debt.

(3)	Administrative expense is not allocated to insurance segments.

(4)	Elimination of intersegment commission.

(5)	Amortization of low-income housing expense, considered a component of income tax expense in the segment analysis.

(6)	Estimated state administrative settlement expense.

(7)	Loss on sale of equipment.

*	The 2011 balances have been retroactively adjusted to give effect to the adoption of new accounting guidance as described in Note F—Adoption of New Accounting Standard.

Summary Of Profitability By Segment

The following table summarizes the measures of segment profitability for comparison. It also reconciles segment profits to net income.

Analysis of Profitability by Segment

(Dollar amounts in thousands)


	Six months ended June 30,						Increase (Decrease)
	2012			2011*			Amount			%
Life insurance	$	250,295		$	228,142			22,153			10
Health insurance		96,214			95,997			217
Annuity		1,772			1,166			606
Investment		126,206			131,272			(5,066	)		(4	)
Other:
Other income		865			1,240			(375	)		(30	)
Administrative expense		(80,427	)		(77,909	)		(2,518	)		3
Corporate and adjustments		(15,447	)		(11,813	)		(3,634	)		31

Pretax total		379,478			368,095			11,383			3
Applicable taxes		(124,209	)		(121,919	)		(2,290	)		2

Total		255,269			246,176			9,093			4
Reconciling items, net of tax:
Realized gains (losses)–Investments		6,284			5,557			727
Loss on disposal of discontinued operations		0			(599	)		599
Part D adjustment		(13,888	)		(3,676	)		(10,212	)
Estimated state administrative settlement		0			(3,900	)		3,900
Loss on sale of equipment		0			(636	)		636

Net income	$	247,665		$	242,922		$	4,743			2

*	The 2011 balances have been retroactively adjusted to give effect to the adoption of new accounting guidance as described in Note F—Adoption of New Accounting Standard.