Business Segments (Tables)

3 Months Ended

Mar. 31, 2013

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.


	Three months ended
	March 31,
	2013			2012
Benefit costs deferred	$	28,304		$	31,614
Government risk-sharing premium adjustment		(15,624	)		(11,787	)

Pre-tax addition to segment interim period income	$	12,680		$	19,827

After tax amount	$	8,242		$	12,888

Reconciliation of Segment Operating Information to 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 three months ended March 31, 2013
	Life			Health			Annuity			Investment			Other & Corporate			Adjustments			Consolidated
Revenue:
Premium	$	470,813		$	298,247		$	130								$	15,624	⁽¹⁾	$	784,814
Net investment income										$	183,040						(6,201	)⁽⁴⁾		176,839
Other income													$	544			(74	)⁽³⁾		470

Total revenue		470,813			298,247			130			183,040			544			9,349			962,123
Expenses:
Policy benefits		305,141			207,823			10,735									28,304	⁽¹⁾		552,003
Required interest on:
Policy reserves		(125,016	)		(14,540	)		(14,459	)		154,015									0
Deferred acquisition costs		41,191			5,764			488			(47,443	)								0
Amortization of acquisition costs		81,099			18,237			2,378												101,714
Commissions, premium taxes, and non-deferred acquisition costs		35,288			23,021			16									(74	)⁽³⁾		58,251
Insurance administrative expense ⁽²⁾														43,935						43,935
Parent expense														2,120						2,120
Stock compensation expense														6,253						6,253
Interest expense											20,877									20,877

Total expenses		337,703			240,305			(842	)		127,449			52,308			28,230			785,153

Subtotal		133,110			57,942			972			55,591			(51,764	)		(18,881	)		176,970
Nonoperating items																	12,680	⁽¹⁾		12,680
Amortization of low-income housing																	6,201	⁽⁴⁾		6,201

Measure of segment profitability (pretax)	$	133,110		$	57,942		$	972		$	55,591		$	(51,764	)	$	0			195,851

Deduct applicable income taxes																				(64,209	)

Segment profits after tax																				131,642


Add back income taxes applicable to segment profitability		64,209
Add (deduct) realized investment gains (losses)		(3,907	)
Deduct Part D adjustment ⁽¹⁾		(12,680	)
Deduct amortization of low-income housing ⁽⁴⁾		(6,201	)

Pretax income from continuing operations per Consolidated Statement of Operations	$	173,063

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

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

(3)	Elimination of intersegment commission.

(4)	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 three months ended March 31, 2012
	Life			Health			Annuity			Investment			Other & Corporate			Adjustments			Consolidated
Revenue:
Premium	$	451,878		$	254,657		$	153								$	11,787	⁽¹⁾	$	718,475
Net investment income										$	179,648						(5,527	)^(2,5)		174,121
Other income													$	409			(88	)⁽⁴⁾		321

Total revenue		451,878			254,657			153			179,648			409			6,172			892,917
Expenses:
Policy benefits		290,688			179,478			10,867									31,614	⁽¹⁾		512,647
Required interest on:
Policy reserves		(118,413	)		(9,288	)		(14,692	)		142,393									0
Deferred acquisition costs		40,823			4,624			596			(46,043	)								0
Amortization of acquisition costs		77,684			16,324			2,490												96,498
Commissions, premium taxes, and non-deferred acquisition costs		34,961			15,863			20									(88	)⁽⁴⁾		50,756
Insurance administrative expense ⁽³⁾														40,570						40,570
Parent expense														1,921						1,921
Stock compensation expense														5,625						5,625
Interest expense											19,605						66	⁽²⁾		19,671

Total expenses		325,743			207,001			(719	)		115,955			48,116			31,592			727,688

Subtotal		126,135			47,656			872			63,693			(47,707	)		(25,420	)		165,229
Nonoperating items																	19,827	⁽¹⁾		19,827
Amortization of low-income housing																	5,593	⁽⁵⁾		5,593

Measure of segment profitability (pretax)	$	126,135		$	47,656		$	872		$	63,693		$	(47,707	)	$	0			190,649

Deduct applicable income taxes																				(62,338	)

Segment profits after tax																				128,311


Add back income taxes applicable to segment profitability		62,338
Add (deduct) realized investment gains (losses)		5,006
Deduct Part D adjustment ⁽¹⁾		(19,827	)
Deduct amortization of low-income housing ⁽⁵⁾		(5,593	)

Pretax income from continuing operations per Consolidated Statement of Operations	$	170,235

(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.

Analysis 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)


	Three months ended March 31,						Increase (Decrease)
	2013			2012			Amount			%
Life insurance	$	133,110		$	126,135		$	6,975			6
Health insurance		57,942			47,656			10,286			22
Annuity		972			872			100
Investment		55,591			63,693			(8,102	)		(13	)
Other:
Other income		544			409			135			33
Administrative expense		(43,935	)		(40,570	)		(3,365	)		8
Corporate and adjustments		(8,373	)		(7,546	)		(827	)		11

Pretax total		195,851			190,649			5,202			3
Applicable taxes		(64,209	)		(62,338	)		(1,871	)		3

Total		131,642			128,311			3,331			3
Reconciling items, net of tax:
Realized gains (losses) - Investments		(3,768	)		3,254			(7,022	)
Part D adjustment		(8,242	)		(12,888	)		4,646

Net income	$	119,632		$	118,677		$	955			1

- Definition

Tabular disclosure of all significant reconciling items in the reconciliation of total profit or loss from reportable segments, to the entity's consolidated income before income taxes, extraordinary items, and discontinued operations.

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