Note D—Investments

Portfolio Composition:

A summary of fixed maturities and equity securities available for sale by cost or amortized cost and estimated fair value at June 30, 2013 is as follows.

Portfolio Composition as of June 30, 2013


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		% of Total Fixed Maturities*
Fixed maturities available for sale:
Bonds:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	446,825	$	481	$	(42,735	)	$	404,571		3	%
States, municipalities, and political subdivisions		1,272,586		113,140		(6,505	)		1,379,221		11
Foreign governments		32,123		588		(76	)		32,635		0
Corporates		9,786,976		820,146		(242,876	)		10,364,246		81
Collateralized debt obligations		66,822		0		(14,605	)		52,217		0
Other asset-backed securities		37,108		2,741		(145	)		39,704		0
Redeemable preferred stocks		568,499		36,160		(14,686	)		589,973		5

Total fixed maturities		12,210,939		973,256		(321,628	)		12,862,567		100	%

Equity securities		875		712		0			1,587

Total fixed maturities and equity securities	$	12,211,814	$	973,968	$	(321,628	)	$	12,864,154

*	At fair value

A schedule of fixed maturities by contractual maturity date at June 30, 2013 is shown below on an amortized cost basis and on a fair value basis. Actual maturity dates could differ from contractual maturities due to call or prepayment provisions.


	Amortized Cost		Fair Value
Fixed maturities available for sale:
Due in one year or less	$	106,388	$	108,421
Due from one to five years		502,441		546,550
Due from five to ten years		881,514		953,025
Due from ten to twenty years		2,849,127		3,123,815
Due after twenty years		7,763,876		8,034,791
Mortgage-backed and asset-backed securities		107,593		95,965

	$	12,210,939	$	12,862,567

Selected information about sales of fixed maturities is as follows.


For the six months ended June 30,
	2013			2012
Proceeds from sales	$	75,096		$	133,079
Gross realized gains		4,302			8,862
Gross realized losses		(776	)		(240	)

Fair Value Measurements:

The following table represents assets measured at fair value on a recurring basis.

Fair Value Measurements at June 30, 2013 Using:


Description	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Fixed maturities available for sale:
Bonds:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	0		$	404,571		$	0		$	404,571
States, municipalities, and political subdivisions		230			1,378,991			0			1,379,221
Foreign governments		0			32,635			0			32,635
Corporates		25,392			10,183,680			155,174			10,364,246
Collateralized debt obligations		0			0			52,217			52,217
Other asset-backed securities		0			39,704			0			39,704
Redeemable preferred stocks		23,106			566,867			0			589,973

Total fixed maturities		48,728			12,606,448			207,391			12,862,567
Equity securities		811			0			776			1,587

Total fixed maturities and equity securities	$	49,539		$	12,606,448		$	208,167		$	12,864,154

Percent of total		0.4	%		98.0	%		1.6	%		100.0	%

As of June 30, 2013, fair value measurements classified as Level 3 represented 1.6% of total fixed maturities and equity securities, compared with 2.1% at December 31, 2012. The decrease in Level 3 investments since December 31, 2012 was due primarily to the reclassification of $82 million private placement corporate bonds as Level 2. The private placement corporate bonds were reclassified to Level 2 due to the availability of values for these securities from independent sources that were closely correlated with values obtained from third-parties and indicated the use of observable inputs in valuation models.

Other-Than-Temporary Impairments:

During the six months ended June 30, 2013, Torchmark wrote down investment real estate in the amount of $2.7 million pre-tax ($1.7 million after tax) because of other-than-temporary impairment. There were no other-than-temporary impairments during the six-month period ended June 30, 2012.

Unrealized Loss Analysis:

The following table discloses unrealized investment losses by class of investment at June 30, 2013. Torchmark considers these investments not to be other-than-temporarily impaired.

Analysis of Gross Unrealized Investment Losses

At June 30, 2013


	Less than Twelve Months					Twelve Months or Longer					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Fixed maturities available for sale:
Bonds:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	386,314	$	(42,733	)	$	142	$	(2	)	$	386,456	$	(42,735	)
States, municipalities and political subdivisions		115,983		(6,505	)		0		0			115,983		(6,505	)
Foreign governments		10,990		(76	)		0		0			10,990		(76	)
Corporates		2,522,092		(210,522	)		208,888		(32,354	)		2,730,980		(242,876	)
Collateralized debt obligations		0		0			52,092		(14,605	)		52,092		(14,605	)
Other asset-backed securities		6,921		(79	)		4,854		(66	)		11,775		(145	)
Redeemable preferred stocks		99,902		(3,083	)		72,837		(11,603	)		172,739		(14,686	)

Total fixed maturities		3,142,202		(262,998	)		338,813		(58,630	)		3,481,015		(321,628	)
Equity securities		0		0			0		0			0		0

Total fixed maturities and equity securities	$	3,142,202	$	(262,998	)	$	338,813	$	(58,630	)	$	3,481,015	$	(321,628	)

Additional information about investments in an unrealized loss position is as follows.


	Less than Twelve Months		Twelve Months or Longer		Total
Number of issues (Cusip numbers) held:
As of June 30, 2013		447		68		515
As of December 31, 2012		195		95		290

Torchmark’s entire fixed-maturity and equity portfolio consisted of 1,628 issues at June 30, 2013 and 1,630 issues at December 31, 2012. The weighted average quality rating of all unrealized loss positions as of June 30, 2013 was BBB+. Even though Torchmark’s fixed-maturity investments are available for sale, Torchmark’s management generally does not intend to sell and does not believe it will be required to sell any securities which are temporarily impaired before they recover due to the strong and stable cash flows generated by its insurance products.

Torchmark’s balances related to bifurcated credit loss positions included in accumulated other comprehensive income were $22 million at June 30, 2013 and December 31, 2012, with no change to this balance during the period.