Business Segments (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Segment Premium Revenue by Each Marketing Group

The tables below present segment premium revenue by each of Torchmark’s marketing groups.

Torchmark Corporation

Premium Income By Distribution Channel



	For the Year 2013
	Life				Health				Annuity				Total
Distribution Channel	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
United American Independent	$	19,742		1	$	298,298		25	$	532		100	$	318,572		10
Liberty National Exclusive		275,980		15		241,264		21						517,244		17
American Income Exclusive		715,366		38		79,435		7						794,801		26
Family Heritage Exclusive		1,006		0		190,923		16						191,929		6
Direct Response		663,544		35		53,898		5						717,442		24
Medicare Part D						300,008		26						300,008		10
Other		209,694		11										209,694		7

	$	1,885,332		100	$	1,163,826		100	$	532		100	$	3,049,690		100


	For the Year 2012
	Life				Health				Annuity				Total
Distribution Channel	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
United American Independent	$	21,127		1	$	298,759		28	$	559		100	$	320,445		11
Liberty National Exclusive		281,723		15		263,535		25						545,258		19
American Income Exclusive		663,696		37		79,640		8						743,336		26
Family Heritage Exclusive		130		0		30,119		3						30,249		1
Direct Response		630,111		35		57,966		6						688,077		24
Medicare Part D						317,764		30						317,764		11
Other		211,737		12										211,737		8

	$	1,808,524		100	$	1,047,783		100	$	559		100	$	2,856,866		100


	For the Year 2011
	Life				Health				Annuity				Total
Distribution Channel	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
United American Independent	$	22,846		1	$	306,490		33	$	608		100	$	329,944		12
Liberty National Exclusive		288,308		17		290,107		31						578,415		22
American Income Exclusive		607,914		35		80,119		9						688,033		26
Direct Response		593,650		35		57,067		6						650,717		25
Medicare Part D						196,710		21						196,710		7
Other		213,526		12										213,526		8

	$	1,726,244		100	$	930,493		100	$	608		100	$	2,657,345		100

Reconciliation of Revenues and Operations by Segment to Major Income Statement Line Items

The following tables set forth a reconciliation of Torchmark’s revenues and operations by segment to its major income statement line items.


	For the year 2013
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments			Consolidated
Revenue:
Premium	$	1,885,332		$	1,163,826		$	532											$	2,584	⁽¹⁾	$	3,052,274
Net investment income										$	734,650									(24,907	)⁽⁴⁾		709,743
Other income													$	2,208						(277	)⁽³⁾		1,931

Total revenue		1,885,332			1,163,826			532			734,650			2,208						(22,600	)		3,763,948
Expenses:
Policy benefits		1,227,857			806,478			43,302												11,209	^(1,6⁾		2,088,846
Required interest on:
Policy reserves		(508,236	)		(59,858	)		(57,294	)		625,388												0
Deferred acquisition costs		164,981			23,233			1,811			(190,025	)											0
Amortization of acquisition costs		323,950			72,244			8,714												(1,519	)⁽⁷⁾		403,389
Commissions, premium taxes, and non-deferred acquisition costs		131,721			89,922			60												(277	)⁽³⁾		221,426
Insurance administrative expense⁽²⁾														178,898						1,155	⁽⁵⁾		180,053
Parent expense																$	8,495			500	⁽⁶⁾		8,995
Stock-based compensation expense																	25,642						25,642
Interest expense											80,461												80,461

Total expenses		1,340,273			932,019			(3,407	)		515,824			178,898			34,137			11,068			3,008,812

Subtotal		545,059			231,807			3,939			218,826			(176,690	)		(34,137	)		(33,668	)		755,136
Non-operating items																				8,761	^(5,6,7)		8,761
Amortization of low-income housing interests																				24,907	⁽⁴⁾		24,907

Measure of segment profitability (pretax)	$	545,059		$	231,807		$	3,939		$	218,826		$	(176,690	)	$	(34,137	)	$	0			788,804

Deduct applicable income taxes																							(258,137	)

Segment profits after tax																							530,667

Add back income taxes applicable to segment profitability																							258,137
Add (deduct) realized investment gains (losses)																							7,990
Deduct amortization of low-income housing⁽⁴⁾																							(24,907	)
Deduct Guaranty Fund Assessment⁽⁵⁾																							(1,155	)
Deduct legal settlement expenses⁽⁶⁾																							(9,125	)
Add Family Heritage Life acquisition adjustments⁽⁷⁾																							1,519

Pretax income per Consolidated Statement of Operations																						$	763,126

(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 interests.

(5)

Guaranty Fund Assessment.

(6)

Legal settlement expenses.

(7)

Family Heritage Life acquisition adjustments.


	For the Year 2012
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments			Consolidated
Revenue:
Premium	$	1,808,524		$	1,047,783		$	559											$	(404	)⁽¹⁾	$	2,856,462
Net investment income										$	715,918									(22,274	)⁽²⁾⁽⁵⁾		693,644
Other income													$	1,898						(321	)⁽⁴⁾		1,577

Total revenue		1,808,524			1,047,783			559			715,918			1,898						(22,999	)		3,551,683
Expenses:
Policy benefits		1,172,020			739,945			44,121												(404	)⁽¹⁾		1,955,682
Required interest on: Policy reserves		(483,892	)		(40,963	)		(59,293	)		584,148												0
Deferred acquisition costs		163,875			19,059			2,238			(185,172	)											0
Amortization of acquisition costs		309,930			65,278			9,959															385,167
Commissions, premium taxes, and non-deferred acquisition costs		137,115			67,123			69												(321	)⁽⁴⁾		203,986
Insurance administrative expense⁽³⁾														165,405									165,405
Parent expense																$	8,222			2,944	⁽⁶⁾		11,166
Stock-based compensation expense																	21,605						21,605
Interest expense											80,298									214	⁽²⁾		80,512

Total expenses		1,299,048			850,442			(2,906	)		479,274			165,405			29,827			2,433			2,823,523

Sub total		509,476			197,341			3,465			236,644			(163,507	)		(29,827	)		(25,432	)		728,160
Non operating items																				2,944	⁽⁶⁾		2,944
Amortization of low-income housing interests																				22,488	⁽⁵⁾		22,488

Measure of segment profitability (pretax)	$	509,476		$	197,341		$	3,465		$	236,644		$	(163,507	)	$	(29,827	)	$	0			753,592

Deduct applicable income taxes																							(246,945	)

Segment profits after tax																							506,647

Add back income taxes applicable to segment profitability																							246,945
Add (deduct) realized investment gains (losses)																							37,833
Deduct amortization of low-income housing⁽⁵⁾																							(22,488	)
Deduct Family Heritage Life acquisition expense⁽⁶⁾																							(2,944	)

Pretax income per the Consolidated Statement of Operations																						$	765,993

(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.

(3)

Administrative expense is not allocated to insurance segments.

(4)

Elimination of intersegment commission.

(5)

Amortization of low-income housing interests.

(6)

Family Heritage Life acquisition expense.


	For the Year 2011
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments			Consolidated
Revenue:
Premium	$	1,726,244		$	930,493		$	608											$	(1,027	)⁽¹⁾	$	2,656,318
Net investment income										$	707,041									(14,013	)⁽^2,5)		693,028
Other income													$	2,507						(356	)⁽⁴⁾		2,151

Total revenue		1,726,244			930,493			608			707,041			2,507						(15,396	)		3,351,497
Expenses:
Policy benefits		1,118,909			632,847			42,547												(1,027	)⁽¹⁾		1,793,276
Required interest on: Policy reserves		(458,029	)		(36,729	)		(57,040	)		551,798												0
Deferred acquisition costs		159,886			18,883			2,618			(181,387	)											0
Amortization of acquisition costs		292,168			62,345			10,070															364,583
Commissions, premium taxes, and non-deferred acquisition costs		152,347			64,157			68												(356	)⁽⁴⁾		216,216
Insurance administrative expense⁽³⁾														159,109						19,880	^(6,7,8)		178,989
Parent expense																$	7,693						7,693
Stock-based compensation expense																	14,954						14,954
Interest expense											77,644									264	⁽²⁾		77,908

Total expenses		1,265,281			741,503			(1,737	)		448,055			159,109			22,647			18,761			2,653,619

Sub total		460,963			188,990			2,345			258,986			(156,602	)		(22,647	)		(34,157	)		697,878
Non operating items																				19,880	^(6,7,8)		19,880
Amortization of low-income housing interests																				14,277	⁽⁵⁾		14,277

Measure of segment profitability (pretax)	$	460,963		$	188,990		$	2,345		$	258,986		$	(156,602	)	$	(22,647	)	$	0			732,035

Deduct applicable income taxes																							(238,335	)

Segment profits after tax																							493,700

Add back income taxes applicable to segment profitability																							238,335
Add (deduct) realized investment gains (losses)																							25,904
Deduct amortization of low-income housing⁽⁵⁾																							(14,277	)
Deduct state administrative settlement expense⁽⁶⁾																							(6,901	)
Deduct loss on sale of equipment⁽⁷⁾																							(979	)
Deduct litigation expense⁽⁸⁾																							(12,000	)

Pretax income per Consolidated Statement of Operations																						$	723,782

(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.

(3)

Administrative expense is not allocated to insurance segments.

(4)

Elimination of intersegment commission.

(5)

Amortization of low-income housing interests.

(6)

State administrative settlement expense.

(7)

Loss on sale of equipment.

(8)

Litigation expense.

Analysis of Profitability by Segment

The following table summarizes the measures of segment profitability as determined in the three preceding tables for comparison with prior periods. The table also reconciles segment profits to net income.

Analysis of Profitability by Segment


	2013			2012			2011			2013 Change			%			2012 Change			%
Life insurance underwriting margin	$	545,059		$	509,476		$	460,963		$	35,583			7		$	48,513			11
Health insurance underwriting margin		231,807			197,341			188,990			34,466			17			8,351			4
Annuity underwriting margin		3,939			3,465			2,345			474			14			1,120			48
Excess investment income		218,826			236,644			258,986			(17,818	)		(8	)		(22,342	)		(9	)
Other insurance:
Other income		2,208			1,898			2,507			310			16			(609	)		(24	)
Administrative expense		(178,898	)		(165,405	)		(159,109	)		(13,493	)		8			(6,296	)		4
Corporate and adjustments		(34,137	)		(29,827	)		(22,647	)		(4,310	)		14			(7,180	)		32

Pre-tax total		788,804			753,592			732,035			35,212			5			21,557			3
Applicable taxes		(258,137	)		(246,945	)		(238,335	)		(11,192	)		5			(8,610	)		4

Total		530,667			506,647			493,700			24,020			5			12,947			3
Realized gains (losses)—investments (after tax)*		3,965			24,591			16,838			(20,626	)					7,753
Loss on disposal of discontinued operations (after tax)		0			0			(455	)		0						455
Acquisition expense and adjustments—Family Heritage (after tax)		522			(1,914	)		0			2,436						(1,914	)
Legal settlement expenses (after tax)		(5,931	)		0			(7,800	)		(5,931	)					7,800
Guaranty Fund assessment (after tax)		(751	)		0			0			(751	)					0
State administrative settlement (after tax)		0			0			(4,486	)		0						4,486
Loss on sale of equipment (after tax)		0			0			(636	)		0						636

Net income	$	528,472		$	529,324		$	497,161		$	(852)			0		$	32,163			6

Assets by Segment

The table below reconciles segment assets to total assets as reported in the consolidated financial statements.

Assets by Segment


	At December 31, 2013
	Life		Health		Annuity		Investment		Other		Consolidated
Cash and invested assets							$	13,456,944			$	13,456,944
Accrued investment income								200,038				200,038
Deferred acquisition costs	$	2,809,199	$	497,743	$	30,707						3,337,649
Goodwill		309,609		131,982								441,591
Other assets									$	755,522		755,522

Total assets	$	3,118,808	$	629,725	$	30,707	$	13,656,982	$	755,522	$	18,191,744


	At December 31, 2012
	Life		Health		Annuity		Investment		Other		Consolidated
Cash and invested assets							$	14,155,919			$	14,155,919
Accrued investment income								195,497				195,497
Deferred acquisition costs	$	2,688,876	$	481,725	$	27,830						3,198,431
Goodwill		309,609		131,982								441,591
Other assets									$	785,472		785,472

Total assets	$	2,998,485	$	613,707	$	27,830	$	14,351,416	$	785,472	$	18,776,910

Other Balances by Segment

Other Balances by Segment


	At December 31, 2013
	Life		Health		Annuity		Investment		Consolidated
Future policy benefits	$	8,493,972	$	1,384,365	$	1,377,818			$	11,256,155
Unearned and advance premium		16,970		57,204						74,174
Policy claims and other benefits payable		121,661		101,719						223,380
Debt							$	1,219,935		1,219,935

Total	$	8,632,603	$	1,543,288	$	1,377,818	$	1,219,935	$	12,773,644


	At December 31, 2012
	Life		Health		Annuity		Investment		Consolidated
Future policy benefits	$	8,093,618	$	1,264,540	$	1,348,061			$	10,706,219
Unearned and advance premium		16,856		59,232						76,088
Policy claims and other benefits payable		123,600		104,870						228,470
Debt							$	1,308,729		1,308,729

Total	$	8,234,074	$	1,428,642	$	1,348,061	$	1,308,729	$	12,319,506