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Torchmark Corporation Reports 9% Increase in Second Quarter 2002 Earnings Per Share From Operations

PRNewswire-FirstCall
BIRMINGHAM, Ala.
Jul 18, 2002

Torchmark Corporation (NYSE: TMK) reported today that net operating income for the second quarter of 2002 was $.87 per share ($106 million), compared with $.80 per share ($101 million) for the second quarter of 2001, a 9% per share increase. For the first six months of 2002, net operating income was $1.72 per share ($211 million) compared with $1.58 per share ($200 million) for the same period of 2001. The 2001 results exclude amortization of goodwill.

Net operating income per share for the second quarter and the first six months of 2001 were previously reported as $.78 and $1.53, respectively, which included amortization of goodwill. Torchmark stopped amortizing goodwill on January 1, 2002, in accordance with Financial Accounting Standard 142.

Net income for the second quarter of 2002 was $.52 per share ($63 million) compared with $.58 per share ($73 million) for the year-ago quarter. Net income for the first six months of 2002 was $1.32 per share ($161 million) compared with $1.34 per share ($170 million) for the same year-ago period. Impacting 2002 net income is a second quarter write-down of certain bonds in the investment portfolio from book value of $110 million to $27 million, resulting in an after-tax realized loss of $54 million.

HIGHLIGHTS -- comparing second quarter of 2002 with the second quarter of 2001:

  --  Direct Response led life sales with $31 million of annualized premium
      sold in the quarter, up 6% from the year-ago period.

  --  American Income Agency led growth in life sales with $25 million of
      annualized premium sold in the quarter, a 62% increase over the year-
      ago quarter.

  --  Health sales grew 6% for the quarter, led by the $23 million in health
      sales by the UA Independent Agency.

  --  Excess Investment Income of $73 million grew 16% compared with the
      year-ago quarter, in part due to a 38% decline in financing costs.


   PER SHARE AMOUNTS
                               Quarter Ended         Six Months Ended
                                  June 30,     %         June 30,       %
                               2002    2001  Change   2002    2001    Change

  Insurance Underwriting
    Income                     $.74    $.74     0    $1.47   $1.47      0
  Excess Investment Income      .60     .50    20     1.19     .97     23
  Other                        (.03)   (.03)          (.06)   (.06)
  Income Tax                   (.44)   (.41)    7     (.88)   (.80)    10
  Net Operating Income         $.87    $.80     9    $1.72   $1.58      9

  Realized Gains (Losses),
   Net of Tax
    Investments                (.42)    .03           (.42)    .05
    Valuation of Interest
     Rate Swaps                 .06    (.01)           .02     .01
  Goodwill Amortization         ---    (.02)           ---    (.05)
  Loss on Redemption of Debt,
    Net of Tax                  ---    (.01)           ---    (.01)
  Change in Accounting
   Principle,
    Net of Tax                  ---    (.21)           ---    (.21)
  Discontinued Operations       ---     ---            ---    (.03)
  Net Income                   $.52    $.58          $1.32   $1.34

INSURANCE OPERATIONS -- comparing the second quarter of 2002 with the second quarter of 2001:

Premium Revenue

Total premium revenue for the quarter increased 2% to $572 million. Life premium revenue increased 6% to $307 million. Health premium revenue remained flat at $255 million. Annuity premium declined 45% to $10 million.

                                   Premium Revenue
                                (dollars in millions)

                        Life               Health              Total
                    Quarter ended     Quarter ended      Quarter ended
                       June 30,    %     June 30,    %      June 30,     %
                    2002    2001  Chg. 2002   2001  Chg.  2002    2001  Chg.

  Direct Response  $79.6   $74.8   7   $6.0   $4.2   41   $85.6   $79.0   8

  LNL Exclusive
   Agency           75.9    75.2   1   39.5   38.8    2   115.4   114.0   1

  American Income
   Agency           68.9    61.1  13   12.9   12.3    5    81.8    73.3  12

  Military          36.6    32.8  12    ---    ---   ---   36.6    32.8  12

  United American
   Agencies
    Branch Office    5.0     4.8   2   80.4   81.8    (2)  85.4    86.6  (1)
    Independent
     Agency         12.6    11.8   6  115.8  116.6    (1) 128.4   128.4   0

  Other Life        28.0    28.3  (1)   ---    ---   ---   28.0    28.3  (1)

  Total Life
   and Health     $306.6  $288.9   6 $254.6 $253.7     0 $561.2  $542.5   3

  Annuity                                                  10.4   18.7  (45)

  Total                                                  $571.5 $561.2    2


  Insurance Underwriting Income

Insurance net underwriting income declined 3% to $91 million. The life underwriting margin (before administrative expenses) was 24% of premium and the health underwriting margin was 17% of premium. Insurance underwriting results are summarized in the following chart:

                                     Insurance Net Underwriting Income
                                           (dollars in millions)
                                 Quarter             Quarter
                                  Ended     % of      Ended    % of      %
                                 June 30,  Premium   June 30, Premium Change
                                   2002                2001

  Underwriting Income before
   Administrative Expenses
     Life                         $72.9        24      $69.9      24     4
     Health                        42.5        17       44.8      18    (5)
     Annuity                        4.4                  6.8           (36)

  Other Income                      1.0                  1.1
  Administrative Expenses         (30.2)        5      (29.5)      5     2

  Insurance Net
   Underwriting Income            $90.5                $93.1            (3)


  Sales

Total insurance sales for the quarter were $140 million, a 13% increase. Total life insurance sales were $88 million, up 17%. Life sales were led by Direct Response with sales of $31 million, an increase of 6%, followed by life sales of $25 million by American Income, an increase of 62%.

While Medicare supplement sales declined 27% to $27 million, total health insurance sales increased 6% to $53 million.

  Sales by distribution channels are shown in the following chart:


                    Annualized Life and Health Premium Issued
                                 (dollars in millions)
                        Life             Health               Total
                   Quarter Ended      Quarter Ended       Quarter Ended
                     June 30,    %     June 30,     %       June 30,     %
                  2002    2001  Chg.  2002  2001   Chg.  2002     2001  Chg.

  Direct Response $31.4   $29.6   6   $3.8   $.4   865   $35.2   $30.0   17

  LNL Exclusive
   Agency          14.4    14.2   1    3.5   2.6    36    17.9    16.8    6

  American Income
   Agency          24.8    15.3  62    3.2   2.5    26    28.0    17.9   57

  Military          6.2     6.0   4                        6.2     6.0    4

  United American
   Agencies
     Branch Office  1.8     1.3  40   19.0  27.7   (31)   20.8    29.0  (28)
     Independent
      Agency        7.1     5.8  23   23.2  16.4    42    30.3    22.1   37

  Other             2.0     2.5 (20)   ---   ---   ---     2.0     2.5  (20)

  Total Premium
   Issued         $87.7   $74.7  17  $52.7 $49.6     6  $140.4  $124.3   13

INVESTMENTS -- comparing the second quarter of 2002 to the second quarter of 2001:

Excess Investment Income

Excess investment income (investment income less interest credited on net policy liabilities and less financing costs) was $73 million compared with $63 million, a 16% increase, or 20% on a per-share basis, as detailed in the following chart:

                                             Quarter Ended
                                          June 30,     June 30,
                                            2002         2001          %
                                          (dollars in millions)      Change


  Investment Income                        $129.0        $124.0          4

  Required Interest:
    Interest Credited on Net Policy
     Liabilities                            (47.6)        (47.0)         1
    Financing Costs:
        Debt                                (11.6)        (11.8)
        Trust Preferred/MIPS                 (2.9)         (3.8)
        Interest Rate Swaps                   5.7           1.6
        Total Financing Costs                (8.7)        (14.0)       (38)

      Total Required Interest               (56.3)        (61.1)        (8)

  Excess Investment Income                  $72.7         $62.9         16

Investment income increased 4%. The fixed income portfolio, which comprises 93% of total invested assets, earned 7.3% during the quarter, compared with 7.5% during the year-ago quarter. During the quarter, acquisitions of fixed maturity investments totaled $243 million, earning an average effective yield of 7.4%.

Financing costs were $9 million, down $5 million, or 38%. The decline was attributable to (1) a $1 million decline in trust preferred/MIPS dividends, and (2) a $4 million increase in cash settlements received from interest rate swap agreements. The more favorable financing position regarding the trust preferred/MIPS securities resulted from Torchmark redeeming the $200 million of 9.18% MIPS in 2001 and the issuance of $150 million of 7.75% trust preferred securities in the fourth quarter of 2001, which began paying quarterly dividends in February, 2002.

Write-down of Investment in Bonds

Net realized losses from investments, after tax, were $51 million in the second quarter of 2002 compared with net realized gains of $4 million in the year-ago quarter. The 2002 net losses are comprised of a write-down of bonds of $54 million, offset by net gains on investment sales totaling $3 million.

At June 30, 2002, Torchmark wrote down the book value of certain bonds in its fixed investment portfolio from $110 million to $27 million, resulting in an after-tax realized loss of $54 million. Annual interest income due from these securities is $8 million, but because receipt of future interest payments is not assured, Torchmark will not accrue income on these securities in 2002. The amount of interest that would have been accrued on these securities at June 30, 2002 is $3 million.

Prior to their write-down, the book value of the securities written down comprised less than 2% of Torchmark's fixed income investments. At June 30, 2002, the market value of Torchmark's fixed maturity investments was $6.742 billion and exceeded "book value" amortized cost by $63 million.

NET INCOME - comparing the second quarter of 2002 with the second quarter of 2001:

Net income was $.52 per share ($63 million) in the second quarter of 2002 compared with $.58 per share ($73 million) in the year-ago quarter. The following chart shows the differences between net operating income and net income:

                                                         Quarter Ended
                                                    June 30,        June 30,
                                                      2002           2001
                                                    (dollars in millions)

  Net Operating Income                              $106.1          $101.1
  Realized Gains (Losses), net of tax:
    Investments                                      (50.9)            4.1
    Valuation of Interest Rate Swaps                   7.5            (1.3)
  Goodwill Amortization                                               (3.0)
  Loss on redemption of debt, net of tax               ---            (1.1)
  Change in Accounting Principle, net of tax           ---           (26.6)

  Net Income                                         $62.7           $73.2

The difference between net operating income and net income in the second quarter of 2002 was a combination of realized investment losses of $51 and the $8 million gain in the market value of Torchmark's interest rate swap agreements. Under these agreements, the company converts interest expense obligations from fixed to floating rates. The periodic cash settlements from these agreements are reflected in net operating income, but as required by Financial Accounting Standard 133, the Company also must record the "market value" of the swaps (i.e. the present value of the estimated future cash settlements) on the balance sheet. The quarterly change in the market value is recognized as a "non-cash" capital gain or loss, even though Torchmark plans to hold the swaps until the scheduled termination dates, at which time their market value and the total capital gains and losses recorded will be $0. At June 30, 2002, the market value of the swap agreements was a net asset of $14 million.

SHARE REPURCHASE - second quarter of 2002:

Torchmark's ongoing share repurchase program resulted in the repurchase of 2.0 million shares of Torchmark Corporation common stock for a total cost of $81 million ($39.94 average cost per share). At June 30, 2002, there were 119.9 million Torchmark shares outstanding (120.4 million on a diluted basis).

OTHER FINANCIAL INFORMATION

Net operating income as a return on equity (excluding the FAS 115 adjustment*) for the quarter ended June 30, 2002, was 16.7%, up from 16.1% for the year-ago quarter. Total assets at June 30, 2002, were $12.1 billion and shareholders' equity was $2.6 billion.

  Book value per diluted share at June 30, 2002 is as follows:

   Excluding FAS 115 adjustment*           $20.98
   FAS 115 adjustment*                        .32
   As Reported for GAAP                    $21.30

The debt to capital ratio (excluding the FAS 115 adjustment*) was 21.3% at June 30, 2002, as compared with 20.4% a year ago (25.6% and 24.9% respectively, when the Monthly Income Preferred and Trust Preferred Securities are treated as debt rather than equity).

* The FAS 115 adjustment reflects fixed maturity assets at fair market value as required by accounting standard SFAS 115.

  SUMMARY OF FINANCIAL RESULTS

                                                  Quarter Ended
                                         June 30, 2002      June 30, 2001
                                       (in thousands, except per share data)

  Total Revenue from Operations **          $700,184          $684,742
  Net Operating Income                      $106,069          $101,070
    Per diluted share                           $.87              $.80
  Net Income                                 $62,712           $73,174
    Per diluted share                           $.52              $.58
  Weighted Average Diluted Shares
   Outstanding                               121,694           126,131

  ** Total revenue from operations excludes net realized investment gains
     and losses.


  CAUTION REGARDING FORWARD-LOOKING STATEMENTS:

This press release may contain forward-looking statements within the meaning of the federal securities laws. These prospective statements reflect management's current expectations, but are not guarantees of future performance. Accordingly, please refer to Torchmark's cautionary statement regarding forward-looking statements, and the business environment in which the Company operates, contained in the Company's Form 10-K for the year ended December 31, 2001, and Form 10Q for the quarter ended March 31, 2002, on file with the Securities and Exchange Commission. Torchmark specifically disclaims any obligation to update or revise any forward-looking statement because of new information, future developments or otherwise.

EARNINGS RELEASE CONFERENCE CALL WEBCAST

Torchmark will provide a live audio webcast of its second quarter earnings release conference call with financial analysts at 10:00 a.m. (Eastern Time) today, July 18, 2002. Access to the live webcast and replays will be available at http://www.torchmarkcorp.com/ on the Investor Relations page, at the "Conference Call on the Web" icon, or at http://www.prnewswire.com/ . Supplemental financial reports for the quarter will be available July 18 on the Investor Relations page of the Torchmark website at the "Financial Reports" icon.

Torchmark Corporation is a financial services holding company specializing in life and supplemental health insurance for "middle income" Americans marketed through multiple distribution channels including direct response, and exclusive and independent agencies. Subsidiary Globe Life and Accident is a nationally recognized direct-response provider of life insurance known for its administrative efficiencies. United American has been a nationally recognized provider of Medicare supplement health insurance since 1966. Liberty National Life, one of the oldest traditional life insurers in the Southeast, is the largest life insurer in its home state of Alabama. American Income Life is nationally recognized for providing supplemental life insurance to labor union members.

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SOURCE: Torchmark Corporation

CONTACT: Joyce Lane, Vice President, Investor Relations, of Torchmark
Corporation, +1-972-569-3627, or fax, +1-972-569-3696, or
jlane@torchmarkcorp.com

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Web site: http://www.torchmarkcorp.com/

Company News On-Call: http://www.prnewswire.com/comp/885425.html


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Key Contacts

Mike Majors
Vice President, Investor Relations
(972) 569-3627
tmkir@torchmarkcorp.com

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