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Torchmark Corporation Reports First Quarter 2016 Results

MCKINNEY, Texas, April 26, 2016 /PRNewswire/ -- Torchmark Corporation TMK, -0.57% reported today that for the quarter ended March 31, 2016, net income was $1.01 per share, compared with $0.95 per share for the year-ago quarter. Net operating income from continuing operations for the quarter was $1.08 per share, compared with $1.02 per share for the year-ago quarter.

Reconciliations between net income and net operating income, GAAP ROE and management ROE, and GAAP book value and management book value are shown in the Financial Summary below.

HIGHLIGHTS:

  • ROE (excluding net unrealized gains on fixed maturities) was 14.5%.
  • Total life premiums increased 6% over the year-ago quarter.
  • Net life sales increased 11% at Liberty National and 7% at American Income over the year-ago quarter.
  • Liberty National ending agent count increased 16% over the previous quarter.
  • 1.5 million shares of common stock were repurchased during the quarter.

FINANCIAL SUMMARY

Net operating income, a non-GAAP financial measure, has long been consistently used by Torchmark's management to evaluate the operating performance of the Company, and is a measure commonly used in the life insurance industry. It differs from net income primarily because it excludes certain non-operating items such as realized investment gains and losses and certain nonrecurring items included in net income. Management believes an analysis of net operating income is important in understanding the profitability and operating trends of the Company's business.


Financial Summary(dollars in millions, except per share data)


Per ShareQuarter Ended




Quarter Ended


March 31,




March 31,




2016



2015


%Chg.


2016



2015


%Chg.

Insurance underwriting income*

$

1.21




$

1.16



4


$

149.4




$

148.8



Excess investment income*

0.44




0.43



2


54.7




54.9



Parent company expense

(0.02)




(0.02)





(2.0)




(2.2)




Income tax

(0.54)




(0.51)



6


(66.2)




(66.2)



Stock option expense, net of tax

(0.02)




(0.04)





(2.5)




(4.7)




Net operating income from continuing operations

$

1.08




$

1.02



6


$

133.4




$

130.7



2

Net operating income from discontinued operations

0.02




0.02





2.0




2.9




Net operating income from all operations

$

1.10




$

1.04





$

135.4




$

133.6


















Reconciling items, net of tax:














Realized gains (losses) on investments- continuing operations








0.2




0.1




Part D adjustment - discontinued operations**

(0.09)




(0.09)





(11.5)




(12.0)




Net income

$

1.01




$

0.95





$

124.0




$

121.6


















Weighted average diluted shares outstanding (000)

123,313




128,587












* See definitions in the following sections and in the Torchmark 2015 SEC Form 10-K.

** Under GAAP, benefit costs can exceed premiums in the first part of the year but be less than premiums during the remainder of the year. For net operating income purposes, Torchmark defers excess benefits incurred in earlier interim periods to later periods in order to more closely match the benefit cost with the associated revenue.


Note 1: In March 2016, the FASB issued ASU 2016-09 Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU affects entities that issue share-based payment awards to their employees and is designed to simplify certain aspects of accounting for share-based payments, including income taxes at settlement. This new accounting guidance will primarily affect computations of net income, diluted shares outstanding, and earnings per share, and is expected to result in increased volatility for net income and earnings per share in future periods. The Company elected to early adopt this standard effective January 1, 2016 and has applied it prospectively.


As a result of the adoption, the Company recorded $2 million in excess tax benefits as a component of income taxes for the quarter ended March 31, 2016, which resulted in an increase to net income as compared to the quarter ended March 31, 2015 when excess tax benefits of $5 million were recorded as a component of additional paid-in capital on the balance sheet. The adoption also resulted in an adjustment to the weighted average diluted shares outstanding to exclude excess tax benefits from the assumed proceeds in the diluted shares calculation. This change resulted in diluted weighted average shares outstanding calculated under the new guidance of 123.3 million for the quarter ended March 31, 2016, as compared to 122.7 million as would have been calculated under the previous guidance.


Note 2: Tables in this news release may not foot due to rounding.


Financial Summary, Continued

Management vs. GAAP Measures

(dollars in millions, except per share data)

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