Business Segments (Tables)

12 Months Ended

Dec. 31, 2016

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 2016
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent	$	13,733	1	$	355,015	38	$	38	100	$	368,786	12
Liberty National Exclusive	270,476		12	201,798		21				472,274		15
American Income Exclusive	913,355		42	84,382		9				997,737		32
Family Heritage Exclusive	2,866		—	236,075		25				238,941		8
Direct Response	782,765		36	70,393		7				853,158		27
Other	206,138		9							206,138		6
	$	2,189,333	100	$	947,663	100	$	38	100	$	3,137,034	100



	For the Year 2015
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent	$	15,036	1	$	345,330	37	$	135	100	$	360,501	12
Liberty National Exclusive	271,113		13	209,150		23				480,263		16
American Income Exclusive	830,903		40	80,339		9				911,242		30
Family Heritage Exclusive	2,334		—	221,091		24				223,425		8
Direct Response	746,693		36	69,610		7				816,303		27
Other	206,986		10							206,986		7
	$	2,073,065	100	$	925,520	100	$	135	100	$	2,998,720	100



	For the Year 2014
	Life			Health			Annuity			Total
Distribution Channel	Amount		% of Total	Amount		% of Total	Amount		% of Total	Amount		% of Total
United American Independent	$	16,582	1	$	305,368	35	$	400	100	$	322,350	11
Liberty National Exclusive	272,265		14	222,017		25				494,282		18
American Income Exclusive	766,458		39	78,722		9				845,180		30
Family Heritage Exclusive	1,595		—	204,667		24				206,262		7
Direct Response	702,023		36	58,666		7				760,689		27
Other	207,377		10							207,377		7
	$	1,966,300	100	$	869,440	100	$	400	100	$	2,836,140	100

Reconciliation of Segment Operating Information to Consolidated Statement of Operations

The following tables set forth a reconciliation of Torchmark’s revenues and operations by segment to its major income statement line items. See Note 1—Significant Accounting Policies for additional information concerning reconciling items of segment profits to pretax income.



	For the year 2016
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments				Consolidated
Revenue:
Premium	$	2,189,333		$	947,663		$	38															$	3,137,034
Net investment income										$	806,903												806,903
Other income													$	1,534					$	(159	)	⁽²⁾	1,375
Total revenue	2,189,333			947,663			38			806,903			1,534						(159		)		3,945,312
Expenses:
Policy benefits	1,475,477			612,725			36,751												3,795			⁽³⁾	2,128,748
Required interest on:
Policy reserves	(577,827		)	(73,382		)	(51,131		)	702,340													—
Deferred acquisition costs	178,946			23,060			807			(202,813		)											—
Amortization of acquisition costs	374,499			90,385			4,179																469,063
Commissions, premium taxes, and non-deferred acquisition costs	164,476			84,819			38												(159		)	⁽²⁾	249,174
Insurance administrative expense ⁽¹⁾													196,598						553			⁽⁴⁾	197,151
Parent expense																$	8,587						8,587
Stock-based compensation expense																26,326							26,326
Interest expense										83,345													83,345
Total expenses	1,615,571			737,607			(9,356		)	582,872			196,598			34,913			4,189				3,162,394
Subtotal	573,762			210,056			9,394			224,031			(195,064		)	(34,913		)	(4,348		)		782,918
Non-operating items																			4,348			^(3,4)	4,348
Measure of segment profitability (pretax)	$	573,762		$	210,056		$	9,394		$	224,031		$	(195,064	)	$	(34,913	)	$	—			787,266
Deduct applicable income taxes																							(237,906		)
Net operating income from continuing operations																							549,360
Add back income taxes applicable to segment profitability																							237,906
Add (deduct) realized investment gains (losses)																							(10,683		)
Deduct administrative settlements ⁽³⁾																							(3,795		)
Deduct non-operating fees ⁽⁴⁾																							(553		)
Income before income taxes per Consolidated Statement of Operations																							$	772,235

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

(2) Elimination of intersegment commission.

(3) Administrative settlements.

(4) Non-operating fees.



	For the year 2015
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments				Consolidated
Revenue:
Premium	$	2,073,065		$	925,520		$	135															$	2,998,720
Net investment income										$	773,951												773,951
Other income													$	2,379					$	(194	)	⁽²⁾	2,185
Total revenue	2,073,065			925,520			135			773,951			2,379						(194		)		3,774,856
Expenses:
Policy benefits	1,374,608			602,610			38,994																2,016,212
Required interest on:
Policy reserves	(552,298		)	(69,057		)	(53,295		)	674,650													—
Deferred acquisition costs	172,947			22,760			1,138			(196,845		)											—
Amortization of acquisition costs	353,595			83,341			8,689																445,625
Commissions, premium taxes, and non-deferred acquisition costs	154,811			81,489			41												1,200			^(2,3)	237,541
Insurance administrative expense ⁽¹⁾													186,191										186,191
Parent expense																$	9,003						9,003
Stock-based compensation expense																28,664							28,664
Interest expense										76,642													76,642
Total expenses	1,503,663			721,143			(4,433		)	554,447			186,191			37,667			1,200				2,999,878
Subtotal	569,402			204,377			4,568			219,504			(183,812		)	(37,667		)	(1,394		)		774,978
Non-operating items																			1,394			⁽³⁾	1,394
Measure of segment profitability (pretax)	$	569,402		$	204,377		$	4,568		$	219,504		$	(183,812	)	$	(37,667	)	$	—			776,372
Deduct applicable income taxes																							(253,459		)
Net operating income from continuing operations																							522,913
Add back income taxes applicable to segment profitability																							253,459
Add (deduct) realized investment gains (losses)																							(8,791		)
Deduct administrative settlements ⁽³⁾																							(1,394		)
Income before income taxes per Consolidated Statement of Operations																							$	766,187

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

(2) Elimination of intersegment commission.

(3) Administrative settlements.



	For the Year 2014
	Life			Health			Annuity			Investment			Other			Corporate			Adjustments				Consolidated
Revenue:
Premium	$	1,966,300		$	869,440		$	400															$	2,836,140
Net investment income										$	758,286												758,286
Other income													$	2,354					$	(233	)	⁽²⁾	2,121
Total revenue	1,966,300			869,440			400			758,286			2,354						(233		)		3,596,547
Expenses:
Policy benefits	1,293,384			559,817			42,005												8,178			⁽⁴⁾	1,903,384
Required interest on:
Policy reserves	(530,192		)	(64,401		)	(55,255		)	649,848													—
Deferred acquisition costs	168,100			22,499			1,453			(192,052		)											—
Amortization of acquisition costs	335,345			72,731			7,838																415,914
Commissions, premium taxes, and non-deferred acquisition costs	143,174			79,475			47												(233		)	⁽²⁾	222,463
Insurance administrative expense ⁽¹⁾													174,832						2,422			⁽³⁾	177,254
Parent expense																$	8,159		(85		)	⁽³⁾	8,074
Stock-based compensation expense																32,203							32,203
Interest expense										76,126													76,126
Total expenses	1,409,811			670,121			(3,912		)	533,922			174,832			40,362			10,282				2,835,418
Subtotal	556,489			199,319			4,312			224,364			(172,478		)	(40,362		)	(10,515		)		761,129
Non-operating items																			10,515			^(3,4)	10,515
Measure of segment profitability (pretax)	$	556,489		$	199,319		$	4,312		$	224,364		$	(172,478	)	$	(40,362	)	$	—			771,644
Deduct applicable income taxes																							(252,041		)
Net operating income from continuing operations																							519,603
Add back income taxes applicable to segment profitability																							252,041
Add (deduct) realized investment gains (losses)																							23,548
Deduct legal settlement expenses ⁽³⁾																							(2,337		)
Deduct administrative settlements⁽⁴⁾																							(8,178		)
Income before income taxes per Consolidated Statement of Operations																							$	784,677

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

(2) Elimination of intersegment commission.

(3) Legal settlement expenses.

(4) Administrative settlements.

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



	2016			2015			2014			2016 Change			%		2015 Change			%
Life insurance underwriting margin	$	573,762		$	569,402		$	556,489		$	4,360		1		$	12,913		2
Health insurance underwriting margin	210,056			204,377			199,319			5,679			3		5,058			3
Annuity underwriting margin	9,394			4,568			4,312			4,826			106		256			6
Excess investment income	224,031			219,504			224,364			4,527			2		(4,860		)	(2	)
Other insurance:
Other income	1,534			2,379			2,354			(845		)	(36	)	25			1
Administrative expense	(196,598		)	(186,191		)	(174,832		)	(10,407		)	6		(11,359		)	6
Corporate and adjustments	(34,913		)	(37,667		)	(40,362		)	2,754			(7	)	2,695			(7	)
Pre-tax total	787,266			776,372			771,644			10,894			1		4,728			1
Applicable taxes⁽¹⁾	(237,906		)	(253,459		)	(252,041		)	15,553			(6	)	(1,418		)	1
Net operating income from continuing operations	549,360			522,913			519,603			26,447			5		3,310			1
Discontinued operations (after tax)⁽²⁾	10,189			10,807			14,865			(618		)	(6	)	(4,058		)	(27	)
Total	559,549			533,720			534,468			25,829			5		(748		)	—
Realized gains (losses)—investments (after tax)	(6,944		)	(5,714		)	15,306			(1,230		)			(21,020		)
Legal settlement expenses (after tax)	—			—			(1,519		)	—					1,519
Administrative settlements (after tax)	(2,467		)	(906		)	(5,316		)	(1,561		)			4,410
Non-operating fees (after tax)	(359		)	—			—			(359		)			—
Net income	$	549,779		$	527,100		$	542,939		$	22,679		4		$	(15,839	)	(3	)

(1) Certain current year amounts were prospectively adjusted to give effect to the adoption of ASU 2016-09 related to excess tax benefits from stock compensation as described in Note 1—Significant Accounting Policies under "Accounting Pronouncements Adopted in the Current Year."

(2) Income from discontinued operations (after tax) is included for purposes of reconciling to net income.

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, 2016
	Life		Health		Annuity		Investment		Other		Consolidated
Cash and invested assets							$	15,955,891			$	15,955,891
Accrued investment income							223,148				223,148
Deferred acquisition costs	$	3,261,220	$	512,701	$	9,237					3,783,158
Goodwill	309,609		131,982								441,591
Other assets									$	1,032,299	1,032,299
Total assets	$	3,570,829	$	644,683	$	9,237	$	16,179,039	$	1,032,299	$	21,436,087



	At December 31, 2015
	Life		Health		Annuity		Investment		Other		Consolidated
Cash and invested assets							$	14,405,073			$	14,405,073
Accrued investment income							209,915				209,915
Deferred acquisition costs	$	3,098,656	$	502,535	$	15,944					3,617,135
Goodwill	309,609		131,982								441,591
Other assets									$	1,179,499	1,179,499
Total assets	$	3,408,265	$	634,517	$	15,944	$	14,614,988	$	1,179,499	$	19,853,213

Other Balances by Segment

Liabilities by Segment



	At December 31, 2016
	Life		Health		Annuity		Investment		Other		Consolidated
Future policy benefits	$	9,825,776	$	1,706,870	$	1,293,191					$	12,825,837
Unearned and advance premiums	16,828		47,189								64,017
Policy claims and other benefits payable	156,437		143,128								299,565
Debt							$	1,397,640			1,397,640
Other									$	2,282,167	2,282,167
Total liabilities	$	9,999,041	$	1,897,187	$	1,293,191	$	1,397,640	$	2,282,167	$	16,869,226



	At December 31, 2015
	Life		Health		Annuity		Investment		Other		Consolidated
Future policy benefits	$	9,327,561	$	1,600,240	$	1,318,010					$	12,245,811
Unearned and advance premiums	17,381		49,640								67,021
Policy claims and other benefits payable	135,778		137,120								272,898
Debt							$	1,233,862			1,233,862
Other									$	1,978,069	1,978,069
Total liabilities	$	9,480,720	$	1,787,000	$	1,318,010	$	1,233,862	$	1,978,069	$	15,797,661