TORCHMARK CORPORATION

(PARENT COMPANY)

SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED BALANCE SHEETS

(Dollar amounts in thousands)



	December 31,
	2017			2016
Assets:
Investments:
Long-term investments	$	35,562		$	33,586
Short-term investments	5,624			—
Total investments	41,186			33,586
Cash	1,008			—
Investment in affiliates	7,763,704			6,004,429
Due from affiliates	95,920			96,005
Taxes receivable from affiliates	63,099			88,406
Other assets	135,616			119,801
Total assets	$	8,100,533		$	6,342,227

Liabilities and shareholders’ equity:
Liabilities:
Short-term debt	$	328,067		$	264,475
Long-term debt	1,281,971			1,282,891
Due to affiliates	8,002			—
Other liabilities	251,072			228,000
Total liabilities	1,869,112			1,775,366

Shareholders’ equity:
Preferred stock	351			351
Common stock	124,218			127,218
Additional paid-in capital	858,987			840,932
Accumulated other comprehensive income	1,424,274			577,574
Retained earnings	4,806,208			3,890,798
Treasury stock	(982,617		)	(870,012		)
Total shareholders’ equity	6,231,421			4,566,861
Total liabilities and shareholders’ equity	$	8,100,533		$	6,342,227

See Notes to Condensed Financial Statements and accompanying Report of Independent Registered

Public Accounting Firm.

TORCHMARK CORPORATION

(PARENT COMPANY)

SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

CONDENSED STATEMENTS OF OPERATIONS

(Dollar amounts in thousands)



	Year Ended December 31,
	2017			2016			2015
Net investment income	$	26,130		$	25,352		$	23,715
Realized investment gains (losses)	(2,791		)	—			8
Total revenue	23,339			25,352			23,723

General operating expenses	61,447			52,613			54,100
Reimbursements from affiliates	(52,776		)	(54,288		)	(53,436		)
Interest expense	88,474			86,853			79,677
Total expenses	97,145			85,178			80,341

Operating income (loss) before income taxes and equity in earnings of affiliates	(73,806		)	(59,826		)	(56,618		)
Income taxes	(9,874		)	23,479			15,542
Net operating loss before equity in earnings of affiliates	(83,680		)	(36,347		)	(41,076		)
Equity in earnings of affiliates	1,538,174			586,126			568,176
Net income	1,454,494			549,779			527,100

Other comprehensive income (loss):
Attributable to Parent Company	(8,409		)	(11,314		)	(3,539		)
Attributable to affiliates	602,709			356,941			(761,966		)
Comprehensive income (loss)	$	2,048,794		$	895,406		$	(238,405	)

See Notes to Condensed Financial Statements and accompanying Report of Independent Registered

Public Accounting Firm.

TORCHMARK CORPORATION

(PARENT COMPANY)

SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT—(continued)

CONDENSED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)



	Year Ended December 31,
	2017			2016			2015
Net income	$	1,454,494		$	549,779		$	527,100
Equity in earnings of affiliates	(1,538,174		)	(586,126		)	(568,176		)
Cash dividends from subsidiaries	453,904			437,566			466,416
Other, net	52,957			(6,718		)	20,371
Cash provided from operations	423,181			394,501			445,711

Cash provided from (used for) investing activities:
Net decrease (increase) in short-term investments	(5,624		)	(3,466		)	17,338
Investment in subsidiaries	(31,000		)	(35,000		)	(2		)
Additions to properties	(7,230		)	(21,965		)	(468		)
Loaned money to affiliates	(180,000		)	(363,056		)	(282,508		)
Repayments from affiliates	180,000			318,056			282,508
Cash provided from (used for) investing activities	(43,854		)	(105,431		)	16,868

Cash provided from (used for) financing activities:
Repayment of debt	(126,875		)	(250,000		)	—
Proceeds from issuance of debt	125,000			400,000			—
Payment for debt issuance costs	(1,661		)	(9,638		)	—
Net issuance (repayment) of commercial paper	61,092			22,224			1,978
Issuance of stock	61,215			61,329			35,958
Acquisitions of treasury stock	(412,989		)	(404,784		)	(418,526		)
Borrowed money from affiliate	278,500			60,000			15,000
Repayments to affiliates	(270,500		)	(78,000		)	(15,000		)
Excess tax benefit on stock option exercises	—			—			8,180
Payment of dividends	(92,101		)	(90,201		)	(90,169		)
Cash provided from (used for) financing activities	(378,319		)	(289,070		)	(462,579		)

Net increase (decrease) in cash	1,008			—			—
Cash balance at beginning of period	—			—			—
Cash balance at end of period	$	1,008		$	—		$	—

See Notes to Condensed Financial Statements and accompanying Report of Independent Registered

Public Accounting Firm.

TORCHMARK CORPORATION

(PARENT COMPANY)

SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Dollar amounts in thousands)

Note A—Dividends from Subsidiaries

Cash dividends paid to Torchmark from the subsidiaries were as follows:



	Year Ended December 31,
	2017		2016		2015
Dividends from subsidiaries	$	453,904	$	437,566	$	466,416

Note B—Supplemental Disclosures of Cash Flow Information

The following table summarizes noncash transactions, which are not reflected on the Condensed Statements of Cash Flows:



	Year Ended December 31,
	2017		2016		2015
Stock-based compensation not involving cash	$	37,034	$	26,326	$	28,664
Borrowed money from affiliate	—		—		56,503
Investment in subsidiaries	317,027		—		39,206
Purchase of agent debit balances	—		—		17,297

The following table summarizes certain amounts paid (received) during the period:



	Year Ended December 31,
	2017			2016			2015
Interest paid	$	86,606		$	84,952		$	77,920
Income taxes paid (received)	(19,961		)	(20,838		)	(22,009		)

Note C—Preferred Stock

As of December 31, 2017, Torchmark had 351 thousand shares of Cumulative Preferred Stock, Series A, issued and outstanding, of which 280 thousand shares were 6.50% Cumulative Preferred Stock, Series A, and 71 thousand shares were 7.15% Cumulative Preferred Stock, Series A (collectively, the “Series A Preferred Stock”). All issued and outstanding shares of Series A Preferred Stock were held by wholly-owned insurance subsidiaries. In the event of liquidation, the holders of the Series A Preferred Stock at the time outstanding would be entitled to receive a liquidating distribution out of the assets legally available to stockholders in the amount of $1 thousand per share or $351 million in the aggregate, plus any accrued and unpaid dividends, before any distribution is made to holders of Torchmark common stock. Holders of Series A Preferred Stock do not have any voting rights nor have rights to convert such shares into shares of any other class of Torchmark capital stock.

See accompanying Report of Independent Registered Public Accounting Firm.