Document

Accounting Pronouncements Yet to be Adopted

Description

Effective date

Effect on the consolidated financial statements

ASU No. 2016-13/2019-04, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, with clarification guidance issued in April 2019.

This standard provides financial statement users with more decision-useful information about the expected credit losses on financial instruments as well as to change the loss impairment methodology for available-for-sale debt securities by use of an allowance rather than a direct write-down.

This standard will become effective on January 1, 2020. The applicable section of the standard related to debt securities requires a prospective transition.

The Company is in the process of determining the impact this guidance will have on the consolidated financial statements.



	March 31, 2019			December 31, 2018
Assets:
Investments:
Fixed maturities—available for sale, at fair value (amortized cost: 2019—$15,988,228; 2018—$15,753,471)	$	17,223,585		$	16,297,932
Policy loans	555,456			550,066
Other long-term investments (includes: 2019—$118,556; 2018—$108,241 under the fair value option)	231,934			207,258
Short-term investments	125,759			63,288
Total investments	18,136,734			17,118,544
Cash	67,342			121,026
Accrued investment income	255,148			243,003
Other receivables	419,610			415,157
Deferred acquisition costs	4,185,231			4,137,925
Goodwill	441,591			441,591
Other assets	559,225			549,899
Assets related to discontinued operations	68,557			68,577
Total assets	$	24,133,438		$	23,095,722
Liabilities:
Future policy benefits	$	14,084,082		$	13,953,826
Unearned and advance premiums	66,924			61,208
Policy claims and other benefits payable	357,294			350,826
Other policyholders' funds	96,986			97,459
Total policy liabilities	14,605,286			14,463,319
Current and deferred income taxes payable	1,225,497			1,047,737
Other liabilities	557,824			453,270
Short-term debt	294,378			307,848
Long-term debt (estimated fair value: 2019—$1,458,751; 2018—$1,384,455)	1,355,601			1,357,185
Liabilities related to discontinued operations	51,426			51,186
Total liabilities	18,090,012			17,680,545
Commitments and Contingencies (Note 5)
Shareholders’ equity:
Preferred stock, par value $1 per share—5,000,000 shares authorized; outstanding: 0 in 2019 and 2018	—			—
Common stock, par value $1 per share—320,000,000 shares authorized; outstanding: (2019—121,218,183 issued; 2018—121,218,183 issued)	121,218			121,218
Additional paid-in capital	518,529			524,414
Accumulated other comprehensive income (loss)	870,067			319,475
Retained earnings	5,364,820			5,213,468
Treasury stock, at cost: (2019—11,292,000 shares; 2018—10,525,147 shares)	(831,208		)	(763,398		)
Total shareholders’ equity	6,043,426			5,415,177
Total liabilities and shareholders’ equity	$	24,133,438		$	23,095,722



	Three Months Ended March 31,
	2019			2018
Revenue:
Life premium	$	624,289		$	598,303
Health premium	266,684			251,798
Other premium	—			5
Total premium	890,973			850,106

Net investment income	226,673			218,084
Realized gains (losses)	1,329			1,951
Other income	241			295
Total revenue	1,119,216			1,070,436

Benefits and expenses:
Life policyholder benefits	409,692			400,581
Health policyholder benefits	170,017			160,619
Other policyholder benefits	8,048			8,689
Total policyholder benefits	587,757			569,889

Amortization of deferred acquisition costs	135,822			129,620
Commissions, premium taxes, and non-deferred acquisition costs	73,465			69,639
Other operating expense	72,793			66,824
Interest expense	21,278			21,622
Total benefits and expenses	891,115			857,594

Income before income taxes	228,101			212,842
Income tax benefit (expense)	(42,707		)	(39,131		)
Income from continuing operations	185,394			173,711

Income (loss) from discontinued operations, net of tax	(49		)	(111		)
Net income	$	185,345		$	173,600

Basic net income (loss) per common share:
Continuing operations	$	1.68		$	1.52
Discontinued operations	—			—
Basic net income per common share	$	1.68		$	1.52

Diluted net income (loss) per common share:
Continuing operations	$	1.65		$	1.49
Discontinued operations	—			—
Diluted net income per common share	$	1.65		$	1.49



	Three Months Ended March 31,
	2019			2018
Net income	$	185,345		$	173,600

Other comprehensive income (loss):

Investments:
Unrealized gains (losses) on fixed maturities:
Unrealized holding gains (losses) arising during period	693,482			(611,548		)
Reclassification adjustments included in net income	(2,444		)	(696		)
Foreign exchange adjustment on fixed maturities recorded at fair value	(142		)	(585		)
Unrealized gains (losses) on fixed maturities	690,896			(612,829		)

Unrealized gains (losses) on other investments	4,043			(2,853		)
Total unrealized investment gains (losses)	694,939			(615,682		)
Less applicable tax (expense) benefit	(145,936		)	129,289
Unrealized investment gains (losses), net of tax	549,003			(486,393		)

Deferred acquisition costs:
Unrealized gains (losses) attributable to deferred acquisition costs	(3,199		)	450
Less applicable tax (expense) benefit	671			(94		)
Unrealized gains (losses) attributable to deferred acquisition costs, net of tax	(2,528		)	356

Foreign exchange translation:
Foreign exchange translation adjustments, other than fixed maturities	3,089			(1,299		)
Less applicable tax (expense) benefit	(647		)	276
Foreign exchange translation adjustments, other than fixed maturities, net of tax	2,442			(1,023		)

Pension:
Amortization of pension costs	2,120			3,778
Less applicable tax (expense) benefit	(445		)	(793		)
Pension adjustments, net of tax	1,675			2,985

Other comprehensive income (loss)	550,592			(484,075		)
Comprehensive income (loss)	$	735,937		$	(310,475	)



	Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total Shareholders’ Equity
Balance at January 1, 2018	$	—	$	124,218	$	508,476		$	1,424,274		$	4,806,208		$	(631,755	)	$	6,231,421
Adoption of ASU 2016-01	—		—		—			—			4,896			—			4,896
Comprehensive income (loss)	—		—		—			(484,075		)	173,600			—			(310,475		)
Common dividends declared ($0.1600 per share)	—		—		—			—			(18,216		)	—			(18,216		)
Acquisition of treasury stock	—		—		—			—						(109,954		)	(109,954		)
Stock-based compensation	—		—		465			—			(1,803		)	10,398			9,060
Exercise of stock options	—		—		—			—			(9,077		)	22,646			13,569
Balance at March 31, 2018	$	—	$	124,218	$	508,941		$	940,199		$	4,955,608		$	(708,665	)	$	5,820,301



	Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock			Total Shareholders’ Equity
Balance at January 1, 2019	$	—	$	121,218	$	524,414		$	319,475		$	5,213,468		$	(763,398	)	$	5,415,177
Adoption of ASU 2016-02⁽¹⁾	—		—		—			—			(497		)	—			(497		)
Comprehensive income (loss)	—		—		—			550,592			185,345			—			735,937
Common dividends declared ($.1725 per share)	—		—		—			—			(18,943		)	—			(18,943		)
Acquisition of treasury stock	—		—		—			—			—			(110,896		)	(110,896		)
Stock-based compensation	—		—		(5,885		)	—			(6,817		)	23,261			10,559
Exercise of stock options	—		—		—			—			(7,736		)	19,825			12,089
Balance at March 31, 2019	$	—	$	121,218	$	518,529		$	870,067		$	5,364,820		$	(831,208	)	$	6,043,426



	Three Months Ended March 31,
	2019			2018
Cash provided from operating activities	$	423,285		$	382,389

Cash provided from (used for) investing activities:
Disposition of investments:
Fixed maturities available for sale—sold	34,997			—
Fixed maturities available for sale—matured or other redemptions	188,253			74,019
Total investments disposed	223,250			74,019
Acquisition of investments:
Fixed maturities—available for sale	(421,111		)	(358,753		)
Other long-term investments	(22,971		)	(53,853		)
Total investments acquired	(444,082		)	(412,606		)
Net (increase) decrease in policy loans	(5,390		)	(2,854		)
Net (increase) decrease in short-term investments	(62,471		)	47,048
Additions to properties	(7,015		)	(11,966		)
Investment in low-income housing interests	(10,054		)	(7,518		)
Cash provided from (used for) investing activities	(305,762		)	(313,877		)

Cash provided from (used for) financing activities:
Issuance of common stock	11,592			13,569
Cash dividends paid to shareholders	(17,696		)	(17,194		)
Repayment of debt	(1,250		)	(625		)
Net borrowing (repayment) of commercial paper	(14,095		)	36,464
Acquisition of treasury stock	(110,896		)	(109,954		)
Net receipts (payments) from deposit-type product	(37,136		)	(25,603		)
Cash provided from (used for) financing activities	(169,481		)	(103,343		)

Effect of foreign exchange rate changes on cash	(1,726		)	4,883
Net increase (decrease) in cash	(53,684		)	(29,948		)
Cash at beginning of year	121,026			118,563
Cash at end of period	$	67,342		$	88,615

Basis of Presentation: The accompanying condensed consolidated financial statements of Torchmark Corporation (Torchmark or alternatively, the Company) have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America (GAAP) for annual financial statements. However, in the opinion of management, these statements include all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the condensed consolidated financial position at March 31, 2019, and the condensed consolidated results of operations, comprehensive income, and cash flows for the periods ended March 31, 2019 and 2018. The interim period condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements that are included in the Form 10-K filed with the Securities Exchange Commission (SEC) on March 1, 2019.



Accounting Pronouncements Adopted in the Current Year
Standard	Description	Effective date	Effect on the consolidated financial statements
ASU No. 2016-02/2018-11, Leases (Topic 842), with clarification guidance issued in July 2018.	The standard requires lessees to record a right-of-use asset and corresponding lease liability on the balance sheet for all operating leases that do not qualify for the practical expedients allowed for in this standard. Additional qualitative and quantitative disclosures are required.	This standard became effective for the Company beginning January 1, 2019.	The Company adopted the optional transition method allowed for under ASU 2018-11 by not restating comparative periods and recognizing an immaterial cumulative-effect adjustment to the opening balance of retained earnings on January 1, 2019. The Company does not have any significant lessor contracts. The adoption did not have a material impact on the consolidated financial statements.
ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities	This standard was issued to shorten the amortization period for certain callable debt securities held at a premium. The standard requires the premium to be amortized to the earliest call date.	This standard became effective for the Company beginning January 1, 2019.	This adoption did not have a material impact on the consolidated financial statements as of March 31, 2019.



Standard	Description	Effective date	Effect on the consolidated financial statements
ASU No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts	The guidance was primarily issued to 1) improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows, 2) simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, 3) simplify the amortization of deferred acquisition costs, and 4) improve the effectiveness of the required disclosures.	This standard is effective beginning January 1, 2021, and should be applied on a retrospective basis. Early adoption of the amendments is permitted.	ASU 2018-12 will require changes to the Company's actuarial systems and data inputs related to the valuation of the future policy benefits. Additionally, it will significantly expand the Company's disclosures. The Company is in the process of evaluating the impact this guidance will have on the consolidated financial statements.
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement	The amendment modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures.	The revised standard is effective beginning January 1, 2020. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. Early adoption is permitted.	The Company does not expect the adoption of this guidance to have a material impact on the consolidated financial statements.
ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20), Changes to the Disclosure Requirements for Defined Benefit Plans	The standard removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant.	This standard is effective beginning January 1, 2021, and will be applied retrospectively. Early adoption is permitted.	The Company does not expect the adoption of this guidance to have a material impact on the consolidated financial statements.
ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract	The standard was issued to align the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software. Accordingly, the standard requires the capitalization of implementation costs incurred in a hosting arrangement that is a service contract, similar to the treatment for developed or obtained internal-use software.	The standard is effective beginning January 1, 2020, and the Company plans to apply the standards on a prospective basis. Early adoption of the amendments is also permitted.	The Company is in the process of determining the impact this guidance will have on the consolidated financial statements.



Reclassification Adjustments
	Three Months Ended March 31,						Affected line items in the Statement of Operations
Component Line Item	2019			2018			Affected line items in the Statement of Operations
Unrealized investment gains (losses) on available for sale assets:
Realized (gains) losses	$	(3,670	)	$	(1,386	)	Realized investment gains (losses)
Amortization of (discount) premium	1,226			690			Net investment income
Total before tax	(2,444		)	(696		)
Tax	513			146			Income taxes
Total after-tax	(1,931		)	(550		)
Pension adjustments:
Amortization of prior service cost	158			119			Other operating expense
Amortization of actuarial gain (loss)	1,962			3,659			Other operating expense
Total before tax	2,120			3,778
Tax	(445		)	(793		)	Income taxes
Total after-tax	1,675			2,985
Total reclassifications (after-tax)	$	(256	)	$	2,435



	March 31, 2019
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value⁽¹⁾		% of Total Fixed Maturities⁽²⁾
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	390,947	$	16,443	$	(1,034	)	$	406,356	2
States, municipalities, and political subdivisions	1,426,461		113,371		(174		)	1,539,658		9
Foreign governments	19,402		2,222		—			21,624		—
Corporates, by sector:
Financial	3,864,828		387,731		(44,465		)	4,208,094		24
Utilities	1,984,792		279,830		(9,690		)	2,254,932		13
Energy	1,645,409		172,802		(27,409		)	1,790,802		10
Other corporate sectors	6,452,950		438,527		(115,784		)	6,775,693		40
Total corporates	13,947,979		1,278,890		(197,348		)	15,029,521		87
Collateralized debt obligations	57,473		25,664		(5,888		)	77,249		1
Other asset-backed securities	145,966		3,577		(366		)	149,177		1
Total fixed maturities	$	15,988,228	$	1,440,167	$	(204,810	)	$	17,223,585	100



	December 31, 2018
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value⁽¹⁾		% of Total Fixed Maturities⁽²⁾
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	390,351	$	5,104	$	(2,787	)	$	392,668	2
States, municipalities, and political subdivisions	1,354,810		83,600		(1,750		)	1,436,660		9
Foreign governments	19,006		1,810		—			20,816		—
Corporates, by sector:
Financial	3,759,768		262,875		(87,515		)	3,935,128		24
Utilities	1,989,506		217,846		(24,399		)	2,182,953		13
Energy	1,652,700		93,880		(62,371		)	1,684,209		10
Other corporate sectors	6,382,707		283,524		(242,509		)	6,423,722		40
Total corporates	13,784,681		858,125		(416,794		)	14,226,012		87
Collateralized debt obligations	57,769		22,014		(6,414		)	73,369		1
Other asset-backed securities	146,854		2,187		(634		)	148,407		1
Total fixed maturities	$	15,753,471	$	972,840	$	(428,379	)	$	16,297,932	100



	Fair Value Measurements at March 31, 2019 using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	—		$	406,356		$	—		$	406,356
States, municipalities, and political subdivisions	—			1,539,658			—			1,539,658
Foreign governments	—			21,624			—			21,624
Corporates, by sector:
Financial	—			4,163,932			44,162			4,208,094
Utilities	5,100			2,098,883			150,949			2,254,932
Energy	—			1,750,336			40,466			1,790,802
Other corporate sectors	—			6,448,950			326,743			6,775,693
Total corporates	5,100			14,462,101			562,320			15,029,521
Collateralized debt obligations	—			—			77,249			77,249
Other asset-backed securities	—			136,023			13,154			149,177
Total fixed maturities	$	5,100		$	16,565,762		$	652,723		$	17,223,585
Percentage of total	—		%	96.2		%	3.8		%	100.0		%



	Fair Value Measurements at December 31, 2018 using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	—		$	392,668		$	—		$	392,668
States, municipalities, and political subdivisions	—			1,436,660			—			1,436,660
Foreign governments	—			20,816			—			20,816
Corporates, by sector:
Financial	—			3,891,728			43,400			3,935,128
Utilities	—			2,032,127			150,826			2,182,953
Energy	—			1,645,077			39,132			1,684,209
Other corporate sectors	—			6,103,609			320,113			6,423,722
Total corporates	—			13,672,541			553,471			14,226,012
Collateralized debt obligations	—			—			73,369			73,369
Other asset-backed securities	—			135,425			12,982			148,407
Total fixed maturities	$	—		$	15,658,110		$	639,822		$	16,297,932
Percentage of total	—		%	96.1		%	3.9		%	100.0		%



	Three Months Ended March 31, 2019
	Asset- Backed Securities			Collateralized Debt Obligations			Corporates⁽¹⁾			Total
Balance at January 1, 2019	$	12,982		$	73,369		$	553,471		$	639,822
Total gains or losses:
Included in realized gains/losses	—			—			—			—
Included in other comprehensive income	298			4,176			10,663			15,137
Acquisitions	—			—			—			—
Sales	—			—			—			—
Amortization	—			1,162			3			1,165
Other⁽²⁾	(126		)	(1,458		)	(1,817		)	(3,401		)
Transfers in and/or out of Level 3⁽³⁾	—			—			—			—
Balance at March 31, 2019	$	13,154		$	77,249		$	562,320		$	652,723
Percent of total fixed maturities	0.1		%	0.4		%	3.3		%	3.8		%



	Three Months Ended March 31, 2018
	Asset- Backed Securities			Collateralized Debt Obligations			Corporates⁽¹⁾			Total
Balance at January 1, 2018	$	14,049		$	71,581		$	582,810		$	668,440
Total gains or losses:
Included in realized gains/losses	—			—			—			—
Included in other comprehensive income	(749		)	4,621			(12,233		)	(8,361		)
Acquisitions	—			—			—			—
Sales	—			—			—			—
Amortization	—			1,201			4			1,205
Other⁽²⁾	(113		)	(1,879		)	(1,781		)	(3,773		)
Transfers in and/or out of Level 3⁽³⁾	—			—			—			—
Balance at March 31, 2018	$	13,187		$	75,524		$	568,800		$	657,511
Percent of total fixed maturities	0.1		%	0.5		%	3.4		%	4.0		%

Other-Than-Temporary Impairments: In accordance with the other-than-temporary impairment (OTTI) policy, the Company evaluated its fixed maturities available for sale in an unrealized loss position to determine if there was any impairment for the quarter. Gross unrealized losses may fluctuate quarter over quarter due to adverse factors in the market that affect our holdings, such as changes in the interest rates or credit spreads. While the Company holds securities that may be in an unrealized loss position from time to time, Torchmark has the ability and intent to hold these investments to recovery. Additionally, Torchmark does not expect to be required to sell any of its securities due to the strong cash flows generated by its insurance operations.



	At March 31, 2019
	Less than Twelve Months					Twelve Months or Longer					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	6	$	—		$	61,709	$	(1,034	)	$	61,715	$	(1,034	)
States, municipalities and political subdivisions	14,974		(26		)	1,056		(5		)	16,030		(31		)
Corporates, by sector:
Financial	69,791		(1,004		)	388,946		(15,440		)	458,737		(16,444		)
Utilities	2,023		(2		)	177,061		(5,553		)	179,084		(5,555		)
Energy	48,948		(693		)	145,645		(7,662		)	194,593		(8,355		)
Other corporate sectors	392,572		(12,612		)	1,560,588		(82,520		)	1,953,160		(95,132		)
Total corporates	513,334		(14,311		)	2,272,240		(111,175		)	2,785,574		(125,486		)
Other asset-backed securities	98		—			4,463		(23		)	4,561		(23		)
Total investment grade securities	528,412		(14,337		)	2,339,468		(112,237		)	2,867,880		(126,574		)

Below investment grade securities:
States, municipalities and political subdivisions	85		(143		)	—		—			85		(143		)
Corporates, by sector:
Financial	—		—			104,759		(28,021		)	104,759		(28,021		)
Utilities	—		—			12,648		(4,135		)	12,648		(4,135		)
Energy	11,207		(589		)	47,260		(18,465		)	58,467		(19,054		)
Other corporate sectors	35,189		(2,153		)	94,367		(18,499		)	129,556		(20,652		)
Total corporates	46,396		(2,742		)	259,034		(69,120		)	305,430		(71,862		)
Collateralized debt obligations	—		—			14,112		(5,888		)	14,112		(5,888		)
Other asset-backed securities	14,132		(343		)	—		—			14,132		(343		)
Total below investment grade securities	60,613		(3,228		)	273,146		(75,008		)	333,759		(78,236		)
Total fixed maturities	$	589,025	$	(17,565	)	$	2,612,614	$	(187,245	)	$	3,201,639	$	(204,810	)



	At December 31, 2018
	Less than Twelve Months					Twelve Months or Longer					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises	$	37,182	$	(212	)	$	89,664	$	(2,575	)	$	126,846	$	(2,787	)
States, municipalities and political subdivisions	124,907		(1,648		)	7,981		(102		)	132,888		(1,750		)
Corporates, by sector:
Financial	931,161		(36,337		)	241,442		(21,572		)	1,172,603		(57,909		)
Utilities	329,753		(11,680		)	121,308		(9,442		)	451,061		(21,122		)
Energy	475,736		(29,426		)	54,937		(9,382		)	530,673		(38,808		)
Other corporate sectors	2,515,541		(149,168		)	575,796		(62,994		)	3,091,337		(212,162		)
Total corporates	4,252,191		(226,611		)	993,483		(103,390		)	5,245,674		(330,001		)
Other asset-backed securities	44,603		(634		)	—		—			44,603		(634		)
Total investment grade securities	4,458,883		(229,105		)	1,091,128		(106,067		)	5,550,011		(335,172		)

Below investment grade securities:
States, municipalities and political subdivisions	—		—			—		—			—		—
Corporates, by sector:
Financial	22,087		(8,674		)	81,101		(20,932		)	103,188		(29,606		)
Utilities	28,613		(3,277		)	—		—			28,613		(3,277		)
Energy	42,874		(3,901		)	36,122		(19,662		)	78,996		(23,563		)
Other corporate sectors	146,373		(7,235		)	69,053		(23,112		)	215,426		(30,347		)
Total corporates	239,947		(23,087		)	186,276		(63,706		)	426,223		(86,793		)
Collateralized debt obligations	—		—			13,586		(6,414		)	13,586		(6,414		)
Other asset-backed securities	—		—			—		—			—		—
Total below investment grade securities	239,947		(23,087		)	199,862		(70,120		)	439,809		(93,207		)
Total fixed maturities	$	4,698,830	$	(252,192	)	$	1,290,990	$	(176,187	)	$	5,989,820	$	(428,379	)

Litigation: Torchmark and its subsidiaries, in common with the insurance industry in general, are subject to litigation, including putative class action litigation, alleged breaches of contract, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of agents of Torchmark’s subsidiaries, employment discrimination, and miscellaneous other causes of action. Based upon information presently available, and in light of legal and other factual defenses available to Torchmark and its subsidiaries, management does not believe that it is reasonably possible that such litigation will have a material adverse effect on Torchmark’s financial condition, future operating results or liquidity; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future. This bespeaks caution, particularly in states with reputations for high punitive damage verdicts. Torchmark’s management recognizes that large punitive damage awards bearing little or no relation to actual damages continue to be awarded by juries in jurisdictions in which Torchmark and its subsidiaries have substantial business, creating the potential for unpredictable material adverse judgments in any given punitive damage suit.

On September 12, 2018, putative class action litigation was filed against American Income Life Insurance Company in California’s Contra Costa County Superior Court (Joh v. American Income Life Insurance Company, Case No. C18-01863). An amended complaint was filed on October 18, 2018. American Income removed the case to the United States District Court for the Northern District of California (Case No. 3:18-cv-06364-TSH). The plaintiff, a former insurance sales agent of American Income, is suing on behalf of all current and former sales agents who sold insurance for American Income in the state of California for the four years prior to the filing of the complaint. The amended complaint alleges that such individuals are employees and asserts claims under the California Labor Code, California Business and Professions Code, and California Private Attorney General Act. The complaint seeks compensatory damages, penalties and attorney fees on claims for failure to pay wages/commissions, failure to appropriately pay agents at termination, failure to provide itemized wage statements, failure to reimburse expenses and unfair business practices. The Company continues to assess the amount and thus does not have a reasonable estimate of any potential liability.

On October 18, 2018, putative class action litigation was filed against Torchmark Corporation and American Income Life Insurance Company in California’s Los Angeles County Superior Court (Golz v. American Income Life Insurance Company, et al Case No. 18STCV01354). American Income removed the case to the United States District Court for the Central District of California (Case No. 2:18-cv-09879 R (SSx)). An amended complaint was filed on February 5, 2019. The amended complaint alleges that the putative class members are employees and asserts claims under the California Labor Code and California Business and Professions Code. The complaint alleges that plaintiff was an American Income insurance agent trainee in California who seeks to represent a class of individuals in California whom American Income classified as independently contracted agent trainees. The class period is alleged to begin four years prior to the complaint’s filing. The complaint seeks compensatory damages, penalties, and attorney fees on claims for failure to pay minimum wage and overtime, failure to provide meal and rest breaks, failure to appropriately pay wages at termination, failure to provide itemized wage statements, failure to reimburse business expenses, and unfair business practices. The Company continues to assess the amount and thus does not have a reasonable estimate of any potential liability.

On December 14, 2018, putative class action litigation was filed against American Income Life Insurance Company in United States District Court for the Northern District of California (Hamilton v. American Income Life Insurance Company, Case No. 4:18-cv-7535-KAW). An amended complaint was filed on January 23, 2019. The plaintiffs, former insurance sales agents of American Income, are suing on behalf of all current and former sales agents who sold insurance for American Income in the state of California for the last four years prior to the filing of the complaint. The lawsuit alleges that putative class members are employees and asserts claims under the California Labor Code, California Business and Professions Code, and California Private Attorney General Act. The complaint seeks compensatory damages, penalties and attorney fees on claims for failure to pay minimum wage and overtime, failure to provide meal and rest breaks, failure to appropriately pay agents at termination, failure to provide itemized wage statements, failure to reimburse expenses, and unfair business practices. The Company continues to assess the amount and thus does not have a reasonable estimate of any potential liability.

On January 16, 2019, putative class action litigation was filed against American Income Life Insurance Company in Orange County, California Superior Court (Putros v. American Income Life Insurance Company, Case No. 30-2019-01044772-CU-OE-CXC). The plaintiff, a former insurance sales agent of American Income, is suing on behalf of all current and former sales agents who sold insurance for American Income in the state of California for the last four years prior to the filing of the complaint. The lawsuit alleges that putative class members are employees and asserts claims under the California Labor Code, California Business and Professions Code, and California Private Attorney General Act. The complaint seeks compensatory damages, penalties and attorney fees on claims for failure to pay minimum wage, failure to provide meal and rest breaks, failure to appropriately pay agents at termination, failure to provide itemized wage statements, failure to reimburse expenses, and unfair business practices. The Company continues to assess the amount and thus does not have a reasonable estimate of any potential liability.

Pension Assets by Component at March 31, 2019



	Fair Value Determined by:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Amount		% of Total
Corporate bonds:
Financial	$	—	$	42,967	$	—	$	42,967	10
Utilities	—		40,077		—		40,077		10
Energy	—		20,765		—		20,765		5
Other corporates	—		86,217		—		86,217		21
Total corporate bonds	—		190,026		—		190,026		46
Exchange traded fund⁽¹⁾	178,120		—		—		178,120		43
Other bonds	—		249		—		249		—
Other long-term investments	—		9,903		—		9,903		2
Guaranteed annuity contract⁽²⁾	—		26,604		—		26,604		6
Short-term investments	8,212		—		—		8,212		2
Other	4,965		—		—		4,965		1
Total pension assets	$	191,297	$	226,782	$	—	$	418,079	100

Pension Assets by Component at December 31, 2018



	Fair Value Determined by:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Amount		% of Total
Corporate bonds:
Financial	$	—	$	44,236	$	—	$	44,236	11
Utilities	—		39,443		—		39,443		10
Energy	—		19,744		—		19,744		5
Other corporates	—		83,202		—		83,202		22
Total corporate bonds	—		186,625		—		186,625		48
Exchange traded fund⁽¹⁾	157,717		—		—		157,717		40
Other bonds	—		245		—		245		—
Other long-term investments	—		8,475		—		8,475		2
Guaranteed annuity contract⁽²⁾	—		26,505		—		26,505		7
Short-term investments	9,289		—		—		9,289		2
Other	3,816		—		—		3,816		1
Total pension assets	$	170,822	$	221,850	$	—	$	392,672	100

Torchmark’s management prefers to evaluate the performance of its underwriting and investment activities separately, rather than allocating investment income to the underwriting results. As such, the investment function is presented as a stand-alone segment. The investment segment includes the management of the investment portfolio, debt, and cash flow. Management’s measure of profitability for this segment is excess investment income, which is the income earned on the investment portfolio less the required interest on net policy liabilities and financing costs. Financing costs include the interest on Torchmark’s debt. Other income and insurance administrative expense are classified in a separate Corporate and other segment.

The majority of the Company’s required interest on net policy liabilities (benefit reserves less the deferred acquisition cost asset) is not credited to policyholder accounts. Instead, it is an actuarial assumption for discounting cash flows in the computation of benefit reserves and the amortization of the deferred acquisition cost asset. Investment income required to fund the required interest on net policy liabilities is removed from the investment segment and applied to the insurance segments to eliminate the effect of the required interest from the insurance segments. As a result, the investment segment measures net investment income against the required interest on net policy liabilities and financing costs, while the insurance segments simply measure premiums against net policy benefits and expenses. Management believes this presentation facilitates a more meaningful analysis of the Company’s underwriting and investment performance as the underwriting results are based on premiums, claims, and expenses and are not affected by unanticipated fluctuations in investment yields.

As noted, Torchmark’s core operations are insurance and investment management. The insurance segments issue policies for which premiums are collected for the eventual payment of policy benefits. In addition to policy benefits, operating expenses are incurred including acquisition costs, administrative expenses, and taxes. Because life and health contracts can be long term, premium receipts in excess of current expenses are invested. Investment activities, conducted by the investment segment, focus on seeking quality investments with a yield and term appropriate to support the insurance product obligations. These investments generally consist of fixed maturities, and, over the long term, the expected yields are taken into account when setting insurance premium rates and product profitability expectations. As a result, fixed maturities are generally held for long periods to support the liabilities, and Torchmark generally expects to hold investments until maturity. However, dispositions of investments occur from time to time, generally for reasons such as credit concerns, calls by issuers, or other factors.

Since Torchmark does not actively trade investments, realized gains and losses from the disposition and write down of investments are generally incidental to operations and are not considered a material factor in insurance pricing or product profitability. While from time to time these realized gains and losses could be significant to net income in the period in which they occur, they generally have a limited effect on the yield of the total investment portfolio. Further, the disposals have little effect on the size of the portfolio as the proceeds of the disposals are reinvested in the portfolio and the income from the reinvestments is included in net investment income. Therefore, management removes realized investment gains and losses from results of core operations when evaluating the performance of the Company. For this reason, these gains and losses are excluded from Torchmark’s operating segments.



	Three Months Ended March 31, 2019
	Life			Health			Annuity			Investment			Corporate & Other			Adjustments				Consolidated
Revenue:
Premium	$	624,289		$	266,684		$	—		$	—		$	—		$	—			$	890,973
Net investment income	—			—			—			226,673			—			—				226,673
Other income	—			—			—			—			241			—				241
Total revenue	624,289			266,684			—			226,673			241			—				1,117,887
Expenses:
Policy benefits	409,692			170,017			8,048			—			—			—				587,757
Required interest on reserves	(163,662		)	(21,496		)	(11,120		)	196,278			—			—				—
Required interest on DAC	50,024			6,283			131			(56,438		)	—			—				—
Amortization of acquisition costs	108,290			27,014			518			—			—			—				135,822
Commissions, premium taxes, and non-deferred acquisition costs	50,106			23,352			7			—			—			—				73,465
Insurance administrative expense⁽¹⁾	—			—			—			—			59,191			400			(2)	59,591
Parent expense	—			—			—			—			2,643			—				2,643
Stock-based compensation expense	—			—			—			—			10,559			—				10,559
Interest expense	—			—			—			21,278			—			—				21,278
Total expenses	454,450			205,170			(2,416		)	161,118			72,393			400				891,115
Subtotal	169,839			61,514			2,416			65,555			(72,152		)	(400		)		226,772
Non-operating items	—			—			—			—			—			400			(2)	400
Measure of segment profitability (pretax)	$	169,839		$	61,514		$	2,416		$	65,555		$	(72,152	)	$	—			227,172

Realized gain (loss)—investments																				1,329
Administrative settlements																				(400		)
Income before income taxes per Condensed Consolidated Statements of Operations																				$	228,101



	Three Months Ended March 31, 2018
	Life			Health			Annuity			Investment			Corporate & Other			Adjustments				Consolidated
Revenue:
Premium	$	598,303		$	251,798		$	5		$	—		$	—		$	—			$	850,106
Net investment income	—			—			—			218,084			—			—				218,084
Other income	—			—			—			—			323			(28		)	(2)	295
Total revenue	598,303			251,798			5			218,084			323			(28		)		1,068,485
Expenses:
Policy benefits	400,581			160,619			8,689			—			—			—				569,889
Required interest on reserves	(156,214		)	(20,404		)	(12,017		)	188,635			—			—				—
Required interest on DAC	47,944			6,013			153			(54,110		)	—			—				—
Amortization of acquisition costs	103,777			25,257			586			—			—			—				129,620
Commissions, premium taxes, and non-deferred acquisition costs	47,394			22,265			8			—			—			(28		)	(2)	69,639
Insurance administrative expense⁽¹⁾	—			—			—			—			55,472			—				55,472
Parent expense	—			—			—			—			2,292			—				2,292
Stock-based compensation expense	—			—			—			—			9,060			—				9,060
Interest expense	—			—			—			21,622			—			—				21,622
Total expenses	443,482			193,750			(2,581		)	156,147			66,824			(28		)		857,594
Subtotal	154,821			58,048			2,586			61,937			(66,501		)	—				210,891
Non-operating items	—			—			—			—			—			—				—
Measure of segment profitability (pretax)	$	154,821		$	58,048		$	2,586		$	61,937		$	(66,501	)	$	—			210,891

Realized gain (loss)—investments																				1,951
Income before income taxes per Condensed Consolidated Statements of Operations																				$	212,842



		How Torchmark Views Its Operations. Torchmark is the holding company for a group of insurance companies that market primarily individual life and supplemental health insurance to lower middle to middle income households throughout the United States. We view our operations by segments, which are the insurance product lines of life, health, and annuities, and the investment segment that supports the product lines. Segments are aligned based on their common characteristics, comparability of the profit margins, and management techniques used to operate each segment.
		Insurance Product Line Segments. The insurance product line segments involve the marketing, underwriting, and administration of policies. Each product line is further segmented by the various distribution units that market the insurance policies. Each distribution unit operates in a niche market offering insurance products designed for that particular market. Whether analyzing profitability of a segment as a whole, or the individual distribution units within the segment, the measure of profitability used by management is the underwriting margin, which is:
		Premium revenue Less: Policy obligations Policy acquisition costs and commissions
		Investment Segment. The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability for the investment segment is excess investment income, which is:
		Net investment income Less: Required interest on net policy liabilities Financing costs

Summary of Operations. Net income increased 7% to $185 million during the first three months of 2019, compared with $174 million in the same period in 2018. This increase was primarily related to favorable underwriting income. Included in net income were after-tax realized gains of $1 million in 2019, compared with realized after-tax gains of $2 million for the same period in 2018. On a diluted per common share basis, net income per common share for the three months ended March 31, 2019 increased 11% from $1.49 to $1.65. The percentage growth in net income per share results continues to exceed the growth in dollar amounts due to our share repurchase program. Realized gains and losses are presented more fully under the caption Realized Gains and Losses in this report.

Torchmark's operations on a segment-by-segment basis are discussed in depth below. Net operating income has been used consistently by Torchmark’s management for many years 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 significant and unusual 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. Net income is the most directly comparable GAAP measure.



	Three Months Ended March 31,
	2019			2018			Change			%
Life insurance underwriting margin	$	169,839		$	154,821		$	15,018		10
Health insurance underwriting margin	61,514			58,048			3,466			6
Annuity underwriting margin	2,416			2,586			(170		)	(7	)
Excess investment income	65,555			61,937			3,618			6
Other insurance:
Other income	241			323			(82		)	(25	)
Administrative expense	(59,191		)	(55,472		)	(3,719		)	7
Corporate and other	(13,202		)	(11,352		)	(1,850		)	16
Pre-tax total	227,172			210,891			16,281			8
Applicable taxes	(42,428		)	(38,721		)	(3,707		)	10
Net operating income	184,744			172,170			12,574			7
Reconciling items, net of tax:
Realized gains (losses) - investments	1,050			1,541			(491		)
Part D adjustment - discontinued operations	(49		)	(111		)	62
Administrative settlements	(400		)	—			(400		)
Net income	$	185,345		$	173,600		$	11,745		7



Life Insurance Summary of Results (Dollar amounts in thousands)
	Three Months Ended March 31,										Increase
	2019					2018					(Decrease)
	Amount			% of Premium		Amount			% of Premium		Amount			%
Premium and policy charges	$	624,289		100		$	598,303		100		$	25,986		4

Policy obligations	409,692			66		400,581			67		9,111			2
Required interest on reserves	(163,662		)	(26	)	(156,214		)	(26	)	(7,448		)	5
Net policy obligations	246,030			40		244,367			41		1,663			1
Commissions, premium taxes, and non-deferred acquisition expenses	50,106			8		47,394			8		2,712			6
Amortization of acquisition costs	158,314			25		151,721			25		6,593			4
Total expense	454,450			73		443,482			74		10,968			2
Insurance underwriting margin before other income and administrative expenses	$	169,839		27		$	154,821		26		$	15,018		10

While American Income Exclusive Agency has historically marketed primarily to members of labor unions, this agency has diversified in recent years by focusing heavily on other affinity groups, third party internet vendor leads, and referrals which has driven growth despite declines in North American union membership. This agency is Torchmark’s largest contributor to life premium at 45% of Torchmark’s 2019 year-to-date total. This agency produced premium income during the first three months of $282 million, an increase of 7% over the comparable prior year period of $263 million. First-year collected premium was $47 million, an increase of 1%. Net sales increased 4% to $58 million in 2019 over the 2018 total of $55 million. Over the long-term, sales growth in our exclusive agencies is generally dependent on growth in the size of the agency force. The American Income Exclusive Agency's average agent count increased to 6,865 for the three months ended March 31, 2019, compared with 6,780 for the same period in 2018. As is the case with all Torchmark agencies, the average agent count is based on the actual count at the end of each week during the period.

The Globe Life Direct Response unit offers adult and juvenile life insurance through a variety of direct-to-consumer marketing approaches, which include direct mailings, insert media, and electronic media. These different approaches support and complement one another in the unit’s efforts to reach the consumer. The Globe Life Direct Response channel’s growth has been fueled over the years by constant innovation. In recent years, electronic media production has grown rapidly as management has aggressively increased marketing activities related to internet and mobile technology, and has focused on driving traffic to the inbound call center. We continually introduce new initiatives in this unit in an attempt to increase response and issue rates.

The Liberty National Exclusive Agency markets individual life insurance to middle-income household and worksite customers. Life premium income for this agency was $71 million in the first three months of 2019 compared with $70 million for the same period in 2018. Net sales for the Liberty National Exclusive Agency increased 8% to $12 million. The continued increases in net sales reflect changes in the structure of the agency that were put in place several years ago. Recent growth in middle management within the agency will help continue this growth. First-year collected premium increased 6% to $9 million. The underwriting margin as a percent of premium was 25%, up from 24% for the three months ended March 31, 2018. The increase is primarily attributable to higher than normal policy obligations during the first three months of 2018 compared with slightly lower policy obligations during the same period in 2019.

The Liberty National Exclusive Agency's average agent count increased 4% to 2,179 for the three months ended March 31, 2019 compared with 2,087 for the same period in 2018. We continue to execute our long term plan to grow this agency through expansion from small-town markets in the southeast to more densely populated areas with larger pools of potential agent recruits and customers. Continued expansion of this agency’s presence into more heavily populated, less-penetrated areas will help create long term agency growth. Additionally, the agency's prospecting training program continues to help improve the ability of agents to develop new worksite marketing business.



	Three Months Ended March 31,										Increase
	2019					2018					(Decrease)
	Amount			% of Premium		Amount			% of Premium		Amount			%
Premium	$	266,684		100		$	251,798		100		$	14,886		6

Policy obligations	170,017			64		160,619			64		9,398			6
Required interest on reserves	(21,496		)	(8	)	(20,404		)	(8	)	(1,092		)	5
Net policy obligations	148,521			56		140,215			56		8,306			6
Commissions, premium taxes, and non-deferred acquisition expenses	23,352			9		22,265			9		1,087			5
Amortization of acquisition costs	33,297			12		31,270			12		2,027			6
Total expense	205,170			77		193,750			77		11,420			6
Insurance underwriting margin before other income and administrative expense	$	61,514		23		$	58,048		23		$	3,466		6

The United American Independent Agency consists of independent agencies who can also sell for other companies. The United American Independent Agency was Torchmark’s largest health agency in terms of health premium income. Premium income was $103 million, representing 38% of Torchmark’s total health premium. Net sales were $15 million, or 39% of Torchmark’s health net sales. This agency primarily produces Medicare Supplement insurance, with Medicare Supplement premium income of $100 million. The United American Independent Agency represents approximately 77% of all Torchmark Medicare Supplement premium and 93% of Medicare Supplement net sales. Medicare Supplement premium in this agency rose 10%. Net sales of the Medicare Supplement product increased 5% in 2019 over the prior year period primarily as a result of an increase in individual sales. First-year collected health premium rose 14% to $16 million.

The Family Heritage Exclusive Agency primarily markets individual limited-benefit supplemental health insurance in non-urban areas. Most of their policies include a cash-back feature, such as a return of premium whereby any excess of premiums over claims paid is returned to the policyholder at the end of a specified period stated within the insurance policy. The Family Heritage Exclusive Agency contributed $13 million, representing 34% of Torchmark's total net health sales in the first three months of 2019. Health premium income was $71 million for the three month period of 2019, representing 27% of Torchmark’s health premium compared with $66 million or 26% of Torchmark's health premium in the prior year period. Underwriting margin as a percent of premium was 25%, up from 23% for the three months ended March 31, 2018. The increase was primarily attributable to the growing portion of new business sold at margins higher than the business purchased in 2012 which is running off over time. The average agent count was 1,002 for the three months ended March 31, 2019 compared with 988 for the same period in 2018, an increase of 1%.

The Liberty National Exclusive Agency represented 18% of all Torchmark health premium income at $48 million in the three months of 2019. The Liberty National Exclusive Agency markets limited-benefit health supplemental products consisting primarily of critical illness insurance. Much of Liberty National Exclusive Agency’s health business is now generated through worksite marketing. In 2019, health premium income in the Liberty National Exclusive Agency declined $1 million to $48 million from prior year premium. Liberty’s health premium decline is primarily due to the runoff of a block of discontinued Medicare Supplement policies previously sold by the agency.



	Three Months Ended March 31,
	2019				2018
	Amount			% of Premium	Amount			% of Premium
Insurance administrative expenses:
Salaries	$	25,184		2.8	$	24,645		2.9
Other employee costs	9,693			1.1	9,687			1.1
Information technology costs	10,173			1.1	6,803			0.8
Legal costs	2,175			0.3	2,019			0.2
Other administrative costs	11,966			1.3	12,318			1.5
Total insurance administrative expenses	59,191			6.6	55,472			6.5

Parent company expense	2,643				2,292
Stock compensation expense	10,559				9,060
Administrative settlements	400				—
Total operating expenses, per Condensed Consolidated Statements of Operations	$	72,793			$	66,824

Insurance administrative expenses:
Increase (decrease) over prior year	6.7		%		6.9		%
Total operating expenses:
Increase (decrease) over prior year	8.9		%		7.2		%

We also view excess investment income per diluted common share as an important and useful measure to evaluate the performance of the investment segment. It is defined as excess investment income divided by the total diluted weighted average shares outstanding, representing the contribution by the investment segment to the consolidated earnings per share of the Company. Since implementing our share repurchase program in 1986, we have used $7.6 billion of cash flow to repurchase Torchmark shares after determining that the repurchases provided a greater return than other investment alternatives. If we had not used this excess cash to repurchase shares, but had instead invested it in interest-bearing assets, we would have earned more investment income and had more shares outstanding. As excess investment income per diluted common share incorporates all capital resources, we believe that excess investment income per diluted share is a useful measure to evaluate the investment segment. In order to put all capital resource uses on a comparable basis, we believe that excess investment income per diluted share is an appropriate measure of the investment segment.



	Three Months Ended March 31,						Increase (Decrease)
	2019			2018			Amount			%
Net investment income	$	226,673		$	218,084		$	8,589		4
Interest on net insurance policy liabilities:
Interest on reserves	(196,278		)	(188,635		)	(7,643		)	4
Interest on deferred acquisition costs	56,438			54,110			2,328			4
Net required interest	(139,840		)	(134,525		)	(5,315		)	4
Financing costs	(21,278		)	(21,622		)	344			(2	)
Excess investment income	$	65,555		$	61,937		$	3,618		6

Excess investment income per diluted share	$	0.58		$	0.53		$	0.05		9

Mean invested assets (at amortized cost)	$	16,780,373		$	15,965,283		$	815,090		5
Average net insurance policy liabilities⁽¹⁾	9,942,946			9,613,064			329,882			3
Average debt and preferred securities (at amortized cost)	1,656,543			1,512,948			143,595			9

Net investment income in 2019 was $227 million or 4% greater than the year ago period. Mean invested assets increased 5% during the first three months of 2019 over the same period last year. The effective annual yield rate earned on the fixed maturity portfolio was 5.53% in the first three months of 2019, compared with 5.58% a year earlier. Growth in net investment income has been negatively impacted in recent years by the low interest rate environment during which time we have invested new money at rates less than the average portfolio yield rate and reinvested the proceeds from dispositions at yield rates less than what we earned on these bonds prior to disposition. As a result, growth in net investment income has been slower than the growth in mean invested assets in recent years. While Torchmark may see a slightly higher turnover rate of 4% to 5% in 2019 due to potential calls of highly rated municipal securities, we expect that the average annual turnover of fixed maturity assets during the next five years will be between 1% to 3% of the portfolio and will not have a material negative impact on investment income.

Should long-term interest rates rise, Torchmark's net investment income would benefit due to higher interest rates on new investments. While such a rise in interest rates could adversely affect the fair value of the fixed maturities portfolio, we could withstand an increase in interest rates of approximately 65 to 70 basis points before the net unrealized gains on our fixed maturity portfolio as of March 31, 2019 would be eliminated. Should interest rates increase further than that, we would not be concerned with potential interest rate driven unrealized losses in our fixed maturity portfolio because we have the intent and, more importantly, the ability to hold our fixed maturities to maturity.

Required interest on net insurance policy liabilities is the amount of net investment income considered by management necessary to “fund” net insurance policy liabilities, which is the net of the benefit reserve liability and deferred acquisition cost asset. As such, it is removed from the investment segment and applied to the insurance segments to offset the effect of the interest required by the insurance segments. As discussed in Note 9—Business Segments, management believes this provides a more meaningful analysis of the investment and insurance segments. Required interest is calculated using the actuarial interest assumptions used to discount the benefit reserve liability and to amortize the deferred acquisition costs for our insurance policies in force.

The great majority of our life and health insurance policies are fixed interest-rate protection policies, not investment products, and are accounted for under current accounting guidance for long-duration insurance products which mandates that interest rate assumptions for a particular block of business be “locked in” for the life of that block. Each calendar year, we set the discount rate to be used to calculate the benefit reserve liability and deferred acquisition cost asset for all insurance policies issued that year. That rate is based on the new money yields that we expect to earn on cash flow received in the future from policies of that issue year, and cannot be changed. The discount rate used for policies issued in the current year has no impact on the in force policies issued in prior years as the rates of all prior issue years are also locked in. As such, the overall discount rate for the entire in force block of 5.6% is a weighted average of the discount rates being used from all issue years. Changes in the overall weighted-average discount rate over time are caused by changes in the mix of the reserves and the deferred acquisition cost asset by issue year on the entire block of in force business. Business issued in the current year has very little impact on the overall weighted-average discount rate due to the size of our in force business.

Investments (acquisitions), comparing the first three months of 2019 with the first three months of 2018. Torchmark’s investment policy calls for investing primarily in investment grade fixed maturities that meet our quality and yield objectives. We generally prefer to invest in securities with longer maturities because they more closely match the long-term nature of our policy liabilities. We believe this strategy is appropriate because our cash flows from operations and invested assets are positive, stable and predictable. If longer-term securities that meet our quality and yield objectives are not available, we do not relax our quality objectives; instead, we consider investing in shorter or lower yielding securities taking into consideration the slope of the yield curve and other factors.

We are not a party to any credit default swaps or other derivative contracts. We do not participate in securities lending, we have no off-balance sheet investments, and we do not have any exposure to European sovereign debt at March 31, 2019. In 2017, it was announced by the head of the United Kingdom's Financial Conduct Authority that they plan to phase out the floating rate, London Interbank Offered Rate (LIBOR), by the end of 2021. Uncertainty remains as to what will be the replacement floating rate. As of March 31, 2019, Torchmark had limited assets and liabilities that utilize LIBOR as a benchmark rate. We will continue to monitor the progress towards the establishment of a new floating rate.



	Below Investment Grade									Total Fixed Maturities									% of Total Fixed Maturities
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		At Amortized Cost	At Fair Value

Corporates:
Financial
Insurance - life, health, P&C	$	66,264	$	3,991	$	(8,718	)	$	61,537	$	2,005,259	$	247,775	$	(15,393	)	$	2,237,641	12	12
Banks	27,068		—		(2,138		)	24,930		902,037		87,811		(4,477		)	985,371		6	6
Other financial	74,958		—		(17,165		)	57,793		957,532		52,145		(24,595		)	985,082		6	6
Total financial	168,290		3,991		(28,021		)	144,260		3,864,828		387,731		(44,465		)	4,208,094		24	24
Utilities
Electric	36,345		315		(4,135		)	32,525		1,465,230		237,205		(7,665		)	1,694,770		10	10
Gas and water	—		—		—			—		519,562		42,625		(2,025		)	560,162		3	3
Total utilities	36,345		315		(4,135		)	32,525		1,984,792		279,830		(9,690		)	2,254,932		13	13
Industrial - Energy
Pipelines	40,544		26		(1,973		)	38,597		913,684		89,428		(7,309		)	995,803		6	6
Exploration and production	28,110		1,464		(488		)	29,086		547,933		62,622		(3,507		)	607,048		3	3
Oil field services	—		—		—			—		49,833		6,868		—			56,701		—	—
Refiner	—		—		—			—		89,157		13,884		—			103,041		1	1
Driller	44,802		—		(16,593		)	28,209		44,802		—		(16,593		)	28,209		—	—
Total energy	113,456		1,490		(19,054		)	95,892		1,645,409		172,802		(27,409		)	1,790,802		10	10
Industrial - Basic materials
Chemicals	—		—		—			—		555,681		18,217		(11,246		)	562,652		3	3
Metals and mining	60,604		4,787		—			65,391		386,829		56,523		(243		)	443,109		2	3
Forestry products and paper	—		—		—			—		111,466		9,494		(513		)	120,447		1	1
Total basic materials	60,604		4,787		—			65,391		1,053,976		84,234		(12,002		)	1,126,208		6	7
Industrial - Consumer, non-cyclical	33,756		349		(5,627		)	28,478		2,094,864		118,733		(45,324		)	2,168,273		13	13
Other industrials	46,778		710		(1,879		)	45,609		1,363,833		94,274		(15,029		)	1,443,078		9	8
Industrial - Transportation	26,097		—		(2,137		)	23,960		570,997		64,663		(4,303		)	631,357		4	4
Other corporate sectors	113,222		1,105		(11,009		)	103,318		1,369,280		76,623		(39,126		)	1,406,777		9	8
Total corporates	598,548		12,747		(71,862		)	539,433		13,947,979		1,278,890		(197,348		)	15,029,521		88	87
Other fixed maturities:
Government (U.S., municipal, and foreign)	440		120		(143		)	417		1,836,200		131,996		(1,208		)	1,966,988		11	11
Collateralized debt obligations	57,473		25,664		(5,888		)	77,249		57,473		25,664		(5,888		)	77,249		—	1
Other asset-backed securities	14,475		—		(343		)	14,132		145,701		3,546		(365		)	148,882		1	1
Mortgage-backed securities⁽¹⁾	—		—		—			—		875		71		(1		)	945		—	—
Total fixed maturities	$	670,936	$	38,531	$	(78,236	)	$	631,231	$	15,988,228	$	1,440,167	$	(204,810	)	$	17,223,585	100	100

(Dollar amounts in thousands)



	Below Investment Grade										Total Fixed Maturities									% of Total Fixed Maturities
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		At Amortized Cost	At Fair Value

Corporates:
Financial
Insurance - life, health, P&C	$	66,310	$	3,836	$	(8,674	)	$	61,472		$	1,941,967	$	181,552	$	(28,158	)	$	2,095,361	12	13
Banks	27,075		—		(1,348		)	25,727			871,485		50,205		(16,730		)	904,960		6	5
Other financial	74,958		—		(19,584		)	55,374			946,316		31,118		(42,627		)	934,807		6	6
Total financial	168,343		3,836		(29,606		)	142,573			3,759,768		262,875		(87,515		)	3,935,128		24	24
Utilities
Electric	36,889		176		(3,277		)	33,788			1,458,193		188,136		(14,943		)	1,631,386		10	10
Gas and water	—		—		—			—			531,313		29,710		(9,456		)	551,567		3	3
Total utilities	36,889		176		(3,277		)	33,788			1,989,506		217,846		(24,399		)	2,182,953		13	13
Industrial - Energy
Pipelines	40,553		—		(4,762		)	35,791			925,689		50,835		(25,395		)	951,129		6	6
Exploration and production	17,187		—		(1,554		)	15,633			548,099		30,969		(17,518		)	561,550		3	3
Oil field services	—		—		(1		)	(1		)	49,837		3,893		(715		)	53,015		—	—
Refiner	—		—		—			—			84,255		8,183		(1,496		)	90,942		1	1
Driller	44,820		—		(17,247		)	27,573			44,820		—		(17,247		)	27,573		—	—
Total energy	102,560		—		(23,564		)	78,996			1,652,700		93,880		(62,371		)	1,684,209		10	10
Industrial - Basic materials
Chemicals	—		—		—			—			554,481		8,818		(25,302		)	537,997		4	3
Metals and mining	57,409		92		(1,492		)	56,009			386,782		33,868		(2,500		)	418,150		2	3
Forestry products and paper	—		—		—			—			111,612		7,329		(2,711		)	116,230		—	1
Total basic materials	57,409		92		(1,492		)	56,009			1,052,875		50,015		(30,513		)	1,072,377		6	7
Industrial - Consumer, non-cyclical	33,847		587		(6,710		)	27,724			2,024,230		76,669		(89,536		)	2,011,363		13	12
Other industrials	46,852		—		(3,311		)	43,541			1,364,192		62,338		(42,222		)	1,384,308		9	8
Industrial - Transportation	26,213		—		(2,592		)	23,621			569,786		47,496		(10,325		)	606,957		4	4
Other corporate sectors	135,873		982		(16,241		)	120,614			1,371,624		47,006		(69,913		)	1,348,717		9	9
Total corporates	607,986		5,673		(86,793		)	526,866			13,784,681		858,125		(416,794		)	14,226,012		88	87
Other fixed maturities:
Government (U.S., municipal, and foreign)	306		93		—			399			1,763,496		90,475		(4,537		)	1,849,434		11	11
Collateralized debt obligations	57,769		22,014		(6,414		)	73,369			57,769		22,014		(6,414		)	73,369		—	1
Other asset-backed securities	—		—		—			—			146,546		2,159		(633		)	148,072		1	1
Mortgage-backed securities⁽¹⁾	—		—		—			—			979		67		(1		)	1,045		—	—
Total fixed maturities	$	666,061	$	27,780	$	(93,207	)	$	600,634		$	15,753,471	$	972,840	$	(428,379	)	$	16,297,932	100	100

An analysis of the fixed maturity portfolio at March 31, 2019 and December 31, 2018 by a composite quality rating is shown in the tables below. The composite quality rating for each security is the average of the security’s ratings as assigned by Moody’s Investor Service, Standard & Poor’s, Fitch Ratings, and Dominion Bond Rating Service, LTD. The ratings assigned by these four nationally recognized statistical rating organizations are evenly weighted when calculating the average. The composite quality rating is created using a methodology developed by Torchmark Corporation using ratings from the various rating agencies noted above. (It should be noted that the composite quality rating is not a Standard & Poor's credit rating. Standard and Poor's does not sponsor, endorse or promote the composite quality rating and shall not be liable for any use of the composite quality rating.) Included in the chart below are private placement fixed maturity holdings of $598 million at amortized cost ($605 million at fair value). The ratings for these holdings were assigned by the third party managers of those securities.

Share Purchases. Torchmark has an on-going share repurchase program which began in 1986 that is reviewed quarterly by management and is reaffirmed by the Board of Directors on an annual basis. The program was reaffirmed on August 7, 2018. With no specified authorization amount, we determine the amount of repurchases based on the amount of our excess cash flow, general market conditions, and other alternative uses. These purchases are made at the Parent Company with excess cash flow. Excess cash flow is primarily made up of cash received from the insurance subsidiaries less dividends paid to shareholders and interest paid on our debt. See further discussion in the Capital Resources section below. Share purchases are also made with the proceeds from option exercises by current and former employees in order to reduce dilution. The following chart summarizes share purchases for the three month periods ended March 31, 2019 and 2018.

Insurance subsidiary liquidity. The operations of our insurance subsidiaries have historically generated substantial cash inflows in excess of immediate cash needs. Sources of cash flows for the insurance subsidiaries include primarily premium and investment income. Cash outflows from operations include policy benefit payments, commissions, administrative expenses and taxes. The funds to provide for policy benefits, the majority of which are paid in future periods, are invested primarily in long-term fixed maturities as they better match the long-term nature of these obligations. In addition to investment income, maturities and scheduled repayments in the investment portfolio are sources of cash. Excess cash available from the insurance subsidiaries’ operations is generally distributed as a dividend to the Parent Company, subject to regulatory restriction. The dividends are generally paid in amounts equal to the subsidiaries’ prior year statutory net income excluding realized capital gains. While the leading source of the excess cash is investment income, a significant portion of the excess cash also comes from underwriting income due to our high underwriting margins and effective expense control.

Short-term borrowings. We have a credit facility with a group of lenders allowing for unsecured revolving borrowings and stand-by letters of credit up to $750 million, which could be extended up to $1 billion. We may request the extension, however, it is not guaranteed. Up to $250 million in letters of credit can be issued against the facility. The facility serves as a back-up credit line for a commercial paper program under which we may issue commercial paper at any time, with total commercial paper outstanding not to exceed the facility maximum, less any letters of credit issued. Interest on the commercial paper program is charged at variable rates. This facility was amended in May 2016 to extend the maturity date of the facility to May 2021. The amendment also allowed for an additional $100 million term loan to be issued under the facility rate structure. The term loan was issued during 2016 and will be repaid in quarterly escalating installments with a balloon payment of $75 million due in May 2021. Interest on the term loan is computed and paid monthly at 125 basis points plus 1 month LIBOR. In accordance with the agreement, we are subject to certain covenants regarding capitalization. As of March 31, 2019, we were in full compliance with those covenants.

Consolidated liquidity. Consolidated net cash inflows from operations were $423 million in the first three months of 2019, compared with $382 million in the same period of 2018. The increase is primarily attributable to fluctuations in the settlement of certain amounts included in other liabilities. In addition to cash inflows from operations, our insurance companies received proceeds from dispositions of fixed maturities available for sale in the amount of $188 million during the 2019 period. As previously noted under the caption Short-term borrowings, we have in place a line of credit facility. The insurance companies have no additional outstanding credit facilities.

Cash and short-term investments were $193 million at March 31, 2019, compared with $184 million at December 31, 2018. In addition to these liquid assets, the entire $17.2 billion (fair value at March 31, 2019) portfolio of fixed income securities is available for sale in the event of an unexpected need. Approximately 97% of our fixed income securities are publicly traded, freely tradable under SEC Rule 144, or qualified for resale under SEC Rule 144A. We generally expect to hold fixed income securities to maturity, and even though these securities are classified as available for sale, we have the ability and intent to hold any securities which are temporarily impaired until they mature. Our strong cash flows from operations, on-going investment maturities, and credit line availability make any need to sell securities for liquidity highly unlikely.



Instrument	Year Due	Interest Rate		Par Value		Book Value		Fair Value
Notes	2023	7.875%		$	165,612	$	164,544	$	194,336
Senior Notes⁽¹⁾	2022	3.800%		150,000		148,854		152,889
Senior Notes	2028	4.550%		550,000		543,310		580,877
Junior Subordinated Debentures	2056	6.125%		300,000		290,535		318,120
Junior Subordinated Debentures	2057	5.275%		125,000		123,358		127,529
Term loan	2021	3.743%	⁽²⁾	92,500		92,500		92,500
				1,383,112		1,363,101		1,466,251
Less current maturity of term loan⁽³⁾				7,500		7,500		7,500
Total long-term debt				1,375,612		1,355,601		1,458,751

Current maturity of term loan⁽³⁾				7,500		7,500		7,500
Commercial paper				288,000		286,878		286,878
Total short-term debt				295,500		294,378		294,378

Total debt				$	1,671,112	$	1,649,979	$	1,753,129

While GAAP requires our fixed maturity assets to be revalued, it does not permit interest-bearing insurance policy liabilities supported by those assets to be valued at fair value in a consistent manner, with changes in value applied directly to shareholders’ equity. However, due to the size of both the investment portfolio and our policy liabilities, this inconsistency in measurement can have a material impact on shareholders’ equity. Because of the long-term nature of our fixed maturities and liabilities and the strong cash flows generated by our insurance subsidiaries, we have the intent and ability to hold our securities to maturity. As such, we do not expect to incur realized gains or losses due to fluctuations in the market value of fixed maturities caused by interest rate changes or losses caused by temporarily illiquid markets. Accordingly, management removes the effect of this rule when analyzing Torchmark’s balance sheet, capital structure, and financial ratios in order to provide a more consistent and meaningful portrayal of the Company’s financial position from period to period.



	At
	March 31, 2019						December 31, 2018						March 31, 2018
	GAAP			Effect of Accounting Rule Requiring Revaluation⁽¹⁾			GAAP			Effect of Accounting Rule Requiring Revaluation⁽¹⁾			GAAP			Effect of Accounting Rule Requiring Revaluation⁽¹⁾
Fixed maturities	$	17,223,585		$	1,235,357		$	16,297,932		$	544,461		$	16,635,885		$	1,361,395
Deferred acquisition costs⁽²⁾	4,185,231			(8,469		)	4,137,925			(5,270		)	4,002,181			(10,369		)
Total assets	24,133,438			1,226,888			23,095,722			539,191			23,182,343			1,351,026
Short-term debt	294,378			—			307,848			—			365,156			—
Long-term debt	1,355,601			—			1,357,185			—			1,131,215			—
Shareholders' equity	6,043,426			969,242			5,415,177			425,961			5,820,301			1,067,311

Book value per diluted share	54.13			8.68			48.11			3.79			50.13			9.19
Debt to capitalization⁽³⁾	21.4		%	(3.1		)%	23.5		%	(1.5		)%	20.5		%	(3.4		)%

Diluted shares outstanding	111,643						112,561						116,098
Actual shares outstanding	109,926						110,693						113,822

We caution readers regarding certain forward-looking statements contained in the previous discussion and elsewhere in this document, and in any other statements made by, or on behalf of Torchmark whether or not in future filings with the Securities and Exchange Commission. Any statement that is not a historical fact or that might otherwise be considered an opinion or projection concerning Torchmark or its business, whether express or implied, is meant as and should be considered a forward-looking statement. Such statements represent management’s opinions concerning future operations, strategies, financial results or other developments. We specifically disclaim any obligation to update or revise any forward-looking statement because of new information, future developments, or otherwise.

Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control. If these estimates or assumptions prove to be incorrect, the actual results of Torchmark may differ materially from the forward-looking statements made on the basis of such estimates or assumptions. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, which may be national in scope, related to the insurance industry generally, or applicable to Torchmark specifically. Such events or developments could include, but are not necessarily limited to:

Evaluation of Disclosure Controls and Procedures. Torchmark, under the direction of the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure that information required to be disclosed by Torchmark in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to Torchmark’s management, including the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

As of the end of the fiscal quarter completed March 31, 2019, an evaluation was performed under the supervision and with the participation of Torchmark management, including the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer, of Torchmark’s disclosure controls and procedures (as those terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon their evaluation, the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer have concluded that Torchmark’s disclosure controls and procedures are effective as of the date of this Form 10-Q. In compliance with Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. §1350), each of these officers executed a Certification included as an exhibit to this Form 10-Q.

Torchmark and its subsidiaries, in common with the insurance industry in general, are subject to litigation, including putative class action litigation, claims involving tax matters, alleged breaches of contract, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of agents of Torchmark’s subsidiaries, employment discrimination, and miscellaneous other causes of action. Based upon information presently available, and in light of legal and other factual defenses available to Torchmark and its subsidiaries, management does not believe that such litigation will have a material adverse effect on Torchmark’s financial condition, future operating results or liquidity; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future. This bespeaks caution, particularly in states with reputations for high punitive damage verdicts. Torchmark’s management recognizes that large punitive damage awards bearing little or no relation to actual damages continue to be awarded by juries in jurisdictions in which Torchmark and its subsidiaries have substantial business, creating the potential for unpredictable material adverse judgments in any given punitive damage suit.



(Mark one)
ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2019

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from _________to_________



DELAWARE		63-0780404
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3700 South Stonebridge Drive, McKinney, Texas		75070
(Address of principal executive offices)		(Zip Code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value per share	TMK	New York Stock Exchange



	CLASS		OUTSTANDING AT April 30, 2019
	Common Stock, $1.00 Par Value		109,940,525



		Page
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Shareholders' Equity	4
	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements
	Note 1—Significant Accounting Policies	6
	Note 2—New Accounting Standards	6
	Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income	8
	Note 4—Investments	10
	Note 5—Commitments and Contingencies	18
	Note 6—Liability for Unpaid Claims	19
	Note 7—Postretirement Benefits	20
	Note 8—Earnings Per Share	22
	Note 9—Business Segments	22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50

Item 4.	Controls and Procedures	50

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	51

Item 6.	Exhibits	51

Signatures		52


(1)	See further discussion in Note 2—New Accounting Standards.



	Three Months Ended March 31, 2018
	Available for Sale Assets			Deferred Acquisition Costs			Foreign Exchange			Pension Adjustments			Total
Balance at January 1, 2018	$	1,569,289		$	(8,547	)	$	16,302		$	(152,770	)	$	1,424,274
Other comprehensive income (loss) before reclassifications, net of tax	(485,843		)	356			(1,023		)	—			(486,510		)
Reclassifications, net of tax	(550		)	—			—			2,985			2,435
Other comprehensive income (loss)	(486,393		)	356			(1,023		)	2,985			(484,075		)
Balance at March 31, 2018	$	1,082,896		$	(8,191	)	$	15,279		$	(149,785	)	$	940,199



	March 31, 2019
	Amortized Cost		Fair Value
Fixed maturities available for sale:
Due in one year or less	$	204,444	$	206,980
Due after one year through five years	611,042		643,173
Due after five years through ten years	1,643,633		1,814,976
Due after ten years through twenty years	5,210,071		5,843,176
Due after twenty years	8,114,988		8,488,204
Mortgage-backed and asset-backed securities	204,050		227,076
	$	15,988,228	$	17,223,585


(2)	Includes capitalized interest, foreign exchange adjustments, and principal repayments.


(3)	Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.



	March 31, 2019		December 31, 2018
Investment in limited partnerships⁽¹⁾	$	118,556	$	108,241
Commercial mortgage loan participations⁽²⁾	110,209		96,266
Other	3,169		2,751
Total other long-term investments	$	231,934	$	207,258


(1)	See the following section for more information regarding the fair value option method used to account for these investments.



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Fair Value Measurements at:
March 31, 2019	$	—	$	118,556	$	—	$	118,556
December 31, 2018	—		108,241		—		108,241



	Changes in Fair Values for the Period for Items Measured at Fair Value Pursuant to Election of the Fair Value Option
	Net Gains and Losses Recognized During the Period			Less Net Gains and Losses Recognized due to Sales		Total Changes in Fair Values Included in Current-Period Earnings
Three Months Ended March 31,
2019	$	(2,185	)	$	—	$	(2,185	)
2018	560			—		560



	Less than Twelve Months	Twelve Months or Longer	Total
Number of issues (CUSIP numbers) held:
As of March 31, 2019	83	311	394
As of December 31, 2018	495	234	729


(1)	A fund including marketable securities that mirror the S&P 500 index.


(2)	Representing a guaranteed annuity contract issued by Torchmark's subsidiary, American Income Life Insurance Company, to fund the obligations of the American Income Pension Plan.



	March 31, 2019		December 31, 2018

Premiums paid for insurance coverage	$	444	$	2,997

Total investments:
Company owned life insurance	$	45,021	$	44,285
Exchange traded funds	56,926		52,659
	$	101,947	$	96,944



	March 31, 2019		December 31, 2018
Funded defined benefit pension	$	509,998	$	481,792
SERP	74,655		74,407
Pension Benefit Obligation	$	584,653	$	556,199


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


(2)	During the first quarter of 2019, Torchmark recorded $400 thousand in administrative settlements related to state regulatory examinations.


•	Net income as a return on equity (ROE) was 12.9% and net operating income as an ROE, excluding net unrealized gains on the fixed maturity portfolio was 14.7%⁽¹⁾.


•	Total premium increased 5% over the prior year-ago quarter. Life premium increased 4% for the period from $598 million in 2018 to $624 million in 2019. Life underwriting margin increased 10% from $155 million in 2018 to $170 million in 2019.


•	Net investment income increased 4% over the prior year-ago quarter. In addition, excess investment income increased 6% over the prior year-ago quarter.


•	Total net sales increased 4% over the prior year-ago quarter from $139 million to $144 million.


•	Book value per share increased 8% over the prior year-ago quarter from $50.13 to $54.13. Book value per share, excluding net unrealized gains on the fixed maturity portfolio, increased 11% over the prior year-ago quarter from $40.94 to $45.45⁽¹⁾.


•	Through March 31, 2019, the Company repurchased 1.1 million shares at a total cost of $89 million for an average share price of $81.32.


•	Annualized premium in force is defined as the premium income that would be received over the following twelve months at any given date on all active policies if those policies remain in force throughout the twelve-month period. Annualized premium in force is an indicator of potential growth in premium revenue.


•	First-year collected premium is defined as the premium collected during the reporting period for all policies in their first policy year. First-year collected premium takes lapses into account in the first year when lapses are more likely to occur, and thus is a useful indicator of how much new premium is expected to be added to premium income in the future.



Life Insurance Net Sales by Distribution Channel (Dollar amounts in thousands)
	Three Months Ended March 31,						Increase
	2019			2018			(Decrease)
	Amount		% of Total	Amount		% of Total	Amount		%
American Income Exclusive Agency	$	57,551	54	$	55,101	54	$	2,450	4
Globe Life Direct Response	32,447		31	32,183		32	264		1
Liberty National Exclusive Agency	12,259		12	11,361		11	898		8
Other Agencies	3,083		3	2,658		3	425		16
Total	$	105,340	100	$	101,303	100	$	4,037	4



Life Insurance First-Year Collected Premium by Distribution Channel (Dollar amounts in thousands)
	Three Months Ended March 31,						Increase
	2019			2018			(Decrease)
	Amount		% of Total	Amount		% of Total	Amount			%
American Income Exclusive Agency	$	47,476	58	$	46,907	59	$	569		1
Globe Life Direct Response	21,256		26	21,586		27	(330		)	(2	)
Liberty National Exclusive Agency	9,394		12	8,831		11	563			6
Other Agencies	2,958		4	2,250		3	708			31
Total	$	81,084	100	$	79,574	100	$	1,510		2


(1)	Net of deferred acquisition costs, excluding the associated unrealized gains and losses thereon.



	At
	March 31, 2019	December 31, 2018	March 31, 2018
Average annual effective yield⁽¹⁾	5.51%	5.55%	5.57%
Average life, in years, to:
Next call⁽²⁾	16.9	16.9	17.3
Maturity⁽²⁾	18.8	18.7	19.1
Effective duration to:
Next call^(2,3)	10.3	10.0	10.5
Maturity^(2,3)	11.2	10.8	11.3


(1)	Tax-equivalent basis. The yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.