Torchmark
Corporation
Insurance Investor Conference
February 24, 2009
Net Operating Income Per Share
10-Year Compound Annual Growth Rate – 9.3%
$6.00
5.80
5.45
4.99
5.00
4.59
4.23
4.00
3.87
2.94
3.00
3.21
3.51
2.64
2.00
1.00
0
1999
2000
2001
2002
2003
2
2004
2005
2006
2007
2008
Torchmark
Corporation
Underwriting
3
Torchmark
Corporation
Underwriting Income
2008
($ in millions)
Life
Premium
American Income
U/W
Inc.
Health
Share of
U/W Inc.
Premium
U/W
Inc.
Share of
U/W Inc.
$73
$23
19%
$474
$128
Direct Response
511
92
27%
45
3
Liberty National
287
53
15%
135
Military
201
43
13%
UA Independent
32
1
UA Branch
17
Other
95
Total
$1,617
38%
Total Life and Health
Premium
U/W
Inc.
Share of
U/W Inc.
$547
$151
3%
556
95
21%
28
24%
422
81
18%
0
0
0%
201
43
9%
0%
357
39
33%
389
40
9%
3
1%
341
25
21%
358
28
6%
20
6%
0
0
0%
95
20
4%
$340
100%
$951
$118
100%
$2,568
$458
100%
Underwriting Income is premium and other operating income less policy
obligations, commission and other acquisition and administrative expenses.
4
33%
Torchmark
Corporation
Net Life Sales
($ in millions)
Net
Sales
1Q 07
$62.4
Change from
Year-Ago
Quarter
(8%)
2Q 07
67.4
(5%)
3Q 07
66.1
1%
4Q 07
68.3
12%
1Q 08
70.5
13%
2Q 08
76.0
13%
3Q 08
75.0
13%
4Q 08
77.0
13%
5
Torchmark
Corporation
Investments
6
Torchmark
Corporation
Investment Portfolio at 12/31/08
($ in millions)
Amortized
Cost
Fixed Maturities
$9,610
% of
Total
94%
Industry
78%
Equities
17
0%
3%
Mortgage Loans
17
0%
10%
2
0%
1%
360
4%
4%
53
1%
3%
131
1%
1%
$10,190
100%
100%
Investment Real Estate
Policy Loans
Other Long-Term Investments
Short-Term Investments
TOTAL
7
Torchmark
Corporation
Fixed Maturities by Type
12/31/08
($ in millions)
Corporates
Redeemable Preferred Stock:
U.S.
Foreign
Municipals
Government-Sponsored Enterprises
Government & Agencies
Residential Mortgage-Backed Securities
Commercial Mortgage-Backed Securities
CDO’s
Other Asset-Backed Securities
TOTAL
Amortized
Cost
Net
Unreal.
Gain
(Loss)
$7,463
$(1,188)
BBB+
78%
1,334
115
261
202
23
23
17
131
(384)
(52)
(44)
(8)
2
2
0
(117)
(4)
BBB+
BBB+
AA
AAA
AA+
AAA
AAA
AA-
14%
$9,610
$(1,793)
BBB+
41
8
Average
Rating
% of
Total
Amortized
Cost
1%
3%
2%
0%
0%
0%
1%
0%
100%
Torchmark
Corporation
Net Unrealized Losses
Fixed Maturities
($ in millions)
Net Unrealized Losses:
12/31/08
$1,793
06/30/08
670
Increase in Unrealized Losses*
$1,123
*% of Increase in Unrealized Losses
From Fixed Maturities With:
No Change in Rating
74%
One Notch Downgrade
18%
9
Torchmark
Corporation
Fixed Maturities by Sector
12/31/08
($ in millions)
Net
Unreal.
Loss
Amort.
Cost
Financial – Life/Health/PC Insurance
Average
Rating
$1,764
$(494)
Financial – Bank
1,659
(328)
Financial – Other
508
(185)
BBB+
1,105
(60)
BBB+
Transportation & Other Industrials
831
(82)
BBB+
9%
Energy
793
(96)
BBB
8%
Consumer – Non-cyclical
644
(54)
BBB+
7%
Consumer – Cyclical
471
(117)
BBB
5%
Communications
600
(103)
BBB-
6%
Basic Materials
578
(107)
BBB
6%
Other
657
(167)
AA
7%
$9,610
$(1,793)
Utilities
TOTAL
10
BBB+
% of Total
Amort.
Cost
A
BBB+
18%
17%
5%
11%
100%
Torchmark
Corporation
Fixed Maturities by Rating
($ in millions)
Amortized
Cost
Net
Unreal.
Loss
% of Amortized
Cost to Total
TMK
Industry
Investment Grade:
AAA
AA
A
BBB
}
$492
442
3,366
4,597
8,897
($9)
(27)
(511)
(995)
(1,542)
5%
5%
35%
48%25%
92.6%
470
131
713
(150)
(50)
(51)
(251)
5%
1%
1%
7.4%
3%
2%
1%
6%
$9,610
($1,793)
100%
100%
69%
94%
Below Investment Grade:
BB
B
Less Than B
TOTAL
112
11
Torchmark
Corporation
Capitalization and Liquidity
12
Torchmark
Corporation
Capitalization
12/31/08
($ in millions)
Insurance Company
Risk Based Capital
Capital
Required Capital
Company Action Level RBC
$1,281
$389
329%
Corporate
Debt to Capital
Commercial Paper
Senior Debentures & Notes
Trust Preferred
Total Debt
Equity, Excluding FAS 115
$304
602
120
$1,026
3,318
Total Capitalization
7.0%
13.9%
2.7%
23.6%
$4,344
13
Torchmark
Corporation
Insurance Companies Net Cash Flow
($ in millions)
2008
2009 E
Cash From Operations
Insurance Underwriting
Excess Investment Income
Income Taxes and Parent Expenses
Net Cash From Operations
Investment Maturities
Net Cash Flow
$494
$485
608
(171)
(180)
$931
$940 - $960
587
600
$1,518
14
$1,540 - $1,560
Torchmark
Corporation
Parent Company Free Cash Flow
($ in millions)
2008
2009 E
Insurance Companies:
Net Cash Flow
Less Cash Retained
Cash Dividended to TMK
$1,518
1,081
$437
Torchmark Parent Company
Dividends Received From
Insurance Companies
$437
Less Cash Outflow:
Interest Expense
Dividends to Shareholders
Other, Net
Net Outflow
62
49
(17)
$94
Free Cash Flow
$343
15
$320 - $330
Torchmark
Corporation
2009 Debt Maturities
($ in millions)
Cash Needed for 2009 Debt Maturities:
Commercial Paper
Senior Notes Due 8/09
$305
99
$404
Sources of 2009 Debt Repayment
> Preference is to Refinance
> Sources of Cash if Refinancing Terms Aren’t Favorable
2009 Free Cash Flow
Loans From Subsidiaries
Issuance of Preferred Shares to Subs
Draw Down Bank Line
Other Sources
$325
390
335
400
400
$1,850
16
Torchmark
Corporation
Long-Term Debt Maturities
($ in millions)
Maturity Schedule
$300
$250
250
200
$166
150
$120
100 $99
$94
50
0
’09 ’11
’13
’15
’17 ’19 ’21 ’23 ’25 ’27 ’29
17
’31 ’33
’35
’37 >
Torchmark
Corporation
Share Repurchases
18
Torchmark
Corporation
Share Repurchases
Year
Average
Price
No. of Shares
(in 000’s)
2009*
$29.45
500
2008
$55.86
7,638
PE
Ratio
4.7 – 4.9
9.6
2007
$65.39
6,150
12.0
2006
$57.47
5,575
11.5
2005
$53.15
5,647
11.6
2004
$51.39
5,221
12.1
2003
$38.17
5,902
9.9
2002
$37.82
4,817
10.8
2001
$37.25
4,265
11.6
2000
$23.22
5,806
7.9
1999
$32.50
5,398
12.3
1998
$36.63
3,436
15.4
* Information based on transactions thru 2/17/09 and
management’s guidance for 2009 operating income per share.
19
Torchmark
Corporation
Summary
Core Operations
•
•
•
•
•
Steady earnings per share growth
Straightforward protection coverage – minimal exposure to variable annuities
Double-digit growth in life sales
Strong growth in agent recruiting at Liberty National and American Income
Stable persistency in life business
Investments
•
•
•
•
•
Primarily investment grade fixed maturities
Little exposure to equities, mortgages, real estate
No direct exposure to subprime or Alt A mortgages
No credit default swaps or other derivatives
Ratio of invested assets to equity is 3X versus peer average of 7X
Capitalization and Liquidity
• Well capitalized
• Strong and consistent free cash flow
• More than sufficient liquidity to retire debt
Share Repurchase Program
• Still the best use of free cash flow along with possible retirement of debt
• Program will be continued prudently
20
Torchmark
Corporation
This presentation may contain forward-looking statements within the meaning of the federal
securities laws. These prospective statements reflect management’s current expectations, but are not
guarantees of future performance.
Accordingly, please refer to Torchmark’s cautionary statement
regarding forward-looking statements, and the business environment in which the Company operates,
contained in the Company’s Form 10-K for the period ended December 31, 2007, and subsequent
Forms 10-Q, on file with the Securities and Exchange Commission, and on the Company’s web site at
www.torchmarkcorp.com on the Investor Relations page. Torchmark specifically disclaims any
obligation to update or revise any forward-looking statement because of new information, future
developments or otherwise.
This presentation contains certain financial measures that differ from the comparable GAAP
measures. Reconciliations between the non-GAAP measures and the comparable GAAP measures
may be found on the Company’s web site at www.torchmarkcorp.com on the Investor Relations page
under SEC filings (form 10-K for 2007) and subsequent quarterly earnings press releases.
21
Torchmark
Corporation
Torchmark
Corporation