torchmark corporation insurance investor conference february 24, 2009
TRANSCRIPT
TorchmarkCorporation
Insurance Investor ConferenceFebruary 24, 2009
$6.00
5.00
4.00
3.00
2.00
1.00
0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
3.21
4.594.99
5.455.80
4.23
2.94
TorchmarkCorporation
Net Operating Income Per ShareNet Operating Income Per Share
10-Year Compound Annual Growth Rate – 9.3%
3.873.51
2.64
2
TorchmarkCorporation
Underwriting
3
Underwriting Income2008
Underwriting Income2008
TorchmarkCorporation
($ in millions)
American Income
Direct Response
Liberty National
Military
UA Independent
UA Branch
Other
Total
$474 $128 38%
511 92 27%
287 53 15%
201 43 13%
32 1 0%
17 3 1%
95 20 6%
$1,617 $340 100%
$73 $23 19%
45 3 3%
135 28 24%
0 0 0%
357 39 33%
341 25 21%
0 0 0%
$951 $118 100%
$547 $151 33%
556 95 21%
422 81 18%
201 43 9%
389 40 9%
358 28 6%
95 20 4%
$2,568 $458 100%
Life U/W Share ofPremium Inc. U/W Inc.
Health U/W Share ofPremium Inc. U/W Inc.
Total Life and Health U/W Share ofPremium Inc. U/W Inc.
Underwriting Income is premium and other operating income less policy obligations, commission and other acquisition and administrative expenses.
4
Net Life SalesNet Life Sales
(8%)
(5%)
1%
12%
13%
13%
13%
13%
NetSales
Change fromYear-AgoQuarter
TorchmarkCorporation
$62.4
67.4
66.1
68.3
70.5
76.0
75.0
77.0
1Q 07
2Q 07
3Q 07
4Q 07
1Q 08
2Q 08
3Q 08
4Q 08
($ in millions)
5
TorchmarkCorporation
Investments
6
Investment Portfolio at 12/31/08Investment Portfolio at 12/31/08
Fixed Maturities
Equities
Mortgage Loans
Investment Real Estate
Policy Loans
Other Long-Term Investments
Short-Term Investments
TOTAL
$9,610
17
17
2
360
53
131
$10,190
94%
0%
0%
0%
4%
1%
1%
100%
78%
3%
10%
1%
4%
3%
1%
100%
AmortizedCost
% of Total Industry
TorchmarkCorporation
($ in millions)
7
TorchmarkCorporation
Fixed Maturities by Type12/31/08
Fixed Maturities by Type12/31/08
Corporates $7,463 $(1,188) BBB+ 78%
Redeemable Preferred Stock:
U.S. 1,334 (384) BBB+ 14%
Foreign 115 (52) BBB+ 1%
Municipals 261 (44) AA 3%
Government-Sponsored Enterprises 202 (8) AAA 2%
Government & Agencies 23 2 AA+ 0%
Residential Mortgage-Backed Securities 23 2 AAA 0%
Commercial Mortgage-Backed Securities 17 0 AAA 0%
CDO’s 131 (117) A- 1%
Other Asset-Backed Securities 41 (4) A- 0%
TOTAL $9,610 $(1,793) BBB+ 100%
AmortizedCost
Net Unreal.
Gain (Loss)
AverageRating
% of Total
AmortizedCost
($ in millions)
8
TorchmarkCorporation
Net Unrealized LossesFixed Maturities
Net Unrealized LossesFixed 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%
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TorchmarkCorporation
Fixed Maturities by Sector12/31/08
Fixed Maturities by Sector12/31/08
Financial – Life/Health/PC Insurance $1,764 $(494) BBB+ 18%
Financial – Bank 1,659 (328) A 17%
Financial – Other 508 (185) BBB+ 5%
Utilities 1,105 (60) BBB+ 11%
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%
TOTAL $9,610 $(1,793) BBB+ 100%
Amort.Cost
NetUnreal.Loss
AverageRating
% of TotalAmort.Cost
($ in millions)
10
TorchmarkCorporation
Investment Grade:
AAA $492 ($9) 5%AA 442 (27) 5%A 3,366 (511) 35%BBB 4,597 (995) 48%25%
8,897 (1,542) 92.6% 94%
Below Investment Grade:
BB 470 (150) 5% 3%B 131 (50) 1% 2%Less Than B 112 (51) 1% 1%
713 (251) 7.4% 6%
TOTAL $9,610 ($1,793) 100% 100%
AmortizedCost
Net Unreal.Loss
% of AmortizedCost to Total
TMK Industry
}
Fixed Maturities by RatingFixed Maturities by Rating
($ in millions)
69%
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TorchmarkCorporation
Capitalization and Liquidity
12
TorchmarkCorporation
Capitalization12/31/08
Capitalization12/31/08
Insurance Company
Risk Based Capital Capital $1,281Required Capital $389Company Action Level RBC 329%
Corporate
Debt to CapitalCommercial Paper $304 7.0%Senior Debentures & Notes 602 13.9%Trust Preferred 120 2.7%
Total Debt $1,026 23.6%Equity, Excluding FAS 115 3,318
Total Capitalization $4,344
($ in millions)
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TorchmarkCorporation
Insurance Companies Net Cash FlowInsurance Companies Net Cash Flow
Cash From Operations
Insurance Underwriting $485Excess Investment Income 608Income Taxes and Parent Expenses (180)
Net Cash From Operations $931 $940 - $960
Investment Maturities 587
Net Cash Flow $1,518 $1,540 - $1,560
($ in millions)
2008 2009 E
$494 608
(171)
587 600
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TorchmarkCorporation
Parent Company Free Cash FlowParent Company Free Cash Flow
($ in millions)
Insurance Companies:
Net Cash Flow $1,518Less Cash Retained 1,081Cash Dividended to TMK $437
Torchmark Parent Company
Dividends Received FromInsurance Companies $437
Less Cash Outflow:Interest Expense 62Dividends to Shareholders 49Other, Net (17)
Net Outflow $94
Free Cash Flow $343 $320 - $330
2008 2009 E
15
TorchmarkCorporation
2009 Debt Maturities2009 Debt Maturities
($ in millions)
Cash Needed for 2009 Debt Maturities:
Commercial Paper $305 Senior Notes Due 8/09 99
$404
Sources of 2009 Debt Repayment
> Preference is to Refinance> Sources of Cash if Refinancing Terms Aren’t Favorable
2009 Free Cash Flow $325Loans From Subsidiaries 390Issuance of Preferred Shares to Subs 335Draw Down Bank Line 400Other Sources 400
$1,850
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TorchmarkCorporation
Long-Term Debt MaturitiesLong-Term Debt Maturities
Maturity Schedule
’09 ’11 ’13 ’15 ’17 ’19 ’21 ’23 ’25 ’27 ’29 ’31 ’33 ’35 ’37 >
$300
250
200
150
100
50
0
$250
$99 $94
$166
$120
($ in millions)
17
TorchmarkCorporation
Share Repurchases
18
2009*
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
$29.45
$55.86
$65.39
$57.47
$53.15
$51.39
$38.17
$37.82
$37.25
$23.22
$32.50
$36.63
500
7,638
6,150
5,575
5,647
5,221
5,902
4,817
4,265
5,806
5,398
3,436
4.7 – 4.9
9.6
12.0
11.5
11.6
12.1
9.9
10.8
11.6
7.9
12.3
15.4
Share RepurchasesShare Repurchases
TorchmarkCorporation
No. of Shares(in 000’s)
AveragePrice
PERatio
Year
* Information based on transactions thru 2/17/09 and management’s guidance for 2009 operating income per share.
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TorchmarkCorporation
SummarySummary
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
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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.
TorchmarkCorporation21
TorchmarkCorporation