TORCHMARK CORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended September 30, 2002

Commission File Number 1-8052

TORCHMARK CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization)

63-0780404
(I.R.S. Employer
Identification No.)

2001 3rd Avenue South, Birmingham, Alabama
(Address of principal executive offices)

35233
(Zip Code)

Registrant’s telephone number, including area code (205) 325-4200

NONE
Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o

Indicate the number of shares outstanding for each of the issuer’s classes of common stock, as of the last practicable date.

CLASS
Common Stock,
$1.00 Par Value

OUTSTANDING AT October 31, 2002
118,434,813

Index of Exhibits (Page 39)
Total number of pages included are 44.

TORCHMARK CORPORATION
INDEX

			Page

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Balance Sheet	1
		Consolidated Statement of Operations	2
		Consolidated Statement of Comprehensive Income	4
		Consolidated Statement of Cash Flow	5
		Notes to Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

	Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	31

	Item 6.	Exhibits and Reports on Form 8-K	39

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

TORCHMARK CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands)

	September 30, 2002			December 31, 2001

	(Unaudited)

Assets

Investments:
Fixed maturities, available for sale, at fair value (amortized cost: 2002 - $6,775,155; 2001 - $6,528,244)	$	7,067,639		$	6,526,429
Equity securities, at fair value (cost: 2002 - $10,260; 2001 - $666)		10,236			571
Mortgage loans, at cost (fair value: 2002 - $124,620; 2001 - $111,407)		119,284			112,135
Investment real estate, at depreciated cost		13,127			14,133
Policy loans		275,187			266,979
Other long-term investments, at fair value		84,188			49,971
Short-term investments		32,193			134,156


Total investments		7,601,854			7,104,374

Cash		4,622			3,714
Accrued investment income		137,186			125,210
Other receivables		73,253			67,549
Deferred acquisition costs		2,141,813			2,066,423
Value of insurance purchased		105,041			115,939
Property and equipment		33,851			36,137
Goodwill		378,436			378,436
Other assets		11,730			28,087
Separate account assets		1,680,810			2,502,284


Total assets	$	12,168,596		$	12,428,153


Liabilities and Shareholders’ Equity

Liabilities:
Future policy benefits	$	5,600,850		$	5,348,929
Unearned and advance premiums		94,911			93,624
Policy claims and other benefits payable		247,730			248,333
Other policyholders’ funds		82,456			80,929


Total policy liabilities		6,025,947			5,771,815

Accrued income taxes		705,950			580,287
Short-term debt		178,194			204,037
Long-term debt (fair value: 2002 - $595,942; 2001 - $543,275)		552,132			536,152
Other liabilities		121,275			191,894
Separate account liabilities		1,680,810			2,502,284


Total liabilities		9,264,308			9,786,469

Trust preferred securities (fair value: 2002 - $155,150; 2001 - $150,660)		144,422			144,557

Shareholders’ equity:
Preferred stock		0			0
Common stock		126,801			126,801
Additional paid-in capital		554,159			552,634
Accumulated other comprehensive income (loss)		168,704			(12,314	)
Retained earnings		2,223,578			1,978,903
Treasury stock, at cost		(313,376	)		(148,897	)


Total shareholders’ equity		2,759,866			2,497,127


Total liabilities and shareholders’ equity	$	12,168,596		$	12,428,153

See accompanying Notes to Consolidated Financial Statements.

TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,

	2002			2001			2002			2001

Revenue:
Life premium	$	307,275		$	287,225		$	912,156		$	857,145
Health premium		251,068			252,217			768,143			758,735
Other premium		9,299			14,599			30,120			46,245


Total premium		567,642			554,041			1,710,419			1,662,125

Net investment income		130,581			123,422			386,859			366,973
Realized investment gains (losses)		16,911			8,567			(60,042	)		19,399
Other income		691			660			1,743			1,989


Total revenue		715,825			686,690			2,038,979			2,050,486

Benefits and expenses:
Life policyholder benefits		202,271			188,106			608,616			565,748
Health policyholder benefits		166,158			166,091			506,648			495,495
Other policyholder benefits		9,206			8,839			25,340			27,479


Total policyholder benefits		377,635			363,036			1,140,604			1,088,722

Amortization of deferred acquisition costs		75,993			77,227			226,193			228,726
Commissions and premium taxes		41,554			41,326			125,777			121,996
Other operating expense		34,135			30,995			101,088			95,569
Amortization of goodwill		0			3,018			0			9,055
Interest expense		7,188			10,422			21,736			34,749


Total benefits and expenses		536,505			526,024			1,615,398			1,578,817

Income from continuing operations before income taxes, extraordinary item, and cumulative effect of change in accounting principle		179,320			160,666			423,581			471,669
Income taxes		(60,973	)		(55,024	)		(142,390	)		(161,644	)
Preferred securities dividends (net of tax)		(972	)		(767	)		(2,948	)		(4,609	)


Income from continuing operations before extraordinary item and cumulative effect of change in accounting principle		117,375			104,875			278,243			305,416
Loss from discontinued operations (net of applicable tax benefit of $1,766)		0			0			0			(3,280	)

Income before extraordinary item and cumulative effect of change in accounting principle		117,375			104,875			278,243			302,136
Loss on redemption of debt (net of applicable tax benefit of $0, $571, $1, and $1,162, respectively)		0			(1,060	)		(2	)		(2,165	)

Income before cumulative effect of change in accounting principle		117,375			103,815			278,241			299,971
Cumulative effect of change in accounting principle (net of applicable tax benefit of $14,315)		0			0			0			(26,584	)

Net income	$	117,375		$	103,815		$	278,241		$	273,387

(Continued on following page)

TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands except per share data)
(Continued)

	Three Months Ended September 30,					Nine Months Ended September 30,

	2002		2001			2002		2001

Basic earnings per share:
Income from continuing operations before extraordinary item and cumulative effect of change in accounting principle	$	0.98	$	0.84		$	2.30	$	2.43
Loss from discontinued operations (net of applicable tax benefit)		0.00		0.00			0.00		(0.02	)

Income before extraordinary item and cumulative effect of change in accounting principle		0.98		0.84			2.30		2.41
Loss on redemption of debt (net of applicable tax benefit)		0.00		(0.01	)		0.00		(0.02	)

Income before cumulative effect of change in accounting principle		0.98		0.83			2.30		2.39
Cumulative effect of change in accounting principle (net of applicable tax benefit)		0.00		0.00			0.00		(0.21	)

Net income	$	0.98	$	0.83		$	2.30	$	2.18


Basic weighted average shares outstanding		119,198		125,190			120,890		125,535

Diluted earnings per share:
Income from continuing operations before extraordinary item and cumulative effect of change in accounting principle	$	0.98	$	0.83		$	2.29	$	2.42
Loss from discontinued operations (net of applicable tax benefit)		0.00		0.00			0.00		(0.03	)

Income before extraordinary item and cumulative effect of change in accounting principle		0.98		0.83			2.29		2.39
Loss on redemption of debt (net of applicable tax benefit)		0.00		(0.01	)		0.00		(0.02	)

Income before cumulative effect of change in accounting principle		0.98		0.82			2.29		2.37
Cumulative effect of change in accounting principle (net of applicable tax benefit)		0.00		0.00			0.00		(0.21	)

Net income	$	0.98	$	0.82		$	2.29	$	2.16


Diluted weighted average shares outstanding		119,506		126,023			121,334		126,325

See accompanying Notes to Consolidated Financial Statements.

TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited and in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,

	2002			2001			2002			2001

Net income	$	117,375		$	103,815		$	278,241		$	273,387

Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period		228,896			170,275			220,894			266,121
Less: reclassification adjustment for gains (losses) on securities included in net income		(659	)		(1,352	)		78,010			(10,994	)
Less: reclassification adjustment for change in accounting principle		0			0			0			40,899
Less: reclassification adjustment for amortization of discount and premium		(1,143	)		(2,069	)		(3,845	)		(5,172	)
Less: foreign exchange adjustment on securities marked to market		2,431			1,585			(361	)		1,937

Unrealized gains (losses) on securities		229,525			168,439			294,698			292,791
Unrealized gains (losses) on other investments		(633	)		484			527			33
Unrealized gains (losses) on deferred acquisition costs		(15,289	)		(12,230	)		(19,584	)		(25,732	)
Foreign exchange translation adjustments		(2,356	)		(1,329	)		1,809			(1,901	)

Other comprehensive income (loss), before tax		211,247			155,364			277,450			265,191

Income tax benefit (expense) related to other comprehensive income (loss)		(74,721	)		(54,784	)		(96,432	)		(93,420	)


Other comprehensive income (loss)		136,526			100,580			181,018			171,771

Comprehensive income	$	253,901		$	204,395		$	459,259		$	445,158

See accompanying Notes to Consolidated Financial Statements.

TORCHMARK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited and in thousands)

	Nine Months Ended September 30,

	2002			2001


Cash provided from operations	$	513,852		$	499,911

Cash provided from (used for) investment activities:
Investments sold or matured:
Fixed maturities available for sale - sold		336,877			757,928
Fixed maturities available for sale - matured, called, and repaid		210,114			207,755
Other long-term investments		5,095			4,195


Total investments sold or matured		552,086			969,878

Investments acquired:
Fixed maturities		(938,332	)		(1,191,841	)
Other long-term investments		(28,521	)		(9,247	)


Total investments acquired		(966,853	)		(1,201,088	)

Net (increase) decrease in short-term investments		101,963			(52,813	)
Disposition of properties		221			766
Additions to properties		(1,732	)		(2,785	)


Cash used for investment activities		(314,315	)		(286,042	)

Cash provided from (used for) financing activities:
Issuance of common stock		3,507			134,586
Additions to debt		0			9,658
Repayments of debt		(25,918	)		(7,749	)
Redemption of monthly income preferred securities		0			(90,000	)
Acquisition of treasury stock		(169,109	)		(228,058	)
Cash dividends paid to shareholders		(32,832	)		(33,953	)
Net receipts (withdrawals) from deposit product operations		25,723			(23,899	)


Cash used for financing activities		(198,629	)		(239,415	)

Net increase (decrease) in cash		908			(25,546	)
Cash at beginning of year		3,714			35,089


Cash at end of period	$	4,622		$	9,543

See accompanying Notes to Consolidated Financial Statements.

TORCHMARK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A - Accounting Policies

The accompanying consolidated financial statements 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. However, in the opinion of management, these statements include all adjustments, consisting of normal recurring accruals, which are necessary for a fair presentation of the consolidated financial position at September 30, 2002, and the consolidated results of operations, comprehensive income and cash flow for the periods ended September 30, 2002 and 2001.

Note B – New Accounting Standards

Effective January 1, 2002, Torchmark adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS No. 142 changed the accounting for goodwill from an amortization method to an impairment method. Accordingly, Torchmark ceased amortizing goodwill in 2002, and continues to carry it at the December 31, 2001 balance of $378 million. Restatement of prior year results to exclude the amortization of goodwill is not permitted. Goodwill is subject to impairment testing upon implementation and annually thereafter based on the procedures outlined in SFAS 142.

In accordance with SFAS No.142, Torchmark has tested goodwill as of December 31, 2001 for impairment. The test involved dividing the Company’s operations into “reporting units” as defined by the Statement. For Torchmark, these reporting units are subdivisions of Torchmark’s operating segments. Assets and liabilities were then assigned to these units. Each of these units was then valued under the procedures outlined in the Statement. The resulting “fair market values” for each unit were then compared with the underlying carrying values of the net assets assigned to that unit (including goodwill). Because the fair value of each unit exceeded the carrying values assigned to those units, there was no goodwill impairment.

Note C - Business Segments

Torchmark’s segments are based on the insurance product lines it markets and administers: life insurance, health insurance, and annuities. There is also an investment segment, which manages the Company’s investment portfolio, debt, and cash flow. The

TORCHMARK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(UNAUDITED)

measure of profitability for insurance segments is underwriting income before other income and administrative expenses. It represents the profit margin on insurance products before administrative expenses, and is calculated by deducting net policy obligations and acquisition expenses from premium revenue. The measure of profitability for the investment segment is excess investment income, which is the income earned on the investment portfolio in excess of net policy requirements and financing costs associated with Torchmark’s debt and preferred securities. Other income and the unallocated insurance administrative expense are classified in a separate “other” segment. The tables below set forth revenue (excluding realized investment gains and losses) and measures of profitability by segment, as well as provide reconciliations from the total measures of profitability to income before income taxes for the nine-month periods ended September 30, 2002 and September 30, 2001, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
(UNAUDITED)

Selected Segment Information
(Amounts in thousands)

	Nine months ended September 30, 2002

	Life		Health		Annuity		Investment		Other			Corporate & Adjustments			Consolidated


Revenue:
Premium	$	912,156	$	768,143	$	30,120									$	1,710,419
Net investment income							$	389,683				$	(2,824	)		386,859
Other income									$	3,101			(1,358	)		1,743

Total revenue*	$	912,156	$	768,143	$	30,120	$	389,683	$	3,101		$	(4,182	)	$	2,099,021


Measure of profitability	$	221,287	$	127,336	$	11,597	$	219,678	$	(89,932	)	$	(6,343	)	$	483,623

	Nine months ended September 30, 2001

	Life		Health		Annuity		Investment		Other			Corporate & Adjustments			Consolidated


Revenue:
Premium	$	857,145	$	758,735	$	46,245									$	1,662,125
Net investment income							$	370,393				$	(3,420	)		366,973
Other income									$	3,426			(1,437	)		1,989

Total revenue*	$	857,145	$	758,735	$	46,245	$	370,393	$	3,426		$	(4,857	)	$	2,031,087


Measure of profitability	$	210,060	$	133,075	$	19,511	$	187,151	$	(84,695	)	$	(3,777	)	$	461,325

Excludes realized investment gains (losses)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(UNAUDITED)

Reconciliation of Measure of Profitability to Income Before Income Taxes
(Amounts in thousands)

	For the nine months ended September 30,

	2002			2001

Total measure of profitablity	$	483,623		$	461,325
Goodwill amortization		0			(9,055	)
Realized gains/(losses)		(60,042	)		19,399

Income before income taxes**	$	423,581		$	471,669

Income from continuing operations before income taxes, extraordinary item, and cumulative effect of change in accounting principle

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary statements. Torchmark cautions readers regarding certain forward-looking statements contained in the following 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.

Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond Torchmark’s 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:

	1)		Changing general economic conditions leading to unexpected changes in lapse rates and/or sales of Torchmark’s policies, as well as levels of mortality, morbidity, and utilization of healthcare services that differ from Torchmark’s assumptions;

	2)		Regulatory developments, including changes in governmental regulations (particularly those impacting taxes and changes to the Federal Medicare program that would affect Medicare Supplement insurance) and regulatory inquiries regarding industrial life insurance;

	3)		Market trends in the senior-aged health care industry that provide alternatives to traditional Medicare (such as Health Maintenance Organizations and other managed care or private plans) and that could affect the sales of traditional Medicare Supplement insurance;

	4)		Interest rate changes that affect product sales and/or investment portfolio yield;

	5)		General economic, industry sector or individual issuers’ financial conditions that may affect the current market value of securities owned by Torchmark, or that may impair issuers ability to pay interest due Torchmark on those securities.

	6)		Changes in pricing competition;

	7)		Litigation results;

	8)		Levels of administrative and operational efficiencies that differ from Torchmark’s assumptions;

	9)		The inability of Torchmark to obtain timely and appropriate premium rate increases for health insurance policies due to regulatory delay;

10)

The customer response to new products and marketing initiatives; and

11)

Reported amounts in the financial statements which are based on management’s estimates and judgments which may differ from the actual amounts ultimately realized.

Results of Operations

Torchmark management focuses on “net operating income” to evaluate the operating performance of the company. Net operating income excludes unusual and nonrecurring income or loss items which distort operating trends.

A reconciliation of net operating income to net income as reported in the income statement is as follows with per share data on a diluted basis:

Reconciliation of Net Operating Income to Net Income
(Dollar amounts in thousands, except for per share data)

	Nine months ended September 30,

	2002						2001

	Amount			Per Share			Amount			Per Share


Net operating income	$	317,271		$	2.61		$	301,862		$	2.39
Realized investment gains (losses), net of tax, from:
Investment sales		2,269			0.02			6,926			0.05
Writedown of fixed maturities		(53,648	)		(0.44	)		0			—
Valuation of interest rate swap agreements		12,351			0.10			5,683			0.05
Goodwill amortization		0			—			(9,055	)		(0.07	)
Discontinued energy operations, net of tax		0			—			(3,280	)		(0.03	)
Change in accounting principle, net of tax		0			—			(26,584	)		(0.21	)
Loss on redemption of debt, net of tax		(2	)		—			(2,165	)		(0.02	)

Net income	$	278,241		$	2.29		$	273,387		$	2.16

Torchmark adopted Financial Accounting Standards Board Statement No. 142 on accounting for goodwill as of January 1, 2002. This Statement no longer allows the amortization of goodwill but requires testing goodwill for impairment under the guidelines outlined by the Statement. No restatement of previous amortization of goodwill is permitted. For this reason, goodwill amortization is excluded from prior year net operating income for comparability.

The loss on discontinued energy operations in 2001 was a one-time charge related to Torchmark’s energy activities disposed of in 1996. The charge resulted from the settlement of litigation, which was pending at the time of the disposition.

Torchmark’s operating revenues, which exclude realized investment gains and losses, rose 3% to $2.10 billion in the first nine months of 2002 over the prior-year period. Total premium increased 3% to $1.71 billion and net investment income increased 5% to $387 million in 2002. Torchmark’s operating expenses as a percentage of operating

revenues were 4.8% in the 2002 nine-month period, compared with 4.7% in the 2001 period. As a percentage of total premium, insurance administrative expenses were 5.4% for the first nine months of 2002, rising slightly from 5.3 % in the prior-year period.

The following table is a summary of Torchmark’s net operating income by component. Insurance underwriting income is premium income less net policy obligations, commissions, acquisition expenses, and insurance administrative expenses plus other income. Excess investment income is tax-equivalent net investment income reduced by the interest credited to net policy liabilities and the financing cost of Torchmark’s debt and preferred securities.

Summary of Net Operating Income
(Dollar amounts in thousands)

	Nine months Ended September 30,						Increase

	2002			2001			Amount			%

Insurance underwriting income before other income and administrative expense:
Life	$	221,287		$	210,060		$	11,227			5
Health		127,336			133,075			(5,739	)		(4	)
Annuity		11,597			19,511			(7,914	)		(41	)

Total		360,220			362,646			(2,426	)		(1	)

Other income		3,101			3,426			(325	)		(9	)
Administrative expense		(93,033	)		(88,121	)		(4,912	)		6


Insurance underwriting income		270,288			277,951			(7,663	)		(3	)

Excess investment income		219,678			187,151			32,527			17
Corporate expense		(8,055	)		(7,448	)		(607	)		8
Tax equivalency adjustment*		(2,824	)		(3,420	)		596			(17	)

Pretax insurance net operating income		479,087			454,234			24,853			5

Income tax		(161,816	)		(152,372	)		(9,444	)		6


Net operating income	$	317,271		$	301,862		$	15,409			5


Net operating income per diluted share	$	2.61		$	2.39						9

The tax equivalency adjustment is the adjustment to the yield on tax-exempt securities to produce a yield equivalent to the pretax yield on taxable securities.

A discussion of Torchmark’s operations by segment follows.

Life insurance. Torchmark’s life insurance premium income increased 6% to $912 million in the first nine months of 2002. The following table presents Torchmark’s life insurance premium and policy charges by distribution method.

Life Insurance
Premium by Distribution Method
(Dollar amounts in thousands)

	Nine months ended September 30,

	2002				2001				Increase

	Amount		% of Total		Amount		% of Total		Amount			%


Direct Response	$	237,440		26	$	217,520		25	$	19,920			9
Liberty National Exclusive Agency		226,530		25		223,442		26		3,088			1
American Income Exclusive Agency		205,061		22		182,856		21		22,205			12
Military		110,076		12		98,770		12		11,306			11
United American Independent Agency		37,591		4		36,092		4		1,499			4
United American Branch Office Agency		14,710		2		14,550		2		160			1
Other		80,748		9		83,915		10		(3,167	)		(4	)


Total life premium	$	912,156		100	$	857,145		100	$	55,011			6

Annualized life premium in force was $1.33 billion, 7% higher than the $1.24 billion in force a year ago. Life insurance sales, in terms of annualized premium issued, were $251 million in the nine months of 2002, increasing 13% over 2001 nine-month sales of $221 million. The following table presents Torchmark’s life insurance sales and in force data by distribution method.

Life Insurance
Annualized Premium Sales and In Force by Distribution Method
(Dollar amounts in thousands)

	Sales										In Force

	Nine months Ended September 30,				Increase						At September 30,				Increase

	2002		2001		Amount			%			2002		2001		Amount			%


Direct Response	$	91,436	$	85,140	$	6,296			7		$	351,887	$	318,663	$	33,224			10
Liberty National
Exclusive Agency		42,430		41,177		1,253			3			318,468		314,384		4,084			1
American Income
Exclusive Agency		68,820		47,536		21,284			45			294,293		258,617		35,676			14
Military		17,621		16,325		1,296			8			154,718		138,230		16,488			12
UA Independent Agency		19,835		18,553		1,282			7			57,816		53,270		4,546			9
UA Branch Office Agency		4,765		3,751		1,014			27			21,742		21,354		388			2
Other Distribution		5,913		8,560		(2,647	)		(31	)		128,455		135,366		(6,911	)		(5	)


Total	$	250,820	$	221,042	$	29,778			13		$	1,327,379	$	1,239,884	$	87,495			7

Torchmark’s Direct Response operation is conducted through direct mail, co-op mailings and television, and direct mail solicitations endorsed by groups, unions and associations. The Direct Response group additionally provides support to other Torchmark marketing agencies through sales leads. Direct Response’s life premium of $237 million represented 26% of Torchmark’s total life premium, the largest percentage contribution of any Torchmark distribution system. Direct Response life premium increased 9% over the prior-year period. Direct Response life insurance sales rose 7% from $85 million to $91 million in the 2002 nine months and rose 25% in the third quarter-over-quarter comparisons. Annualized premium in force rose 10% over the past twelve months to $352 million at September 30, 2002.

The Liberty National Agency markets to middle-income customers in the Southeastern United States. It represented 25% of Torchmark’s life premium in the 2002 nine months, the second largest percentage of any distribution system. Life premium was $227 million, increasing 1% or $4 million over the nine months of 2001. Life insurance sales grew 3% to $42 million of annualized life premium issued. Annualized life premium in force was $318 million at September 30, 2002, increasing 1% over the prior year.

The American Income Agency markets to members of labor unions, credit unions, and other associations. This agency produced premium income of $205 million, an increase of 12% over the nine months of 2001. American Income life premium represented 22% of total Torchmark life premium. Life sales for this agency rose 45% in the 2002 nine-

month period to $69 million, the strongest growth in sales of any Torchmark life agency in both dollar amount and percentage. Growth in sales of the American Income Agency was largely attributable to the growth in the number of agents, which rose 16% over the prior year to 1,967 at September 30, 2002. Annualized life premium in force was $294 million at September 30, 2002, up 14% compared with a year ago.

Torchmark’s Military Agency is an independent agency comprised of former military officers who sell exclusively to military officers and their families. Life premium in the Military Agency rose 11% in the 2002 nine months to $110 million. Sales in the Military Agency were $18 million in the first nine months of 2002, rising 8%. This agency had 12% growth in annualized life premium in force totalling $155 million at September 30, 2002.

Torchmark’s Other Distribution systems offering life insurance include United Investors and various minor distribution channels. The Other Distribution group contributed $81 million of life premium to Torchmark, a decline of 4%. Other Distribution sales declined 31% to $5.9 million and annualized premium in force was down 5% to $128 million. These declines were primarily the result of the termination of United Investors’ sales agreement with Waddell & Reed.

Life Insurance
Summary of Results
(Dollar amounts in thousands)

	Nine months ended September 30,

	2002				2001				Increase

	Amount		% to Total		Amount		% to Total		Amount		%


Premium and policy charges	$	912,156		100	$	857,145		100	$	55,011		6
Net policy obligations		400,602		44		369,464		43		31,138		8
Commissions and acquisition expense		290,267		32		277,621		32		12,646		5

Insurance underwriting income before other income and administrative expense	$	221,287		24	$	210,060		25	$	11,227		5

Life insurance underwriting income before insurance administrative expenses was $221 million in the first nine months of 2002, increasing 5% over the same period of 2001. As a percentage of life premium, underwriting income declined slightly (24.5% to 24.3%) from the prior-year period as there was a slight increase in mortality in 2002.

Health insurance. Health insurance premium income grew 1% from $759 million in the first nine months of 2001 to $768 million in the same period of 2002. The table below is an analysis of Torchmark’s health premium by distribution method.

Health Insurance
Premium by Distribution Method
(Dollar amounts in thousands)

	Nine months ended September 30,

	2002				2001				Increase

	Amount		% to Total		Amount		% to Total		Amount			%

United American Independent Agency	$	352,523		46	$	350,505		46	$	2,018			1
United American Branch Office Agency		240,888		31		241,038		32		(150	)		0
Liberty National Exclusive Agency		119,592		16		116,552		15		3,040			3
American Income Exclusive Agency		38,795		5		37,258		5		1,537			4
Direct Response		16,345		2		13,382		2		2,963			22

Total health premium	$	768,143		100	$	758,735		100	$	9,408			1

The table below is a presentation of health insurance sales and in force data.

Health Insurance
Annualized Premium Sales and In Force By Distribution Method
(Dollar amounts in thousands)

	Sales										In Force

	Nine months Ended September 30,				Increase						At September 30,				Increase

	2002		2001		Amount			%			2002		2001		Amount			%

UA Independent Agency	$	70,668	$	53,045	$	17,623			33		$	474,870	$	475,665	$	(795	)		0
UA Branch Office Agency		55,199		86,358		(31,159	)		(36	)		320,747		338,688		(17,941	)		(5	)
Liberty Exclusive Agency		9,248		7,737		1,511			20			169,769		167,877		1,892			1
AI Exclusive Agency		8,539		7,426		1,113			15			49,863		48,344		1,519			3
Direct Response		6,315		2,396		3,919			164			23,075		18,424		4,651			25

Total	$	149,969	$	156,962	$	(6,993	)		(4	)	$	1,038,324	$	1,048,998	$	(10,674	)		(1	)

Annualized health insurance premium in force was $1.04 billion at September 30, 2002, a decline of 1% from a year ago. Sales of health insurance, as measured by annualized premium issued, declined 4% to $150 million during the nine months of 2002 as compared with the year-ago period. The decline in health sales moderated during the third

quarter of 2002 from the 22% and 10% declines in the first and second quarters of 2002, respectively, in year-over-year quarterly comparisons. Third quarter 2002 health sales rose 9% over the prior year quarter to $47 million.

Medicare Supplement sales, which represented 52% of Torchmark’s total 2002 health sales, declined 35% in the first nine months of 2002. These sales were $78 million in the 2002 nine months compared with $119 million in the 2001 period. United American Independent and Branch Office Agencies sell Torchmark’s Medicare Supplement products. The decline in Medicare Supplement sales was primarily the result of the decline in the number of agents in the Branch Office Agencies as well as agent adjustment to premium rate increases implemented in recent quarters. Increased competition from other carriers has also been a factor, as these companies have been slower to implement needed rate increases.

As a result of the decline in Medicare Supplement sales in 2002, annualized Medicare Supplement premium in force declined 5%. Annualized Medicare Supplement premium in force was $728 million at September 30, 2002, compared with $766 million a year earlier. Medicare Supplement represented 70% of Torchmark’s total health premium in force at September 30, 2002.

Cancer sales, produced primarily by the Liberty National Agency, were $8.6 million in the 2002 nine months, rising 8% over the prior-year period. Cancer annualized premium in force was $176 million, compared with $174 million a year earlier. Cancer business represented 17% of Torchmark’s annualized health premium in force at September 30, 2002. Other health product sales, consisting primarily of accident and limited-benefit hospital and surgical policies, more than doubled to $64 million in the 2002 period. Sales were $30 million in the prior-year nine months. Other health annualized premium in force increased 24% to $134 million.

The following table presents underwriting margin data for health insurance.

Health Insurance
Summary of Results
(Dollar amounts in thousands)

	Nine months ended September 30,

	2002				2001				Increase

	Amount		% of Total		Amount		% of Total		Amount			%

Premium and policy charges	$	768,143		100	$	758,735		100	$	9,408			1
Net policy obligations		495,273		64		484,255		63		11,018			2
Commissions and acquisition expense		145,534		19		141,405		19		4,129			3

Insurance underwriting income before other income and administrative expenses	$	127,336		17	$	133,075		18	$	(5,739	)		(4	)

Underwriting margins for health insurance declined 4% to $127 million in the 2002 nine-month period from the prior-year period. As a percentage of health premium, underwriting margins declined from 18% in 2001 to 17% in 2002. Approximately half of the health margin decline occurred in the United American Branch Office operation where in previous years non-commission expenses had grown to support a larger sales force than the current number of agents. While the Company has endeavored to reduce these expenses to a level appropriate for the current lower number of agents, these expenses have declined slower than the decline in sales over the past year. In addition, the negative impact on persistency from rate increases and loss of agents has resulted in higher amortization of acquisition expenses per dollar of premium revenue compared to the year ago period. The other half of the health margin decline results from the continuing margin pressure from increasing medical cost inflation on a closed block of Liberty National cancer policies.

Annuities. The following table presents collection and deposit balance information about Torchmark’s annuities.

Annuities
Collections and Deposit Balances
(Dollar amounts in thousands)

	Collections										Deposit Balances

	Nine Months Ended September 30,				Increase (Decrease)						At September 30,				Increase (Decrease)

	2002		2001		Amount			%			2002		2001		Amount			%


Fixed	$	44,597	$	25,169	$	19,428			77		$	616,170	$	618,959	$	(2,789	)		0
Variable		20,425		105,257		(84,832	)		(81	)		1,567,083		2,241,994		(674,911	)		(30	)

Total	$	65,022	$	130,426	$	(65,404	)		(50	)	$	2,183,253	$	2,860,953	$	(677,700	)		(24	)

Torchmark sells fixed and variable annuities. Fixed annuity collections were $45 million in the first nine months of 2002, an increase of 77% from $25 million collected in the prior-year period. Fixed annuities on deposit with Torchmark declined slightly to $616 million from $619 million one year ago. The fixed annuity balance increased 1% from $610 million at year-end 2001. Collections of variable annuities were $20 million in the first nine months of 2002, declining 81% from variable collections of $105 million in the same period of 2001. The variable annuity balance was $1.6 billion at September 30, 2002, $2.4 billion at December 31, 2001, and $2.2 billion one year ago. The 30% decline in the variable annuity balance during the prior twelve months was primarily the result of (1) the significant decline in the market value of deposit balances during the prior twelve months, reflective of general equity market declines, and (2) the termination of Torchmark’s marketing agreement with the Waddell & Reed sales force, Torchmark’s primary distributor of variable annuity products. In addition to the loss of sales, Waddell & Reed has also engaged in replacing Torchmark’s variable annuity products with those of a competitor. The decline in account balances was due to the Waddell & Reed policy replacement activity and the performance of the equity markets.

On March 19, 2002, an Alabama jury awarded to Torchmark’s subsidiary, United Investors, $50 million compensatory damages against Waddell & Reed. The dispute arose regarding certain compensation on United Investors’ in-force block of variable annuities and alleged a scheme by Waddell & Reed to improperly replace United Investors’ variable annuities with those of another company. On June 25, 2002, an order was issued by the Jefferson County Alabama Circuit Court entering the jury verdict. Interest on the $50 million award will accrue at an annual rate of 12% from June 25, 2002 until the date paid. Waddell & Reed has appealed the Circuit Court’s decision to the Alabama Supreme Court. In October 2002, the Alabama Supreme Court affirmed the dismissal of counterclaims against Torchmark and an individual defendant but Waddell & Reed's appeal from the jury verdict and trial court judgment remains pending. United Investors will not record the award or the related accrued interest as income until it

is received, which will not occur until all appeals are completed. In addition, United Investors’ request for injunctive relief to prohibit future improper policy replacements by Waddell & Reed was denied by the Circuit Court, which specified that United Investors has the right to bring additional litigation against Waddell & Reed.

Torchmark is currently marketing its variable annuities through other distributors. However, it does not expect to emphasize the growth of this product line in the future.

The following table presents underwriting margin results for Torchmark’s annuities.

Annuities
Summary of Results
(Dollar amounts in thousands)

	Nine months Ended September 30						Increase

	2002			2001			Amount			%


Policy charges	$	30,120		$	46,245		$	(16,125	)		(35	)
Net policy obligations		(2,499	)		(4,765	)		2,266			(48	)
Commissions and acquisition expense		21,022			31,499			(10,477	)		(33	)


Insurance underwriting income before other income and administrative expenses	$	11,597		$	19,511		$	(7,914	)		(41	)

Policy charges are assessed against the annuity account balance periodically for insurance risk, sales, administration, and cash surrender. Policy charges for annuities declined 35% in the first nine months of 2002 to $30.1 million, primarily as a result of the decline in annuity account balances compared with the prior year. Annuity underwriting income decreased 41% in the 2002 nine months to $11.6 million from $19.5 million in the 2001 period, primarily because of the decline in policy charges. Net policy obligations also increased due to guaranteed minimum death benefits increasing by $1.0 million to $2.5 million for the nine months of 2002. This increase is due in part to the decline in the equity markets, but is also due to a higher than normal number of claims involving guaranteed benefits in the third quarter of 2002.

Investment. Approximately 93% of Torchmark’s investments are in a diversified fixed-maturity portfolio. At September 30, 2002, fixed maturities had a market value of $7.07 billion, $292 million higher than their amortized cost of $6.78 billion. An analysis of Torchmark’s fixed-maturity portfolio by component at September 30, 2002 is as follows.

Fixed Maturities by Component
(Dollar amounts in millions)

	Amortized Cost		%		Market Value		%

U. S. Government	$	99		1.5	$	106		1.5
GNMA		132		2.0		144		2.0
Other Mortgage Backed		124		1.8		138		2.0
Municipals		159		2.3		170		2.4
Corporates:
Electric, Gas, Sanitary Services		1,116		16.5		1,136		16.1
Depository Institutions		1,078		15.9		1,171		16.6
Insurance Carriers		751		11.1		755		10.7
Telecommunications		371		5.5		356		5.0
Nondepository Credit Institutions		341		5.0		365		5.2
Food & Kindred Products		230		3.4		259		3.7
Transportation Equipment		226		3.3		237		3.4
Chemicals & Allied Products		232		3.4		255		3.6
Other Corporates*		1,862		27.5		1,917		27.0
All Other Fixed Maturities		54		0.8		59		0.8

Total Fixed Maturities	$	6,775		100.0	$	7,068		100.0

No sector represented more than 2% of the total portfolio

An analysis by quality rating at September 30, 2002 is as follows.

Fixed Maturities by Rating*
(Dollar amounts in millions)

	Amortized Cost		%		Market Value		%


AAA	$	485		7.2	$	529		7.5
AA		381		5.6		425		6.0
A		3,177		46.8		3,442		48.7
BBB		2,062		30.4		2,137		30.2
BB		378		5.6		309		4.4
B		200		3.0		154		2.2
Below B		81		1.2		61		0.9
Not Rated		11		0.2		11		0.1

	$	6,775		100.0	$	7,068		100.0

Rating based on Bloomberg composite

The portfolio has an average quality rating of “A-.” Approximately 90% of the portfolio at amortized cost was considered investment grade.

The following table summarizes Torchmark’s investment income and excess investment income.

Excess Investment Income
(Dollars in thousands)

	Nine months Ended September 30,						Increase

	2002			2001			Amount			%


Net investment income	$	386,859		$	366,973		$	19,886			5
Tax equivalency adjustment		2,824			3,420			(596	)		(17	)

Tax equivalent investment income		389,683			370,393			19,290			5

Required interest on net insurance policy liabilities		(143,733	)		(141,402	)		(2,331	)		2
Financing costs
Debt		(34,700	)		(34,749	)		49			0
Trust Preferred/MIPS		(8,738	)		(11,601	)		2,863			(25	)
Interest rate swaps		17,166			4,510			12,656			281

Total financing costs		(26,272	)		(41,840	)		15,568			(37	)


Excess investment income	$	219,678		$	187,151		$	32,527			17


Excess investment income per share	$	1.81		$	1.48		$	0.33			22

Tax-equivalent net investment income increased 5% to $390 million in the first nine months of 2002, compared with $370 million during the same 2001 period. The increase was primarily the result of the 5% growth in the investment portfolio (based on average invested assets), but was partially offset by the loss of interest income on certain bonds in default that were written down earlier in 2002. Average invested assets, which include fixed maturities at amortized cost, were $7.3 billion in the 2002 first nine months, compared with $6.9 billion in the 2001 period. The $373 million increase in average invested assets over the prior-year period was achieved even though Torchmark used $244 million to repurchase Torchmark shares under its share repurchase program and wrote certain fixed maturities down by $59 million (after tax) during the prior twelve months.

Excess investment income is tax-equivalent net investment income reduced by the interest credited to net insurance policy liabilities and less Torchmark’s financing costs. Financing costs include interest on debt, the pretax dividends on Torchmark’s preferred securities, and the difference between the fixed-rate and floating-rate payments on Torchmark’s swap instruments. Excess investment income for the 2002 nine-month period rose 17% to $220 million from $187 million for the same period of 2001. Financing costs declined 37% to $26 million in the 2002 period as a result of the lower borrowing costs from the refinancing of the MIPS in 2001, lower short-term interest rates in the 2002 nine-month

period compared with a year ago, and the favorable effect of lower variable rates on Torchmark’s swap instruments. Because significant cash flow has been used to purchase Torchmark stock, management believes excess investment income should be considered on a per-share basis. Excess investment income per share rose 22% in the 2002 period to $1.81 from $1.48.

During the first nine months of 2002, Torchmark continued to emphasize the purchase of investment grade fixed maturity bonds with a diversity of issuers and industry sectors. Purchases of fixed maturities totaled $868 million and had an average yield of 7.41%, equivalent to an effective annual yield of 7.55%. For the comparable 2001 period, fixed maturity acquisitions totaled $1.2 billion and had average and effective yields of 7.48% and 7.62%, respectively. Purchases during the 2001 period were higher due to tax-motivated sales during that period. The average life of 2002 purchases was 12.7 years, compared with an average of 11.3 years for the comparable 2001 period. Both yield and average life calculations on new purchases are based on the maturity date, or for callable bonds the call or maturity date whichever produces the lowest yield, i.e. “yield to worst.” Because net insurance policy liabilities are long term and, for all practical purposes, have a fixed crediting rate of about 6%, Torchmark is less challenged to match assets and liabilities than are many other insurance companies, especially those that primarily sell asset accumulation products. As a result, Torchmark can lengthen or shorten the maturity of acquisitions depending on yields available in the market place. However, once acceptable returns are achieved, the maturity of each purchase is generally kept as short as possible.

As mentioned previously, Torchmark’s $6.8 billion fixed maturity portfolio had an unrealized gain at market of $292 million. At the end of the third quarter last year, the $6.4 billion portfolio had an unrealized gain of $57 million. At year-end 2001, the $6.5 billion portfolio had an unrealized loss of $2 million. The improvement in market valuation of the portfolio resulted principally from the continued reduction during the period in interest rates and in yields on competing assets, but also from the second quarter 2002 writedown to market of several impaired securities.

Torchmark calculates the average life of the fixed maturity portfolio two ways: (1) based on the same date used to calculate the yield, which is the “worst call” date for callable bonds and the maturity date for all other bonds, and (2) based on the maturity date of all bonds, whether callable or not. The average lives of the portfolio using these methods were as follows:

	Average Life (Years)

	To Worst Call	To Maturity

September 30, 2002	9.4	13.3
September 30, 2001	9.8	12.6

Compared to 2001, the average life of the portfolio declined on the worst call basis, but increased on the maturity basis. This occurred because the percentage of callable bonds with long maturities has increased in 2002. As measured by effective duration, a measure of the price sensitivity of a fixed income security to a particular change in interest rates, the fixed maturity portfolio had an effective duration of 5.4 years at the end of the September 2002 quarter, as contrasted with 6.3 years at the end of the third quarter 2001.

Financial Condition

Liquidity. Torchmark’s liquidity is demonstrated by strong positive cash flow, a portfolio of marketable investments, and the availability of a line of credit facility. Torchmark’s insurance operations ordinarily generate cash flows well in excess of immediate requirements. Torchmark’s net cash inflows from operations were $514 million in the first nine months of 2002, compared with $500 million in the same period of 2001. Cash flow for the 2001 period benefited from: (1) $51 million of tax payments that were deferred to the fourth quarter due to the September 11 attack, and (2) $32 million of refunds of prior-year taxes and other tax benefits. In addition to cash flows from operations, Torchmark received $210 million in investment maturities or repayments during the first nine months of 2002.

Torchmark’s cash and short-term investments were $37 million at September 30, 2002, compared with $138 million of these assets at December 31, 2001 and $163 million at the end of September, 2001. In addition to these liquid assets, Torchmark’s entire portfolio of fixed-income and equity securities, in the approximate amount of $7.1 billion at market value on September 30, 2002, is available for sale should any need arise.

Torchmark has in place a line of credit facility with a group of lenders that allows unsecured borrowings and stand-by letters of credit up to $625 million. The facility consists of two parts: a $325 million 364-day tranche maturing November 29, 2002 and a $300 million five-year tranche maturing November 30, 2006. The company has the ability to request up to $200 million in letters of credit to be issued against the $300 million five-year tranche. Under either tranche, interest is charged at variable rates. The line of credit is further designated as a back-up credit line for a commercial paper program not to exceed $600 million, where Torchmark may borrow from either the credit line or issue commercial paper at any time, with total commercial paper outstanding not to exceed $600 million. Commercial paper borrowings and letters of credit on a combined basis may not exceed $625 million. At September 30, 2002, Torchmark had $178 million face amount of commercial paper outstanding, $161 million letters of credit issued, and there were no borrowings under the line of credit. A facility fee is charged on the entire $625 million facility. The facility has no ratings-based acceleration triggers which would require early repayment. In accordance with the agreements, Torchmark is subject to certain covenants regarding capitalization and interest coverage. At September 30, 2002, Torchmark was in full compliance with these covenants. Torchmark intends to renew the $325 million 364-day tranche for another year with approximately the same terms.

Capital resources. Torchmark’s total debt outstanding was $730 million at September 30, 2002, compared with $740 million at December 31, 2001 and $698 million at September 30, 2001. Long-term debt was $552 million at September 30, 2002. The carrying value of Torchmark’s 6.25% Senior Note is adjusted each period to reflect the change in market value of a swap instrument which hedges the value of the note. Excluding this adjustment, long-term debt was $536 million at September 30, 2002 and

December 31, 2001, and $359 million at September 30, 2001. During the nine months of 2002, Torchmark acquired $74 thousand carrying value ($75 thousand par value) of its 7 7/8% Senior Notes at a cost of $76 thousand on the open market. These purchases resulted in an after-tax loss of $2 thousand.

Debt as a percentage of total capitalization was 21.1% at September 30, 2002, treating the Preferred Securities as equity and including the fixed maturity portfolio at amortized cost. The debt to capitalization ratio was 21.9% at year-end 2001 and 21.1% at September 30, 2001. If the Preferred Securities were counted as debt, the debt to capitalization ratio would be 25.3% at September 30, 2002, compared with 26.2% at year-end 2001 and 24.3% one year ago. Interest coverage was 20.5 times for the first nine months of 2002, compared with 14.6 times for the same period of 2001. Excluding realized gains and losses, interest coverage would have been 23.2 in 2002 and 14.0 in 2001.

Torchmark acquired 4.5 million of its outstanding common shares on the open market at a cost of $169 million during the first nine months of 2002 under its share repurchase program. Torchmark will continue to consider repurchasing its outstanding common shares when financial markets are favorable.

Torchmark’s shareholders’ equity was $2.76 billion at September 30, 2002, compared with $2.50 billion at the prior year end and $2.54 billion one year ago. The following table presents Torchmark book value per share information.

Book Value per Share

	September 30, 2002		December 31, 2001		September 30, 2001


Per Diluted Share:
GAAP	$	23.23	$	20.24	$	20.23
GAAP, excluding FAS 115*		21.73		20.25		19.95

Per Actual Share:
GAAP	$	23.28	$	20.32	$	20.31
GAAP, excluding FAS 115*		21.78		20.32		20.03

Diluted shares		118,812		123,354		125,345
Actual shares		118,557		122,888		124,835

Under FAS 115, the fixed-maturity portfolio is carried at market. Excluding FAS 115, book value per share has the fixed-maturity portfolio recorded at its amortized cost.

The year-over-year growth in adjusted book value per diluted share was 9%, and was achieved during a twelve-month period in which $244 million in share buybacks were made

under Torchmark’s share repurchase program and a writedown in the amount of $59 million after-tax was taken on investment securities.

The annualized return on common equity, or net operating income from continuing operations as a percentage of average equity excluding the effects of interest rate fluctuations on securities, was 16.7% for the first nine months of 2002. Return on equity for the same period in 2001 was 16.6% (after restating to exclude the amortization of goodwill in 2001).

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

There have been no quantitative or qualitative changes with respect to market risk exposure during the three months ended September 30, 2002.

Item 4.

Controls and Procedures

Torchmark, under the direction of the Chairman and Chief Executive Officer 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 Chairman and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Within 90 days prior to the filing of this Form 10-Q, an evaluation was performed under the supervision and with the participation of Torchmark management, including the Chairman and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of Torchmark’s disclosure controls and procedures (as those terms are defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based upon their evaluation, the Chairman and Chief Executive Officer 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 in this Form 10-Q.

As of the date of this Form 10-Q, there have not been any significant changes in Torchmark’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. No significant deficiencies or material weaknesses in such internal controls were identified in the evaluation and as a consequence, no corrective action was required to be taken.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Torchmark and its subsidiaries continue to be named as parties to pending or threatened legal proceedings. These lawsuits involve 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. Many of these lawsuits involve claims for punitive damages in state courts of Alabama, a jurisdiction particularly recognized for its large punitive damage verdicts. A number of such actions involving Liberty also name Torchmark as a defendant. In 1999, Alabama enacted legislation limiting punitive damages in non-physical injury cases to the greater of $500,000 or three times compensatory damages. Since this legislation has not undergone scrutiny by appellate courts regarding its constitutionality and a jury’s discretion regarding the amount of compensatory damages (including mental anguish) awarded in any given case is not precisely defined, the effect of this legislation on Torchmark’s litigation remains unclear. Additionally, it should be noted that Torchmark subsidiaries actively market insurance in the State of Mississippi, a jurisdiction which is recognized nationally for large punitive damage verdicts. Bespeaking caution is the fact that the likelihood or extent of a punitive damage award in any given case is currently impossible to predict. As of September 30, 2002, Liberty was a party to approximately 84 active lawsuits (including 8 employment related cases and excluding interpleaders and stayed cases), 62 of which were Alabama proceedings and 7 of which were Mississippi proceedings in which punitive damages were sought. Liberty faces trial settings in these cases on an on-going basis.

Based upon information presently available, and in light of legal and other factual defenses available to Torchmark and its subsidiaries, contingent liabilities arising from threatened and pending litigation are not presently considered by management to be material. It should be noted, however, that large punitive damage awards bearing little or no relation to actual damages awarded by juries in jurisdictions in which Torchmark has substantial business, particularly Alabama and Mississippi, continue to occur, creating the potential for unpredictable material adverse judgments in any given punitive damage suit.

It has been previously reported that purported class action litigation was filed against Torchmark’s subsidiary, American Income Life Insurance Company and certain of its employee benefit plans (Peet, et al v. American Income Life Insurance Company, et al, Case No. C-99-2283) on May 18, 1999 in the U.S. District Court for the Northern District of California, which was subsequently transferred to the U.S. District Court for the Western District of Texas. Plaintiffs, individually and on behalf of all current and former public relations representatives of American Income, asserted that they had been improperly classified as independent contractors rather than employees and thus denied participation in certain of American Income’s employee benefit plans. The lawsuit alleged breach of fiduciary duty and wrongful denial of access to plan documents and other information

under the Employee Retirement Income Security Act. Declaratory and injunctive relief together with restitution, disgorgement and statutory penalties were sought. On September 12, 2000, the District Court granted the defendants’ motions for partial summary judgment and denied plaintiffs’ motion for class certification with leave to renew plaintiffs’ class certification motion if they provided the Court with information regarding additional benefit plans from which they had been improperly excluded. Subsequently, in September 2000, plaintiffs submitted additional information to the Court alleging additional benefit plans from which plaintiffs had allegedly been improperly excluded, and plaintiffs also filed a motion for reconsideration of the order granting defendants’ motion for summary judgment with respect to American Income’s defined benefit plan. The Court denied plaintiffs’ motion for reconsideration and in September, 2001 entered a final judgment for American Income. Plaintiffs filed an appeal in Peet with the United Circuit Court of Appeals for the Fifth Circuit. Oral arguments in the appeal were heard by the Fifth Circuit Court on August 5, 2002 and on August 12, 2002, the Fifth Circuit Court affirmed the final judgment for American Income.

As previously reported, Liberty was served on October 28, 1999 with a subpoena from the Florida Department of Insurance in connection with that Department’s investigation into Liberty’s sales practices and disclosures in the State of Florida regarding industrial life insurance and low coverage life insurance policies. Liberty has also received similar subpoenas from the Alabama, Georgia, Kentucky, Texas, South Carolina and Minnesota Insurance Departments regarding its industrial life insurance and other low face-amount life insurance policies sold in those states. Specific inquiry is made into the historical use of race-distinct mortality in the design or pricing of industrial insurance, a practice believed to be actuarially sound, but nevertheless discontinued by Liberty many years ago. In 1988, Liberty endeavored to convert to paid-up status those policies utilizing race-distinct mortality that remained in premium-paying status at that time. Liberty has been and continues responding to these subpoenas in a timely fashion. In July 2000, the Florida and Georgia Insurance Departments issued cease and desist orders to all companies reporting premium income from industrial life insurance, including Liberty, stating that, to the extent that any company is currently collecting any race-distinct insurance premiums from Florida and Georgia residents, respectively, it immediately cease and desist from collecting any premium differential based on the race of the policyholders. Upon receiving the Georgia order, Liberty informed the Georgia Insurance Department that Liberty did not interpret the Georgia Department’s directive as a cease and desist order since it did not afford Liberty the opportunity for a mandatory or voluntarily requested hearing thereunder. On August 22, 2000, the Florida District Court of Appeals issued an order staying the Florida Insurance Department’s immediate final cease and desist order, pending appeals to the Florida Supreme Court. The Florida Supreme Court subsequently reversed and rendered the District Court of Appeals’ order, and thus declared the cease and desist order null and void. Liberty, as an Alabama domestic company, was examined by representatives of the Alabama Department of Insurance with regard to issues parallel to those raised by the State of Florida. By order dated January 28, 2002, the Alabama Department finalized a report of its examination of Liberty. The report has now been turned over to the Alabama Department’s Legal Division for further consideration.

On December 8, 1999, purported class action litigation was filed against Liberty in the United States District Court for the Northern District of Alabama (Moore v. Liberty National Life Insurance Company, Case No. CV-99-BU-3262-S), on behalf of all African-Americans who have or have had at the time of policy termination an ownership interest in certain life insurance policies ($25,000 face amount or less) marketed by Liberty and certain of its former subsidiaries. The alleged class period covers virtually the entire twentieth century. Plaintiffs allege racial discrimination in Liberty’s premium rates in violation of 42 U.S.C. § 1981, breach of fiduciary duty in sales and administrative practices, receipt of excessive and unreasonable premium payments by Liberty, improper hiring, supervision, retention and failure to monitor actions of officers, agents and employees, breach of contract in dismantling the debit premium collection system, fraudulent inducement and negligent misrepresentation. Unspecified compensatory and punitive damages are sought together with a declaratory judgment and equitable and/or injunctive relief, including establishment of a constructive trust for the benefit of class members. Defendants filed a motion for judgment on the pleadings or in the alternative for summary judgment on January 27, 2000. On April 7, 2000, the District Court entered an order granting Liberty’s motion for judgment on the pleadings and dismissing plaintiffs’ claims under 42 U.S.C. § 1981 with prejudice as time-barred and dismissing their state law claims without prejudice to re-file in state court if desired. Plaintiffs subsequently filed motions with the District Court to reconsider its April 17, 2000 order and for permission to file an amended complaint adding similar claims under 24 U.S.C. § 1982. Liberty opposed this motion. On June 22, 2000, purported class action litigation with allegations comparable to those in the Moore case was filed against Liberty in the Circuit Court of Jefferson County, Alabama (Baldwin v. Liberty National Life Insurance Company, Case No. CV 00-684). The Baldwin case is currently stayed pending disposition of the Moore case.

On July 3, 2000, the District Court issued an order in the Moore case granting in part and denying in part the plaintiffs’ motions. The District Court ordered the Moore plaintiffs to file an amended complaint setting forth their claims under 28 U.S.C. §§ 1981 and 1982 and, if such claims are timely, any state law claims for breach of contract related to the discontinuance of debit collections, and dismissed with prejudice all remaining state law claims of the plaintiffs as time-barred by the common law rule of repose. On July 14, 2000, plaintiffs filed their amended complaint with the District Court and Liberty filed a motion to alter or amend the District Court’s July order or, in the alternative, requested that the District Court certify for purposes of appeal the issue whether the state law doctrine of repose should be applied to and bar plaintiffs’ actions under §§ 1981 and 1982. The District Court entered such an order on July 21, 2000 and stayed proceedings in Moore pending resolution of Liberty’s petition to the U.S. Circuit Court of Appeals for the Eleventh Circuit. Liberty filed a petition on July 30, 2000 with the Eleventh Circuit seeking that Court’s permission to appeal the portions of the District Court’s July order in Moore granting the plaintiffs the right to file the amended complaint. The Eleventh Circuit Court granted Liberty’s motion and agreed to consider Liberty’s arguments regarding the applicability of the state law of repose to actions under §§1981 and 1982. Oral arguments were heard by the Eleventh Circuit Court on July 20, 2001. On September 28, 2001, the Eleventh Circuit Court ruled that the rule of repose was not a bar to the Moore claims in federal court and that there is no reverse pre-emption under the McCarrin Ferguson Act.

Liberty filed a petition seeking an en banc rehearing in the Eleventh Circuit Court, which was subsequently denied. Liberty filed a petition for a writ of certiorari with the U.S. Supreme Court on February 21, 2002, which has been denied. The District Court has scheduled the filing of motions for class certification in Moore for November 21, 2002.

Four individual cases with similar allegations to those in the Moore case which were filed against Liberty in various state Circuit Courts in Alabama remain pending and have been removed and/or transferred to the U.S. District Court for the Northern District of Alabama. The Moore case and all cases transferred to the Northern District of Alabama have been assigned to Judge U.W. Clemon, a noted former civil rights attorney. In the earliest filed of the individual state court actions, Walter Moore v. Liberty National Life Insurance Company (Circuit Court of Dallas County, Alabama, CV 00-306) the Court entered an order granting summary judgment in favor of Liberty based upon the doctrine of repose and has subsequently denied a motion to reconsider its dismissal of this case.

Hudson v. Liberty National Life Insurance Company, one of the four individual cases referenced above, was filed in the Circuit Court of Bullock County, Alabama on February 28, 2001 (Case No. CV 2001-25) and contains similar allegations to those in Moore. After denials by the Bullock Circuit Court of Liberty’s motion to dismiss and request that certain questions arising in the litigation be certified to the Alabama Supreme Court, Liberty sought a writ of mandamus on the certified questions issue from the Alabama Supreme Court. The Alabama Supreme Court agreed to hear Liberty’s petition for writ of mandamus seeking to have the Supreme Court direct the trial court to grant Liberty’s motion to dismiss or for a summary judgment or to certify for interlocutory appeal the Circuit Court’s denial of such motion. On January 18, 2002, the Alabama Supreme Court denied Liberty’s request for the writ of mandamus but noted that Liberty’s motion for summary judgment based on the rule of repose remained pending in the trial court and was ripe for adjudication. Upon remand, plaintiff amended his complaint to add causes of action under federal law and this case has been removed to federal court as discussed above.

In the fifth individual state court action, (Edwards v. Liberty National Life Insurance Company, Case No. CV 0005872), the trial court denied Liberty’s motion seeking a summary judgment based upon the rule of repose but indicated that it would reconsider that motion after discovery. Liberty filed a motion to alter or amend the trial court’s order, or in the alternative, for an interlocutory appeal. In September 2001, the trial court in that case vacated its earlier order and stayed the litigation pending resolution of the Hudson case, which is discussed above. On February 22, 2002, the trial court held a hearing regarding the stay in Edwards. The trial court permitted the plaintiffs very limited discovery, which is currently being conducted.

On March 15, 2001, purported class action litigation was filed against Liberty in the United States District Court for the District of South Carolina (Hinton v. Liberty National Life Insurance Company, Civil Action No. 3-01-68078 19), containing allegations largely similar to the Moore case filed in the Federal District Court for the Northern District of Alabama. Liberty was described in the suit as successor in interest of New South Life Insurance Company (New South), an insurer acquired out of receivership by an entity which was

subsequently acquired by Peninsular Life Insurance Company (Peninsular). In 1985, Liberty reinsured a block of insurance business from Peninsular, including business formerly written by New South. Liberty has requested indemnification in the Hinton litigation from Peninsular and its successors in interest. Liberty sought a writ of mandamus in Hinton from the Fourth Circuit Court of Appeals as well as a change of venue to consolidate the Hinton case with the Moore case currently pending in Federal District Court in Alabama. Both the change in venue and the writ of mandamus were denied. However, the South Carolina District Court issued an order inviting the parties to resubmit a motion for change of venue. Liberty National filed such a motion to transfer the case to the U.S. District Court for the Northern District of Alabama, which was granted by the South Carolina District Court on February 12, 2002.

Another action with similar allegations to Moore, which also includes claims for race discrimination under 24 U.S.C. §§1981 and 1982, was filed against Liberty in U.S. District Court for the Northern District of Alabama on January 28, 2002 (Hull v. Liberty National Life Insurance Company, Civil Action No. CV-02-C-0219-W).

There are a total of 16 race-distinct mortality cases pending in the U.S. District Court for the Northern District of Alabama (with two of such cases having been originally filed in the U.S. District Court for the Northern District of Georgia), including Sunday v. Liberty National Life Insurance Company, Case No. CV02-BE-0639-S), in which approximately 460 individuals assert that they had discriminatory insurance policies with Liberty. The Baldwin and Edwards cases remain pending in Alabama Circuit Courts. Plaintiffs’ attorneys are actively advertising for additional plaintiffs to join these suits or file additional suits.

On July 26, 2001, litigation was filed against Torchmark and three current members of Torchmark’s Board of Directors in the United States District Court for the District of Kansas (Waddell & Reed Financial, Inc. v. Torchmark Corporation, Civil Action No. 01-2372-KHV). Plaintiffs assert that defendants engaged in a scheme to control and injure Waddell & Reed Financial after it was spun-off by Torchmark in November 1998, to interfere with the business relationship between a Waddell & Reed Financial subsidiary, Waddell & Reed, Inc. (W&R) and a Torchmark subsidiary, United Investors Life Insurance Company (UILIC), and to injure W&R Financial as well as asserting that one of the individual defendants sought to interfere with W&R Financial’s relationship with the United Group of Mutual Funds. The litigation alleges RICO violations, breaches of fiduciary duty by the three individual defendants, knowing participation in such breaches of fiduciary duty by Torchmark and intentional interference with prospective business relations in connection with the relationship between W&R and UILIC. Plaintiffs seek actual, punitive and treble damages, interest, fees and costs under RICO of $29 million, $13.4 million plus punitive damages, interest and costs on the intentional interference allegations and a total of $58 million on the remaining two counts.

Defendants filed a motion to abstain or, in the alternative, to dismiss the Kansas District Court litigation on August 22, 2001, citing pending litigation filed in Jefferson County Alabama state circuit court by Torchmark and its subsidiary, UILIC against W&R Financial

and W&R (United Investors Life Insurance Company v. Waddell & Reed Financial, Inc., et al, Case No. CV 00-2720), involving an alleged agreement dealing with existing in-force UILIC variable annuity business marketed by W&R as well as the prior dismissal by the Kansas District Court of litigation originally filed by W&R against UILIC in Kansas state court involving such variable annuity business. Defendant’s motion was denied but the Kansas District Court ruled that a judgment in the prior Alabama litigation would likely be res judicata as to the claims against Torchmark and one of the individual defendants in the current Kansas litigation. Trial of the Alabama state court litigation began February 19, 2002.

On March 19, 2002, a Jefferson County, Alabama Circuit Court jury awarded $50 million compensatory damages to Torchmark’s subsidiary UILIC in the Alabama State Court litigation. UILIC’s claims in this litigation for additional injunctive relief prohibiting unlawful future policy replacements by W&R remained to be decided by the Circuit Court. Based upon the Alabama jury verdict, Torchmark filed a motion for summary judgment in the Kansas District Court, which is currently pending before that Court.

On June 25, 2002, the Jefferson County Circuit Court entered an order in UILIC’s Alabama State Court litigation granting a declaratory judgment for UILIC against W&R. The Circuit Court refused to set aside or reduce the $50,000,000 compensatory damage verdict awarded against W&R by the trial jury in the original litigation. The Circuit Court’s order stated that there was no valid and binding contractual or other obligation requiring UILIC to pay certain additional compensation that W&R had sought in connection with UILIC’s in-force block of variable annuity business for which W&R had formerly been the distributor. Escrowed funds for the commissions owed by W&R to UILIC were ordered to be released to UILIC. The Circuit Court also denied W&R’s motions to set aside the jury’s verdict or to order a new trial and denied UILIC’s motion for additional injunctive relief to prohibit future replacements of UILIC policies by W&R since UILIC has an adequate remedy at law through additional litigation against W&R.

On July 25, 2002, W&R filed notice of appeal to the Alabama Supreme Court of the Jefferson County Circuit Court’s order, which notice of appeal was supplemented on July 31, 2002 and the record of the same was certified to the Alabama Supreme Court in September, 2002. On October 25, 2002, the Alabama Supreme Court affirmed the trial court’s judgment dismissing with prejudice all of W&R’s third party counterclaims against Torchmark and R.K. Richey. W&R’s appeal from the jury verdict and trial court judgment against W&R on United Investors’ claims remains pending at this time.

On September 28, 2001, a shareholder derivative action was filed in the Circuit Court of Jefferson County, Alabama against Torchmark, two unaffiliated limited liability companies, and three individual defendants (Bomar v. Torchmark Corporation, Case No. CV 0105981). The derivative action arises from an October 1, 1999 transaction in which the three individual defendants (one of whom is a director and former Chairman of Torchmark and a second of whom is a former officer of a former real estate subsidiary of Torchmark) acting through two unaffiliated limited liability companies acquired the majority of the investment real estate of Torchmark together with other properties. Plaintiff alleges

that, despite review and approval of the transaction by all independent and disinterested members of the Torchmark Board of Directors, the transaction was procedurally and substantively unfair to Torchmark and resulted from the breach of fiduciary duties of loyalty owed to Torchmark by two of the above described individual defendants and the knowing participation of the third individual defendant in the alleged breach of fiduciary duty. Establishment of a constructive trust for such assets for the benefit of Torchmark and its shareholders, an accounting for profits and unspecified compensatory and punitive damages are sought. The request for establishment of a constructive trust was subsequently deleted by the plaintiff.

On October 16, 2001, defendant Torchmark filed a motion to dismiss and to stay discovery in the Bomar action, asserting plaintiff’s lack of standing, failure to make a legally-required demand on the Board of Directors of Torchmark and failure to comply with certain Alabama Rules of Civil Procedure. On October 17, 2001, the Board of Directors created a special litigation committee comprised of two independent, disinterested directors to review and make determinations and a report with regard to the transactions involved in such suit. Defendant Torchmark’s motion was amended on October 19, 2001 to include as further grounds for dismissal and stay the creation of that special litigation committee and the delegation of complete authority to said committee to review the transaction and determine whether prosecution of the Bomar action is in the interests of Torchmark and its shareholders and what action Torchmark should take with regard to the Bomar action. The committee, through its separately retained counsel, advised the Court that it concurred in Torchmark’s motions. A hearing on Torchmark’s amended motion to dismiss and stay discovery was held November 13, 2001 and on November 26, 2001, the Circuit Court issued an order staying all proceedings in Bomar for 150 days during which the special litigation committee was charged with investigating, reviewing and analyzing the asserted claims, completing its written report and filing the same with the Circuit Court. The special litigation committee began its interview process in February, 2002. On April 24, 2002, the plaintiff filed a motion to modify the stay so as to permit the filing of a second amended complaint, which sought to assert that the transaction violated a 1982 Torchmark Board of Directors resolution relating to conflicts of interest as well as the Alabama Insurance Holding Company System Regulatory Act; that the consideration received by Torchmark was unfairly low and was the result of two of the defendants’ violations of their fiduciary duty of loyalty to Torchmark; and that defendants concealed and suppressed material facts intentionally, knowingly and wantonly. The Circuit Court, on May 6, 2002, ordered the special litigation committee to also consider the allegations made in plaintiff’s second amended complaint (although the same was never formally filed with the Court). The Circuit Court granted the Committee extensions of time for the filing of its report until August 1, 2002. On July 31, 2002, the special litigation committee released and filed its written report with the Circuit Court.

On October 3, 2002, the Circuit Court entered an order granting motions for summary judgment in favor of all defendants in Bomar. The Circuit Court stated in its order that demand on the Torchmark Board of Directors by the plaintiff was not excused, that a majority of the Board and all members of the Special Litigation Committee were independent and disinterested, that the Special Litigation Committee conducted its

investigation thoroughly and in good faith, that the Special Litigation Committee’s findings and conclusion that the Bomar action should be dismissed and that the real estate transaction in question was well within the scope of the business judgment rule was correct and such findings were adopted by the Circuit Court and that the Special Litigation Committee’s conclusion that the transaction “was entirely fair to Torchmark” was fully supported by the record and the law.

On January 22, 2002, purported class action litigation was filed against Liberty and Torchmark in the Circuit Court of Choctaw County, Alabama on behalf of all persons who currently or in the past were insured under Liberty cancer policies which are no longer marketed regardless of whether such policies remain in force or have lapsed (Roberts v. Liberty National Life Insurance Company, Case No. CV-2002-009-B). Plaintiffs in this action purchased guaranteed renewable cancer policies wherein Liberty reserved the right to change premium rates. They allege that Liberty ceased marketing certain cancer policies -”closed” the block of business-, capping the potential pool of insureds and leading to increased premiums to the remaining insureds. They further allege that in instituting premium increases on cancer policies after the Robertson v. Liberty National Life Insurance Company class action settlement, Liberty misrepresented the reasons for such premium increases. This action asserts claims for breach of contract in implementing premium rate increases on a basis other than that set out in the policies, misrepresentation regarding the premium increases, fraud and suppression concerning the closed block of business and unjust enrichment. Unspecified compensatory and punitive damages, attorneys fees, costs and interest are sought by plaintiffs. Defendants filed a motion to dismiss or, in the alternative, for summary judgment on March 29, 2002 with the Circuit Court. A hearing on this motion was held on October 23, 2002.

On September 12, 2002, a trial court jury in Chambers County, Alabama Circuit Court returned a $3.2 million verdict against Liberty in Ingram v. Liberty National Life Insurance Company (Civil Action No. CV-96-62). This case, originally filed in March 1996, alleged that the plaintiff purchased an interest-sensitive life insurance policy from Liberty based upon agent representations that premiums on the policy would be due for ten years and thereafter it would have paid-up policy status. Plaintiff asserted fraud, misrepresentation of material facts, suppression, deceit, fraudulent deceit, wanton or intentional conduct, civil conspiracy, wanton hiring, retention, supervision of agents, bad faith, and conversion since the policy did not reach paid-up status at the end of the ten years of premium payments. The plaintiff had sought a declaratory judgment and compensatory and punitive damages in the Circuit Court. Liberty will pursue all available post judgment motions and appellate relief.

Item 6.

Exhibits and Reports on Form 8-K.

(a) Exhibits

(11)

Statement re computation of per share earnings

(99)(a)

Certification of Periodic Report by C.B. Hudson

(99)(b)

Certification of Periodic Report by Gary L. Coleman

(b) Reports on Form 8-K

A Form 8-K dated August 13, 2002 was filed in the third quarter of 2002 containing the sworn statements of Torchmark Corporation’s Principal Executive Officer and Principal Financial Officer pursuant to Section 21(a)(1) of the Securities Exchange Act. No financial statements were filed as part of the Form 8-K.

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			TORCHMARK CORPORATION
Date: November 11, 2002			/s/ C. B. HUDSON

			C. B. Hudson, Chairman of the Board and Chief Executive Officer


Date: November 11, 2002			/s/ GARY L. COLEMAN

			Gary L. Coleman, Executive Vice President and Chief Financial Officer (Chief Accounting Officer)

CERTIFICATIONS

I, C. B. Hudson, Chairman and Chief Executive Officer of Torchmark Corporation, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Torchmark Corporation;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: November 11, 2002			/s/ C.B. HUDSON

			CB Hudson Chairman and Chief Executive Officer

I, Gary L. Coleman, Executive Vice President and Chief Financial Officer of Torchmark Corporation, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Torchmark Corporation;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


Date: November 11, 2002			/s/ GARY L. COLEMAN

			Gary L. Coleman Executive Vice President and Chief Financial Officer